<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 22, 1998
REGISTRATION NO. 333-412198
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE RESORT AT SUMMERLIN, LIMITED PARTNERSHIP
THE RESORT AT SUMMERLIN, INC.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
<TABLE>
<S> <C> <C>
NEVADA 7011 86-0857506
NEVADA 7011 86-0857505
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
BRIAN MCMULLAN
1160 TOWN CENTER DRIVE CHIEF EXECUTIVE OFFICER
SUITE 200 THE RESORT AT SUMMERLIN, INC.
LAS VEGAS, NEVADA 89134 1160 TOWN CENTER DRIVE
(702) 869-7000 SUITE 200
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE LAS VEGAS, NEVADA 89134
NUMBER, (702) 869-7000
INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL (NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE
EXECUTIVE OFFICES NUMBER, INCLUDING AREA CODE, OF REGISTRANTS'
AND PRINCIPAL PLACE OF BUSINESS) AGENT FOR SERVICE)
</TABLE>
------------------------
COPY TO:
VICTOR L. WALLACE II, ESQ.
BAKER & HOSTETLER LLP
303 EAST 17TH AVENUE
SUITE 1100
DENVER, COLORADO 80203
(303) 861-0600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the registration statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE(1)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13% Series B Senior
Subordinated PIK Notes due
2007........................ $100,000,000 100% $100,000,000 $30,303.03
TOTAL............... $100,000,000 100% $100,000,000 $30,303.03
======================================================================================================================
</TABLE>
(1) Registrants previously paid $30,303.03 upon filing of its initial
Registration Statement, dated April 8, 1998.
===============================================================================
<PAGE> 2
THE RESORT AT SUMMERLIN, LIMITED PARTNERSHIP
THE RESORT AT SUMMERLIN, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-4 ITEM HEADING OR LOCATION IN
NUMBER AND CAPTION INFORMATION STATEMENT - PROSPECTUS
------------------ ----------------------------------
<S> <C> <C>
A. Information about the Transaction
1. Forepart of Registration Statement and Outside Front
Cover Page of Information Statement - Prospectus..... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Information Statement - Prospectus................... Inside Front Cover Page of Prospectus;
Available Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................... Prospectus Summary; Selected Financial
Information; Risk Factors
4. Terms of the Transaction............................... Prospectus Summary; Comparison of Shareholder
Rights; Description of Captial Stock
5. Pro Forma Financial Information........................ *
6. Material Contracts with Company Being Acquired......... *
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters........ *
8. Interests of Named Experts and Counsel................. *
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... Management
B. Information about the Registrant
10. Information with Respect to S-3 Registrants............ *
11. Incorporation of Certain Information by Reference...... *
12. Information with Respect to S-2 or S-3 Registrants..... *
12. Information with Respect to S-2 or S-3 Registrants..... *
13. Incorporation of Certain Information by Reference...... *
14. Information With Respect to Registrants Other than S-2
or S-3 Registrants................................... Available Information; Prospectus Summary;
Selected Financial Data; Index to Financial
Statements
C. Information about the Company Being Acquired
15. Information With Respect to S-3 Companies.............. *
16. Information With Respect to S-2 or S-3 Companies....... *
17. Information With Respect to Companies Other Than S-2 or
S-3 Companies........................................ *
D. Voting and Management Information
18. Information if Proxies, Consents or Authorizations are
to be Solicited...................................... *
19. Information if Proxies, Consents or Authorizations are
not to be Solicited in an Exchange Order............. Outside Front Cover Page of Prospectus;
Prospectus Summary
</TABLE>
- ---------------
* Answer is negative or item is not applicable.
<PAGE> 3
PROSPECTUS
THE RESORT AT SUMMERLIN,
LIMITED PARTNERSHIP
THE RESORT AT SUMMERLIN, INC.
OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF
13% SERIES B SENIOR SUBORDINATED PIK NOTES DUE 2007
REGISTERED UNDER THE SECURITIES ACT FOR EACH $1,000
IN PRINCIPAL AMOUNT OF $100.0 MILLION PRINCIPAL AMOUNT
OUTSTANDING 13% SENIOR SUBORDINATED
PIK NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED.
------------------------
The Resort at Summerlin, Limited Partnership, a Nevada limited partnership
(the "Partnership"), and The Resort at Summerlin, Inc., a Nevada corporation and
the general partner of the Partnership ("RAS" and collectively with the
Partnership, the "Issuers"), hereby offer (the "Exchange Offer"), upon the terms
and conditions set forth in this Prospectus (this "Prospectus") and the
accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange
$1,000 principal amount of their 13% Series B Senior Subordinated PIK Notes due
2007 (the "Exchange Notes"), registered under the Securities Act of 1933, as
amended (the "Securities Act") for each $1,000 principal amount of their $100.0
million principal amount outstanding 13.0% Senior Subordinated PIK Notes due
2007 (the "Original Notes" and collectively with the Exchange Notes, the
"Notes"). As of December 31, 1997, on a pro forma basis after giving effect to
the completion of the Resort Casino, the aggregate principal amount of the
Issuers' outstanding Senior Indebtedness was $100.0 million (assuming issuance
of all $100.0 million of the Mortgage Notes) and the Issuers had no Subordinated
Obligations. As of March 31, 1998, the total outstanding Indebtedness of the
Issuers ranking senior or pari passu with the Exchange Notes, and including
$60.0 million of the Mortgage Notes, trade and other operating debt, is $60.0
million. As of the date of this Prospectus, the Issuers neither have any
Restricted Subsidiary debt or anticipate incurring any such debt in the future.
The form and terms of the Exchange Notes are the same as the form and terms of
the Original Notes, except that the Exchange Notes will bear a Series B
designation, will be registered under the Securities Act, will not bear legends
restricting transfer and will not contain certain provisions relating to an
increase in the interest rate under certain circumstances relating to the timing
of the Exchange Offer. The Exchange Notes will evidence the same indebtedness as
the Original Notes and will be issued under and entitled to the benefits of the
December 31, 1997 Indenture (the "Indenture"), among the Partnership, RAS and
United States Trust Company of New York as trustee (the "Trustee"). For the
definitions of certain terms utilized herein, see "Glossary." See "The Exchange
Offer" and "Description of the Notes."
The Issuers will accept for exchange any and all Original Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time on
, 1998, unless extended by the Issuers in their sole discretion (the
"Expiration Date"). Tenders of the Original Notes may be withdrawn at any time
prior to 5:00 p.m. on the Expiration Date. The Exchange Offer is subject to
certain customary conditions.
(continued on next page)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PURCHASERS OF THE EXCHANGE NOTES.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NEITHER THE NEVADA GAMING COMMISSION NOR THE NEVADA STATE GAMING CONTROL BOARD
NOR THE COLORADO DIVISION OF GAMING NOR THE COLORADO GAMING COMMISSION HAS
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS OR THE INVESTMENT MERITS
OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE> 4
(continued from previous page)
Interest on the Notes will be payable semi-annually in arrears on each June
15 and December 15, commencing June 15, 1998. Interest on the Notes is payable
either in cash or in additional Notes, at the option of the Issuers, through
June 15, 1999, and thereafter is payable in cash. The Notes will mature on
December 15, 2007. The Notes are redeemable at the option of the Issuers, in
whole or in part, at any time on or after December 15, 2002, at the redemption
prices set forth herein, plus accrued and unpaid interest, if any, to the date
of redemption. The Issuers, at their option, also may redeem in the aggregate up
to $35.0 million, or 35.0% of the original principal amount of the Notes, from
time to time prior to December 31, 2000 at 113.0% of the aggregate principal
amount so redeemed, plus accrued and unpaid interest to the redemption date,
with the cash proceeds received from one or more underwritten primary public
offerings for cash by the Partnership of its limited partnership interests, or
options, warrants or rights with respect to its partnership interests pursuant
to an effective registration statement under the Securities Act ("Public Equity
Offering"), provided that at least $65.0 million of the original principal
amount of the Notes remain outstanding following redemption. See "Description of
the Notes -- Optional Redemption."
If any of the Nevada Gaming Commission (the "Nevada Commission"), the
Nevada State Gaming Control Board (the "Nevada Board"), the City of Las Vegas,
Nevada or any other gaming regulatory body or other agency which has or may at
any time after December 31, 1997 have jurisdiction over the gaming activities of
the Partnership or any of its Affiliates or Subsidiaries (collectively, the
"Nevada Gaming Authorities") requires a registered owner of the Notes (a
"Holder") or beneficial owner of the Notes to be licensed, qualified or found
suitable in order to maintain any gaming license or franchise of the Partnership
and the Holder or beneficial owner fails to apply for such license within 30
days or if the Holder is not so licensed, the Issuers have the option to redeem
the Notes of such Holder or beneficial owner at a redemption price equal to the
lesser of (i) the price at which the Notes were acquired by the Holder; or (ii)
the fair market value of the Notes on such redemption date; or (iii) the
principal amount of such Notes. In the case of redemption for the acquisition
price or fair market value, the redemption payment will not include accrued
interest or any redemption premium unless payment is permitted by the applicable
Nevada Gaming Authority, in which case such interest or premium shall be paid
through the earlier of the date of redemption or the date of any finding of any
unsuitability. See "Regulation and Licensing -- Nevada" and "Description of the
Notes -- Optional Redemption -- Regulatory Redemption."
The Notes are not subject to any sinking fund requirement and will be
considered to be issued with original issue discount ("OID") for U.S. federal
income tax purposes. Although cash interest may not be payable on the Notes
prior to June 15, 1999, OID (the difference between the stated redemption price
at maturity of the Original Notes and the portion of the issue price of the
Units, as part of which the Original Notes were sold, allocable to the Notes)
will accrue from December 31, 1997 (the "Issue Date") and will be included as
interest income periodically (including periods ending prior to June 15, 1999)
in a U.S. Holder's gross income for U.S. federal income tax purposes in advance
of receipt of the cash payment to which the interest income is attributable. See
"Certain United States Federal Income Tax Consequences."
The Exchange Notes will be general senior unsecured obligations of the
Issuers subordinate in right of payment to all existing and future Senior
Indebtedness of the Issuers, including $100.0 million aggregate principal amount
of First Mortgage Notes which are secured by a perfected first security interest
in all assets of the Resort Casino (the "Mortgage Notes"), and senior in right
of payment to any other subordinated Indebtedness which is expressly subordinate
or junior in right of payment to the Notes or a Subsidiary Guarantee pursuant to
a written agreement (the "Subordinated Obligations"). The Exchange Notes will be
effectively subordinated in right of payment to all secured Indebtedness and
Indebtedness of the Issuers arising pursuant to the December 30, 1997 Credit
Agreement (the "Credit Agreement") among the Issuers and the National
Westminster Bank PLC as administrative agent (the "Administrative Agent")
(collectively the "Senior Indebtedness"). The Indenture permits the Partnership
to incur additional Indebtedness (including secured Indebtedness and other
additional Senior Indebtedness) subject to certain limitations. Upon completion
of the Resort Casino, the Issuers are expected to have an aggregate amount of
$100.0 million of Senior Indebtedness outstanding. See "Risk
Factors -- Substantial Leverage," "Use of Proceeds" and "Capitalization."
ii
<PAGE> 5
The Notes will be fully, unconditionally, jointly and severally guaranteed
on a senior subordinated unsecured basis (the "Subsidiary Guarantees") by all
future direct and indirect Restricted Subsidiaries having either assets, capital
or stockholders' equity in excess of $10,000 (the "Guarantors"). Each Subsidiary
Guarantee also will be effectively subordinated to all Secured Indebtedness of a
Guarantor. As of the date of this Prospectus, there are no Restricted
Subsidiaries or Subsidiary Guarantees. See "Description of the Notes -- Certain
Covenants -- Future Subsidiary Guarantors."
The Original Notes were sold by the Issuers on the Issue Date to NatWest
Capital Markets Limited (the "Initial Purchaser") in reliance upon an exemption
under the Securities Act as part of series of transactions (the "144A Offering")
consisting of the offer and sale of (i) 100,000 units (the "Units"), each Unit
consisting of $1,000 in principal amount of the Original Notes and a warrant
(each, a "Corporate Warrant") to purchase one share of common stock (the "Common
Stock") of RAS Warrant Co., a Nevada corporation ("Warrant Co."), and (ii)
$100.0 million aggregate principal amount of the Mortgage Notes. The Initial
Purchaser resold the Units to Qualified Institutional Buyers in reliance upon
Rule 144A under the Securities Act ("Rule 144A"). As part of the 144A Offering
and as required by the December 30, 1997 Warrant Agreement (the "Partnership
Warrant Agreement") by and among the Partnership, Warrant Co. and United States
Trust Company of New York as warrant agent, Warrant Co. also received 100,000
warrants (the "Partnership Warrants" and collectively with the Corporate
Warrants, the "Warrants"), each of which grant to Warrant Co. the right to
purchase one limited partnership interest in the Partnership, representing
0.00008% of the total partnership interests in the Partnership. The Exchange
Notes are being offered in exchange for the Original Notes as required by the
December 30, 1997 Exchange and Registration Rights Agreement among the
Partnership, RAS, the limited partners of the Partnership, Warrant Co. and the
Initial Purchaser (the "Registration Rights Agreement"). Neither the
Partnership, RAS nor Warrant Co. has any obligation under the Registration
Rights Agreement or any other agreement to exchange or register the Warrants
under the Securities Act. See "The Exchange Offer."
Based upon no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Partnership
believes Exchange Note Holders (other than certain broker-dealers and Affiliates
of the Issuers) may offer for resale, resell or transfer the Exchange Notes
without compliance with the registration and prospectus delivery requirements of
the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of the Holders' business and the Holders have no arrangement
with any person to participate in the distribution of the Exchange Notes.
Tendering Holders will be required to represent that, by accepting the Exchange
Offer, they are not engaged in, and do not intend to engage in, a distribution
of the Exchange Notes. Any Tendering Holder intending to participate in the
distribution of the Exchange Notes cannot rely on the positions of the
Commission's staff upon which the Issuers are relying in conducting the Offering
and must comply with the registration and prospectus delivery requirements of
the Securities Act. The Issuers have not sought a no-action letter with respect
to the Exchange Offer, and there is no assurance that the Commission would make
a similar determination with respect to the Exchange Offer. Tendering Holders
wishing to accept the Exchange Offer must represent to the Issuers that these
conditions have been met. See "The Exchange Offer -- Resale of the Exchange
Notes." Each broker-dealer that receives Exchange Notes for its account pursuant
to the Exchange Offer (a "Participating Broker-Dealer") must acknowledge that it
will deliver a prospectus in connection with any resale of the Exchange Notes.
Any Participating Broker-Dealer holding the Notes for its own account as a
result of market making or other trading activities may be a statutory
underwriter and must acknowledge to the Issuers that it will deliver a
prospectus meeting the requirements of the Securities Act in any resale of the
Exchange Notes. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Original Notes where such Original
Notes were acquired by such Participating Broker-Dealer as a result of market-
making activities or other trading activities. The Issuers have agreed that, for
a period of 180 days after the Expiration Date, they will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. Neither the Issuers nor any of their affiliates have entered into any
arrangement or understanding with any broker-dealer to distribute the Exchange
Notes. See "Plan of Distribution."
iii
<PAGE> 6
Holders of Original Notes not tendered and accepted in the Exchange Offer
will continue to hold such Original Notes, will be entitled to all the rights
and benefits thereof, and will be subject to the limitations applicable thereto
under the Indenture and with respect to transfer under the Securities Act.
Following consummation of the Exchange Offer, the Issuers will have no further
obligation to the Original Note Holders to provide for the registration under
the Securities Act of the Original Notes. The Issuers will pay all the expenses
incurred by them incident to the Exchange Offer and will not receive any
proceeds from the Exchange Offer. See "The Exchange Offer."
There previously has not been any public market for the Notes. The Issuers
do not intend to list the Exchange Notes on any securities exchange or to seek
approval for quotation through any automated quotation system. There can be no
assurance that an active market for the Exchange Notes will develop. See "Risk
Factors -- Absence of a Public Market; Restrictions on Transfer." To the extent
that Original Notes are tendered and accepted in the Exchange Offer, any trading
market of untendered and tendered but unaccepted Original Notes could be
adversely affected.
Certain Persons participating in this Exchange Offer may engage in
transactions that stabilize, maintain, or otherwise affect the price of the
Original Notes or the Exchange Notes, including passive market making. For a
description of these activities, see "Plan of Distribution."
AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 together with all amendments, exhibits, and schedules thereto (the
"Registration Statement") pursuant to the Securities Act, and the rules and
regulations promulgated thereunder, for the Exchange Notes being offered hereby.
This Prospectus does not contain all the information contained in the
Registration Statement. For further information concerning the Issuers and the
Exchange Offer, reference is made to the Registration Statement. 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 document or matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement,
including the exhibits thereto, can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of such site is http://www.sec.gov.
As a result of the filing of the Registration Statement with the
Commission, the Company will become subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and will
be required to file periodic reports and other information with the Commission.
The obligation of the Company to file periodic reports and other information
with the Commission will be suspended if the Notes are held of record by fewer
than 300 Holders as of the beginning of any fiscal year of the Partnership other
than the fiscal year in which the Registration Statement is declared effective.
The Partnership has agreed that, if not required to do so, while any of the
Notes remain outstanding, it will furnish to the Note Holders and file with the
Commission (unless the Commission will not accept such a filing) (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K, including for
each a "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and, with respect to the annual information only, a report
thereon by the Company's independent auditors, and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Partnership
was required to file such reports.
iv
<PAGE> 7
NOTICE TO INVESTORS
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY NOTES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
IMPORTANT
To tender Original Notes, the following procedures must be followed:
Each beneficial owner owning interests in Original Notes through a DTC
Participant must instruct the Participant to cause the Original Notes to be
tendered in accordance with the procedures set forth in this Prospectus and
in the Letter of Transmittal.
Each participant (a "DTC Participant") in the Depository Trust Company
("DTC") holding Original Notes through DTC must (i) electronically transmit
its acceptance to DTC through the DTC Automated Tender Offer Program
("ATOP"), for which the transaction will be eligible, and DTC will then
edit and verify the acceptance, execute a book-entry delivery to the
account of the United States Trust Company of New York (the "Exchange
Agent") at DTC and send an Agent's Message to the Exchange Agent for its
acceptance, or (ii) comply with the guaranteed delivery procedures
described under "The Exchange Offer -- Guaranteed Delivery Procedures." By
tendering through ATOP, DTC Participants will expressly acknowledge receipt
of the accompanying Letter of Transmittal and agree to be bound by its
terms and the Issuers will be able to enforce such agreement against such
DTC participants.
Each Holder must (i) complete and sign the accompanying Letter of
Transmittal, and mail or deliver such Letter of Transmittal, and all other
documents required by the Letter of Transmittal (together with
certificates) representing all tendered Original Notes, to the Exchange
Agent at its address set forth under "The Exchange Offer -- Exchange
Agent," or (ii) comply with the guaranteed delivery procedures described
under "The Exchange Offer -- Guaranteed Delivery Procedures."
For purposes of this Prospectus, "Tendering Holder" means (i) each DTC
Participant that has properly transmitted (and not properly withdrawn) its
acceptance through ATOP and in respect of which DTC has sent an Agent's Message,
(ii) each Holder that has timely delivered to the Exchange Agent (and not
properly withdrawn) a properly completed and duly executed Letter of
Transmittal, and any other documents required by the Letter of Transmittal
(together with certificates) representing all tendered Original Notes, or (iii)
each DTC Participant or Holder that has complied with the guaranteed delivery
procedures set forth herein.
The information in this Prospectus concerning DTC and its book-entry
systems has been obtained by the Issuers from sources that the Issuers believe
to be reliable, and the Issuers take no responsibility for the accuracy thereof.
v
<PAGE> 8
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial information and statements, and notes thereto,
appearing elsewhere in this Prospectus. This Prospectus contains forward-looking
statements that involve risks and uncertainties. The Partnership's actual
results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such differences include,
but are not limited to, those discussed in "Risk Factors." See "Glossary" for
the definition of certain terms used in this Prospectus.
THE PARTNERSHIP
The Partnership plans to construct, own and operate The Resort at
Summerlin, a Mediterranean-style luxury hotel, casino and spa complex (the
"Resort Casino"), to be located approximately nine miles from the Las Vegas
Strip (the "Strip") and approximately a 20 minute drive from McCarran
International Airport. The 54.5-acre Resort Casino site (the "Resort Casino
Site") is located at the gateway to the Summerlin master-planned community
("Summerlin"), a 22,500-acre land development of Howard Hughes Properties,
Limited Partnership ("HHP"), an affiliate of Howard Hughes Corporation, a
subsidiary of the Rouse Corporation. The Resort Casino is designed to offer a
complete range of amenities including two five-star hotels with a total of 476
rooms and 80 suites, a 50,000 square foot gaming facility, a 40,000 square foot
state-of-the-art spa and fitness facility, up to eight restaurants of varied
cuisine and an indoor/outdoor buffet, a 60,000 square foot lifestyle complex,
and a 50,000 square foot conference and banquet center. The Resort Casino
presently has the right to reserve up to 50.0%, and may in the future exercise
its option for the right to reserve up to 75.0%, of the tee times at the
adjoining Tournament Players Club ("TPC") at the Canyons golf course ("TPC
Canyons"), home to the Senior PGA Tour's Las Vegas Senior Classic, and the
Resort Casino Site is located near eight additional golf courses. Construction
of the Resort Casino began in January 1998 with an opening to the general public
scheduled in April 1999. Swiss Casinos of America, Inc. ("SCA") is the owner of
91.26% of the issued and outstanding Partnership interests and the sole owner of
RAS. SCA is 99.0% owned in the aggregate by certain of its officers and
directors. See "Management" and "Ownership of Interests."
BUSINESS AND MARKETING STRATEGY
The Partnership's business and the goal of its marketing strategy are to
(i) create the Resort Casino as a premier off-Strip location with geographic
exclusivity, (ii) deliver superior resort amenities within the local off-Strip
market, (iii) target middle- to upper-income customers, (iv) capitalize on its
marquee hotel flag and extensive travel network relationship, (v) carefully
manage construction costs and risks with a proven design and build team, and
(vi) leverage management's track record and continuity.
- CREATE A PREMIER OFF-STRIP LOCATION WITH GEOGRAPHIC EXCLUSIVITY. The
Issuers believe that, at the time of its completion, the Resort Casino
will be the only luxury destination in the United States with gaming and
nine golf courses within a five minute drive. The Resort Casino will be
situated at the gateway to Summerlin, which is projected by the
University of Nevada Reno -- Bureau of Business and Economic Research
("BBER") to have a 1999 population base of 235,000 residents. Located at
the intersection of Rampart Boulevard and Summerlin Parkway, two
principal traffic arteries in northwest Las Vegas, the area is readily
accessible from most major points in the city including downtown Las
Vegas (approximately eight miles), the Strip (approximately nine miles)
and McCarran International Airport (approximately 15 miles).
Accessibility will be further enhanced by the planned connection of the
Las Vegas beltway to Summerlin Parkway in the year 2000.
TPC Canyons is adjacent to the Resort Casino Site. Immediately to the
south and east of the Resort Casino Site is the Angel Park Golf Club
which includes two regulation 18-hole courses and an executive, 12-hole
par three course. An additional five 18-hole public and private golf
courses and one 27-hole public golf course are within a five minute drive
of the Resort Casino Site. The Resort Casino will offer panoramic views
of the adjoining golf courses as well as Las Vegas and the Strip to the
east and the Red Rock Canyon National Park to the west.
1
<PAGE> 9
The Partnership has obtained rights of first offer from HHP to develop an
additional four designated gaming sites in the Summerlin development
which rights may be assigned to certain Unrestricted Subsidiaries in
certain circumstances. See "Risk Factors -- Competition." Additionally,
Nevada Senate Bill #208, enacted in July 1997, from which the Resort
Casino and the additional four gaming sites are exempt, limits the
development of casinos near residential neighborhoods, churches and
schools, restricting entry by competitors into the market.
- DELIVER SUPERIOR RESORT AMENITIES. The Resort Casino is designed along
the lines of a Scottsdale- or Palm Springs-type facility with
Mediterranean-style architecture, intimate ambiance and strong focus on
service intended to create a lifestyle experience for its guests and
offer visitors a haven from the pressures of daily life. The Issuers
believe that this atmosphere generally is unavailable in Las Vegas or
other gaming locales in the United States. The Resort Casino's hotels
will feature 476 standard rooms and 80 suites. The Issuers believe that,
at approximately 564 square feet, the Resort Casino's standard guest room
will be among the most spacious in Las Vegas. The circular-design casino
will be situated at the hub of the Resort Casino and is expected to
feature 50,000 square feet of gaming space, 1,200 slot machines, 40 table
games, a sports and race betting club and two salons prives for higher
stake slots and table games. For golfers, the Resort Casino will be able
to reserve up to 50.0%, and may in the future exercise its option for the
right to receive up to 75.0%, of the tee times at TPC Canyons and will
benefit from an additional 165 holes of golf within a five minute drive
of the Resort Casino Site. The Resort Casino also will include a 40,000
square foot upscale spa and fitness facility with state-of-the-art
equipment designed to the same standards as the award-winning Grand
Wailea, Hawaii and Golden Door, California spa resorts. Guests will have
various indoor and outdoor dining options including up to eight
restaurants of varied cuisine and a large, roof-deck buffet. The Resort
Casino also will include a technologically advanced, flexible-design
business meeting center to cater to executive retreats and conferences.
All the components in the development will be linked by the lifestyle
complex (the "Lifestyle Complex"), which is designed to facilitate indoor
and outdoor activity and highlighted by terraces, fountains and pools.
The Lifestyle Complex will include gourmet food and wine shops, a cigar
shop, a beauty salon and other boutique outlets selected to encourage
frequent visits by local residents.
- TARGET MIDDLE- TO UPPER-INCOME CUSTOMER SEGMENTS. The Resort Casino will
be specifically tailored to cater to the affluent, higher-end customer.
The Issuers believe that the Resort Casino's hotels and recreational
amenities will appeal to customers from the following principal long-term
markets:
The Captive Summerlin Market. The population within a five-mile radius of
the Resort Casino, which encompasses Summerlin and other residential
neighborhoods in metropolitan Las Vegas, is estimated by BBER to be
approximately 223,000 and is projected by BBER to grow to 235,000 by
1999. According to the Nevada State Demographers Office ("NSDO"), the
population of Clark County has grown approximately 48.8% since 1990, and
the population within a five-mile radius of the Resort Casino Site is
projected by BBER to continue growing at approximately 5.0% per year. The
median household income of approximately $47,500 for residents in this
target market is approximately 21.8% above the Las Vegas median annual
household income of approximately $39,000 and approximately 30.3% above
the United States national average according to BBER. The Partnership's
goal is to position the Resort Casino as the Summerlin residents'
"country club."
Middle-to Upper-Income Local Market. The Issuers believe this segment is
characterized by a highly profitable, repeat clientele that has long been
underserved by "local" casinos, and expect the Resort Casino will appeal
strongly to the affluent local population, including the estimated 72.0%
of adult Las Vegas residents who game an average of 51.31 times a year
and spend an average of $51.44 (in 1995 dollars) per each visit according
to the Las Vegas Convention and Visitors Authority ("LVCVA").
Golfer/Gamer and Resort Vacationer. According to Simmons Market Resource
Bureau, approximately 1.9 million golfer/gamers visit Las Vegas at least
once annually and 43.2% of golfer/gamers spend over $1,500 per trip. The
Issuers believe that the Resort Casino will represent the only gaming
resort in the United States in close proximity to two TPC and seven other
golf courses. Additionally,
2
<PAGE> 10
the high levels of service and amenities expected to be provided by the
Resort Casino will cater to resort table players with gaming budgets from
$5,000 to $250,000 per visit.
Local and Out-of-State Conferences and Banquets. The Resort Casino is
expected to have one of the few high-tech business meeting facilities in
Las Vegas catering to small- and mid-size conferences. Designed with the
necessary services and amenities to cater to executive retreats including
ample parking, the Issuers believe that the Resort Casino will provide an
ideal setting for small- to mid-size conferences and will have the
capacity to host charity and social events for up to 1,100 people in
dinner seating.
- CAPITALIZE ON MARQUEE HOTEL FLAG AND TRAVEL NETWORK RELATIONSHIP. The
Partnership has entered into an agreement with Regent Hotels Worldwide,
Inc. ("Regent International"), an affiliate of the Carlson Hospitality
group. The Regent International hotels are a group of luxury hotels
concentrated around the Pacific Rim, with the Resort Casino representing
its only property in Las Vegas. Regent International's only flagged
property in the U.S. is the Regent Beverly Wilshire-Los Angeles. The
Resort Casino will benefit from Regent's reservation network and Carlson
Wagonlit Travel, a national travel agency with no existing Las Vegas
hotel affiliate.
- CAREFULLY MANAGE CONSTRUCTION COSTS AND RISKS WITH PROVEN DESIGN AND
BUILD TEAM. RAS's management has a proven track record of resort and
casino design, construction, development and operation, including Sun
International's Carousel in South Africa, and the Prairie Knights and
Speaking Rock casinos in the United States. The Issuers have assembled an
experienced project team. The Partnership has signed a $133.0 million
guaranteed maximum price (exclusive of any change orders which must be
authorized by the Partnership) construction management contract (the
"Construction Contract") with J.A. Jones Construction ("J.A. Jones"), a
subsidiary of J.A. Jones, Inc., a national general contractor. J.A.
Jones, Inc. is a subsidiary of Philipp Holzmann AG, a German contracting
company, which is an affiliate of Deutsche Bank AG with several major
projects to its credit, including renovation of the West and East wings
of the White House, the world's tallest buildings -- the Twin Towers of
Kuala Lumpur-- and Sun International's Paradise Island Bahamas Phase II.
A completion guaranty covering certain cost overruns has been provided by
J.A. Jones, Inc. The Resort Casino was designed by Paul Steelman, Ltd.
(the "Architect"), a national casino design firm whose principal, Paul
Steelman, is the beneficial owner of a 5.0% limited partnership interest
in the Partnership. The Architect's projects include work for, among
others, Mirage Resorts, Caesars, Harrah's and Sun International. For the
Resort Casino grounds, the Partnership has contracted with Lifescapes
International ("Lifescapes"), a landscape design firm. Lifescapes'
projects include The Mirage, Bellagio, Treasure Island and Jurassic Park
at Universal Studios. The Partnership has provided contingency and
completion reserve funds of approximately $4.4 million (approximately
3.3% of the Construction Contract maximum amount) and has subordinated
the $3.0 million development fee of SCA, the 91.26% limited partner of
the Partnership and the parent of RAS, to the successful on-budget
completion of the Resort Casino.
- LEVERAGE MANAGEMENT TEAM TRACK RECORD AND CONTINUITY. The Partnership
expects to leverage the gaming experience and track record of RAS's
senior and middle management. RAS's senior management has a cumulative 75
years of experience in the gaming and resort industry. Brian McMullan and
Jim Fonseca, the Chief Executive Officer and President and Senior Vice
President Gaming Operations of RAS, respectively, have worked together
for over 20 years. Quinton Boshoff, the Senior Vice President Slot
Operations of RAS, has worked with Mr. McMullan and Mr. Fonseca for over
11 years, and all were previously employed by Sun International, an
international casino group. Messrs. McMullan, Fonseca and Boshoff
participated in the design, building and operation of six casinos in
South Africa, including Sun International's Carousel. John Tipton, the
Senior Vice President, Chief Financial Officer and General Counsel of
RAS, served in Colorado Governor Roy Romer's cabinet as Executive
Director of the Colorado Department of Revenue, during which time he
drafted and implemented casino gaming legislation in Colorado. RAS's
middle management includes nine gaming and non-gaming professionals with
experience principally in the United States, the United Kingdom and
southern Africa. See "Management."
3
<PAGE> 11
SWISS CASINOS OF AMERICA, INC.
Based in Las Vegas, Nevada, SCA was formed in 1989 and is a majority-owned
(83.0%) subsidiary of Tivolino Holding AG (the "Swiss Parent") which is owned by
Hans Jecklin, the Chairman of the Board of Directors of RAS, and his family. SCA
was formed for the primary purpose of acquiring, developing and managing casino
and resort properties in the United States. The Swiss Parent currently owns or
operates 23 gaming establishments, hotels, restaurants and other businesses in
Europe, and leases and/or operates additional gaming establishments in the
United States. The Swiss Parent is a leading gaming operator in Switzerland with
gaming facilities located throughout Switzerland, the Netherlands and Great
Britain. As with the Swiss Parent, SCA's activities extend beyond the casino
operations and include the management of a hotel, restaurants, retail outlets,
bars and live entertainment.
RESORT CASINO OWNERSHIP STRUCTURE
The following is an ownership chart of the Resort Casino.
[OWNERSHIP CHART]
4
<PAGE> 12
THE ORIGINAL NOTES OFFERING
ORIGINAL NOTES................ Pursuant to the December 31, 1997 Purchase
Agreement (the "Purchase Agreement"), the
Issuers sold $100.0 million aggregate principal
amount of the Original Notes to the Initial
Purchaser as part of the Units in the 144A
Offering. The Initial Purchaser subsequently
resold the Original Notes to Qualified
Institutional Buyers pursuant to Rule 144A.
REGISTRATION RIGHTS
AGREEMENT..................... Pursuant to the Purchase Agreement, the Issuers
and the Initial Purchaser entered into the
Registration Rights Agreement, which granted
Original Notes Holders certain exchange and
registration rights, which the Exchange Offer
is intended to satisfy. No offer to exchange
the Warrants is being made in this Prospectus
and neither the Partnership nor Warrant Co. is
obligated to register or exchange the Warrants
pursuant to the Registration Rights Agreement
or otherwise.
THE EXCHANGE OFFER
SECURITIES OFFERED............ $100 million aggregate principal amount of 13%
Series B Senior Subordinated PIK Notes due
2007.
ISSUERS....................... The Resort at Summerlin, Limited Partnership
The Resort at Summerlin, Inc.
1160 Town Center Drive
Suite 200
Las Vegas, Nevada 89134
(702) 869-7000
THE EXCHANGE OFFER............ $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of
Original Notes that are properly tendered and
accepted. As of the date of this Prospectus,
$100.0 million aggregate principal amount of
Original Notes are outstanding. The Issuers
will issue the Exchange Notes on or promptly
after the Expiration Date. The Exchange Offer
is not conditioned upon any minimum aggregate
principal amount of Notes being tendered.
Based upon the interpretations by the staff of
the Commission set forth in no-action letters
issued to third parties, the Issuers believe
the Exchange Notes may be offered for resale,
resold and otherwise transferred by any Holder
thereof (other than certain broker-dealers and
Affiliates of the Issuers) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that
the Exchange Notes are acquired in the ordinary
course of the Holder's business and the Holder
is not engaged in, does not intend to
participate and has no arrangement with any
person to participate in, and does not intend
to engage in, any distribution of the Exchange
Notes.
Each Exchange Notes Holder, other than a
broker-dealer, must represent that such
conditions have been met. In addition, each
Participating Broker-Dealer that receives
Exchange Notes for its account must acknowledge
that it will deliver a Prospectus in connection
with any resale of Exchange Notes. Each
Tendering
5
<PAGE> 13
Holder is required to represent in the Letter
of Transmittal that, among other things, the
Exchange Notes will be acquired by the Holder
in the ordinary course of business and the
Holder does not intend to participate, and has
no arrangement or understanding with any person
to participate, in the distribution of such
Exchange Notes.
Participating Broker-Dealers acquiring Original
Notes for their own account as a result of
market-making activities or other trading
activities may be statutory underwriters. The
Letter of Transmittal accompanying this
Prospectus states that by so acknowledging and
delivering a prospectus, a Participating
Broker-Dealer will not be deemed to admit that
it is an "underwriter" within the meaning of
the Securities Act. A broker-dealer may
nonetheless be deemed to be an "underwriter"
under the Securities Act notwithstanding such
disclaimer. This Prospectus, as it may be
amended or supplemented from time to time, may
be used by a Participating Broker-Dealer in
connection with resale of Exchange Notes
received in exchange for Original Notes where
the Original Notes were acquired by the
Participating Broker-Dealer as a result of
market-making activities or other trading
activities. Pursuant to the Registration Rights
Agreement, the Issuers have agreed that, for a
period of 180 days after the Expiration Date,
they will provide this Prospectus to any
Participating Broker-Dealer for use in
connection with any resale. See "The Exchange
Offer -- Purpose and Effect of the Exchange
Offer" and "Plan of Distribution."
Any Holder who tenders with the intention to
participate, or for the purpose of
participating, in a distribution of the
Exchange Notes will not be able to rely on the
position of the staff of the Commission set
forth in no-action letters and, in the absence
of an exemption, must comply with the
registration and prospectus delivery
requirements of the Securities Act for any
resale. Failure to comply with these
requirements may result in liability under the
Securities Act.
EXPIRATION DATE............... 5:00 p.m., New York City time, on ,
1998 unless extended by the Issuers in their
sole discretion. See "The Exchange
Offer -- Expiration Date; Extensions;
Amendments."
ACCRUED INTEREST ON EXCHANGE
NOTES......................... Each Exchange Note will bear interest from the
most recent date to which interest has been
paid on the Original Notes, or, if no interest
has been paid on the Original Notes, from
December 31, 1997.
CONDITIONS TO THE EXCHANGE
OFFER......................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Issuers. The Issuers reserve the right to
terminate or amend the Exchange Offer at any
time prior to the Expiration Date upon the
occurrence of any such condition. The Exchange
Offer is not conditioned upon any minimum
aggregate principal amount of Original Notes
being tendered or accepted for exchange. See
"The Exchange Offer -- Conditions."
6
<PAGE> 14
CONSEQUENCES OF FAILURE TO
EXCHANGE...................... Any Original Notes not tendered pursuant to the
Exchange Offer will remain outstanding and
accrue interest and will remain "restricted
securities" under the Securities Act, the
liquidity of which could be adversely affected
upon the completion of the Exchange Offer. See
"Risk Factors -- Consequences of Failure to
Exchange" and "The Exchange
Offer -- Consequences of Failure to Exchange."
U.S. FEDERAL INCOME TAX
CONSEQUENCES................ The exchange of the Original Notes for the
Exchange Notes pursuant to the Exchange Offer
will not be a taxable event for U.S. federal
income tax purposes. See "Certain U.S. Federal
Income Tax Considerations."
USE OF PROCEEDS............... There will be no cash proceeds to the Issuers
from the Exchange Offer. See "Use of Proceeds."
PROCEDURES FOR TENDERING
TENDERING ORIGINAL NOTES...... Each beneficial owner through a DTC Participant
must instruct the DTC Participant to cause
Original Notes to be tendered in accordance
with the procedures set forth in this
Prospectus and in the Letter of Transmittal.
See "The Exchange Offer -- Procedures for
Tendering -- Original Notes Held by DTC." Each
DTC Participant in DTC holding Original Notes
through DTC must (i) electronically transmit
acceptance to DTC through ATOP, for which the
transaction will be eligible, and DTC will then
edit and verify the acceptance, execute a
book-entry delivery to the Exchange Agent's
account at DTC and send an Agent's Message to
the Exchange Agent for its acceptance, or (ii)
comply with the guaranteed delivery procedures
set forth in this Prospectus and in the Letter
of Transmittal. By tendering through ATOP, DTC
Participants expressly will acknowledge receipt
of the Letter of Transmittal and agree to be
bound by its terms and the Issuers will be able
to enforce such agreement against such DTC
participants. See "The Exchange
Offer -- Procedures for Tendering -- Original
Notes Held Through DTC" and "-- Guaranteed
Delivery Procedures -- Original Notes Held
Through DTC."
Each Tendering Holder must (i) submit a Letter
of Transmittal and all other required
documents, together with certificates
representing all tendered Original Notes, to
the Exchange Agent, or (ii) comply with the
guaranteed delivery procedures. See "The
Exchange Offer -- Procedures for Tendering,"
"-- Exchange Agent," and "-- Guaranteed
Delivery Procedures -- Original Notes Held by
Holders." Each Tendering Holder will represent
that, among other things, (i) it is not a
broker-dealer tendering Original Notes acquired
directly from the Issuers for its own account,
(ii) the Exchange Notes are being acquired in
the ordinary course of its business, and (iii)
it is not an Affiliate of the Issuers. See "The
Exchange Offer -- Procedures for Tendering."
7
<PAGE> 15
GUARANTEED DELIVERY
PROCEDURES.................... Tendering Holders who are DTC Participants but
cannot transmit their acceptances through ATOP
prior to the Expiration Date may tender in
accordance with the procedures set forth in
this Prospectus and in the Letter of
Transmittal. See "The Exchange Offer --
Guaranteed Delivery Procedures." Tendering
Holders (i) whose Original Notes are not
immediately available and will not be available
for tendering prior to the Expiration Date, or
(ii) who cannot deliver their Original Notes,
the Letter of Transmittal or any other required
documents to the Exchange Agent prior to the
Expiration Date may tender in accordance with
the procedures set forth in this Prospectus.
See "The Exchange Offer -- Guaranteed Delivery
Procedures."
WITHDRAWAL RIGHTS............. The tender of Original Notes pursuant to the
Exchange Offer may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the
Expiration Date. See "The Exchange
Offer -- Withdrawal of Tenders."
UNTENDERED ORIGINAL NOTES..... Following the consummation of the Exchange
Offer, Original Note Holders who elect not to
tender will not have any further exchange
rights and will continue to hold Original Notes
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for
such Original Notes could be adversely
affected. See "The Exchange
Offer -- Consequences of Failure to Exchange."
SHELF REGISTRATION
STATEMENT..................... Under certain circumstances described in the
Registration Rights Agreement, certain Original
Note Holders (including Holders who are not
permitted to participate in the Exchange Offer)
may require the Issuers to file and use their
best efforts to cause to become effective a
shelf registration statement under the
Securities Act for resales of Original Notes.
See "The Exchange Offer -- Purpose and Effect
of the Exchange Offer."
SPECIAL PROCEDURE FOR
BENEFICIAL OWNERS............. Any beneficial owner owning interests in
Original Notes whose Original Notes are
registered in the name of a broker-dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact the
registered Holder promptly and instruct the
registered Holder to tender on the beneficial
owner's behalf. A beneficial owner wishing to
tender directly must, prior to completing and
executing the Letter of Transmittal and
delivering its Original Notes, either cause the
Original Notes to be registered in the
beneficial owner's name or obtain a properly
completed bond power from the registered
Holder. The transfer of registered ownership
may take considerable time. The Company will
keep the Exchange Offer open for not less than
30 business days in order to provide for the
transfer of registered ownership. See "The
Exchange Offer -- Procedures for
Tendering -- Original Notes Held Through DTC."
EXCHANGE AGENT................ United States Trust Company of New York. See
"The Exchange Offer -- Exchange Agent."
8
<PAGE> 16
THE EXCHANGE NOTES
GENERAL....................... The Exchange Notes and the Original Notes are
identical in all material respects, except that
(i) the Exchange Notes have been registered
under the Securities Act and will not bear
legends restricting transfer, and (ii) the
Exchange Note Holders will not be entitled to
certain rights under the Registration Rights
Agreement, including the provisions providing
for an increase in the interest rate on the
Original Notes in certain circumstances
relating to the timing of the Exchange Offer,
which rights will terminate when the Exchange
Offer is consummated. See "The Exchange
Offer -- Purpose and Effect of the Exchange
Offer." The Exchange Notes will evidence the
same debt as the Original Notes and will be
subject to, and entitled to the benefits of,
the Indenture. See "Description of the Notes."
NOTES OFFERED................. $100.0 million principal amount of 13% Series B
Senior Subordinated PIK Notes due 2007.
MATURITY DATE................. December 15, 2007.
INTEREST PAYMENT DATES........ Interest will accrue on the Exchange Notes from
the date of issuance and will be payable
semi-annually in arrears on each June 15 and
December 15, commencing on June 15, 1998. The
Exchange Notes will bear interest from the
later to have occurred of (i) the most recent
date to which interest has been paid on the
Original Notes, or (ii) December 31, 1997.
INTEREST...................... 13.0% per annum accruing from the date of
issuance, payable semi-annually in arrears
beginning June 15, 1998 either in cash or in
additional Notes, at the option of the Issuers,
through June 15, 1999, and thereafter only in
cash. See "Risk Factors -- Substantial
Leverage."
RANKING....................... Unsecured and subordinated in right of payment
to all existing and future Senior Indebtedness
of the Issuers, including the Mortgage Notes.
The Notes will rank senior to any future
Subordinated Obligations of the Issuers. As of
December 31, 1997, on a pro forma basis after
giving effect to the completion of the Resort
Casino, the aggregate principal amount of the
Issuers' outstanding Senior Indebtedness was
$100.0 million (assuming issuance of all $100.0
million of the Mortgage Notes) and the Issuers
had no outstanding Subordinated Obligations. As
of March 31, 1998, the total outstanding
Indebtedness of the Issuers ranking senior or
pari passu with the Exchange Notes, and
including $60.0 million of the Mortgage Notes,
trade and other operating debt, is $60.0
million. As of the date of this Prospectus, the
Issuers neither have any Restricted Subsidiary
debt or anticipate incurring any such debt in
the future. See "Description of the
Notes -- Ranking and Subordination."
OPTIONAL REDEMPTION........... Except as described below under "Change of
Control" and "Regulatory Redemption," the
Issuers may not redeem the Notes until December
15, 2002, at which time the Issuers may redeem
the
9
<PAGE> 17
Exchange Notes, in whole or in part, at any
time at the redemption prices set forth herein,
together with accrued and unpaid interest. In
addition, at any time and from time to time
prior to December 15, 2000, the Issuers may,
subject to certain requirements, redeem up to
$35.0 million, or 35.0% of the aggregate
principal amount of the Notes with the cash
proceeds received from one or more Public
Equity Offerings at a redemption price equal to
113.0% of the principal amount to be redeemed,
together with any accrued and unpaid interest.
See "Description of the Notes -- Optional
Redemption."
REGULATORY REDEMPTION......... If a Nevada Gaming Authority requires that a
Holder or beneficial owner of the Notes must be
licensed, qualified or found suitable in order
to maintain any gaming license or franchise of
the Partnership and the Holder or beneficial
owner fails to apply for such license within 30
days or applies but is not licensed, the
Issuers may redeem the Notes of such Holder or
beneficial owner at a redemption price equal to
the lesser of (i) the price at which the Notes
were acquired by the Holder or beneficial
owner, (ii) the fair market value of the Notes
on the redemption date and (iii) the principal
amount of the Notes. See "Regulation and
Licensing -- Nevada" and "Description of the
Notes -- Optional Redemption -- Regulatory
Redemption."
CHANGE OF CONTROL............. Upon a Change of Control, the Issuers will be
required to offer to repurchase the Notes for
101.0% of the principal amount thereof and any
accrued and unpaid interest. A Change of
Control also will require the Issuers to repay
the Credit Facilities or obtain the consent of
the Credit Facility Lenders to the repurchase
of the Notes, which consent may be withheld by
the Credit Facility Lenders for any reason or
for no reason. The failure or inability of the
Issuers to repay the Credit Facilities and/or
repurchase the Notes following a Change of
Control will constitute Events of Default under
both the Credit Facilities and the Indenture.
See "Risk Factors -- Change of Control" and
"Description of the Notes -- Optional
Redemption" and "-- Change of Control."
GUARANTEES BY FUTURE
SUBSIDIARIES.................. The Subsidiary Guarantees will be full,
unconditional, joint and several guarantees of
the Notes on a senior subordinated unsecured
basis by all Guarantors. Each Subsidiary
Guarantee also will be effectively subordinated
to all secured Indebtedness of a Guarantor. As
of the date of this Prospectus, there are no
Restricted Subsidiaries or Subsidiary
Guarantees. See "Description of the
Notes -- Certain Covenants -- Future Subsidiary
Guarantors."
ORIGINAL ISSUE DISCOUNT....... The Notes will be considered to be issued with
OID for U.S. federal income tax purposes.
Although cash interest may not be paid on the
Notes prior to December 15, 1999, OID (the
difference between the stated redemption price
at maturity of the Original Notes and the
portion of the issue price of the Units
allocable to the Notes) will accrue from the
Issue Date and will be included as interest
income periodically (including periods ending
10
<PAGE> 18
prior to June 15, 1999) in a U.S. Holder's
gross income for U.S. federal income tax
purposes in advance of receipt of the cash
payment to which the income is attributable.
See "Certain U.S. Federal Income Tax
Consequences."
RESTRICTIVE COVENANTS......... The Indenture limits (i) the incurrence of
additional Indebtedness by each of the Issuers
and the Restricted Subsidiaries, (ii) the
payment of dividends on, and redemption of,
capital stock of the Issuers and the redemption
of certain Subordinated Obligations of the
Issuers, (iii) investments, (iv) sales of
assets and subsidiary stock, (v) transactions
with Affiliates, and (vi) consolidations,
mergers and transfers of all or substantially
all the assets of the Issuers. Any negative
pledge in respect of the securities of the
Issuers may require the approval of the Nevada
Commission to remain effective upon the
issuance of a Gaming License to the Issuers
and/or Warrant Co. The Indenture also prohibits
certain restrictions on distributions from
Restricted Subsidiaries. See "Description of
the Notes -- Certain Covenants."
EVENTS OF DEFAULT............. Events of Default under the Indenture include
(i) a default of any payment of interest when
due which continues for 30 days, (ii) a default
in the payment of principal when due at
maturity or otherwise, (iii) the failure of the
Issuers, the Partnership or the Guarantors to
comply with certain covenants or other
provisions of the Indenture, (iv) the uncured
failure of the Partnership or any Restricted
Subsidiary to pay any Indebtedness in excess of
$5.0 million when due, (v) certain events of
bankruptcy, insolvency or reorganization of the
Issuers or a significant Subsidiary or the
existence of a final, nonappealable judgment
against the Issuers or a significant Subsidiary
in excess of $2.0 million, and (vi) the failure
of the Resort Casino to commence hotel and
gaming operations by October 2, 1999. See
"Description of the Notes -- Events of
Default."
TRUSTEE....................... United States Trust Company of New York shall
act as the Trustee under the Indenture and has
been appointed by the Issuers as Registrar and
Paying Agent for the Notes. See "Description of
the Notes -- The Trustee."
For more complete information regarding the
Notes, see "Description of the Notes."
OTHER AGREEMENTS
DISBURSEMENT AGREEMENT........ The Issuers, the Administrative Agent, the
Trustee and First Security Trust Company of
Nevada as disbursement agent (the "Disbursement
Agent") and account agent (the "Account Agent")
entered into a December 31, 1997 Disbursement
Agreement (the "Disbursement Agreement") which
established conditions to, and the sequencing
of, funding construction of the Resort Casino.
Nevada Construction Services, Inc. acts as the
construction consultant (the "Construction
Consultant") under the Disbursement Agreement
and will be required to approve each request
11
<PAGE> 19
by the Issuers for the disbursement of funds.
See "Description of Disbursement Agreement."
CONSTRUCTION CONTRACT......... The Partnership has executed the Construction
Contract with J.A. Jones. The fee payable
pursuant to the Construction Contract is based
upon the cost of the work plus the fee payable
to J.A. Jones up to a guaranteed maximum price
of $133.0 million. The Construction Contract
provides for liquidated damages of up to $4.0
million assessable against J.A. Jones for its
failure to satisfy certain timing requirements.
See "Additional Material
Agreements -- Construction Contract and
Completion Guaranty."
CONSTRUCTION MANAGEMENT
CONTRACT...................... The Partnership has executed a Construction
Management Contract (the "Construction
Management Contract") with Rider Hunt (NV)
L.L.C. ("Rider Hunt") which will provide
certain administrative services related to the
Construction Contract, including development of
cash flow reports and forecasts; advising of
variations between actual and budgeted costs;
in consultation with the Partnership and the
Architect, rejecting work not in conformity
with the Construction Contract; preparing
valuations of amounts due the respective
contractors; and recording the progress of
construction of the Resort Casino. Rider Hunt
is not authorized to approve significant change
orders under the Construction Contract.
COMPLETION GUARANTY........... There is a completion guaranty covering certain
cost overruns from J.A. Jones, Inc., the parent
of J.A. Jones.
RISK FACTORS
Prior to tendering for Exchange Notes, the Original Note Holders should
carefully consider the matters discussed under "Risk Factors" which,
individually or in the aggregate, could have a material adverse effect on the
financial condition of the Partnership and the Issuers' ability to pay the
Indebtedness, including the Notes.
12
<PAGE> 20
SUMMARY SELECTED CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data set forth below as of
December 31, 1997 and December 31, 1996, for the year ended December 31, 1997,
and for the period from inception through December 31, 1996, have been derived
from the financial statements of RAS and the Partnership included elsewhere
herein which have been audited by Ernst & Young LLP, independent auditors, and
should be read in conjunction with those financial statements (including the
notes thereto) and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," all appearing elsewhere in this
Prospectus.
