<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1998
REGISTRATION NO 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
HARD ROCK HOTEL, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
NEVADA 7999 88-0306263
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>
--------------------------
4455 PARADISE ROAD
LAS VEGAS, NEVADA 89109
(702) 693-5000
(Address, including zip code, and telephone number, including
area code of registrant's principal executive offices)
--------------------------
BRUCE R. DALL
CHIEF FINANCIAL OFFICER AND TREASURER
4455 PARADISE ROAD
LAS VEGAS, NEVADA 89109
(702) 693-5000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------------
COPIES TO:
MICHAEL A. WORONOFF
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
300 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 687-5000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: as soon as
practicable after the effective date of this registration statement.
--------------------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 1/4% Series B Senior Subordinated Notes
due 2005.................................. $120,000,000 100% $120,000,000 $35,400
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED MAY 21, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
OFFER FOR ALL OUTSTANDING 9 1/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2005 IN
EXCHANGE FOR 9 1/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2005, WHICH HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
HARD ROCK HOTEL, INC.
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
, 1998, UNLESS EXTENDED.
Hard Rock Hotel, Inc. (the "Company") hereby offers, upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (which together constitute the "Exchange Offer"), to
exchange up to $120,000,000 aggregate principal amount of 9 1/4% Series B Senior
Subordinated Notes due 2005 (the "New Notes"), which have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), for a like
principal amount at maturity of the issued and outstanding 9 1/4% Series A
Senior Subordinated Notes due 2005 (the "Old Notes" and, together with the New
Notes, the "Notes"). The terms of the New Notes are identical in all material
respects to the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes. The Company issued $120,000,000
aggregate principal amount of Old Notes on March 23, 1998, pursuant to
exemptions from, or transactions not subject to, the registration requirements
of the Securities Act and applicable state securities laws (the "Offering").
The Notes bear interest at the rate of 9 1/4% per annum, payable
semi-annually in arrears on April 1 and October 1 of each year, commencing on
October 1, 1998. The Notes mature on April 1, 2005. The Notes are redeemable at
the option of the Company, in whole or in part, at any time on or after April 1,
2002 at the redemption prices set forth herein, plus accrued and unpaid
interest, if any, to the redemption date. The Company will have the option to
direct a holder's disposition of the Notes or redeem the Notes pursuant to
certain regulatory requirements. On or before April 1, 2001, the Company may
redeem up to 35% in aggregate principal amount of the Notes originally issued at
a redemption price equal to 109.25% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the redemption
date, with the net proceeds of Equity Offerings (as defined). Upon a Change of
Control (as defined), the Company will be required to offer to repurchase the
Notes at a price equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase. See "Description of Notes."
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to all Senior Indebtedness (as defined), including borrowings
under the New Credit Facility (as defined). As of April 30, 1998, the aggregate
amount of outstanding Senior Indebtedness was $0.3 million and the Company had
$67.0 million of undrawn availability under the New Credit Facility. The Company
anticipates incurring additional indebtedness under the New Credit Facility to
fund a portion of the Expansion (as defined). The Indenture (as defined) permits
the Company to incur additional indebtedness subject to certain limitations. See
"Description of Notes."
SEE "RISK FACTORS" BEGINNING AT PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR OLD NOTES IN THE
EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR 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.
This date of this Prospectus is May 21, 1998
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" and elsewhere in this Prospectus constitute "forward-looking
statements." Such forward-looking statements include the discussions of the
business strategies of the Company and expectations concerning future
operations, margins, profitability, liquidity, capital expenditures and capital
resources. Although management believes that the expectations in such
forward-looking statements are reasonable, it can give no assurance that any
forward-looking statements will prove to be correct. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors,
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the risks associated with new construction, competition and other
planned construction in Las Vegas, government regulation related to the gaming
industry, uncertainty of casino customer spending and vacationing in casino
resorts in Las Vegas, occupancy rates and average room rates in Las Vegas, the
popularity of Las Vegas as a convention and trade show destination, the
completion of infrastructure improvements in Las Vegas, including the on-going
expansion of McCarran International Airport, and general economic and business
conditions that may affect levels of disposable income of consumers and pricing
of hotel rooms. For a further discussion of such factors and others, see "Risk
Factors."
------------------------
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. The New Notes will bear interest from the most recent date to which
interest has been paid on the Old Notes or, if no interest has been paid on the
Old Notes, from March 23, 1998. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders of Old Notes accepted for exchange will not receive any payment in
respect of accrued interest on such Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement (as
defined herein). The Company is making the Exchange Offer pursuant to the
registration statement of which this Prospectus is a part in reliance upon the
position of the staff of the Securities and Exchange Commission (the
"Commission") set forth in certain no-action letters addressed to other parties
in other transactions. However, the Company has not sought its own no-action
letter and there can be no assurance that the staff of the Commission would make
a similar determination with respect to the Exchange Offer. Based on these
interpretations by the staff of the Commission, the Company believes that the
New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by holders thereof (other than (i) any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act; (ii) an Initial Purchaser (as defined herein) or
holder of Old Notes who acquired the Old Notes directly from the Company solely
in order to resell pursuant to Rule 144A of the Securities Act or any other
available exemption under the Securities Act; or (iii) a broker-dealer who
acquired the Old Notes as a result of market making or other trading activities)
without further compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business and such holder is not
participating and has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
New Notes. Each broker-dealer that receives New 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 New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The
i
<PAGE>
Company has agreed that, for a period of at least 12 months after the date upon
which the Registration Statement, of which this Prospectus is a part, is
declared effective by the Commission, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses of the Exchange Offer. Tenders of Old Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. If the Company terminates the Exchange Offer and does not
accept for exchange any Old Notes, the Company will promptly return the Old
Notes to the Holders thereof. See "The Exchange Offer."
There is no existing trading market for the New Notes, and there can be no
assurance regarding the future development of a market for the New Notes. The
Initial Purchasers have advised the Company that they currently intend to make a
market in the New Notes. The Initial Purchasers are not obligated to do so,
however, and any market-making with respect to the New Notes may be discontinued
at any time without notice. The Company does not intend to apply for listing or
quotation of the New Notes on any securities exchange or stock market or
register or qualify the New Notes for offer and sale in any jurisdiction (other
than the registration of the New Notes under the Securities Act).
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the New Notes
offered hereby. This Prospectus, which forms a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the New Notes offered hereby,
reference is made to the Registration Statement. Any statements made in this
Prospectus concerning the provisions of certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement otherwise filed with the
Commission.
Upon the effectiveness of the Registration Statement, the Company will
become subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and in accordance therewith will file
reports and other information with the Commission. The Registration Statement,
the exhibits forming a part thereof and the reports and other information filed
by the Company with the Commission in accordance with the Exchange Act may be
inspected, without charge, at the Public Reference Section of the Commission
located at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
following Regional Offices of the Commission: 7 World Trade Center, 13th Floor,
New York, New York 10048; and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any portion of the material may be obtained
from the Public Reference Section of the Commission upon payment of the
prescribed fees. The Commission also maintains a site on the World Wide Web that
contains reports, proxy and information statements and other information at
http:/www.sec.gov.
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND THE
NOTES THERETO APPEARING ELSEWHERE HEREIN. REFERENCES TO "FISCAL YEAR" HEREIN ARE
TO THE COMPANY'S FISCAL YEAR ENDING NOVEMBER 30.
THE COMPANY
The Company owns and operates the Hard Rock Hotel & Casino in Las Vegas,
Nevada, the world's first casino resort with a rock music theme (the "Resort").
The Resort is modeled after the highly successful Hard Rock
Cafe-Registered Trademark- restaurant chain and is decorated with an extensive
collection of rare rock memorabilia as well as a distinctive roof top
guitar-shaped neon sign that extends 180 feet into the Las Vegas skyline. The
original Hard Rock Cafe was co-founded in 1971 by Peter A. Morton, the Company's
Chairman, Chief Executive Officer and President, and "Hard Rock" has grown to
become a widely recognized name throughout the world. Since the Resort's opening
in March 1995, it has developed a strong following among its target customer
base of youthful individuals, generally between the ages of 25 and 45, who seek
a vibrant, energetic entertainment and gaming experience with the services and
amenities associated with a boutique luxury resort hotel. As evidence of its
appeal to its target customer base, the Resort was selected in CONDE NAST
TRAVELER as one of "The 25 Coolest Places to Stay Now" in the world and was also
recognized in the 1997 LAS VEGAS REVIEW JOURNAL'S "Best of Las Vegas" issue as
being "The Best Place to Take Out-of-Town Visitors" and for having "The Best
Hotel Pool," "Best Blackjack Tables" and "Best Live Music Club." In order to
capitalize on its current success, the Company intends to undertake an expansion
designed to significantly enhance and enlarge the Resort.
The Resort occupies one of the most highly visible and easily accessible
sites in Las Vegas. It is located on approximately 16.7 acres of land near the
intersection of Paradise Road and Harmon Avenue, approximately two miles from
McCarran International Airport and approximately one mile east of Las Vegas
Boulevard (the "Strip"), the main tourist area in Las Vegas. The Resort
represents an attractive alternative for tourists, business travelers and locals
who wish to avoid the crowds and congestion of the Strip, while maintaining
close and easy access to the Strip. The Company has agreements with major hotels
and casinos and retail establishments pursuant to which shuttle services are
provided between such locations and the Resort. The Resort's location is
particularly attractive due to its proximity to (i) a high concentration of
popular Las Vegas restaurants and nightclubs, (ii) the Las Vegas Convention
Center, (iii) the Thomas & Mack Center at the University of Nevada Las Vegas,
Las Vegas' primary sporting and special events arena and (iv) a number of
non-gaming hotels, which have an aggregate of more than 1,000 guest rooms.
The Resort currently consists of (i) an eleven-story hotel tower (the
"Hotel") with 339 guest rooms (including 28 deluxe suites), (ii) a 28,000
square-foot casino (the "Casino"), with 741 slot machines and 50 table games,
(iii) a 2,000 square-foot retail shop (the "Retail Store"), (iv) a nightclub and
live music concert hall with a capacity of 1,400 persons ("The Joint"), (v) an
outdoor swimming pool area with a tropical theme (the "Beach Club"), (vi) two
restaurants, (vii) three cocktail lounges and (viii) an exercise facility (the
"Athletic Club"). The Hotel's guest rooms and deluxe suites have an average size
of 450 square feet and are decorated in a modern, minimalist style that features
black and white photos of famous rock musicians. The Casino is designed with an
innovative circular layout around an elevated bar (the "Center Bar"), which
allows its patrons to see and be seen from nearly every area of the Casino. Rock
music is played continuously to provide the Casino with an energetic and
entertaining, club-like atmosphere. The Retail Store has an innovatively
designed decor with a guitar-shaped sales counter, where customers may purchase
a wide variety of merchandise displaying the popular "Hard Rock Hotel" and "HRH"
logos. The Joint, a premier live music venue, successfully draws audiences from
Las Vegas visitors and from the local Las Vegas population. The Beach Club
features a 175-foot long, sand bottomed pool with a waterslide and underwater
rock music, which was dubbed the "eighth wonder of Las Vegas" by VOGUE magazine.
The
1
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Resort's two restaurants offer fine dining at Mortoni's and 24-hour casual
dining with a rock music inspired atmosphere at Mr. Lucky's.
The Company has successfully differentiated itself in the Las Vegas market
by targeting a predominantly youthful and "hip" customer base, which management
believes consists primarily of rock music fans and youthful individuals, as well
as actors, musicians and other members of the entertainment industry. To attract
this target audience, the Company promotes the Resort as "the place to be" in
Las Vegas. The "Hard Rock Hotel" trademark and Mr. Morton's extensive network of
contacts in the music and entertainment industry have helped to attract a number
of famous actors, musicians and celebrities to the Resort. In addition, The
Joint has hosted numerous famous rock singers and popular music groups, such as
The Rolling Stones, The Eagles, No Doubt, Fiona Apple, The Wallflowers, Sheryl
Crow and Jewel. The Resort has also regularly hosted a variety of televised
special events that have reinforced the Resort's marquee image, such as segments
of, and the post awards party for, the Fox/Billboard Magazine Music Awards,
MTV's dance program THE GRIND, VH-1's Fairway to Heaven, a celebrity golf
tournament, the King of the Beach Invitational, a pro volleyball tournament, and
the premiere of the major motion picture CON AIR.
The success of the Resort's focused strategy is reflected in its strong
visitor traffic and high occupancy rates since its opening in March 1995. As
evidence of the strong demand for its rooms, the Hotel achieved a 99.5% and
100.0% occupancy rate in fiscal years 1996 and 1997, respectively (as compared
to the average occupancy rate of 93.4% and 90.3%, respectively, for all hotels
in Las Vegas in the calendar years 1996 and 1997). In addition, the Hotel's
average daily room rate ("ADR") increased from $91.60 in 1996 to $96.36 in
fiscal year 1997, despite the addition of approximately 15,300 hotel and motel
rooms in Las Vegas in calendar years 1996 and 1997. Management estimates that
the Hotel turns away between 5,000 and 10,000 requests for reservations each
month as a result of the lack of sufficient hotel rooms to meet the high level
of demand.
The Company emphasizes its non-gaming operations as an important source of
revenues. In fiscal year 1997, the Company's non-gaming operations, including
lodging, retail, food and beverage and other, collectively accounted for 57.1%
of the Company's gross revenues and generated an average gross margin of 52.1%.
The strength of the "Hard Rock Hotel-Registered Trademark-" trademark is
illustrated by strong sales of merchandise bearing the "Hard Rock Hotel" logo.
Merchandise sales comprised 18.7% of gross revenues and generated a gross margin
of 53.9% in fiscal year 1997.
THE EXPANSION
In order to capitalize on the strong popularity of the Resort, the Company
is undertaking an expansion (the "Expansion") that is designed to significantly
enlarge and enhance the Hotel, the Beach Club, the Retail Store and the variety
of restaurants and entertainment amenities offered to guests of the Resort. The
purpose of the Expansion is to attract a greater number of guests to the Resort,
especially during mid-week periods, and to increase the amount of time and money
guests spend at the Resort. Key elements of the Expansion include (i) nearly
doubling the number of hotel rooms, (ii) significantly increasing the size and
features of the Beach Club and (iii) the addition of other amenities including
three full-service restaurants, a 1,088 space parking garage, a full-service
health club and spa, a nightclub and larger convention and meeting facilities.
The Company is also moderately expanding the Casino by adding approximately 60
slot machines and 11 table games, opening a new, higher limit gaming area and
increasing the size of the race and sports book area by approximately 30%.
The Company has established a total construction budget for the Expansion of
$87.0 million (of which $4.2 million has been expended as of April 30, 1998),
including construction contingency, pre-opening costs and construction period
interest. Construction began in February 1998 and is expected to be completed in
the second quarter of 1999. Construction of the Expansion has been planned in
three separate phases in order to minimize disruption of existing operations.
Phase I consists of the construction of the parking
2
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facility, which began in February 1998, and is expected to be completed in the
fall of 1998. Phase II, which includes the development of the new nightclub and
warehouse facility and the expansion of the Retail Store, is expected to be
completed by the end of 1998. Phase III, which involves the development of the
new hotel tower, expanded Beach Club, health club and spa and the additional
restaurants and meeting space, is expected to be completed in the second quarter
of 1999. Mr. Morton has provided a Completion Guaranty for the Expansion. See
"Risk Factors--Completion Guaranty" and "Completion Guaranty."
------------------------
The Resort, which commenced operations in March 1995, was conceived and
founded by Peter A. Morton and developed in partnership with Harveys Casino
Resorts ("Harveys"). In October 1997, the Company redeemed Harveys' 40% equity
interest in the Company and terminated a management agreement (the "Management
Agreement") between the Company and Harveys (the "Buyout"). See "Certain
Relationships and Related Transactions--Harveys Buyout." In connection with the
Buyout, virtually all executive management employees working at the Resort at
the time of the Buyout remained with the Company, including Gary R. Selesner,
the Company's Senior Vice President of Operations and the Resort's General
Manager. The Resort's core management team has an average of 21 years of
experience within the gaming and lodging industry and has been integral to the
Company's success.
Mr. Morton co-founded the Hard Rock Cafe-Registered Trademark- restaurant
chain in London, England in 1971 and oversaw the expansion of restaurants and
the development of the Hard Rock Cafe brand name in certain territories until
1996. In June 1996, Mr. Morton and certain other investors sold the Hard Rock
Cafes and certain related assets to The Rank Organization plc ("Rank") for
approximately $410 million, pursuant to a transaction that provided Rank with
global control of all Hard Rock Cafes. In connection with such sale, Mr. Morton
and Rank entered into a trademark and licensing agreement pursuant to which Mr.
Morton was granted the right to use the "Hard Rock Hotel-Registered Trademark-"
and "Hard Rock Casino-Registered Trademark-" trademarks in perpetuity in
connection with hotel casinos and casinos in areas of the United States west of
the Mississippi River plus Illinois and Louisiana, but excluding Texas (other
than Houston), and in Australia, Brazil, Israel, Venezuela and metropolitan
Vancouver, British Columbia (collectively, the "Morton Territory"). Mr. Morton
has granted a sublicense to the Company, pursuant to which the Company holds the
exclusive right to use the "Hard Rock Hotel" and "Hard Rock Casino" trademarks
for the Resort's operations in Las Vegas. See "Certain Relationships and Related
Transactions."
The principal executive offices of the Company are located at 4455 Paradise
Road, Las Vegas, Nevada 89109, and its telephone number is (702) 693-5000.
3
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THE EXCHANGE OFFER
On March 23, 1998 the Company issued $120 million principal amount of Old
Notes. The Old Notes were sold pursuant to exemptions from, or in transactions
not subject to, the registration requirements of the Securities Act and
applicable state securities laws. Bear Stearns & Co. Inc., BancAmerica,
Robertson Stevens and Donaldson Lufkin & Jenrette Securities Corporation (the
"Initial Purchasers"), as a condition to their purchase of the Old Notes,
requested that the Company agree to commence the Exchange Offer following the
offering of the Old Notes.
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SECURITIES OFFERED.................. Up to $120,000,000 principal amount or 9 1/4% Series
B Senior Subordinated Notes due 2005, which have been
registered under the securities Act. The terms of the
New Notes and the Old Notes are identical in all
material respects, except (i) that the New Notes have
been registered under the Securities Act, (ii) for
certain transfer restrictions and registration rights
relating to the Old Notes and (iii) that the New
Notes will not contain certain provisions relating to
additional interest to be paid to the holders of Old
Notes under certain circumstances relating to the
timing of the Exchange Offer and certain other
registration requirements described below under
"Description of Notes--Registration Rights;
Liquidated Damages."
THE EXCHANGE OFFER.................. The New Notes are being offered in exchange for a
like principal amount of Old Notes. The issuance of
the New Notes is intended to satisfy obligations of
the Company contained in the Registration Rights
Agreement, dated as of March 23, 1998, among the
Company and the Initial Purchasers (the "Registration
Rights Agreement"). For procedures for tendering, see
"The Exchange Offer."
TENDERS, EXPIRATION DATE; The Exchange Offer will expire at 5:00 p.m. New York
WITHDRAWAL........................ City time, on , 1998, or such later date and
time to which it is extended. Each holder tendering
Old Notes must acknowledge that it is not engaging
in, nor does it intend to engage in, a distribution
of the New Notes. The tender of Old Notes pursuant to
the Exchange Offer may be withdrawn at any time prior
to the Expiration Date (as defined herein). Any Old
Note not accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
CERTAIN CONDITIONS TO EXCHANGE The Exchange Offer is not subject to any condition,
OFFER............................. other than that the Exchange Offer does not violate
any applicable law, including in particular any
Nevada Gaming Law (as defined), or regulation or
interpretation of the staff of the SEC.
FEDERAL INCOME TAX CONSIDERATIONS... The exchange of Notes pursuant to the Exchange Offer
should not result in any income, gain or loss to the
holders thereof or the Company for federal income tax
purposes. See "Certain Federal Income Tax
Considerations."
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<TABLE>
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USE OF PROCEEDS..................... There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer. See
"Capitalization" and "Use of Proceeds."
EXCHANGE AGENT...................... U.S. Bank Trust, National Association is serving as
Exchange Agent in connection with the Exchange Offer.
SHELF REGISTRATION STATEMENT........ Under certain circumstances, certain holders of Notes
(including holders who are not permitted to
participate in the Exchange Offer or who may not
freely resell New Notes received in the Exchange
Offer) may, by giving the Company written notice on
or before the date specified in the Registration
Rights Agreement, require the Company to file, and
cause to become effective, a shelf registration
statement under the Securities Act, which would cover
resales of Notes by such holders. See Description of
the Notes--Registration Rights; Liquidated Damages."
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CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company does not currently anticipate that
it will register the Old Notes under the Securities Act. See "Description of
Notes--Registration Rights; Liquidated Damages."
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions and registration rights
relating to the Old Notes. The New Notes will bear interest from the most recent
date to which interest has been paid on the Old Notes or, if no interest has
been paid on the Old Notes, from March 23, 1998. Accordingly, registered holders
of New Notes on the relevant record date for the first interest payment date
following the consummation of the Exchange Offer will receive interest accruing
from the most recent date to which interest has been paid or, if no interest has
been paid, from March 23, 1998. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders whose Old Notes are accepted for exchange will not receive any payment
in respect of interest on such Old Notes otherwise payable on any interest
payment date the record date for which occurs on or after consummation of the
Exchange Offer.
<TABLE>
<S> <C>
ISSUER.............................. Hard Rock Hotel, Inc.
SECURITIES OFFERED.................. Up to $120,000,000 aggregate principal amount of
9 1/4% Series B Senior Subordinated Notes due 2005.
MATURITY DATE....................... April 1, 2005.
INTEREST............................ Interest on the New Notes will be payable on each
April 1 and October 1, commencing October 1, 1998.
RANKING............................. The New Notes will be general unsecured obligations
of the Company, subordinated in right of payment to
all existing and future Senior Indebtedness,
including all borrowings under
</TABLE>
5
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<TABLE>
<S> <C>
the New Credit Facility. As of April 30, 1998, the
aggregate amount of outstanding Senior Indebtedness
was $0.3 million and the Company had $67.0 million of
undrawn availability under the New Credit Facility.
See "Description of Notes-- Subordination."
CHANGE OF CONTROL................... Upon a Change of Control, the Company will be
required to make an offer to repurchase the New Notes
at a price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase. See "Description of
Notes--Repurchase at the Option of Holders--Change of
Control."
OPTIONAL REDEMPTION................. The New Notes will be subject to redemption at the
option of the Company, in whole or in part, at any
time on or after April 1, 2002, at the redemption
prices set forth herein, plus accrued and unpaid
interest thereon, if any, to the redemption date. In
addition, on or prior to April 1, 2001, the Company
may redeem up to 35% of the original aggregate
principal amount of the New Notes at a redemption
price equal to 109.25% of the principal amount
thereof, plus accrued and unpaid interest thereon, if
any, to the redemption date with the net proceeds of
one or more Equity Offerings; PROVIDED that at least
65% of the aggregate principal amount of New Notes
originally issued remain outstanding immediately
after the occurrence of such redemption; and PROVIDED
FURTHER, that such redemption shall occur within 60
days of the date of the closing of such Equity
Offering. See "Description of Notes--Optional
Redemption."
REGULATORY REDEMPTION............... The Company will have the option to direct a holder's
disposition of the New Notes or redeem the New Notes
in connection with gaming laws and regulations of the
State of Nevada. See "Description of
Notes--Regulatory Redemption."
MANDATORY REDEMPTION................ None.