The statement of operations data for the three months ended March 31, 1998
and March 31, 1997 and the selected balance sheet data as of March 31, 1998 have
been derived from the unaudited financial statements of RAS and the Partnership
appearing elsewhere in this Prospectus which, in the opinion of management,
reflect all adjustments (consisting solely of normal recurring adjustments)
necessary for a fair presentation. Results of operations for interim periods are
not necessarily indicative of future or full year results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- --------------------------
RAS CONSOLIDATED 1998 1997 1997 1996
---------------- ----------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues................................... $ -- $ -- $ -- $ --
Costs and Expenses:
General and administrative................. 153,404 2,801 498,427 84,458
Depreciation and amortization.............. 519,524 -- 113,312 --
Other Income (Expense):
Interest income............................ 2,571,648 -- 41,255 --
Interest expense........................... (5,481,349) -- (48,346) --
----------- ------- ------------ -----------
Loss before limited partners' interests...... (3,582,629) (2,801) (618,830) (84,458)
Limited partners' interests.................. (3,546,803) (2,773) (608,145) (83,613)
----------- ------- ------------ -----------
Net loss..................................... $ (35,826) $ (28) $ (10,685) $ (845)
=========== ======= ============ ===========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------ --------------------------
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......................... $ 82,862,654 $175,491,628 $ --
Short term investments............................ 86,226,508 -- --
Property and equipment, net....................... 33,389,085 20,871,112 17,154,547
Total assets...................................... 233,903,005 226,237,440 18,646,981
Total current liabilities......................... 10,567,924 1,127,313 --
Long-term debt, net of discount................... 154,188,650 154,131,067 --
Warrants redeemable for partnership interest...... 7,619,565 5,869,565 --
Total liabilities................................. 172,376,139 161,127,945 18,146,826
Total stockholder's equity........................ 635,144 670,970 500,155
Total liabilities, limited partners' interest and
stockholder's equity........................... 233,903,005 226,237,440 18,646,981
</TABLE>
13
<PAGE> 21
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------- --------------------------
THE PARTNERSHIP 1998 1997 1997 1996
--------------- ------------ ------- ------------ -----------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues................................... $ -- $ -- $ -- $ --
Cost and Expenses:
General and administrative................. 153,404 2,801 493,885 84,458
Depreciation and amortization.............. 519,524 -- 113,312 --
Other Income (Expense):
Interest income............................ 2,571,648 -- 41,255 --
Interest expense........................... (5,481,349) -- (48,346) --
------------ ------- ------------ -----------
Net loss..................................... $ (3,582,629) $(2,801) $ (614,288) $ (84,458)
============ ======= ============ ===========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------ --------------------------
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents........................... $ 82,858,686 $175,487,660 $ --
Short term investments.............................. 86,226,508 -- --
Property and equipment, net......................... 33,389,085 20,871,112 17,154,547
Total assets........................................ 233,899,037 226,233,472 18,645,981
Total current liabilities........................... 10,566,914 1,126,303 --
Long-term debt, net of discount..................... 154,188,650 154,131,067 --
Warrants redeemable for partnership interest........ 7,619,565 5,869,565 --
Total liabilities................................... 172,375,129 161,126,935 --
Total partnership interest.......................... 61,523,908 65,106,537 18,645,981
Total liabilities and partnership interest.......... 233,899,037 226,233,472 18,645,981
</TABLE>
14
<PAGE> 22
RISK FACTORS
The Exchange Notes offered hereby involve a high degree of risk, including
the risks described below. Prospective Tendering Holders should carefully
consider the specific factors set forth below, as well as the other information
contained in this Prospectus, before deciding to tender the Original Notes for
the Exchange Notes.
This Prospectus contains certain "forward-looking statements" which
represent the Partnership's expectations or beliefs, including, but not limited
to, statements concerning industry performance and the Partnership's operations,
performance, financial condition, plans, growth and strategies. Any statements
contained in this Prospectus that are not statements of historical fact may be
deemed to be forward looking statements. Without limiting the generality of the
foregoing, words such as "may," "will," "expect," "anticipate," "intend,"
"could," "estimate" or "continue" or the negative or other variations thereof or
comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
certain of which are beyond the Partnership's control, and actual results may
differ materially depending on a variety of important factors, including those
described below in this "Risk Factors" section and elsewhere in this Prospectus.
NEW PROJECT; LACK OF OPERATING HISTORY
The Partnership plans to open the Resort Casino in April 1999, and the
Resort Casino has had no earnings or operations to date. Although several
members of RAS's management have experience constructing and operating resort
hotels of comparable or greater scope than the Resort Casino, neither the
Partnership, RAS nor RAS's management has previously been involved in
constructing or operating a luxury destination resort in the Las Vegas market.
The Partnership is a start-up entity and will be subject to all of the risks
inherent in establishing a new business enterprise, including, but not limited
to, unanticipated construction, licensing, permitting and operating problems.
The Issuers also have no proven ability to successfully develop, conduct, manage
or operate a luxury resort casino in the Las Vegas market or elsewhere. There
can be no assurance that the Resort Casino will open as scheduled or that, once
opened, it will achieve profitable operations. The inability to achieve
profitable operations will have a material adverse effect on the financial
condition of the Partnership and the Issuers' ability to pay the Indebtedness,
including the Notes.
SUBSTANTIAL LEVERAGE
Upon the issuance of the Original Notes and the Mortgage Notes, the Issuers
had significant debt service obligations. The ability of the Issuers to meet
their debt service and other obligations depends upon their future performance
and is subject to financial, economic and other factors, many of which are
beyond their control. At December 31, 1997 the Partnership's ratio of total debt
(total debt net of discount plus warrant liability) to total capitalization
(total debt plus total equity) was approximately .71 to 1.0. As of December 31,
1997, on a pro forma basis after giving effect to the completion of the Resort
Casino, the Issuers had an aggregate of $100.0 million of outstanding Senior
Indebtedness and the Partnership had partners' contributed capital of $65.8
million and a ratio of total debt to total capitalization of approximately .75
to 1.0. See "Capitalization." The Indenture permits the Partnership to incur
additional Indebtedness, including Senior Indebtedness, subject to certain
limitations. See "Description of the Notes."
The Partnership's high degree of leverage has important consequences to the
Note Holders, including: (i) the Partnership's ability to obtain additional
financing in the future is restricted; (ii) a substantial portion of the
Partnership's cash flow from operations must be dedicated to the payment of
principal and interest on its Indebtedness, thereby reducing the funds available
to the Partnership for other purposes; (iii) the Mortgage Notes will be secured
and mature prior to the Notes; (iv) the Partnership may be substantially more
leveraged than certain of its competitors, which may place it at a competitive
disadvantage; and (v) the Partnership's substantial degree of leverage may limit
its flexibility to adjust to changing market conditions, reduce its ability to
withstand competitive pressures and make it more vulnerable to a downturn in
general economic conditions or its business. See "Description of the Notes."
15
<PAGE> 23
ABILITY TO SERVICE DEBT
The Partnership's ability to make scheduled payments or to refinance its
obligations with respect to its Indebtedness will depend on its financial and
operating performance, which is subject to prevailing economic conditions and to
certain financial, business and other factors beyond its control. If the
Partnership's cash flow and capital resources are insufficient to fund its debt
service obligations, the Partnership may be forced to reduce or delay planned
expansion and capital expenditures, sell assets, obtain additional equity
capital or restructure its debt. There can be no assurance that the
Partnership's operating results, cash flow and capital resources will be
sufficient for future payment of its Indebtedness. In the absence of such
operating results and resources, the Partnership could face substantial
liquidity problems and might be required to dispose of material assets or
operations to meet its debt service and other obligations. There can be no
assurance as to the timing of such sales or the proceeds that the Partnership
could realize therefrom. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." There
can be no assurance that the Issuers will be able to repay their Indebtedness
upon maturity. Any default by the Issuers under the Indebtedness, including the
Mortgage Notes, would subject the Issuers to risk of foreclosure on
substantially all of their assets to the extent necessary in order to repay any
amounts due under the Indebtedness including, but not limited to, principal,
interest, penalties or other costs and expenses incurred in the event of a
default. Any such default would have a material adverse effect on the financial
condition of the Partnership and the Issuers' ability to pay the Indebtedness,
including the Notes.
SUBORDINATION; ASSET ENCUMBRANCES
The Original Notes are, and the Exchange Notes will be, unsecured senior
subordinated obligations of the Partnership and will be expressly subordinated
in right of payment to all existing and future Senior Indebtedness, including
the principal of, any premium, interest on, and all other amounts due on or
payable under, the Mortgage Notes. As of December 31, 1997, on a pro forma basis
after giving effect to the completion of the Resort Casino, the aggregate
principal amount of the Issuers' outstanding Senior Indebtedness was $100.0
million (assuming issuance of all $100.0 million of the Mortgage Notes) and the
Issuers had no outstanding Subordinated Obligations. As of March 31, 1998, the
total outstanding Indebtedness of the Issuers ranking senior or pari passu with
the Exchange Notes, and including $60.0 million of the Mortgage Notes, trade and
other operating debt, is $60.0 million. As of the date of this Prospectus, the
Issuers neither have any Restricted Subsidiary debt or anticipate incurring any
such debt in the future. The Partnership also is permitted under the Indenture
to incur additional Senior Indebtedness. By reason of such subordination, in the
event of the insolvency, liquidation, reorganization, dissolution or other
winding-up of the Partnership or upon a default in payment with respect to, or
the acceleration of, any Senior Indebtedness, the holders of Senior Indebtedness
must be paid in full before the Note Holders are paid. Under such circumstances,
the holders of any additional debt ranking pari passu with the Notes would be
entitled to share ratably with the Note Holders in the proceeds of any
distribution. This may have the effect of reducing the amount of proceeds paid
to Note Holders. See "Description of the Notes."
The Partnership has granted the Mortgage Notes lenders security interests
in substantially all of the current and future assets of the Partnership,
including a pledge of all of the issued and outstanding shares of capital stock
of the Partnership's future subsidiaries. In the event of any default on secured
Indebtedness, including the Mortgage Notes, the lenders of such Indebtedness
will have a prior secured claim on the Partnership interests and assets. An
attempted or actual foreclosure by any lenders would have a material adverse
effect on the Issuers, the financial condition of the Partnership and the
Issuers' ability to pay the Indebtedness, including the Notes.
RESTRICTIONS UNDER DEBT AGREEMENTS
The Indenture contains covenants that, among other things, limit the
ability of the Issuers and their Restricted Subsidiaries, if any, to incur
additional Indebtedness, incur liens, pay dividends and make certain other
restricted payments, make certain investments, consummate certain asset sales,
enter into certain transactions with Affiliates, issue Subsidiary stock, create
dividend or other payment restrictions affecting Restricted Subsidiaries,
consolidate or merge with any other Person or transfer all or substantially all
of the assets of the Issuers. See "Description of the Notes -- Certain
Covenants." The Mortgage Notes and the up to $10.0 million revolving credit
facility under the Credit Agreement, and any extensions, revisions,
16
<PAGE> 24
refinancings, restatements or replacements thereof (the "Revolving Credit
Facility") contain restrictive covenants which generally are more restrictive
than those in the Indenture and further limit the ability of the Issuers and
their Subsidiaries to prepay Indebtedness (including the Notes). The Mortgage
Notes and the Revolving Credit Facility require the Partnership to maintain
specified consolidated financial ratios and satisfy certain consolidated
financial tests. The Issuers' ability to meet those ratios and tests may be
affected by events beyond their control, and there can be no assurance that the
Issuers will meet those ratios and tests. A breach of any of the covenants under
the Mortgage Notes, the Revolving Credit Facility or the Indenture could result
in a default under other outstanding indebtedness, including the Mortgage Notes,
the Revolving Credit Facility and the Indenture. If an event of default occurs
under the Mortgage Notes or the Revolving Credit Facility, the lenders may elect
to declare all amounts outstanding thereunder, together with accrued interest,
to be immediately due and payable. If the Issuers are unable to repay those
amounts, the lenders could proceed against the collateral pledged as security
for the Indebtedness. Any such action taken by the lenders under the Mortgage
Notes, the Revolving Credit Facility or other Indebtedness will likely result in
an acceleration of the Indebtedness under the Notes. The Mortgage Notes or the
Revolving Credit Facility are secured by substantially all of the real property
and contract rights of the Partnership relating to the construction of the
Resort Casino.
CONSTRUCTION AND BUDGET RISKS
The Partnership has entered a guaranteed maximum price contract with J.A.
Jones. While the Issuers believe that the nature of the guaranteed maximum price
contract, plus $4.4 million of contingency and construction reserves and $26.0
million of forecasted cash at opening, will be sufficient to cover any
construction-related overages, there can be no assurance that this will be the
case. To provide additional protection against cost overruns, SCA's $3.0 million
development fee will not be paid until the successful completion of the Resort
Casino at or below the projected cost, including the contingency and
construction completion reserve. The contingency and construction reserves equal
approximately 3.3% of the $133.0 guaranteed maximum price under the Construction
Contract.
The Construction Contract contains a provision wherein the Partnership has
given to J.A. Jones the right to act as agent for and execute all subcontracts
and purchase orders as agent for, and on behalf of, the Partnership. There is a
substantial risk that this relationship between the Partnership and J.A. Jones
will result in, among other things, litigation against and liability of the
Partnership rather than against J.A. Jones as is the case in the normal
relationship between an owner and its contractor.
Construction projects such as the construction of the Resort Casino entail
significant risks, including, without limitation, shortages of skilled labor and
materials, unforeseen engineering, environmental or geological problems, work
stoppages, weather interference, floods and unanticipated cost increases. The
anticipated costs and construction schedule are based upon budgets, conceptual
design documents and construction schedule estimates prepared by the Partnership
in consultation with the Architect, an independent construction estimation firm,
and contractors. Construction, equipment or staffing problems or difficulties in
obtaining any of the requisite licenses, permits, allocations and authorizations
from regulatory authorities could increase the total cost, delay or prevent the
construction or operation of the Resort Casino or otherwise affect the design
and features of the Resort Casino. There can be no assurance that the budgeted
cost of the Resort Casino will not be exceeded or that it will commence
operations within the contemplated time frame, if at all.
DEPENDENCE ON KEY MARKETS
The Partnership's success depends upon acceptance of the Resort Casino by
visitors to Las Vegas, golfer/gamers and local Las Vegas residents. There can be
no assurance that the population and economic strength of Summerlin and the
surrounding area, including Las Vegas, will continue to grow, that the
Partnership will be able to attract a sufficient number of local gamers or Hotel
guests to the Resort Casino or that local gamers and the Hotel guests will seek
the amenities offered by the Resort Casino. The Partnership's inability to
attract a sufficient number of local gamers or Hotel guests may have a material
adverse effect on
17
<PAGE> 25
the financial performance of the Partnership and the Issuers' ability to service
the Indebtedness, including the Notes.
GAMING REGULATION
Prior to the commencement of construction of the Resort Casino, Seven
Circle Resorts of Nevada, Inc. ("SCRN"), a wholly-owned subsidiary of SCA,
obtained a Nevada distributor's license from the Nevada Commission. In addition,
the Swiss Parent and SCA were registered by the Nevada Gaming Authorities as a
holding company and an intermediary company, respectively, of SCRN. Prior to
opening the Resort Casino, the Partnership will apply for a nonrestricted Nevada
gaming license and RAS will apply for registration as an intermediary company
and/or licensing as a general partner, as applicable. The gaming operations and
the ownership of securities of the Issuers are subject to extensive regulation
by the Nevada Gaming Authorities, each of which has broad authority with respect
to licensing and registration of entities and individuals involved with the
Issuers, including the Note Holders.
The Partnership and RAS, the general partner of the Partnership, may be
required to disclose the identities of the Note Holders to the Nevada Gaming
Authorities upon request. The Nevada Commission may, in its discretion, require
the Note Holders to file an application, be investigated and be found suitable
to hold the Notes. Additionally, the Nevada Commission may, in its discretion,
require the holder of any debt security of an entity registered by the Nevada
Commission as a publicly traded corporation (a "Registered Company") to file an
application, be investigated and be found suitable to own the debt security of a
Registered Company. If the Nevada Commission determines that a person is
unsuitable (an "unsuitable person") to own the securities of a Registered
Company, then, pursuant to the Nevada Gaming Control Act and the regulations
promulgated thereunder (collectively, the "Nevada Act"), the Registered Company
may be sanctioned, including the loss of its approvals, if without the prior
approval of the Nevada Commission, it: (i) pays to the unsuitable person any
dividend, interest, or any distribution whatsoever; (ii) recognizes any voting
right by an unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal redemption, conversion, exchange,
liquidation, or similar transaction. The Partnership and RAS will be required to
be registered by the Nevada Commission as Registered Companies upon the
effectiveness of the Exchange Offer and the licensing of the Partnership.
Each Note Holder shall be deemed to have agreed (to the extent permitted by
law) that if the Nevada Gaming Authorities determine that a Note Holder or
beneficial owner of the Notes must be found suitable for any reason and if the
Note Holder or beneficial owner either refuses to file an application or is
found to be an unsuitable person, the Note Holder shall dispose of the Holder's
Notes within 30 days of a request by the Issuers or such other date if so
ordered by the Nevada Gaming Authorities. Any Holder which refuses or fails to
dispose of Notes will be deemed to have agreed to the foregoing restrictions on
voting, remuneration, dividend and distribution payment and redemption. The
Issuers also will have the right to redeem the Notes from any Holder at any time
to prevent the loss or material impairment of a Gaming License or an application
for a Gaming License.
Although the Partnership and RAS believe that they will obtain all
necessary Gaming Licenses prior to the completion of the Resort Casino, there
can be no assurance that all Gaming Licenses will be obtained by the completion
of the Resort Casino, if at all, given the complexity of the licensing
procedures under the Nevada Act and the broad authority of the Nevada Gaming
Authorities. A failure to obtain such Gaming Licenses by the Resort Casino's
completion could have a material adverse effect on the financial performance of
the Partnership and the Issuers' ability to service the Indebtedness, including
the Notes, and, if not obtained within 180 days from the Commencement Date, will
constitute a Default under the Indenture.
The Nevada Gaming Authorities may, among other things, revoke the gaming
license of any licensed entity (a "Licensee") or the registration of a
Registered Company or any entity registered as a holding or intermediary company
of a Licensee. In addition, the Nevada Gaming Authorities may revoke the license
or finding of suitability of any officer, director, controlling person,
shareholder, limited partner, noteholder or key employee of a licensed or
registered entity. If the Gaming Licenses of the Issuers are revoked for any
reason,
18
<PAGE> 26
the Nevada Gaming Authorities may require the closing of the Resort Casino,
which would result in a material adverse effect on the financial performance of
the Partnership and the Issuers' ability to service the Indebtedness, including
the Notes. The Partnership and certain of its officers, directors, partners and
key employees either will apply or have applied for licensing with the Nevada
Gaming Authorities. In addition, prior to opening, the Partnership must apply
for and receive a City of Las Vegas Gaming License and a liquor license.
Upon the effectiveness of the Exchange Offer, the Partnership and RAS will
each be a "publicly traded corporation" under the Nevada Act. In order for an
entity that is a "publicly traded corporation" to receive a gaming license, the
Nevada Commission must grant an exemption to the Partnership from a regulatory
provision in the Nevada Act which makes publicly traded corporations ineligible
to apply for or hold a gaming license. However, the Nevada Commission has
exempted companies from this provision in the past and has granted gaming
licenses to publicly traded corporations. The Partnership intends to apply for
an exemption from this eligibility requirement (the "Exemption") in connection
with its application for a Gaming License. In connection with licensing and
receipt of the Exemption, RAS and the Partnership will each be required to be
registered by the Nevada Commission as a Registered Company. After becoming a
Registered Company, neither the Partnership nor RAS may make a public offering
of any securities without the prior approval of the Nevada Commission if the
securities or the proceeds therefrom are intended to be used to construct,
acquire or finance gaming facilities in Nevada, or to retire or extend
obligations incurred for such purposes. Such approval, if given, does not
constitute a finding, recommendation or approval by the Nevada Board or the
Nevada Commission as to the accuracy or adequacy of the Prospectus or the
investment merits of the securities. Any representation to the contrary is
unlawful.
The regulations of the Nevada Board and the Nevada Commission also provide
that any entity which is not an "affiliated company," as defined in the Nevada
Act, or which is not otherwise subject to the provisions of the Nevada Act, such
as the Partnership and RAS, which plans to make a public offering of securities,
the proceeds from which are intended for the construction or operation of gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes, may apply to the Nevada Commission for prior approval of such
offering. The Nevada Commission may find an applicant unsuitable based solely on
its failure to submit such an application, unless upon a written request for a
ruling, the Nevada Board Chairman has ruled that it is not necessary to submit
such an application. The Exchange Offer will qualify as a public offering. The
Issuers have filed a written request (the "Ruling Request") with the Nevada
Board Chairman for a ruling that it is not necessary to submit the Exchange
Offer for prior approval. On March 27, 1998, the Nevada Board Chairman granted
the Issuers' Ruling Request, ruling that the Exchange Offer need not be
submitted to the Nevada Board or the Nevada Commission for prior approval.
In addition, if the Partnership and RAS are each registered as a Registered
Company and have been granted certain exemptions by the Nevada Commission, any
beneficial owner of the Partnership's or RAS's voting securities, regardless of
the number of shares owned, may be required to file an application, be
investigated, and have his suitability determined. Beneficial owners of more
than 10.0% of a Registered Company's voting securities must apply for a finding
of suitability within thirty days after the Chairman of the Nevada Board mails
written notice requiring such filing. Under certain circumstances, an
"institutional investor" beneficially owning more than 10.0% but not more than
15.0% of the Partnership's voting securities may apply to the Nevada Commission
for a waiver of such finding of suitability requirements. In any event, the
applicant must pay all costs of investigation incurred by the Nevada Gaming
Authorities in conducting any such investigation. See "Regulation and
Licensing -- Nevada" and "Description of the Notes -- Optional
Redemption -- Regulatory Redemption".
The Swiss Parent and SCA are subject to the jurisdiction of other gaming
authorities in the United States, including the Colorado Limited Gaming Control
Commission, the State of North Dakota Attorney General's Office, the Standing
Rock Tribal Gaming Commission and the National Indian Gaming Commission as well
as European gaming authorities. Should any of these other gaming authorities
take certain actions against the Swiss Parent, SCA or a corporate affiliate of
the Issuers, such action could have a material adverse effect on the
Partnership's ability to obtain or maintain a Nevada gaming license and
additional sanctions
19
<PAGE> 27
could be imposed by Nevada gaming authorities for regulatory violations outside
the State of Nevada. See "Regulation and Licensing."
AVAILABILITY AND RETENTION OF KEY MANAGEMENT AND OTHER EMPLOYEES
The development, construction and successful commercialization of the
Resort Casino require a highly skilled and experienced team of managers. The
Partnership is highly dependent on the efforts and abilities of RAS, its general
partner, and the senior management of RAS, particularly Mr. McMullan, President
and Chief Executive Officer of RAS; Mr. Fonseca, the Senior Vice President of
Gaming Operations of RAS; Mr. Boshoff, the Senior Vice President of Slot
Operations of RAS; Mr. Tipton, the Senior Vice President, Chief Financial
Officer and General Counsel of RAS; and Mr. Smith, the Financial Controller of
RAS. Additionally, the quality of hires associated with the hotel and gaming
operations will be critical to the success of the Resort Casino. It may be
difficult to attract, retain and train qualified employees due to its location
and that other facilities may be approaching completion. A failure to attract or
retain qualified management and personnel at all levels or the loss of any of
RAS's key executives could have a material adverse effect on the financial
performance of the Partnership and the Issuers' ability to service the
Indebtedness, including the Notes.
Messrs. McMullan, Fonseca, Boshoff, Tipton and Smith are employees of, and
will be compensated by, SCR which will provide substantially all management and
general and administrative services to the Partnership for a fee of
approximately $2.0 million plus 65.0% (estimated to be approximately $100,000)
of SCR's overhead for 1998, subject to renegotiation annually for future years.
SCR is engaged in the business of developing, commercializing and managing
gaming and resort destinations, presently manages a destination in North Dakota
and is preliminarily exploring potential projects elsewhere. SCR's parent, SCA,
owns and manages a property in Colorado. Each of Messrs. McMullan, Fonseca,
Boshoff, Tipton and Smith, as employees of SCR, currently are engaged, and in
the future will engage, in the development and management of SCR's other
businesses and properties. They will devote only as much of their time to the
business of the Partnership as they, in their judgment, deem to be reasonably
required, which will be less than their full time. These officers and directors
may experience conflicts of interest in allocating management time, services and
functions among the Partnership and the various other business activities of
SCR.
COMPETITION
Both the gaming and resort hotel industries are highly fragmented and
characterized by a high degree of competition among a large number of
participants. Many of the Partnership's competitors are much larger than the
Partnership and have substantially greater resources. The Resort Casino will
face competition from all other casinos and hotels in the Las Vegas area,
including competitors that primarily target local residents and casinos and
hotels located on the Strip, on the Boulder Highway and in downtown Las Vegas.
The Resort Casino also will face competition from non-hotel gaming facilities
that target local residents of Las Vegas. Several new hotel casinos either have
recently opened or currently are under construction on the Strip, including
Monte Carlo, a 3,000-room hotel casino which opened in June 1996; New York-New
York, a 2,000-room hotel-casino which opened in January 1997; the Venetian, a
3,000 room hotel casino, with plans to expand to 6,000 rooms which is expected
to open in April 1999; and Bellagio, a 3,000-room hotel casino which is expected
to open during 1998. In addition, several new projects and expansions have been
announced including Paris, Mandalay Bay, Lake Las Vegas, Mountain Spa, Ritz
Carlton and Marriott Marquis at MGM Grand and the Aladdin, each of which may be
completed within the next several years and would significantly increase the
total number of hotel rooms and gaming capacity in Las Vegas and its environs.
In addition, Coast Resorts has announced plans to build The Sundance Casino a
short distance from the Resort Casino on Rampart Boulevard. The construction of
new properties and the expansion or enhancement of existing properties by
competitors may have a material adverse effect on the financial performance of
the Partnership and the Issuers' ability to service the Indebtedness, including
the Notes.
The Partnership holds rights of first offer (the "Right of First Offer")
granted by HHP with respect to four other potential gaming sites in Summerlin.
The Partnership's ability to develop these sites is dependent upon numerous
factors, including the timing of the receipt of a Right of First Offer, the
financial condition of
20
<PAGE> 28
the Partnership, the ability of the Partnership to finance the development of
the Resort Casino Site, and other factors, many of which are beyond control of
the Partnership. Development of one or more of these sites by one or more
competitors of the Partnership may have a material adverse effect on the
financial condition of the Partnership and the Issuers' ability to service the
Indebtedness, including the Notes.
The Partnership will also compete for gaming customers with casinos located
in the Laughlin and Reno-Lake Tahoe areas of Nevada; in Atlantic City, New
Jersey; and in other parts of the world, including gaming on cruise ships and
international gaming operations, as well as with state-sponsored lotteries, on-
and off-track wagering, card parlors, riverboat, dockside, land-based and Native
American gaming ventures and other forms of legalized gaming in the United
States. In addition, several states recently have legalized, and several other
states are currently considering legalizing, casino gaming. The development of
casino properties similar to those in Las Vegas in areas close to Nevada,
particularly California and Arizona, may have a material adverse effect on the
financial condition of the Partnership and the ability of the Issuers to service
the Indebtedness, including the Notes.
POSSIBLE LEGISLATION
In May 1996, a U.S. Senate committee established the Gambling Impact Study
Commission ("GISC") to conduct a comprehensive study of all matters relating to
the impact of gaming in the United States. No later than 18 months after the
enactment of such legislation, GISC was required to issue a report containing
its findings and conclusions, together with recommendations for legislation and
administrative actions. Any such recommendations, if enacted into law, could
adversely impact the gaming industry and have a material adverse effect on the
financial condition of the Partnership and the Issuers' ability to service the
Indebtedness, including the Notes. As of the date of this Prospectus, GISC has
not issued a report.
The Nevada legislature has, from time to time, considered imposing
additional state taxes on all gaming establishments. Any material increase in
taxes, or the imposition of any additional taxes or fees on the Partnership,
could have a material adverse effect on the financial condition of the
Partnership and the Issuers' ability to service the Indebtedness, including the
Notes.
REGENT INTERNATIONAL FRANCHISE
The Partnership has entered into an agreement with Regent International, an
affiliate of the Carlson Hospitality group. Although Regent International plans
on expanding into the U.S. market, it currently only has one franchisee in the
U.S. and does not currently have significant brand name recognition
domestically. Failure of Regent International to penetrate the U.S. market and
obtain brand name recognition may have a material adverse effect on the
financial condition of the Partnership and the Issuers' ability to service the
Indebtedness, including the Notes.
The Partnership selected Regent International, in part, on the expectation
that the Hotels will receive five-star ratings by one or more rating
organizations. Although Regent International hotels have been granted five-star
ratings in the past, there can be no assurance that the Hotels will receive a
five-star rating. The failure of the Hotels to obtain a five-star rating could
have a material adverse effect on the financial condition of the Partnership and
the Issuers' ability to service the Indebtedness, including the Notes.
CONTROL BY SIGNIFICANT STOCKHOLDER
Upon consummation of the Exchange Offer, SCA will own 91.26% of the
outstanding equity interests of the Partnership and 100.0% of the outstanding
stock of RAS, the general partner of the Partnership, and will be able to
control the affairs of RAS and the Partnership. SCA is controlled by Mr.
Jecklin, the Chairman of the Board of RAS, through the Swiss Parent and certain
voting arrangements that expire in 2004. By virtue of such ownership, SCA will
have the power to direct the affairs of the Partnership and to determine the
outcome of all matters required to be submitted to the limited partners of the
Partnership for approval, including any amendments to the Agreement of Limited
Partnership, as amended, of the Partnership (the "Partnership Agreement"). The
interest of SCA as equity holders may differ from the interest of the Note
Holders. See "-- Competition," "Certain Transactions" and "Ownership of
Interests."
21
<PAGE> 29
FRAUDULENT CONVEYANCES AND PREFERENTIAL TRANSFERS
The ability of the Note Holders to enforce the Notes or any Subsidiary
Guarantees may be limited by certain fraudulent conveyance and revocatory laws,
which may be used by a court to avoid or subordinate the Notes or Subsidiary
Guarantees. The requirements for establishing a fraudulent conveyance or
revocatory transfer vary depending on the law of the jurisdiction being applied.
Generally, if under federal and certain state statutes in a bankruptcy,
reorganization, rehabilitation or similar proceeding in respect of the Issuers
or a Guarantor, or in a lawsuit by or on behalf of creditors against the Issuers
or a Guarantor, a court were to find that (i) the Issuers or the Guarantor
incurred Indebtedness in connection with the Notes (including the Subsidiary
Guarantee) with the intent of hindering, delaying or defrauding current or
future creditors of the Issuers or the Guarantor, or (ii) the Issuers or the
Guarantor received less than reasonably equivalent value or fair consideration
for incurring the Indebtedness for the Notes (including the Subsidiary
Guarantee) and the Issuers or the Guarantor (a) were insolvent at the time of
the incurrence of the Indebtedness for the Notes (including the Subsidiary
Guarantee), (b) were rendered insolvent by incurring the Indebtedness for the
Notes (including the Subsidiary Guarantee), (c) were engaged or about to engage
in a business or transaction for which its assets constituted unreasonably small
capital, or (d) were intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they matured, such court could void in
whole or in part the obligations of the Issuers or the Guarantor in connection
with the Notes (including the Subsidiary Guarantee) and/or subordinate claims of
the Note Holder (including the Subsidiary Guarantee) to all other debts of the
Issuers or the Guarantor, including the Senior Indebtedness. If the obligations
of the Issuers or a Guarantor for the Notes (including a Subsidiary Guarantee)
were subordinated to all such debt, there can be no assurance that, after
payment of the other debts of the Issuers or the Guarantor, there would be
sufficient assets to pay such subordinated claims for the Notes or the
Subsidiary Guarantee.
The measures of insolvency for purposes of the foregoing will vary
depending upon the law of the jurisdiction being applied in any such proceeding.
Generally, however, an entity will be considered insolvent if the sum of its
respective debts was greater than the fair saleable value of all of its property
at a fair valuation or if the present fair salable value of its assets is less
than the amount that will be required to pay its probable liability on its
existing debts, as they become absolute and matured.
If certain bankruptcy or insolvency proceedings were initiated by or
against an Issuer or any Guarantor within 90 days after any payment by such
Issuer or such Guarantor with respect to the Notes or a Subsidiary Guarantee,
respectively, or after the issuance of any Subsidiary Guarantee, or if the
Partnership or such Guarantor, as applicable, anticipated becoming insolvent at
the time of such payment or issuance, all or a portion of such payment, or, in
the case of the issuance of a Subsidiary Guarantee, such Subsidiary Guarantee,
could be voided as a preferential transfer under federal bankruptcy or
applicable state insolvency law, and the recipient of such payment could be
required to return such payment.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Note Holder will have the
right to require the Issuers to repurchase for cash all or any part of such
Holder's Notes for 101.0% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase. A Change of Control is (i) any
sale, lease, exchange or other transfer (collectively, a "Transfer") (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Partnership and its Subsidiaries; (ii) the adoption of a plan
relating to the liquidation or dissolution of the Partnership; (iii) RAS ceasing
to be the sole General Partner of the Partnership; or (iv) the Existing Partners
failing to own in the aggregate, directly or indirectly, at least 50.0% of the
General Partner.
If any amounts are owing under the Credit Facilities, at the time of a
Change of Control, the Issuers will be required to (i) repay in full all
obligations under the Credit Facilities, (ii) offer to repay in full the Credit
Facilities and repay the Credit Facilities to each lender who has accepted such
offer, or (iii) obtain the consents of the lenders under the Credit Facilities
to repurchase the Notes. The Issuers will be required to comply with the
provisions described in the preceding sentence prior to complying with their
obligations to repurchase Notes in the event of a Change of Control. The Credit
Facilities lenders are not legally or
22
<PAGE> 30
otherwise obligated to consent to a repurchase of the Notes by the Issuers
following a Change of Control and may be entitled to withhold their consent to
the repurchase of the Notes for any reason or for no reason. A Change of Control
could occur at a time when the Issuers are financially unable to repay the
Credit Facilities and/or to repurchase the Notes. The Issuers have not
established, and do not intend to establish, any reserves or sinking funds for
the repayment of the Credit Facilities or the repurchase of the Notes following
a Change of Control or otherwise and have not received a commitment from any
lender to refinance the Indebtedness under the Credit Facilities or the Notes
obligations in the event of a Change of Control or otherwise. The failure or
inability of the Issuers to repay the Credit Facilities and/or repurchase the
Notes following a Change of Control will constitute Events of Default under both
the Credit Facilities and the Indenture. See "Description of the Notes -- Change
of Control"
ENVIRONMENTAL RISKS AND REGULATION
As is the case with any owner or operator of real property, the Partnership
is subject to a variety of federal, state and local governmental regulations
relating to the use, storage, discharge, emission and disposal of hazardous
materials. Failure to comply with environmental laws could result in the
imposition of severe penalties or restrictions on operations by government
agencies or courts of law which could adversely affect operations. The
Partnership does not have environmental liability insurance to cover most such
events, and the environmental liability insurance coverage it maintains to cover
certain events includes significant limitations and exclusions. In addition, if
the Partnership discovers any significant environmental contamination affecting
any of its properties, the Partnership could face material remediation costs or
additional development costs for future expansion activities. See
"Business -- Properties."
Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and remediate hazardous or toxic substances or petroleum
product releases at such property and may be held liable to a governmental
entity or to private parties for property damage and for investigation and
remediation costs incurred by such parties in connection with the contamination.
Such laws typically impose remediation responsibility and liability without
regard to whether the owner knew or caused the presence of the contaminants, and
the liability under such laws has been interpreted to be joint and several
unless the harm is divisible and there is a reasonable basis for allocation of
responsibility. The costs of investigation, remediation or removal of such
substances may be substantial, and the presence of such substances, or the
failure properly to remediate the contamination on such property, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances at a disposal or treatment facility also may be
liable for the costs of removal or remediation of hazardous or toxic substances
at such disposal or treatment facility, whether or not such facility is owned or
operated by such person. In addition, some environmental laws create a lien on
the contaminated site in favor of the government for damages and costs incurred
in connection with the contamination. Finally, the owner of a site may be
subject to common law claims by third parties for damages and costs resulting
from environmental contamination emanating from such site.
Certain federal, state and local laws, regulations and ordinances govern
the removal, encapsulation or disturbance of asbestos-containing materials
("ACM") when such materials are in poor condition or in the event of
construction, remodeling, renovation or demolition of a building. Such laws may
impose liability for release of ACM and may permit third parties to seek
recovery from owners or operators for personal injury resulting from ACM. In
connection with its ownership and operation of the properties, the Partnership
potentially may be liable for such costs.
The Partnership is not aware of any environmental liability that the
Partnership believes could have a material adverse effect on the Partnership's
financial condition or the Issuers' ability to pay the Indebtedness, including
the Notes. Nevertheless, it is possible that there are material environmental
liabilities of which the Partnership is unaware. Moreover, there is no assurance
that (i) future laws, ordinances or regulations will not impose any material
environmental liability or (ii) the current environmental condition of the
Resort Casino Site or any future properties will not be affected by the
condition of land or operations in the vicinity of the properties (such as the
presence of underground storage tanks) or third parties unrelated to the
Partnership.
23
<PAGE> 31
The Partnership has not been notified by any governmental authority, and is
not otherwise aware, of any material noncompliance, liability or claim relating
to hazardous or toxic substances or petroleum products in connection with
ownership of the Resort Casino Site.
AMERICANS WITH DISABILITIES ACT COMPLIANCE
Under the American with Disabilities Act (the "ADA") places of public
accommodation or commercial facilities are required to meet certain federal
requirements for access and use by disabled persons. Although the Partnership
believes the Resort Casino Site is in material compliance with the ADA, the
Partnership may incur additional costs in connection with ADA compliance in the
future. Also, the ADA and other federal, state and local laws and regulations
concerning access by disabled persons may require modifications to the
Partnership's properties. Non-compliance with the ADA could result in the
imposition of fines, awards of damages to private litigants or an order to
correct non-compliance.
REDEMPTION AND/OR DISPOSAL OF NOTES PURSUANT TO REGULATORY REQUIREMENTS
If a Holder or beneficial owner of a Note is required by any Gaming
Authority to be found suitable, such Holder will be required to apply for a
finding of suitability within 30 days after request of the Gaming Authority or
such other time prescribed by the Gaming Authority. The applicant for a finding
of suitability must pay all costs of the investigation for such finding of
suitability. If a Holder or beneficial owner is required to be found suitable
and is not found suitable by the Gaming Authority, such person may be required
pursuant to the terms of the Notes or law to dispose of the Notes. If a Gaming
Authority determines that a person is unsuitable to own the Notes, then the
Issuers may be subject to sanctions, including the loss of their regulatory
approvals, if, without the prior approval of the applicable Gaming Authority,
they (i) pay to the unsuitable person any dividend, interest or any distribution
whatsoever, (ii) recognize any voting rights by the unsuitable person in
connection with the Notes, (iii) pay the unsuitable person remuneration in any
form, or (iv) make any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar transaction. Further,
if the Holder or beneficial owner of the Notes is required to be found suitable
and is not found suitable by a Gaming Authority, (i) such person shall, upon
request of the Issuers, dispose of the person's Notes within 30 days or within
the time prescribed by such Gaming Authority, whichever is earlier (and if not
so disposed of, the person is deemed to agree to be bound by the restrictions
described in the previous sentence), or (ii) the Issuers may, at their option,
redeem the person's Notes at the lesser of (a) the principal amount thereof, (b)
the fair market value of the Notes, or (c) the price at which the Notes were
acquired by the person, in any case, without accrued and unpaid interest to the
date of the finding of unsuitability by the Gaming Authority, unless payment of
such interest is permitted by the Gaming Authority. See "Regulation and
Licensing -- Nevada" and "Description of the Notes -- Optional Redemption --
Regulatory Redemption."
ORIGINAL ISSUE DISCOUNT
The Original Notes were issued with OID (the difference between the stated
redemption price at maturity of the Original Notes and the portion of the issue
price of the Units allocable to the Original Notes) for U.S. federal income tax
purposes. OID accrues from the Issue Date and generally will be includable as
interest income in the U.S. Holder's gross income for U.S. federal income tax
purposes in advance of the cash payments to which the income is attributable. If
a bankruptcy case is commenced by or against the Partnership under the United
States Bankruptcy Code (the "Bankruptcy Code") after the issuance of the Notes,
the claim of a Note Holder with respect to the principal amount thereof may be
limited to an amount equal to the sum of (i) the initial offering price
allocable to the Notes and (ii) the portion of OID which is not deemed to
constitute "unmatured interest" for purposes of the Bankruptcy Code. Any OID
that was not amortized as of the date of any such bankruptcy filing would
constitute "unmatured interest." See "Certain U.S. Federal Income Tax
Consequences."
24
<PAGE> 32
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The Original Notes were issued to, and, the Company believes, are currently
owned by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Original Notes. The Original
Notes have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
Exchange Notes by Holders who are entitled to participate in the Exchange Offer.
The Original Note Holders (other than any Holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) who are not
eligible to participate in the Exchange Offer are entitled to certain
registration rights, and the Company is required to file a Shelf Registration
Statement for such Original Notes. The Exchange Notes will constitute a new
issue of securities with no established trading market. The Company does not
intend to list the Exchange Notes on any national securities exchange or seek
the admission thereof to trading in the National Association of Securities
Dealers Automated Quotation System. The Initial Purchaser has advised the
Company that it currently intends to make a market in the Exchange Notes, but it
is not obligated to do so and may discontinue market making at any time. In
addition, any market making activity will be subject to the limits imposed by
the Securities Act and the Exchange Act and may be limited during the Exchange
Offer and the pendency of any Shelf Registration Statement. No assurance can be
given that an active public or other market will develop for the Exchange Notes
or as to the liquidity of the trading market for the Exchange Notes. If a
trading market does not develop or develops and is not maintained, Holders may
experience difficulty in reselling the Exchange Notes or may be unable to sell
them at all. Any market for the Exchange Notes which develops may be
discontinued at any time.
If a public trading market develops for the Exchange Notes, future trading
prices will depend on many factors including, among other things, prevailing
interest rates, the Company's results of operations and the market for similar
securities. Depending on these and other factors, the Exchange Notes may trade
at a discount from their principal amount.
CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
Original Note Holders who do not tender will remain subject to the
restrictions on transfer of the Original Notes which were issued in a private
transaction and were not registered under the Securities Act and applicable
state securities laws. In general, the Original Notes may not be offered or sold
unless registered under the Securities Act and applicable state securities laws,
or pursuant to an exemption therefrom. The Company does not intend to register
the Original Notes under the Securities Act. Any Original Note Holder who
tenders in the Exchange Offer for the purpose of participating in a distribution
may be deemed to have received restricted securities and will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale. To the extent Original Notes are
tendered and accepted in the Exchange Offer, the trading market, if any, for the
Original Notes not tendered could be adversely affected. See "The Exchange
Offer."
25
<PAGE> 33
USE OF PROCEEDS
There will be no cash proceeds payable to the Partnership from the issuance
of the Exchange Notes pursuant to the Exchange Offer. The proceeds from the 144A
Offering, together with the proceeds from the Mortgage Notes and equity
contributions, are being used to construct, develop and equip the Resort Casino
as described below:
<TABLE>
<CAPTION>
USES $ IN MILLIONS
---- -------------
<S> <C>
Land(1).................................................. $ 17.8
Construction Contract Costs(2)........................... 133.0
FF&E, Gaming Equipment and MIS(3)........................ 48.5
Construction Soft Costs(4)............................... 9.8
Net Working Capital(5)................................... 5.9
Cash Interest and Fees, Net(6)........................... 0.3
Licenses, Taxes and Fees................................. 7.8
Pre-Opening Expenses..................................... 14.3
Contingency and Construction Completion Reserves(7)...... 4.4
Interest in Escrow(8).................................... 12.4
Transaction Fees and Expenses............................ 13.3
------
Total Uses..................................... $267.5
======
</TABLE>
- ---------------
(1) Land acquisition cost paid in August 1996 was $16.6 million for the purchase
of the 54.5 acre Resort Casino Site and option fees totalling $1.2 million
to obtain option rights with respect to the Option Parcel, which were
assigned to SCA prior to the completion of the 144A Offering. See "Certain
Transactions -- Option and Right of First Offer."
(2) The Partnership has executed the $133.0 million maximum amount Construction
Contract with J.A. Jones and the Construction Management Contract with Rider
Hunt.
(3) The Partnership has the ability to lease up to $15.0 million of additional
furniture, fixtures and equipment.
(4) Construction soft costs consist principally of architectural, engineering
and sewer and water connection fees.
(5) Net working capital represents principally cash for the Resort Casino and
four months prepaid gaming taxes.
(6) The Resort Casino is scheduled to open in April 1999. "Cash Interest and
Fees, Net" equals the total of interest expense and commitment fees on the
Mortgage Notes, net of interest income.
(7) Contingency and construction completion reserves represent principally cash
available for construction cost overruns, if any, in addition to other cost
overrun provisions.
(8) Interest in escrow represents principally five quarters of interest on the
Mortgage Notes based on an estimated interest rate of 9.95%.
26
<PAGE> 34
CAPITALIZATION
The following table sets forth the capitalization of the Partnership as of
March 31, 1998 after the completion of the 144A Offering. This table should be
read in conjunction with the financial statements and the notes thereto, "Use of
Proceeds," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED(1)
------ --------------
(IN MILLIONS)
<S> <C> <C>
Long-term debt:
Mortgage Notes..................................... $ 60.0 $100.0
Original Notes(2).................................. 94.2 94.2
Warrants(2)........................................ 7.6 7.6
------ ------
Total long-term debt............................ 161.8 201.8
Partners' capital:
Partners' contributed capital(3)................ 65.8 65.8
Deficit accumulated during development stage.... (4.3) (4.3)
------ ------
Total partnership interest................. 61.5 61.5
------ ------
Total capitalization....................... $223.3 $263.3
====== ======
</TABLE>
- ---------------
(1) Adjusted capitalization includes the remaining $40.0 million of Mortgage
Notes commitment.
(2) Through June 15, 1999, interest is payable in arrears in either cash or by
issuing additional Notes. The Issuers expect to pay interest through June
15, 1999 by issuing additional Notes, which would increase the principal
amount of the Notes to $120.8 million, assuming an interest rate of 13.0%.
For GAAP purposes the Partnership has allocated the $100.0 million of
proceeds from the sale of the Units as follows (in millions):
<TABLE>
<S> <C>
Original Notes...................... $94.1
Warrants............................ 5.9
------
Total............................... $100.0
======
</TABLE>
The $5.9 million of OID on the issue of the Original Notes will be amortized
over the term of the Original Notes using the effective interest method. The
Partnership accrues additional interest in connection with the Warrants. See
Note 2 to the Financial Statements.
(3) The components of partners' contributed capital are (i) approximately $63.0
million in cash from SCA, and (ii) approximately $4.5 million in cash from
other limited partners less (iii) $500,000 of licensing costs carried on the
books of SCRN and (iv) $1.2 million of option payments assigned to SCA. See
"Certain Transactions -- Option and Right of First Offer."
Contributed capital of RAS at March 31, 1998 is $682,500 (actual and as
adjusted). RAS has no long-term debt.
27
<PAGE> 35
SELECTED CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data set forth below as of
December 31, 1997 and December 31, 1996, for the year ended December 31, 1997,
and for the period from inception through December 31, 1996, have been derived
from the financial statements of RAS and the Partnership included elsewhere
herein which have been audited by Ernst & Young LLP, independent auditors, and
should be read in conjunction with those financial statements (including the
notes thereto) and with "Management's Discussion and Analysis of Financial
Condition and Results of Operations", all appearing elsewhere in this
Prospectus. The statement of operations data for the three months ended March
31, 1998 and March 31, 1997 and the selected balance sheet data as of March 31,
1998 have been derived from the unaudited financial statements of RAS and the
Partnership appearing elsewhere in this Prospectus which, in the opinion of
management, reflect all adjustments (consisting solely of nominal recurring
adjustments) necessary for a fair presentation. Results of operations for
interim periods are not necessarily indicative of future or full year results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------------------- --------------------------
RAS CONSOLIDATED 1998 1997 1997 1996
---------------- ------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues............................. $ -- $ -- $ -- $ --
Costs and Expenses:
General and administrative........... 153,404 2,801 498,427 84,458
Depreciation and amortization........ 519,524 -- 113,312 --
Other Income (Expense):
Interest income...................... 2,571,648 -- 41,255 --
Interest expense..................... (5,481,349) -- (48,346) --
------------ ------------ ------------ -----------
Loss before limited partners'
interests............................ (3,582,629) (2,801) (618,830) (84,458)
Limited partners' interests............ (3,546,803) (2,773) (608,145) (83,613)
------------ ------------ ------------ -----------
Net loss............................... $ (35,826) $ (28) $ (10,685) $ (845)
============ ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------ --------------------------
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......................... $ 82,862,654 $175,491,628 $ --
Short term investments............................ 86,226,508 -- --
Property and equipment, net....................... 33,389,085 20,871,112 17,154,547
Total assets...................................... 233,903,005 226,237,440 18,646,981
Total current liabilities......................... 10,567,924 1,127,313 --
Long-term debt, net of discount................... 154,188,650 154,131,067 --
Warrants redeemable for partnership interest...... 7,619,565 5,869,565 --
Total liabilities................................. 172,376,139 161,127,945 18,146,826
Total stockholder's equity........................ 635,144 670,970 500,155
Total liabilities, limited partners' interest and
stockholder's equity........................... 233,903,005 226,237,440 18,646,981
</TABLE>
28
<PAGE> 36
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------------- ------------------------
THE PARTNERSHIP 1998 1997 1997 1996
--------------- ----------- ------- ------------- --------
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues.................................... $ -- $ -- $ -- $ --
Cost and Expenses:
General and administrative.................. 153,404 2,801 493,885 84,458
Depreciation and amortization............... 519,524 -- 113,312 --
Other Income (Expense):
Interest income............................. 2,571,648 -- 41,255 --
Interest expense............................ (5,481,349) -- (48,346) --
----------- ------- ------------- --------
Net loss...................................... $(3,582,629) $(2,801) $ (614,288) $(84,458)
=========== ======= ============= ========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------ --------------------------
1998 1997 1996
------------ ------------ -----------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......................... $ 82,858,686 $175,487,660 $ --
Short term investments............................ 86,226,508 -- --
Property and equipment, net....................... 33,389,085 20,871,112 17,154,547
Total assets...................................... 233,899,037 226,233,472 18,645,981
Total current liabilities......................... 10,566,914 1,126,303 --
Long-term debt, net of discount................... 154,188,650 154,131,067 --
Warrants redeemable for partnership interest...... 7,619,565 5,869,565 --
Total liabilities................................. 172,375,129 161,126,935 --
Total partnership interest........................ 61,523,908 65,106,537 18,645,981
Total liabilities and partnership interest........ 233,899,037 226,233,472 18,645,981
</TABLE>
29
<PAGE> 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations of the Partnership should be read in conjunction with the information
contained in the Financial Statements, including the notes thereto, and the
other financial information appearing elsewhere in this Prospectus. The
following discussion includes forward-looking statements that involve certain
risks and uncertainties. See "Risk Factors."
DEVELOPMENT ACTIVITIES
The Partnership is constructing, and will own and operate, the Resort
Casino which is expected to include two luxury hotel facilities, a casino, a spa
and fitness center, and a retail, meeting and entertainment complex in Las
Vegas, Nevada. The Resort Casino is expected to commence operations in the
second quarter of 1999. Construction of the Resort Casino began in January 1998.
RESULTS OF OPERATIONS
RAS was incorporated in Nevada in June 1996, and the Partnership was formed
in Nevada in August 1996. Because the Issuers are in the development stage and
have had no significant operating results, the results of operations are not
discussed. See the Financial Statements for the Issuers' historical results of
operation.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, approximately $64.2 million ($51.4 million as of
December 31, 1997) of the estimated total project cost of $267.5 million had
been expended or incurred to fund construction and development of the Resort
Casino. Of the costs incurred, approximately $32.2 million represents land,
construction in progress and furniture, fixtures and equipment, and the balance
represents related development costs, financing costs and funds deposited into
the Mortgage Notes interest escrow account.
The remaining construction and development costs for the Resort Casino are
expected to be funded from a combination of (i) gross proceeds from the offering
of the Mortgage Notes of approximately $100.0 million, (ii) gross proceeds from
the 144A Offering of approximately $100.0 million, and (iii) the Equity
Contribution, which was fully funded prior to the closing date of the 144A
Offering. See "Use of Proceeds" and "Description of the Notes." There were no
changes in the Partnership's capital resources between December 31, 1997 and
March 31, 1998.
The Mortgage Notes consist of up to $100.0 million of loans ("Construction
Loans") which may be used to finance construction of the Resort Casino, with the
principal amount of Construction Loans outstanding on the Commencement Date to
convert into term loans (the "Term Loans"). Construction Loans and Term Loans
may not be re-borrowed once repaid. Advances on the Construction Loans may be
made after the Issue Date pursuant to a maximum of four drawdowns (each a
"Drawdown"), of at least $10.0 million each on a quarter end from March 31, 1998
through March 31, 1999. See "Certain Material Agreements -- Disbursement
Agreement." In addition, a portion, if any, of the maximum $100.0 million not
incurred as Construction Loans (but not in excess of $10.0 million) will be made
available on and after the Commencement Date under the Revolving Credit Facility
which will be available from the Commencement Date to March 31, 2004 (the
"Maturity Date"). The Partnership may obtain additional sources of liquidity, if
necessary, including (i) up to $15.0 million of lease financing for furniture,
fixtures and equipment and (ii) up to $5.0 million of unsecured debt.
The funds provided by these sources are expected to be sufficient to
develop, construct and commence operations of the Resort Casino assuming there
are no significant delays, material cost or construction cost overruns or that
any delays, material cost and construction cost overruns are covered by (i) the
Partnership's contingency and construction completion reserves of $4.4 million,
(ii) the subordination of SCA's $3.0 million development fee and (iii) various
insurance policies. See "Insurance Requirements."
30
<PAGE> 38
Based on current cash balances and anticipated expenditures, management
estimates a cash balance upon opening of the Resort Casino of $26.0 million,
comprised of (i) $1.7 million for casino bankroll; (ii) $200,000 for slot
machine coin inventory; (iii) $12.4 million of Mortgage Notes interest escrow;
(iv) $4.4 million of unspent project contingency and reserves; (v) a $6.7
million general contractor retention; and (vi) $600,000 of construction and
preopening payables.
Beginning with the scheduled opening of the Resort Casino in April 1999 the
Issuers expect to fund their operations, capital requirements and debt service
obligations from (i) operating cash flow; (ii) a forecasted cash balance upon
opening of $26.0 million; (iii) additional indebtedness of up to $10.0 million
under the Revolving Credit Facility; and (iv) any remaining financing permitted
under the Credit Agreement and the Indenture. Such financing is subject to
certain conditions, including completion of the Resort Casino. See "Risk
Factors."
Management believes that forecasted cash balances, operating cash flow and
additional borrowings allowed under the Credit Agreement and the Indenture will
provide the Partnership with sufficient resources to meet its existing debt
obligations and foreseeable capital expenditure requirements.