CERTAIN COVENANTS................... The Indenture contains covenants restricting or
limiting the ability of the Company and its
Restricted Subsidiaries to, among other things, (i)
pay dividends or make other restricted payments
(including investments), (ii) incur additional
indebtedness and issue certain preferred stock, (iii)
create certain liens, (iv) incur dividend and other
payment restrictions affecting subsidiaries, (v)
enter into certain mergers or consolidations, (vi)
utilize proceeds from asset sales and (vii) enter
into transactions with affiliates. These covenants
are subject to certain significant exceptions and
qualifications. See "Description of Notes--Certain
Covenants."
EXCHANGE OFFER; REGISTRATION Holders of New Notes are not entitled to any
RIGHTS............................ registration rights with respect to the New Notes.
Pursuant to the
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Registration Rights Agreement, the Company has agreed
to file an Exchange Offer Registration Statement or,
under certain circumstances, a Shelf Registration
Statement. The Registration Statement of which this
Prospectus is a part constitutes the Exchange Offer
Registration Statement. Under certain circumstances,
certain holders of Notes (including holders who may
not participate in the Exchange Offer) may require
the Company to file, and cause to become effective, a
shelf registration statement under the Securities
Act, which would cover resales of the Notes by such
holders. See "Description of Notes--Registration
Rights; Liquidated Damages."
USE OF PROCEEDS..................... There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer. See
"Capitalization" and "Use of Proceeds."
</TABLE>
RISK FACTORS
Prospective holders of New Notes should consider carefully all of the
information set forth in this Prospectus and, in particular, should evaluate the
specific factors set forth under "Risk Factors," which begins on page 9, before
making a decision to tender their Old Notes in exchange for New Notes.
7
<PAGE>
SUMMARY FINANCIAL DATA
The following table summarizes certain selected historical income statement
data of the Company for fiscal years 1995, 1996 and 1997 that has been derived
from the Company's Financial Statements, which have been audited by Ernst &
Young LLP, independent auditors, and are included elsewhere herein. The
financial data for the three month periods ended February 28, 1997 and 1998 are
derived from unaudited financial statements included elsewhere herein. The
unaudited financial statements include all adjustments, consisting of normal
recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the three months ended February 28, 1998 are not
necessarily indicative of the results that may be expected for the entire year
ending November 30, 1998. The selected pro forma balance sheet data at February
28, 1998 gives effect to the Offering and the application of the net proceeds
therefrom and the New Credit Facility, as if such transactions had occurred on
February 28, 1998. The Company commenced operations on March 9, 1995, and
therefore, fiscal year 1995 is not directly comparable to fiscal years 1996 and
1997. The summary financial data set forth below should be read in conjunction
with the Financial Statements and notes thereto and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED NOVEMBER 30, FEBRUARY 28,
--------------------------------- --------------------
1995(1) 1996 1997 1997 1998
----------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues........................................... $ 55,738 $ 77,289 $ 77,048 $ 18,344 $ 19,468
Operating expenses(2).................................. 50,184 59,775 59,895 16,070 16,460
Management, incentive and supervisory fees............. 3,454 4,851 4,397 1,081 356
Charge for termination of Management Agreement......... -- -- 24,715 -- --
Income (loss) from operations.......................... 2,100 12,663 (11,959) 2,274 3,007
Interest income (expense), net......................... (4,930) (5,617) (5,585) (1,209) (2,544)
Net income (loss)...................................... (1,981) 4,467 (17,489) 682 297
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 28, 1998
------------------------
ACTUAL PRO-FORMA(3)
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................................ $ 2,971 $ 12,571
Total assets......................................................................... 109,496 120,976
Total debt........................................................................... 105,287 120,287
---------- ------------
Shareholders' (deficit)(4)........................................................... (7,639) (11,171)
</TABLE>
- ------------
(1) The Company commenced operations on March 9, 1995, and therefore, fiscal
year 1995 is not directly comparable to fiscal years 1996 and 1997.
(2) Operating expenses for fiscal years 1995, 1996 and 1997 and the three months
ended February 28, 1997 and 1998 exclude fees paid pursuant to the
Management Agreement ($2.3 million, $3.3 million, $2.8 million, $0.7
million, and $0.0, respectively), fees paid pursuant to the Supervisory
Agreement (as defined) ($1.1 million, $1.5 million, $1.6 million, $0.4
million, and $0.4 million, respectively), and the $24.7 million
non-recurring charge for termination of the Management Agreement in fiscal
year 1997. Operating expenses for fiscal year 1995 include $4.9 million of
pre-opening expenses.
(3) Pro forma to give effect to the Offering and the application of the net
proceeds therefrom and the New Credit Facility (including related financing
costs), as if such transactions had occurred on February 28, 1998. The pro
forma data includes a pre-tax charge of $3.5 million related to the early
retirement of the Prior Credit Facility (as defined herein).
(4) Effective October 24, 1997, the Company redeemed Harveys' 40% equity
interest in the Company and its rights under the Management Agreement for
$45.0 million. The Company accounted for this transaction in its November
30, 1997 financial statements with a $21.2 million charge to paid-in-capital
and a $24.7 million charge to expense (which amounts include $0.9 million in
related transaction costs). See "Certain Relationships and Related
Transactions--Harveys Buyout."
8
<PAGE>
RISK FACTORS
HOLDERS OF OLD NOTES SHOULD CAREFULLY CONSIDER THE FOLLOWING SPECIFIC RISK
FACTORS, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, BEFORE
TENDERING THEIR OLD NOTES IN EXCHANGE FOR NEW NOTES.
LEVERAGE AND DEBT SERVICE
The Company is highly leveraged. As of April 30, 1998, the Company's total
debt was $0.3 million. The Company expects to incur additional indebtedness
under the New Credit Facility to fund the Expansion. The consequences of the
Company's leverage include, but are not limited to, the following: (i) a
substantial portion of the Company's cash from operations will be dedicated to
the payment of interest on the Company's indebtedness, (ii) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, development financing or other purposes may be limited and
(iii) the Company will be susceptible to adverse changes in the economy and the
Las Vegas gaming market. Furthermore, the Indenture and the New Credit Facility
impose certain operating and financial restrictions on the Company. Such
restrictions limit, among other things, the ability of the Company to incur
additional indebtedness, create liens on its assets, sell assets or engage in
mergers or consolidations, make investments, pay dividends or engage in
intracorporate transactions. The failure by the Company to comply with numerous
restrictive covenants contained in the Indenture and the New Credit Facility may
result in a default which, if not cured or waived, could have a material adverse
effect on the Company.
The Company will be dependent to a significant extent upon the successful
completion of the Expansion and operation of the Resort before and after
completion of the Expansion for coverage of its debt service. The Company's
future operating performance is itself dependent on a number of factors, many of
which are outside of the Company's control, including prevailing economic
conditions and financial, business, regulatory and other factors. A significant
decrease in the Company's operations during the construction period would
negatively impact the Company's ability to complete the Expansion on time,
within the specified description or at all. Any significant increases in the
construction budget or delays in completing the construction and opening of the
Expansion would adversely affect the Company. There can be no assurance that
future cash flows of the Company will be sufficient to meet all of the Company's
obligations and commitments. If the Company were unable to generate sufficient
cash from its future operations to pay interest on the Notes or to satisfy any
other debt service requirements, or to pay its debts as they mature, the Company
would be required to explore alternatives, such as seeking additional debt or
equity financing, reducing or delaying capital expenditures or selling material
assets or operations. No assurance can be given that the Company would be
successful in implementing any of these alternatives, if necessary. In addition,
Nevada law contains certain restrictions on the ability of companies engaged in
the gaming business to undertake certain financing transactions. Such
restrictions could cause delays in obtaining necessary capital. See
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Regulation and Licensing."
SUBORDINATION OF NOTES; NEW CREDIT FACILITY
New Notes, like the Old Notes, will be general unsecured obligations of the
Company subordinated in right of payment to all existing and future Senior
Indebtedness, including all borrowings of the Company under the New Credit
Facility. Subject to certain limitations, the Indenture will permit the Company
to incur additional indebtedness, including Senior Indebtedness. As a result of
the subordination provisions contained in the Indenture, in the event of a
liquidation or insolvency, the assets of the Company will be available to pay
obligations on the Notes only after all Senior Indebtedness has been paid in
full, and there can be no assurance that there will be sufficient assets
remaining to pay amounts due on any or all of the Notes then outstanding. See
"Description of the New Credit Facility" and "Description of Notes."
The Company is dependent on the availability of the New Credit Facility to
fund construction of the Expansion. In the event that the Company is unable to
generate cash flow sufficient to make required
9
<PAGE>
payments of principal and interest on its indebtedness, or is otherwise in
default with respect to the covenants thereunder, the lenders under the New
Credit Facility could elect to declare all borrowings thereunder to be due and
payable, together with accrued and unpaid interest, and to terminate their
commitments thereunder. If the lenders for any reason require early repayment of
the funds borrowed pursuant to the New Credit Facility, or fail to provide funds
pursuant to that agreement, the Company may not be able to complete some or all
of the Expansion.
Obligations under the New Credit Facility will be secured by liens on
substantially all assets of the Company. In addition, the indebtedness under the
New Credit Facility will become due prior to the maturity of the Notes. If New
Credit Facility creditors were to foreclose on the collateral securing the New
Credit Facility, it is possible that insufficient assets would remain after
satisfaction of such indebtedness to satisfy fully the claims of the holders of
the Notes. Upon an event of default and acceleration under the New Credit
Facility the lenders thereunder may exercise the right, subject to prior
approval by the Nevada Gaming Authorities of their application to acquire
control, to control the operation of the Resort.
Borrowings under the New Credit Facility will bear interest at floating
rates based on the Federal Funds Rate, the prime lending rate or LIBOR.
Increases in interest rates on indebtedness under the New Credit Facility would
increase the Company's interest payment obligations and could have an adverse
effect on the Company.
RISKS RELATING TO THE EXPANSION
Failure to complete the Expansion within the budget or on schedule may have
a material adverse effect on the Company. Although the Company expects that the
final stage of the Expansion will be completed in the second quarter of 1999,
the Company has not entered into a contract for the construction of the entire
Expansion and no assurances can be given that the Expansion will be completed by
then or any other time, or that the projected budget will not be exceeded. The
anticipated costs and completion date for the Expansion are based upon the
Company's budgets, conceptual design documents and construction schedule
estimates, prepared in part in consultation with architects and construction and
design consultants. Such estimates and projected completion dates may change
significantly as the Expansion progresses. Although the Company anticipates the
Expansion to take substantially the form described herein, construction plans
for the entire Expansion have not been completed and are subject to change. Any
such change may result in some or all of the Expansion being completed in a
manner substantially different from that described herein or not at all. Changes
in design and construction plans may require additional funds beyond those
provided by the Offering and the New Credit Facility. There can be no assurance
that other resources would be available to the Company under terms that would
not be disadvantageous to the Company.
Construction projects, such as the Expansion, can entail significant
development and construction risks including, but not limited to, labor
disputes, shortages of material and skilled labor, weather interference,
unforeseen engineering problems, environmental problems, geological problems,
construction, demolition, excavation, zoning, permitting or equipment problems
and unanticipated cost increases, any of which could give rise to delays or cost
overruns or otherwise have a material adverse effect on the Expansion and the
Company.
In addition, the Expansion will require many permits, licenses and approvals
that have not yet been obtained. The scope of the approvals required for
projects of this nature is extensive, including, without limitation, state and
local land-use permits, building and zoning permits. Unexpected changes or
concessions required by local, state or federal regulatory authorities could
involve significant additional costs and delay the scheduled completion of the
Expansion. There can be no assurance that such conditions will not adversely
affect the Company or that such regulatory approvals will be obtained.
Although construction activities related to the Expansion are planned to
minimize disruption, construction noise and debris and the temporary closing of
certain facilities may disrupt the Resort's
10
<PAGE>
operations and unexpected delays in construction for any reason could exacerbate
or magnify these disruptions. There can be no assurance that the construction of
the Expansion will not have an adverse effect on the Company.