Although no additional funding for the Resort Casino is currently
contemplated (other than described above), the Partnership may seek, if
necessary and to the extent permitted under the Mortgage Notes and the Notes,
additional financing through additional bank borrowings or debt or equity
financing. There can be no assurance that additional financing, if needed, will
be available to the Partnership and, if available, that the financing will be on
terms favorable to the Partnership. Finally, there can be no assurance that new
business developments or other unforeseen events will not occur resulting in the
need to raise additional funds.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written using
two digit dates rather than four to define the applicable year. As a result,
those programs have time-sensitive software that recognize a date using "00" as
the year 1900 rather than the year 2000. This could cause system failures or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions or engage in similar
business activities.
Due to the Issuers' current development stage status and lack of
significant operations, management believes the cost of its Year 2000 compliance
program will not be material. The Issuers are currently operating computer
systems purchased during the last two years and accordingly believe that these
systems will not require significant modifications in order to achieve Year 2000
compliance. The Issuers are in the process of selecting computer operating
systems for the Resort Casino and will obtain confirmation from the vendor that
the systems are Year 2000 compliant prior to installation. Accordingly, it is
not expected that the Issuers will incur significant amounts to modify the
Resort Casino's systems for Year 2000 compliance. There can be no assurance that
the systems of other companies on which the Issuers may rely, such as vendors,
will be properly converted before year 2000 or that failure to convert by
another company will not have an adverse effect on the Issuers' operations.
31
<PAGE> 39
BUSINESS
GENERAL
The Partnership plans to construct, own and operate the Resort Casino, a
Mediterranean-style luxury hotel, casino and spa complex, to be located
approximately nine miles from the Strip and approximately a 20 minute drive from
McCarran International Airport. The Resort Casino Site is located at the gateway
to Summerlin, a 22,500-acre land development of HHP. The Resort Casino is
designed to offer a complete range of amenities including two five-star hotels
with a total of 476 rooms and 80 suites, a 50,000 square foot gaming facility, a
40,000 square foot state-of-the-art spa and fitness facility, up to eight
restaurants of varied cuisine and an indoor/outdoor buffet, a 60,000 square foot
lifestyle complex, and a 50,000 square foot conference and banquet center. The
Resort Casino presently has the right to reserve up to 50.0%, and may in the
future exercise its option for the right to reserve up to 75.0%, of the tee
times at the adjoining TPC Canyons, home to the Senior PGA Tour's Las Vegas
Senior Classic, and the Resort Casino Site is located near eight additional golf
courses. Construction of the Resort Casino began in January 1998 with an opening
to the general public scheduled for April 1999.
RAS was incorporated in Nevada in June 1996, and the Partnership was formed
as a limited partnership in Nevada in August 1996. SCA is the owner of 91.26% of
the issued and outstanding Partnership interests and the sole owner of RAS. SCA
is 99.0% owned in the aggregate by certain of its officers and directors. See
"Management" and "Ownership of Interests." The executive offices of the Issuers
are located at 1160 Town Center Drive, Suite 200, Las Vegas, Nevada 89134 and
the telephone number is (702) 869-7000.
BUSINESS AND MARKETING STRATEGY
The Partnership's business and the goal of its marketing strategy is to (i)
create the Resort Casino as a premier off-Strip location with geographic
exclusivity, (ii) deliver superior and market-unique resort amenities within the
local off-Strip market, (iii) target middle- to upper-income customers, (iv)
capitalize on its marquee hotel flag and extensive travel network relationship,
(v) carefully manage construction costs and risks with a proven design and build
team, and (vi) leverage management's track record and continuity.
- CREATE A PREMIER OFF-STRIP LOCATION WITH GEOGRAPHIC EXCLUSIVITY. The
Issuers believe that, at the time of its completion, the Resort Casino
will to be the only luxury destination of its kind in the United States
with gaming and nine golf courses within a five minute drive. The Resort
Casino will be situated at the gateway to Summerlin which is projected by
BBER to have a 1999 population base of 235,000 residents. Located at the
intersection of Rampart Boulevard and Summerlin Parkway, two principal
traffic arteries in northwest Las Vegas, the area is readily accessible
from most major points in the city including downtown Las Vegas
(approximately eight miles), the Strip (approximately nine miles) and
McCarran International Airport (approximately 15 miles). Accessibility
will be further enhanced by the planned connection of the Las Vegas
beltway to Summerlin Parkway by 2000.
TPC Canyons is adjacent to the Resort Casino Site. Immediately to the
south and east of the Resort Casino Site is the Angel Park Golf Club which
includes two regulation 18-hole courses and an executive, 12-hole par
three course. An additional five 18-hole public and private golf courses
and one 27-hole public golf course are within a five minute drive of the
Resort Casino Site. The Resort Casino will offer panoramic views of the
adjoining golf courses as well as of Las Vegas and the Strip to the east
and the Red Rock Canyon National Park to the west.
The Partnership has obtained the Right of First Offer from HHP to develop
an additional four designated gaming sites in Summerlin which rights may
be assigned to certain Unrestricted Subsidiaries in certain circumstances.
See "Risk Factors -- Competition." Additionally, Nevada Senate Bill #208,
enacted in July 1997, from which the Resort Casino and the additional four
gaming sites subject to the Right of First Offer are exempt, limits the
development of casinos near residential neighborhoods, churches and
schools, restricting entry by competitors into the market.
- DELIVER SUPERIOR RESORT AMENITIES. The Resort Casino is designed along
the lines of a Scottsdale- or Palm Springs-type facility with
Mediterranean-style architecture, intimate ambiance and strong focus
32
<PAGE> 40
on service intended to create a lifestyle experience for its guests and
offer visitors a haven from the pressures of daily life. The Issuers
believe that this atmosphere generally is unavailable in Las Vegas or
other gaming locales in the United States. The Resort Casino's two Hotels
will feature 476 standard rooms and 80 suites. The Issuers believe that,
at approximately 564 square feet, the Resort Casino's standard guest room
will be among the most spacious in Las Vegas. The circular design casino
will be situated at the hub of the Resort Casino and will feature 50,000
square feet of gaming space, including 1,200 slot machines, 40 table
games, a sports and race betting club and two salons prives for higher
stake slots and table games. For golfers, the Resort Casino will be able
to reserve up to 50.0%, and may in the future contract for the right to
reserve up to 75.0%, of the tee times at TPC Canyons and will benefit
from an additional 165 holes of golf within a five minute drive of the
Resort Casino Site. The Resort Casino also will include a 40,000 square
foot upscale spa and fitness facility with state-of-the-art equipment
designed to the same standards as the award-winning Grand Wailea, Hawaii
and Golden Door, California spa resorts. Guests will have various indoor
and outdoor dining options including up to eight restaurants of varied
cuisine and a large, roof-deck buffet. The Resort Casino also will
include a technologically advanced, flexible design business meeting
center to cater to executive retreats and conferences. The Lifestyle
Complex, which is designed to facilitate indoor and outdoor activity and
highlighted by terraces, fountains and pools, will link all the
components in the Resort Casino. The Lifestyle Complex will include
gourmet food and wine shops, a cigar shop, a beauty salon and other
boutique outlets selected to encourage frequent visits by local
residents.
- TARGET MIDDLE- TO UPPER-INCOME CUSTOMER SEGMENTS. The Resort Casino will
be specifically tailored to cater to the affluent, higher-end customer.
The Issuers believe that the Resort Casino's Hotels and recreational
amenities will appeal to customers from the following principal long-term
markets:
The Captive Summerlin Market. The population within a five-mile radius of
the Resort Casino Site, which encompasses Summerlin and other residential
neighborhoods in metropolitan Las Vegas, is estimated by BBER to be
approximately 223,000 and projected by BBER to grow to 235,000 by 1999.
According to NSDO, the population of Clark County has grown approximately
48.8% since 1990, and the population within a five-mile radius of the
Resort Casino Site is projected by BBER to continue growing at
approximately 5.0% per year. The median household income of approximately
$47,500 for residents in this target market is approximately 21.8% above
the Las Vegas median annual household income of approximately $39,000 and
approximately 30.3% above the United States national average according to
BBER. The Partnership's goal is to position the Resort Casino as the
Summerlin residents' "country club."
Middle- to Upper-Income Local Market. The Issuers believe this segment is
characterized by a highly profitable, repeat clientele that has long been
under-served by "local" casinos, and expect the Resort Casino will appeal
strongly to the affluent local population, including the estimated 72.0%
of adult Las Vegas residents who game an average of 51.31 times a year and
spend an average of $51.44 (in 1995 dollars) per each visit according to
the LVCVA.
Golfer/Gamer and Resort Vacationer. According to Simmons Market Research
Bureau, approximately 1.9 million golfer/gamers visit Las Vegas at least
once annually and 43.2% of golfer/gamers spend over $1,500 per trip. The
Issuers believe the Resort Casino will represent the only gaming resort in
the United States in close proximity to two TPC and seven other golf
courses. Additionally, the high levels of service and amenities expected
to be provided by the Resort Casino will cater to resort table players
with gaming budgets from $5,000 to $250,000 per visit.
Local and Out-of-State Conferences and Banquets. The Resort Casino is
expected to have one of the few high-tech business meeting facilities in
Las Vegas catering to small- and mid-size conferences. Designed with the
necessary services and amenities to cater to executive retreats, including
ample parking, the Issuers believe that the Resort Casino will provide an
ideal setting for small- to mid-sized conferences and will have the
capacity to host charity and social events for up to 1,100 people in
dinner seating.
33
<PAGE> 41
- CAPITALIZE ON MARQUEE HOTEL FLAG AND TRAVEL NETWORK RELATIONSHIP. The
Partnership has entered into an agreement with Regent International, an
affiliate of the Carlson Hospitality group. The Regent International
hotels are a group of luxury hotels concentrated around the Pacific Rim,
with the Resort Casino representing its only property in Las Vegas. As of
the date of this Prospectus, Regent International's only flagged property
in the U.S. is the Regent Beverly Wilshire-Los Angeles. The Resort Casino
will benefit from Regent's reservation network and Carlson Wagonlit
Travel, a national travel agency with no existing Las Vegas hotel
affiliate.
- CAREFULLY MANAGE CONSTRUCTION COSTS AND RISKS WITH PROVEN DESIGN AND
BUILD TEAM. RAS's management has a proven track record of resort and
casino design, construction, development and operation including Sun
International's Carousel in South Africa, and the Prairie Knights and
Speaking Rock casinos in the United States. The Issuers have assembled an
experienced project team. The Partnership has signed the $133.0 million
guaranteed maximum price Construction Contract with J.A. Jones, a
subsidiary of J.A. Jones, Inc., a national general contractor. J.A.
Jones, Inc. is a subsidiary of Philipp Holzmann AG, a German contracting
company, which is an affiliate of Deutsche Bank AG with several major
projects to its credit, including the renovation of the West and East
wings of the White House, the world's tallest buildings -- the Twin
Towers of Kuala Lumpur -- and Sun International's Paradise Island Bahamas
Phase II. A completion guaranty covering certain cost overruns has been
provided by J.A. Jones, Inc. The Resort Casino was designed by the
Architect, a national casino design firm whose principal, Mr. Steelman,
is the beneficial owner of a 5.0% limited partnership interest in the
Partnership. The Architect's projects include work for, among others,
Mirage Resorts, Caesars, Harrah's and Sun International. For the Resort
Casino grounds, the Partnership has contracted with Lifescapes whose
projects include The Mirage, Bellagio, Treasure Island and Jurassic Park
at Universal Studios. The Partnership has provided contingency and
completion reserve funds of approximately $4.4 million (approximately
3.3% of the Construction Contract maximum amount) and has subordinated
the $3.0 million development fee of SCA, the 91.26% limited partner of
the Partnership and the parent of RAS, to the successful on-budget
completion of the Resort Casino.
- LEVERAGE MANAGEMENT TEAM TRACK RECORD AND CONTINUITY. The Partnership
expects to leverage the gaming experience and track record of RAS's
senior and middle management. RAS's senior management has a cumulative 75
years of experience in the gaming and resort industry. Messrs. McMullan
and Fonseca, the President and Chief Executive Officer and Senior Vice
President Gaming Operations of RAS, respectively, have worked together
for over 20 years. Mr. Boshoff, the Senior Vice President Slot Operations
of RAS, has worked with Mr. McMullan and Mr. Fonesca for over 11 years.
Messrs. McMullan, Fonseca and Boshoff each were previously employed by
Sun International, an international casino group, and participated in
designing, building and operating six casinos in South Africa including
Sun International's Carousel. Mr. Tipton, the Senior Vice President,
Chief Financial Officer and General Counsel of RAS, served in Colorado
Governor Roy Romer's cabinet as Executive Director of the Colorado
Department of Revenue, during which time he successfully drafted and
implemented casino gaming legislation. The Partnership's middle
management includes nine gaming and non-gaming professionals with
experience principally in the United States, the United Kingdom and
southern Africa. See "Management."
SWISS CASINOS OF AMERICA, INC.
Based in Las Vegas, Nevada, SCA was formed in 1989 and is a majority-owned
(83.0%) subsidiary of the Swiss Parent which is owned by Mr. Jecklin, the
Chairman of the Board of Directors of RAS, and his family. SCA was formed for
the primary purpose of acquiring, developing and managing casino and resort
properties in the United States. The Swiss Parent currently owns or operates 23
gaming establishments, hotels, restaurants and other businesses throughout
Europe, and leases and/or operates additional gaming establishments in the
United States. The Swiss Parent is a leading gaming operator in Switzerland and
also has gaming facilities in the Netherlands and Great Britain. As with the
Swiss Parent, SCA's activities extend beyond the casino operations and include
the management of hotels, restaurants, retail outlets, bars and live
entertainment.
34
<PAGE> 42
THE RESORT CASINO
Hotels
The Resort Casino is designed with two six-story hotels with a combined 556
guest rooms and suites (the "Hotels"). The Issuers believe it is critical to
keep each Hotel small enough to retain the ambiance and service expected of a
five-star operation. A full range of hotel services are anticipated, including
business services, concierge and transportation services, 24-hour room service,
spa and fitness facilities, dining and lounge offerings, laundry and valet
services, state-of-the-art telecommunications systems, and luxury guest and bath
amenities. Examples of the Hotels' anticipated level of service include: (i)
early morning coffee service in the lobby, available from room service and from
an in-room coffee machine; (ii) bottled mineral water and towels available to
joggers; (iii) pre-registration for VIP and all returning guests; (iv) 24-hour
bellman, valet and reception coverage; (v) a currency exchange board; (vi)
multi-lingual concierge; (vii) bonded, professional babysitting services; (viii)
messages delivered to room and printed on good stock in an envelope; (ix) voice
mail; and (x) one-hour or overnight shoeshine, pressing and laundry.
The Issuers believe that the quality and size of the Hotel rooms will be
one of the most attractive features to its guests. The Hotel's standard guest
room will be approximately 564 square feet, which the Issuers believe will make
it among the most spacious in Las Vegas. The rooms are designed to offer resort
guests the sense of comfort expected at a five-star resort and will be furnished
with quality bedding, king-size feather pillows, mini-bars, in-room safes,
appropriate night stands and lighting, AM/FM clock radios, three two-line
telephones, remote control cable television in an enclosed, built-in armoire,
dressers, desk, chair and ottoman, a full-length mirror and artwork. Jogging
maps and high quality publications will be provided. The guest rooms are
expected to have marble and carpet floor coverings and will have synthetic
plaster walls and wood wainscoting. The bathrooms will have a combination of
ceramic tile and marble floors and synthetic plaster walls, with marble and
ceramic tile walls in the separate whirlpool bath and shower stalls. The vanity
will be marble and offer two sinks and a make-up area.
Gaming Operations
Situated at the hub of the Resort Casino, the casino (the "Casino") will
emphasize comfort, space and informality, and consist of approximately 50,000
square feet of gaming space, with 1,200 slot machines, 40 table games and a
sports and race betting club. Two salons prives will offer higher stakes slots
and table games in a more intimate setting. The Issuers believe that with one of
the lowest ratios of gaming positions per square foot in Las Vegas, the Casino
will provide a gaming experience generally not available in the local market.
The Issuers believe that few casinos in the Las Vegas market that cater to
Las Vegas residents place a significant emphasis on table games. The Resort
Casino's marketing efforts will emphasize its table game limits and credit
facilities. Maximum bet limits will accommodate many of the local players who
currently patronize the Strip due to the prevailing low maximum bet limits
imposed by the other local casinos. The table operation will be marketed
directly to local players and visitors with table gaming budgets from $5,000 to
$250,000. The Issuers anticipate that the Resort Casino will extend credit to
any customers who can establish creditworthiness, irrespective of whether they
are residents or visitors.
Food and Beverage
Few restaurants are currently available within Summerlin and the
neighboring communities. The Resort Casino will seek to target this market need
by offering nine separate dining facilities and nine bars and lounges, including
several in the Lifestyle Complex. The largest dining facility is expected to be
a 532-seat indoor/ outdoor buffet serving two meals daily on the second floor of
the Casino with panoramic views of the mountains, golf courses and city lights.
The Resort Casino also will have eight other restaurants offering a variety of
menus at many price points. Currently the Partnership has executed one lease for
a steak and seafood restaurant and plans to enter into at least four additional
leases with different restaurant operators to operate restaurants at the Resort
Casino serving Asian, French and Italian cuisines. See "Additional Material
Agreements -- Restaurant Lease Agreements."
35
<PAGE> 43
Lifestyle Complex
The 60,000 square foot Lifestyle Complex, which will tie together the
Resort Casino's restaurants, shops and other entertainment areas, is designed to
facilitate indoor and outdoor activities with Mediterranean-themed terraces,
fountains and pools. The Lifestyle Complex will target middle- to upper-income
residents and is expected to include:
<TABLE>
<S> <C>
- - Gift Shop - Cigar Shop
- - Florist - Gourmet Delicatessen
- - Golf Pro Shop - Patisserie
- - Chocolatier - Ice Cream Parlor
- - Authentic Irish Pub - Travel Agency
- - Wine Shop - Beauty Salon
</TABLE>
The Issuers expect the Resort Casino will provide live blues and jazz
performances as well as other entertainment in the Lifestyle Complex.
Executive Office, Conference and Banquet Complex
For meetings and conferences, the Resort Casino will have 50,000 square
feet of dedicated conference room and meeting space available, outfitted with
audio and visual support equipment. An on-site business center with a mix of
small and large rooms will provide corporate travelers with access to the latest
technology including full service audio-visual equipment, computer terminals,
laser printers, telephones, fax machines, online market updates and other
business services. The office and conference complex is designed to support the
Resort Casino's strategy of attracting out-of-state group business (such as
corporate retreats and small conventions) as well as meetings of local
residents. The Resort Casino will provide state-of-the-art audiovisual equipment
and a technician who will help executive conferees produce computer animated
audio-visual presentations. The Issuers' goal is for the conference center to
become the local venue of choice for charity events, company functions and
weddings. The proximity to 183 holes of golf is expected to be a key additional
element in the Resort Casino's attractiveness as a center for small meetings.
Recreational Amenities
The Resort Casino's recreational facilities will include access to the
18-hole TPC Canyons golf course, a high-end spa facility, a fully equipped
fitness center, walking trails and outdoor pools with lush landscaping. The
Resort Casino anticipates offering local residents fee-paying memberships to the
spa, health club and pools.
Golf. The Resort Casino will be associated with the highly rated, 18-hole
TPC Canyons golf course which currently hosts the Senior PGA Tour's Las Vegas
Senior Classic. As part of a contractual agreement with the TPC Canyons, the
Resort Casino will have the ability to control 50.0% of the available tee times
for the next 99 years. At the Resort Casino's option, this percentage may be
increased to 75.0%.
TPC Canyons is one of 17 TPC clubs and courses nationwide. Home to numerous
PGA Tour and Senior PGA Tour events, the TPC network has a reputation for
providing some of the finest golf facilities in the world. TPC Canyons was
designed by and for PGA professionals in consultation with Raymond Floyd, one of
the world's top professional golfers. TPC Canyons is a stadium course, naturally
incorporated into the desert terrain with a variety of trees, elevation changes,
steep ravines and a canyon lake. With more than 60 tees, wide fairway landing
areas and soft, rolling greens, the course appeals to players of all abilities.
TPC Canyons also has a practice facility, realistic target greens and a complete
short game area with practice bunkers. In addition to the course and practice
facility, TPC Canyons features a large clubhouse with a full-service grille
offering breakfast, lunch and dinner, a full-service golf shop offering a
complete line of apparel, equipment and TPC specialty items and fully equipped
locker facilities.
To the north of the Resort Casino is the TPC Summerlin championship course,
home to the PGA Tour's annual Las Vegas Invitational and the site of Tiger
Woods' first PGA tour victory. TPC Summerlin is a
36
<PAGE> 44
private club that will be accessible to the Resort Casino's best customers as
guests of the Partnership. Moreover, for those golfers desiring a variety of
course offerings during their stay in Las Vegas, an additional 48 holes of golf
are available at Angel Park including a lighted 12-hole par three course. Five
other public and private 18-hole courses and one 27-hole public course are
located within a five minute drive of the Resort Casino Site.
In total, guests of the Resort Casino will be in close proximity to the
following courses:
LAS VEGAS GOLF COURSES
(IMMEDIATE AREAS OF THE RESORT CASINO)
<TABLE>
<CAPTION>
COURSE NAME LOCATION HOLES
----------- -------- -----
<S> <C> <C>
TPC Canyons........................................ Adjoining 18
TPC Summerlin...................................... Immediately North 18
Angel Park......................................... Immediately South and East 36
Angel Park (Executive)............................. Immediately South and East 12
Badlands........................................... 1/2 Mile South 27
Palm Valley........................................ Sun City 18
Highland Falls..................................... Sun City 18
Eagle Crest........................................ Sun City 18
Canyon Gate Country Club........................... 2 Miles South 18
---
TOTAL HOLES.............................. 183
</TABLE>
Superior Spa and Fitness Center. The Resort Casino will contain a 40,000
square foot superior spa, salon and fitness center, which the Issuers believe
will be one of the largest and best equipped in Las Vegas. Resort Casino guests
and members will have access to facilities including locker rooms, showers,
steam room, sauna, whirlpool and specialty baths, and a cascading waterfall
shower. The spa is expected to offer a variety of treatments, including facials
(European, Glycolic, Moor Mud, Fango, Teen, Back, and Summerlin Spa Deluxe,
among others), massages from around the world (Swedish, Shiatsu, Sports, Reiki,
etc.), body treatments including mud wraps, seaweed wraps, aromatherapy oil
wraps, body scrubs and polishes, and honey steam wraps, watsu pool, and
traditional Indian Ayurvedic treatments.
The salon will provide hair care services including cuts, conditioning,
coloring, weaves, braids, and bridal services. The salon also will offer
manicures, pedicures, make-up and waxing. The spa's boutique will sell fitness
attire, Resort Casino logo wear, hydrotherapy bath products, massage and
aromatherapy oils, and skin care products.
The fitness center will contain state-of-the-art workout equipment
including Gravitrons, Stairmasters, treadmills, rowing machines and Lifecycles;
an aerobics studio; and a full range of weight training equipment. The fitness
center will be staffed with certified personal fitness trainers, aerobics, step,
toning, stretch and yoga instructors.
Gardens and Swimming Pool. The Resort Casino is expected to have an 11,000
square foot outdoor pool and a children's pool. The pool area will offer Resort
Casino guests and members lush landscaping in a tropical setting. Food and
drinks as well as towels and other services will be available poolside. Thirteen
pool cabanas will be available on a fee basis for added privacy and a putting
green and lounge will be adjacent to the pool area. Several acres of elaborate
landscaping, water features and walking paths will be incorporated throughout
the Resort Casino Site.
PARKING AND TRANSPORTATION
The Resort Casino will have parking sufficient to accommodate both
out-of-town and local guests. A four-level covered parking structure will
provide parking for approximately 1,000 vehicles with surface parking provided
for an additional 1,550 vehicles. Resort Casino guests and visitors will have
the option of either
37
<PAGE> 45
self-parking or using a complimentary valet service. The Resort Casino will
provide transportation for VIP guests to and from the airport and shuttles and
limousines to the Strip and popular shows.
FUTURE SITES AND DEVELOPMENT
The Resort at Summerlin is located at the only approved gaming site in the
portion of Summerlin known as Summerlin North. The Partnership has obtained the
Right of First Offer from HHP for future development on the four approved gaming
sites in Summerlin South and West which rights, in certain circumstances, may be
assigned to an affiliate of SCA in exchange for an equity interest in such
affiliate. Development of Summerlin South began in 1997, and Summerlin West is
anticipated to be developed over the next five to 10 years. The Issuers believe
this geographic exclusivity enhances the Partnership's future prospects in the
Las Vegas market that will give the Resort Casino a sustainable competitive
advantage. See "Risk Factors -- Competition." Moreover, recently enacted Nevada
legislation, from which the Resort Casino and the additional four Summerlin
gaming sites subject to the Right of First Offer are exempt, limits the
development of casinos near residential neighborhoods, churches and schools and
will restrict further the ability of new casinos to enter the Partnership's
targeted market. This legislation prohibits new casino development within 500
feet of a residential area or within 1,500 feet of a church or school. This
legislation also requires clear and convincing evidence that a proposed casino
will not adversely affect residential areas, schools or churches located within
2,500 feet. Casino sites in master-planned communities that had been previously
zoned and approved for casino development at the time the legislation became law
are exempted from these requirements under Nevada Senate Bill #208. Examples of
such sites are the four additional sites subject to the Right of First Offer in
Summerlin West and Summerlin South as well as Coast Resorts' Sundance casino
site in close proximity to the Resort Casino Site. In addition, Nevada Senate
Bill #208 imposed a time certain deadline for receipt of governmental approvals
for certain other proposed casino development in neighborhood areas not
otherwise exempted by terms of the legislation.
CONSTRUCTION SCHEDULE AND BUDGET
Construction of the Resort Casino began in January 1998 with a scheduled
completion in April 1999.
DESIGN AND CONSTRUCTION TEAM
The Issuers have assembled what they believe to be a highly qualified team
of specialists to design and construct the Resort Casino.
General Contractor
J.A. Jones, the construction manager for the Resort Casino, is a
wholly-owned subsidiary of J.A. Jones, Inc., one of the nation's leading general
contractors. Founded in 1890, J.A. Jones, Inc. is a wholly-owned subsidiary of
Philipp Holzmann AG, a European contractor. J.A. Jones, Inc.'s portfolio of
completed projects include: (i) the renovation of the East Wing and West Wing of
The White House; (ii) the world's tallest buildings, the "Twin Towers" of Kuala
Lumpur; (iii) the Ritz Carlton in Naples, Florida; (iv) the Four Seasons Hotel
in Chicago, Illinois; (v) the Galleria Shopping Mall in Dallas, Texas; (vi) the
Federal Triangle Building in Washington, DC; and (vii) the AT&T Building in New
York, New York. Current projects include (a) the U.S. Federal Courthouse in Las
Vegas, Nevada, and (b) Sun International's Atlantis Casino Resort Phase II in
Paradise Island, Bahamas. The Partnership has contracted with Rider Hunt to
provide certain administrative services related to the Construction Contract,
including development of cash flow reports and forecasts; advising of variations
between actual and budgeted costs; in consultation with the Partnership and the
Architect, rejecting work not in conformity with the Construction Contract;
preparing valuations of amounts due the respective contractors; and recording
the progress of construction of the Resort Casino. Rider Hunt is not authorized
to approve significant change orders under the Construction Contract.
38
<PAGE> 46
Architect
Paul Steelman, Ltd., an architectural firm specializing in casino
entertainment design, is the Architect for the Resort Casino. Mr. Steelman, who
founded the firm in 1987 after having worked with Mirage Resorts for nine years,
is the beneficial owner of a 5.0% limited partnership interest in the
Partnership. In the last 30 months, the Architect has overseen the design of
over 20 gaming entertainment resorts that include, among others: The Mirage,
Caesars Palace (renovation), The MGM Theme Park, Harrah's (renovations) and
Caesars Magical Empire, Las Vegas, Nevada; Sun City, Bophuthatswana; Harrah's
Tunica, Sheraton Tunica, Lady Luck Coahoma and Harrah's Vicksburg's,
Mississippi; Harrah's Ak-Chin, Arizona; Treasure Chest and Harrah's Shreve Star,
Louisiana; Lady Luck Bettendorf, Iowa; Sheraton, Lima, Peru; Jackpot Casino,
Casino Thun and Casino, Locarno, Switzerland; Sheraton Halifax and Sheraton
Sydney, Canada; Casino Riviera, Cannes, France; Speaking Rock, Texas; Dover
Downs Video Lottery, Delaware; Harrah's Skagit Valley, Washington; and Prairie
Knights, North Dakota.
Landscape Architect
The Architect has retained Lifescapes, a national gaming and entertainment
landscape architectural firm. Lifescapes focuses on quality in landscape design
while taking into account environmental and conservation concerns. The following
representative projects have either been completed or are in process by
Lifescapes: The Mirage, Bellagio, Treasure Island, South Coast Village, Shadow
Creek Golf Course, Luxor Hotel, Las Vegas Strip Landscape Beautification
Project, Canyon Gate, Showcase Entertainment Complex, and Peccole Ranch,
Queensridge, Las Vegas, Nevada; Beau Rivage Biloxi, Mississippi; South Coast
Plaza Renovation Work, Newport Beach, Jurassic Park-The Ride, Hollywood, Sea
World, San Diego, Shamu Stadium, San Diego, and Knott's Berry Farm, Buena Park,
California; Players Island, Lake Charles, Louisiana; Entertainment Mall 7 & 8,
Bangkok, Thailand; Players Island, Maryland Heights, Missouri; and the Rain
Forest Cafe, Woodfield Mall, Chicago, Illinois.
PROPERTIES
The Partnership acquired the Resort Casino Site at the intersection of
Summerlin Parkway and Rampart Boulevard in Las Vegas, Nevada in August 1996 for
approximately $16.6 million. The Partnership maintains two offices: (i)
Corporate Office at 1160 Town Center Drive, Suite 200 Las Vegas, Nevada 89134
and (ii) Development Office at 3330 West Desert Inn Road, Unit 5, Las Vegas,
Nevada 89102. The respective telephone numbers are (702) 869-7000 and (702)
869-7500.
EMPLOYEES
The Partnership anticipates that it will directly employ approximately
1,600 employees in connection with the Resort Casino. The Partnership will be
required to undertake a major recruiting and training program prior to the
opening of the Resort Casino at a time when other major new facilities may be
approaching completion and also recruiting employees. The Partnership believes
that it will be able to attract and retain a sufficient number of qualified
individuals to operate the Resort Casino.
LITIGATION
The Issuers are not currently parties to any claims or legal actions.
ENVIRONMENTAL MATTERS
The Partnership's operations and properties are subject to a wide variety
of increasingly complex and stringent environmental laws. The Issuers believe
their operations and properties are in compliance in all material respects with
environmental laws. Based upon its experience to date, the Issuers believe that
the future cost of compliance with and liability under existing environmental
laws will not have a material adverse effect on the financial condition of the
Partnership and the Issuers' ability to service the Indebtedness, including the
Notes. There can be no assurance, however, that this will be the case. See "Risk
Factors -- Environmental Risks and Regulation."
39
<PAGE> 47
LAS VEGAS MARKET AND INDUSTRY
BACKGROUND INFORMATION
Las Vegas is the oldest and largest gaming market in the United States. The
Las Vegas metro area gaming market is divided into four geographic sectors: the
Downtown, Strip, North Las Vegas and Boulder Strip areas. The Strip is the
location of approximately 40 casinos, including Las Vegas' largest and newest
mega-casinos. The Downtown area includes 18 casinos on and near Fremont Street
in old Las Vegas. The oldest of these include Binion's Horseshoe, Sam Boyd's
Fremont, the Four Queens, Fitzgeralds and the Golden Nugget. The Boulder Strip
features suburban casinos, which are primarily low- and middle-market
facilities. The largest properties include Boulder Station, Sam's Town and the
Showboat, with Sunset Station further south near the residential areas of
Henderson and Green Valley. This market is comprised largely of local residents
and their guests. North Las Vegas similarly caters to middle-market locals with
some planned upscale local and tourist venues. The largest properties currently
operating in this area are the Fiesta, Santa Fe, Arizona Charlie's and Texas
Station.
New development in Las Vegas is occurring primarily on the Strip. The last
three major casinos to open in the Strip area were the Monte Carlo, Stratosphere
and New York-New York. Bellagio is expected to open in late 1998 and will be
followed in 1999 by Mandalay Bay, Paris, the new Aladdin, the Venetian and
Planet Hollywood. In addition to this development, existing properties on the
Strip are undergoing substantial renovation and improvement to upgrade
facilities and increase hotel and gaming capacity. Apart from expansion of
existing properties, the only new developments announced in the vicinity of the
Resort Casino Site are Cactus Kate's (one block northwest of the Fiesta) and The
Sundance Casino (at the intersection of Rampart and Alta), both of which are
expected to open after 1999.
LAS VEGAS OCCUPANCY AND VISITATION STATISTICS
According to the LVCVA, in 1996 there were a total of 29,636,361 visitors
to Las Vegas, a 2.2% increase over 1995, when Las Vegas welcomed 29,002,122
visitors and the greatest yearly increase experienced in the last five years
occurred between 1993 and 1994, when visitation grew by approximately 19.9%.
According to the LVCVA, approximately 44.0% of visitors to Las Vegas currently
arrive by air, up from 30.1% in 1970. The city is served by McCarran
International Airport, which has grown substantially over the last several
decades to keep pace with visitor demand generated by the gaming and lodging
market. The airport serves more than 20 scheduled air carriers and 19 charter
service airlines.
According to the LVCVA, in 1996, McCarran International Airport hosted an
average of 84,000 passengers daily. In addition, Federal Aviation Authority and
county officials projected that the annual number of passengers could increase
from approximately 30.3 million in 1996 to approximately 38.7 million in 2000. A
$500.0 million expansion project is under way at McCarran International Airport
to handle the increasing volume of air passengers. The project includes capacity
for up to 60 new gates, installation of an automatic transit system (people
mover) and expansion of the baggage claim area, runways and the north ticketing
lobby. When the project is completed, it will increase parking by 87.0%, gates
by 53.0%, baggage claim areas by 25.0%, ticket counters by 25.0% and main
carrier runways by 15.0%.
<TABLE>
<CAPTION>
TOTAL
TOTAL NUMBER OF OCCUPANCY % AVERAGE NUMBER OF
NUMBER % HOTEL & MOTEL % ------------- NUMBER AIRLINE %
YEAR OF VISITORS CHG. ROOMS CHG. HOTEL MOTEL OF NIGHTS PASSENGERS CHG.
- --------------- ----------- ---- ------------- ---- ----- ----- --------- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1985 14,194,189 N/A 53,067 N/A N/A N/A N/A 10,924,047 N/A
1986 15,196,284 7.1% 56,494 6.5% 86.3% 70.9% 3.9 12,428,748 13.8%
1987 16,216,102 6.7 58,474 3.5 87.0 74.0 4.0 15,582,302 25.4
1988 17,199,808 6.1 61,394 5.0 89.3 73.7 3.6 16,231,199 4.2
1989 18,129,684 5.4 67,391 9.8 89.8 72.5 3.3 17,106,948 5.4
1990 20,954,420 15.6 73,730 9.4 89.1 69.8 3.0 19,089,684 11.6
1991 21,315,116 1.7 76,879 4.3 85.2 62.6 3.1 20,171,969 5.7
</TABLE>
40
<PAGE> 48
<TABLE>
<CAPTION>
TOTAL
TOTAL NUMBER OF OCCUPANCY % AVERAGE NUMBER OF
NUMBER % HOTEL & MOTEL % ------------- NUMBER AIRLINE %
YEAR OF VISITORS CHG. ROOMS CHG. HOTEL MOTEL OF NIGHTS PASSENGERS CHG.
- --------------- ----------- ---- ------------- ---- ----- ----- --------- ---------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 21,886,865 2.7 76,523 (0.5) 88.8 66.1 3.3 20,912,585 3.7
1993 23,522,593 7.5 86,053 12.5 92.6 69.7 3.1 22,492,156 7.6
1994 28,214,362 19.9 88,560 2.9 92.6 73.2 3.1 26,850,486 19.4
1995 29,002,122 2.8 90,046 1.7 91.4 72.4 3.5 28,027,239 4.4
1996 29,636,361 2.2 99,072 10.0 93.4 75.7 3.7 30,459,965 8.7
% Change 108.8% 86.7% 178.8%
Compound Annual
Growth Rate 6.9% 5.8% 9.8%
</TABLE>
- ---------------
Data Source: LVCVA.
LAS VEGAS GAMING SUMMARY
According to the 1995-96 Visitor Profile Study by the LVCVA, the typical
Las Vegas visitor is married, employed, college educated, from the West, 40
years or older, and with a household income of $40,000 or more. According to the
LVCVA the percentage of tourists who game decreased from 92.0% to 87.0% between
1994 and 1996, and gaming tourists are spending somewhat less on gaming as a
percentage of total spending, and more on non-gaming entertainment and lodging,
but total revenues continue to grow. According to the LVCVA the average gaming
budget per visitor per trip has increased from approximately $431 in 1991 to
more than $580 in 1996, the average gaming duration has gone from almost five
hours in 1990 to just over four hours in 1996, and 72.0% of adult Clark County
residents game at least occasionally. According to BBER in 1996 the Las Vegas
metro area had a total population of 998,758, of whom 70.8% (707,548) were
adults and 505,897 were casino gamers. According to the LVCVA Las Vegas
residents who game do so, on average, just over once per week and 54.0% game at
least once a week. The 1995-1996 LVCVA study indicates an average of 51.31
visits per year among locals, up from 48.58 in the 1993-94 study.
According to the 1995-96 LVCVA study, approximately 44.0% of local
residents game at off-Strip casinos.
In terms of gaming spend, the LVCVA arrived at a mean spend per visit of
$51.44 (in 1995 dollars). This estimate is lower than the LVCVA's 1993-94
estimate of $58.23 as residents appear to be visiting casinos more often but
spending less per visit. The increased emphasis on non-gaming amenities also may
have contributed to this trend.
THE LAS VEGAS "LOCALS" MARKET AND LOCAL COMPETITION
Las Vegas is one of the fastest growing cities in the United States. The
current rate of immigration is approximately 4,000 people per month. Clark
County's population has grown from 463,087 in 1980 to approximately 1.1 million
in 1996 and is projected to exceed 2.0 million in 2010, according to the NSDO.
The Issuers believe that as major new Strip properties are built and opened over
the next several years, the resulting employment is likely to fuel further
population growth in suburban Las Vegas.
In the past eight years, a number of new residential developments aimed at
the local market have appeared. Much of this growth is situated on the Boulder
Highway (Sam's Town, Boulder Station), Rancho Drive (Texas Station, Fiesta) and
immediately west of I-15 and the Strip (Rio, Palace Station, The Orleans and
Gold Coast).
Of the casinos in the local market that opened prior to December 1996, the
Issuers believe that none, with the exception of the Rio, has followed the lead
of the Mirage and attempted to position itself at the quality end of the market.
Essentially all of these new properties have repeated the same formula: standard
41
<PAGE> 49
rooms with economy class furnishings, dark interiors in the casino, low limits,
predominantly video poker and discounted food. In addition, amenities are
targeted toward lower- to middle-income clientele.
THE GOLFER/GAMER MARKET
In 1995, the total United States market for golfer/gamers was estimated to
be approximately 5.9 million and, of the destinations visited, six states
accounted for more than half of the visits, according to Simmons Market Research
Bureau. Nevada had the largest share with approximately 16.8% of total
golfer/gamer visits. Approximately 90.0% of golfer/gamers travel in a party of
two or more, and 32.5% have visited Las Vegas during the last twelve months.
The Issuers believe very few of the existing Las Vegas properties have a
competitive product in this segment of the market. Only the Desert Inn and the
Las Vegas Hilton have a golf course adjacent to their properties. In the future,
the proposed development of the Lake Las Vegas complex could create a
significant competitor in the market. However, the Issuers believe that the
Resort Casino will have the advantage of being first to the market with its
product, it will be associated directly with a TPC course which is host to a
nationally televised tournament, and 183 holes of golf are within a five minute
drive of the Resort Casino Site. The Resort Casino Site also is only about 20
minutes from McCarran International Airport and 15 minutes from the Strip. From
the PGA Tour and Senior PGA Tour events, the Summerlin name enjoys a degree of
recognition in the United States among the golfing community which, the Issuers
believe, will benefit the Resort Casino.
At present, those resorts in the southwestern United States which offer a
competitive product for the golfer, but are situated outside Nevada, are unable
to offer the gaming attractions which will be available at the Resort Casino.
Arizona and California have a limited number of casinos on Indian reservations,
but the Issuers believe that there are problems with the location of these
casinos and in neither state is it possible to offer the full service gaming
product which is available in Nevada. The Issuers believe that the Resort Casino
is in a good position with regard to its market, a position that Issuers believe
will enable it to charge premium rates and attract more affluent customers.
REGULATION AND LICENSING
NEVADA
The ownership and operation of casino gaming facilities in Nevada are
subject to the Nevada Act, various local regulations and the licensing and
regulatory control of the Nevada Gaming Authorities.
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of Licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) providing a source of state and local revenues
though taxation and licensing fees. Change in such laws, regulations and
procedures could have a material adverse effect on the financial condition of
the Partnership and the Issuers' ability to service the Indebtedness, including
the Notes.
The Partnership will be required to be licensed by the Nevada Gaming
Authorities. Gaming Licenses require the periodic payment of fees and taxes and
are not transferable. Once registered by the Nevada Commission as Registered
Companies, the Issuers will be required periodically to submit detailed
financial and operating reports to the Nevada Commission and furnish any other
information which the Nevada Commission may require. No person may be a partner
of, or receive any percentage of profits from, the Partnership without first
obtaining licenses and approvals from the Nevada Gaming Authorities ("Gaming
Approvals").
42
<PAGE> 50
In connection with the licensing and registration of the Partnership, RAS
will be required to be registered and found suitable as an intermediary company
of the Partnership and as a Registered Company and/or licensed as the general
partner. In connection with the registration of RAS as an intermediary company
and/or licensure as the general partner, each direct and indirect owner of RAS,
including without limitation, SCA, the Swiss Parent and their respective owners
(collectively, the "RAS Owners") will be required to obtain from the Nevada
Gaming Authorities the applicable Gaming Approvals.
Upon the effectiveness of the Exchange Offer, the Partnership and RAS each
will be a "publicly traded corporation" as defined in the Nevada Act. In order
to receive a Gaming License as a publicly traded corporation, the Partnership
must be exempted by the Nevada Commission from a prohibition in the Nevada Act
which makes Registered Companies ineligible to apply for or hold a Gaming
License. The Nevada Commission has exempted Registered Companies from this
provision in the past and has granted gaming licenses to publicly traded
corporations. The Partnership intends to apply for the Exemption in connection
with its application for a Gaming License. In connection with licensing and
receipt of the Exemption, RAS and the Partnership each also will be required to
be registered by the Nevada Commission as a Registered Company. The following
regulatory requirements will be applicable to the Partnership and RAS upon their
receipt of all necessary Gaming Approvals from the Nevada Gaming Authorities. If
Warrant Co. also becomes registered by the Nevada Commission as a Registered
Company, the regulatory requirements will become applicable to Warrant Co. The
Partnership, RAS and the RAS Owners have not yet obtained from the Nevada Gaming
Authorities the Gaming Approvals required in order for the Partnership to
conduct gaming operations at the Resort Casino, and there can be no assurance
that such Gaming Approvals will be obtained, or that they will be obtained on a
timely basis. There can also be no assurance that the Partnership's officers,
partners and key employees will obtain Gaming Approvals from the Nevada Gaming
Authorities. The failure of either of the Issuers and their officers, partners,
directors, stockholders and key employees to obtain Gaming Approval would have a
material adverse effect on the Partnership's financial condition and the
Issuers' ability to service the Indebtedness, including the Notes.
As a Registered Company, the Partnership will be required periodically to
submit detailed financial information and operating reports to the Nevada
Commission and furnish any other information that the Nevada Commission may
require. No person may become a partner of, or receive any percentage of profits
from, a Licensee without first obtaining licenses and approvals from the Nevada
Gaming Authorities.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship or involvement with the Partnership, RAS, Warrant Co. and
the RAS Owners to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, managers and
certain key employees of the Partnership, RAS, Warrant Co., SCA and the Swiss
Parent must file applications with the Nevada Gaming Authorities and will be
required to be licensed, or found suitable, by the Nevada Gaming Authorities.
The Nevada Gaming Authorities may deny an application for licensing or a finding
of suitability for any cause they deem reasonable. A finding of suitability is
comparable to licensing, and both require submission of detailed personal and
financial information followed by a thorough investigation. The applicant for
licensing or a finding of suitability, or the gaming licensee by whom the
applicant is employed or for whom the applicant serves, must pay all the costs
of the investigation. Changes in licensed positions must be reported to the
Nevada Gaming Authorities, and the Nevada Gaming Authorities have jurisdiction
to disapprove a change in a position.
If the Gaming Authorities were to find an officer, director, partner,
stockholder or key employee unsuitable for licensing or to continue having a
relationship with the Partnership, RAS, Warrant Co., SCA or the Swiss Parent,
the entities involved would have to sever all relationships with such person. In
addition, the Nevada Commission may require the Partnership, RAS, Warrant Co.,
SCA or the Swiss Parent to terminate the employment of any person who refuses to
file appropriate applications. Determinations of suitability or of questions
pertaining to licensing are not subject to judicial review in Nevada.
If the Partnership, RAS, Warrant Co., SCA or the Swiss Parent violated the
Nevada Act, the Gaming Licenses the Partnership would hold could be limited,
conditioned, suspended or revoked, subject to compliance with certain statutory
and regulatory procedures. In addition, the Swiss Parent, SCA, RAS,
43
<PAGE> 51
Warrant Co., the Partnership, and the persons involved could be subject to
substantial fines for each separate violation of the Nevada Act at the
discretion of the Nevada Commission. Further, a supervisor could be appointed by
the Nevada Commission to operate the Resort Casino and, under certain
circumstances, earnings generated during the supervisor's appointment (except
for the reasonable rental value thereof) could be forfeited to the State of
Nevada. Limitation, conditioning or suspension of any Gaming License or the
appointment of a supervisor could (and revocation of any Gaming License would)
materially adversely affect the financial condition of the Partnership and the
Issuers' ability to service the Indebtedness, including the Notes.
Even if a Registered Company is granted certain exemptions by the Nevada
Commission, any beneficial holder of the Registered Company's voting securities,
regardless of the number of securities owned, may be required to file an
application, be investigated, and have his suitability as a beneficial holder of
the Registered Company's voting securities determined if the Nevada Commission
has reason to believe that such ownership would otherwise be inconsistent with
the declared policies of the State of Nevada. Each beneficial owner of an
interest in the Partnership may be required to be licensed or found suitable.
The applicant must pay all costs of investigation incurred by the Gaming
Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5.0% of a
Registered Company's voting securities to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of more than 10.0% of
a Registered Company's voting securities apply to the Nevada Commission for a
finding of suitability within 30 days after the Chairman of the Nevada Board
mails the written notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which acquires
beneficial ownership of more than 10.0%, but not more than 15.0%, of a
Registered Company's voting securities may apply to the Nevada Commission for a
waiver of such finding of suitability requirements if the institutional investor
holds the voting securities for investment purposes only. An institutional
investor is not deemed to hold voting securities for investment purposes unless
the voting securities are acquired and held in the ordinary course of business
as an institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors
of a Registered Company, any change in a Registered Company's corporate charter,
bylaws, management, policies or operations, or any of its gaming affiliates, or
any other action which the Nevada Commission finds to be inconsistent with
holding a Registered Company's voting securities for investment purposes only.
Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to cause a change in its management, policies or operations; and (iii) other
activities as the Nevada Commission may determine to be consistent with
investment intent. A corporation, partnership or trust which is a beneficial
owner that must be found suitable, must submit detailed business and financial
information including a list of beneficial owners and must pay all costs of
investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Nevada Commission or
the Chairman of the Nevada Board may be found unsuitable, including any record
owner who, upon request, fails to identify a beneficial owner. Any stockholder
found unsuitable and who holds, directly or indirectly, any beneficial ownership
of the voting securities of a Registered Company beyond such period of time as
may be prescribed by the Nevada Commission may be guilty of a criminal offense.
A Registered Company is subject to disciplinary action if, after it receives
notice that a person is unsuitable to be a stockholder or limited partner or to
have any other relationship with the Resort Casino or an affiliate, it (i) pays
that person any dividend or interest upon voting securities of the Registered
Company, (ii) allows that person to exercise, directly or indirectly, any voting
right conferred through securities held by that person, (iii) pays remuneration
in any form to that person for services rendered or otherwise, or (iv) fails to
pursue all lawful efforts to require the unsuitable person to relinquish his
voting securities for cash at fair market value.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Company (such as the Notes) to file applications,
be investigated and be found suitable to own the debt security of a Registered
Company. If the Nevada Commission determines that a person is unsuitable to own
a
44
<PAGE> 52
debt security, then pursuant to the Nevada Act, the Registered Company can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.
All Registered Companies are required to maintain a current ledger in
Nevada reflecting all ownership interests, which may be examined by the Nevada
Gaming Authorities at any time. If any securities are held in trust by an agent
or by a nominee, the record holder may be required to disclose the identity of
the beneficial owner to the Nevada Gaming Authorities. A failure to make such
disclosure may be grounds for finding the record holder unsuitable. All
Registered Companies also are required to render maximum assistance in
determining the identity of the beneficial owner. The Nevada Commission has the
power to require that certificates representing ownership interest in a
Registered Company bear a legend indicating that such securities are subject to
the Nevada Act. It is unknown at this time whether the Nevada Commission will
impose this requirement on the Partnership, RAS or Warrant Co.
None of the Swiss Parent, SCA, RAS, Warrant Co. or the Partnership may make
a public offering of its securities (including the Exchange Offer) without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Nevada Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities, and any
representation to the contrary is unlawful.
The regulations of the Nevada Board and the Nevada Commission also provide
that any entity which is not an "affiliated company," as defined in the Nevada
Act, or which is not otherwise subject to the provisions of the Nevada Act, such
as the Partnership and RAS, which plans to make a public offering of securities
intending to use such securities, or the proceeds from the sale thereof, for the
construction or operation of gaming facilities in Nevada, or to retire or extend
obligations incurred for such purposes, may apply to the Nevada Commission for
prior approval of the offering. The Nevada Commission may find an applicant
unsuitable based solely on the fact that it did not submit such an application,
unless upon a written request for a ruling, the Nevada Board Chairman has ruled
that it is not necessary to submit an application. The Exchange Offer will
qualify as a public offering. The Issuers filed a Ruling Request with the Nevada
Board Chairman for a ruling that it is not necessary to submit the Exchange
Offer for prior approval. On March 27, 1998, the Nevada Board Chairman granted
the Issuers' Ruling Request, ruling that the Exchange Offer need not be
submitted to the Nevada Board or the Nevada Commission for prior approval.
Changes in control of a Registered Company through merger, consolidation,
stock or asset acquisitions, management or consulting agreements, or any act or
conduct by a person whereby he obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Company must satisfy the Nevada Board and the Nevada Commission in a
variety of stringent standards prior to assuming control of the Registered
Company. The Nevada Commission also may require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Companies that are
affiliated with those operations may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their Affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environmental for the orderly governance of
corporate affairs. Approvals are, in certain circumstances, required from the
Nevada Commis-
45
<PAGE> 53
sion before a Registered Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by a Registered
Company's Board of Directors in response to a tender offer made directly to a
Registered Company's stockholders or partners for the purposes of acquiring
control of a Registered Company.
License fees and taxes vary depending on the type of gaming or activity
involved and are payable to the State of Nevada and to the counties and cities
in which the Licensee's respective operations are conducted. Depending upon the
particular fee or tax involved, these fees and taxes are payable either monthly,
quarterly or annually and are based upon either: (i) a percentage of the gross
revenues received; (ii) the number of gaming devices operated; or (iii) the
number of table games operated. A casino entertainment tax also will be paid by
the Partnership where certain entertainment is provided in a cabaret, nightclub,
cocktail lounge or casino showroom in connection with the serving or selling of
food, refreshments or merchandise. Licensees such as SCRN that hold a
distributor's license also pay certain fees and taxes to the State of Nevada.
Any Licensee who proposes to become involved in a gaming venture outside of
Nevada is required to deposit and maintain with the Nevada Board a revolving
fund in the amount of $10,000 to pay the expenses of investigation of the Nevada
Board of its participation in such foreign gaming. The revolving fund is subject
to increase or decrease in the discretion of the Nevada Commission. Thereafter,
Licensees are required to comply with certain reporting requirements imposed by
the Nevada Act. Licensees also are subject to disciplinary action by the Nevada
Commission if they knowingly violate any laws of the foreign jurisdiction
pertaining to the foreign gaming operation, fail to conduct the foreign gaming
operation in accordance with the standards of honesty and integrity required of
Nevada gaming operations, engage in activities harmful to the State of Nevada or
its ability to collect gaming taxes and fees, or employ a person in a foreign
operation who has been denied a license or finding of suitability in Nevada on
the ground of personal unsuitability.
The sale of alcoholic beverages by the Partnership on the premises of the
Resort Casino also will be subject to licensing, control and regulation by the
City of Las Vegas. All licenses are revocable and are not transferable. The City
of Las Vegas has full power to limit, condition, suspend or revoke any such
license, and any such disciplinary action could or suspension or revocation
would have a material adverse effect on the financial condition of the
Partnership and the Issuers' ability to service the Indebtedness, including the
Notes.
Gaming Taxes
With the exception of lotteries, nearly all types of gaming are legal in
Nevada. Taxes on nonrestricted gaming locations (more than 15 slot machines) are
paid monthly on a sliding scale: 3.0% on the first $50,000 of gross gaming
revenues, 5.0% on the next $90,000 and 6.25% on revenues exceeding $140,000.
There is a 10.0% tax on all admissions, concessions, merchandise and services
for certain events and other forms of entertainment offered by the gaming
establishment. Quarterly and annual fees are assessed by the state, county and
local governments based on the number of table games and slot machines.