COMPETITION
The Company's success is dependent upon the success of the Resort and its
continuing ability to attract visitors and operate profitably. However, the
Company's operations are subject to significant business, economic, regulatory
and competitive uncertainties and contingencies, many of which are beyond the
control of the Company.
The Company, located less than one mile east of the Strip, competes with
other high-quality Las Vegas resorts and other Las Vegas hotel casinos,
including those located on the Strip, on the basis of overall atmosphere, range
of amenities, price, location, entertainment offered, theme and size. Currently,
there are approximately 24 major gaming properties located on or near the Strip,
13 additional major gaming properties in the downtown area and additional gaming
properties located in other areas of Las Vegas. Many of the competing
properties, such as the Rio, Sunset Station, the Mirage, Treasure Island,
Caesar's Palace, Luxor, New York-New York and the MGM Grand, have themes and
attractions that draw a significant number of visitors and directly compete with
the Company's operations. Some of these facilities are operated by companies
that have more than one operating facility and may have greater name recognition
and financial and marketing resources than the Company and market to the same
target demographic group as the Company. In addition, hotel casinos under
construction, such as the Bellagio, the Mansion at MGM Grand, Mandalay Bay,
Paris, The Venetian, Marriott International, the Aladdin/ Planet Hollywood and
Aladdin sister properties, will also directly compete with the Company's
operations. These projects and others are expected to add approximately 20,000
rooms to the market. While there has been significant new hotel casino
construction in Las Vegas in the past, including approximately 15,300 hotel and
motel rooms added in 1996 and 1997, the Las Vegas market has not previously
witnessed the room capacity additions expected in the next three years and
management cannot estimate the effect on the Company of these developments.
Certain of these properties may incorporate a music theme (and at least one has
announced its intention to do so) that may affect the Company negatively. There
can be no assurance that competition with existing and new gaming properties
will not adversely affect the Company. There also can be no assurance that the
Las Vegas market will continue to grow or that hotel casino resorts will
continue to be popular, and a decline or leveling off of the growth or
popularity of such facilities would adversely affect the Company.
The Company will also face competition from competing "Hard Rock" hotels and
casinos that may be established in jurisdictions other than Las Vegas. The
Company has the exclusive right to exploit the "Hard Rock Hotel" and "Hard Rock
Casino" trademarks only in connection with the Resort in Las Vegas. Mr. Morton
holds the exclusive rights to exploit such trademarks in other parts of the
Morton Territory in connection with hotel casinos and casinos, and Rank holds
such rights in the remainder of the world. The Company has been informed that
Rank intends to open several hotels using the "Hard Rock" name in jurisdictions
both inside and outside the Morton Territory. There can be no assurance that the
development by Rank or Mr. Morton of other hotels and casinos using names that
include the phrase "Hard Rock" outside of Las Vegas will not adversely affect
the Company. See "--Risks Associated with Shared Use of the 'Hard Rock' Brand
Names."
To a lesser extent, the Company competes with hotel casinos in the Mesquite,
Laughlin, Reno and Lake Tahoe areas of Nevada, Atlantic City, New Jersey and
other parts of the United States. The Company also competes with state-sponsored
lotteries, on- and off-track wagering, card parlors, and other forms of
legalized gaming in the United States, as well as with gaming on cruise ships
and international gaming operations. Continued proliferation of gaming
activities could significantly and adversely affect the Company. In particular,
the legalization of casino gaming in or near any metropolitan area (particularly
11
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Southern California) from which the Company attracts customers would have a
material adverse effect on the Company. See "--Possible Legislation."
Many of the Company's competitors in the hotel casino industry are
emphasizing or are expected to emphasize their non-gaming businesses, including
retail sales. Consequently, the Company has recently experienced (and expects to
continue to experience) increased competition in the retail sales market in Las
Vegas. The Company's retail departmental income decreased during fiscal year
1997 relative to fiscal year 1996, and there can be no assurance that retail
departmental income will not continue to decrease.
DEPENDENCE UPON KEY MARKET AND LIMITED BASE OF OPERATIONS
All of the Company's revenues are generated from the Resort. The Company's
results of operations are dependent on conditions in Las Vegas, Nevada and,
indirectly, Southern California, where many of the Resort's targeted customers
reside. A decline in the local economies of Las Vegas or Southern California
could have a negative effect on the Company. In addition, because Las Vegas
draws from a national and international tourist base, a downturn in the domestic
or global economies could have a negative effect on operators of Las Vegas
casinos, including the Company. Furthermore, due to the Company's single
location, it is subject to greater risks than a more diversified hotel and
casino resort operator.
The combination of the single location and the significant investment
associated with it may cause the operating results of the Company to fluctuate
significantly and adversely affect the Company. Due to the single location, poor
operating results at the Resort would materially affect the profitability of the
entire Company. Future growth in revenues and profits will depend to a
substantial extent on the Company's ability to successfully execute the
Expansion and generate cash flow sufficient for working capital needs.
RELIANCE ON KEY PERSONNEL, CONTROL BY PRINCIPAL SHAREHOLDER
The ability of the Company to operate successfully and competitively is
dependent, in part, upon the continued services of certain of its employees,
particularly Peter A. Morton, Chairman of the Board, Chief Executive Officer,
President and Secretary, and Gary R. Selesner, Senior Vice President of
Operations and General Manager. In the event that either of Messrs. Morton and
Selesner were to leave the Company, there can be no assurance that a suitable
replacement could be found. Management believes that the loss of services by
either of these executives could have a material adverse effect on the Company.
The Company does not maintain key man life insurance for any officer or director
of the Company. Mr. Morton has several outside business interests and may have
additional business interests in the future. Although Mr. Morton currently
spends substantially all of his business time on the Company, there can be no
assurance that he will continue to do so in the future.
Mr. Morton beneficially owns over 90% of the outstanding common stock of the
Company, including 100% of the outstanding voting common stock of the Company,
and therefore is able to control the election of the Board of Directors of the
Company and approve or disapprove any other matters submitted to the
stockholders.
In addition, while Mr. Morton has informed the Company that he believes he
will be able to perform his obligations under the Completion Guaranty, such
guaranty is not secured. If Mr. Morton were to die or become bankrupt or
insolvent, the performance of his obligations under the Completion Guaranty
could be delayed or adversely affected.
LACK OF SIGNIFICANT OPERATING HISTORY
From the inception of the Company to October 24, 1997, Harveys owned 40% of
the Company and managed the Resort pursuant to the Management Agreement.
Although no executive personnel changes at the Resort were effected by the
Buyout, Harveys had previously provided hotel and casino management expertise
and oversight and was responsible for the Resort's management information
systems, employee
12
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benefit programs and insurance policies. These responsibilities were transferred
to the Company in October 1997 and the Company has not established a track
record of independently operating a resort. The continued success of the
Company's operations will depend on the Company's successful management and
implementation of its own systems.
RISKS ASSOCIATED WITH SHARED USE OF THE "HARD ROCK" BRAND NAMES
The Company benefits from the global name recognition and reputation
generated by the Hard Rock Cafes that are operated by Rank. At present, Rank
operates or franchises over 80 Hard Rock Cafes located in the United States and
abroad. Rank is, however, under no obligation to continue to own, operate or
franchise the Hard Rock Cafes, and there can be no assurance that Rank will not
sell, change the focus of, or manage such restaurants in a manner that would
adversely affect the Resort, which bears a similar name.
In addition, although the Company has obtained the exclusive right to use
and develop the "Hard Rock Hotel" and "Hard Rock Casino" trademarks in
connection with the Resort in Las Vegas, a subsidiary of Rank is the sole owner
of the rights to the "Hard Rock Cafe," "Hard Rock Hotel" and "Hard Rock Casino"
trademarks. As a result, Rank or its licensee can exploit the "Hard Rock" name
and logo (other than in connection with hotel casinos and casinos in the Morton
Territory), including marketing "Hard Rock" merchandise, anywhere in the world.
There can be no assurance that the Company will not be adversely affected by the
management and reputation of any such use of the "Hard Rock" brand name.
COMPLETION GUARANTY
Pursuant to the Completion Guaranty, Peter A. Morton has guaranteed, subject
to certain conditions and limitations, payment of construction and development
costs of the Expansion in excess of $87.0 million, up to a maximum of $10.0
million. Mr. Morton's obligations under the Completion Guaranty will be deferred
during the pendency of any FORCE MAJEURE event or any other event that makes
completion of the Expansion physically impossible or unlawful. The Completion
Guaranty does not provide for the incurrence by Mr. Morton, directly or
indirectly, of any obligation, contingent or otherwise for the payment of the
principal, premium and interest on the Notes or any other indebtedness under the
financings described herein. If such construction and development costs exceed
the amount of funds available to the Company for the Expansion, including
amounts available under the Completion Guaranty, no assurance can be given that
Mr. Morton will provide any additional funds and no assurance can be given that
the Company will be able to raise additional funds. If Mr. Morton dies or
becomes bankrupt or insolvent, the performance of his obligation to put money
into the Company could be delayed or affected adversely. See "--Reliance on Key
Personnel, Control by Principal Shareholder" and "Completion Guaranty."
GOVERNMENT REGULATION
The gaming operations and the ownership of securities of the Company are
subject to extensive regulation by the Nevada Gaming Commission (the "Nevada
Commission"), the Nevada State Gaming Control Board (the "Nevada Board") and the
Clark County Liquor and Gaming Licensing Board (the "CCLGLB" and, together with
the Nevada Commission and the Nevada Board, the "Nevada Gaming Authorities").
The Nevada Gaming Authorities have broad authority with respect to licensing and
registration of entities and individuals involved with the Company, including
holders of the Notes.
The Nevada Commission may, in its discretion, require the holders of the
Notes to file applications, be investigated and be found suitable to hold the
Notes. If requested, appropriate applications must be filed within 30 days of
the request.
Additionally, the Nevada Commission may, in its discretion, require the
holder of any debt security of a company registered by the Nevada Commission as
a publicly traded corporation ("Registered Corporation") to file an application,
be investigated and be found suitable to own the debt security of a Registered
13
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Corporation. If the Nevada Commission determines that a person is unsuitable to
own such security, then pursuant to the Nevada Gaming Control Act and the
regulations promulgated thereunder (collectively, the "Nevada Act"), the
Registered Corporation can be sanctioned, including the loss of its approvals,
if without the prior approval of the Nevada Commission, it: (i) pays to the
unsuitable person any dividend, interest, or any distribution whatsoever; (ii)
recognizes any voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any form; or (iv)
makes any payment to the unsuitable person by way of principal, redemption,
conversion, exchange, liquidation, or similar transaction. The Company will be
required to be registered by the Nevada Commission as a Registered Corporation
upon the effectiveness of the Exchange Offer.
Each holder of Notes shall be deemed to have agreed (to the extent permitted
by law) that if the Nevada Gaming Authorities determine that a holder or
beneficial owner of the Notes must be found suitable, and if such holder or
beneficial owner either refuses to file an application or is found unsuitable,
such holder or beneficial owner shall, upon request of the Company, and by the
terms of the Notes, dispose of such holder's or beneficial owner's Notes within
30 days after receipt of such request or such earlier date as may be ordered by
the Nevada Gaming Authorities. Although not a regulatory requirement, the
Company also will have the right to call for the redemption of Notes by any
holders at any time to prevent the loss or material impairment of a gaming
license or an application for a gaming license at a redemption price equal to
the lesser of the principal amount thereof, the fair market value of such Notes
on the date of redemption or the price at which such holder or beneficial owner
acquired the Notes, together with, in either case, accrued and unpaid interest
to the earlier of the date of redemption or such earlier date as may be required
by the Nevada Gaming Authorities or the date of the finding of unsuitability by
the Nevada Gaming Authorities, which may be less than 30 days following the
notice of redemption, if so ordered by the Nevada Gaming Authorities. See
"Description of Notes--Regulatory Redemption."
Although the Company currently holds a gaming license issued by the Nevada
Gaming Authorities, the Nevada Gaming Authorities may, upon the violation of a
gaming law or regulation and after disciplinary complaint and public hearing,
among other things, revoke, suspend, limit or condition the gaming license of
any corporate entity (a "Corporate Licensee") or the registration of a
Registered Corporation or any entity registered as a holding company of a
Corporate Licensee. In addition, the Nevada Gaming Authorities may revoke the
license or finding of suitability of any officer, director, controlling person,
shareholder, noteholder or key employee of a licensed or registered entity. If
the gaming licenses of the Company were revoked for any reason, the Nevada
Gaming Authorities could require the closing of the Resort's gaming operations,
which would result in a material adverse effect on the business of the Company.
The Company and certain of its officers, directors, shareholders and key
employees either have been licensed by, or have applied for licensing with, the
Nevada Gaming Authorities.
The Exchange Offer and any future public offering of debt or equity
securities by the Company requires the prior approval of the Nevada Commission,
if the securities or the proceeds from the sale thereof are intended to be used
by the Company to pay for construction of, or to acquire an interest in, any
gaming facilities in Nevada, to finance the gaming operations of an affiliated
company or to retire or extend obligations incurred for any such purpose. The
ability of the Company to effect the Exchange Offer is conditioned upon
approvals from the Nevada Commission. The Company is currently seeking such
approvals. See "Regulation and Licensing."
RISKS RELATED TO MARKET DATA
The Company has included market data and information with respect to the
performance of other gaming entities which are believed to be reasonably
accurate. This data and information have not been independently verified by the
Company and are subject to material uncertainties due to, among other things,
the unavailability of raw data, the voluntary nature of the data gathering
process and the inherent
14
<PAGE>
uncertainty of the estimation process. Accordingly, investors should not place
undue reliance on such market data and performance data as there can be no
assurance that such data and information are accurate in all material respects.
ENVIRONMENTAL RISKS AND REGULATION
Under various federal, state and local laws, regulations and ordinances
(collectively, "Environmental Laws"), an owner or operator of real estate
interests may be liable for the costs of cleaning up, as well as certain damages
resulting from, past or present spills, disposals or other releases of hazardous
or toxic substances or wastes on, in or from a property. Certain Environmental
Laws impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of hazardous or toxic substances or wastes at or
from the property. An owner or operator of real estate or real estate interests
also may be liable under certain Environmental Laws that govern activities or
operations at a property having adverse environmental effects, such as
discharges to air and water as well as handling and disposal practices for solid
and hazardous or toxic wastes. In some cases, liability may not be limited to
the value of the property in question. The presence of such substances or
wastes, or the failure to properly remediate any resulting contamination, also
may adversely affect the owner's or operator's ability to sell, lease or operate
its property or to borrow using its property as collateral. The Company does not
have environmental liability insurance to cover such events.
The Company has in the past engaged in real estate development projects and
has owned several parcels of real estate. Although there can be no assurance,
the Company is not aware of any condition at any such properties that would have
a material adverse effect on the Company's financial condition or results of
operations.
POSSIBLE LEGISLATION
California recently enacted the Gambling Control Act, which provides for a
state regulatory board to oversee existing forms of gambling in California. The
Gambling Control Act specifically maintains a strict categorical prohibition
over certain forms of gambling. Due to the recent enactment of the Gambling
Control Act, no assurances can be given regarding any effect that it may have on
the Company's operations. Additionally, the California Senate is currently
deliberating an amendment to the California constitution that would allow the
establishment and operation of casinos on Native American lands. The Company
believes that the expansion of casino gaming on Native American lands, or
otherwise, in California could have a material adverse effect on the Company.
The National Gambling Impact and Policy Commission has been formed to
conduct a comprehensive study of all matters relating to the economic and social
impact of gaming in the United States. Such commission is required to issue a
report to Congress containing its findings and conclusions, together with
recommendations for legislation and administrative actions by June 1999. Any
such recommendations, if enacted into law, could adversely affect the gaming
industry and have a material adverse effect on the Company.
Additionally, from time to time, certain federal legislators have proposed
the imposition of a federal tax on gaming revenues. Any such tax could have a
material adverse effect on the Company.
YEAR 2000 RISK
The Company believes that its systems are capable of functioning from and
after the year 2000 without any material additional costs. The ability of third
parties with whom the Company transacts business to adequately address their
year 2000 issues is outside of the Company's control. There can be no assurance
that the failure of the Company or such third parties to adequately address
their respective year 2000 issues will not have a material adverse effect on the
Company.
15
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
The Old Notes have not been registered under the Securities Act or any other
securities laws of any jurisdiction and, therefore, may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act and any other applicable securities laws or pursuant to
exemptions from, or in transactions not subject to, those requirements and, in
each case, in compliance with certain other conditions and restrictions. Holders
of Old Notes who do not exchange their Old Notes for New Notes pursuant to the
Exchange Offer will continue to be subject to such restrictions on transfer of
such Old Notes as set forth in the legend thereon. In addition, upon
consummation of the Exchange Offer, holders of Old Notes which remain
outstanding will not be entitled to any rights to have such Old Notes registered
under the Securities Act or to any similar rights under the Registration Rights
Agreement (subject to certain limited exemptions). The Company does not
currently anticipate that it will register or qualify any Old Notes which remain
outstanding after consummation of the Exchange Offer for offer or sale in any
jurisdiction (subject to limited exceptions, if applicable). To the extent that
Old Notes are tendered and accepted in the Exchange Offer, a holder's ability to
sell untendered Old Notes could be adversely affected.
The New Notes and any Old Notes which remain outstanding after consummation
of the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage thereof have taken
certain actions or exercised certain rights under the Indenture.
Upon consummation of the Exchange Offer, holders of Old Notes will not be
entitled to any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Description of
Notes--Registration Rights; Liquidated Damages."
ABSENCE OF PUBLIC MARKET
The Old Notes were issued to, and the Company believes such securities are
currently owned by, a relatively small number of beneficial owners. The Old
Notes have not been registered under the Securities Act and will be subject to
restrictions on transferability if they are not exchanged for the New Notes.
Although the New Notes may be resold or otherwise transferred by the holders
(who are not affiliates of the Company) without compliance with the registration
requirements under the Securities Act, they will constitute a new issue of
securities with no established trading market. There can be no assurance that
such a market will develop. In addition, the New Notes will not be listed on any
national securities exchange. The New Notes may trade at a discount from the
initial offering price of the Old Notes, depending upon prevailing interest
rates, the market for similar securities, the Company's operating results and
other factors. The Issuers have been advised by the Initial Purchasers that they
currently intend to make a market in the New Notes, as permitted by applicable
laws and regulations; however, the Initial Purchasers are not obligated to do
so, and any such market-making activities may be discontinued at any time
without notice. In addition, such market-making activity may be limited during
the Exchange Offer and the pendency of any Shelf Registration Statement.
Therefore, there can be no assurance that an active market for any of the New
Notes will develop, either prior to or after the Company's performance of its
obligations under the Registration Rights Agreement. If an active public market
does not develop, the market price and liquidity of the New Notes may be
adversely affected.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on holders of the New Notes.
Each broker-dealer that receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-marking activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution."
16
<PAGE>
PURCHASE OF NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, the Company is required, subject to certain
conditions, to offer to purchase all outstanding Notes at a purchase price equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of repurchase. The source
of funds for any such purchase would be the Company's available cash or cash
generated from other sources, including borrowings, sales of assets, sales of
equity or funds provided by a new controlling person. The New Credit Facility
will restrict the purchase of Notes upon a Change of Control. A Change of
Control likely would constitute an event of default under the New Credit
Facility that would permit the lenders to accelerate the debt thereunder. In
such event, the Company likely would attempt to refinance the indebtedness
outstanding under the New Credit Facility and the Notes. There can be no
assurance that sufficient funds will be available at the time of any Change of
Control to make any required purchases of the Notes tendered and to repay
indebtedness outstanding under the New Credit Facility. See "Description of New
Credit Facility" and "Description of Notes--Repurchase at the Option of
Holders--Change of Control."
17
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds to the Company from the Offering were $115.8 million. The Company used
the net proceeds of the Offering, to repay the $120,000,000 credit agreement
entered into by the Company with a consortium of banks in September of 1997 (the
"Prior Credit Facility"), and expects to use borrowings under the New Credit
Facility and cash flow from operations to fund the Expansion. Concurrently with
the Offering, the Company entered into the New Credit Facility, which has a
maximum availability of $67.0 million, all of which remains undrawn as of April
30, 1998. Indebtedness under the Prior Credit Facility had a weighted average
interest rate of 9.22% per annum at November 30, 1997 and all tranches were
scheduled to expire between June 2002 and April 2006. Upon the repayment of the
total outstanding indebtedness of $105.7 million under the Prior Credit
Facility, such facility was terminated. See "Description of New Credit
Facility."
CAPITALIZATION
The following table sets forth at February 28, 1998 (i) the actual
capitalization of the Company, and (ii) the pro forma capitalization of the
Company, which gives effect to the Offering, the application of the net proceeds
therefrom and the closing of the New Credit Facility. See "Use of Proceeds."
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements of the Company and notes thereto appearing elsewhere in this Offering
Memorandum.
<TABLE>
<CAPTION>
AT FEBRUARY 28, 1998
------------------------
ACTUAL PRO FORMA
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt................................................. $ 7,608 $ 108
----------- -----------
----------- -----------
Long-term debt:
Prior Credit Facility.............................................................. $ 97,500 --
New Credit Facility(1)............................................................. -- --
The Notes.......................................................................... -- 120,000
Other long-term debt and obligations............................................... 179 179
----------- -----------
Total long-term debt............................................................. 97,679 120,179
Shareholders' deficit(2)............................................................. (7,639) (11,171)
----------- -----------
Total capitalization............................................................. $ 90,040 $ 109,008
----------- -----------
----------- -----------
</TABLE>
- ------------------------------
(1) As of April 30, 1998, the Company had $67.0 million of undrawn availability
under the New Credit Facility. See "Description of the New Credit Facility."
(2) Effective October 24, 1997, the Company redeemed Harveys' 40% equity
interest in the Company and its rights under the Management Agreement for
$45.0 million. The Company accounted for this transaction in its November
30, 1997 financial statements with a $21.2 million charge to paid-in-capital
and a $24.7 million charge to expense (which amounts include $0.9 million in
related transaction costs). See "Certain Relationships and Related
Transactions--Harveys Buyout."