OTHER GAMING JURISDICTIONS
The Swiss Parent and SCA are subject to the jurisdiction of other gaming
authorities in the United States, including the Colorado Limited Gaming Control
Commission, the State of North Dakota Attorney General's Office, the Standing
Rock Tribal Gaming Commission and the National Indian Gaming Commission as well
as European gaming authorities. Should any of these other gaming authorities
take certain actions against the Swiss Parent, SCA or a corporate affiliate of
the Issuers, such action could have a material adverse effect on the
Partnership's ability to obtain or maintain a Nevada gaming license and
additional sanctions could be imposed by Nevada gaming authorities for
regulatory violations outside the State of Nevada. Any action by any Gaming
Authority may adversely affect the Issuers' Gaming Licenses, which would have a
material adverse effect on the financial condition of the Partnership and the
Issuers' ability to service the Indebtedness, including the Notes.
46
<PAGE> 54
MANAGEMENT
DIRECTORS, OFFICERS AND SENIOR MANAGEMENT
The directors and executive officers of RAS, the general partner of the
Partnership, are:
<TABLE>
<CAPTION>
NAME TITLE AGE COUNTRY OF CITIZENSHIP DIRECTOR/OFFICER SINCE
---- ----- --- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Hans Jecklin.......... Chairman of the Board 52 Switzerland 1996
Christiane Jecklin.... Director 52 Switzerland 1996
Brian McMullan........ Director, President and 51 United Kingdom 1996
Chief Executive Officer
John Tipton........... Director, Senior Vice 51 United States 1996
President, Chief
Financial Officer and
General Counsel
Jim Fonseca........... Director, Senior Vice 48 United Kingdom 1996
President Gaming
Operations
Quinton Boshoff....... Director, Senior Vice 44 South Africa 1996
President Slot Operations
Jeff Smith............ Treasurer, Secretary and 32 United States 1996
Financial Controller
</TABLE>
Hans Jecklin, the Chairman of the Board of RAS since June 1996, and husband
of Christiane Jecklin, first became involved in the gaming industry in Zurich,
Switzerland in 1968. In 1975, he founded the predecessor to Tivolino Holding AG
in Zurich, whose core business was gaming. Today, the Swiss Parent's operations
include gaming, hotels, restaurants and real estate investment.
Christiane Jecklin, a director of RAS since June 1996, and the wife of Hans
Jecklin, has been involved in the gaming industry and the management of SCA
since its formation in 1989.
Brian McMullan, the President and Chief Executive Officer of RAS and a
director since June 1996, has nearly 30 years of gaming experience, much of that
time in senior management positions for gaming companies in Great Britain and
South Africa. Mr. McMullan entered the gaming industry in Britain in 1968. From
1986 to 1992, Mr. McMullan served as Sun International's Director of Gaming
Operations, where he was responsible for the gaming operations.
John Tipton, Senior Vice President, Chief Financial Officer and General
Counsel of RAS and a director since June 1996, has over 25 years experience in
the private and public sector, including a number of years in private legal
practice during which time he was managing partner of Calkins, Kramer, Grimshaw
& Harring, a Denver law firm. From 1988 to 1992, Mr. Tipton served as Executive
Director of the Colorado Department of Revenue, where he was charged with
drafting and implementing the casino gaming legislation in Colorado. He also was
responsible for managing the Colorado Lottery, the Colorado Division of Gaming
and pari-mutuel racing in Colorado. Mr. Tipton joined SCA in 1993 and is
responsible for regulatory, development and legal matters.
Jim Fonseca, Senior Vice President Gaming Operations of RAS and a director
since June 1996, has over 25 years of gaming experience. Starting in 1972, he
worked for a number of London casinos and has experience in the primary casino
table games. From 1987 to 1992, Mr. Fonseca was Regional Gaming Manager of Sun
International (Bophuthatswana) Ltd.
Quinton Boshoff, the Senior Vice President Slot Operations of RAS and a
director since June 1996, entered the gaming business in southern Africa in
1979. As Regional Slots Manager of Sun International (Bophuthatswana) Ltd., Mr.
Boshoff led a team in marketing, security and operating procedures with respect
to slot development. In 1992 Mr. Boshoff came to the U.S. as a founder of SCR.
Jeff Smith, the Treasurer, Secretary and Financial Controller of RAS since
June 1996, has been involved in the casino and resort industry for over ten
years. From 1986 to 1991, Mr. Smith was an accountant at Ernst
47
<PAGE> 55
& Young LLP. Mr. Smith joined SCA in 1991 and has been involved in the openings
of all three U.S. properties.
ADDITIONAL SENIOR MANAGEMENT
Additional senior management of the Partnership includes:
<TABLE>
<CAPTION>
COUNTRY OF
NAME TITLE AGE CITIZENSHIP
---- ----- --- -----------
<S> <C> <C> <C>
David Atkins................... Vice President -- Table Games 37 United Kingdom
Richard Coleman................ Group Internal Audit Manager 57 United Kingdom
David Colling.................. Construction Manager 51 United States
Jim Currie..................... Slots Technical Manager 38 United Kingdom
Daniel de Waal................. Management Information Systems 33 South Africa
Director
Delores Edwards................ Recruitment Director 49 United States
Campbell Jamieson.............. Vice President -- Slot 38 Zimbabwe
Operations
Tristan Kaatze................. Vice President and Chief 36 United Kingdom
Financial Officer
Sean McGuinness................ Assistant General Counsel 34 United States
</TABLE>
In addition to the officers and directors of RAS, the Partnership has a
management team with substantial experience in the various aspects of its
business operations. All of these members of senior management are employed on
an "at will" basis. As a part of the strategy for the successful operation of
the Resort Casino, the Partnership intends to hire a number of management
personnel from the Nevada market with experience specifically in the operation
of gaming, hotel and resort facilities in Nevada. See "Risk Factors -- New
Project; Lack of Operating History" and "-- Availability and Retention of Key
Management and Other Employees."
David Atkins (Vice President -- Table Games) has more than 15 years gaming
operational experience in London, southern Africa and the United States. At Sun
International he was Casino Manager or Deputy Casino Manager at three resorts:
Wild Coast Sun, Morula Sun and The Carousel.
Richard Coleman (Group Internal Audit Manager) has worked as a dealer and
in middle management in the London gaming industry throughout the 1960s and
1970s prior to joining Playboy in Atlantic City in 1979 as training manager.
Since 1982, Mr. Coleman has worked predominantly in internal audit in London,
South Africa and the U.S. In this capacity, he has worked with Price Waterhouse
in South Africa, Ernst & Young, LLP in the U.S. and with the Las Vegas office of
Arthur Andersen, LLP in the preparation of the Internal Control System.
David Colling (Construction Manager) has more than 20 years experience in
the construction industry, holding the positions of Owner's
Representative/Project Manager, Project Estimator and Project Superintendent.
Jim Currie (Slots Technical Manager) joined Sun International in 1985.
During his career he has held the positions of Slots Technical Manager at Sun
City, The Carousel and Morula Sun.
Daniel de Waal (Management Information Systems Director) has experience in
the field of information systems and worked for several computer and office
equipment concerns in South Africa. Mr. de Waal was a member of the development
and installation team at The Carousel, after which he served for six years as
its MIS director. Mr. de Waal is an Enterprise Certified Novell Engineer, and is
a Certified Computer Professional in the U.S.
Delores Edwards (Recruitment Director) has 25 years experience in
recruiting, including 10 years running her own executive search firm. Ms.
Edwards has been involved in most recruiting for SCA properties, including the
openings of The Teller House, Prairie Knights Casino and Speaking Rock Casino &
48
<PAGE> 56
Entertainment Centre. Ms. Edwards worked with Watson Wyatt International in the
development of the skill-based compensation plan that is in place at all SCA
operations.
Campbell Jamieson (Vice President -- Slot Operations) has over 16 years
experience in the gaming industry. Mr. Jamieson has held many positions in slots
operations, both technical and floor. During his twelve years with Sun
International, Mr. Jamieson was Complex Slots Manager at Sun City and The
Carousel.
Tristan Kaatze (Vice President and Chief Financial Officer) is a chartered
accountant in South Africa who spent nine years at Sun International and held
positions both in the corporate office and operating units. Most recently, Mr.
Kaatze served as Chief Financial Officer of Sun City.
Sean McGuinness (Assistant General Counsel) first became involved in the
gaming industry in 1989. Mr. McGuinness served with the Iowa Racing and Gaming
Commission and the Mississippi Gaming Commission before representing several
gaming companies in private law practice in Mississippi. Mr. McGuinness' clients
have included Bally Entertainment Corporation and Trump Hotels and Casino
Resorts. Mr. McGuinness became Assistant General Counsel of the Partnership in
March 1997.
The Swiss Parent's reputation is as the pioneer of casino games in
Switzerland. Since 1993, the Swiss Parent has established strategic alliances
with "Kursaals" (gaming and entertainment facilities under municipal control)
and, in conjunction with these entities, operates gaming facilities in Locarno,
Bern, Geneva, Thun, Schaffhausen, Rheinfelden, and, in a joint venture with
Casinos Austria, Lugano, Luzern and St. Moritz. In addition to gaming, all of
these operations offer restaurants, bars and entertainment facilities. The Swiss
Parent operates a casino in The Hague, Netherlands as well as 13 "arcades" in
Great Britain.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following sets forth the annual
compensation for services in all capacities to the Issuers for the fiscal year
ended December 31, 1997 of Mr. McMullan, the President and Chief Executive
Officer of RAS, and Messrs. Tipton, Fonseca, Boshoff and Smith, the remaining
executive officers of RAS.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY BONUS COMPENSATION(2) COMPENSATION(3)
------------------------------ ---- -------- ------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Brian McMullan....................... 1997 $275,000 $10,781 $71,151 $107,167
President and Chief Executive
Officer
John Tipton.......................... 1997 $225,000 $ 5,391 $62,718 $ 97,761
Senior Vice President, Chief
Financial Officer and General
Counsel
Jim Fonseca.......................... 1997 $225,000 $ 5,391 $59,347 $ 93,757
Senior Vice President Gaming
Operations
Quinton Boshoff...................... 1997 $150,000 $ 5,391 $54,715 $ 82,024
Senior Vice President Slot
Operations
Jeff Smith........................... 1997 $125,000 -- $ 5,932 $ 65,936
Treasurer, Secretary and Financial
Controller
</TABLE>
- ---------------
(1) Executive officers of RAS are compensated by SCA either directly or through
SCR, its wholly owned subsidiary, and neither the Partnership nor RAS pays
any compensation to any of the executive officers. See "Certain
Transactions."
49
<PAGE> 57
(2) Each perquisite or other personal benefit exceeding 25.0% of the total
perquisites and other personal benefits for each named executive officer is:
<TABLE>
<CAPTION>
TAXES FOR LIFE
INSURANCE
NAME PREMIUMS CAR ALLOWANCE
---- -------------- -------------
<S> <C> <C>
Brian McMullan............................................. $38,164 $29,030
John Tipton................................................ $30,499 $29,030
Jim Fonseca................................................ $27,244 $29,030
Quinton Boshoff............................................ $19,243 $29,030
Jeff Smith................................................. $ 5,157 --
</TABLE>
(3) Items included in "All Other Compensation" are:
<TABLE>
<CAPTION>
EXECUTIVE LIFE
ONE-TIME INSURANCE 401(K)
NAME MOVING ALLOWANCE PREMIUMS CONTRIBUTIONS
---- ---------------- -------------- -------------
<S> <C> <C> <C>
Brian McMullan............................... $50,000 $46,867 $10,300
John Tipton.................................. $50,000 $37,461 $10,300
Jim Fonseca.................................. $50,000 $33,457 $10,300
Quinton Boshoff.............................. $50,000 $23,631 $ 8,393
Jeff Smith................................... $50,000 $ 9,061 $ 6,875
</TABLE>
Compensation of Directors. RAS does not pay any fees or other compensation
(other than reimbursement of expenses incurred to attend meetings) to directors
for their services in that capacity.
Compensation Committee Interlocks and Insider Participation. Neither the
Issuers, SCA or SCR has a compensation committee or other committee of the board
of directors which performs a similar function. Each of the executive officers'
compensation, which is paid by SCR, a wholly owned subsidiary of SCA, was
determined by Messrs. Jecklin, McMullan and Tipton. Each of the directors of RAS
is a director of SCR. See "Risk Factors -- Availability and Retention of Key
Management and Other Employees" and "Certain Transactions -- Certain Business
Relationships."
EMPLOYMENT AGREEMENTS AND EQUITY ARRANGEMENTS
There are no employment agreements between either of the Issuers and any of
the directors or executive officers of RAS or senior operating management of the
Partnership or RAS. Messrs. McMullan, Tipton, Fonseca and Boshoff (the
"Executives") are employees of SCR, a wholly-owned subsidiary of SCA, and each
has an employment agreement which may be terminated by any of the Executives or
SCR with 90 days prior written notice. As employees of SCR, each of the
Executives currently are engaged, and in the future will engage, in the
development and management of SCR's other businesses and properties. They will
devote only as much of their time to the business of the Partnership as they, in
their judgment, deem to be reasonably required, which will be less than their
full time. These officers and directors may experience conflicts of interest in
allocating management time, services and functions among the Partnership and the
various other business activities of SCR.
INDEMNIFICATION AND LIMITATION OF LIABILITY
As permitted under the Nevada General Corporation Law, the Partnership's
Partnership Agreement and the Bylaws of RAS eliminate the personal liability and
provide for the indemnification of the partners, officers, directors, employees,
agents or Affiliates of the Partnership or RAS for any damages, action, suit or
proceeding provided that such person acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Partnership or RAS, as applicable, and, with respect to any criminal action, had
no reasonable cause to believe his conduct was unlawful.
50
<PAGE> 58
The Bylaws of RAS also provide for indemnification of officers and
directors of RAS and persons who serve at the request of RAS as a director,
officer, employee, agent or trustee of another corporation, partnership, joint
venture, trust or other enterprise, to the full extent allowed by Nevada law.
The Nevada General Corporation Law authorizes indemnification of officers,
directors and persons serving other entities in certain capacities at the
request of the corporation, subject to certain conditions and limitations set
forth therein, against all expenses and liabilities incurred by or imposed upon
them as a result of actions, suits and proceedings brought against them in such
capacity if they acted in good faith, in a manner they reasonably believed to be
in, or not opposed to, the best interests of the corporation, and, with respect
to any criminal action, they had reasonable cause to believe the conduct was
lawful.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Issuers
pursuant to the foregoing provisions, the Issuers have been informed that in the
opinion of the Commission, such indemnification is against public policy as
expressed in the Securities Act, and is therefore unenforceable.
CERTAIN TRANSACTIONS
MANAGEMENT FEES
Pursuant to the terms of the Partnership Agreement, RAS is entitled to 3.0%
of the monthly net revenues of the Partnership, and 6.0% of the monthly EBITDA
with the net revenue fee deducted each calendar month, as compensation for
management of the Partnership. The maximum amount of compensation payable to
RAS, however, shall not exceed 10.0% of the Partnership's total net revenue.
Distribution of these fees shall be made on a quarterly basis, subject to the
terms of the Indenture and the Credit Agreement. Such compensation shall be
subordinated to the Notes and the Mortgage Notes.
Substantially all management and general and administrative services,
including the services of Messrs. McMullan, Tipton, Fonseca, Boshoff and Smith,
certain members of additional senior management, certain clerical and
administrative employees, and certain other general and administrative support
including office space, will be provided to the Partnership by SCA either
directly or through SCR, its wholly-owned subsidiary. All executive officers of
the Partnership will be compensated by SCR and neither the Partnership nor RAS
will pay any compensation to any of the Partnership's executive officers. In
consideration of the foregoing, in 1998 the Partnership will pay to SCR a fee of
approximately $2.0 million plus 65.0% (estimated to be approximately $100,000)
of SCR's overhead. The fee paid by the Partnership to SCR was $356,103 for 1996
and approximately $2.3 million for 1997. The fee is subject to renegotiation
annually between the Partnership and SCR. The current fee was not, and any
future fee will not be, the result of arms-length negotiation between the
Partnership and SCR.
DEVELOPMENT FEE
The Partnership will pay to SCA a development fee equal to $3.0 million,
which will be subordinated to the Notes and the Mortgage Notes, for services it
has rendered, and will render, in connection with the development of the Resort
Casino.
OPTION AND RIGHT OF FIRST OFFER
Prior to completion of the 144A Offering, the Partnership assigned its
option rights on a 22.5-acre parcel (the "Option Parcel") adjacent to the Resort
Casino to SCA subject to the approval of HHP. The right to purchase the Option
Parcel was originally purchased by the Partnership for $1.2 million. It is
anticipated that a new entity will be established for any development of the
Option Parcel. Any interest retained by SCA in the Option Parcel development and
any other economic benefit from the Option Parcel will be shared by the partners
based upon their Partnership interests.
The Partnership currently holds the Right of First Offer with respect to
four other potential gaming sites in Summerlin. If the Partnership is given a
notice to exercise its Right of First Offer, and it elects to exercise
51
<PAGE> 59
such right, it must first attempt to develop and finance such site under the
terms of the Indenture and Credit Agreement. If, however, the financing of such
site is restricted under the Indenture and Credit Agreement, the Partnership
will then be permitted to assign such rights to an affiliate of SCA in exchange
for an equity interest in such affiliate provided, however, that SCA owns at
least 85.0% of such affiliate. The determination of the value of the Right of
First Offer that may be assigned to the affiliate of SCA will be determined by
the general partner of the Partnership, currently RAS, a wholly-owned subsidiary
of SCA. RAS currently holds a 1.0% interest in the Partnership as the general
partner. SCA also owns a limited partnership interest that represents 91.26% of
the Partnership's total interests, excluding the Warrants.
ARCHITECT'S LIMITED PARTNERSHIP INTEREST
Christiana L. P., an entity controlled by Mr. Steelman, the principal of
the Architect, owns a 5.0% limited partnership interest in the Partnership. The
Partnership entered into the Architect Agreement with the Architect prior to the
consummation of the 144A Offering pursuant to which the Architect shall be paid
compensation of approximately $2.4 million and any reimbursable expenses. The
Architect Agreement also provides for additional expenditures of up to
approximately $2.3 million primarily for third party engineering, landscaping
and other consulting fees.
CERTAIN BUSINESS RELATIONSHIPS
Mr. Jecklin, the Chairman of the Board of RAS, is the Chairman of the Board
of SCA and the Swiss Parent. Additionally, Messrs. McMullan, Tipton, Fonseca,
Boshoff and Smith, the executive officers of RAS, also serve as executive
officers of SCA.
52
<PAGE> 60
OWNERSHIP OF INTERESTS
The following table sets forth certain information with respect to the
beneficial ownership of the common stock of RAS and the partnership interests in
the Partnership by (i) each person who, to the knowledge of RAS and the
Partnership, beneficially owns more than 5.0% of the outstanding common stock of
RAS, and owns any partnership interest in the Partnership and (ii) all executive
officers and directors of RAS as a group that is expected upon the completion of
the Exchange Offer. As of March 31, 1998, RAS had 1,000 shares of outstanding
common stock, all of which has voting rights.
RAS
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP PERCENTAGE
------------------- -------------------- ----------
<S> <C> <C>
Hans Jecklin(2)............................................. 623 62.30%
Christiane Jecklin(3)....................................... 207 20.70
Brian McMullan(4)........................................... 60 6.00
John Tipton(5).............................................. 30 3.00
Jim Fonseca(6).............................................. 40 4.00
Quinton Boshoff(7).......................................... 30 3.00
Jeff Smith.................................................. -- --
All executive officers and directors of RAS as a group...... 990 99.00%
</TABLE>
- ---------------
(1) The address of each person named herein is c/o The Resort at Summerlin,
Inc., 1160 Town Center Drive, Suite 200, Las Vegas, Nevada 89134.
(2) Mr. Jecklin is the beneficial owner of 6,230 shares of SCA. Excludes 2,070
shares of SCA owned by Christiane Jecklin, his wife, in which he disclaims
beneficial interest.
(3) Ms. Jecklin is the beneficial owner of 2,070 shares of SCA. Excludes 6,230
shares of SCA owned by Hans Jecklin, her husband, in which she disclaims
beneficial interest.
(4) Mr. McMullan owns 600 shares of SCA.
(5) Mr. Tipton owns 300 shares of SCA.
(6) Mr. Fonseca owns 400 shares of SCA.
(7) Mr. Boshoff owns 300 shares of SCA.
THE PARTNERSHIP
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP
BENEFICIAL OWNER(1)(2) PERCENTAGE
---------------------- ----------
<S> <C>
RAS(3)...................................................... 1.00%
SCA(4)...................................................... 92.26
Christiana L.P.(5).......................................... 5.00
Hans Jecklin(6)............................................. 57.50
Christiane Jecklin(7)....................................... 19.10
Brian McMullan(8)........................................... 5.50
John Tipton(9).............................................. 2.80
Jim Fonseca(10)............................................. 3.70
Quinton Boshoff(11)......................................... 2.80
Jeff Smith.................................................. --
All executive officers and directors of RAS as a
group(12)................................................. 92.26%
</TABLE>
- ---------------
(1) The address of each person named herein is c/o The Resort at Summerlin,
Limited Partnership, 1160 Town Center Drive, Suite 200, Las Vegas, Nevada
89134.
53
<PAGE> 61
(2) Percentages exclude percentage ownership attributable to the Warrants.
(3) RAS is a wholly-owned subsidiary of SCA and owns a 1.0% general partnership
interest in the Partnership.
(4) SCA holds a 91.26% limited partnership interest and a beneficial 1.0%
general partnership interest in the Partnership through the ownership of
RAS.
(5) Controlled by Mr. Steelman, the principal of the Architect. See "Certain
Transactions."
(6) Mr. Jecklin is the beneficial owner of 6,230 shares of SCA, which owns a
91.26% limited partnership interest and a beneficial 1.0% general
partnership interest in the Partnership. Excludes 2,070 shares of SCA owned
by Christiane Jecklin, his wife, in which he disclaims beneficial interest.
(7) Ms. Jecklin is the beneficial owner of 2,070 shares of SCA, which owns a
91.26% limited partnership interest and a beneficial 1.0% general
partnership interest in the Partnership. Excludes 6,230 shares of SCA owned
by Hans Jecklin, her husband, in which she disclaims beneficial interest.
(8) Mr. McMullan owns 600 shares of SCA, which owns a 91.26% limited
partnership interest and a beneficial 1.0% general partnership interest in
the Partnership.
(9) Mr. Tipton owns 300 shares of SCA, which owns a 91.26% limited partnership
interest and a beneficial 1.0% general partnership interest in the
Partnership.
(10) Mr. Fonseca owns 400 shares of SCA, which owns a 91.26% limited partnership
interest and a beneficial 1.0% general partnership interest in the
Partnership.
(11) Mr. Boshoff owns 300 shares of SCA, which owns a 91.26% limited partnership
interest and a beneficial 1.0% general partnership interest in the
Partnership.
(12) Messrs. Jecklin, McMullan, Tipton, Fonseca and Boshoff and Smith are
directors and executive officers, of SCA, which owns all the outstanding
shares of common stock of RAS, and such persons, as a group, beneficially
own 100.0% of SCA's common stock and, therefore, may be deemed to
beneficially own all the Partnership interests held by RAS and SCA. In
addition, through certain voting arrangements that expire in 2004, Mr.
Jecklin has the power to vote all the shares of common stock of SCA owned
by the Executives, which totals 16.0% of the outstanding stock of SCA. Mr.
Jecklin, through his ownership and control of the Swiss Parent, also has
voting and dispositive power with respect to 83.0% of the outstanding stock
of SCA, all of which is owned by the Swiss Parent. The remaining 1.0% is
held by a director of the Swiss Parent.
54
<PAGE> 62
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Original Notes were originally sold by the Issuers on December 31,
1997, to the Initial Purchaser pursuant to the Purchase Agreement. The Initial
Purchaser subsequently resold the Original Notes to Qualified Institutional
Buyers pursuant to Rule 144A, or institutional "accredited investors" as defined
in Rule 501(a) (1), (2), (3) or (7) of Regulation D under the Securities Act. As
provided in the Purchase Agreement, the Issuers entered into the Registration
Rights Agreement, pursuant to which the Issuers have agreed, for the benefit of
the Holders of the Original Notes, at the Issuers' cost, to (i) file the
Registration Statement of which this Prospectus is a part with the Commission or
before April 30, 1998 (the "Filing Date") with respect to the Exchange Offer for
the Exchange Notes (and which was filed with the Commission on April 8, 1998),
(ii) use their best efforts to cause the Registration Statement to be declared
effective under the Securities Act on or before June 29, 1998, and (iii) use
their best efforts to consummate the Exchange Offer on or before July 29, 1998.
Upon the Registration Statement being declared effective, the Issuers will offer
the Exchange Notes in exchange for the Original Notes. The Issuers will keep the
Exchange Offer open for no less than 30 business days (or longer if required by
applicable law) after the date on which notice of the Exchange Offer is mailed
to the Holders.
For each Original Note properly tendered and accepted pursuant to the
Exchange Offer, the Holder will receive an Exchange Note having a principal
amount equal to that of the Original Note tendered. Interest on each Exchange
Note will accrue or accumulate from the last interest payment date on which
interest was paid on the Original Note tendered in exchange therefor or, if no
interest has been paid on such Original Note, from December 31, 1997.
Each Original Note Holder who wishes to exchange the Original Notes for
Exchange Notes in the Exchange Offer will be required to represent in the Letter
of Transmittal that (i) any Exchange Notes to be received by it will be acquired
in the ordinary course of its business, (ii) at the time of commencement of the
Exchange Offer, it has no arrangement with any person to participate in the
distribution (within the meaning of the Securities Act) of the Exchange Notes,
and (iii) it is not an Affiliate of the Issuers.
If (i) the Issuers are not required to file the Registration Statement or
permitted to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law, including all applicable Gaming Laws or Commission
policy, or (ii) any holder of Transfer Restricted Securities notifies the
Issuers prior to the 20th day following consummation of the Exchange Offer that
(A) it is prohibited by law or Commission policy from participating in the
Exchange Offer, or (B) it may not resell the Exchange Notes, acquired by it in
the Exchange Offer to the public without delivering a prospectus and the
prospectus contained in the Registration Statement is not appropriate or
available for such resales, or (C) that it is a broker-dealer and owns Original
Notes acquired directly from the Issuers, or if for any other reason the
Exchange Offer is not consummated on or before July 29, 1998, or, under certain
other circumstances, if the Initial Purchaser or any Original Note Holder (other
than the Initial Purchaser) who is not eligible to participate in the Exchange
Offer shall so request (a "Shelf Request"), the Issuers, will at their cost (a)
within 120 days of such Shelf Request, file a shelf registration statement
relating to the offer and sale of the then outstanding Original Notes (a "Shelf
Registration Statement"); (b) use their best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act no
later than 180 days following a Shelf Request; and (c) use their best efforts to
keep effective the Shelf Registration Statement until the earlier of December
31, 1999 or such shorter period terminating when all of the Original Notes
covered by the Shelf Registration Statement or all of the Original Notes become
eligible for resale pursuant to Rule 144 without volume restrictions. The
Issuers will, in the event of the filing of a Shelf Registration Statement,
provide to each Original Note Holder copies of the prospectus which is a part of
the Shelf Registration Statement, notify each such Holder when such Shelf
Registration Statement has become effective and take certain other actions
required to permit unrestricted resales of the Original Notes. A Holder that
sells its Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the
55
<PAGE> 63
provisions of the Registration Rights Agreement which are applicable to such
Holder (including indemnification obligations). If the Issuers fail to comply
with the above provisions or if such registration statements fail to become
effective, then, as liquidated damages, additional interest (the "Additional
Interest") shall become payable with respect to the Original Notes as follows:
(i) if a Shelf Registration Statement is required and not filed,
within 120 days following a Shelf Request, Additional Interest of 0.25% per
annum shall accrue on the Original Notes over and above the stated rate for
the first 90 days commencing on the Shelf Request, such Additional Interest
increasing by an additional 0.25% per annum at the beginning of each
subsequent 30-day period;
(ii) if the Registration Statement or Shelf Registration Statement is
not declared effective, in the case of the Registration Statement, on or
before June 29, 1998 or, in the case of the Shelf Registration Statement,
within 180 days following a Shelf Request, Additional Interest of 0.25% per
annum shall accrue on the Original Notes over and above the stated rate for
the first 90 days commencing on June 29, 1998 or such Shelf Request,
respectively, such Additional Interest increasing by an additional 0.25%
per annum at the beginning of each subsequent 30-day period; or
(iii) if (A) the Issuers have not exchanged all Original Notes validly
tendered in accordance with the terms of the Exchange Offer on or prior to
July 29, 1998, or (B) the Registration Statement ceases to be effective at
any time prior to the time that the Exchange Offer is consummated, or (C)
if applicable, the Shelf Registration Statement has been declared effective
and such Shelf Registration Statement ceases to be effective at any time
prior to December 31, 1999 (unless all the Original Notes have been sold
thereunder), then Additional Interest of 0.25% per annum shall accrue on
the Original Notes over and above the stated rate for the first 30 days
commencing on (x) July 29, 1998 with respect to the Original Notes validly
tendered and not exchanged by the Issuers in the case of (A) above, or (y)
the date the Registration Statement ceases to be effective or usable for
its intended purpose in the case of (B) above, or (z) the day such Shelf
Registration Statement ceases to be effective in the case of (C) above,
such Additional Interest increasing by an additional 0.25% per annum at the
beginning of each subsequent 30-day period; provided that all Additional
Interest on the Original Notes may not exceed in the aggregate 2.0% per
annum; and that (1) upon the filing of the Shelf Registration Statement (in
the case of clause (i) above), (2) upon the effectiveness of the Exchange
Offer Registration Statement or Shelf Registration Statement (in the case
of (ii) above), or (3) upon the exchange of Exchange Notes for all Original
Notes tendered (in the case of clause (iii)(A) above), or upon the
effectiveness of the Registration Statement which had ceased to remain
effective (in the case of clause (iii)(B) above), or upon the effectiveness
of the Shelf Registration Statement which had ceased to remain effective
(in the case of clause (iii)(C) above), Additional Interest on the Original
Notes as a result of such clause (or the relevant subclause thereof), as
the case may be, shall cease to accrue.
Any Additional Interest due will be payable on the same original interest
payment dates as the Original Notes.
The regulations of the Nevada Board and the Nevada Commission also provide
that any entity which is not an "affiliated company," as defined in the Nevada
Act, or which is not otherwise subject to the provisions of the Nevada Act or
regulations, such as each of the Issuers, which plans to make a public offering
of securities or the proceeds from the sale of which are intended for the
construction or operation of gaming facilities in Nevada, or to retire or extend
obligations incurred for such purposes, may apply to the Nevada Commission for
prior approval of such offering. The Nevada Commission may find an applicant
unsuitable based solely on the fact that it did not submit such an application,
unless upon a written Ruling Request, the Nevada Board Chairman has ruled that
it is not necessary to submit an application. The Exchange Offer will qualify as
a public offering. The Issuers filed a Ruling Request with the Nevada Board
Chairman. On March 27, 1998, the Nevada Board Chairman granted the Issuers'
Ruling Request, ruling that the Exchange Offer need not be submitted to the
Nevada Board or the Nevada Commission for prior approval. See "Regulation and
Licensing -- Nevada" and "Description of the Notes -- Optional
Redemption -- Regulatory Redemption."
56
<PAGE> 64
Following the consummation of the Exchange Offer, the Holders eligible to
participate in the Exchange Offer but who did not tender their Original Notes
will not have any further exchange or registration rights and the Original Notes
will continue to be subject to certain restrictions on transfer adversely
affecting the liquidity of the Original Notes. See "Risk Factors -- Consequences
of Failure to Exchange Original Notes."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept Original Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
Expiration Date. The Issuers will issue $1,000 principal amount of Exchange
Notes in exchange for each $1,000 principal amount of Original Notes tendered
and identical to those accepted in the Exchange Offer. Holders may tender some
or all of their Original Notes pursuant to the Exchange Offer. However, Original
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are identical to the Original
Notes in all material respects except (i) the Exchange Notes bear a Series B
designation, (ii) the Exchange Notes have been registered under the Securities
Act and hence will not bear legends restricting the transfer thereof, and (iii)
the Exchange Notes will not contain certain provisions relating to an increase
in the interest rate relating to the timing of the Exchange Offer, which rights
will terminate when the Exchange Offer is consummated. The Exchange Notes will
evidence the same debt as the Original Notes and will be entitled to the
benefits of the Indenture.
As of the date of this Prospectus, $100.0 million aggregate principal
amount of Original Notes are outstanding. The Issuers have fixed 5:00 p.m., New
York City time, on , 1998, as the record date for the Exchange Offer
for purposes of determining the persons to whom this Prospectus and the Letter
of Transmittal will be mailed initially. Original Note Holders do not have any
appraisal or dissenters' rights under the General Corporation Law of Nevada or
the Indenture in connection with the Exchange Offer. The Issuers intend to
conduct the Exchange Offer in accordance with the applicable requirements of the
Exchange Act and the rules and regulations of the Commission thereunder. The
Issuers shall be deemed to have accepted validly tendered Original Notes when,
as and if the Issuers have given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the Tendering Holders for the
purpose of receiving the Exchange Notes from the Issuers. If any tendered
Original Notes are not accepted for exchange because of an invalid tender, the
occurrence of certain other events set forth herein or otherwise, the
certificates for any unaccepted Original Notes will be returned, without
expense, to the Tendering Holder thereof as promptly as practicable after the
Expiration Date. Tendering Holders will not be required to pay brokerage
commissions or fees or, subject to the instructions of the Letter of
Transmittal, transfer taxes with respect to the exchange of Original Notes
pursuant to the Exchange Offer. The Issuers will pay all charges and expenses,
other than the transfer taxes in certain circumstances, in connection with the
Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The "Expiration Date" is 5:00 p.m., New York City time, on ,
1998, unless the Issuers, in their sole discretion, extend the Exchange Offer,
in which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
Holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
The Issuers reserve the right (i) to delay acceptance of any Original
Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of
the conditions set forth below under "-- Conditions" 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 any
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered Holders.
57
<PAGE> 65
PROCEDURES FOR TENDERING
The tender of Original Notes pursuant to any of the procedures set forth in
this Prospectus and in the Letter of Transmittal will constitute a binding
agreement between the Tendering Holder and the Issuers in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal. The tender of Original Notes will constitute an agreement to
deliver good and marketable title to all tendered Original Notes prior to the
Expiration Date free and clear of all liens, charges, claims, encumbrances,
interests and restrictions of any kind.
EXCEPT AS PROVIDED IN "-- GUARANTEED DELIVERY PROCEDURES," UNLESS THE
ORIGINAL NOTES BEING TENDERED ARE DEPOSITED BY THE TENDERING HOLDER WITH THE
EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE (ACCOMPANIED BY A PROPERLY COMPLETED
AND DULY EXECUTED LETTER OF TRANSMITTAL), THE ISSUERS MAY, AT THEIR OPTION,
REJECT SUCH TENDER. ISSUANCE OF EXCHANGE NOTES WILL BE MADE ONLY AGAINST DEPOSIT
OF TENDERED ORIGINAL NOTES AND DELIVERY OF ALL OTHER REQUIRED DOCUMENTS.
NOTWITHSTANDING THE FOREGOING, DTC PARTICIPANTS TENDERING THROUGH ATOP WILL BE
DEEMED TO HAVE MADE VALID DELIVERY WHERE THE EXCHANGE AGENT RECEIVES AN AGENT'S
MESSAGE PRIOR TO THE EXPIRATION DATE.
To tender Original Notes, the following procedures must be followed:
Original Notes held through DTC. Each beneficial owner owning interests in
Original Notes holding Original Notes through a DTC Participant must instruct
such DTC Participant to cause its Original Notes to be tendered in accordance
with the procedures set forth in this Prospectus.
Pursuant to an authorization given by DTC to the DTC Participants, each DTC
Participant holding Original Notes through DTC must (i) electronically transmit
its acceptance through ATOP, and DTC will then edit and verify the acceptance,
execute a book-entry delivery to the Exchange Agent's account at DTC and send an
Agent's Message to the Exchange Agent for its acceptance, or (ii) comply with
the guaranteed delivery procedures set forth below and in the Notice of
Guaranteed Delivery. See "-- Guaranteed Delivery Procedures."
The Exchange Agent will (promptly after the date of this Prospectus)
establish accounts at DTC for purposes of the Exchange Offer with respect to
Original Notes held through DTC, and any financial institution that is a DTC
Participant may make book-entry delivery of interests in Original Notes into the
Exchange Agent's account through ATOP. However, although delivery of interests
in the Original Notes may be effected through book-entry transfer into the
Exchange Agent's account through ATOP, an Agent's Message in connection with
such book-entry transfer, and any other required documents, must be, in any
case, transmitted to and received by the Exchange Agent at its address set forth
under "-- Exchange Agent," or the guaranteed delivery procedures set forth below
must be complied with, in each case, prior to the Expiration Date. Delivery of
documents to DTC does not constitute delivery to the Exchange Agent. The
confirmation of a book-entry transfer into the Exchange Agent's account at DTC
as described above is referred to herein as a "Book-Entry Confirmation."
The term "Agent's Message" means a message transmitted by DTC to, and
received by, the Exchange Agent and forming a part of the Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
each DTC Participant tendering through ATOP that such DTC Participants have
received a Letter of Transmittal and agree to be bound by the terms of such
Letter of Transmittal and that the Issuers may enforce such agreement against
such DTC Participants.
Cede & Co., as the Holder of the global certificates representing the
Original Notes (the "Global Notes"), will tender a portion of each of the Global
Notes equal to the aggregate principal amount due at the stated maturity for
which instructions to tender are given by DTC Participants.
Original Notes held by Holders. Each Holder must (i) complete and sign and
mail or deliver the accompanying Letter of Transmittal, and any other documents
required by such Letter of Transmittal,
58
<PAGE> 66
together with certificates representing all tendered Original Notes, to the
Exchange Agent at its address set forth under "-- Exchange Agent," or (ii)
comply with the guaranteed delivery procedures set forth below and in the Notice
of Guaranteed Delivery. See "-- Guaranteed Delivery Procedures."
All signatures on a Letter of Transmittal must be guaranteed by any member
firm of a registered national securities exchange or of the National Association
of Securities Dealers, Inc., a commercial bank or trust company having an office
or correspondent in the United States or an "eligible guarantor" institution
within the meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible
Institution"); provided, however, that signatures on a Letter of Transmittal
need not be guaranteed if such Original Notes are tendered for the account of an
Eligible Institution including (as such terms are defined in Rule 17Ad-15): (i)
a bank; (ii) a broker, dealer, municipal securities dealer, municipal securities
broker, government securities dealer or government securities broker; (iii) a
credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings institution that is a
participant in a Securities Transfer Association recognized program.
If a Letter of Transmittal or any Original Note is signed by a trustee,
executor, administrator, guardian, attorney-in-fact, agent, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person must so indicate when signing, and proper evidence satisfactory to
the Issuers of the authority of such person so to act must be submitted.
Holders should indicate in the applicable box in the Letter of Transmittal
the name and address to which substitute certificates evidencing Original Notes
for amounts not tendered are to be issued or sent, if different from the name
and address of the person signing such Letter of Transmittal. In the case of
issuance in a different name, the employer identification or social security
number of the person named must also be indicated. If no instructions are given,
such Original Notes not tendered, as the case may be, will be returned to the
person signing such Letter of Transmittal.
By tendering, each Holder and each DTC Participant will make to the Issuers
the representations set forth in the third paragraph under the heading
"-- Purpose and Effect of the Exchange Offer."
No alternative, conditional, irregular or contingent tenders will be
accepted (unless waived). By executing a Letter of Transmittal or transmitting
an acceptance through ATOP, as the case may be, each Tendering Holder waives any
right to receive any notice of the acceptance for purchase of its Original
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Original Notes will be resolved by the
Issuers, whose determination will be final and binding. The Issuers reserve the
absolute right to reject any or all tenders that are not in proper form or the
acceptance of which may, in the opinion of counsel for the Issuers, be unlawful.
The Issuers also reserve the absolute right to waive any condition to the
Exchange Offer and any irregularities or conditions of tender as to particular
Original Notes. The Issuers' interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will be
final and binding. Unless waived, any irregularities in connection with tenders
must be cured within such time as the Issuers shall determine. The Issuers and
the Exchange Agent shall not be under any duty to give notification of defects
in such tenders and shall not incur liabilities for failure to give such
notification. Tenders of Original Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Original Notes received
by the Exchange Agent that are not properly tendered and as to which the
irregularities have not been cured or waived will be returned by the Exchange
Agent to the Tendering Holder, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
LETTERS OF TRANSMITTAL AND ORIGINAL NOTES MUST BE SENT ONLY TO THE EXCHANGE
AGENT. DO NOT SEND LETTERS OF TRANSMITTAL OR ORIGINAL NOTES TO THE ISSUERS OR
DTC.
The method of delivery of Original Notes and Letters of Transmittal, any
required signature guaranties and all other required documents, including
delivery through DTC and any acceptance through ATOP, is at the election and
risk of the persons tendering and delivering acceptances or Letters of
Transmittal and, except as otherwise provided in the applicable Letter of
Transmittal, delivery will be deemed made only when
59
<PAGE> 67
actually received by the Exchange Agent. If delivery is by mail, it is suggested
that the Holder use properly insured, registered mail with return receipt
requested, and that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent prior to the Expiration
Date.
GUARANTEED DELIVERY PROCEDURES
Original Notes held through DTC. DTC Participants holding Original Notes
through DTC who wish to cause their Original Notes to be tendered, but who
cannot transmit their acceptances through ATOP prior to the Expiration Date, may
cause a tender to be effected if:
(a) guaranteed delivery is made by or through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by mail, hand delivery,
facsimile transmission or overnight courier) substantially in the form
provided by the Issuers herewith; and
(c) Book-Entry Confirmation and an Agent's Message in connection
therewith (as described above) are received by the Exchange Agent within
three NYSE trading days after the date of the execution of the Notice of
Guaranteed Delivery.
Original Notes Held by Holders. Holders who wish to tender their Original
Notes and (i) whose Original Notes are not immediately available, (ii) who
cannot deliver their Original Notes, the Letter of Transmittal or any other
required documents to the Exchange Agent, or (iii) who cannot complete the
procedures for book-entry transfer, prior to the Expiration Date, may effect a
tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to 5:00 p.m., New York City time on the Expiration Date, the
Exchange Agent receives from such Eligible Institution a properly completed
and duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the Holder,
the certificate number(s) of such Original Notes and the principal amount
of Original Notes tendered, stating that the tender is being made thereby
and guaranteeing that, within three NYSE trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof) together with the
certificates representing the Original Notes (or a confirmation of
book-entry transfer of such Original Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility), and any other documents
required by such Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificate(s) representing all tendered
Original Notes in proper form for transfer (or a confirmation or book-entry
transfer of such Original Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by such
Letter of Transmittal are received by the Exchange Agent upon three NYSE
trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
Original Notes held through DTC. DTC Participants holding Original Notes
who have transmitted their acceptances through ATOP may, prior to 5:00 p.m., New
York City time, on the Expiration Date, withdraw the instruction given thereby
by delivering to the Exchange Agent, at its address set forth under "-- Exchange
Agent," a written, telegraphic or facsimile notice of withdrawal of such
instruction. Such notice of withdrawal must contain the name and number of the
DTC Participant, the principal amount due at the stated maturity or number of
shares of the Original Notes to which such withdrawal related and the signature
of the DTC
60
<PAGE> 68
Participant. Withdrawal of such an instruction will be effective upon receipt of
such written notice of withdrawal by the Exchange Agent.
Original Notes held by Holders. Holders may withdraw a tender of Original
Notes in the Exchange Offer, by a telegram, telex, letter or facsimile
transmission notice of withdrawal received by the Exchange Agent at its address
set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date.
Any such notice of withdrawal must (i) specify the name of the person having
deposited the Original Notes to be withdrawn (the "Depositor"), (ii) identify
the Original Notes to be withdrawn (including the certificate number(s) and
principal amount due at the stated maturity of such Original Notes, or, in the
case of Original Notes transferred by book-entry transfer, the name and number
of the account at the Book-Entry Transfer Facility to be credited), (iii) be
signed by the Holder in the same manner as the original signature on the Letter
of Transmittal by which such Original Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Original Notes register the
transfer of such Original Notes into the name of the person withdrawing the
tender, and (iv) specify the name in which any such Original Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by the Issuers, whose determination shall be final and binding on
all parties. Any Original Notes so withdrawn will be deemed not to have been
validly tendered for purposes of the Exchange Offer and no Exchange Notes will
be issued with respect thereto unless the Original Notes so withdrawn are
validly retendered. Any Original Notes which have been tendered but which are
not accepted for exchange will be returned to the Holder thereof without cost to
such Holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Original Notes may be
retendered by following one of the procedures described above under
"-- Procedures for Tendering" at any time prior to the Expiration Date.
All signatures on a notice of withdrawal must be guaranteed by an Eligible
Institution; provided, however, that signatures on the notice of withdrawal need
not be guaranteed if the Original Notes being withdrawn are held for the account
of an Eligible Institution.
A withdrawal of an instruction or a withdrawal of a tender must be executed
by a DTC Participant or a Holder, as the case may be, in the same manner as the
person's name appears on its transmission through ATOP or Letter of Transmittal,
as the case may be, to which such withdrawal relates. If a notice of withdrawal
is signed by a trustee, partner, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person must so indicate when signing
and must submit with the revocation appropriate evidence of authority to execute
the notice of withdrawal. A DTC Participant or a Holder may withdraw an
instruction or a tender, as the case may be, only if such withdrawal complies
with the provisions of this Prospectus.
A withdrawal of a tender of Original Notes by a DTC Participant or a
Holder, as the case may be, may be rescinded only by a new transmission of an
acceptance through ATOP or execution and delivery of a new Letter of
Transmittal, as the case may be, in accordance with the procedures described
herein.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange or exchange any Original Notes, and may
terminate or amend the Exchange Offer as provided herein before the acceptance
of such Original Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange
Offer which, in the judgment of the Issuers upon written advice of
counsel, could reasonably be expected to impair materially the
ability of the Issuers to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Issuers or any Subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the
judgment of the Issuers and based on written advice of
61
<PAGE> 69
counsel, could reasonably be expected to impair materially the
ability of the Issuers to proceed with the Exchange Offer or impair
materially the contemplated benefits of the Exchange Offer to the
Issuers; or
(c) any governmental approval has not been obtained, which approval the
Issuers shall, in their discretion and based on written advice of
counsel, deem necessary for the consummation of the Exchange Offer
as contemplated hereby.
If any of the conditions are not satisfied, the Issuers may (i) refuse to
accept any Original Notes and return all tendered Original Notes to the
Tendering Holders, (ii) extend the Exchange Offer and retain all Original Notes
tendered prior to the expiration of the Exchange Offer, subject, however, to the
rights of Holders to withdraw such Original Notes (see "-- Withdrawal of
Tenders") or (iii) waive such unsatisfied conditions with respect to the
Exchange Offer and accept all properly tendered Original Notes which have not
been withdrawn.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange
Agent for the Exchange Offer. Questions and requests for assistance, requests
for additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
P. O. Box 844 770 Broadway-13th Floor 111 Broadway
Cooper Station Corporate Trust Operations Lower Level
New York, NY 10276-0844 Department New York, NY 10006
(registered or certified New York, NY 10003 Attn: Corporate Trust Services
mail
recommended)
By Facsimile:
(212) 780-0592
(For Eligible Institutions Only)
Confirm by telephone:
(800) 548-6565
</TABLE>
Delivery to an address other than as set forth above, or transmission of
instructions via a facsimile number other than the one set forth above, will not
constitute a valid delivery.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Issuers and their Affiliates.
The Issuers have 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 Issuers, 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 Issuers. Such expenses include fees and expenses of the Exchange
Agent and the Trustee, accounting and legal fees and printing costs, among
others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes, which is face value less the OID attributed to the Warrants as
reflected in the Issuers' accounting records on the date of
62
<PAGE> 70
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Issuers. The expenses of the Exchange Offer will be
capitalized and amortized over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Original Notes that are not exchanged for Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Original
Notes may be resold only (i) to the Issuers (upon redemption thereof or
otherwise), (ii) so long as the Original Notes are eligible for resale pursuant
to Rule 144A, to a person inside the United States whom the seller reasonably
believes is a Qualified Institutional Buyer within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A, in accordance with Rule 144,
or pursuant to another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel reasonably acceptable to
the Issuers), (iii) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 under the Securities Act, or
(iv) pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any state of
the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of the Exchange Notes, based on interpretations by
the staff of the Commission set forth in no-action letters issued to third
parties, the Issuers believe that a Holder or other person who receives Exchange
Notes in the ordinary course of business, whether or not such person is the
Holder (other than (i) a broker-dealer who purchases such Exchange Notes from
the Issuers to resell pursuant to Rule 144A or any other available exemption
under the Securities Act or (ii) a person that is an "affiliate" of the Issuers
(within the meaning of Rule 405 under the Securities Act) who receives Exchange
Notes in exchange for Original Notes, and who is not participating, does not
intend to participate, and has no arrangement or understanding with such person
to participate in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any Holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such Holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Further, each Participating
Broker-Dealer that receives Exchange Notes for its own account in exchange for
Original Notes, where such securities were acquired by such Participating
Broker-Dealer as a result of market making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each Holder accepting the Exchange Offer is required to represent to
the Issuers in the Letter of Transmittal that (i) the Exchange Notes are to be
acquired by the Holder or the person receiving such Exchange Notes, whether or
not such person is the Holder, in the ordinary course of business, (ii) the
Holder or any such other person (other than a Participating Broker-Dealer
referred to in the next sentence) is not engaging and does not intend to engage,
in the distribution of the Exchange Notes, (iii) the Holder or any such other
person has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the Holder nor any such other
person is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act, and (v) the Holder or any such other person acknowledges that if
such Holder or other person participates in the Exchange Offer for the purpose
of distributing the Exchange Notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale of the Exchange Notes and cannot rely on the no-action letters. As
indicated above, each Participating Broker-Dealer that receives Exchange Notes
for its own account in exchange for Original Notes must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. For a
description of the procedures for such resales by Participating Broker-Dealers,
see "Plan of Distribution."
63
<PAGE> 71
DESCRIPTION OF THE NOTES
The following summary of certain provisions of the Indenture and the Notes
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture (including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act")) and the
Notes. See "Glossary" beginning on page 96 for definitions of certain
capitalized terms. Capitalized terms that are used but not otherwise defined
herein have the meanings assigned to them in the Indenture and such definitions
are incorporated herein by reference.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes bear a Series B
designation, (ii) the Exchange Notes have been registered under the Securities
Act and hence will not bear legends restricting the transfer thereof, and (iii)
the Exchange Note Holders will not be entitled to certain rights under the
Registration Rights Agreement relating to an increase in the interest rate
relating to the timing of the Exchange Offer, which rights will terminate when
the Exchange Offer is consummated. The terms of the Exchange Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act as in effect on December 31, 1997 for a statement of them. A
copy of the form of Indenture may be obtained from the Issuers or the Commission
by any Holder or prospective investor upon request. See "Additional
Information."
The Original Notes were, and the Exchange Notes will be, issued pursuant to
the Indenture. Principal of, premium, if any, and interest on the Notes will be
payable, and the Notes may be exchanged or transferred, at the office or agency
of the Issuers in the Borough of Manhattan, the City of New York (which
initially shall be the corporate trust office of the Trustee in New York, New
York), except that, at the option of the Issuers, cash payments of interest may
be made by check mailed to the Note Holders. Initially, the Trustee will act as
Paying Agent and Registrar for the Notes. The Notes may be presented for
registration of transfer, and the Original Notes may be presented for exchange,
at the offices of the Registrar, which initially will be the Trustee's corporate
trust office. The Issuers may change any Paying Agent and Registrar without
notice to Note Holders.
The Exchange Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge will be made for any registration of transfer or exchange of
Exchange Notes, but the Issuers may require payment of a sum sufficient to cover
any transfer tax or other similar governmental charge payable in connection
therewith.
PRINCIPAL AMOUNT, MATURITY AND INTEREST PAYMENTS
In December 1997, the Issuers jointly and severally sold $100.0 million
aggregate principal amount of Original Notes to the Initial Purchaser in the
144A Offering. The Notes will mature on December 15, 2007 and bear interest at
the rate of 13.0% per annum from December 31, 1997 or from the most recent date
to which interest has been paid or provided for, which will be payable in
arrears semiannually on each Interest Payment Date, commencing on June 15, 1998,
to Holders of record at the close of business on June 1 or December 1
immediately preceding the Interest Payment Date. The interest rate on the Notes
is subject to increase under certain circumstances. See "The Exchange Offer."
Interest will be payable only in cash or in additional Notes on each Interest
Payment Date, at the option of the Issuers, until June 15, 1999, and thereafter
will be payable in cash. To the extent any cash interest is not paid after June
15, 1999, the amount not paid will bear interest at the interest rate then
applicable to the Notes plus 2.0%. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. The Notes will not be entitled
to the benefit of any mandatory sinking fund.
OPTIONAL REDEMPTION
Except as described under "-- Regulatory Redemption" or under "-- Optional
Redemption Upon Public Equity Offering," the Notes will not be redeemable at the
option of the Issuers until December 15, 2002, at which time the Notes will be
redeemable, in whole or in part, at the Issuers' option at any time upon not
less than 30 nor more than 60 days notice by first-class mail at the following
redemption prices, if redeemed during
64
<PAGE> 72
the 12-month period commencing on December 15 of the years set forth below, plus
accrued and unpaid interest to the redemption date:
<TABLE>
<CAPTION>
REDEMPTION
12 MONTHS COMMENCING DECEMBER 15 PRICE
-------------------------------- ----------
<S> <C>
2002........................................................ 106.50%
2003........................................................ 104.33
2004........................................................ 102.17
2005 and thereafter......................................... 100.00%
</TABLE>
Optional Redemption Upon Public Equity Offering. At any time prior to
December 15, 2000, and not more than 90 days after the consummation of any
Public Equity Offering, each of the Issuers at its option may redeem up to 35.0%
of the aggregate principal amount of the Notes with the Net Cash Proceeds of one
or more Public Equity Offerings by the Partnership at a redemption price equal
to 113.0% of the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of redemption, provided that there is a Public
Market at the time of such redemption and that after any such redemption at
least $65.0 million of the original principal amount of the Notes remains
outstanding.