18
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The selected historical income statement data of the Company set forth below
for fiscal years 1995, 1996 and 1997 and the selected historical balance sheet
data set forth below at November 30, 1996 and 1997 have been derived from the
Company's Financial Statements, which have been audited by Ernst & Young LLP,
independent auditors, and are included elsewhere herein. The selected historical
income statement data of the Company set forth below for the period from
inception (August 30, 1993) through November 30, 1993 and for the fiscal year
1994 and the selected historical balance sheet data set forth below at November
30, 1993, 1994 and 1995 have been derived from the Company's audited Financial
Statements not included herein. The financial data for the three month periods
ended February 28, 1997 and 1998 are derived from unaudited financial statements
included elsewhere herein. The unaudited financial statements include all
adjustments, consisting of normal recurring accruals, which the Company
considers necessary for a fair presentation of the financial position and the
results of operations for these periods. Operating results for the three months
ended February 28, 1998 are not necessarily indicative of the results that may
be expected for the entire year ending November 30, 1998. The selected pro forma
balance sheet data at February 28, 1998 gives effect to the Offering and the
application of the net proceeds therefrom and the New Credit Facility, as if
such transaction had occurred on February 28, 1998. The Company commenced
operations on March 9, 1995, and therefore, fiscal years 1993, 1994 and 1995 are
not directly comparable to fiscal years 1996 and 1997. The selected financial
and operating data set forth below should be read in conjunction with the
Financial Statements and notes thereto and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS ENDED
ENDED YEARS ENDED NOVEMBER 30, FEBRUARY 28,
------------- ---------------------------------------------- --------------------
1993(1) 1994(1) 1995(1) 1996 1997 1997 1998
------------- ----------- ----------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
REVENUES:
Casino................................ $ -- $ -- $ 26,262 $ 36,560 $ 35,395 $ 8,771 $ 10,062
Lodging............................... -- -- 7,845 12,257 12,919 3,012 3,093
Food and beverage..................... -- -- 10,061 15,003 16,704 3,773 4,240
Retail................................ -- -- 13,984 17,336 15,404 3,789 3,247
Other income.......................... -- -- 1,290 1,901 2,076 408 500
Less complimentaries.................. -- -- (3,704) (5,768) (5,450) (1,409) (1,674)
------------- ----------- ----------- --------- --------- --------- ---------
Net revenues.......................... -- -- 55,738 77,289 77,048 18,344 19,468
COSTS AND EXPENSES:
Casino................................ -- -- 12,399 18,158 17,921 4,631 4,850
Lodging............................... -- -- 3,071 4,112 4,149 1,017 908
Food and beverage..................... -- -- 6,877 10,118 10,360 2,444 2,528
Retail................................ -- -- 6,325 7,869 7,102 1,845 1,539
Other................................. -- -- 821 949 943 195 180
Marketing............................. -- -- 4,686 2,975 3,174 931 1,956
General and administrative............ -- -- 10,647 14,922 15,140 3,620 3,105
Depreciation and amortization......... -- -- 3,870 5,523 5,503 1,387 1,396
Pre-opening expenses.................. -- -- 4,942 -- -- -- --
Charge for termination of Management
Agreement........................... -- -- -- -- 24,715 -- --
------------- ----------- ----------- --------- --------- --------- ---------
Total costs and expenses.............. -- -- 53,638 64,626 89,007 16,070 16,460
------------- ----------- ----------- --------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS........... -- -- 2,100 12,663 (11,959) 2,274 3,007
Interest income (expense), net........ 19 42 (4,930) (5,617) (5,585) (1,209) (2,544)
Other expenses, net................... (6) (487) (8) (54) (32) (5) 0
------------- ----------- ----------- --------- --------- --------- ---------
Income (loss) before income tax
provision (benefit) and
extraordinary loss.................. 13 (445) (2,838) 6,992 (17,576) 1,060 463
Income tax provision (benefit)........ 3 6 (857) 2,525 (1,168) 378 166
------------- ----------- ----------- --------- --------- --------- ---------
Income (loss) before extraordinary
loss................................ 10 (451) (1,981) 4,467 (16,408) 682 297
Extraordinary loss.................... -- -- -- -- (1,081) -- --
------------- ----------- ----------- --------- --------- --------- ---------
Net income (loss)....................... $ 10 $ (451) $ (1,981) $ 4,467 $ (17,489) $ 682 $ 297
------------- ----------- ----------- --------- --------- --------- ---------
------------- ----------- ----------- --------- --------- --------- ---------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS ENDED
ENDED YEARS ENDED NOVEMBER 30, FEBRUARY 28,
------------- ---------------------------------------------- --------------------
1993(1) 1994(1) 1995(1) 1996 1997 1997 1998
------------- ----------- ----------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Diluted earnings (loss) per share....... $ .10 $ (4.32) $ (15.98) $ 35.25 $ (143.84) $ 5.38 $ 3.87
------------- ----------- ----------- --------- --------- --------- ---------
------------- ----------- ----------- --------- --------- --------- ---------
Shares used in calculating diluted
earnings (loss) per share............. 100,000 104,480 123,965 126,705 121,586 126,705 76,791
------------- ----------- ----------- --------- --------- --------- ---------
------------- ----------- ----------- --------- --------- --------- ---------
OTHER DATA:
Capital expenditures(2)............... 911 44,860 39,118 4,006 2,557 209 1,897
Depreciation and amortization......... -- -- 3,870 5,523 5,503 1,387 1,396
Ratio of earnings to fixed
charges(3).......................... -- -- -- 2.2x -- 1.9x 1.2x
</TABLE>
<TABLE>
<CAPTION>
AT NOVEMBER 30, AT FEBRUARY 28, 1998
----------------------------------------------------- --------------------------
ACTUAL PRO FORMA(4)
1993 1994 1995 1996 1997 (UNAUDITED) (UNAUDITED)
--------- --------- --------- --------- --------- ----------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 8,945 $ 1,059 $ 3,634 $ 5,958 $ 4,214 $ 2,971 $ 12,571
Total assets...................... 16,826 56,570 99,855 109,044 109,556 109,496 120,976
Total debt........................ -- 28,141 65,405 64,315 106,013 105,287 120,287
Shareholders' equity
(deficit)(5).................... 16,710 18,275 26,295 30,762 (7,911) (7,639) (11,171)
</TABLE>
- ------------------------------
(1) The Company was incorporated on August 30, 1993 and commenced operations on
March 9, 1995, and was considered a development stage company during this
period. Therefore, fiscal years 1993, 1994 and 1995 are not directly
comparable to fiscal years 1996 and 1997.
(2) Capital expenditures for fiscal years 1994, 1995 and 1996 exclude $0.3
million, $0.5 million and $6.4 million, respectively, of non-cash additions.
(3) In computing the ratio of earnings to fixed charges: (a) earnings have been
based on income (loss) before extraordinary items, income taxes and fixed
charges, net of interest capitalized, and (b) fixed charges consist of
interest, including amounts capitalized, amortization of debt, and the
estimated interest portion of rentals. Net losses for fiscal years 1994,
1995 and 1997 resulted in coverage deficiencies of $0.4 million, $2.3
million and $11.9 million, respectively.
(4) Pro forma to give effect to the Offering and the application of the net
proceeds therefrom and the New Credit Facility (including related financing
costs), as if such transactions had occurred on February 28, 1998. The pro
forma data includes a pre-tax charge of $3.5 million related to the early
retirement of the Prior Credit Facility.
(5) Effective October 24, 1997, the Company redeemed Harveys' 40% equity
interest in the Company and its rights under the Management Agreement for
$45 million. The Company accounted for this transaction in its November 30,
1997 financial statements with a $21.2 million charge to paid-in-capital and
a $24.7 million charge to expense (which amounts include $0.9 million in
related transaction costs). See "Certain Relationships and Related
Transactions--Harveys Buyout."
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH, AND IS
QUALIFIED IN ITS ENTIRETY BY, THE COMPANY'S FINANCIAL STATEMENTS, INCLUDING THE
NOTES THERETO, AND THE OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS, AS WELL AS THE DISCUSSION UNDER "RISK FACTORS."
OVERVIEW
The Company's sole business is the operation of the Resort, which commenced
operations on March 9, 1995. Prior to the Resort's opening, the Company recorded
no operating revenue or income.
During fiscal year 1997, 42.9% of the Resort's revenues were derived from
gaming operations. The Company also seeks to maximize revenues from hotel,
retail, food and beverage and entertainment sales. The Company's business
strategy is to provide its guests with an energetic and exciting gaming and
entertainment environment with the services and amenities of a luxury, boutique
hotel. To capitalize on customer demand, the Company has begun construction of
the $87 million Expansion of the Resort.
The Company began construction of the Expansion in February 1998. The
Expansion has been designed to be constructed in phases in order to minimize
disruption at the Resort. However, if construction activities are more
disruptive than management currently anticipates, net revenues and EBITDA for
fiscal year 1998 could be lower than results achieved in fiscal year 1997.
Fiscal year 1998 operating results will also include the extraordinary pre-tax
loss resulting from the write-off of $3.5 million in unamortized loan fees and
financing costs in connection with the retirement of the Prior Credit Facility.
The Company believes that its systems are capable of functioning from and
after the year 2000 without any material additional costs. The ability of third
parties with whom the Company transacts business to adequately address their
year 2000 issues is outside of the Company's control. There can be no assurance
that the failure of the Company or such third parties to adequately address
their respective year 2000 issues will not have a material adverse effect on the
Company.
RESULTS OF OPERATIONS
FISCAL QUARTER ENDED FEBRUARY 28, 1998 COMPARED TO FISCAL QUARTER ENDED
FEBRUARY 28, 1997
NET REVENUES AND OPERATING INCOME. Net revenues increased 6.1% for the
three months ended February 28, 1998 to $19.5 million compared to $18.3 million
for the corresponding period of the prior year. Operating income increased 32.3%
for the three months ended February 28, 1998 to $3.0 million compared to $2.3
million for the corresponding period of the prior year. The increases are
primarily due to (i) continued strong weekend business, (ii) revenue benefits
generated from hosting The Rolling Stones, a special marquee event designed to
increase the property's awareness and image, offset in part by the costs
associated with the event designed to increase the property's awareness and
image, and (iii) the elimination of management fees paid to Harveys.
CASINO. Casino revenues increased 14.7% for the three months ended February
28, 1998 to $10.1 million compared to $8.8 million for the corresponding period
of the prior year. The increase is primarily due to strong table game and slots
play on the weekend of and week after The Rolling Stones event. Casino
departmental income increased 25.9% for the three months ended February 28, 1998
to $5.2 million from $4.1 million, primarily as a result of the increased
revenues. Casino departmental income as a percentage of casino revenues
increased to 51.8% in 1998 from 47.2% in 1997, primarily as a result of
spreading fixed costs over a larger revenue base.
LODGING. Lodging revenues increased 2.7% for the three months ended
February 28, 1998 to $3.1 million from $3.0 million for the corresponding period
of the prior year. The increase was related to a 3.0% increase in the average
daily room rate ("ADR") for the three months ended February 28, 1998 to $93.60
from $90.84 for the three months ended February 28, 1997. Hotel occupancy
remained at 100%.
21
<PAGE>
Lodging Departmental income increased 9.6% for the three months ended February
28, 1998 to $2.2 million from $2.0 million, primarily as a result of the
increased revenues. Lodging departmental income as a percentage of Lodging
revenues increased to 70.6% in 1998 from 66.2% in 1997, primarily as a result of
spreading fixed costs over a larger revenue base.
FOOD AND BEVERAGE. Food and Beverage revenues increased 12.4% for the three
months ended February 28, 1998 to $4.2 million from $3.8 million for the
corresponding period of the prior year. The increase was related to an increase
in banquet revenues and overall bar revenues primarily attributed to operating
an after hours lounge. Food and Beverage departmental income increased 28.8% for
the three months ended February 28, 1998 to $1.7 million from $1.3 million,
primarily as a result of the increased revenues. Food and Beverage departmental
income as a percentage of Food and Beverage revenues improved to 40.4% in 1998
from 35.2% in 1997, primarily as a result of the increases in revenues coming
from higher margin beverage and banquet food sales.
RETAIL. Retail revenues decreased 14.3% for the three months ended February
28, 1998 to $3.2 million from $3.8 million for the corresponding period of the
prior year. The decrease is primarily attributable to increased retail
competition in the Las Vegas metropolitan area, including the expanded Forum
Shops and the recently opened Rain Forest Cafe inside the MGM Grand. Retail
departmental income decreased 12.1% for the three months ended February 28, 1998
to $1.7 million from $1.9 million, primarily as a result of the decreased
revenues partially offset by decreased operating costs as a percent of revenue.
Retail departmental income as a percentage of Retail revenues increased to 52.6%
in 1998 from 51.3% in 1997, primarily as a result of decreased cost of goods,
labor and other operating expenses.
Marketing, General and Administrative. Marketing, General and Administrative
expenses increased 11.2% for the three months ended February 28, 1998 to $5.1
million from $4.6 million for the corresponding period of the prior year. The
increase is primarily attributable to the cost associated with hosting The
Rolling Stones event, partially offset by the elimination of management fees
paid to Harveys.
DEPRECIATION AND AMORTIZATION. Depreciation and Amortization expense was
$1.4 million for the three months ended February 28, 1998 and the corresponding
period of the prior year.