Selection. The Notes will be selected for any redemption by the Trustee on
a pro rata basis, by lot or by such other method as the Trustee in its sole
discretion deems to be fair and appropriate, provided that for a partial
redemption with the Net Cash Proceeds of a Public Equity Offering, selection of
the Notes for redemption shall be made by the Trustee only on a pro rata basis
unless such method is otherwise prohibited. The Notes may be redeemed in
multiples of $1,000 principal amount only. Notice of redemption will be sent by
first class mail, postage prepaid, at least 30 days (unless a shorter period is
acceptable to the Trustee) but not more than 60 days prior to the date fixed for
redemption to each Holder whose Notes are to be redeemed. If any Note is to be
redeemed partially, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder upon cancellation of the original Note. On and after any
redemption date, interest will cease to accrue on the Notes (or part thereof)
called for redemption as long as either of the Issuers has deposited with the
Paying Agent funds in satisfaction of the redemption price pursuant to the
Indenture.
Regulatory Redemption. If any Gaming Authority requires that a Holder or
beneficial owner of the Notes be licensed, qualified or found suitable under any
applicable Gaming Laws in order to maintain any gaming license or franchise of
the Partnership under any applicable Gaming Laws, and the Holder or beneficial
owner fails to apply (at its sole cost and expense) for a license, qualification
or finding of suitability within 30 days after being requested to do so by the
Gaming Authority (or such other period that may be required by such Gaming
Authority), or if such Holder or beneficial owner is not so licensed, qualified
or found suitable, the Issuers shall have the right, at their option, (i) to
require such Holder or beneficial owner to dispose of the Notes within 30 days
of receipt of such finding by the Gaming Authority (or such other date as may be
required by the applicable Gaming Authority), or (ii) to call for redemption
(pursuant to the procedures of the Indenture unless otherwise required by a
Gaming Authority) of the Notes of such Holder or beneficial owner at a
redemption price equal to the lesser of the principal amount, the fair market
value thereof or the price at which such Holder or beneficial owner acquired the
Notes, together with, in either case, accrued and unpaid interest. See "Risk
Factors -- Gaming Regulation" and "Regulation and Licensing -- Nevada."
RANKING AND SUBORDINATION
The Original Notes are, and the Exchange Notes will be, general unsecured
obligations of the Issuers subordinated in right of payment to payment in full
of all existing and future Senior Indebtedness, and will be senior or pari passu
in right of payment to all existing and future subordinated Indebtedness.
Payment from the proceeds of U.S. Government Obligations held in any defeasance
trust is not subordinate to any Senior Indebtedness or subject to the
restrictions described herein. See "-- Defeasance." As of December 31, 1997,
65
<PAGE> 73
on a pro forma basis after giving effect to the completion of the Resort Casino,
the aggregate principal amount of the Issuers' outstanding Senior Indebtedness
was $100.0 million (assuming issuance of all $100.0 million of the Mortgage
Notes) and the Issuers had no outstanding Subordinated Obligations. As of March
31, 1998, the total outstanding Indebtedness of the Issuers ranking senior or
pari passu with the Exchange Notes, and including $60.0 million of the Mortgage
Notes, trade and other operating debt, is $60.0 million. As of the date of this
Prospectus, the Issuers neither have any Restricted Subsidiary debt or
anticipate incurring any such debt in the future.
Although the Indenture limits the additional Indebtedness that the Issuers
may incur, the amount of such Indebtedness could be substantial and, in any
case, such Indebtedness may be Senior Indebtedness. See "-- Certain
Covenants -- Limitation on Indebtedness."
Upon any distribution to creditors of an Issuer in a liquidation or
dissolution of such Issuer or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Issuer or its property, an
assignment for the benefit of creditors or any marshaling of an Issuer's assets
and liabilities, the Holders will be entitled to receive payment in full of all
obligations due in respect of such Senior Indebtedness (including interest after
the commencement of any such proceeding, whether or not an allowable claim, at
the rate specified in the applicable Senior Indebtedness) before the Holders
will be entitled to receive any payment with respect to the Notes. Until all
obligations with respect to Senior Indebtedness are paid in full, any
distribution to which the Holders would be entitled will be made to the holders
of Senior Indebtedness (except that the Holders may receive and retain permitted
Subordinated Obligations and payments made from the defeasance trust). See
"-- Defeasance."
The Issuers may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"-- Defeasance" below and may not otherwise purchase, redeem or otherwise retire
any Notes if (i) any Designated Senior Indebtedness is not paid when due, or
(ii) any other default on Designated Senior Indebtedness occurs and the maturity
of such Designated Senior Indebtedness is accelerated in accordance with its
terms unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Designated Senior Indebtedness has been
paid in full in cash or Cash Equivalents. However, the Issuers may pay the Notes
without regard to the foregoing if the Issuers and the Trustee receive written
notice approving such payment from the Representative of the Designated Senior
Indebtedness with respect to which either of the events set forth in clause (i)
or (ii) of the immediately preceding sentence has occurred and is continuing.
During the continuance of any default (other than a default described in clause
(i) or (ii) of the second preceding sentence) with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Issuers may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Issuers) of
written notice (a "Blockage Notice") of such default from the Representative of
the Designated Senior Indebtedness specifying an election to effect a Payment
Blockage Period and ending 179 days thereafter (or earlier if such Payment
Blockage Period is terminated (i) by written notice to the Trustee and the
Issuers from the Person or Persons who gave such Blockage Notice, (ii) by
repayment in full in cash or Cash Equivalents of such Designated Senior
Indebtedness, or (iii) because the default giving rise to such Blockage Notice
is no longer continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions contained in the
first sentence of this paragraph), unless the Holders of such Designated Senior
Indebtedness or the Representative of such Holders have accelerated the maturity
of such Designated Senior Indebtedness, the Issuers may resume payments on the
Notes after the end of the Payment Blockage Period. Not more than one Blockage
Notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period. In no event, however, may the total number of days during which any
Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate
during any 360 consecutive day period. For purposes of this paragraph, no
default or event of default that existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period shall be, or be
made, the basis of the commencement of a subsequent Payment Blockage Period by
the Representative of the Designated Senior
66
<PAGE> 74
Indebtedness, whether or not within a period of 360 consecutive days, unless
such default or event of default shall have been cured or waived for a period of
not less than 90 consecutive days.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors who are holders of Designated Senior
Indebtedness (including holders of the Mortgage Notes) may recover more,
ratably, than the Holders of Notes, and creditors who are not holders of Senior
Indebtedness (including Holders of the Notes) may recover less, ratably, than
holders of Senior Indebtedness. There can be no assurance that, in the event of
insolvency, creditors will recover any portion of amounts owed by the Issuers.
ACCOUNTS
On the Issue Date the Issuers deposited in an account (the "Notes Proceeds
Account") maintained with First Security Trust Company of Nevada as the Account
Agent the net proceeds of the Original Notes. The amounts in the Notes Proceeds
Account (which were comprised solely of cash and Cash Equivalents) will be used
only to satisfy construction and development costs and will be disbursed
pursuant to the Disbursement Agreement. See "Description of Disbursement
Agreement."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Note Holder will have the
right to require the Issuers to repurchase for cash all or any part of such
Holder's Notes for 101.0% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase. A Change of Control is (i) any
sale, lease, exchange or other transfer (collectively, a "Transfer") (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Partnership and its Subsidiaries; (ii) the adoption of a plan
relating to the liquidation or dissolution of the Partnership; (iii) RAS ceasing
to be the sole General Partner of the Partnership; or (iv) the Existing Partners
failing to own in the aggregate, directly or indirectly, at least 50.0% of the
General Partner.
No earlier than 30 days and no later than 60 days following a Change of
Control (or if the Notes have been repaid in full at such time), the Issuers
shall notify each holder of the Change of Control and the Holder's right to
require the Issuers to repurchase (within 70 to 90 days of the notice) such
Holder's Notes for 101.0% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of purchase and any applicable procedures
not inconsistent with the Indenture.
If any amounts are owing under the Credit Facilities, at the time of a
Change of Control, prior to the mailing of the notice to the Holders but in any
event within 30 days following the Change of Control, the Issuers will be
required to (i) repay in full all obligations under the Credit Facilities, (ii)
offer to repay in full the Credit Facilities and repay the Credit Facilities to
each lender who has accepted such offer, or (iii) obtain the consents of the
lenders under the Credit Facilities to repurchase the Notes. The Issuers will be
required to comply with the provisions described in the preceding sentence prior
to complying with their obligations to repurchase Notes in the event of a Change
of Control. The Credit Facilities lenders are not legally or otherwise obligated
to consent to a repurchase of the Notes by the Issuers following a Change of
Control and may be entitled to withhold their consent to the repurchase of the
Notes for any reason or for no reason. A Change of Control could occur at a time
when the Issuers are financially unable to repay the Credit Facilities and/or to
repurchase the Notes. The Issuers have not established, and do not intend to
establish, any reserves or sinking funds for the repayment of the Credit
Facilities or the repurchase of the Notes following a Change of Control or
otherwise and have not received a commitment from any lender to refinance the
Indebtedness under the Credit Facilities or the Notes obligations in the event
of a Change of Control or otherwise. The failure or inability of the Issuers to
repay the Credit Facilities and/or repurchase the Notes following a Change of
Control will constitute Events of Default under both the Credit Facilities and
the Indenture. See "Risk Factors -- Change of Control."
The Issuers will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes. To the extent that the provisions of
any securities laws or regulations conflict with provisions of the Indenture,
the
67
<PAGE> 75
Issuers will comply with the applicable securities laws and regulations and
shall not, as a result of such compliance, be deemed to have breached their
obligations described in the Indenture.
The Issuers will not make any required repurchase of Subordinated
Obligations until at least 30 days after the Issuers are required to make
purchases of the Notes following a Change of Control.
The definition of "Change of Control" includes, among other transactions, a
disposition of all or substantially all of the property and assets of the
Partnership and its Subsidiaries. The phrase "all or substantially all" as used
in the Indenture varies according to the facts and circumstances of the subject
transaction, has no clearly established meaning under New York law (which is the
law which governs the Indenture) and is subject to judicial interpretation.
Accordingly, in certain circumstances there may exist uncertainty as to whether
a transaction is a disposition of "all or substantially all" of the property or
assets and whether a Change of Control has occurred.
CERTAIN COVENANTS
The Indenture contains certain covenants including, among others, the
following:
Limitation on Indebtedness
The Partnership shall not, and shall not permit any of its Restricted
Subsidiaries to, incur any Indebtedness other than:
(a)(i) ranking pari passu with or which is expressly subordinate and junior
in right of payment to, the Notes, if no Default or Event of Default shall have
occurred and be continuing at the time of such incurrence or would occur as a
consequence of such incurrence and the Consolidated Coverage Ratio would be
equal to at least 2.00 to 1.00 and (ii) Senior Indebtedness if no Default or
Event of Default shall have occurred and be continuing at the time of such
incurrence or would occur as a consequence of such incurrence and the
Consolidated Coverage Ratio would be at least equal to 2.50 to 1.00
(collectively, the "Coverage Ratio Indebtedness"); and
(b) The following Indebtedness (collectively, the "Additional Permitted
Indebtedness"):
(i) Indebtedness under the Credit Agreement, in an aggregate principal
amount outstanding at any time not to exceed $100.0 million (less the
amount of any repayments of principal of the Mortgage Notes and any
permanent reductions in the amount of available borrowings under the
Revolving Credit Facility as a result of repayments made thereunder);
(ii) the incurrence by the Partnership or any of its Restricted
Subsidiaries of Indebtedness (including Capitalized Lease Obligations,
Attributable Indebtedness incurred in connection with a Sale/ Leaseback
Transaction or purchase money obligations), incurred for the purpose of
financing all or any part of the purchase or lease of personal property or
equipment or financing existing casino equipment used in the business of
the Partnership or a Restricted Subsidiary, in an aggregate principal
amount (including any permitted refinancing thereof) not to exceed $15.0
million (plus accrued interest thereon and the amount of reasonable
expenses incurred and premium paid in connection with any permitted
refinancing) outstanding at any time;
(iii) Indebtedness of the Partnership owing to and held by any
Wholly-Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to
and held by the Partnership or any Wholly-Owned Subsidiary; provided that
any subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Wholly-Owned Subsidiary ceasing to be a
Wholly-Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Partnership or any Wholly-Owned Subsidiary) shall be deemed
to constitute the incurrence of such Indebtedness by the issuer thereof;
(iv) Indebtedness represented by, or Refinancing Indebtedness of, (a)
the Notes, (b) the Subsidiary Guarantee, and (c) any Coverage Ratio
Indebtedness;
68
<PAGE> 76
(v) Indebtedness, or Refinancing Indebtedness, of a Restricted
Subsidiary outstanding on the date on which such Restricted Subsidiary was
acquired by the Partnership (other than Indebtedness incurred in
anticipation of, or to provide all or any portion of the funds or credit
support utilized to consummate the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a
Subsidiary or was otherwise acquired by the Partnership); provided that at
the time such Restricted Subsidiary is acquired by the Partnership, the
Partnership would have been able to incur an additional $1.00 of Coverage
Ratio Indebtedness;
(vi) Indebtedness (A) in respect of performance bonds, bankers'
acceptances and surety or appeal bonds provided by the Partnership or any
of its Restricted Subsidiaries to their suppliers, lessors, licensees,
contractors, franchises or customers in the ordinary course of their
business, (B) in respect of performance bonds or similar obligations of the
Partnership or any of its Restricted Subsidiaries for or in connection with
pledges, deposits or payments made or given in the ordinary course of
business in connection with or to secure statutory, regulatory or similar
obligations, including obligations under health, safety or environmental
obligations, and (C) arising from Guarantees to suppliers, lessors,
licensees, contractors, franchises or customers of obligations (other than
Indebtedness) incurred in the ordinary course of business;
(vii) Indebtedness under certain Currency Agreements entered into for
bona fide hedging purposes of the Partnership or its Restricted
Subsidiaries (as determined in good faith by the General Partner of the
Partnership) and which correspond in terms of notional amount, duration,
currencies and interest rates as applicable, to Indebtedness of the
Partnership or its Restricted Subsidiaries incurred without violation of
the Indenture or to business transactions of the Partnership or its
Restricted Subsidiaries on customary terms entered into in the ordinary
course of business;
(viii) Indebtedness from indemnification agreements, adjustment of
purchase price or similar obligations, or from Guarantees or letters of
credit, surety bonds or performance bonds securing any obligations of the
Partnership or any of its Restricted Subsidiaries pursuant to such
agreements, in each case incurred in connection with the disposition of any
business assets or Restricted Subsidiary of the Partnership (other than
Guarantees of Indebtedness or other obligations incurred by any Person
acquiring all or any portion of such business assets or Restricted
Subsidiary of the Partnership for the purpose of financing such
acquisition) in a principal amount not to exceed the gross proceeds
actually received by the Partnership or any of its Restricted Subsidiaries
in connection with such disposition and which, together with all other such
Indebtedness, does not exceed $2.0 million;
(ix) Indebtedness consisting of (A) Guarantees by the Partnership of
Indebtedness which would qualify as Coverage Ratio Indebtedness or
otherwise as Additional Permitted Indebtedness if incurred directly by the
Partnership and (B) Guarantees by a Restricted Subsidiary of Indebtedness
incurred by the Partnership which would qualify as Coverage Ratio
Indebtedness or otherwise as Additional Permitted Indebtedness if incurred
directly by the Restricted Subsidiary;
(x) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument issued by the
Partnership or its Subsidiaries drawn against insufficient funds in the
ordinary course of business in an amount not to exceed $250,000 at any
time, provided that such Indebtedness is extinguished within two business
days of its incurrence; and
(xi) any other Indebtedness in an aggregate principal amount not to
exceed $5.0 million.
Neither the Partnership nor any Restricted Subsidiary shall incur any
Indebtedness under paragraph (b) above if the proceeds thereof are used,
directly or indirectly, to refinance any Subordinated Obligations of the
Partnership unless such Indebtedness shall be subordinated to the Notes to at
least the same extent as such Subordinated Obligations. No Restricted Subsidiary
shall incur any Indebtedness under paragraph (b) above if the proceeds thereof
are used, directly or indirectly, to refinance any Guarantor Subordinated
Obligation of such Subsidiary Guarantor unless such Indebtedness shall be
subordinated to the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee to at least the same extent as such Guarantor
69
<PAGE> 77
Subordinated Obligation. The Issuers anticipate that any Guarantees by the
Partnership or any Subsidiary Guaranty will be full and unconditional.
The Partnership will not permit any Unrestricted Subsidiary to incur any
Indebtedness other than Non-Recourse Debt (as such term is defined in the
Indenture).
Limitation on Restricted Payments
The Partnership shall not, and shall not permit any of its Restricted
Subsidiaries, directly or indirectly, to (i) declare or pay any dividend or make
any distribution on or in respect of its Capital Stock except (A) dividends or
distributions payable in its Capital Stock (other than Disqualified Stock) or in
options, warrants or other rights to purchase such Capital Stock and (B)
dividends or distributions payable to the Partnership or a Restricted Subsidiary
which holds any equity interest in the paying Restricted Subsidiary (and if the
Restricted Subsidiary paying the dividend or making the distribution is not a
Wholly-Owned Subsidiary, to its other holders of Capital Stock on a pro rata
basis), (ii) purchase, redeem, retire or otherwise acquire for value any Capital
Stock of the Partnership held by Persons other than a Wholly-Owned Subsidiary of
the Partnership or any Capital Stock of a Restricted Subsidiary of the
Partnership held by any Affiliate of the Partnership, other than a Wholly-Owned
Subsidiary (in either case, other than in exchange for its Capital Stock (other
than Disqualified Stock)), (iii) purchase, repurchase, redeem, defease or
otherwise acquire or retire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment, any Subordinated Obligations, or
(iv) make any Investment (other than a Permitted Investment) in any Person (each
of the foregoing being referred to as a "Restricted Payment"); if at the time
the Partnership or such Restricted Subsidiary makes such Restricted Payment: (A)
a Default shall have occurred and be continuing (or would result therefrom); or
(B) the Partnership is not able to incur an additional $1.00 of Coverage Ratio
Indebtedness; or (C) the aggregate amount of such Restricted Payment and all
other Restricted Payments declared or made subsequent to the Issue Date would
exceed the sum of (1) 50.0% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the first day of the fiscal
quarter beginning on or after the Issue Date to the end of the most recent
fiscal quarter ending prior to the date of such Restricted Payment as to which
financial results are available (but in no event ending more than 135 days prior
to the date of such Restricted Payment) (or, in case such Consolidated Net
Income shall be a deficit, minus 100.0% of such deficit); (2) the aggregate net
proceeds received by the Partnership from the issue or sale of its Capital Stock
(other than Disqualified Stock) or other capital contributions subsequent to the
Issue Date (other than net proceeds received from an issuance or sale of such
Capital Stock to (x) a Subsidiary of the Partnership, (y) an employee stock
ownership plan or similar trust or (z) management employees of the Partnership
or any Subsidiary of the Partnership (other than sales of Capital Stock (other
than Disqualified Stock) to management employees of the Partnership pursuant to
bona fide employee stock option plans of the Partnership); provided that the
value of any non-cash net proceeds shall be as determined by the General Partner
in good faith where non-cash net proceeds are $2.0 million or more, by a
nationally-recognized independent investment banking firm); (3) the amount by
which Indebtedness of the Partnership is reduced on the Partnership's balance
sheet upon the conversion or exchange (other than by a Restricted Subsidiary of
the Partnership) subsequent to the Issue Date of any Indebtedness of the
Partnership convertible or exchangeable for Capital Stock of the Partnership
(less the amount of any cash, or other property, distributed by the Partnership
upon such conversion or exchange); and (4) the amount equal to the net reduction
in Investments (other than Permitted Investments) made after the Issue Date by
the Partnership or any of its Restricted Subsidiaries in any Person resulting
from (i) repurchases or redemptions of such Investments by such Person, proceeds
realized upon the sale of such Investment to an unaffiliated purchaser,
repayments of loans or advances or other transfers of assets by such Person to
the Partnership or any Restricted Subsidiary of the Partnership or (ii) the
redesignation of Unrestricted Subsidiaries as Restricted Subsidiaries (valued in
each case as provided in the definition of "Investment") not to exceed, in the
case of any Unrestricted Subsidiary, the amount of Investments previously
included in the calculation of the amount of Restricted Payments; provided that
no amount shall be included under this clause (4) to the extent included in
Consolidated Net Income.
70
<PAGE> 78
Restricted Payments do not include (i) any purchase or redemption of
Capital Stock or Subordinated Obligations of the Partnership made by exchange
for, or out of the proceeds of the substantially concurrent sale of, Capital
Stock of the Partnership (other than Disqualified Stock and other than Capital
Stock issued or sold to a Subsidiary, an employee stock ownership plan or
similar trust, or management employees of the Partnership or any Subsidiary of
the Partnership); provided that (A) such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such sale shall be excluded from the calculation of aggregate
net proceeds to the Partnership from the sale or issuance of Capital Stock for
purposes of determining Restricted Payments; (ii) any permitted purchase or
redemption of Subordinated Obligations made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Subordinated Obligations;
provided that such purchase or redemption shall be excluded in the calculation
of the amount of Restricted Payments; (iii) any permitted purchase or redemption
of Subordinated Obligations from Net Available Cash (such purchase or redemption
to be excluded in the calculation of Restricted Payments); (iv) distributions
paid within 60 days after the date of declaration if such distributions would
have been permitted on the date of declaration (such distributions to be
included in the calculation of the amount of Restricted Payments); (v) permitted
transfer of the Right of First Offer to an Affiliate of SCA; (vi) distributions
to the General Partner or limited partners of the Partnership as Tax Allowance
Amounts payable in cash and made as distributions to all partners; (vii) any
redemption or purchase by the Issuers or any Restricted Subsidiary of Capital
Stock or Subordinated Obligations of either of the Issuers required by a Gaming
Authority in order to preserve a material Gaming License; provided, that such
efforts do not jeopardize any material Gaming License, the Issuers or such
Restricted Subsidiary shall have diligently tried to find a third-party
purchaser for such Capital Stock or Subordinated Obligations and no third-party
purchaser acceptable to the applicable Gaming Authority was willing to purchase
such Capital Stock or Subordinated Obligations within a time period acceptable
to such Gaming Authority and (viii) the payment of the subordinated development
fee due to SCA in an amount not to exceed $3.0 million; provided, that in the
case of clauses (i), (ii), (iii), (v) and (viii), no Default or Event of Default
shall have occurred or be continuing at the time of such payment or as a result
thereof.
For purposes of determining compliance with the foregoing covenant,
Restricted Payments may be made with cash or non-cash assets, provided that any
Restricted Payment made other than in cash shall be valued at the fair market
value (determined in good faith by the General Partner) of the assets so
utilized in making such Restricted Payment, provided, that (i) in the case of
any Restricted Payment made with capital stock or indebtedness, such Restricted
Payment shall be deemed to be made in an amount equal to the greater of the fair
market value thereof and the liquidation preference (if any) or principal amount
of the Capital Stock or Indebtedness, as the case may be, so utilized, and (ii)
in the case of any Restricted Payment in an aggregate amount in excess of $2.0
million, a written fairness opinion of the valuation thereof shall be issued by
a nationally-recognized independent investment banking firm.
Limitation on Liens
The Indenture provides that the Partnership shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly, create or permit to exist
any Liens except for Permitted Liens.
Limitation on Layered Indebtedness
The Partnership shall not, directly or indirectly, incur any Indebtedness,
and shall not permit any Subsidiary Guarantor to incur any Indebtedness that is
expressly subordinate in right of payment to any other Indebtedness of the
Partnership or such Subsidiary Guarantor unless such Indebtedness is expressly
subordinate in right of payment to, or ranks pari passu in all respects with,
the Notes or the Subsidiary Guarantee of such Subsidiary Guarantor.
Limitation on Business Activities of the Partnership
The Partnership shall not, and shall not permit any Restricted Subsidiary
to, engage, directly or indirectly, in any business other than a Permitted
Business.
71
<PAGE> 79
Limitation on Business Activities of RAS
RAS shall not engage in or conduct any trade or business other than the
incurrence as a joint and several obligor of permitted Indebtedness of the
Partnership and the holding of the Capital Stock of the Partnership issued to
RAS and activities incidental thereto. RAS shall not create, capitalize or
otherwise own or acquire any Subsidiary. See "-- Limitation on Indebtedness."
Limitation on Restrictions on Distributions from Restricted Subsidiaries
The Partnership shall not, and shall not permit any of its Restricted
Subsidiaries to, create or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any such Restricted Subsidiary to
(i) pay dividends or make any other distributions on its Capital Stock or pay
any Indebtedness or other obligation owed to the Partnership, (ii) make any
loans or advances to the Partnership, or (iii) transfer any of its property or
assets to the Partnership, except: (a) any encumbrance or restriction pursuant
to an agreement in effect at or entered into on the Issue Date (including the
Credit Agreement); (b) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any Indebtedness
issued by such Restricted Subsidiary on or prior to the date on which such
Restricted Subsidiary was acquired by the Partnership and outstanding on such
date (other than Indebtedness incurred in anticipation of, or to provide all or
any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary of the Partnership or was acquired by
the Partnership); (c) any encumbrance or restriction with respect to such a
Restricted Subsidiary pursuant to an agreement evidencing Indebtedness incurred
without violation of the Indenture or effecting certain permitted refinancing of
Indebtedness provided that the encumbrances and restrictions with respect to
Restricted Subsidiaries contained in any of such agreement, refinancing
agreement or amendment, taken as a whole, are no less favorable to the holders
of the Notes in any material respect, as determined in good faith by the General
Partner, than encumbrances and restrictions with respect to Restricted
Subsidiaries contained in agreements in effect at, or entered into on, the Issue
Date; (d) any encumbrance or restriction (A) that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset, (B) by
virtue of any transfer of, agreement to transfer, option or right with respect
to, or Lien on, any property or assets of the Partnership or any Restricted
Subsidiary not otherwise prohibited by the Indenture, (C) that is included in a
licensing agreement to the extent such restrictions limit the transfer of the
property subject to such licensing agreement, or (D) arising or agreed to in the
ordinary course of business and that does not, individually or in the aggregate,
detract from the value of property or assets of the Partnership or any of its
Subsidiaries in any manner material to the Partnership or any such Restricted
Subsidiary; (e) restrictions contained in security agreements, mortgages or
similar documents securing Indebtedness of a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject to such security
agreements; (f) any instrument governing or evidencing Indebtedness of a Person
acquired by the Partnership or any Restricted Subsidiary of the Partnership at
the time of such acquisition, which encumbrance or restriction is not applicable
to any Person, or the properties or assets of any Person, other than the Person
so acquired; provided that such Indebtedness is not incurred in connection with
or in contemplation of such acquisition; (g) any restriction with respect to
such a Restricted Subsidiary imposed pursuant to an agreement entered into for
the sale or disposition of all or substantially all the Capital Stock or assets
of such Restricted Subsidiary pending the closing of such sale or disposition;
(h) encumbrances or restrictions imposed by any Gaming Authority; and (i)
encumbrances or restrictions arising or existing by reason of applicable law.
Limitation on Sales of Assets and Subsidiary Stock
(a) The Partnership shall not, and shall not permit any of its Restricted
Subsidiaries to, make any Asset Disposition unless (i) the Partnership or such
Restricted Subsidiary receives consideration at the time of such Asset
Disposition at least equal to the fair market value, as determined in good faith
by the General Partner (including as to the value of all non-cash
consideration), of the shares and assets subject to such Asset Disposition, (ii)
at least 80.0% of the consideration is either cash or Cash Equivalents, and
(iii) an amount equal to 100.0% of the Net Available Cash from such Asset
Disposition is applied by the Partnership (or such
72
<PAGE> 80
Restricted Subsidiary, as the case may be) within the time required by the
Indenture and subject to the Partnership receiving certain minimum amounts of
Net Available Cash (A) first, to the extent the Partnership or any Restricted
Subsidiary elects (or is required by the terms of any Senior Indebtedness), (x)
to prepay, repay or purchase Senior Indebtedness or (y) to the investment in or
acquisition of Additional Assets within 365 days from the later of the date of
such Asset Disposition or the receipt of such Net Available Cash; (B) second,
within 365 days from the receipt of such Net Available Cash to make an offer to
purchase Notes at 101.0% of their principal amount plus accrued and unpaid
interest, if any, thereon; (C) third, to prepay, repay or repurchase
Indebtedness (other than Preferred Stock) of a Wholly-Owned Subsidiary (in each
case other than Indebtedness owed to the Partnership); and (D) fourth, (w) to
invest in or acquire of Additional Assets, (x) to make Temporary Cash
Investments, (y) to prepay, repay or purchase Indebtedness of the Partnership
(other than Indebtedness owing to any Subsidiary of the Partnership) or
Indebtedness of any Subsidiary (other than Indebtedness owed to the Partnership
or any of its Subsidiaries) or (z) for any other purpose otherwise permitted
under the Indenture. Notwithstanding the foregoing provisions, the Partnership
and its Restricted Subsidiaries shall not be required to apply any Net Available
Cash in accordance with the foregoing restrictions except to the extent that the
aggregate Net Available Cash from all Asset Dispositions which are not applied
in accordance with this covenant at any time exceed $5.0 million. The
Partnership shall not be required to make an offer for Notes pursuant to this
covenant if the Net Available Cash available therefor (after application of the
proceeds as provided in clause (A)) is less than $5.0 million for any particular
Asset Disposition (which lesser amounts shall be carried forward for purposes of
determining whether an offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition).
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption by the transferee of Senior Indebtedness of the Partnership
or any Restricted Subsidiary of the Partnership and the release of the
Partnership or such Restricted Subsidiary from all liability on such Senior
Indebtedness in connection with such Asset Disposition (in which case the
Partnership shall, without further action, be deemed to have applied such
assumed Indebtedness in accordance with clause (A) of the preceding paragraph)
and (y) securities received by the Partnership or any Restricted Subsidiary of
the Partnership from the transferee that are promptly (and in any event within
60 days) converted by the Partnership or such Restricted Subsidiary into cash.
(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to clause (a) (iii) (B), the Issuers will be required to purchase
Notes tendered pursuant to an offer by the Issuers for the Notes at a purchase
price of 101.0% of their principal amount plus accrued and unpaid interest, if
any, to the purchase date in accordance with the procedures (including prorating
in the event of oversubscription) set forth in the Indenture. If the aggregate
purchase price of the Notes tendered pursuant to the offer is less than the Net
Available Cash allotted to the purchase of the Notes, the Issuers will apply the
remaining Net Available Cash in accordance with clauses (a) (iii) (C) or (D)
above.
Limitation on Affiliate Transactions
The Partnership will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or conduct any transaction
or series of related transactions (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with or for the
benefit of any Affiliate of the Partnership, other than a Wholly-Owned
Subsidiary or RAS (an "Affiliate Transaction"), unless: (i) the terms of such
Affiliate Transaction are no less favorable to the Partnership or such
Restricted Subsidiary, as the case may be, than those that could be obtained at
the time of such transaction in arm's-length dealings with a non-Affiliate; (ii)
Affiliate Transactions involving an aggregate amount in excess of $1.0 million
have been approved by of the Board of Directors of the General Partner including
a majority of the disinterested Directors, if any; and (iii) for Affiliate
Transactions in excess of $2.0 million, the Partnership has received a written
fairness opinion from a nationally-recognized independent investment banking
firm.
The foregoing shall not apply to (i) any permitted Restricted Payment, (ii)
any issuance of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of, employment arrangements,
or any stock options and stock ownership plans for the benefit of employees,
officers and
73
<PAGE> 81
directors, consultants and advisors approved by the General Partner, (iii) loans
or advances to employees in the ordinary course of business of the Partnership
or any of its Restricted Subsidiaries in an aggregate amount outstanding not to
exceed $250,000 to any employee or $1.0 million in the aggregate at any time,
(iv) any transaction between Wholly-Owned Subsidiaries, (v) indemnification
agreements with, and the payment of fees and indemnities to, directors, officers
and employees of the Partnership and its Restricted Subsidiaries, in each case
in the ordinary course of business, (vi) transactions pursuant to agreements in
existence on the Issue Date which are (x) described in the Prospectus or (y)
otherwise, in the aggregate, immaterial to the Partnership and its Restricted
Subsidiaries taken as a whole, (vii) any employment, noncompetition or
confidentiality agreements entered into by the Partnership or any of its
Restricted Subsidiaries with its employees in the ordinary course of business,
(viii) provided that no Default or Event of Default exists or would occur as a
consequence of such payment, payment of the management fee to the General
Partner in an amount not to exceed 3.0% of net revenues ("Net Revenue Fee") plus
6.0% of EBITDAM (net of the Net Revenue Fee), (ix) the issuance of Capital Stock
of the Partnership (other than Disqualified Stock), and (x) payments to SCR for
amounts allocated by SCR to the Partnership for compensation (whether deferred
or current) of SCR employees providing services to the Partnership and related
expenses. In addition, if an opportunity arises to develop further sites in the
Summerlin master planned community as a result of a Right of First Offer, and
the Partnership elects to pursue such opportunity, the Partnership shall use its
reasonable efforts to pursue such opportunity to develop and finance such site
under the existing terms of the Indenture or Credit Agreement. If the Indenture
or the Credit Agreement, however, restrict the Partnership's ability to pursue
such opportunity, the foregoing paragraph (a) shall not prohibit the Partnership
from transferring the Right of First Offer to an Affiliate of SCA established by
SCA to pursue such opportunity; provided, that, such Affiliate is at least 85.0%
owned by SCA (directly or indirectly) and the Partnership receives an interest
in such Affiliate equal to the value of the Right of First Offer as determined
in good faith by the Board of Directors of the General Partner.
Limitation on Issuances of Capital Stock of Restricted Subsidiaries
The Partnership will not permit any of its Restricted Subsidiaries to issue
any Capital Stock to any Person (other than to the Partnership or a Wholly-Owned
Subsidiary) or permit any other Person to own any Capital Stock of a Restricted
Subsidiary of the Partnership, if as a result thereof such Restricted Subsidiary
would no longer be a Restricted Subsidiary, provided that neither the
Partnership nor any of its Restricted Subsidiaries is prohibited from selling,
leasing or otherwise disposing of all of the Capital Stock of any Restricted
Subsidiary or designating a Restricted Subsidiary as an Unrestricted Subsidiary
in compliance with the Indenture.
Limitation on Sale/Leaseback Transactions
The Partnership will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, a Guarantee or otherwise become liable with
respect to any Sale/Leaseback Transaction with respect to any property or assets
unless (i) the Partnership or such Restricted Subsidiary would be entitled to
pursuant to the Indenture to incur Indebtedness secured by a Permitted Lien on
such property or assets in an amount equal to the Attributable Indebtedness with
respect to such Sale/Leaseback Transaction, (ii) the Net Cash Proceeds from such
Sale/Leaseback Transaction are at least equal to the fair market value of the
property or assets subject to such Sale/Leaseback Transaction (such fair market
value determined, in the event such property or assets have a fair market value
in excess of $1.0 million, no more than 30 days prior to the effective date of
such Sale/Leaseback Transaction, by the General Partner as evidenced by a
resolution of the Board of Directors of the General Partner), and (iii) the Net
Cash Proceeds of such Sale/Leaseback Transaction are applied in accordance with
the provisions described under "-- Limitation on Sales of Assets and Subsidiary
Stock."
SEC Reports
The Issuers shall file with the Trustee and provide to the Note Holders,
within 15 days after filing with the Commission, copies of the annual reports
and of the information, documents and other reports (or copies
74
<PAGE> 82
of such portions of any of the foregoing as the Commission may by rules and
regulations prescribe) which the Issuers file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act or similar information if the Issuers
are not required to file such reports within 15 days after it would have been
required to file it with the Commission.
Limitation on Designations of Unrestricted Subsidiaries
The Partnership may designate any Subsidiary of the Partnership (other than
a Subsidiary of the Partnership which owns Capital Stock of a Restricted
Subsidiary) as an "Unrestricted Subsidiary" under the Indenture (a
"Designation") only if at the time of Designation:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b) the Partnership would be permitted under the Indenture to make an
Investment (assuming the effectiveness of such Designation) in an amount
(the "Designation Amount") equal to the sum of (i) fair market value of the
Capital Stock of such Subsidiary owned by the Partnership and the
Restricted Subsidiaries, and (ii) the aggregate amount of other Investments
of the Partnership and the Restricted Subsidiaries in such Subsidiary; and
(c) the Partnership would be permitted to incur an additional $1.00 of
Coverage Ratio Indebtedness (other than Permitted Indebtedness) described
under "-- Limitation on Indebtedness."
In the event of a Designation, the Partnership shall be deemed to have made
an Investment constituting a Restricted Payment. See "-- Limitation on
Restricted Payments." Neither the Partnership or any Restricted Subsidiary may
at any time (x) provide direct or indirect credit support for or a guarantee of
any Indebtedness of any Unrestricted Subsidiary, (y) be directly or indirectly
liable for any Indebtedness of any Unrestricted Subsidiary, or (z) be directly
or indirectly liable for any Indebtedness which provides that the holder thereof
may declare a default thereon or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity upon the occurrence of a default
with respect to any Indebtedness of any Unrestricted Subsidiary (including any
right to take enforcement action against such Unrestricted Subsidiary), except
to the extent permitted under the Indenture. See "-- Limitation on Restricted
Payments."
The Partnership may revoke any Designation of a Subsidiary as an
Unrestricted Subsidiary (a "Revocation"), whereupon such Subsidiary shall then
become a Restricted Subsidiary, if:
(a) no Default has occurred and is continuing at the time of, and
after giving effect to, such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of the
Indenture.
Limitation on Status as Investment Company
The Indenture prohibits the Issuers and the Restricted Subsidiaries of the
Partnership from being required to register as an "investment company" (as
defined in the Investment Company Act of 1940, as amended).
Future Subsidiary Guarantors
All present and future Restricted Subsidiaries will, jointly and severally,
guarantee, irrevocably and unconditionally, all principal, premium, if any, and
interest on the Notes on a senior subordinated basis. If the Partnership or any
of its Restricted Subsidiaries acquires or creates another Restricted Subsidiary
after the Issue Date, the Restricted Subsidiary shall execute a Subsidiary
Guarantee and deliver to the Trustee an Opinion of Counsel relating to the
enforceability and authorization of the Subsidiary Guarantee.
75
<PAGE> 83
The Indebtedness evidenced by each Subsidiary Guarantee (including any
required payment of principal of, premium, if any, and interest) will be
subordinated to Guarantor Senior Indebtedness on substantially the same basis as
the Notes are subordinated to Senior Indebtedness. Although the Indenture
contains limitations on the amount of additional Indebtedness that the
Partnership's Restricted Subsidiaries may incur, under certain circumstances the
amount of such Indebtedness could be substantial and, in any case, such
Indebtedness may be Guarantor Senior Indebtedness. See "Certain
Covenants -- Limitation on Indebtedness" and "-- Ranking and Subordination."
The obligations of each Subsidiary Guarantor will be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor (including, without limitation,
Guarantees of the Mortgage Notes and after giving effect to any collections from
or payments made by or on behalf of any other Subsidiary Guarantor in respect of
the obligations of such other Subsidiary Guarantor under its Subsidiary
Guarantee or pursuant to its contribution obligations under the Indenture), will
result in the obligations of such Subsidiary Guarantor under the Subsidiary
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Subsidiary Guarantor that makes a payment or
distribution under a Subsidiary Guarantee shall be entitled to contribution from
each other Subsidiary Guarantor of a pro rata amount based on the Adjusted Net
Assets of each Subsidiary Guarantor.
Each Subsidiary Guarantor may consolidate with or merge into or sell its
assets to the Partnership or another Subsidiary Guarantor without limitation.
Each Subsidiary Guarantor may consolidate with or merge into or sell all or
substantially all its assets to a corporation, partnership or trust other than
the Partnership or another Subsidiary Guarantor (whether or not affiliated with
the Subsidiary Guarantor). Upon the sale or disposition of a Subsidiary
Guarantor (or all or substantially all of its assets) to a Person (whether or
not an Affiliate of the Subsidiary Guarantor) which is not a Subsidiary of the
Partnership, which sale or disposition is otherwise in compliance with the
Indenture such Subsidiary Guarantor shall be deemed released from all its
obligations under the Indenture and its Subsidiary Guarantee and such Subsidiary
Guarantee shall terminate; provided that any such termination occurs only to the
extent that all obligations of such Subsidiary Guarantor under all of its
pledges of assets or other security interests which secure any other
Indebtedness of the Partnership shall also terminate upon such release, sale or
transfer. See "-- Certain Covenants -- Limitation on Sales of Assets and
Subsidiary Stock."
Taxes
The Issuers will, and the Partnership will cause the Restricted
Subsidiaries to, pay and discharge when due and payable all taxes, levies,
imposts, duties or other governmental charges ("Taxes") imposed on it or on its
income or profits or on any of its properties except such Taxes which are being
contested in good faith in appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP.
Merger and Consolidation
Neither the Partnership nor Warrant Co. shall consolidate with or merge
with or into, or convey, transfer or lease all or substantially all of its
assets to, any Person, unless: (i) the resulting, surviving or transferee Person
(the "Successor Entity") is a corporation, partnership, trust or limited
liability company organized and existing under the laws of the United States of
America, any state or the District of Columbia and the Successor Entity (if not
the Partnership) expressly assumes, by supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all obligations
of the Partnership under the Notes and the Indenture; (ii) immediately after
giving effect to such transaction (and treating any Indebtedness that becomes an
obligation of the Successor Entity or any Subsidiary of the Successor Entity as
a result of such transaction as having been incurred by the Successor Entity or
such Restricted Subsidiary at the time of such transaction), no Default or Event
of Default exists; (iii) immediately after giving effect to such transaction,
the Successor Entity (A) shall have a Consolidated Net Worth equal or greater
than the Consolidated Net Worth of the Partnership immediately prior to such
transaction and (B) shall be able to incur at least an additional $1.00 of
Coverage Ratio Indebtedness; (iv) the Partnership shall have delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
the consolidation, merger or transfer and such supplemental indenture (if any)
complies with the Indenture; and (v) there has been delivered to the
76
<PAGE> 84
Trustee an Opinion of Counsel to the effect that Holders of the Notes will not
recognize income, gain or loss for U.S. federal income tax purposes as a result
of such consolidation, merger, conveyance, transfer or lease and will be subject
to U.S. federal income tax on the same amount and in the same manner and at the
same times as would have been the case if such consolidation, merger,
conveyance, transfer or lease had not occurred.
The Successor Entity will succeed to, and be substituted for, and may
exercise every right and power of, the Partnership under the Indenture, but, in
the case of a lease of all or substantially all its assets, the Partnership will
not be released from the obligation to pay the principal of and interest on the
Notes.
Notwithstanding the foregoing, any Restricted Subsidiary of the Partnership
may consolidate with, merge into or transfer all or part of its properties and
assets to the Partnership.
EVENTS OF DEFAULT
Each of the following constitutes an Event of Default under the Indenture:
(i) a default in any payment of interest on any Note when due which continues
for 30 days, (ii) a default in the payment of principal of any Note when due at
its Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise, (iii) the failure by the Partnership to comply with
its obligations under the "Merger and Consolidation" covenant described under
"Certain Covenants" above, (iv) the failure by the Issuers to comply for 30 days
after notice with any of its obligations under the covenants described under
"Change of Control" above or under covenants described under "Certain Covenants"
above (in each case, other than a failure to purchase Notes when required which
shall constitute an Event of Default under clause (ii) above), other than
"Merger and Consolidation," (v) the failure by the Issuers or any Subsidiary
Guarantor to comply for 60 days after notice with its other agreements contained
in the Indenture, (vi) Indebtedness of the Partnership or any Restricted
Subsidiary is not paid within any applicable grace period after final maturity
or is accelerated by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $5.0 million and such
default shall not have been cured or such acceleration rescinded after a 10-day
period, (vii) certain events of bankruptcy, insolvency or reorganization of the
Issuers or a Significant Subsidiary (the "bankruptcy provisions"), (viii) any
judgment or decree for the payment of money in excess of $2.0 million (to the
extent not covered by insurance) is rendered against the Issuers or a
Significant Subsidiary and such judgment or decree shall remain undischarged or
unstayed for a period of 60 days after such judgment becomes final and
nonappealable (the "judgment default provision"), (ix) any Subsidiary Guarantee
by a Significant Subsidiary ceases to be in full force and effect (except as
contemplated by the terms of the Indenture) or any Subsidiary Guarantor that is
a Significant Subsidiary denies or disaffirms its obligations under the
Indenture or its Subsidiary Guarantee and such Default continues for 10 days,
(x) after the Resort Casino is completed, revocation, termination, suspension or
other cessation of effectiveness of any Gaming License, which results in the
total cessation or total suspension of gaming operations for a period of more
than 90 consecutive days at the Resort Casino, or (xi) the Resort Casino has not
commenced hotel and gaming operations by October 2, 1999.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25.0% in principal amount of the outstanding Notes by notice to the
Issuers may declare the principal of and accrued and unpaid interest, if any, on
all the Notes to be immediately due and payable. If an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Issuers
occurs, the principal of and accrued and unpaid interest on all the Notes will
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holders. Under certain circumstances, the
Holders of a majority in principal amount of the outstanding Notes may rescind
any such acceleration.
If an Event of Default occurs and is continuing, the Trustee will be under
no obligation to exercise any of the rights or powers under the Indenture at the
request or direction of any of the Holders unless such Holders have offered to
the Trustee reasonable indemnity or security against any loss, liability or
expense. Except to enforce the right to receive payment of principal, premium
(if any) or interest when due, no Holder may pursue any remedy with respect to
the Indenture or the Notes unless (i) such Holder has previously given the
Trustee notice that an Event of Default is continuing, (ii) Holders of at least
25.0% in principal amount of the
77
<PAGE> 85
outstanding Notes have requested the Trustee to pursue the remedy, (iii) such
Holders have offered the Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Trustee has not complied with such request
within 60 days after the receipt, and (v) the Holders of a majority in principal
amount of the outstanding Notes have not given the Trustee a direction that, in
the opinion of the Trustee, is inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. The Trustee may refuse
to follow any direction that conflicts with law or the Indenture or that the
Trustee determines is unduly prejudicial to the rights of any other Holder or
that would subject the Trustee to liability. Prior to taking any action under
the Indenture, the Trustee shall be entitled to indemnification satisfactory to
it in its sole discretion against all losses and expenses caused by taking or
not taking such action.
If a Default occurs and is continuing and is known to the Trustee, the
Trustee must mail to each Holder notice of the Default within 90 days after it
occurs. Except in the case of a Default in the payment of principal of, premium
(if any) or interest on any Note, the Trustee may withhold notice, provided it
determines in good faith that withholding notice is in the interests of the
Holders. In addition, the Partnership is required to deliver to the Trustee,
within 90 days after the end of each fiscal year, a certificate indicating
whether the signers thereof know of any Default that occurred during the
previous year. The Partnership also is required to deliver to the Trustee,
within 30 days after the occurrence thereof, written notice of certain Defaults.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding and any past default or compliance with any provisions may be waived
with the consent of the Holders of a majority in principal amount of the Notes
then outstanding. However, without the consent of each Holder of an outstanding
Note affected, no amendment may, among other things, (i) reduce the amount of
Notes whose Holders must consent to an amendment, (ii) reduce the stated rate
of, or extend the stated time for payment of, interest on any Note, (iii) reduce
the principal of or extend the Stated Maturity of any Note, (iv) reduce the
premium payable upon the redemption or repurchase of any Note or change the time
at which any Note may be redeemed as described under "Optional Redemption"
above, (v) make any Note payable in money other than that stated in the Note,
(vi) impair the right of any holder to receive payment of principal of and
interest on such Holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Holder's Notes, or (vii) make any change in the amendment provisions which
require each Holder's consent or in the waiver provisions.
Without the consent of any Holder, the Issuers and the Trustee may amend
the Indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation, partnership, trust or
limited liability company of the obligations of the Issuers under the Indenture
(provided that there has been delivered to the Trustee an Opinion of Counsel to
the effect that Holders of Notes will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such assumption and will be
subject to U.S. federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such assumption had not
occurred), to provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued in
registered form for purposes of Section 163(f) of the Code, or in a manner such
that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add further Guarantees with respect to the Notes, to secure the Notes,
to add to the covenants of the Issuers for the benefit of the Holders or to
surrender any right or power conferred upon the Issuers, to make any change that
does not adversely affect the rights of any Holder or to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act.
After an amendment under the Indenture becomes effective, the Issuers are
required to mail to the Holders a notice briefly describing such amendment.
However, the failure to give such notice to all the Holders or any defect
therein will not impair or affect the validity of the amendment.
78
<PAGE> 86
DEFEASANCE
The Issuers at any time may terminate all their obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a Registrar and Paying Agent in respect of the
Notes. The Issuers at any time may terminate their obligations under most of the
covenants and certain other provisions of the Indenture ("covenant defeasance").
The Issuers may exercise their legal defeasance option notwithstanding
their prior exercise of its covenant defeasance option. If the Issuers exercise
their legal defeasance option, payment of the Notes may not be accelerated
because of an Event of Default with respect thereto. If the Issuers exercise
their covenant defeasance option, payment of the Notes may not be accelerated
because certain specified Events of Default or because of the failure of the
Issuers to comply with certain restrictions concerning merger and consolidation.
In order to exercise either defeasance option, the Issuers must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of such
deposit and defeasance and will be subject to U.S. federal income tax on the
same amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a ruling of the
Internal Revenue Service or other change in applicable U.S. federal income tax
law).
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect (except as otherwise
expressly provided for in the Indenture) when either (i) all outstanding Notes
have been delivered (other than lost, stolen or destroyed Notes which have been
replaced) to the Trustee for cancellation or (ii) all outstanding Notes have
become due and payable, whether at maturity or as a result of the mailing of a
notice of redemption pursuant to the terms of the Indenture and the Issuers have
irrevocably deposited with the Trustee funds sufficient to pay at maturity or
upon redemption all outstanding Notes, including interest thereon, and, in
either case, the Issuers have paid all other sums payable under the Indenture.
The Trustee is required to acknowledge satisfaction and discharge of the
Indenture on demand of the Issuers accompanied by an Officer's Certificate and
an Opinion of Counsel at the cost and expense of the Issuers.
TRANSFER AND EXCHANGE
Upon any transfer of a Note, the Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents, and to
pay any taxes and fees required by law or permitted by the Indenture. The
Registrar is not required to transfer or exchange any Notes selected for
redemption nor is the Registrar required to transfer or exchange any Notes for a
period of 15 days before a selection of Notes to be redeemed. The registered
Holder of a Note may be treated as the owner of it for all purposes.
THE TRUSTEE
United States Trust Company of New York is to be the Trustee under the
Indenture and has been appointed by the Issuers as Registrar and Paying Agent
with regard to the Notes.
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim a 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 or resign.
79
<PAGE> 87
The Holders of a majority in aggregate principal amount of the then
outstanding Notes issued under the Indenture will have the right to direct the
time, method and place of conducting any proceeding for exercising any remedy
available to the Trustee. 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 of the Holders of the Notes issued thereunder unless they
shall have offered to the Trustee security and indemnity satisfactory to it.
DESCRIPTION OF DISBURSEMENT AGREEMENT
On December 31, 1997, the Issuers, National Westminster Bank PLC, as the
administrative agent for the Mortgage Notes (the "Administrative Agent"), the
Trustee, the Account Agents (the "Account Agents"), in respect of the Accounts
described below, and First Security Trust Company of Nevada, as the Disbursement
Agent entered into a Disbursement Agreement (the "Disbursement Agreement"). The
following summary of the material provisions of the Disbursement Agreement does
not purport to be complete and is qualified in its entirety by reference to the
Disbursement Agreement, including the definitions therein of certain terms used
below. Capitalized terms that are used but not otherwise defined in this
Prospectus have the meanings assigned to them in the Disbursement Agreement.
GENERAL
The Disbursement Agreement establishes the conditions to, and the relative
sequencing of, the making of disbursements from the Equity Contribution, the
proceeds from the Original Notes and the Mortgage Notes and establishes the
obligations of the Administrative Agent and the Trustee to make disbursements
under their respective funding commitments upon satisfaction of such conditions.
FUNDING ORDER
The Disbursement Agreement sets forth the sequencing order in which funds
from the various sources will be made available to the Partnership.
All disbursement requests permitted to be made from the proceeds of the
Original Notes, the Mortgage Notes and Equity Contributions shall be funded in
the following sequence: (i) from the Equity Contributions and certain other cash
amounts received by the Issuers and on deposit from time to time in the
Partnership's funds account (the "Partnership Funds Account"), until exhausted,
(ii) from the net proceeds of the Original Notes deposited in the Notes Proceeds
Account, and (iii) from the net proceeds of the Mortgage Notes deposited in the
Mortgage Notes Proceeds Account.
Construction of the Resort Casino commenced in January 1998, and the
Issuers have incurred significant costs in connection with the Resort Casino.
Pursuant to the Disbursement Agreement, the Construction Consultant will confirm
that such costs were incurred within the parameters set forth in the approved
budget for the Resort Casino (the "Project Budget") as in effect at the time of
such confirmation.
ACCOUNTS
In order to implement the funding of disbursements, there have been
established certain accounts, each of which is subject to a security interest in
favor of the lenders under the Credit Facilities (provided that the net proceeds
of the Original Notes are subject to a security interest in favor of the holders
of the Mortgage Notes only). Such accounts include, among other things, the
following:
Partnership Funds Account
The net proceeds of the Equity Contribution and all other contributions
required to be made by or on behalf of the Partnership (except to the extent
used to pay costs of the Resort Casino incurred prior to the Issue Date) shall
be deposited into the Partnership Funds Account. Subject to certain exceptions,
there shall also be deposited into the Partnership Funds Account (i) all amounts
received by the Partnership in respect of
80
<PAGE> 88
liquidated or other damages under the Construction Contract and certain other
contracts and (ii) all advanced deposits and revenues from operation of the
Resort Casino, in each case, prior to the Commencement Date. Amounts in the
Partnership Funds Account shall be held in escrow and invested in cash or Cash
Equivalents by the Account Agent until transferred from time to time, on each
disbursement date, to the Disbursement Account for the payment of costs of the
Resort Casino. Investment income from amounts on deposit in the Partnership
Funds Account shall be retained and reinvested.