NET INTEREST EXPENSE. Net Interest expense increased 110% for the three
months ended February 28, 1998 to $2.5 million from $1.2 million for the
corresponding period of the prior year. The increase is directly related to the
financing of the buyout of Harveys 40% interest in the Hard Rock Hotel & Casino
and related management agreement on October 24, 1997 for $45 million.
INCOME TAXES. The income tax provision reflects the federal statutory rate,
adjusted for non-deductible expenses.
NET INCOME. As a result of the factors described above, net income
decreased 56.4% for the three months ended February 28, 1998 to $0.3 million
from $0.7 million for the corresponding period of the prior year.
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
NET REVENUES AND OPERATING INCOME. Net revenues remained essentially
constant at $77.0 million in fiscal year 1997 compared to $77.3 million in
fiscal year 1996. Operating income increased 3.9% in fiscal year 1997 to $13.2
million (excluding the charge of $24.7 million for the termination of the
Management Agreement and other non-recurring financing fees of $0.4 million)
from $12.7 million in fiscal year 1996. In fiscal year 1997, the Company
maintained strong operating performance despite the increased competitiveness in
the Las Vegas market, which included the addition of approximately 15,300 new
hotel and motel rooms in Las Vegas in 1996 and 1997. The Company continued to
have strong demand for its hotel rooms and was successful in marketing The Joint
and the Beach Club as banquet venues for large corporate events during major Las
Vegas conventions.
22
<PAGE>
CASINO. Casino revenues decreased 3.2% in fiscal year 1997 to $35.4 million
compared to $36.6 million in fiscal year 1996. The decrease is due primarily to
competition in the Las Vegas market and a reduction in the number of slot
machines. The decline in slot revenues was partially offset by a 4.0% increase
in table game revenues due to an increase in the number of table games. The
Company replaced 75 underutilized slot machines with a pit containing blackjack
tables and added four blackjack tables at the Beach Club in order to capture
demand during peak periods. Casino departmental income decreased 5.0% in fiscal
year 1997 to $17.5 million from $18.4 million in fiscal year 1996, as a result
of a decline in casino revenues and an increase in employee benefit costs.
Casino departmental income as a percentage of casino revenues decreased to 49.4%
in fiscal year 1997 from 50.3% in fiscal year 1996, primarily as a result of the
change in mix towards table games, which yield lower margins than slot machines.
LODGING. Lodging revenues increased 5.4% in fiscal year 1997 to $12.9
million compared to $12.3 million in fiscal year 1996. The increase was related
to a 5.2% increase in ADR in fiscal year 1997 to $96.36 from $91.60 in fiscal
year 1996 due to improved yield management and rate utilization. The Hotel's
occupancy rate reached 100% in fiscal year 1997 compared to 99.5% in fiscal year
1996. Lodging departmental income increased 7.7% in fiscal year 1997 to $8.8
million from $8.1 million in fiscal year 1996 due to higher room revenue.
Lodging departmental income as a percentage of lodging revenues improved in
fiscal year 1997 to 67.9% from 66.5% in fiscal year 1996 due primarily to the
increase in ADR in fiscal year 1997.
FOOD AND BEVERAGE. Food and beverage revenues increased 11.3% in fiscal
year 1997 to $16.7 million compared to $15.0 million in fiscal year 1996. The
increase was primarily due to an increase in banquet revenues in fiscal year
1997 of $1.3 million, or 108.1%, from fiscal year 1996, resulting from increased
marketing efforts of the Resort's banquet services targeted to companies looking
to host large corporate events. The remainder of the increase in food and
beverage revenues was from higher beverage sales in the Resort's cocktail
lounges. Food and beverage departmental income increased 30.0% in fiscal year
1997 to $6.3 million from $4.9 million in fiscal year 1996. Food and beverage
departmental income as a percentage of food and beverage revenues improved in
fiscal year 1997 to 38.0% from 32.6% in fiscal year 1996 primarily due to an
increase in the higher margin banquet business and a decline in direct labor and
other operating expenses.
RETAIL. Retail revenues decreased 11.1% in fiscal year 1997 to $15.4
million compared to $17.3 million in fiscal year 1996. The decline was primarily
attributable to increased competition in the retail market in Las Vegas and the
benefits in the fourth quarter of 1996 of increased clothing sales due to an
unsolicited endorsement from a popular Japanese band. During the last 18 months,
the All-Star Cafe, Motown Cafe and Coca-Cola have all opened retail stores in
Las Vegas. Management plans to introduce new clothing and other lines of retail
merchandise to help mitigate the effects of the increased retail competition in
Las Vegas. Retail departmental income decreased 12.3% in fiscal year 1997 to
$8.3 million from $9.5 million in fiscal year 1996 largely as a result of the
decrease in retail revenues. Retail departmental income as a percentage of
retail revenues also declined slightly to 53.9% in fiscal year 1997 from 54.6%
in fiscal year 1996.
MARKETING, GENERAL AND ADMINISTRATIVE. Marketing, general and
administrative expenses remained at $17.9 million in fiscal year 1997, excluding
$414,000 of non-recurring financing fees in fiscal year 1997. The Company also
incurred a one-time charge of $24.7 million in fiscal year 1997 in connection
with the termination of the Management Agreement in connection with the Buyout.
Including the one-time charge related to the Buyout and other non-recurring
financing fees, marketing, general and administrative expenses would have been
$43.0 million in fiscal year 1997. See "Certain Relationships and Related
Transactions--Harveys Buyout."
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
remained at $5.5 million in fiscal year 1997.
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NET INTEREST EXPENSE. Net interest expense remained at $5.6 million for
fiscal year 1997 as a result of lower interest expense from the repayment of
principal in the beginning of fiscal year 1997 offset by higher interest expense
during the last two months of fiscal year 1997 in connection with the financing
of the Buyout. See "Certain Relationships and Related Transactions--Harveys
Buyout."
INCOME TAXES. The income tax benefit for fiscal year 1997 was 6.3% of
pre-tax loss as a result of establishing a valuation allowance due to the
Company's accumulated losses as of November 30, 1997.
EXTRAORDINARY LOSS. In connection with entering into the Prior Credit
Facility in fiscal year 1997, the Company wrote-off $1.1 million in unamortized
loan fee costs associated with the Company's retirement of the Old Credit
Facility (as defined).
NET LOSS. As a result of the factors described above, net loss was $17.5
million in fiscal year 1997 compared to net income of $4.5 million in fiscal
year 1996. The fiscal year 1997 loss has been impacted by the charge for
termination of the Management Agreement and the extraordinary loss noted above.
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995
The Resort opened on March 9, 1995, and therefore, operating results for
fiscal year 1996 are not directly comparable to fiscal year 1995. Accordingly,
all revenue and expense items were higher in fiscal year 1996 than in fiscal
year 1995 due to a full year of operations in fiscal 1996.
NET REVENUES AND OPERATING INCOME. Net revenues and operating income
increased to $77.3 million and $12.7 million, respectively, in fiscal year 1996
from $55.7 million and $9.4 million, respectively, in fiscal year 1995,
excluding $4.9 million of pre-opening expenses and $2.4 million of grand opening
expenses in fiscal year 1995.
CASINO. Casino revenues increased 39.2% in fiscal year 1996 to $36.6
million compared to $26.3 million in fiscal year 1995. Casino departmental
income as a percentage of casino revenues decreased to 50.3% in fiscal year 1996
compared to 52.8% in fiscal year 1995. The decrease was due to a change in the
mix of casino revenues as table game revenue growth, which has a lower margin,
exceeded slot revenue growth, and due to an increase in complimentaries in
fiscal year 1996. During fiscal year 1995, the Company employed less generous
complimentary policies as the Resort continued to benefit from the significant
publicity surrounding the grand opening of the Resort.
LODGING. Lodging revenues increased 56.2% in fiscal year 1996 to $12.3
million compared to $7.8 million in fiscal year 1995. The Hotel's occupancy rate
increased to 99.5% in fiscal year 1996 from 95.0% in fiscal year 1995 and ADR
increased to $91.60 in fiscal year 1996 from $86.71 in fiscal year 1995 due to
improved yield management. Other lodging revenue increased 143.0%, primarily due
in part to higher PBX telephone charges. Lodging departmental income as a
percentage of lodging revenues improved in fiscal year 1996 to 66.5% from 60.9%
in fiscal year 1995 due to an increase in ADR, an increase in PBX telephone
charges and a reduction in hotel reservation costs related to the Company
operating the Resort's central reservation function, which was previously
handled by Harveys.
FOOD AND BEVERAGE. Food and beverage revenues increased 49.1% in fiscal
year 1996 to $15.0 million compared to $10.1 million in fiscal year 1995.
Banquet revenues increased to $1.2 million in fiscal year 1996 from $0.1 million
in fiscal year 1995 as a result of increased marketing efforts of the Resort's
banquet services to companies hosting large corporate events. Food and beverage
departmental income increased 53.4% in fiscal year 1996 to $4.9 million from
$3.2 million in fiscal year 1995. Food and beverage departmental income as a
percentage of food and beverage revenues increased to 32.6% in fiscal year 1996
from 31.6% in fiscal year 1995 primarily due to an increase in the higher margin
banquet business.
RETAIL. Retail revenues increased 24.0% in fiscal year 1996 to $17.3
million compared to $14.0 million in fiscal year 1995, mainly due to the
additional operating days during fiscal year 1996 and the
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benefits in the fourth quarter of 1996 of increased clothing sales due to an
unsolicited endorsement from a popular Japanese band. Retail departmental income
as a percentage of retail revenue remained essentially the same at 54.6% in
fiscal year 1996 compared to 54.8% in fiscal year 1995.
MARKETING, GENERAL AND ADMINISTRATIVE. Marketing, general and
administrative expenses increased 16.7% in fiscal year 1996 to $17.9 million
from $15.3 million in fiscal year 1995. Marketing expense for fiscal year 1995
includes $2.4 million of grand opening expenses and $4.9 million in pre-opening
expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 42.7% in fiscal year 1996 to $5.5 million from $3.9 million for fiscal
year 1995.
NET INTEREST EXPENSE. Net interest expense increased 13.9% in fiscal year
1996 to $5.6 million compared to $4.9 million in fiscal year 1995. A majority of
the increase resulted from interest expense on outstanding debt for an entire
year partially offset by a reduction of principal and a decline in interest
rates on the Company's borrowings.
NET INCOME. As a result of the factors described above, net income was $4.5
million in fiscal year 1996 compared to a net loss of $2.0 million in fiscal
year 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity and capital resources have been
cash flow from operations, borrowings under various credit agreements and equity
contributions. At April 30, 1998, the Company had $12.8 million of cash and cash
equivalents.
During fiscal year 1995, the Company's principal source of funds was bank
borrowings under its first mortgage financing to complete the construction of
the Resort and an equity contribution of $10 million from the issuance of stock.
The primary use in fiscal year 1995 was capital expenditures for the completion
of the Resort of $47.4 million.
During fiscal year 1996, the Company generated cash flows from operating
activities of $10.3 million. The primary uses of funds in fiscal year 1996 were
capital expenditures of $4.0 million and principal payments on long-term debt of
$4.5 million.
During fiscal year 1997, the Company generated negative cash flow from
operating activities of $13.3 million as a result of the Buyout. The Buyout
resulted in a one-time charge of $24.7 million to earnings in fiscal year 1997.
Excluding this one-time charge, cash flow from operating activities totaled
$11.4 million in fiscal year 1997. The Company's primary uses of funds for
investing activities in fiscal year 1997 were for acquisitions of property and
equipment of $2.6 million.
During fiscal year 1997, the Company generated $13.5 million of net cash
flows from financing activities. This consisted of $105.7 million of borrowings
under the Prior Credit Facility, offset by repayment of indebtedness aggregating
$67.4 million, the cash payment to Harveys in exchange for Harveys' 40% equity
interest in the Company and loan fees of $3.7 million on the Prior Credit
Facility.