Notes Proceeds Account
The net proceeds of the Original Notes were deposited in the Notes proceeds
account (the "Notes Proceeds Account"). Amounts on deposit in the Notes Proceeds
Account are held in escrow and invested in cash or Cash Equivalents by the
Account Agent with respect thereto until (i) transferred from time to time on
each disbursement date to the Disbursement Account for the payment of costs of
the Resort Casino and (ii) upon the occurrence of certain events, to repurchase
a portion of the Subordinated Notes. Investment income from amounts on deposit
in the Notes Proceeds Account shall be retained and reinvested.
Mortgage Notes Proceeds Account
The net proceeds of the Mortgage Notes will be deposited into the Mortgage
Notes Proceeds Account. Amounts on deposit in the Mortgage Notes Proceeds
Account will be held in escrow and invested in cash or Cash Equivalents by the
Account Agent with respect thereto until (i) transferred from time to time on
each disbursement date, to the Disbursement Account for the payment of costs of
the Resort Casino and (ii) upon the occurrence of certain events, to repurchase
a portion of the Mortgage Notes. Investment income from the Mortgage Notes
Proceeds Account shall be retained and reinvested.
Disbursement Account
It is anticipated that all disbursements for major costs of the Resort
Casino will be made from the Disbursement Account. The Disbursement Agent will
transfer from the Partnership Funds Account, the Notes Proceeds Account and the
Mortgage Notes Proceeds Account, in that order and to the extent necessary, the
disbursement to be funded therefrom. Amounts in the Disbursement Account will be
applied to pay costs of the Resort Casino by disbursement to the Construction
Manager and others providing goods or services to the Resort Casino.
FUNDING CONDITIONS
The Disbursement Agreement will permit the Partnership to submit
disbursement requests once a month. The Disbursement Agreement will authorize
disbursement requests only upon the satisfaction of various conditions
precedent. These conditions include, among others: (i) delivery by the Issuers
of a disbursement request and certificate certifying, among other things, (a)
the application of funds to be disbursed, (b) the substantial conformity of
construction undertaken to date with the plans and specifications, in accordance
with the Construction Contract, (c) the expectation that the Resort Casino will
achieve the July 2, 1999 Commencement Date, (d) the accuracy of the Project
Budget, in accordance with the Construction Contract, (e) the sufficiency of
remaining funds to complete the Resort Casino and (f) compliance with line item
budget allocations in accordance with the Construction Contract, taking into
account allocations for contingencies; (ii) delivery by the Construction
Manager, the Construction Consultant and the Architect of certificates
corroborating various matters set forth in the Issuers' disbursement request and
certificate; (iii) the representations and warranties of the Issuers in the
Credit Agreement being true and correct in all material respects as if made on
such date; and (iv) that no Default or Event of Default exists under the Credit
Agreement.
INSURANCE
Marsh & McLennan, an international insurance brokerage/consulting firm, has
been engaged as the Resort Casino's insurance broker to assist in purchasing the
insurance coverage for the Resort Casino. The
81
<PAGE> 89
insurance requirements are set forth in the Construction Contract with J.A.
Jones. See "Additional Material Agreements -- Construction Contract and
Completion Guaranty." The following summary of the material provisions of the
insurance requirements does not purport to be complete and is qualified in its
entirety by reference to the Construction Contract.
The Partnership is the primary insured for all insurance coverages and
determines which contractors and suppliers are included under the coverages. Any
contractor or supplier not included under the coverages is required to provide
indemnification to the owners of the Resort Casino and to provide reasonable
limits of insurance. Such contractors or suppliers also will be required to
provide property insurance to the extent that they maintain an insurable
interest in property located at the Resort Casino.
The Issuers believe that the insurance requirements of the Construction
Contract provide commercially appropriate protections against insurable risks
that could arise in connection with the construction and operation of the Resort
Casino.
BUILDER'S RISK AND OTHER PROPERTY INSURANCE
The coverages include: (i) builder's risk insurance to cover the physical
risk of loss to the Resort Casino during the course of construction and the
insurable interests of the contractors and suppliers, and (ii) delay and loss of
profits insurance for losses arising out of physical losses occurring either at
the Resort Casino site or at selected off-site facilities that are providing
equipment or materials for the Resort Casino.
PROJECT LIABILITY
General liability insurance coverage includes: (i) bodily injury and
property damage insurance (for the Resort Casino and, in the Partnership's
discretion, all or some of the contractors and suppliers) during the
construction period and an additional period thereafter, and (ii) workers'
compensation and employer's liability insurance for the contractors and
suppliers. General liability insurance coverage may also include pollution
liability insurance.
FORCE MAJEURE
The coverage includes: (i) insurance to cover the economic losses arising
from additional interest payments resulting from the failure of the construction
project to be completed in a timely manner, and (ii) insurance for cost overruns
and/or otherwise uninsured delays.
LIMITS AND DEDUCTIBLES
Limits and deductibles are set in what the Issuers believe are commercially
appropriate amounts.
ADDITIONAL MATERIAL AGREEMENTS
The following summarizes the material terms of certain material agreements
to which the Partnership is a party, but does not purport to be complete and is
qualified in its entirety by reference to the agreements describe herein. Copies
of such agreements are available upon request to the Partnership. Capitalized
terms used but not otherwise defined herein shall have the meaning ascribed to
such terms in the agreement being described (unless otherwise indicated).
HOTEL LICENSE AGREEMENT
The Partnership has entered into a December 16, 1997 License Agreement (the
"License Agreement") with Regent International (a subsidiary of Carlson
Companies, Inc.), pursuant to which Regent International agreed to license to
the Partnership the right to flag the Hotels located at the Resort Casino and to
use Regent International's trade name, trademarks and systems in connection with
the operations of the Hotels. The License Agreement relates to non-gaming
operations only and provides for the Partnership or its affiliates to be the
sole Regent International licensee(s) in Clark County, Nevada.
82
<PAGE> 90
The term of the License Agreement is 15 years. The Partnership has the
right to terminate the License Agreement on December 31, 2005 or December 31,
2010 if: (i) on December 31, 2004, Regent International does not have at least
20 hotels or 6,000 guest rooms in or under contract to become part of the Regent
International system, at least one-half of which must be located in the United
States, Canada, Mexico and the Caribbean, or (ii) prior to December 31, 2009,
Regent International does not have at least 40 hotels or 12,000 guest rooms in
or under contract to become part of the Regent International system. The
Partnership also has the right to terminate the License Agreement upon payment
of a $2.0 million termination fee if (i) the Partnership abandons development of
the Hotels on the Resort Casino Site, or (ii) the opening date of the Resort
Casino does not occur by June 15, 2000. The License Agreement requires the
Partnership to commence construction of the Hotels on or before March 1, 1998.
Pursuant to the License Agreement, the Hotels are to be constructed in
accordance with Regent International's standard requirements and image generally
consistent with those required of other Regent International hotels.
The Partnership has paid to Regent International a nonrefundable initial
fee of $50,000 and is required to pay to Regent International a continuing fee
(the "Continuing Fee") equal to 1.75% of the Hotels' gross revenues per month.
In addition, the Partnership is expected to pay to Regent International a
reservation fee equal to (i) a fixed fee which is currently $200 per guest room
per year but which may be increased by not more than 5.0% for any calendar year
after January 1, 2001 at Regent's discretion, and (ii) a variable fee of 3.0% of
the gross room revenue derived from all reservations made through the Regent
International central reservation system. A marketing fee of 1.5% of the Hotels'
gross revenue per month is also expected to be payable by the Partnership to
Regent International under the License Agreement. The License Agreement also is
expected to provide for certain program fees, for participation in Regent
International's system programs and services imposed on all Regent International
hotels.
Pursuant to the License Agreement, Regent International will provide access
to its central reservation system on a basis generally comparable with all other
Regent International hotels in order to facilitate worldwide reservations at the
Hotels. In addition, Regent International will provide training to the
Partnership's employees with respect to the reservation system and the Hotels'
property management system software.
The marketing fees, reservation fees and certain other fees designated by
Regent International and paid by the Partnership will constitute part of a fund
(the "RSM Fund") established by Regent International and consisting of similar
fees paid by other Regent International hotels. The RSM Fund is to be used for
promotion and marketing of Regent International hotels, generating business for
the hotels, developing and conducting training programs, providing reservation
services and paying certain administrative and other expenses of the RSM Fund.
Prior to the opening date of the Hotels, the Hotels' general manager and
other members of the Hotels' staff primarily responsible for sales, front
office, accounting, reservations, human resources, training, rooms and food and
beverage must satisfy certain Regent International specific orientation and
training programs. Regent International will assist the Partnership, at no
additional cost to the Partnership, with the initial announcements and events
with respect to the grand opening of the Hotels and related public relations and
publicity for pre-opening and opening of the Hotels. Regent International will
also provide general consulting services and will include the Hotels in all
local, regional and worldwide tactical promotional and advertising programs
directed at the business, leisure and conference market. The License Agreement
places certain limitations on the rights of the Partnership to assign the
License Agreement or to transfer the Hotels without Regent International's prior
approval. Certain transfers of equity interests in the Partnership are permitted
without Regent International's consent, provided that effective control of the
Partnership has not changed. Pursuant to the License Agreement, the Partnership
is obligated to indemnify Regent International from and against all claims,
lawsuits, damages, obligations, liabilities and actions and judgments alleged by
any person or entity against Regent International arising out of or as a result
of or in connection with the Partnership's operation of the Hotels or the
Partnership's negligence.
83
<PAGE> 91
SUBORDINATION, STABILIZATION AND ASSUMPTION AGREEMENT
In conjunction with the License Agreement, the Partnership and Regent
International entered into the December 16, 1997 Subordination, Stabilization
and Assumption Agreement pursuant to which Regent International has agreed to
subordinate the Continuing Fee to the Credit Facilities for the 15-month period
commencing on the date the Partnership opens the Hotels for business. Pursuant
to the Subordination Agreement, during the first 15 months following the opening
of the Hotels, in the event the actual revenues of the Hotels fall below
approximately $2.6 million (during the first 12 months) or approximately $2.9
million (during the 13th, 14th and 15th months) in any month, then the
Continuing Fee for that month will be accrued but not paid. At any time during
the first 15-month period, in the event the cumulative actual revenues for the
Hotels are equal to or greater than 80.0% of the projected cumulative revenue,
then the accrued Continuing Fee shall be paid. At the end of the first 15-month
period, any accrued Continuing Fee shall be paid in full to Regent International
within 20 days following the end of the 16th full month of operation.
CONSTRUCTION CONTRACT AND COMPLETION GUARANTY
The Partnership has entered into the Construction Contract for the Resort
Casino with J.A. Jones which provides for payment based on the cost of the work
plus a fee payable to J.A. Jones including a guaranteed maximum price of $133.0
million (exclusive of any change orders which must be authorized by the
Partnership).
Based upon the Construction Contract, the Partnership anticipates that the
Resort Casino will be substantially completed on or before February 5, 1999. The
Construction Contract provides for liquidated damages of up to $4.0 million
assessable against J.A. Jones for its failure to satisfy certain timing
requirements, and contains a provision which provides that J.A. Jones is acting
agent for the Partnership and authorized to enter into all subcontracts as agent
for the Partnership.
It is currently contemplated by management that insurance for the Resort
Casino will be provided through an owner-controlled insurance program or
"wrap-up" with required limits of insurance as set forth in the Construction
Contract.
CONSTRUCTION MANAGEMENT CONTRACT
The Partnership has entered into a "Standard Form of Agreement Between
Owner and Project Construction Management Consultant Where the Project
Construction Management Consultant is NOT a Constructor, (AIA Document
B801/Cma)" with certain modifications, with Rider Hunt, which will provide
certain services as project construction management consultant in connection
with the construction of the Resort Casino. The fees to be paid to Rider Hunt
include $20,000 per month plus reimbursement of certain expenses. Such
compensation may be subject to further adjustment based upon the modifications,
if any, to the second Hotel.
Under the Construction Management Contract, it is expected that Rider Hunt
will provide administrative services related to the Construction Contract,
including development of cash flow reports and forecasts; advising of variances
between actual and budgeted costs; in consultation with the Partnership and the
Architect, rejecting work not in conformity with the Construction Contract;
preparing valuations of amounts due the respective contractors; and recording
the progress of construction of the Resort Casino. Rider Hunt is not authorized
to approve significant change orders under the Construction Contract.
ARCHITECT AGREEMENT
The Partnership has selected Paul Steelman, Ltd. as the Architect for the
Resort Casino. Management has entered into an agreement with the Architect based
upon, with some modifications, the American Institute of Architects "Standard
Form of Agreement Between Owner and Architect Where the Construction Manager is
NOT a Constructor -- Construction Manager -- Adviser Edition" (the "Architect
Agreement"). Pursuant to the Architect Agreement, the Partnership will pay the
Architect base compensation of
84
<PAGE> 92
approximately $2.4 million, any reimbursable expenses of the Architect and
approximately $2.3 million to various consultants providing services related to
the construction and design of the Resort Casino. The Architect Agreement
requires the Architect to provide certain services including the preparation of
final construction drawings and specifications for construction of the Resort
Casino that comply with all applicable laws, statutes, ordinances, codes, rules
and regulations, assisting the Partnership in negotiating the final Construction
Contract with J.A. Jones, inspecting the work as the work progresses and
certifying the requests for payment received from J.A. Jones, and providing
contract administration in accordance with the general conditions to the
Construction Contract. The Issuers did not provide the Architect with authority
to approve significant change orders under the Construction Contract.
AGREEMENTS WITH HHP
Development Agreement
In connection with the acquisition of the Resort Casino Site and option to
purchase the Option Parcel, the Partnership entered into a development agreement
(the "Declaration") with HHP pursuant to which the Partnership (i) agreed to
develop the Resort Casino Site subject to the restrictions, covenants,
conditions, reservations and limitations contained in the Declaration, and (ii)
granted to HHP the right to repurchase the Resort Casino Site in the event the
Partnership failed to commence construction of its improvements on the Resort
Casino Site within the time frame described in the Declaration.
The construction of any improvements on the Resort Casino Site is subject
to the prior written approval of HHP. The Partnership has agreed, prior to the
commencement of the construction of any improvements upon the Resort Casino
Site, to submit to HHP for its review and approval final drawings and
specifications for the improvements to be constructed upon the Resort Casino
Site. Approval of the plans and specifications for construction of improvements
shall be based, among other things, upon conformity with the Conceptual
Development Plan and upon compliance with certain design guidelines.
Plans and specifications for any improvements subsequent to the completion
of the Resort Casino by the Partnership must also be in compliance with the
design guidelines and be submitted to, and approved in writing by, HHP.
Landscaping, irrigation and maintenance of the Resort Casino Site are also
governed by the Declaration. Failure by the Partnership properly to landscape,
irrigate and maintain the Resort Casino Site affords HHP, among other remedies,
the right to place a lien upon the Resort Casino Site in an amount expended by
HHP for curing such failure plus interest from the date of the expenditure.
Generally, any alteration, improvement, screening, fencing, antenna, utility
line, sign, exterior lighting or other item that may be viewed from a
neighboring property is subject to the prior written approval of HHP. The Resort
Casino Site is to be used, developed, maintained and operated only as a resort
style hotel and/or casino, with such ancillary commercial, entertainment and
recreational amenities as are approved by HHP in writing.
The Partnership also has agreed not to sell, lease, transfer, exchange or
otherwise convey or dispose of its interest in the Resort Casino Site to another
investor, builder or developer other than a permitted assignee for a period of
one year following substantial completion of the Resort Casino.
The Resort Casino Site is subject to assessment by the Master Association
in connection with certain portions of Summerlin owned, controlled and
maintained by the Master Association. The Resort Casino Site is also subject to
special assessments pursuant to the terms and provisions of the Master
Declaration. A failure by the Partnership to pay any assessments due the Master
Association shall subject the Resort Casino Site to a continuing lien in the
amount of such assessment(s) together with interest thereon, late charges, costs
and reasonable attorneys' fees.
No breach or violation of the Declaration shall defeat or render invalid
the lien of any mortgage, deed of trust or similar instrument securing a loan
made in good faith and for value with respect to the development or permanent
financing of the Resort Casino Site or any portion thereof, and to the extent
that the combined principal amount of such loan and any superior loans
encumbering the Resort Casino Site does not exceed 70.0% of the improved fair
market value of the Resort Casino Site. The Declaration and all provisions
thereof are binding upon and effective against any subsequent owner of the
Resort Casino Site and their successors
85
<PAGE> 93
and assigns or other occupants of the Resort Casino Site or portion thereof
whose title is acquired by foreclosure, trustee sale, deed in lieu of
foreclosure or otherwise, but such subsequent owner shall have a reasonable
period of time after taking title to cure any violation thereunder that is
reasonably capable of being cured, provided that such subsequent owner
diligently acts to effect such cure.
The term of the Declaration is through August 15, 2056. The Option Parcel
is also subject to the Declaration.
Royalty Agreement and Golf Agreement
The Partnership entered into an August 15, 1996 Royalty Agreement with HHP,
pursuant to which, in consideration of a royalty fee, HHP agreed to provide the
Partnership, among other things: (i) the Right of First Offer; (ii) a priority
for the reservation of a minimum of 50.0%, which may be increased to 75.0% at
the Partnership's option, of the starting times at the TPC Canyons golf course,
subject to certain restrictions contained in a separate agreement; (iii) a
membership in the TPC network of golf courses operated by PGA Tour, Inc. or its
affiliates; (iv) the exclusive right to operate a casino in Summerlin North; and
(v) a license to use the "Summerlin" name.
As consideration the Partnership agreed to pay HHP a royalty fee beginning
on the earlier of the day the Resort Casino is open to the public, or 18 months
following the first day of construction of the Resort Casino (the "Royalty
Commencement Date"), negotiated to be initially $1.0 million per year,
increasing on the fifth anniversary of the Royalty Commencement Date, and on
each succeeding fifth anniversary by an amount equal to 15.0% of the amount paid
at the end of the preceding five-year period. The royalty fee is to be paid
quarterly in equal installments, with the Partnership receiving a credit against
the royalty fee for amounts paid pursuant to a separate Golf Course Agreement
(the "Golf Reservation Fees") among HHP, Summerlin Corporation and Tournament
Players Club at Summerlin, Inc. The initial amount of the Golf Reservation Fees
will be $500,000. In the event the Partnership elects to increase the tee times
to 75.0%, it will, under the terms of the Golf Agreement and without a credit
under the Royalty Agreement, initially be required to pay an annual fee of
$125,000, which will increase according to an agreed-upon schedule.
In the event the Partnership fails to pay any installment of the royalty
fee when due and such failure is not cured within 30 days notice from HHP, HHP
is granted the right, among others, to terminate the Royalty Agreement and the
Golf Course Agreement.
RESTAURANT LEASE AGREEMENTS
In connection with the operation of the Resort Casino, the Partnership has
executed one lease and plans to enter into at least four additional leases
pursuant to which it will lease space to at least five restaurants (the
"Restaurant Leases"). See "Business -- The Resort Casino -- Food and Beverage."
The following is a description of the Restaurant Leases which the Partnership
has executed or anticipates executing. There is no assurance that the
Partnership will be successful in obtaining the anticipated Restaurant Leases
described herein. Any Restaurant Leases actually executed by the Partnership for
the Resort Casino may differ materially from the anticipated Restaurant Leases
described herein.
The Restaurant Leases require or will require the restaurants to operate
continuously during the term of each lease and provide controls over each
restaurant's use of their respective premises. Base rent is or will be payable
on a monthly basis on the first day of each month. The Restaurant Leases provide
or will provide for additional lease payments based on a percentage of each
restaurant's gross sales in excess of certain amounts. The percentages will
range from 6.5% to 7.5% and the gross sales amounts are expected to range from
approximately $2.0 million to $3.2 million. Each restaurant also is or will be
responsible for utilities used on the premises and other customary costs of
operation including customary insurance. The Restaurant Leases grant or will
grant the Partnership certain termination rights in the event the restaurant
fails to meet certain sales targets. Each Restaurant Lease also provides or will
provide that the restaurant may not operate another similar restaurant within a
certain radius from the Resort Casino.
The Partnership is or will be responsible for constructing the shell
premises and the restaurant generally will be responsible for constructing the
interior alterations for the specific restaurant. The Partnership also is or
86
<PAGE> 94
will be responsible for maintaining the foundations, bearing walls and roof
structure of each premises and the restaurant will provide all other repairs and
maintenance. One Restaurant Lease for 10,000 square feet obligates the
Partnership to provide construction allowances to such restaurant up to $1.5
million. It is anticipated that another Restaurant Lease for 5,000 square feet
will obligate the Partnership to provide construction allowances to such
restaurant up to $750,000. A third Restaurant Lease for 5,000 square feet may
obligate the Partnership to provide a partial rent credit, in lieu of any
construction allowance, to such restaurant up to $600,000.
The Restaurant Leases also contain or will contain certain customary
covenants and rights by the restaurant in favor of the Partnership, including,
without limitation, the following: (i) a covenant to keep the premises and the
Resort Casino free from all liens and claims of liens arising out of any action
by the restaurant; (ii) a covenant not to assign its lease or sublet the
premises without the Partnership's consent; (iii) a covenant to take certain
customary actions to ensure each respective Restaurant Lease will become
subordinate to all future leases or mortgages which may affect the Resort
Casino; and (iv) the right of the Partnership to inspect the premises of each
restaurant.
In addition to the other rights and remedies of the Partnership under the
Restaurant Leases, in the event of an uncured default by a restaurant, the
Partnership may elect to (i) terminate the lease and sue the restaurant for
damages pursuant to a formula contained in the lease or (ii) keep the lease in
effect, evict the restaurant from the premises and sue the restaurant for any
damages due to the breach, less any amounts obtained through mitigation.
The following table sets forth certain information with respect to the
proposed individual Restaurant Leases:
<TABLE>
<CAPTION>
RESTAURANT
------------------------------------------------------------------------------
STEAK AND
SEAFOOD ASIAN ASIAN FRENCH ITALIAN
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Initial term........... 10 years 10 years 10 years 10 years 10 years
10 year renewal
options.............. 2 2 2 2 2
Approximate size of
premises............. 10,000 sq. ft. 5,000 sq. ft. 2,400 sq. ft. 5,000 sq. ft. 5,000 sq. ft.
</TABLE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal tax consequences of
the acquisition, ownership and disposition of the Notes and the Corporate
Warrants by a holder thereof. This summary only applies to the Notes or the
Corporate Warrants held as capital assets and does not address aspects of U.S.
federal income taxation that may be applicable to holders that are subject to
special tax rules, such as insurance companies, tax-exempt organizations, banks,
or dealers or traders in securities or currencies, holders that will hold a Note
or Corporate Warrant, as part of a position in a "straddle" or as part of a
"hedging," "conversion" or "integrated" transaction for U.S. federal income tax
purposes or that have a "functional currency" other than the U.S. dollar.
Moreover, this summary does not address the U.S. federal income tax treatment of
holders that did not acquire Notes or Corporate Warrants as part of the initial
distribution at their initial issue price. Each prospective purchaser should
consult its tax advisor with respect to the U.S. federal, state, local and
foreign tax consequences of acquiring, holding and disposing of the Notes and
the Corporate Warrants.
This summary is based on the Internal Revenue Code of 1986, as amended,
existing and proposed Treasury Regulations, administrative pronouncements and
judicial decisions, each as available on the date hereof. All of the foregoing
are subject to change (possibly with retroactive effect) or differing
interpretations which could affect the tax consequences described herein.
For purposes of this summary, a "U.S. Holder" is a Holder of Notes or
Corporate Warrants, who for U.S. federal income tax purposes is (i) a citizen or
resident of the United States; (ii) a corporation or partnership organized in or
under the laws of the United States or any State thereof (including the District
of Columbia); (iii) an estate the income of which is subject to U.S. federal
income taxation regardless of its source; (iv) a trust (a) the administration
over which a U.S. court can exercise primary supervision and (b) all of the
87
<PAGE> 95
substantial decisions of which one or more U.S. persons have the authority to
control; or (v) otherwise subject to U.S. federal income taxation on a net
income basis with respect to the Notes. Notwithstanding the preceding sentence,
to the extent provided in U.S. Treasury Regulations, certain trusts in existence
on August 20, 1996, and treated as United States persons prior to such date,
that elect to continue to be treated as United States persons also will be a
U.S. Holder. A "Non-U.S. Holder" is a holder of Notes or Corporate Warrants
other than a U.S. Holder.
Allocation of the Issue Price Between an Original Note and Corporate Warrant
Based upon the election of all Unit purchasers to acquire Corporate
Warrants, each Unit was comprised of an Original Note and a Corporate Warrant.
The "issue price" of a Unit for U.S. federal income tax purposes was the initial
offering price of a substantial amount of the Units to investors (other than
persons acting in their capacity as underwriters, placement agents or
wholesalers). The issue price has been allocated between the Notes and the
Corporate Warrants based on their respective fair market values at the time of
issuance, and a U.S. Holder's initial tax basis in each will be equal to the
amount so allocated. Based upon its estimate of the fair market value of a
Corporate Warrant, the Company treated $941.30 of the issue price of a Unit to
the Notes (which amount the Company treated as its "issue price" for U.S.
federal income tax purposes) and $58.70 was allocated to the Warrant. The
Company intends to file information returns with the Internal Revenue Service
(the "IRS") based on such allocation.
The Company's allocation of the issue price is binding on a U.S. Holder for
U.S. federal income tax purposes unless the Holder discloses the use of a
different allocation in its U.S. federal income tax return for the year in which
the Unit was acquired. However, the Company's allocation is not binding on the
IRS, and there can be no assurance that the IRS will not challenge such
allocation.
The Notes
U.S. Holders
Original Issue Discount. In general, the excess of the "stated redemption
price at maturity" of a Note over its "issue price" generally will constitute
original issue discount ("OID") for U.S. federal income tax purposes. The stated
redemption price at maturity of a Note is the sum of all scheduled amounts
payable on the Note (including interest). U.S. Holders of the Notes will be
required to include OID in income for U.S. federal income tax purposes as it
accrues, in accordance with a constant yield method based on a compounding of
interest, before the receipt of cash payments attributable to such income. Under
this method, U.S. Holders generally will be required to include in income
increasingly greater amounts of OID in successive accrual periods.
The Partnership does not intend to treat the possibility of an optional or
provisional redemption or repurchase of the Notes as giving rise to any
additional accrual of OID or recognition of ordinary income upon redemption,
sale or exchange.
Sale, Exchange or Retirement. Subject to the discussion of the Exchange
Offer below, upon the sale, exchange or retirement of a Note, a U.S. Holder will
recognize taxable gain or loss equal to the difference between the amount
realized and such holder's adjusted tax basis. A U.S. Holder's adjusted tax
basis generally will equal the issue price of such Note increased by the amount
of any OID previously included in income by such U.S. Holder with respect to
such Note and decreased by any payment previously made on such Note. Such gain
or loss realized on the sale, exchange or retirement will be capital gain or
loss. In the case of a noncorporate U.S. Holder, the maximum marginal U.S.
federal income tax rate applicable to such gain will be lower than the maximum
marginal U.S. federal income tax rate applicable to ordinary income if such U.S.
Holder's holding period for such Notes exceeds one year and will be further
reduced if such Notes were held for more than 18 months.
Exchange Offer. The exchange of an Original Note for an Exchange Note by a
U.S. Holder pursuant to the Exchange Offer should not constitute a taxable
exchange for U.S. federal income tax purposes. A U.S. Holder should not
recognize any gain or loss upon the receipt of an Exchange Note pursuant to the
Exchange Offer and should be required to continue to include interest on the
Exchange Note in gross income for U.S.
88
<PAGE> 96
federal income tax purposes in the manner and to the extent described above. A
U.S. Holder's holding period for an Exchange Note should include the holding
period for the Original Note exchanged pursuant to the Exchange Offer, and such
holder's adjusted basis in an Exchange Note should be the same as such holder's
adjusted basis in such Original Note.
It is possible that the IRS could assert that the Additional Interest (as
defined) which the Partnership would be obligated to pay if the Exchange Offer
Registration Statement is not filed or declared effective within the time
periods set forth herein (or certain other actions are not taken) (as described
above under "Exchange Offer and Registration Rights") are "contingent payments"
for U.S. federal income tax purposes. If so treated, the Notes would be treated
as contingent payment debt instruments, and certain adverse U.S. federal income
tax consequences could result. However, the U.S. Treasury Regulations issued by
the IRS regarding debt instruments that provide for one or more contingent
payments provide that, for purposes of determining whether a debt instrument is
a contingent debt instrument, remote or incidental contingencies are ignored.
The Partnership believes that the possibility of the payment of Additional
Interest is remote and, accordingly, does not intend to treat the Notes as
contingent payment debt instruments.
Non-U.S.Holders
Under U.S. federal income tax law, (i) payments of principal of, premium,
if any, and interest on the Notes by the Partnership, General Partner or any
paying agent thereof to any Non-U.S. Holder (other than, (a) a controlled
foreign corporation related to the Partnership or the General Partner (b) a
shareholder owning, actually or constructively, 10% or more of the total
combined voting power of all classes of stock of the General Partner entitled to
vote or a partner who owns 10.0% or more of the capital or profits interests in
the Partnership, or (c) a bank which acquired such Notes in consideration of an
extension of credit made pursuant to a loan agreement entered into in the
ordinary course of business) will not be subject to U.S. withholding tax,
provided that valid certifications meeting the requirements of Section
871(h)(2)(B)(ii) or 881(c)(2)(B)(ii) of the Code (as discussed below under
"Backup Withholding Tax and Information Reporting"), are received or an
exemption is otherwise established and subject, however, to the discussion of
backup withholding below, (ii) any gain or income realized by any Non-U.S.
Holder upon the sale or redemption of the Notes will not be subject to U.S.
income or withholding tax, subject to the discussion of backup withholding
below, and unless (x) such gain is effectively connected with the conduct by
such Non-U.S. Holder of a trade or business in the United States or (y) in the
case of any gain realized by an individual Non-U.S. Holder, such holder is
present in the United States for 183 days or more in the taxable year of such
sale, exchange or retirement and certain other conditions are met, and (iii) a
Note that is held by an individual who at the time of death is not a citizen or
resident of the United States will not be subject to U.S. federal estate tax as
a result of such individual's death, provided that such individual is not
actually or constructively a 10.0% (or more) shareholder of the General Partner
or a partner who owns 10.0% or more of the capital or profits interests in the
Partnership and, at the time of such individual's death, payments of interest
with respect to such Notes would not have been effectively connected with the
conduct by such individual of a trade or business in the United States.
The gross amount of payments to a Non-U.S. Holder of interest and OID, if
any, that do not qualify under (a) above and that are not effectively connected
with the conduct by such Non-U.S. Holder of a trade or business within the
United States ("U.S. Trade or Business Income") will be subject to U.S.
withholding tax at the rate of 30.0%, unless a U.S. income tax treaty applies to
reduce or eliminate withholding. U.S. Trade or Business Income will be taxed at
regular U.S. federal income tax rates (rather than the 30.0% gross withholding
tax rate) and, if such Non-U.S. Holder is a foreign corporation, may be subject
to a 30.0% "branch profits tax" unless it qualifies for a lower rate under an
applicable tax treaty. To claim the benefit of a tax treaty or to claim an
exemption from withholding because the income is U.S. Trade or Business Income,
a Non-U.S. Holder must provide a properly executed Form 1001 or 4224 (or such
successor form as the IRS designates), as applicable, prior to payment of
interest.
89
<PAGE> 97
Classification as Applicable High Yield Discount Obligations
Corporations that issue debt obligations that are classified as applicable
high yield discount obligations (as defined in the Code) and holders thereof are
subject to special rules (the "AHYDO Rules") regarding the deductibility of
interest and reclassification of certain interest as dividends. If a debt
obligation's yield to maturity exceeds the "applicable federal rate" in effect
at the time of their issuance (the "AFR") plus five percentage points, such debt
obligation will be classified as an applicable high yield discount obligation.
In that event, no portion of the OID would be deductible by the issuer until
paid. In addition, a portion of the OID thereon may not be deductible by the
issuer at any time; such portion would be an amount that bears the same ratio to
such OID as (i) the excess of the yield to maturity of such debt obligation over
the AFR plus six percentage points bears to (ii) the yield to maturity. Since
RAS is a co-issuer of the Notes and certain partners of the Partnership (a
co-issuer of the Notes) are corporations, the AHYDO rules will apply to such
corporate partners even though the Partnership is not taxed as a corporation for
U.S. federal income tax purposes.
Corporate Warrants
Purchasers of Corporate Warrants should note that Warrant Co. will be
subject to U.S. federal income tax (and possibly state and local income tax) on
(i) gains recognized from the sale of a Partnership Warrant by Warrant Co. and
(ii) its distributive share of Partnership income/loss. Accordingly, amounts
available for distribution to holders of Warrant Co. stock may be reduced.
U.S. Holders
Due to the nominal exercise price of the Corporate Warrants, a holder of a
Corporate Warrant will likely be treated as holding the underlying Common Stock
of Warrant Co. from the date of acquisition of the Corporate Warrants for U.S.
federal income tax purposes.
Under Section 305 of the Code, a U.S. Holder of a Corporate Warrant may be
deemed to have received a constructive distribution of ordinary income from
Warrant Co. in the event of certain adjustments to the number of shares of
Common Stock of Warrant Co. to be issued on exercise of a Corporate Warrant or
the failure to make such an adjustment.
Upon the sale or exchange of a Corporate Warrant, a U.S. Holder generally
will recognize gain or loss equal to the difference, if any, between the amount
realized and the U.S. Holder's tax basis. Any such gain generally will be
capital gain or loss. In the case of a noncorporate U.S. Holder, the maximum
marginal U.S. federal income tax rate applicable to such gain will be lower than
the maximum marginal U.S. federal income tax rate applicable to ordinary income
if such U.S. Holder's holding period for such Corporate Warrant exceeds one year
and will be further reduced if such Corporate Warrants were held for more than
18 months.
Non-U.S. Holders
A holder of Corporate Warrants will likely be treated as holding the
underlying Common Stock of Warrant Co. for U.S. federal income tax purposes and
the Corporate Warrants should constitute a U.S. real property interest for U.S.
federal income tax purposes. Accordingly, certain dispositions of Corporate
Warrants by a Non-U.S. Holder should be subject to tax under the Foreign
Investment in Real Property Tax Act ("FIRPTA") provisions of the Code (which is
collected by withholding) unless certain certification and filing requirements
are satisfied. Any such Non-U.S. Holder should consult with its own tax advisor
regarding the application of the FIRPTA provisions to its particular
circumstances.
An individual holder of a Corporate Warrant who is not a United States
person will be subject to U.S. federal estate tax with respect to his or her
Corporate Warrants.
90
<PAGE> 98
Common Stock
U.S. Holders
Distributions of cash or property (other than Common Stock of Warrant Co.,
if any, distributed pro rata to all shareholders of Warrant Co., including
holders of Corporate Warrants) will be includible in ordinary income by a U.S.
Holder at the time of receipt, to the extent such distributions are made from
the current or accumulated earnings and profits of Warrant Co. Such dividends
will be earnings and profits of Warrant Co. Such dividends will be eligible for
the dividends received deduction generally allowed to corporate U.S. Holders.
The dividends received deduction is subject to certain limitations, though, and
the benefit of such deduction may be reduced by the corporate alternative
minimum tax. Corporate U.S. Holders should consult their own tax advisors
regarding the availability of, and limitations on, the dividends received
deduction. To the extent, if any, that the amount of any distribution by Warrant
Co. exceeds Warrants Co.'s current and accumulated earnings and profits, it will
be treated first as a tax-free return of the U.S. Holder's tax basis in the
Common Stock of Warrant Co. and thereafter as capital gain.
Non-U.S. Holders
Dividends paid to a Non-U.S. Holder of Common Stock of Warrant Co.
generally will be subject to withholding of U.S. federal income tax at a 30.0%
rate or such lower rate as may be specified by an applicable U.S. income tax
treaty. Currently, dividends paid to an address in a foreign country generally
are presumed to be paid to a resident of such country in determining the
applicability of an income tax treaty for such purposes. However,
recently-issued U.S. Treasury Regulations would, for dividends paid after
December 31, 1999, require a Non-U.S. Holder to file certain forms to obtain the
benefit of any applicable U.S. income tax treaty. Such forms would contain such
Non-U.S. Holder's name and address and an official statement by the competent
authority in the foreign country (as designated in the applicable U.S. income
tax treaty) attesting to the holder's status as a resident thereof. Except as
may be otherwise provided in an applicable U.S. income tax treaty, a Non-U.S.
Holder will be taxed at ordinary U.S. federal income tax rates (on a net income
basis) on dividends that are effectively connected with the conduct of a trade
or business of such Non-U.S. Holder within the United States and such dividends
will not be subject to the withholding described above. If such Non-U.S. Holder
is a foreign corporation, it may also be subject to a withholding described
above. If such Non-U.S. Holder is a foreign corporation, it may also be subject
to a 30.0% "branch profits tax" unless it qualifies for a lower rate under an
applicable U.S. income tax treaty. To claim the benefit of a U.S. income tax
treaty or to claim an exemption from withholding because the income is
effectively connected with a United States trade or business, a Non-U.S. Holder
must provide a properly executed Form 1001 or 4224 (or such successor form as
the IRS designates), as applicable, prior to payment of interest.
As discussed above, certain dispositions of Common Stock of Warrant Co. by
a Non-U.S. Holder would be subject to tax under the FIRPTA provisions of the
Code (which is collected by withholding) unless certain certification and filing
requirements are satisfied.
An individual holder of a Corporate Warrant who is not a United States
person will be subject to U.S. federal estate tax with respect to his or her
Corporate Warrant.
U.S. Backup Withholding Tax and Information Reporting
A 31.0% backup withholding tax and information reporting requirements apply
to certain payments of principal of, and premium, if any, and interest and
dividends on, a security and to the proceeds of the sale or redemption of an
obligation, to certain non-corporate U.S. Holders. The payor will be required to
withhold 31.0% of any such payment on a Note, Warrant or share of Common Stock
of Warrant Co. to a U.S. Holder (other than an "exempt recipient," such as a
corporation) if such holder fails to furnish its correct taxpayer identification
number or otherwise fails to comply with, or establish an exemption from, such
backup withholding requirements.
Under current U.S. Treasury Regulations, payments of principal of, interest
on and proceeds from the sale or redemption of a Note by the Issuers or any
paying agent thereof to a Non-U.S. Holder will not be
91
<PAGE> 99
subject to U.S. federal income tax withholding, backup withholding or
information reporting if an appropriate certification is provided by the
beneficial owner or by a financial institution holding the Note or Warrant on
behalf of the beneficial owner in the ordinary course of its trade or business
to the paying agent and the paying agent does not have actual knowledge that the
certificate is false. If provided by a beneficial owner, the certification must
give the name and address of such owner, state that such owner is not a United
States person, or, in the case of an individual, that such person is neither a
citizen or resident of the United States, and be signed by the owner under
penalties of perjury. If provided by a financial institution, the certification
must state that the financial institution has received from the beneficial owner
the certificate set forth in the preceding sentence, set forth the information
contained in such certificate (and include a copy of such certificate), and be
signed by an authorized representative of the financial institution under
penalties of perjury. In addition, if such principal, interest or dividends are
paid to the beneficial owner of a Note, Warrant or share of Common Stock by a
foreign office of a foreign custodian, foreign nominee or other foreign agent of
such beneficial owner, of if a foreign office of a foreign "broker" (as defined
in the applicable U.S. Treasury Regulations) pays the proceeds of the sale of a
Note, Warrant or share of Common Stock to the seller thereof, backup withholding
and information reporting will not apply to such payment (provided that such
nominee, custodian, agent or broker derives less than 50.0% of its gross income
for certain periods from the conduct of a trade or business in the United States
and is not a "controlled foreign corporation" as to the United States).
Principal and interest and dividends so paid by a foreign office of other
custodians, nominees or agents, or the payment by a foreign office of other
brokers of the proceeds of the sale of a Note, will not be subject to backup
withholding, but will be subject to information reporting unless the custodian,
nominee, agent or broker has documentary evidence in its records that the
beneficial owner is not a United States person for purposes of such backup
withholding and information reporting requirements and certain conditions are
met, or the beneficial owner otherwise establishes an exemption. Principal and
interest so paid by the United States office of a custodian, nominee or agent,
or the payment of the proceeds of a sale of a Note by the United States office
of a broker, is subject to both backup withholding and information reporting
unless the beneficial owner certifies its non-United States status under
penalties of perjury or otherwise establishes an exemption.
Recently issued U.S. Treasury Regulations (the "Withholding Regulations")
would modify certain of the rules discussed above generally with respect to
payments on the Notes or the Warrants made after December 31, 1999 and provide
alternative methods for establishing an exemption from U.S. withholding tax. In
particular, under the Withholding Regulations, the furnishing of the names of
the beneficial owners of Notes that are not United States persons and a copy of
such beneficial owner's certificate by a financial institution will not be
required where the financial institution is a qualified intermediary ("QI") that
has entered into a withholding agreement with the IRS pursuant to the
Withholding Regulations and that has assumed primary withholding responsibility.
In the case of payments to foreign partnerships (other than payments to foreign
partnerships that qualify as "withholding foreign partnerships" within the
meaning of such U.S. Treasury Regulations and payments to foreign partnerships
that are effectively connected with the conduct of a trade or business in the
United States), the partners of such partnerships will be required to provide
the certification discussed above in order to establish an exemption from
withholding, backup withholding tax and information reporting requirements.
Moreover, a payor may rely on a certification provided by a Non-U.S. Holder only
if such payor does not have actual knowledge or a reason to know that any
information or certification stated in such certificate is unreliable. Further,
if any such payment of principal, premium (if any) or interest with respect to a
Note or Warrant are made to the beneficial owner thereof by the foreign office
of a foreign custodian, foreign nominee or other foreign agent of such
beneficial owner, or the foreign office of a foreign "broker" (as defined in
applicable Treasury Regulations) pays the proceeds of the sale of a Note to the
seller thereof, backup withholding and information reporting will not apply
(provided that such nominee, custodian, agent or broker (i) derives less than
50.0% of its gross income for certain periods from the conduct of a trade or
business in the United States, (ii) is not a "controlled foreign corporation"
within the meaning of Section 957(a) of the Code, (iii) is not a foreign
partnership (x) one or more of the partners of which, at any time during its tax
year, are United States persons (as defined in Treasury Regulations Section
1.1441-1(c)(2)) who, in the aggregate hold more than 50.0% of the income or
capital interest in the partnership and (y) which, at any time during its tax
year, is engaged in the conduct of a trade or business in the United States).
Moreover, such payments of principal, premium (if any) or
92
<PAGE> 100
interest with respect to a Note so made by the foreign offices of other
custodians, nominees or agents, or the payment by the foreign offices of other
brokers of the proceeds of the sale of a Note or a Warrant will not be subject
to backup withholding (unless the payer has actual knowledge that the payee is a
United States person), but will be subject to information reporting unless the
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner is not a United States person and certain conditions are
met, or the beneficial owner otherwise establishes an exemption.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL
TAX CONSEQUENCES RELATING TO THE OWNERSHIP OF EXCHANGE NOTES OR THE WARRANTS.
PROSPECTIVE PURCHASERS OF EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE TAX CONSEQUENCES OF THEIR PARTICULAR SITUATIONS.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Original Notes where such Original Notes were acquired
as a result of market-making activities or other trading activities. The Issuers
have each agreed that for a period of 180 days after the Expiration Date, each
will make this Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale. In
additional, until , 1998 (90 days after the commencement of the
Exchange Offer), all dealers effecting transactions in the Exchange Notes,
whether or not participating in this distribution, may be required to deliver a
prospectus.
The Issuers will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by Participating
Broker-Dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Exchange Notes. Any Participating Broker-Dealer that resells the
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit of any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of Securities Act.
For a period of 180 days after the Expiration Date, the Issuers will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
pursuant to a Letter of Transmittal.
BOOK-ENTRY, DELIVERY AND FORM
The Exchange Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (collectively, the "Global
Note"). The Global Note will be deposited upon issuance with the Trustee, as
custodian for DTC, in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to an account of a direct or indirect
participant as described below. Notes sold to Accredited Investors (as defined
in Rule 501(a)(1), (2), (3), or (7) under the Securities Act) may be
93
<PAGE> 101
represented by the Global Note, or if such an investor may not hold an interest
in the Global Note, a certificated Note.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Book-Entry Notes for Certificated Notes."
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar of the Notes.
DEPOSITORY PROCEDURES
DTC has advised the Partnership that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of the Participants. The Participants include
securities brokers and dealers (including the Initial Purchaser), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and the Indirect Participants.
DTC also has advised the Partnership that pursuant to procedures
established by it, (i) upon deposit of the Global Note, DTC will credit the
accounts of Participants designed by the Exchange Agent with portions of the
principal amount of the Global Note and (ii) ownership of such interest in the
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interest in the Global Note).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interest in the Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants and certain banks, the ability of a
person having beneficial interests in the Global Note to pledge such interests
to person or entities that do not participate in the DTC system, or otherwise
take actions in respect of such interests, may be affected by the lack of a
physical certificate evidencing such interests. For certain other restrictions
on the transferability of the Notes, See "-- Exchange of Book-Entry Notes for
Certificated Notes."
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, any premium and interest on the
Global Note registered in the name of DTC or its nominee will be payable to DTC
or its nominee in its capacity as the registered holder under the Indenture.
Under the terms of the Indenture, the Partnership and the Trustee will treat the
persons in whose names the Notes, including the Global Notes, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Partnership, the
Trustee nor any agent of the Partnership or the Trustee has or will have any
responsibility or liability for (i) any aspect or accuracy of DTC's records or
any Participant's or Indirect Participants records relating to our payments made
on account of beneficial ownership interests in the Global Note, or for
maintaining supervising or reviewing any of DTC's records or any Participant's
or Indirect Participant's records relating to
94
<PAGE> 102
the beneficial ownership interests in the Global Note, or (ii) any other matter
relating to the actions and practices of DTC or any of its Participants or
Indirect Participants.
DTC has advised the Partnership that its current practice, upon receipt of
any payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Note as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of Notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the Trustee or the Partnership. Neither the
Partnership nor the Trustee will be liable for any delay by DTC or any of the
Participants in identifying the beneficial owners of the Notes and the Company
and the Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee as the registered owner of the Notes for
all purposes.
Interest in the Global Note will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures, and will be settled in
same-day funds.
DTC has advised the Partnership that it will take any action permitted to
be taken by a holder of Notes only at the direction of one or more Participants
to whose account will DTC interests in the Global Notes are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if any of the events described under "-- Exchange of Book Entry Notes
for Certificated Notes" occur, DTC reserves the right to exchange the Global
Note for Notes in certificated form, and to distribute such Notes to the
relevant participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Partnership believes to be reliable, but
the Partnership takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Note among accountholders in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Partnership, the Trustee
nor any agent of the Partnership or Trustee will have any responsibility for the
performance of DTC, or its respective accountholders, indirect participants or
accountholders of their respective obligations under the rules and procedures
governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
The Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Partnership that it is unwilling
to continue as depository for the Global Note and the Partnership thereupon
fails to appoint a successor depositary or (y) has ceased to be a clearing
agency registered under the Exchange Act; (ii) the Partnership, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for the Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures).
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Issuers by
Baker & Hostetler LLP.
95
<PAGE> 103
EXPERTS
The audited financial statements of the Issuers, as of December 31, 1997
and 1996 and for the periods then ended, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
GLOSSARY
"144A Offering" means the series of transactions consisting of the offer
and sale of (i) 100,000 Units, each unit consisting of $1,000 in principal
amount of the Original Notes and a Corporate Warrant and (ii) $100.0 million
aggregate principal amount of the Mortgage Notes.
"Account Agent" means First Security Trust Company of Nevada as account
agent under the December 30, 1997 Mortgage Notes Proceeds Agreement by and among
the Issuers, the Administrative Agent and the Account Agent, the December 30,
1997 Subordinated Notes Proceeds Agreement by and among the Issuers, the Trustee
and the Account Agent, and the December 30, 1997 Partnership Funds Agreement by
and among the Issuers and the Account Agent.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock) in a Permitted Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Partnership or a Restricted Subsidiary of the
Partnership; (iii) Capital Stock constituting a minority interest in any Person
that at such time is a Restricted Subsidiary of the Partnership; or (iv)
Permitted Investments of the type and in the amounts described in clause (viii)
of the definition thereof; provided, however, that, in the case of clauses (ii)
and (iii), such Restricted Subsidiary is primarily engaged in a Permitted
Business.
"Additional Interest" means additional interest which shall become payable
with respect to the Original Notes if the Issuers fail to comply with provisions
for filing a Registration Statement pursuant to the terms of the Registration
Rights Agreement or a Shelf Registration Statement, or if such registration
statements fail to become effective.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date means the
lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, the probable liability of such Subsidiary Guarantor with respect to
its contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Subsidiary Guarantees, of such Subsidiary Guarantor at
such date and (y) the present fair salable value of the assets of such
Subsidiary Guarantor at such date exceeds the amount that will be required to
pay the probable liability of such Subsidiary Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date and after giving effect to any collection from any Subsidiary by
such Subsidiary Guarantor in respect of the obligations of such Subsidiary under
the Subsidiary Guarantees), excluding debt in respect of the Subsidiary
Guarantees, as they become absolute and matured.
"Administrative Agent" means National Westminster Bank PLC as
administrative agent pursuant to the Credit Agreement.
"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 the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Affiliate Transaction" means any transaction or series of related
transactions (including the purchase, sale, lease or exchange of any property or
the rendering of any service), with or for the benefit of, any Affiliate of the
Partnership, other than a Wholly-Owned Subsidiary or RAS.
96
<PAGE> 104
"AFR" means the applicable federal rate in effect at the time of a debt
obligation's issuance.
"Agent's Message" means a message transmitted by DTC to, and received by,
the Exchange Agent and forming a part of the Book-Entry Confirmation, which
states that DTC has received an express acknowledgment from each DTC Participant
tendering through ATOP that such DTC Participants have received a Letter of
Transmittal and agree to be bound by the terms of such Letter of Transmittal,
and that the Issuers may enforce such agreement against such DTC participants.
"Agreement" means the January 1, 1994 Stock Ownership and Cash Profit
Sharing Agreement between each Executive and SCA.
"AHYDO Rules" means applicable high yield discount obligations rules.
"applicable high yield discount obligations" has the meaning ascribed to it
in the Code.
"Architect" means Paul Steelman, Ltd.
"Architect Agreement" means the December 29, 1997 American Institute of
Architects "Standard Form of Agreement between Owner and Architect where the
Construction Manager is NOT a Constructor -- Construction Manager -- Adviser
Edition" between the Partnership and the Architect.
"Asset Disposition" means any sale, lease, transfer, issuance or other
disposition (or series of related sales, leases, transfers, issuances or
dispositions that are part of a common plan) of shares of Capital Stock of (or
any other equity interests in) a Restricted Subsidiary (other than directors'
qualifying shares) or of any other property (other than the Right of First Offer
as permitted under "Limitation on Affiliate Transactions") or other assets (each
referred to for the purposes of this definition as a "disposition") by the
Partnership or any of its Restricted Subsidiaries (including any disposition by
means of a merger, consolidation or similar transaction) other than (i) a
disposition by a Restricted Subsidiary to the Partnership or by the Partnership
or a Restricted Subsidiary to a Wholly-Owned Subsidiary, (ii) a disposition of
inventory in the ordinary course of business, (iii) a disposition of obsolete or
worn out equipment or equipment that is no longer useful in the conduct of the
business of the Partnership and its Restricted Subsidiaries and that is disposed
of in each case in the ordinary course of business, (iv) dispositions of
property for net proceeds which, when taken collectively with the net proceeds
of any other such dispositions under this clause (iv) that were consummated
since the beginning of the calendar year in which such disposition is
consummated, do not exceed $2.0 million, and (v) transactions permitted under
"Certain Covenants -- Merger and Consolidation" above. Notwithstanding anything
to the contrary contained above, a Restricted Payment made in compliance with
the "Limitation on Restricted Payments" covenant shall not constitute an Asset
Disposition except for purposes of determinations of the Consolidated Coverage
Ratio.
"ATOP" means Automated Tender Offer Program.
"Attributable Indebtedness" in respect of a Sale/Leaseback Transaction
means, as at the time of determination, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the total obligations
of the lessee for rental payments during the remaining term of the lease
included in such Sale/Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
indebtedness, the quotient obtained by dividing (i) the sum of the product of
the numbers of years (rounded upwards to the nearest month) from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption multiplied by the amount of such payment by (ii)
the sum of all such payments.
"Bankruptcy Code" means the United States Bankruptcy Code, as amended.
"bankruptcy provisions" means certain events of bankruptcy, insolvency or
reorganization of the Issuers or a Significant Subsidiary.
"BBER" means the Bureau of Business and Economic Research at the University
of Nevada, Reno.
97
<PAGE> 105
"Blockage Notice" means written notice from the Representative of the
Designated Senior Indebtedness to the Trustee (with a copy to the Issuers) of
any default with respect to any Designated Senior Indebtedness specifying an
election to effect a Payment Blockage Period.
"Book-Entry Confirmation" means the confirmation of a book-entry transfer
into the Exchange Agent's account at DTC.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock (but excluding any debt securities convertible into such equity) and
including, without limitation, if such Person is a partnership or limited
liability company, any partnership or membership interests (whether general or
limited) and any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distribution of assets
of, such partnership or limited liability company.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease prior to the first
date such lease may be terminated without penalty.
"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, (iii) certificates of deposit, time
deposits and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any commercial bank having
capital and surplus in excess of $500.0 million, (iv) repurchase obligations for
underlying securities of the types described in clauses (ii) and (iii) entered
into with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper rated P-I (or higher according to
Moody's) or A-1 or higher (according to S&P) and in each case maturing within
one year after the date of acquisition, (vi) investment funds investing 95.0% or
more of their assets in securities of the types described in clauses (i)-(v)
above, (vii) readily marketable direct obligations issued by any state of the
United States of America or any political subdivision thereof having one of the
two highest rating categories obtainable from either Moody's or S&P, and (viii)
Indebtedness or preferred stock issued by Persons with a rating of "A" or higher
from S&P or "A2" or higher from Moody's.