In May 1997, the Company completed an exchange for a site adjacent to the
Resort, which was acquired for the initial phase of the Expansion. As part of
the consideration for the site, the Company paid $5.1 million in cash and
executed a $3.5 million promissory note payable to the seller. The promissory
note, along with accrued interest, was refinanced with a portion of the proceeds
from the Prior Credit Facility in September 1997.
In September 1997, the Company entered into the $120 million Prior Credit
Facility. At November 30, 1997, indebtedness under the Prior Credit Facility
totaled $105.7 million, of which $5.7 million was drawn under its revolving line
of credit and $100 million was outstanding under multiple term loans. The
Company has repaid all borrowings outstanding and terminated the Prior Credit
Facility with the net
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proceeds from the Offering. Concurrent with the closing of the Offering, the
Company entered into the $67.0 million New Credit Facility, which was undrawn at
April 30, 1998. See "Use of Proceeds."
On October 24, 1997, the Company redeemed Harvey's 40% equity interest in
the Company and terminated its rights under the Management Agreement in exchange
for $45 million in cash. See "Certain Relationships and Related
Transactions--Harveys Buyout." The Company funded this purchase through proceeds
from the Prior Credit Facility, and concurrent with this transaction, refinanced
existing indebtedness totaling $59.3 million.
For the three months ended February 28, 1998, the Company's principal source
of funds was cash flow from operating activities of approximately $1.7 million.
The primary use of funds was expansion and maintenance capital expenditures of
$1.9 million and payments on long-term debt of $0.7 million.
Management anticipates funding the capital expenditures for the Expansion
and its operating liquidity needs from the funds remaining from the net proceeds
of the Offering, funds available under the $67.0 million New Credit Facility and
operating cash flow. The Company used a significant portion of the net proceeds
from the Offering to repay approximately $105 million of outstanding
indebtedness. The Expansion is budgeted to cost $87.0 million. Construction of
the Expansion commenced in February 1998 and is expected to be completed by the
second quarter of 1999. Based on current plans, approximately $44 million of
capital expenditures related to the Expansion is expected to be incurred in
fiscal year 1998, with the remaining $43 million expected to be incurred in
fiscal 1999. However, timing for capital expenditures relating to the Expansion
may change depending on the actual completion date for the Expansion. Failure to
complete the Expansion within budget or on schedule could have a material
adverse effect on the Company. Management believes that its current cash
balance, borrowings available under the New Credit Facility and cash flow from
operations, will be sufficient to fund the completion of the Expansion. However,
no assurances can be given with respect to the sufficiency of such amounts.
Peter A. Morton has entered into a Completion Guaranty, pursuant to which he
has guaranteed, subject to certain conditions and limitations, payment of
construction and development costs in excess of $87.0 million, up to a maximum
of $10.0 million. See "Risk Factors--Completion Guaranty" and "Completion
Guaranty."
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (which together constitute the Exchange
Offer), the Company will accept for exchange Old Notes which are properly
tendered on or prior to 5:00 p.m., New York City time, on , 1998 and
not withdrawn as permitted below; provided, however, that if the Company, in its
sole discretion, has extended the period of time for which the Exchange Offer is
open, the term "Expiration Date" means the latest time and date to which the
Exchange Offer is extended.
As of the date of this Prospectus, $120,000,000 aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about the date hereof, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes for
exchange pursuant to the Exchange Offer is subject to certain conditions as set
forth below. See "--Certain Conditions to the Exchange Offer."
The Company expressly reserves the right, at any time, or from time to time,
to extend the period of time during which the Exchange Offer is open by not more
than thirty days, and thereby delay acceptance for exchange of any Old Notes, by
giving oral or written notice of such extension to the holders thereof as
described below. During any such extension, all Old Notes previously tendered
will remain subject to the Exchange Offer and may be accepted for exchange by
the Company. Any Old Notes not accepted for exchange for any reason will be
returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below. See "--Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the holders of the Notes as promptly as practicable, such notice
in the case of any extension to be issued by means of a press release or other
public announcement no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal or (in the case of a book-entry transfer)
an Agent's Message in lieu of such Letter of Transmittal, to U.S. Bank Trust
National Association (the "Exchange Agent") at the address set forth below under
"Exchange Agent" on or prior to the expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date with the Letter of Transmittal or an Agent's Message in lieu of
such Letter of Transmittal, or (iii) the holder must comply with the guaranteed
delivery procedures described below. "Agent's Message" means a message,
transmitted by the Book-Entry Transfer Facility to and received by the
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Exchange Agent and forming a part of a Book-Entry Confirmation, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the tendering participant, which acknowledgment states that such
participant has received and agrees to be bound by the Letter of Transmittal and
that the Company may enforce such Letter of Transmittal against such
participant. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a holder of the Old Notes who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered national securities exchange
with the signature thereon guaranteed by an Eligible Institution.
All questions as to the validity, form. eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Note not properly tendered or to not accept any particular
Old Note which acceptance might, in the judgment of the Company or its counsel,
be unlawful. The Company also reserves the absolute right to waive any defects
or irregularities or conditions of the Exchange Offer as to any particular Old
Note either before or after the Expiration Date (including the right to waive
the ineligibility of any holder who seeks to tender Old Notes in the Exchange
Offer). The interpretation of the terms and conditions of the Exchange Offer as
to any particular Old Note either before or after the Expiration Date (including
the Letter of Transmittal and the instructions thereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with the tenders of Old Notes for exchange must be cured within
such reasonable period of time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of any defect or irregularity with respect to any tender of Old
Notes for exchange, nor shall any of them incur any liability for failure to
give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by powers of attorney, in either case signed by the registered
holder or holders exactly as the name or names of the registered holder or
holders appear on the Old Notes.
If the Letter of Transmittal or any Old Notes or powers of attorneys are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted with the Letter of Transmittal.
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By tendering, each holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the holder and that neither the holder nor such
other person has any arrangement or understanding with any person to participate
in the distribution of the Now Notes. If any holder or any such other person (a)
is an "affiliate", as defined under Rule 405 of the Securities Act, of the
Company, (b) is engaged in or intends to engage in or has an arrangement or
understanding with any person to participate in a distribution of such New Notes
to be acquired pursuant to the Exchange Offer, or (c) acquired by Old Notes as a
result of market making or other trading activities, such holder or any such
other person (i) could not rely on the applicable interpretations of the staff
of the Commission and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution." The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "--Certain Conditions to the Exchange Offer." For purposes of the
Exchange Offer, the Company shall be deemed to have accepted properly tendered
Old Notes for exchange when, as and if the Company has given oral (promptly
confirmed in writing) or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. Accordingly, registered holders of New Notes on the relevant record
date for the first interest payment date following the consummation of the
Exchange Offer will receive interest accruing from the most recent date to which
interest has been paid or, if no interest has been paid, from March 23, 1998.
Old Notes accepted for exchange will cease to accrue interest from and after the
date of consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of (i) certificates for such Old Notes or a timely Book
Entry Confirmation of such Old Notes into the Exchange Agent' s account at the
Book-Entry Transfer Facility, (ii) a properly completed and duly executed Letter
of Transmittal or an Agent' s Message in lieu thereof and (iii) all other
required documents. If any tendered Old Notes are not accepted for any reason
set forth in the terms and conditions of the Exchange Offer or if Old Notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged Old Notes will be returned without expense to
the tendering holder thereof (or, in the case of Old Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry procedures described below, such
non-exchanged Old Notes will be credited to an account maintained with such
Book-Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFERS
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer Facility
systems must make book-entry delivery of Old Notes by causing the Book-Entry
Transfer Facility to transfer such Old Notes into the Exchange Agent's account
at the Book-Entry Transfer Facility in accordance with such
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Book-Entry Transfer Facility's Automated Tender Offer Program ("ATOP")
procedures for transfer. Such participant using ATOP should transmit its
acceptance to the Book-Entry Transfer Facility on or prior to the Expiration
Date or comply with the guaranteed delivery procedures described below. The
Book-Entry Transfer Facility will verify such acceptance, execute a book-entry
transfer of the tendered Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility and then send to the Exchange Agent confirmation of
such book-entry transfer, including an Agent' s Message confirming that the Book
Entry Transfer Facility has received an express acknowledgment from such
participant that such participant has received and agrees to be bound by the
Letter of Transmittal and that the Company may enforce the Letter of Transmittal
against such participant. However, although delivery of Old Notes may be
effected through book-entry transfer at the Book-Entry Transfer Facility, an
Agent's Message and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth below
under "--Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a holder of the Old Notes desires to tender such Old Notes and the Old
Notes are not immediately available, or time will not permit such holder's Old
Notes or other required documents to reach the Exchange Agent before the
Expiration Date, or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may he effected if (i) the tender is made through an
Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent
received from such Eligible Institution a Notice of Guaranteed Delivery,
substantially in the form provided by the Company (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of the Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice or
Guaranteed Delivery, the certificates for all physically rendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation as the case may be,
together with a properly completed and duly executed appropriate Letter of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof) with any
required signature guarantees and any other documents required by the Letter of
Transmittal will be deposited by the Eligible institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book-Entry Confirmation, as the case may be,
together with a properly completed and duly executed appropriate Letter of
Transmittal (or facsimile thereof or Agent's Message in lieu thereof) with any
required signature guarantees and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within three NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth below under "--Exchange Agent." Any such notice of
withdrawal must (i) specify the name of the person having tendered the Old Notes
to be withdrawn, (ii) identify the Old Notes to be withdrawn (including the
principal amount of such Old Notes), and (iii) (where certificates for Old Notes
have been transmitted) specify the name in which such Old Notes are registered,
if different from that of the withdrawing holder. If certificates for Old Notes
have been delivered or otherwise identified to the Exchange Agents then, prior
to the release of such certificates the withdrawing holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such holder is an Eligible Institution. If Old Notes have been tendered
pursuant to the procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Old Notes and otherwise
comply with the procedures of such facility. All questions as to the validity,
form and eligibility (including time of receipt)
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of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for exchange for purposes of the Exchange Offer.
Any Old Notes which have been tendered for exchange but which are not exchanged
for any reason will be returned to the holder thereof without cost to such
holder (or, in the case of Old Notes tendered by book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the
book-entry transfer procedures described above, such Old Notes will be credited
to an account maintained with such Book Entry Transfer Facility for the Old
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Old Notes" above at any time on or prior to 5:00 p.m., New York City
time, on the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Old Notes, the Exchange Offer violates, or will
violate, any applicable law, including in particular any Nevada Gaming Law, or
regulation or interpretation by the staff by the SEC.
Additionally as a condition to its participation in the Exchange Offer
pursuant to the terms of the Registration Rights Agreement, each holder of Old
Notes will be required to furnish, upon the request of the Company, prior to the
Consummation thereof, a written representation to the Company (which may be
contained in the letter of transmittal contemplated by the Registration
Statement) to the effect that (a) it is not an affiliate of the Company, (b) it
is not engaged in, and does not intend to engage in, and has no arrangement or
understanding with any Person to participate in, a distribution of the New Notes
to be issued in the Exchange Offer and (c) it is acquiring the Notes in its
ordinary course of business.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
EXCHANGE AGENT
U.S. Bank Trust National Association ("U.S. Bank Trust") has been appointed
as the Exchange Agent for the Exchange Offer. All executed Letters of
Transmittal should be directed to the Exchange Agent at the address set forth
below. Questions and requests for assistance, requests for additional copies of
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
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Delivery to: U.S. Bank Trust National Association,
As Exchange Agent
<TABLE>
<S> <C>
BY HAND: BY MAIL:
U.S. Bank Trust National Association U.S. Bank Trust National Association
U.S. Bank Trust Center PO. Box 64485
Attn: Corporate Trust Department St. Paul, Minnesota 55164-9549
180 East Fifth Street
St. Paul, Minnesota 55101
Attn: Attn: Rick Prokosch
BY OVERNIGHT COURIER: BY FACSIMILE:
U.S. Bank Trust National Association (612) 244-0711
U.S. Bank Trust Center Attn: Corporate Trust Department
Attn: Corporate Trust