"Casino" means the casino which is part of the Resort Casino.
"Change of Control" means (i) any Transfer (in one transaction or a series
of related transactions) of all or substantially all of the assets of the
Partnership and its Subsidiaries; (ii) the adoption of a plan relating to the
liquidation or dissolution of the Partnership; (iii) RAS ceasing to be the sole
General Partner of the Partnership; or (iv) the Existing Partners failing to own
in the aggregate, directly or indirectly, at least 50.0% of the General Partner.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commencement Date" means the date on which the Resort Casino opens for
business.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of Warrant Co.
"Consolidated Cash Flow" for any period means the Consolidated Net Income
for such period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) income tax expense, (ii) Consolidated Interest
Expense, (iii) depreciation expense, (iv) amortization expense, and (v) all
other non-cash items reducing Consolidated Net Income (excluding any non-cash
item to the extent it represents an accrual of or reserve for cash disbursements
for any subsequent period prior to the stated maturity of the Notes), including
pre-opening costs that are required by GAAP to be charged as an expense prior to
or upon opening, in each case for such period and determined in accordance with
GAAP. Notwithstanding the
98
<PAGE> 106
foregoing, the income tax expense, depreciation expense and amortization expense
of a Subsidiary of the Partnership shall be included in Consolidated Cash Flow
only to the extent (and in the same proportion) that the net income of such
Subsidiary was included in calculating Consolidated Net Income.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated Cash Flow for the period of
the most recent four consecutive fiscal quarters ending prior to the date of
such determination and as to which financial statements are available to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that (A) if the Partnership or any of its Restricted Subsidiaries has incurred
any Indebtedness since the beginning of such period and through the date of
determination of the Consolidated Coverage Ratio that remains outstanding or if
the transaction giving rise to the need to calculate Consolidated Coverage Ratio
is an incurrence of Indebtedness, or both, Consolidated Cash Flow and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to (1) such Indebtedness as if such Indebtedness had
been incurred on the first day of such period (provided that if such
Indebtedness is incurred under a revolving credit facility (or similar
arrangement or under any predecessor revolving credit or similar arrangement)
only that portion of such Indebtedness that constitutes the one year projected
average balance of such Indebtedness (as determined in good faith by the General
Partner) shall be deemed outstanding for purposes of this calculation), and (2)
the discharge of any other Indebtedness repaid, repurchased, defeased or
otherwise discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (B) if since the
beginning of such period any Indebtedness of the Partnership or any of its
Restricted Subsidiaries has been repaid, repurchased, defeased or otherwise
discharged (other than Indebtedness under a revolving credit or similar
arrangement unless such revolving credit Indebtedness has been permanently
repaid and the underlying commitment terminated and has not been replaced),
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Indebtedness had been repaid, repurchased,
defeased or otherwise discharged on the first day of such period, (C) if since
the beginning of such period the Partnership or any of its Restricted
Subsidiaries shall have made any Asset Disposition or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Asset
Disposition, Consolidated Cash Flow for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive) attributable to the
assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the Consolidated Cash Flow (if negative)
attributable thereto for such period, and Consolidated Interest Expense for such
period shall be (i) reduced by an amount equal to the Consolidated Interest
Expense attributable to any Indebtedness of the Partnership or any of its
Restricted Subsidiaries repaid, repurchased, defeased or otherwise discharged
with respect to the Partnership and its continuing Restricted Subsidiaries in
connection with such Asset Disposition for such period (or, if the Capital Stock
of any Restricted Subsidiary of the Partnership is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Restricted Subsidiary to the extent the Partnership and its continuing
Restricted Subsidiaries are no longer liable for such Indebtedness after such
sale) and (ii) increased by interest income attributable to the assets which are
the subject of such Asset Disposition for such period, (D) if since the
beginning of such period the Partnership or any of its Restricted Subsidiaries
(by merger or otherwise) shall have made an Investment in any Restricted
Subsidiary of the Partnership (or any Person which becomes a Restricted
Subsidiary of the Partnership as a result thereof) or an acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder which constitutes all or substantially all of an operating unit of a
business, Consolidated Cash Flow and Consolidated Interest Expense for such
period shall be calculated after giving pro forma effect thereto (including the
incurrence of any Indebtedness) as if such Investment or acquisition occurred on
the first day of such period, and (E) if since the beginning of such period any
Person (that subsequently became a Restricted Subsidiary of the Partnership or
was merged with or into the Partnership or any Restricted Subsidiary of the
Partnership since the beginning of such period) shall have made any Asset
Disposition, Investment or acquisition of assets that would have required an
adjustment pursuant to clause (C) or (D) above if made by the Partnership or a
Restricted Subsidiary of the Partnership during such period, Consolidated Cash
Flow and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto as if such Asset Disposition, Investment or
acquisition occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating
99
<PAGE> 107
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness incurred in connection therewith, the pro forma calculations shall
be determined in good faith by a responsible financial or accounting officer of
the Partnership. If any Indebtedness bears a floating rate of interest and is
being given pro forma effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Indebtedness if such Interest Rate Agreement has a
remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Partnership and its Restricted Subsidiaries determined in
accordance with GAAP, plus, to the extent not included in such interest expense
(i) interest expense attributable to Capitalized Lease Obligations, (ii)
capitalized interest, (iii) amortization of debt discount, (iv) non-cash
interest expense, (v) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers' acceptance financing, (vi)
interest actually paid by the Partnership or any such Restricted Subsidiary
under any Guarantee of Indebtedness or other obligation of any other Person,
(vii) net payments (whether positive or negative) pursuant to Interest Rate
Agreements, (viii) the cash contributions to any employee stock ownership plan
or similar trust to the extent such contributions are used by such plan or trust
to pay interest or fees to any Person (other than the Partnership) in connection
with Indebtedness incurred by such plan or trust, and (ix) cash and Disqualified
Stock dividends in respect of all Preferred Stock of Subsidiaries and
Disqualified Stock of the Partnership held by Persons other than the Partnership
or a Wholly-Owned Subsidiary and less (a) to the extent included in such
interest expense, the amortization of capitalized debt issuance costs, (b)
interest income and (c) to the extent included in such interest expense, the
amortization of debt original issue discount on the Notes and/or interest
expense relating to the Notes in excess of the coupon rate recorded to account
for the effective interest rate. Notwithstanding the foregoing, the Consolidated
Interest Expense with respect to any Restricted Subsidiary of the Partnership,
that was not a Wholly-Owned Subsidiary, shall be included only to the extent
(and in the same proportion) that the net income of such Restricted Subsidiary
was included in calculating Consolidated Net Income.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Partnership and its consolidated Subsidiaries determined in
accordance with GAAP; provided, however, that there shall not be included in
such Consolidated Net Income: (i) any net income (loss) of any Person acquired
by the Partnership or any of its Restricted Subsidiaries in a pooling of
interests transaction for any period prior to the date of such acquisition, (ii)
any net income of any Restricted Subsidiary of the Partnership if such
Restricted Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Partnership (other than restrictions
in effect on the Issue Date with respect to a Restricted Subsidiary of the
Partnership and other than restrictions that are created or exist in compliance
with the "Limitation on Restrictions on Distributions from Restricted
Subsidiaries" covenant), (iii) any gain or loss realized upon the sale or other
disposition of any assets of the Partnership or its consolidated Restricted
Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which are
not sold or otherwise disposed of in the ordinary course of business and any
gain or loss realized upon the sale or other disposition of any Capital Stock of
any Person, (iv) any extraordinary gain or loss, (v) the cumulative effect of a
change in accounting principles, (vi) the net income of any Person, other than a
Restricted Subsidiary, except to the extent of the lesser of (A) cash dividends
or distributions actually paid to the Partnership or any of its Restricted
Subsidiaries by such Person and (B) the net income of such Person (but in no
event less than zero), and the net loss of such Person (other than an
Unrestricted Subsidiary) shall be included only to the extent of the aggregate
Investment of the Partnership or any of its Restricted Subsidiaries in such
Person, and (vii) any non-cash expenses attributable to grants or exercises of
employee stock options. Notwithstanding the foregoing, for the purpose of the
covenant described under "Certain Covenants -- Limitation on Restricted
Payments" only, there shall be excluded from Consolidated Net Income any
dividends, repayments of loans or advances or other transfers of assets from
Unrestricted Subsidiaries to the Partnership or a Restricted Subsidiary to the
extent such dividends, repayments or transfers increase the amount of Restricted
Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof.
100
<PAGE> 108
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Partnership and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Partnership ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 135 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Partnership plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Construction Consultant" means Nevada Construction Services, Inc.
"Construction Contract" means the $133.0 million guaranteed maximum price
construction contract (exclusive of any change orders which must be authorized
by the Partnership) between the Partnership and J.A. Jones.
"Construction Loans" means $100.0 million of loans which may be used to
finance construction of the Resort Casino.
"Construction Management Contract" means the January 13, 1998 Construction
Management Contract between the Partnership and Rider Hunt.
"Continuing Fee" means the continuing fee equal to 1.75% of the Hotels'
gross revenues per month which the Partnership is required to pay to Regent
International.
"Corporate Warrants" means warrants to purchase one share of Common Stock
of Warrant Co.
"covenant defeasance" means the Issuers' right to terminate their
obligations under most of the covenants and certain other provisions of the
Indenture at any time.
"Coverage Ratio Indebtedness" means any Indebtedness other than (i) ranking
pari passu with or which is expressly subordinate and junior in right of payment
to, the Notes, if no Default or Event of Default shall have occurred and be
continuing at the time of such incurrence or would occur as a consequence of
such incurrence and the Consolidated Coverage Ratio would be equal to at least
2.00 to 1.00; and (ii) Senior Indebtedness if no Default or Event of Default
shall have occurred and be continuing at the time of such incurrence or would
occur as a consequence of such incurrence and the Consolidated Coverage Ratio
would be at least equal to 2.50 to 1.00.
"Credit Agreement" means the December 30, 1997 Credit Agreement among the
Issuers and the Administrative Agent. Without limiting the generality of the
foregoing, the term "Credit Agreement" shall include Interest Rate Agreements
with lenders party to the Credit Agreement, any amendment, amendment and
restatement, renewal, extension, restructuring, supplement or modification to
any Credit Agreement and all refunding, refinancing and replacements of any
Credit Agreement.
"Credit Facilities" means the Mortgage Notes and the Revolving Credit
Facility.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Declaration" means the August 15, 1996 Development Agreement between the
Partnership and HHP.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Depositor" means the Person having deposited Original Notes to be
withdrawn in the Exchange Offer.
"Designated Senior Indebtedness" means the indebtedness evidenced by the
Mortgage Notes and the Revolving Credit Facility.
"Designation" means the designation by the Partnership of any Subsidiary of
the Partnership (other than a Subsidiary of the Partnership which owns Capital
Stock of a Restricted Subsidiary) as an Unrestricted Subsidiary under the
Indenture.
101
<PAGE> 109
"Designation Amount" means the amount the Partnership would be permitted to
make under the Indenture (assuming the effectiveness of such Designation) which
is equal to the sum of (i) fair market value of the Capital Stock of such
Subsidiary owned by the Partnership and the Restricted Subsidiaries, and (ii)
the aggregate amount of other Investments of the Partnership and the Restricted
Subsidiaries in such Subsidiary.
"Development Fee" means the $3.0 million development fee payable to SCA as
compensation for identifying, financing, planning, designing, developing and
opening the Resort Casino.
"Disbursement Agent" means First Security Trust Company of Nevada as
disbursement agent under the Disbursement Agreement and its successor or
assigns.
"Disbursement Agreement" means the December 31, 1997 Disbursement Agreement
which established conditions to, and the sequencing of funding construction of,
the Resort Casino.
"Disqualified Stock" means any Capital Stock which, 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 (other than an event which
would constitute a Change of Control), (i) matures (excluding any maturity as
the result of an optional redemption by the issuer thereof) or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final Stated Maturity of the Notes, or (ii) is convertible into or exchangeable
(unless at the sole option of the issuer thereof) for (a) debt securities or (b)
any Capital Stock referred to in (i) above, in each case at any time prior to
the final Stated Maturity of the Notes.
"Drawdown" means any of four advances on the Construction Loans of at least
$10.0 million each made after the Issue Date.
"DTC" means Depository Trust Company.
"DTC Participant" means a participant in Depository Trust Company.
"EBITDA" means earnings before income tax, depreciation and amortization.
"EBITDAM" means earnings before interest, income tax, depreciation,
amortization and management fee expense.
"Eligible Institution" means any member firm of a registered national
securities exchange or the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or an "eligible guarantor" institution within the meaning of Rule 17Ad-15
under the Exchange Act.
"Event of Default" means (i) a default in any payment of interest on any
Note when due, continued for 30 days, (ii) a default in the payment of principal
of any Note when due at its Stated Maturity, upon optional redemption, upon
required repurchase, upon declaration or otherwise, (iii) the failure by the
Partnership to comply with its obligations under the "Merger and Consolidation"
covenant, (iv) the failure by the Issuers to comply for 30 days after notice
with any of its obligations under the Indenture upon a Change of Control or
under covenants in the Indenture, (v) the failure by the Issuers or any
Subsidiary Guarantor to comply for 60 days after notice with its other
agreements contained in the Indenture, (vi) Indebtedness of the Partnership or
any Restricted Subsidiary is not paid within any applicable grace period after
final maturity or is accelerated by the holders thereof because of a default and
the total amount of such Indebtedness unpaid or accelerated exceeds $5.0 million
and such default shall not have been cured or such acceleration rescinded after
a 10-day period, (vii) the bankruptcy provisions, (viii) the judgment default
provision, (ix) any Subsidiary Guarantee by a Significant Subsidiary ceases to
be in full force and effect (except as contemplated by the terms of the
Indenture) or any Subsidiary Guarantor that is a Significant Subsidiary denies
or disaffirms its obligations under the Indenture or its Subsidiary Guarantee
and such Default continues for 10 days, (x) after the Resort Casino is
completed, revocation, termination, suspension or other cessation of
effectiveness of any Gaming License, which results in the total cessation or
total suspension of gaming operations for a period of more than 90 consecutive
days at the Resort Casino, or (xi) the Resort Casino has not commenced hotel and
gaming operations by October 2, 1999.
102
<PAGE> 110
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute or statutes thereto, and the rules and regulations of the
Commission promulgated thereunder.
"Exchange Agent" means United States Trust Company of New York.
"Exchange Notes" means Issuers' 13% Series B Senior Subordinated PIK Notes
due 2007.
"Exchange Offer" means the offer by the Issuers to exchange $1,000
principal amount of their Exchange Notes, registered under the Securities Act,
for each $1,000 principal amount of their Original Notes.
"Executives" mean Brian McMullan, John Tipton, Jim Fonseca and Quinton
Boshoff.
"Exemption" means an exemption granted by the Nevada Commission to the
Nevada Act prohibition making Registered Companies ineligible to apply for or
hold a nonrestricted gaming license to operate a casino.
"Existing Partners" means Tivolino Holding A.G. or any of its wholly-owned
subsidiaries.
"Expiration Date" means , 1998, 5:00 p.m., New York City time
unless extended.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction.
"Filing Date" means April 30, 1998.
"foreign broker" has the meaning ascribed to it in the applicable Treasury
Regulations.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the Indenture, including those 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 approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
the Indenture shall be computed in conformity with GAAP.
"Gaming Approvals" means licenses and approvals of the Nevada Gaming
Authorities.
"Gaming Authority" means any of the Nevada Commission, the Nevada Board,
the City of Las Vegas, any gaming regulatory body in North Dakota and Colorado,
and any other gaming regulatory body or any agency which has, or may at any time
after the Issue Date have, jurisdiction over the gaming activities of the
Partnership or any of its Affiliates or Subsidiaries or any successor to such
authority.
"Gaming Laws" mean the provisions of the Nevada Gaming Control Act, as
amended from time to time, all regulations of the Nevada Gaming Commission
promulgated thereunder, as amended from time to time, all ordinances, rules and
regulations adopted by the City of Las Vegas, as amended from time to time, and
all other laws, statutes, rules, rulings, order, ordinances, regulations and
other legal requirements of any Gaming Authority.
"Gaming License" means any license, qualification, permit, franchise or
other authorization from any Gaming Authority required on the date of the
Indenture or at any time thereafter to own, operate or otherwise conduct the
gaming business of the Partnership and its Affiliates or Subsidiaries, including
all licenses, findings of suitability and registrations granted under Gaming
Laws.
"General Partner" means RAS, a Nevada corporation, and any of its
successors.
"GISC" means Gambling Impact Study Commission.
"Global Notes" means global certificates representing the Original Notes.
"Golf Reservation Fees" means amounts paid by the Partnership to HHP,
Summerlin Corporation and Tournament Players Club at Summerlin, Inc., pursuant
to a Golf Course Agreement.
103
<PAGE> 111
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Guarantors" means all future direct and indirect Restricted Subsidiaries
of the Partnership having either assets, capital or stockholders' equity in
excess of $10,000.
"Guarantor Senior Indebtedness" means, with respect to a Subsidiary
Guarantor, whether outstanding on the Issue Date or thereafter issued, all
Guarantees by such Subsidiary Guarantor of Senior Indebtedness of the
Partnership and all other Indebtedness of such Subsidiary Guarantor, including
interest and fees thereon, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is expressly provided that
the obligations of such Subsidiary Guarantor in respect of such Indebtedness are
not superior in right of payment to the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee; provided, however, that Guarantor Senior
Indebtedness shall not include (1) any obligations of such Subsidiary Guarantor
to the Partnership or any other Subsidiary of the Partnership or (2) any
Indebtedness, Guarantee or obligation of such Subsidiary Guarantor that is
expressly subordinate or junior in right of payment to any other Indebtedness,
Guarantee or obligation of such Subsidiary Guarantor, including any Guarantor
Subordinated Indebtedness and Guarantor Subordinated Obligations of such
Subsidiary Guarantor.
"Guarantor Subordinated Indebtedness" means, with respect to a Subsidiary
Guarantor, the obligations of such Subsidiary Guarantor under the Subsidiary
Guarantee and any other Indebtedness of such Subsidiary Guarantor that
specifically provides that such Indebtedness is to rank pari passu in right of
payment with the obligations of such Subsidiary Guarantor under the Subsidiary
Guarantee.
"Guarantor Subordinated Obligation" means, with respect to a Subsidiary
Guarantor, any Indebtedness of such Subsidiary Guarantor (whether outstanding on
the Issue Date or thereafter incurred) which is expressly subordinate or junior
in right of payment to the obligations of such Subsidiary Guarantor under the
Subsidiary Guarantee pursuant to a written agreement.
"incur" means issue, assume, guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be incurred
by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary.
"HHC" means Howard Hughes Corporation, a subsidiary of the Rouse
Corporation.
"HHP" means Howard Hughes Properties, Limited Partnership, an Affiliate of
HHC.
"Historical Financial Statements" means the audited financial statement for
the Partnership and RAS for the fiscal year ended December 31, 1997, and the
notes thereto.
"Holder" means a registered owner of the Notes.
"Hotels" means the hotels located at the Resort Casino.
"IGRA" means the Indian Gaming Regulatory Act.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of and premium (if any)
in respect of indebtedness of such Person for borrowed money, (ii) the principal
of and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (iii) all obligations of
such Person in respect of letters of credit
104
<PAGE> 112
or other similar instruments (including reimbursement obligations with respect
thereto) (other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (i), (ii) and (v))
entered into in the ordinary course of business of such Person to the extent
that such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the third business day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit), (iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services (except trade payables and accrued
expenses incurred in the ordinary course of business), which purchase price is
due more than six months after the date of placing such property in service or
taking delivery and title thereto or the completion of such services, (v) all
Capitalized Lease Obligations and all Attributable Indebtedness of such Person,
(vi) all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person, (vii) all
Indebtedness of other Persons to the extent Guaranteed by such Person, (viii)
the amount of all obligations of such Person with respect to the redemption,
repayment or other repurchase of any Disqualified Stock or, with respect to any
Restricted Subsidiary of the Partnership, any Preferred Stock of such Restricted
Subsidiary to the extent such obligation arises on or before the Stated Maturity
of the Notes (but excluding, in each case, accrued dividends) with the amount of
Indebtedness represented by such Disqualified Stock or Preferred Stock, as the
case may be, being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price; provided that,
for purposes hereof the "maximum fixed repurchase price" of any Disqualified
Stock or Preferred Stock, as the case may be, which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Stock or Preferred Stock, as the case may be, as if such
Disqualified Stock or Preferred Stock, as the case may be, were purchased on any
date on which Indebtedness shall be required to be determined pursuant to the
Indenture, and if such price is based on the fair market value of such
Disqualified Stock or Preferred Stock, as the case may be, such fair market
value shall be determined in good faith by the General Partner, and (ix) to the
extent not otherwise included in this definition, obligations under Currency
Agreements and Interest Rate Agreements. Unless specifically set forth above,
the amount of Indebtedness of any Person at any date shall be the outstanding
principal amount of all unconditional obligations as described above, as such
amount would be reflected on a balance sheet prepared in accordance with GAAP,
and the maximum liability of such Person, upon the occurrence of the contingency
giving rise to the obligation, of any contingent obligations described above at
such date.
"Indenture" means the December 31, 1997 Indenture among the Partnership,
RAS and United States Trust Company of New York as trustee.
"Indirect Participants" means other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly.
"Initial Purchaser" means NatWest Capital Markets Limited.
"Interest Payment Date" means each June 15 and December 15 of each year.
"Interest Rate Agreement" means with respect to any Person any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts payable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement, but
excluding any debt or extension of credit represented by a bank deposit other
than a time deposit) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
Indebtedness or other similar instruments issued by such Person. For purposes of
the "Limitation on Restricted Payments" covenant, (i) "Investment" shall include
the portion (proportionate to the Partnership's equity interest in a Restricted
Subsidiary to be designated as an Unrestricted Subsidiary) of the fair market
value of the net assets of such Restricted Subsidiary of the Partnership at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a Restricted
105
<PAGE> 113
Subsidiary, the Partnership shall be deemed to continue to have a permanent
"Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to
(x) the Partnership's "Investment" in such Subsidiary at the time of such
redesignation less (y) the portion (proportionate to the Partnership's equity
interest in such Subsidiary) of the fair market value of the net assets of such
Subsidiary at the time that such Subsidiary is so redesignated a Restricted
Subsidiary; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the General Partner and
evidenced by a resolution of the Board of Directors of the General Partner
certified in an Officers' Certificate to the Trustee.
"Issue Date" means December 31, 1997.
"Issuers" means RAS and the Partnership.
"J.A. Jones" means J.A. Jones Construction, a subsidiary of J.A. Jones,
Inc.
"judgment default provision" means any judgment or decree for the payment
of money in excess of $2.0 million (to the extent not covered by insurance)
which is rendered against the Issuers or a Significant Subsidiary and which
judgment or decree shall remain undischarged or unstayed for a period of 60 days
after such judgment becomes final and nonappealable.
"legal defeasance" means the right of Issuers to terminate all their
obligations under the Notes and the Indenture at any time.
"Letter of Transmittal" means the letter accompanying the Prospectus in
which Issuers offer to exchange $1,000 principal amount of their Exchange Notes,
registered under the Securities Act, for each $1,000 principal amount of their
Original Notes.
"License Agreement" means the December 16, 1997 License Agreement between
the Partnership and Regent International, pursuant to which Regent International
agrees to license to the Partnership the right to flag the Hotels and to use
Regent International's trade name, trademarks and systems in connection with
operations of the Hotels.
"Licensee" means any person licensed, required to be licensed, registered,
or required to be registered by the Nevada Gaming Authorities, or is under
common control with such persons.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Lifescapes" means Lifescapes International.
"Lifestyle Complex" means the lifestyle complex which will link all
components of the Resort Casino development and will include gourmet food and
wine shops, a cigar shop, a beauty salon and other boutique outlets.
"LVCVA" means the Las Vegas Convention and Visitors Authority.
"Maturity Date" means March 31, 2004.
"Moody's" means Moody's Investors Service.
"Mortgage Notes" means up to $100.0 million in principal amount of the
Issuers' First Mortgage Notes issued under the Credit Agreement and any
extensions, revisions, refinancing, restatements or replacements thereof in
whole or in part.
"Mortgage Notes Proceeds Account" means the account into which shall be
deposited the net proceeds of the Mortgage Notes.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Indebtedness or other obligations relating
to the properties or assets
106
<PAGE> 114
subject to such Asset Disposition) therefrom in each case net of (i) all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all distributions and other payments required to be made to any Person
owning a beneficial interest in assets subject to sale or minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition,
(iii) the deduction of appropriate amounts to be provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
assets disposed of in such Asset Disposition, provided, however, that upon any
reduction in such reserves (other than to the extent resulting from payments of
the respective reserved liabilities), Net Available Cash shall be increased by
the amount of such reduction to reserves, and retained by the Partnership or any
Restricted Subsidiary of the Partnership after such Asset Disposition, and (iv)
any portion of the purchase price from an Asset Disposition placed in escrow
(whether as a reserve for adjustment of the purchase price, for satisfaction of
indemnities in respect of such Asset Disposition or otherwise in connection with
such Asset Disposition) provided, however, that upon the termination of such
escrow, Net Available Cash shall be increased by any portion of funds therein
released to the Partnership or any Restricted Subsidiary.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees and costs actually incurred
in connection with such issuance or sale and net of taxes paid or payable as a
result of such issuance or sale.
"Net Revenue Fee" means the management fee payable to the General Partner
in an amount not to exceed 3.0% of net revenues.
"Nevada Act" means the Nevada Gaming Control Act and the regulations
promulgated thereunder.
"Nevada Board" means the Nevada State Gaming Control Board.
"Nevada Commission" means the Nevada Gaming Commission.
"Nevada Gaming Authorities" means the City of Las Vegas, the Nevada
Commission and the Nevada Board.
"Non-U.S. Holder" means a holder of Notes or Corporate Warrants other than
a U.S. Holder.
"Notes" means the Original Notes and the Exchange Notes.
"Notes Proceeds Account" means the account maintained with First Security
Trust Company of Nevada into which Issuers deposited the net proceeds of the
Original Notes on the Issue Date.
"Notice of Guaranteed Delivery" means notice by facsimile transmission,
mail or hand delivery) setting forth the name and address of the Holder, the
certificate number(s) of such Original Notes and the principal amount of
Original Notes tendered, stating that the tender is being made thereby and
guaranteeing that, within three NYSE trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the certificates)
representing the Original Notes (or a confirmation of book-entry transfer of
such Original Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by such Letter of Transmittal will
be deposited by the Eligible Institution with the Exchange Agent.
"NSDO" means the Nevada State Demographers Office.
"NYSE" means New York Stock Exchange, Inc.
"Officer's Certificate" means, in the case of RAS, a certificate signed by
two officers and, in the case of the Partnership, a certificate signed by the
General Partner acting on behalf of the Partnership.
"Opinion of Counsel" means a written opinion, in form and substance
acceptable to the Trustee, from legal counsel who is acceptable to the Trustee.
107
<PAGE> 115
"OID" means original issue discount, which is the difference between the
stated redemption price at maturity of an Original Note and the portion of the
issue price of a Unit allocable to the Original Note.
"Option Parcel" means the 22.5-acre parcel adjacent to the Resort Casino.
"Original Notes" means the Issuer's $100.0 million principal amount
outstanding 13% Senior Subordinated PIK Notes due 2007.
"Participants" means DTC's participating organizations.
"Participating Broker-Dealer" means a broker-dealer that receives Exchange
Notes for its account pursuant to the Exchange Offer.
"Partnership" means The Resort at Summerlin, Limited Partnership, a Nevada
limited partnership.
"Partnership Agreement" means the Agreement of Limited Partnership, as
amended, of the Partnership.
"Partnership Funds Account" means the Partnership's funds account.
"Partnership Warrants" means warrants to purchase one limited partnership
interest of the Partnership.
"Paying Agent" means United States Trust Company of New York and any of its
successors and assigns.
"Payment Blockage Period" means the period commencing upon receipt by the
Trustee (with a copy to the Issuers) of a Blockage Notice of any default with
respect to any Designated Senior Indebtedness.
"Permitted Business" means the casino gaming, hotel, retail and spa and
resort business and any activity or business incidental, directly related or
similar thereto, or any business or activity that is a reasonable extension,
development or expansion thereof or ancillary thereto, including any hotel,
entertainment, recreation, convention, trade show, meeting, retail sales or
other activity or business designed to promote, market, support, develop,
construct or enhance the casino gaming, hotel, retail and resort business
operated by the Partnership and Restricted Subsidiaries (including, without
limitation, engaging in transactions with Affiliates and incurring Indebtedness,
providing guarantees or providing other credit support, in each case to the
extent permitted under the Indenture), owning and operating joint ventures to
supply materials or services for the construction or operation of the resort
owned or operated by the Partnership and entering into casino leases or
management agreements for any casino situated on land owned by the Issuers or
owned or operated by the Issuers.
"Permitted Investment" means an Investment by the Partnership or any of its
Restricted Subsidiaries in (i) a Wholly-Owned Subsidiary of the Partnership;
provided, however, that the primary business of such Wholly-Owned Subsidiary is
a Permitted Business; (ii) another Person if as a result of such Investment such
other Person becomes a Wholly-Owned Subsidiary of the Partnership or is merged
or consolidated with or into, or transfers or conveys all or substantially all
its assets to, the Partnership or a Wholly-Owned Subsidiary of the Partnership;
provided, however, that in each case such Person's primary business is a
Permitted Business; (iii) Temporary Cash Investments; (iv) receivables owing to
the Partnership or any of its Restricted Subsidiaries, created or acquired in
the ordinary course of business and payable or dischargeable in accordance with
customary trade terms; (v) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be treated as
expenses for accounting purposes and that are made in the ordinary course of
business; (vi) loans and advances to employees made in the ordinary course of
business of the Partnership or such Restricted Subsidiary in an aggregate amount
outstanding at any one time not to exceed $250,000 to any one employee or $1.0
million in the aggregate; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Partnership or any of its Restricted Subsidiaries or in satisfaction of
judgments or claims; (viii) a Person engaged in a Permitted Business or a loan
or advance by the Partnership the proceeds of which are used solely to make an
investment in a Person engaged in a Permitted Business or a Guarantee by the
Partnership of Indebtedness of any Person in which such Investment has been made
provided, however, that no Permitted Investments may be made pursuant to this
clause (viii) to the extent the amount thereof would, when taken together with
all other Permitted Investments made pursuant to this clause (viii), exceed $5.0
million in the aggregate (plus, to the extent not previously reinvested, any
return of capital realized on Permitted Investments made pursuant to this
108
<PAGE> 116
clause (viii), or any release or other cancellation of any Guarantee
constituting such Permitted Investment); (ix) Persons to the extent such
Investment is received by the Partnership or any Restricted Subsidiary as
consideration for asset dispositions effected in compliance with the covenant
described under "Limitations on Sales of Assets and Subsidiary Stock"; (x)
prepayments and other credits to suppliers made in the ordinary course of
business of the Partnership and its Restricted Subsidiaries; and (xi)
Investments in connection with pledges, deposits, payments or performance bonds
made or given in the ordinary course of business in connection with or to secure
statutory, regulatory or similar obligations, including obligations under
health, safety or environmental obligations.
"Permitted Liens" means: (i) Liens granted by the Partnership and the
Subsidiary Guarantors which secure Senior Indebtedness; (ii) Liens in favor of
the Partnership; (iii) Liens on property of a Person existing at the time such
Person is acquired by or merged into or consolidated with the Partnership or any
Restricted Subsidiary thereof; provided that such Liens were in existence prior
to the contemplation of such acquisition and do not extend to any assets of the
Partnership or its Restricted Subsidiaries other than those acquired in
connection with such merger or consolidation; (iv) Liens to secure the
performance of 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 Issue Date; (vi) Liens in respect of extensions, renewals,
refundings or refinancing of any Indebtedness secured by the Liens referred to
in clauses (ii), (iii) and (v) above and (viii) below; provided that the Liens
in connection with such renewal, extensions, renewals, refundings or refinancing
shall be limited to all or part of the specific property which was subject to
the original Lien; (vii) 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 provisions as shall be required in
conformity with GAAP shall have been made therefor; (viii) any Lien securing
purchase money obligations incurred in compliance with paragraph (b)(ii) of the
"Limitation on Indebtedness" covenant, provided that such Liens do not extend to
any property (other than the property so purchased) owned by the Partnership or
its Restricted Subsidiaries and is not incurred more than 60 days after the
incurrence of such Indebtedness secured by such Lien; (ix) Liens to secure
Indebtedness permitted under clause (ii) of the "Limitation on Indebtedness"
covenant, provided that such Liens do not extend to or cover any property of the
Partnership or any of its Subsidiaries other than the property subject to such
financing; and (x) Liens incurred in the ordinary course of business of the
Partnership or any Restricted Subsidiary thereof with respect to obligations
that do not exceed $2.0 million at any one time outstanding and that (A) are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (B)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of the business by the
Partnership or such Restricted Subsidiary.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision hereof or any
other entity.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Project Budget" means the approved budget for the Resort Casino as in
effect from time to time.
"Prospectus" means the final prospectus included in the Issuers'
Registration Statement filed with the Commission, pursuant to which the Issuers
will offer to exchange $1,000 principal amount of their Exchange Notes,
registered under the Securities Act, for each $1,000 principal amount of their
Original Notes.
"Public Equity Offering" means an underwritten primary public offering for
cash by the Partnership of its limited partnership interests, or options,
warrants or rights with respect to its partnership interests pursuant to an
effective registration statement under the Securities Act.
109
<PAGE> 117
A "Public Market" exists at any time with respect to the Capital Stock of
the Partnership if (a) the Capital Stock of the Partnership is then registered
with the Commission pursuant to Section 12(b) or 12(g) of the Exchange Act and
traded either on a national securities exchange or in the National Association
of Securities Dealers Automated Quotation System, and (b) at least 15.0% of the
total issued and outstanding Capital Stock of the Partnership, as applicable,
has been distributed prior to such time by means of an effective registration
statement under the Securities Act.
"Purchase Agreement" means the December 22, 1997 Purchase Agreement by and
among the Issuers, Warrant Co., and the Initial Purchaser.
"QI" means qualified intermediary.
"RAS" means The Resort at Summerlin, Inc., a Nevada corporation and the
general partner of the Partnership.
"RAS Management Fee" means 3.0% of the total net revenue and 6.0% of
EBITDAM less the top line management fee, not to exceed 10.0% of total net
revenue.
"RAS Owners" means SCA, the Swiss Parent and their respective owners.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
replaces, renews, repays or extends (including pursuant to any defeasance or
discharge mechanism) (collectively, "refinances," and "refinanced" shall have a
correlative meaning) any Indebtedness existing on the date of the Indenture or
incurred in compliance with the Indenture (including Indebtedness of the
Partnership that refinances Indebtedness of any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary that refinances Indebtedness of
another Restricted Subsidiary) including Indebtedness that refinances
Refinancing Indebtedness; provided, however, that (i) the Refinancing
Indebtedness has a Stated Maturity no earlier than the earlier of (A) the first
anniversary of the Stated Maturity of the Notes and (B) the Stated Maturity of
the Indebtedness being refinanced, (ii) the Refinancing Indebtedness has an
Average Life at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the lesser of (A) the Average Life of the Notes and (B) the
Average Life of the Indebtedness being refinanced, and (iii) the Refinancing
Indebtedness is in an aggregate principal amount (or if issued with original
issue discount, an aggregate issue price) that is equal to (or 101.0% of, in the
case of a refinancing of the Notes in connection with a Change of Control) or
less than the sum of the aggregate principal amount (or if issued with original
issue discount, the aggregate accredited value) then outstanding of the
Indebtedness being refinanced (plus the amount of any premium required to be
paid in connection therewith and reasonable fees and expenses therewith),
provided further, that Refinancing Indebtedness shall not include Indebtedness
of a Subsidiary which refinances Indebtedness of the Partnership.
"Regent International" means Regent Hotels Worldwide, Inc.
"Register" means a registry of the names and addresses of the Holders of
the Notes maintained by the Registrar at the offices of the Registrar.
"Registered Company" means a company registered by the Nevada Commission as
a publicly traded corporation.
"Registrar" means United States Trust Company of New York and any of its
successors or assigns.
"Registration Rights Agreement" means the December 30, 1997 Exchange and
Registration Rights Agreement among the Partnership, RAS, the limited partners
of the Partnership, Warrant Co. and the Initial Purchaser.
"Registration Statement" means the registration statement filed with the
Commission by the Partnership on Form S-4, together with all amendments,
exhibits and schedules thereto.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Resort Casino" means The Resort at Summerlin, a Mediterranean-style luxury
hotel, casino and spa complex which will be constructed, owned and operated by
the Partnership.
110
<PAGE> 118
"Resort Casino Site" means the 54.5 acre site on which the Resort Casino
will be located.
"Restaurant Leases" means leases which the Partnership plans to enter into
in connection with the operation of the Resort Casino, whereby the Partnership
anticipates leasing space to at least four restaurants.
"Restricted Payment" means limitations under which the Partnership shall
not, and shall not permit any of its Restricted Subsidiaries, directly or
indirectly to (i) declare or pay any dividend or any distribution on or in
respect of its Capital Stock except (A) dividends or distributions payable in
its Capital Stock (other than Disqualified Stock) or in options, warrants or
other rights to purchase such Capital Stock and (B) dividends or distributions
payable to the Partnership or a Restricted Subsidiary which holds any equity
interest in the paying Restricted Subsidiary (and if the Restricted Subsidiary
paying the dividend or making the distribution is not a Wholly-Owned Subsidiary,
to its other holders of Capital Stock on a pro rata basis), (ii) purchase,
redeem, retire or otherwise acquire for value any Capital Stock of the
Partnership held by Persons other than a Wholly-Owned Subsidiary of the
Partnership or any Capital Stock of a Restricted Subsidiary of the Partnership
held by any Affiliate of the Partnership, other than a Wholly-Owned Subsidiary
(in either case, other than in exchange for its Capital Stock (other than
Disqualified Stock)), (iii) purchase, repurchase, redeem, defease or otherwise
acquire or retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment, any Subordinated Obligations, or (iv) make any
Investment (other than a Permitted Investment) in any Person.
"Restricted Subsidiary" means any Subsidiary of the Partnership other than
an Unrestricted Subsidiary.
"Revocation" means the revocation by the Partnership of any Designation of
a Subsidiary as an Unrestricted Subsidiary.
"Revolving Credit Facility" means the up to $10.0 million revolving credit
facility under the Credit Agreement, and any extensions, revisions, refinancing,
restatements or replacements thereof.
"Rider Hunt" means Rider Hunt (NV) L.L.C.
"Rights of First Offer" means the rights of first offer held by the
Partnership granted by HHC with respect to four other potential gaming sites in
Summerlin.
"Royalty Agreement" means the August 15, 1996 agreement between the
Partnership and HHP.
"Royalty Commencement Date" means the earlier of the day the Resort Casino
is open to the public, or 18 months following the first day of construction of
the Resort Casino.
"RSM Fund" means the fund established by Regent International which will
consist of marketing fees, reservation fees and certain other fees designated by
Regent International and paid by the Partnership and other Regent International
Hotels.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Ruling Request" means the written request filed by the Issuers with the
Nevada Board Chairman for a ruling that it is not necessary to submit the
Exchange Offer for prior approval.
"S&P" means Standard & Poor's Corporation.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired whereby the Partnership or a Restricted Subsidiary
transfers such property to a Person and the Partnership or a Subsidiary leases
it from such Person.
"SCA" means Swiss Casinos of America, Inc., formerly Seven Circle Gaming
Corporation.
"SCR" means Seven Circle Resorts, Inc., a wholly-owned subsidiary of SCA.
"SCRN" means Seven Circle Resorts of Nevada, Inc., a wholly-owned
subsidiary of SCA.
"Securities Act" means the Securities Act of 1933, as amended.
111
<PAGE> 119
"Senior Indebtedness" of the Issuers means all Indebtedness (including any
monetary obligations under or in respect of the Credit Agreement and interest,
whether or not allowable, accruing on Indebtedness incurred pursuant to the
Credit Agreement after the filing of a petition initiating any proceeding under
any bankruptcy, insolvency or similar law) of the Issuers arising under the
Credit Agreement, except to the extent of any such Indebtedness incurred in
violation of the terms of the Indenture.
"Shelf Request" means a request by the Holders of Original Notes to the
Issuers to file a Shelf Registration Statement.
"Shelf Registration Statement" means a shelf registration statement
relating to the offer and sale of the outstanding Original Notes.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Partnership within the meaning of Rule 1-02
under Regulation S-X promulgated by the Commission.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision.
"stated redemption price at maturity" means the sum of all scheduled
amounts payable on the Note (including interest).
"Strip" means the Las Vegas Strip.
"Subordination Agreement" means the December 16, 1997, Subordination,
Stabilization and Assumption Agreement between the Partnership and Regent
International.
"Summerlin" means the Summerlin master-planned community, a 22,500-acre
land development of HHC.
"Subordinated Obligations" means, with respect to the Partnership or any
Subsidiary Guarantor, any Indebtedness of the Partnership or such Subsidiary
Guarantor, as the case may be (whether outstanding on the Issue Date or
thereafter incurred) which is expressly subordinate or junior in right of
payment to the Notes or a Subsidiary Guarantor's Subsidiary Guarantee, as the
case may be, in each case pursuant to a written agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50.0% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
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 (i) such Person, (ii) such Person and one
or more Subsidiaries of such Person, or (iii) one or more Subsidiaries of such
Person. Unless otherwise specified herein, each reference to a Subsidiary shall
refer to a Subsidiary of the Partnership.
"Subsidiary Guarantee" means the Guarantee of the Notes by a Subsidiary
Guarantor.
"Subsidiary Guarantor" means each Subsidiary of the Partnership in
existence on the Issue Date and each Subsidiary (other than Unrestricted
Subsidiaries) created or acquired by the Partnership after the Issue Date.
"Successor Entity" means the resulting, surviving or transferee Person
remaining if the Partnership or Warrant Co. consolidates with or merges with or
into, or conveys, transfers or leases all or substantially all of its assets to,
any Person.
"Swiss Parent" means Tivolino Holding AG.
"Tax Allowance Amount" shall mean, with respect to any Partner (including a
Warrant holder if such Warrant holder is treated as owning an equity interest in
the Partnership for U.S. federal, state or local income tax purposes), for any
calendar quarter, (i) forty percent (40.0%) of the excess of (a) the estimated
taxable income allocable to such Partner arising from its ownership of a
Partnership Interest for the fiscal year through
112
<PAGE> 120
such calendar quarter over (b) any losses of the Partnership for prior fiscal
years and such fiscal year that are allocable to such Partner that were not
previously utilized in the calculation of Tax Allowance Amounts minus (ii) prior
distributions of Tax Allowance Amounts for such fiscal year, all as determined
by the General Partner in good faith. The amount so determined by the General
Partner shall be the Tax Allowance Amount for such period and shall be final and
binding on all Partners.
"Taxes" means all taxes, levies, imposts, duties or other governmental
charges.
"Temporary Cash Investments" means any of the following: (i) any Investment
in direct obligations of the United States of America or any agency thereof or
obligations Guaranteed by the United States of America or any agency thereof,
(ii) Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States of America having capital surplus and undivided profits
aggregating in excess of $250.0 million (or the foreign currency equivalent
thereof) and whose long-term debt, or whose parent holding company's long-term
debt, is rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act), (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) Investments in commercial paper, maturing not more than 180
days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Partnership) organized and in existence under the laws of the
United States of America or any foreign country recognized by the United States
of America with a rating at the time as of which any investment therein is made
of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P,
(v) Investments in securities with maturities of six months or less from the
date of acquisition issued or fully guaranteed by any state, commonwealth or
territory of the United States of America, or by any political subdivision or
taxing authority thereof, and rated at least "A" by S&P or "A" by Moody's, and
(vi) Investments in mutual funds whose investment guidelines restrict such
funds' investments to those satisfying the provisions of clauses (i) through (v)
above.
"Tendering Holder" means (i) each DTC Participant that has properly
transmitted (and not properly withdrawn) its acceptance through ATOP and in
respect of which DTC has sent an Agent's Message, (ii) each Holder that has
timely delivered to the Exchange Agent (and not properly withdrawn) a properly
completed and duly executed Letter of Transmittal, and any other documents
required by the Letter of Transmittal, together with certificates) representing
all tendered Original Notes, or (iii) each DTC Participant or Holder that has
complied with the guaranteed delivery procedures set forth herein.
"Term Loans" means term loans which are created by conversion of the
principal amount of Construction Loans outstanding on the Commencement Date.
"TPC" means Tournament Players Club.
"TPC Canyons" means the Tournament Players Club at the Canyons golf course.
"Transfer" means any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Partnership and its Subsidiaries.
"Treasury Regulations" means the Income Tax Regulations promulgated by the
U.S. Department of Treasury under the Code.
"Tribe" means the Standing Rock Sioux Tribe.
"Trustee" means United States Trust Company of New York.
"Units" means 100,000 units sold by the Issuers as part of the 144A
Offering, each Unit consisting of $1,000 in principal amount of the Original
Notes and a Corporate Warrant.
"unmatured interest" means any OID that was not amortized as of any
bankruptcy filing.
113
<PAGE> 121
"Unrestricted Subsidiary" means (i) any Subsidiary of the Partnership that
at the time of determination shall be designated an Unrestricted Subsidiary by
the General Partner in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The General Partner may designate any Subsidiary of the
Partnership (including any newly acquired or newly formed Subsidiary of the
Partnership) to be an Unrestricted Subsidiary unless such Subsidiary or any of
its Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Partnership or any Restricted Subsidiary of the
Partnership that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that each Subsidiary to be so designated and each of its
Subsidiaries has not at the time of such designation, and does not thereafter
create, incur, issue, assume, guarantee or otherwise becomes liable with respect
to any Indebtedness other than Non-Recourse Debt and either (A) the Subsidiary
to be so designated has total consolidated assets of $10,000 or less or (B) if
such Subsidiary has consolidated assets greater than $10,000, then such
designation would be permitted under "Limitation on Restricted Payments." The
General Partner may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary subject to the limitations contained in "Limitation on Designations
of Unrestricted Subsidiaries."
"unsuitable person" means a person determined by the Nevada Commission to
be unsuitable to own securities of a Registered Company.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"U.S. Holder" means a Holder of Notes or Corporate Warrants, who for U.S.
federal income tax purposes is (i) a citizen or resident of the United States;
(ii) a corporation or partnership organized in or under the laws of the United
States or any State thereof (including the District of Columbia); (iii) an
estate the income of which is subject to U.S. federal income taxation regardless
of its source; (iv) a trust (a) the administration over which a U.S. court can
exercise primary supervision and (b) all of the substantial decisions of which
one or more U.S. persons have the authority to control; or (v) otherwise subject
to U.S. federal income taxation on a net income basis with respect to the Notes.
Notwithstanding the preceding sentence, to the extent provided in U.S. Treasury
Regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons prior to such date, that elect to continue to be treated
as United States persons also will be a U.S. Holder.
"Warrant Co." means RAS Warrant Co., a Nevada corporation, an Affiliate of
RAS and the Partnership.
"Wholly-Owned Subsidiary" means a Restricted Subsidiary of the Partnership,
at least 99.0% of the Capital Stock of which (other than directors' qualifying
shares) is owned by the Partnership or another Wholly-Owned Subsidiary.
"withholding foreign partnerships" has the meaning ascribed to it in the
Treasury Regulations.
"Withholding Regulations" means recently issued applicable Treasury
Regulations.
114
<PAGE> 122
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997, THE PERIOD FROM
INCEPTION THROUGH DECEMBER 31, 1996,
THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
AND THE PERIOD FROM INCEPTION THROUGH MARCH 31, 1998 (UNAUDITED)
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Audited Financial Statements
The Resort at Summerlin, Inc. (a development stage company)
Balance Sheets......................................... F-3
Statements of Operations............................... F-6
Statements of Changes in Stockholder's Equity.......... F-11
Statements of Cash Flows............................... F-13
The Resort at Summerlin, L.P. (a development stage company)
Balance Sheets......................................... F-3
Statements of Operations............................... F-6
Statements of Partnership Interests.................... F-12
Statements of Cash Flows............................... F-13
The Resort at Summerlin, Inc. (consolidated) (a development
stage company)
Balance Sheets......................................... F-3
Statements of Operations............................... F-6
Statements of Changes in Stockholder's Equity.......... F-11
Statements of Cash Flows............................... F-13
Notes to Financial Statements (all entities)................ F-18
</TABLE>
F-1
<PAGE> 123
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Partners
The Resort at Summerlin, Inc. and
The Resort at Summerlin, L.P.
We have audited the accompanying balance sheets for the companies specified in
the attached table of contents (both of which are development stage companies)
as of December 31, 1997 and 1996, and the related statements of operations,
partnership interests, changes in stockholder's equity and cash flows for the
year ended December 31, 1997 and the period from inception through December 31,
1996. These financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Companies at December 31,
1997 and 1996, and the results of their operations and their cash flows for the
year ended December 31, 1997 and the period from inception through December 31,
1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
March 5, 1998
F-2
<PAGE> 124
BALANCE SHEETS
(DEVELOPMENT STAGE COMPANIES)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
-------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 3,968 $ 82,858,686 $ 82,862,654
Investments....................................... -- 86,226,508 86,226,508
Interest receivable............................... -- 928,841 928,841
-------- ------------ ------------
Total current assets................................... 3,968 170,014,035 170,018,003
Property and equipment:
Land.............................................. -- 16,628,459 16,628,459
Construction in progress.......................... -- 15,798,457 15,798,457
Furniture, fixtures and equipment................. -- 1,149,584 1,149,584
-------- ------------ ------------
-- 33,576,500 33,576,500
Accumulated depreciation.......................... -- (187,415) (187,415)
-------- ------------ ------------
-- 33,389,085 33,389,085
Restricted assets...................................... -- 12,400,000 12,400,000
Debt issuance costs.................................... -- 12,049,022 12,049,022
Investment in The Resort at Summerlin, L.P............. 632,186 -- --
Licensing costs and other intangible assets............ -- 138,333 138,333
Preopening costs....................................... -- 5,908,562 5,908,562
-------- ------------ ------------
Total assets........................................... $636,154 $233,899,037 $233,903,005
======== ============ ============
LIABILITIES
Current liabilities:
Accounts payable.................................. $ -- $ 187,398 $ 187,398
Construction and preopening payables.............. -- 5,753,503 5,753,503
Related party payable............................. 1,010 27,871 28,881
Interest payable.................................. -- 4,598,142 4,598,142
-------- ------------ ------------
Total current liabilities.............................. 1,010 10,566,914 10,567,924
Long-term debt, net of discount........................ -- 154,188,650 154,188,650
Warrants redeemable for partnership interests.......... -- 7,619,565 7,619,565
-------- ------------ ------------
Total liabilities...................................... 1,010 172,375,129 172,376,139
Limited partners' interests............................ -- -- 60,891,722
STOCKHOLDER'S EQUITY AND PARTNERSHIP INTERESTS
Common stock, no par value, 2,500 shares authorized,
1,000 shares issued.................................. 682,500 -- 682,500
General partner interest............................... -- 675,000 --
Limited partners' interests............................ -- 65,130,283 --
Deficit accumulated during development stage........... (47,356) (4,281,375) (47,356)
-------- ------------ ------------
Total stockholder's equity and partnership interests... 635,144 61,523,908 635,144
-------- ------------ ------------
Total liabilities, stockholder's equity and partnership
interests............................................ $636,154 $233,899,037 $233,903,005
======== ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE> 125
BALANCE SHEETS
(DEVELOPMENT STAGE COMPANIES)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
-------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 3,968 $175,487,660 $175,491,628
Interest receivable............................ -- 24,167 24,167
-------- ------------ ------------
Total current assets................................ 3,968 175,511,827 175,515,795
Property and equipment:
Land........................................... -- 16,628,459 16,628,459
Construction in progress....................... -- 3,782,333 3,782,333
Furniture, fixtures and equipment.............. -- 573,000 573,000
-------- ------------ ------------
-- 20,983,792 20,983,792
Accumulated depreciation....................... -- (112,680) (112,680)
-------- ------------ ------------
-- 20,871,112 20,871,112
Restricted assets................................... -- 12,400,000 12,400,000
Debt issuance costs................................. -- 12,561,721 12,561,721
Investment in The Resort at Summerlin, L.P. ........ 668,012 -- --
Licensing costs..................................... -- 50,000 50,000
Preopening costs.................................... -- 4,838,812 4,838,812
-------- ------------ ------------
Total assets........................................ $671,980 $226,233,472 $226,237,440
======== ============ ============
LIABILITIES
Current liabilities:
Accounts payable............................... $ -- $ 158,471 $ 158,471
Construction and preopening payables........... -- 619,373 619,373
Related party payable.......................... 1,010 348,459 349,469
-------- ------------ ------------
Total current liabilities........................... 1,010 1,126,303 1,127,313
Long-term debt, net of discount..................... -- 154,131,067 154,131,067
Warrants redeemable for partnership interests....... -- 5,869,565 5,869,565
-------- ------------ ------------
Total liabilities................................... 1,010 161,126,935 161,127,945
Limited partners' interests......................... -- -- 64,438,525
STOCKHOLDER'S EQUITY AND PARTNERSHIP INTERESTS
Common stock, no par value, 2,500 shares authorized,
1,000 shares issued............................... 682,500 -- 682,500
General partner interest............................ -- 675,000 --
Limited partners' interests......................... -- 65,130,283 --
Deficit accumulated during development stage........ (11,530) (698,746) (11,530)
-------- ------------ ------------
Total stockholder's equity and partnership
interests......................................... 670,970 65,106,537 670,970
-------- ------------ ------------
Total liabilities, stockholder's equity and
partnership interests............................. $671,980 $226,233,472 $226,237,440
======== ============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 126
BALANCE SHEETS
(DEVELOPMENT STAGE COMPANIES)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
-------- ----------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Subscription receivable............................. $ 1,000 $ -- $ 1,000
-------- ----------- -----------
Total current assets..................................... 1,000 -- 1,000
Property and equipment:
Land................................................ -- 16,628,459 16,628,459
Construction in progress............................ -- 526,088 526,088
-------- ----------- -----------
-- 17,154,547 17,154,547
Accumulated depreciation............................ -- -- --
-------- ----------- -----------
-- 17,154,547 17,154,547
Investment in The Resort at Summerlin, L.P............... 499,155 -- --
Option fee............................................... -- 583,900 583,900
Preopening costs......................................... -- 907,534 907,534
-------- ----------- -----------
Total assets............................................. $500,155 $18,645,981 $18,646,981
======== =========== ===========
LIABILITIES
Limited partners' interest............................... $ -- $ -- $18,146,826
STOCKHOLDER'S EQUITY AND PARTNERSHIP INTERESTS
Common stock, no par value, 2,500 shares authorized,
1,000 shares issued.................................... 1,000 -- 1,000
General partner interest................................. -- 500,000 --
Limited partners' interests.............................. 500,000 18,230,439 500,000
Deficit accumulated during development stage............. (845) (84,458) (845)
-------- ----------- -----------
Total stockholder's equity and partnership interests..... 500,155 18,645,981 500,155
-------- ----------- -----------
Total liabilities, stockholder's equity and partnership
interests.............................................. $500,155 $18,645,981 $18,646,981
======== =========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE> 127
STATEMENTS OF OPERATIONS
(DEVELOPMENT STAGE COMPANIES)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1998
---------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
-------- ----------- ------------
<S> <C> <C> <C>
Revenues.............................................. $ -- $ -- $ --
Costs and expenses:
Equity in loss of The Resort at Summerlin, L.P... 35,826 -- --
General and administrative....................... -- 153,404 153,404
Depreciation and amortization.................... -- 519,524 519,524
-------- ----------- -----------
35,826 672,928 672,928
Other income (expense):
Interest income.................................. -- 2,571,648 2,571,648
Interest expense................................. -- (5,481,349) (5,481,349)
-------- ----------- -----------
-- (2,909,701) (2,909,701)
-------- ----------- -----------
Loss before limited partners' interest................ (35,826) (3,582,629) (3,582,629)
Limited partners' interest............................ -- -- (3,546,803)
-------- ----------- -----------
Net loss.............................................. $(35,826) $(3,582,629) $ (35,826)
======== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 128
STATEMENTS OF OPERATIONS
(DEVELOPMENT STAGE COMPANIES)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1997
------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
-------- -------- ------------
<S> <C> <C> <C>
Revenues.................................................... $ -- $ -- --
Costs and expenses:
Equity in loss of The Resort at Summerlin, L.P. ....... 28 -- --
General and administrative............................. -- 2,801 2,801
---- ------- -------
28 2,801 2,801
---- ------- -------
Loss before limited partners' interest...................... (28) (2,801) (2,801)
Limited partners' interest.................................. -- -- (2,773)
---- ------- -------
Net loss.................................................... $(28) $(2,801) $ (28)
==== ======= =======
</TABLE>
See accompanying notes.
F-7
<PAGE> 129
STATEMENTS OF OPERATIONS
(DEVELOPMENT STAGE COMPANIES)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
-------- --------- ------------
<S> <C> <C> <C>
Revenues................................................. $ -- $ -- $ --
Costs and expenses:
Equity in loss of The Resort at Summerlin, L.P. .... 6,143 -- --
General and administrative.......................... 4,542 493,885 498,427
Depreciation and amortization....................... -- 113,312 113,312
-------- --------- ---------
10,685 607,197 611,739
Other income (expense):
Interest income..................................... -- 41,255 41,255
Interest expense.................................... -- (48,346) (48,346)
-------- --------- ---------
-- (7,091) (7,091)
-------- --------- ---------
Loss before limited partners' interest................... (10,685) (614,288) (618,830)
Limited partners' interest............................... -- -- (608,145)
-------- --------- ---------
Net loss................................................. $(10,685) $(614,288) $ (10,685)
======== ========= =========
</TABLE>
See accompanying notes.
F-8
<PAGE> 130
STATEMENTS OF OPERATIONS
(DEVELOPMENT STAGE COMPANIES)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION THROUGH
DECEMBER 31, 1996
------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
-------- -------- ------------
<S> <C> <C> <C>
Revenues................................................... $ -- $ -- $ --
Costs and expenses:
Equity in loss of The Resort at Summerlin, L.P........ 845 -- --
General and administrative............................ -- 84,458 84,458
----- -------- --------
845 84,458 84,458
----- -------- --------
Loss before limited partners' interest..................... (845) (84,458) (84,458)
Limited partners' interest................................. -- -- (83,613)
----- -------- --------
Net loss................................................... $(845) $(84,458) $ (845)
===== ======== ========
</TABLE>
See accompanying notes.
F-9
<PAGE> 131
STATEMENTS OF OPERATIONS
(DEVELOPMENT STAGE COMPANIES)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION THROUGH
MARCH 31, 1998
--------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
-------- ----------- ------------
<S> <C> <C> <C>
Revenues................................................. $ -- $ -- $ --
Costs and expenses:
Equity in loss of The Resort at Summerlin, L.P. .... 42,814 -- --
General and administrative.......................... 4,542 731,747 736,289
Depreciation and amortization....................... -- 632,836 632,836
-------- ----------- -----------
47,356 1,364,583 1,369,125
Other income (expense):
Interest income..................................... -- 2,612,903 2,612,903
Interest expense.................................... -- (5,529,695) (5,529,695)
-------- ----------- -----------
-- (2,916,792) (2,916,792)
-------- ----------- -----------
Loss before limited partners' interest................... (47,356) (4,281,375) (4,285,917)
Limited partners' interest............................... -- -- (4,238,561)
-------- ----------- -----------
Net loss................................................. $(47,356) $(4,281,375) $ (47,356)
======== =========== ===========
</TABLE>
See accompanying notes.
F-10
<PAGE> 132
THE RESORT AT SUMMERLIN, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING TOTAL
COMMON DEVELOPMENT STOCKHOLDER'S
STOCK STAGE EQUITY
-------- ----------- -------------
<S> <C> <C> <C>
Balance at June 12, 1996 (inception)....................... $ -- $ -- $ --
Capital contributions................................. 501,000 -- 501,000
Net loss.............................................. -- (845) (845)
-------- -------- --------
Balance at December 31, 1996............................... 501,000 (845) 500,155
Capital contributions................................. 181,500 -- 181,500
Net loss.............................................. -- (10,685) (10,685)
-------- -------- --------
Balance at December 31, 1997............................... 682,500 (11,530) 670,970
Net loss (unaudited).................................. -- (35,826) (35,826)
-------- -------- --------
Balance at March 31, 1998 (unaudited)...................... $682,500 $(47,356) $635,144
======== ======== ========
</TABLE>
See accompanying notes.
F-11
<PAGE> 133
THE RESORT AT SUMMERLIN, L.P.
STATEMENTS OF PARTNERSHIP INTERESTS
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
GENERAL LIMITED DURING TOTAL
PARTNER PARTNERS' DEVELOPMENT PARTNERSHIP
INTEREST INTERESTS STAGE INTERESTS
-------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at August 15, 1996 (inception)....... $ -- $ -- $ -- $ --
Capital contributions by partners.......... 500,000 18,230,439 -- 18,730,439
Net loss................................... -- -- (84,458) (84,458)
-------- ----------- ----------- -----------
Balance at December 31, 1996................. 500,000 18,230,439 (84,458) 18,645,981
Capital contributions by partners.......... 175,000 48,081,046 -- 48,256,046
Distribution of non-cash asset............. -- (1,181,202) -- (1,181,202)
Net loss................................... -- -- (614,288) (614,288)
-------- ----------- ----------- -----------
Balance at December 31, 1997................. 675,000 65,130,283 (698,746) 65,106,537
Net loss (unaudited)....................... -- -- (3,582,629) (3,582,629)
-------- ----------- ----------- -----------
Balance at March 31, 1998 (unaudited)........ $675,000 $65,130,283 $(4,281,375) $61,523,908
======== =========== =========== ===========
</TABLE>
See accompanying notes.
F-12
<PAGE> 134
STATEMENTS OF CASH FLOWS
(DEVELOPMENT STAGE COMPANIES)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1998
--------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
-------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................ $(35,826) $ (3,582,629) $ (35,826)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization......................... -- 519,524 519,524
Non-cash interest expense for warrant put options..... -- 1,750,000 1,750,000
Equity in loss of limited partnership................. 35,826 -- --
Limited partners' interest............................ -- -- (3,546,803)
Changes in operating assets and liabilities:
Interest payable................................... -- 3,508,849 3,508,849
Interest receivable................................ -- (2,132,138) (2,132,138)
-------- ------------ ------------
Net cash provided by operating activities............... -- 63,606 63,606
INVESTING ACTIVITIES
Capital expenditures.................................... -- (11,541,152) (11,541,152)
Increase in construction and preopening payables........ -- 4,897,747 4,897,747
Purchases of investments................................ -- (84,999,044) (84,999,044)
Preopening costs........................................ -- (1,069,750) (1,069,750)
Investment in licensing costs and other intangible
assets................................................ -- (88,333) (88,333)
-------- ------------ ------------
Net cash used in investing activities................... -- (92,800,532) (92,800,532)
FINANCING ACTIVITIES
Debt issuance costs..................................... -- 107,952 107,952
-------- ------------ ------------
Net change in cash and cash equivalents................. -- (92,628,974) (92,628,974)
Cash and cash equivalents at beginning of quarter....... 3,968 175,487,660 175,491,628
-------- ------------ ------------
Cash and cash equivalents at end of quarter............. $ 3,968 $ 82,858,686 $ 82,862,654
======== ============ ============
</TABLE>
See accompanying notes.
F-13
<PAGE> 135
STATEMENTS OF CASH FLOWS
(DEVELOPMENT STAGE COMPANIES)
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31, 1997
------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
-------- -------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................................... $(28) $ (2,801) $ (28)
Adjustments to reconcile net loss to net cash used in
operating activities:
Equity in loss of limited partnership................. 28 -- --
Limited partners' interest............................ -- -- (2,773)
---- -------- ---------
Net cash used in operating activities...................... -- (2,801) (2,801)
INVESTING ACTIVITIES
Capital expenditures....................................... -- (255,890) (255,890)
Increase in construction and preopening payables........... -- 155,202 155,202
Preopening costs........................................... -- (72,984) (72,984)
---- -------- ---------
Net cash used in investing activities...................... -- (173,672) (173,672)
FINANCING ACTIVITIES
Capital contributions from limited partners................ -- 726,473 726,473
Debt issuance costs........................................ -- (50,000) (50,000)
---- -------- ---------
Net cash provided by financing activities.................. -- 676,473 676,473
---- -------- ---------
Net change in cash and cash equivalents.................... -- 500,000 500,000
Cash and cash equivalents at beginning of quarter.......... -- -- --
---- -------- ---------
Cash and cash equivalents at end of quarter................ $ -- $500,000 $ 500,000
==== ======== =========
</TABLE>
See accompanying notes.
F-14
<PAGE> 136
STATEMENTS OF CASH FLOWS
(DEVELOPMENT STAGE COMPANIES)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
--------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.............................................. $ (10,685) $ (614,288) $ (10,685)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation..................................... -- 112,680 112,680
Amortization of debt discount.................... -- 632 632
Equity in loss of limited partnership............ 6,143 -- --
Limited partners' interest....................... -- -- (608,145)
Changes in operating assets and liabilities:
Accounts payable............................ 1,010 -- 1,010
Interest receivable......................... -- (24,167) (24,167)
--------- ------------ ------------
Net cash used in operating activities................. (3,532) (525,143) (528,675)
INVESTING ACTIVITIES
Acquisition of property and equipment................. -- (3,829,245) (3,829,245)
Preopening costs...................................... -- (1,637,360) (1,637,360)
Increase in construction and preopening payables...... -- 701,313 701,313
Investment in licensing costs......................... -- (50,000) (50,000)
Investment in option fee.............................. -- (597,312) (597,312)
Investment in The Resort at Summerlin, L.P............ (175,000) -- --
--------- ------------ ------------
Net cash used in investing activities................. (175,000) (5,412,604) (5,412,604)
FINANCING ACTIVITIES
Capital contributions................................. 182,500 -- 182,500
Capital contribution from General Partner............. -- 175,000 --
Capital contributions from limited partners........... -- 45,787,128 45,787,128
Issuance of First Mortgage Notes...................... -- 60,000,000 60,000,000
Issuance of Senior Subordinated Notes................. -- 100,000,000 100,000,000
Debt issuance costs................................... -- (12,136,721) (12,136,721)
Increase in restricted assets......................... -- (12,400,000) (12,400,000)
--------- ------------ ------------
Net cash provided by financing activities............. 182,500 181,425,407 181,432,907
--------- ------------ ------------
Net change in cash and cash equivalents............... 3,968 175,487,660 175,491,628
Cash and cash equivalents at beginning of year........ -- -- --
--------- ------------ ------------
Cash and cash equivalents at end of year.............. $ 3,968 $175,487,660 $175,491,628
========= ============ ============
SUPPLEMENTAL INFORMATION
Preopening costs incurred and paid by SCA on behalf of
The Resort at Summerlin, L.P........................ $ -- $ 2,293,918 $ 2,293,918
Distribution of non-cash asset........................ -- 1,181,202 1,181,202
Accrued debt issuance costs........................... -- 425,000 425,000
</TABLE>
See accompanying notes.
F-15
<PAGE> 137
STATEMENTS OF CASH FLOWS
(DEVELOPMENT STAGE COMPANIES)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION THROUGH DECEMBER 31, 1996
-----------------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
----------- -------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.............................................. $ (845) $ (84,458) $ (845)
Adjustments to reconcile net loss to net cash used in
operating activities:
Equity in loss of limited partnership............ 845 -- --
Limited partners' interest....................... -- -- (83,613)
--------- ------------ ------------
Net cash used in operating activities................. -- (84,458) (84,458)
INVESTING ACTIVITIES
Acquisition of property and equipment................. -- (17,154,547) (17,154,547)
Preopening costs...................................... -- (551,016) (551,016)
Investment in option fee.............................. -- (583,900) (583,900)
Investment in The Resort at Summerlin, L.P. .......... (500,000) -- --
--------- ------------ ------------
Net cash used in investing activities................. (500,000) (18,289,463) (18,289,463)
FINANCING ACTIVITIES
Capital contributions................................. 500,000 -- 500,000
Capital contribution from General Partner............. -- 500,000 --
Capital contributions from limited partners........... -- 17,873,921 17,873,921
--------- ------------ ------------
Net cash provided by financing activities............. 500,000 18,373,921 18,373,921
Net change in cash and cash equivalents............... -- -- --
Cash and cash equivalents at beginning of period...... -- -- --
--------- ------------ ------------
Cash and cash equivalents at end of period............ $ -- $ -- $ --
========= ============ ============
SUPPLEMENTAL INFORMATION
Preopening costs incurred and paid by SCA on behalf of
The Resort at Summerlin, L.P........................ .......... $ -- $ 356,518
</TABLE>
See accompanying notes.
F-16
<PAGE> 138
STATEMENTS OF CASH FLOWS
(DEVELOPMENT STAGE COMPANIES)
(UNAUDITED)
<TABLE>
<CAPTION>
PERIOD FROM INCEPTION THROUGH MARCH 31, 1998
--------------------------------------------
CONSOLIDATED
RAS INC. RAS L.P. RAS INC.
---------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................... $ (47,356) $ (4,281,375) $ (47,356)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization................. -- 632,836 632,836
Non-cash interest expense for warrant put
options..................................... -- 1,750,000 1,750,000
Equity in loss of limited partnership......... 42,814 -- --
Limited partners' interest.................... -- -- (4,238,561)
Changes in operating assets and liabilities:
Accounts payable......................... 1,010 -- 1,010
Interest payable......................... -- 3,557,195 3,557,195
Interest receivable...................... -- (2,156,305) (2,156,305)
--------- ------------ ------------
Net cash used in operating activities.............. (3,532) (497,649) (501,181)
INVESTING ACTIVITIES
Capital expenditures............................... -- (32,518,012) (32,518,012)
Preopening costs................................... -- (3,258,126) (3,258,126)
Increase in construction and preopening payables... -- 5,968,772 5,968,772
Purchases of investments........................... -- (84,999,044) (84,999,044)
Investment in The Resort at Summerlin, L.P......... (675,000) -- --
Investment in licensing costs and other intangible
assets........................................... -- (138,333) (138,333)
Investment in option fee........................... -- (1,181,212) (1,181,212)
--------- ------------ ------------
Net cash used in investing activities.............. (675,000) (116,125,955) (116,125,955)
FINANCING ACTIVITIES
Capital contributions.............................. 682,500 -- 682,500
Capital contribution from General Partner.......... -- 675,000 --
Capital contribution from limited partners......... -- 63,661,059 63,661,059
Issuance of First Mortgage Notes................... -- 60,000,000 60,000,000
Issuance of Senior Subordinated Notes.............. -- 100,000,000 100,000,000
Increase in restricted assets...................... -- (12,400,000) (12,400,000)
Debt issuance costs................................ -- (12,453,769) (12,453,769)
--------- ------------ ------------
Net cash provided by financing activities.......... 682,500 199,482,290 199,489,790
--------- ------------ ------------
Net change in cash and cash equivalents............ 3,968 82,858,686 82,862,654
Cash and cash equivalents at beginning of period... -- -- --
--------- ------------ ------------
Cash and cash equivalents at end of period......... $ 3,968 $ 82,858,686 $ 82,862,654
========= ============ ============
SUPPLEMENTAL INFORMATION
Preopening costs incurred and paid by SCA on behalf
of The Resort at Summerlin, L.P.................. $ -- $ 2,650,436 $ 2,650,436
Distribution of non-cash asset..................... -- 1,181,202 1,181,202
Accrued debt issuance costs........................ -- 425,000 425,000
</TABLE>
See accompanying notes.
F-17
<PAGE> 139
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
The Resort at Summerlin, Limited Partnership ("RAS L.P.") is majority owned
by Swiss Casinos of America, Inc., formerly known as Seven Circle Gaming
Corporation ("SCA"). It was formed on August 15, 1996 for the purpose of
acquiring land and developing a casino resort in the Summerlin master planned
community in Las Vegas, Nevada ("Summerlin"). The Resort at Summerlin, Inc.
("RAS Inc.") is a wholly-owned subsidiary of SCA and serves as general partner
of RAS L.P. The ownership percentages in RAS L.P. of RAS Inc., SCA and
unaffiliated investors are 1.00%, 91.26% and 7.74%, respectively. RAS L.P.
allocates earnings and losses to the partners in accordance with these
percentages.
RAS L.P. purchased 54.5 acres of land located in Summerlin on which it is
developing and plans to operate a resort facility (the "Resort"), to include a
casino, hotel, conference center, spa, restaurants, and retail center. The land
is zoned for gaming, and the Las Vegas City Council has granted the special use
permit required to develop the proposed facility.
RAS L.P. and RAS Inc. (collectively the "Companies") are development stage
companies as they are devoting substantially all of their efforts to develop the
Resort. The Companies have no current source of income and do not anticipate any
material amounts until such time as the Resort is operational. The Resort is
expected to open for business in April 1999.
BASIS OF PRESENTATION
The accompanying unaudited financial statements as of March 31, 1998, the
quarters ended March 31, 1998 and 1997, and the period from inception through
March 31, 1998 have been prepared in accordance with generally accepted
accounting principles for interim financial information. In the opinion of
management, all adjustments (consisting of normal, recurring adjustments)
necessary for a fair presentation have been included. Results for the interim
periods are not necessarily indicative of the results to be expected for a full
year.
As prescribed by Statement of Position 78-9, Accounting for Investments in
Real Estate Ventures, RAS Inc.'s indirect ownership in RAS L.P. through SCA and
its direct 1% general partnership investment constitutes a controlling interest
and is therefore considered a subsidiary requiring consolidation in the
financial statements of RAS Inc. RAS Inc.'s sole business activity at this time
is its 1% general partnership interest in RAS L.P. The consolidated RAS Inc.
financial statements include the following adjusting entries:
- Elimination of RAS Inc.'s investment in RAS L.P.
- Reclassification of the 99% limited partnership interests in RAS L.P.
to minority interest within the balance sheet.
- Allocation of 99% of the net losses of RAS L.P. to the limited
partners and the elimination of RAS Inc. equity interest in the losses
of RAS L.P.
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid debt instruments with a maturity of
three months or less when purchased. Cash equivalents are carried at cost which
approximates fair value.
RESTRICTED ASSETS
Restricted assets consists of funds held in escrow for future payment of
interest incurred on the First Mortgage Notes (see Note 3) during the first five
quarters following the opening of the Resort. Use of the escrow funds for each
interest payment is subject to various financial tests. Any unused funds at the
end of the five quarter period must be applied to the outstanding principal
balance on the notes. As of December 31,
F-18
<PAGE> 140
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
1997, all escrow funds were held in a cash equivalent fund. During 1998, this
cash was used to purchase a short term investment. See Note 2 for detail of
restricted investments.
CONSTRUCTION IN PROGRESS
Expenditures incurred for the design and construction of the Resort have
been capitalized as construction in progress. These amounts are expected to be
reclassified to buildings upon completion of the facility and will be
depreciated over the useful life of the asset.
DEPRECIATION
Property and equipment are stated at cost and are depreciated on a
straight-line basis over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings................................................... 30 years
Furniture, fixtures and equipment........................... 3-7 years
</TABLE>
SHORT-TERM INVESTMENTS HELD TO MATURITY
Management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when the Company has
the positive intent and ability to hold the securities to maturity.
Held-to-maturity securities are stated at amortized cost.
The amortized cost of debt securities classified as held-to-maturity is
adjusted for amortization of premiums and accretion of discounts to maturity, or
in the case of mortgage-backed securities, over the estimated life of the
security. Such amortization is included in interest income from investments.
Interest and dividends are included in interest income from investments.
Realized gains and losses, and declines in value judged to be
other-than-temporary are included in net securities gains (losses). The cost of
securities sold is based on the specific identification method.
DEBT DISCOUNT AND ISSUANCE COSTS
Debt discount and issuance costs are capitalized and amortized to expense
based on the terms of the related debt agreements using the effective interest
method or a method which approximates the effective interest method.
PREOPENING COSTS
Development costs incurred by RAS L.P. are capitalized and will be charged
to expense at the commencement of operations. These costs include legal fees,
incremental personnel costs, travel, and other costs related to the development
of the Resort.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 entitled Reporting on the Costs of Start-up
Activities ("SOP 98-5") which requires entities to expense costs of preopening
activities as they are incurred. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. Accordingly, the Companies will adopt the
statement in fiscal year 1999. Upon adoption, the Companies are required to
report the initial adoption as a cumulative effect of a change of accounting
principle as described in Accounting Principles Board Opinion No. 20, Accounting
Changes, during the first quarter of their fiscal year 1999 and expense
subsequent preopening costs as incurred. The cumulative effect upon adoption
will result in a one-time charge to income in an amount equal to the net book
value of the Companies' preopening costs. Under the Companies' existing policy,
the preopening expenses would have
F-19
<PAGE> 141
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
been expensed upon the opening of the Resort, which is currently estimated to be
during the second quarter of 1999.
LICENSING COSTS
RAS L.P. capitalizes certain license costs required for the operation of
the casino, hotel and restaurants. These costs will be amortized over the term
of the license (15 years for the hotel license), commencing with the opening of
the Resort.
EXPENDITURES INCURRED BY SCA
SCA incurs various expenditures on behalf of RAS L.P. which are reflected
as contributed capital on the books of RAS L.P. These amounts primarily relate
to salaries and personnel costs of employees who have devoted a portion of their
time to the development of the Resort. During 1997 and 1996, these expenditures
were $2,293,918 and $356,518, respectively. In accordance with the accounting
policies noted above, RAS L.P. capitalized a portion of these costs as
preopening costs and expensed amounts relating to general and administrative
activities.
CAPITALIZATION OF INTEREST
RAS L.P. capitalizes interest costs on amounts expended on capital projects
based upon the weighted average interest costs of borrowings outstanding during
the period of construction. During the quarter ended March 31, 1998 and the year
ended December 31, 1997, RAS L.P. capitalized interest costs of $1,034,005 and
$6,932, respectively, as construction in progress.
INCOME TAXES
RAS L.P. is a limited partnership. Accordingly, no provision for federal or
state income taxes was recorded because any taxable income or loss is included
in the income tax returns of the partners.
SCA includes RAS Inc. in its consolidated state and federal tax returns.
During 1996 and 1997, RAS Inc. has had minimal operating losses on both a tax
and book basis. However, the utilization of these losses against future earnings
is uncertain and all deferred tax assets will be fully reserved until such time
as the earnings have been realized.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and the
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 1997 audited financials statements have been
reclassified to conform with the 1998 presentation. These reclassifications had
no effect on the Companies' results of operations.
FINANCIAL INSTRUMENTS
The Companies' financial instruments consist of cash, investments, accounts
payable, accrued expenses, long term debt and warrants redeemable for
partnership interests. The carrying values of cash, accounts payable and accrued
expenses approximate their fair value. The carrying value of investments
approximates the fair value due to the short term maturities of those
instruments. The Company believes the fair values and
F-20
<PAGE> 142
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
the carrying values of the long term debt and warrant would not be materially
different due to the instruments' interest rates approximating market rates for
similar projects at March 31, 1998 and December 31, 1997.
2. INVESTMENTS
As of March 31, 1998, all of the Companies' investments and restricted
investments were classified as held-to-maturity. These securities consist of
U.S. governmental agency mortgage backed securities with contractual maturities
of six to nine months. Carrying values of the investments approximate their fair
values and gross unrealized gains and losses were not material.
3. LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
First Mortgage Notes due 2004................... $ 60,000,000 $ 60,000,000
Senior Subordinated Pay-in-Kind Notes due
2007.......................................... 100,000,000 100,000,000
Original issue discount.................... (5,811,350) (5,868,933)
------------ ------------
94,188,650 94,131,067
------------ ------------
Total long-term debt............................ $154,188,650 $154,131,067
============ ============
</TABLE>
On December 31, 1997, the Companies issued, as joint and several
co-obligors, $100.0 million of First Mortgage Notes due March 31, 2004 (the
"Mortgage Notes") of which $60.0 million was drawn at closing and $100.0 million
of Senior Subordinated Notes due 2007 (the "Senior Subordinated Notes"). The
Mortgage Notes Credit Agreement (the "Credit Agreement") and the Senior
Subordinated Notes Indenture (the "Indenture") contain various covenants and
restrictions as more fully described below.
MORTGAGE NOTES
Prior to the Resort opening for business, at the option of the Companies,
interest on the Mortgage Notes will accrue at the London Interbank Offered Rate
("LIBOR") for one or three month periods plus 4% or at the Base Rate (higher of
Federal Reserve prime rate or federal funds rate plus one half of 1%) plus 3%.
The interest rate was established at 11.5% on December 31, 1997 and subsequently
adjusted to 9.7% in January 1998. Interest is payable on the last business day
of each calendar quarter for Base Rate tranches and at the end of the applicable
interest period but no less frequently than quarterly for LIBOR tranches.
Subsequent to the opening of the Resort, the percentage above LIBOR or the base
rate reference rates will decrease based on the debt ratios of RAS L.P. The
$40.0 million of unissued notes can be drawn in increments of at least $10.0
million each, on one or more quarter ends from March 31, 1998 through March 31,
1999.
The Mortgage Notes are secured by a first perfected security interest in
all assets comprising the Resort, including all real and personal property, all
intangibles and all furniture, fixtures and equipment, together with title
insurance. In addition, $12.4 million was deposited in an interest escrow
account for the benefit of the Mortgage Note holders, which will support the
interest payment obligations during the five fiscal quarters following the
opening of the Resort (the "Commencement Date"). This amount has been reflected
as restricted cash on the accompanying balance sheet.
F-21
<PAGE> 143
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT -- (CONTINUED)
Prior to the conclusion of construction, the Companies anticipate drawing
the full amount of the Mortgage Notes. Scheduled maturities of the Mortgage
Notes will be as follows (in millions):
<TABLE>
<S> <C>
1998........................................................ $ --
1999........................................................ --
2000........................................................ 12.5
2001........................................................ 14.5
2002........................................................ 19.0
Thereafter.................................................. 54.0
------
$100.0
======
</TABLE>
An amount equal to 75% of the first $15.0 million of excess cash flow, as
defined in the Credit Agreement, and 25% of the excess cash flow above $15.0
million is due annually in addition to the above amounts.
The Credit Agreement contains certain covenants including those restricting
additional indebtedness, liens, change of business, sale and purchase of assets,
mergers and consolidations, investments thereafter with affiliates and financial
covenants. At March 31, 1998, management believes the Companies are in
compliance with all covenants.
SENIOR SUBORDINATED NOTES
The Note Issuers have issued 100,000 units consisting of $1,000 principal
amount of 13% Senior Subordinated Notes due December 15, 2007 and an L.P.
Warrant, which can be exchanged for a Corporate Warrant at the purchaser's
election. RAS L.P. issued the L.P. Warrants and RAS Warrant Co. ("Warrant Co.")
issued the Corporate Warrants (both warrants collectively referred to as the
"Note Warrants"). Warrant Co. is a wholly-owned subsidiary of SCA and at
December 31, 1997, Warrant Co. has one share of common stock outstanding from a
total of 100,001 authorized shares (see "Warrants" below). The Senior
Subordinated Notes are unsecured and subordinated in right of payment to all
existing and future senior indebtedness of the Note Issuers, including the
Mortgage Notes.
Interest at the rate of 13% per annum of the principal is payable
semiannually beginning in June 1998. The interest is payable either in cash or
in additional Senior Subordinated Notes at the option of RAS L.P. through June
1999, and thereafter is payable in cash. In addition to the 13% coupon rate on
the Senior Subordinated Notes, RAS L.P. accrues additional interest expense of
7% for a total of 20% (see "Warrants" below).
On or after December 15, 2002, the Senior Subordinated Notes may be
redeemed at the Companies' option in whole or in part at face value plus accrued
and unpaid interest at the time of redemption. In addition, at any time prior to
December 15, 2000, the Companies may redeem up to 35% of the aggregate principal
with the cash proceeds received from one or more public equity offerings at a
redemption price equal to 113% of the principal amount, provided that at least
$65.0 million of the original principal amount remains outstanding immediately
after the redemption.
If the Nevada Gaming Commission (the "Commission") or the Nevada State
Gaming Control Board (the "Board") (each a "Nevada Gaming Authority" or together
the "Nevada Gaming Authorities") requires that a holder or beneficial holder of
the Senior Subordinated Notes must be licensed, qualified or found suitable, and
if the holder fails to apply or is not licensed, the Companies have the option
to redeem such Senior Subordinated Notes, at a redemption price as defined in
the Indenture.
By April 30, 1998, the Companies are required to file a registration
statement with respect to an offer to exchange the Senior Subordinated Notes for
a series of subordinated notes with terms substantially identical which will be
registered with the Securities and Exchange Commission.
F-22
<PAGE> 144
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT -- (CONTINUED)
The restrictive covenants relating to the Senior Subordinated Notes will
limit the incurrence of additional indebtedness, the payment of dividends on and
the redemption of certain subordinated obligations, investments, sale of assets
and subsidiary stock, transactions with affiliates and consolidations, mergers
and transfers of all or substantially all the assets of the Companies. At March
31, 1998, management believes the Companies are in compliance with all
covenants.
WARRANTS
Each L.P. Warrant will entitle the holder to acquire on or after December
31, 1997 and before the expiration date of December 15, 2007, one L.P.
Partnership Interest representing 0.00008% of the total partnership interest in
RAS L.P. at a price per L.P. Warrant of $0.01, subject to the provisions of the
partnership agreement and adjustments from time to time upon the occurrence of
certain changes in the terms of the partnership interests, distributions, and
certain issuances of options or convertible securities. Holders of L.P. Warrants
will not by virtue of being such holders have any rights as limited partners of
RAS L.P.
Each Corporate Warrant will entitle the holder to acquire, on the exercise
date and prior to December 15, 2007, one share of common stock of Warrant Co. at
a price of $0.01 per share, subject to certain adjustments from time to time
upon the occurrence of certain changes in the Common Stock of Warrant Co. Upon
the exercise of a Corporate Warrant, Warrant Co. will exercise an L.P. Warrant
in RAS L.P. entitling it to the ownership percentage in RAS L.P. discussed
above. Holders of Corporate Warrants will not, by virtue of being such holders,
have any rights as stockholders of Warrant Co. As of December 31, 1997, all
warrants outstanding were Corporate Warrants.
In the event that any existing limited partner proposes to sell or
otherwise transfer at least 15% of the total L.P. Partnership Interests, the
holders of the Note Warrants and L.P. Partnership interests shall have the right
to require such existing limited partner to cause the proposed purchaser to
purchase, on the same terms and conditions, a percentage of the number of Note
Warrants and the L.P. Partnership interests owned by each such holder.
In the event that any existing limited partner proposes to sell or transfer
any L.P. Partnership Interests aggregating 51% or more of the total L.P.
Partnership Interests, the existing Limited Partner shall have the right to
require the holders of the Note Warrants and L.P. Partnership interests to sell
on the same terms and conditions from each of them a percentage of the number of
Note Warrants and L.P. Partnership Interests owned by each such holder.
If RAS L.P. has not completed an initial public equity offering of at least
$50.0 million of gross proceeds with respect to the L.P. Partnership Interests
on or before December 31, 2005, each holder of the Note Warrants will have, for
a 30-day period beginning on April 15, 2006, or if the Mortgage Notes are
prepaid prior to their maturity date, beginning on April 15, 2003, the one-time
right to require RAS L.P. to purchase the Note Warrants at the takeout price,
described below. RAS L.P. will have a one-time right, for a 30-day period
beginning on October 15, 2006, or if the Mortgage Notes are prepaid prior to
their maturity date, beginning on October 15, 2003, to purchase the Note
Warrants on a pro rata basis, for a purchase price equal to the takeout price.
The takeout price is defined as the greater of:
- the value of the Note Warrants as determined by a formula based on eight
times earnings before interest, taxes, depreciation and amortization
("EBITDA") for the fiscal year ending December 31, 2005, or if the
Mortgage Notes are prepaid, for the fiscal year ending December 31, 2003;
or
- the value of the Note Warrants as determined by a formula based on eight
times the average EBITDA for each of the fiscal years ending December 31,
2003, 2004, and 2005, or if the Mortgage Notes are prepaid, December 31,
2001, 2002, and 2003; or
F-23
<PAGE> 145
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. LONG-TERM DEBT -- (CONTINUED)
- an amount necessary to cause the Senior Subordinated Notes and the Note
Warrants to create a bond equivalent internal rate of return of 20% from
the issue date to the date of purchase.
RAS L.P. records interest expense at a total rate of 20% to account for the
put option. Interest in excess of the stated Senior Subordinated Notes will be
credited to warrant liability and either be settled in the terms above or upon
the exercise of the warrants.
Pursuant to the Nevada Gaming Control Act, RAS L.P. may not issue an L.P.
Partnership Warrant Interest to Warrant Co. or any other holder of a partnership
warrant without the prior approval, licensing and registration, as applicable,
of Warrant Co. or such other holder as a limited partner in RAS L.P. by the
Nevada Gaming Authorities.
4. LAND PURCHASE AND OPTION AGREEMENT
On May 22, 1996, Seven Circle Resorts, Inc. ("SCR"), an affiliated company,
executed a Purchase and Option Agreement (the "Purchase Agreement") to purchase
approximately 54.5 acres of property ("Sale Parcel") and to secure an option to
acquire approximately 22 additional acres of property ("Option Parcel") in Las
Vegas, Nevada, to construct and operate a resort hotel and casino. SCR assigned
the Purchase Agreement to RAS L.P. on August 15, 1996.
LAND PURCHASE AGREEMENT
On August 15, 1996, RAS L.P. closed on the purchase of the Sale Parcel for
$16,620,000. On January 7, 1998, RAS L.P. commenced grading and construction on
the site, having substantially complied with all conditions outlined in the
Purchase Agreement.
OPTION AGREEMENT
On August 15, 1996, RAS L.P. executed an option agreement ("Option
Agreement"), paying $583,900 for the right to purchase the Option Parcel. The
Option Agreement is valid until August 15, 2000.
The option purchase price is $5,839,000, plus an increase each anniversary
date equal to inflation for the previous year. On the subsequent anniversary
dates of the Option Agreement, RAS L.P. will be required to pay an additional
option fee equal to 10% of the purchase price then in effect.
The amount of each option fee that exceeds the original option fee of
$583,900 will be credited towards the option purchase price at closing. RAS L.P.
can allow the option to lapse by failing to make an annual option fee payment.
On August 8, 1997, RAS L.P. paid and capitalized the second option fee of
$597,312.
On December 27, 1997, RAS L.P. assigned the Option Agreement to SCA through
a preferential distribution. A new company will be established to develop the
option parcel. Any carried interest held by SCA in the Option Parcel development
company and any other economic benefit derived from the Option Parcel will be
shared by the Partners based on their current ownership interests in RAS L.P.
5. COMMITMENTS AND CONTINGENCIES
LICENSING
As a condition of the Purchase Agreement, RAS L.P., or an affiliate, was
required to obtain a Nevada gaming license prior to the commencement of
construction of the facility (see "Land Purchase Agreement" above). Seven Circle
Resorts of Nevada, Inc. ("SCRN"), an affiliated company, was formed for this
purpose.
F-24
<PAGE> 146
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Effective September 5, 1997, the Board granted a distributor's gaming
license to SCRN. The receipt of this gaming license indicates the Board and the
Commission have found SCRN and its key principals suitable. In order to operate
a casino, RAS L.P. will have to obtain a nonrestricted gaming license, which it
intends to apply for during the construction period. In addition to findings of
suitability, the receipt of a nonrestricted gaming license requires the review
by the Board and the Commission of several aspects of the proposed casino,
including the source of funds, location, internal controls, surveillance systems
and operating procedures. The Board and Commission may act upon the suitability
and/or license certain key executives and other investors in the nonrestricted
gaming operations. Because of the common ownership and control shared by SCRN
and RAS L.P., management believes the granting of SCRN's distributor's license
has increased the likelihood that RAS L.P.'s nonrestricted license application
will be approved.
In the event RAS L.P. does not obtain a nonrestricted gaming license due to
the ownership by one or more of the minority partners, the other partners have
the right to purchase the noncomplying partner's ownership interest, thereby
enabling receipt of the gaming license.
CONSTRUCTION AGREEMENT
RAS L.P. executed a construction contract for the Resort on the basis of
the cost of work plus the fee payable to the general contractor, with a
guaranteed maximum price of $133 million. The construction contract contains
liquidated damage clauses assessable against the general contractor for each day
that the Resort is not completed by the date set for final completion, subject
to certain conditions. Management estimates the effective date for liquidated
damages to be April 23, 1999.
ROYALTY AGREEMENT
RAS L.P. is subject to a royalty agreement under which it will pay a
royalty fee of $1 million in each of the first five years commencing at the
earlier of the opening of the hotel and casino operations or 18 months following
commencement of construction. The royalty agreement and a related golf course
agreement will enable RAS L.P. to use the Summerlin name and will provide RAS
L.P. with up to 50% of the tee times on the adjacent Tournament Players Club at
the Canyons golf course. The royalty fee will increase on each fifth anniversary
thereafter by an amount equal to 15% of the annual amount paid in the preceding
five-year period. RAS L.P. has the right to secure up to 75% of the tee times by
paying an additional $125,000 per year.
HOTEL FRANCHISE LICENSE AGREEMENT
On December 16, 1997, RAS L.P. entered into a hotel franchise license
agreement. The agreement gives RAS L.P. the right to operate under the name of
the franchisor, and to use its trade name, trademarks and systems in connection
with nongaming operations.
The term of the license is for 15 years. RAS L.P. has the right to
terminate the agreement effective December 31, 2005 or December 31, 2010 if the
franchisor has not met certain numbers of hotels or guest rooms under contract.
The franchisor will provide access to its central reservation system in order to
facilitate worldwide reservations at the hotel, in addition to providing
marketing services. The franchisor will provide training to the employees with
respect to the reservation and property management system.
RAS L.P. will pay the following fees:
- Fixed fee, currently $200 per room per annum.
- Variable fee of 3% of gross room revenue derived from reservations made
through the central reservation system.
- Continuing fee of 1.75% of the hotel's gross revenues, as defined.
F-25
<PAGE> 147
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
- A marketing fee of 1.5% of the hotel's gross revenues, as defined.
- Certain incidental program costs.
FUTURE DEVELOPMENTS
RAS L.P. has negotiated the right of first offer with the master developer of
Summerlin to develop an additional four designated gaming sites in Summerlin. In
the event that RAS L.P. cannot finance the development of a gaming site under
the Credit Agreement or the Indenture, RAS L.P. has the ability to assign the
rights to SCA or an affiliate.
CASINO LEASE
On August 15, 1996, SCRN and RAS L.P. entered into a lease ("Casino Lease")
whereby SCRN will rent casino space from RAS L.P. beginning on the first day of
operations in the event RAS L.P. has not yet obtained a nonrestricted gaming
license (see "Licensing" above for other remedies available to RAS L.P. in the
event a nonrestricted gaming license is not obtained). The lease provides for
annual rental payments of $2.4 million, prorated monthly. The lease will
terminate upon the earlier of (i) the third anniversary of the commencement date
or (ii) the date upon which RAS L.P. is granted a nonrestricted gaming license.
MANAGEMENT FEES
Under the terms of RAS L.P.'s limited partnership agreement, RAS L.P. is to pay
RAS Inc. a monthly fee equal to 3% of monthly net revenues and 6% of EBITDA as
compensation for management services provided to RAS L.P. This fee cannot exceed
10% of net revenues in any given month and may be restricted by certain
covenants in the Credit Agreement and the Indenture.
F-26
<PAGE> 148
======================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH AN 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 THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN ANY CHANGE IN THE ISSUERS SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................... iv
Notice to Investors..................... v
Prospectus Summary...................... 1
Risk Factors............................ 15
Use of Proceeds......................... 26
Capitalization.......................... 27
Selected Consolidated Financial Data.... 28
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 30
Business................................ 32
Las Vegas Marketing and Industry........ 40
Regulation and Licensing................ 42
Management.............................. 47
Certain Transactions.................... 51
Ownership of Interests.................. 53
The Exchange Offer...................... 55
Description of the Notes................ 64
Description of Disbursement Agreement... 80
Insurance............................... 81
Additional Material Agreements.......... 82
Certain U.S. Federal Income Tax
Consequences.......................... 87
Plan of Distribution.................... 93
Book-Entry, Delivery and Form........... 93
Legal Matters........................... 95
Experts................................. 96
Glossary................................ 96
Index to Consolidated Financial
Statements............................ F-1
</TABLE>
UNTIL , 1998 (90 DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE
OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
$100,000,000
THE RESORT AT SUMMERLIN,
LIMITED PARTNERSHIP
THE RESORT AT SUMMERLIN, INC.
OFFER TO EXCHANGE $1,000
IN PRINCIPAL AMOUNT OF
13% SERIES B SENIOR SUBORDINATED PIK NOTES DUE 2007 REGISTERED UNDER THE
SECURITIES ACT FOR EACH $1,000 IN PRINCIPAL AMOUNT OF $100.0 MILLION PRINCIPAL
AMOUNT OUTSTANDING 13% SENIOR SUBORDINATED PIK NOTES DUE 2007
THE EXCHANGE AGENT FOR THE
EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY
OF NEW YORK
-------------------------
PROSPECTUS
-------------------------
, 1998
======================================================
<PAGE> 149
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.7502(1) of the Nevada General Corporation Law allows a Nevada
corporation to indemnify any person made or threatened to be made a party to any
action (except an action by or in the right of the corporation, a "derivative
action"), by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
against expenses including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he acts in a good faith manner which he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal proceeding, had no reasonable cause to believe that
his conduct was unlawful. Under Section 78.7502(2), a similar standard of care
applies to derivative actions, except that indemnification is limited solely to
expenses (including attorneys' fees) incurred in connection with the defense or
settlement of the action and court approval of the indemnification is required
where the person seeking indemnification has been found liable to the
corporation. In addition, Section 78.751(2) of the Nevada General Corporation
law allows a corporation to advance payment of indemnifiable expenses prior to
final disposition of the proceeding in question upon receipt of an undertaking
by or on behalf of the director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by the corporation. Any discretionary indemnification
made under Subsections 78.7502(1) or (2), may be made upon a determination that
such indemnification is proper in the circumstances as determined by the
stockholders, a majority of the Board of Directors at a meeting at which a
quorum of disinterested directors is present, or by written legal opinion.
Provisions relating to liability and indemnification of officers and
directors of RAS for acts by such officers and directors are contained in
Article IV of the Bylaws of RAS attached hereto as Exhibit 3.4 and incorporated
herein by reference. The Bylaws provide that RAS shall indemnify all directors,
officers, employees and agents of RAS to the fullest extent permitted by the
Nevada General Corporation Law, as amended from time to time. The Bylaws,
consistent with and to the extent allowable under Nevada General Corporation
Law, state, among other things, that upon the determination of the stockholders,
a majority of the Board of Directors at a meeting which a quorum of
disinterested directors is present, or by independent legal counsel written
opinion if a majority vote of a quorum consisting of disinterested directors
cannot be obtained: (1) RAS shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of RAS) by reason of the fact that he
or she is or was a director, officer, employee or agent of RAS or is or was
serving at the request of RAS as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement, actually and reasonably incurred by him or her in connection with
the action , suite or proceeding if he or she acted in good faith and in a
manner which he or she reasonably believe to be in or not opposed to the best
interests of RAS, and with respect to any criminal action nor proceeding, had no
reasonable cause to believed his or her conduct was unlawful; and (2) RAS shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of RAS
to procure a judgment in its favor by reason of the act that he or she is or was
a director, officer, employee or agent to RAS, or is or was serving at the
request of RAS as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorney fees, actually and reasonably
incurred by him or her in connection with the defense or settlement of the
action or suit if he or she acted in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interest of RAS and
except that no indemnification shall be made for any claim, issue or manner as
to which such person has been adjudged by a court of competent jurisdiction,
after exhaustion of all aspects there from, to be liable to RAS or for amounts
paid in settlement to RAS, unless and only to the extent that the court in which
the action or suit was brought or other court of competent jurisdiction
II-1
<PAGE> 150
determines upon application that in view of all the circumstances of the case,
the person is fairly and reasonably entitled to indemnity or such expenses as
the court deems proper.
The Bylaws further provide that RAS shall pay the expenses of officers and
directors as they are incurred and in advance of the final disposition upon
receipt of an undertaking by or on behalf of the director or officer to repay
the amount if it is ultimately determined by a court of competent jurisdiction
that he is not entitled to be indemnified by RAS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of RAS pursuant
to the foregoing provisions, or otherwise, RAS has 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. See Item 22, "Undertakings."
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<C> <S>
2.1 December 22, 1997 Purchase Agreement.*
3.1 Certificate of Limited Partnership of The Resort at
Summerlin, Limited Partnership.*
3.2 Agreement of Limited Partnership, as amended, of The Resort
at Summerlin, Limited Partnership.*
3.3 Articles of Incorporation of The Resort At Summerlin, Inc.*
3.4 Bylaws of The Resort at Summerlin, Inc.*
4.1 December 31, 1997 Indenture.*
4.2 December 30, 1997 Exchange and Registration Rights
Agreement.*
4.3 December 30, 1997 Registration Rights and Limited Partners'
Agreement.*
4.4 December 30, 1997 Warrant Agreement for Partnership
Warrants.*
4.5 December 30, 1997 Warrant Agreement for Corporate Warrants.*
4.6 December 31, 1997 Disbursement Agreement.*
4.7 December 31, 1997 Subordinated Notes Proceeds Accounts
Agreement.*
4.8 December 31, 1997 Mortgage Notes Proceeds Account
Agreement.*
4.9 December 31, 1997 Interest Escrow Account Agreement.*
4.10 December 31, 1997 Partnership Funds Account Agreement.*
4.11 December 31, 1997 Global Note in the original principal
amount of $100.0 million.*
4.12 Form of Partnership Warrants.*
4.13 Form of Corporate Warrants.*
5.1 Opinion of Baker & Hostetler LLP.*
10.1 December 22, 1997 Construction Contract.*
10.2 December 16, 1997 License Agreement between RAS and Regent
Hotels Worldwide, Inc.*
10.3 December 29, 1997 Architect Agreement between RAS and Paul
Steelman, Ltd.*
10.4 August 15, 1996 Development Declaration and Option to
Repurchase between RAS and Howard Hughes Properties, Limited
Partnership.*
10.5 August 15, 1996 Royalty Agreement between RAS and Howard
Hughes Properties, Limited Partnership.*
10.6 December 22, 1997 Guaranty of Completion of J.A. Jones,
Inc.*
10.7 December 31, 1997 Credit Agreement.*
10.8 December 30, 1997 Subordinated Notes Proceeds Agreement.*
10.9 Golf Course Agreement.*
</TABLE>
II-2
<PAGE> 151
<TABLE>
<C> <S>
10.10 January 13, 1998 Construction Management Contract.*
23.1 Consent of Baker & Hostetler LLP (included in the opinion
filed as Exhibit 5.1 to this Registration Statement).*
23.2 Consent of Ernst & Young LLP.**
23.3 Consent of United States Trust Company of New York (included
in Exhibit 25.1 to this Registration Statement).*
24.1 Powers of Attorney (included on signature page of the
Registration Statement).*
25.1 Statement of Eligibility and Qualification on Form T-1 under
the Trust Indenture Act of 1939 of United States Trust
Company of New York, as Trustee of the Indenture relating to
the 13.0% Senior Subordinated PIK Notes due 2007.*
27.1 Financial Data Schedule.*
27.2 Financial Data Schedule.*
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.*
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
(b) FINANCIAL STATEMENT SCHEDULES.
None.
ITEM 22. UNDERTAKINGS.
The Registrants hereby undertake:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant 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 Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE> 152
(4) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this 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 20.0% 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 this registration statement
or any material change to such information in this registration
statement.
Provided, however, that paragraphs (5)(i) and (5)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(5) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(6) 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.
II-4
<PAGE> 153
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement, or amendment thereto, to be filed
on its behalf by the undersigned, thereupon duly authorized, in the City of Las
Vegas, State of Nevada, on June 22, 1998.
THE RESORT AT SUMMERLIN, LIMITED
PARTNERSHIP
(Registrant)
By: The Resort at Summerlin, Inc.,
a Nevada corporation, its general
partner
By: /s/ BRIAN MCMULLAN
------------------------------------
Brian McMullan
Its: President and Chief Executive
Officer
(Principal Executive Officer)
By: /s/ JOHN TIPTON
------------------------------------
John Tipton
Senior Vice President, Chief
Financial
Officer and General Counsel
(Principal Financial Officer)
By: *
------------------------------------
Jeff Smith
Treasurer, Secretary and Financial
Controller
(Principal Accounting Officer)
By: *
------------------------------------
Jim Fonseca
Senior Vice President, Gaming
Operations/Director
By: *
------------------------------------
Quinton Boshoff
Senior Vice President, Slot
Operations/Director
By: *
------------------------------------
Hans Jecklin
Chairman of the Board of Directors
By: *
------------------------------------
Christiane Jecklin
Member of the Board of Directors
*By: /s/ JOHN TIPTON
---------------------------------
John Tipton
Attorney-in-Fact
II-5
<PAGE> 154
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement, or amendment thereto, to be filed
on its behalf by the undersigned, thereupon duly authorized, in the City of Las
Vegas, State of Nevada, on June 22, 1998.
THE RESORT AT SUMMERLIN, INC.
(Registrant)
By: /s/ BRIAN MCMULLAN
------------------------------------
Brian McMullan
President and Chief Executive
Officer
(Principal Executive Officer)
By: /s/ JOHN TIPTON
------------------------------------
John Tipton
Senior Vice President, Chief
Financial
Officer and General Counsel
(Principal Financial Officer)
By: *
------------------------------------
Jeff Smith
Treasurer, Secretary and Financial
Controller
(Principal Accounting Officer)
By: *
------------------------------------
Jim Fonseca
Senior Vice President, Gaming
Operations/Director
By: *
------------------------------------
Quinton Boshoff
Senior Vice President, Slot
Operations/Director
By: *
------------------------------------
Hans Jecklin
Chairman of the Board of Directors
By: *
------------------------------------
Christiane Jecklin
Member of the Board of Directors
*By: /s/ JOHN TIPTON
---------------------------------
John Tipton
Attorney-in-Fact
II-6
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Summary Selected
Consolidated Financial Data", "Selected Consolidated Financial Data" and
"Experts" and to the use of our report dated March 5, 1998, in Amendment No. 2
to the Registration Statement (Form S-4) and related Prospectus of The Resort
at Summerlin, Limited Partnership and The Resort at Summerlin, Inc. for the
registration of $100,000,000 Series B 13% Senior Subordinated PIK Notes due
2007.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Denver, Colorado
June 22, 1998
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
THE RESORT AT SUMMERLIN, LIMITED PARTNERSHIP
THE RESORT AT SUMMERLIN, INC.
1160 Town Center Drive, Suite 200
Las Vegas Nevada, 89124
Offer to Exchange its 13% Series B Exchange Senior Subordinated PIK Notes due
2007 ("New Notes"), which have not been registered under the Securities Act
for any and all of its outstanding 13% Senior Subordinated PIK Notes due 2007
("Old Notes"), pursuant to the Prospectus dated___________________, 1998.
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
____________________, 1998 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE
OFFER MAY BE EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
THE EXPIRATION DATE.
To:
UNITED STATES TRUST COMPANY OF NEW YORK, Exchange Agent
Facsimile Transmission: (212) 780-0592
Confirm by telephone to:
(800)548-6565
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
P.O. Box 844 770 Broadway-13th Floor 111 Broadway
Cooper Station Corporate Trust Operations Lower Level
New York, NY 10276-0844 Department New York, NY 10006
(registered or certified mail New York, NY 10003 Attn: Corporate Trust Services
recommended)
</TABLE>
----------
DELIVERY OF THIS LETTER OF TRANSMITTAL 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.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL, INCLUDING THE
INSTRUCTIONS TO THIS LETTER, CAREFULLY BEFORE COMPLETING ANY BOX BELOW.
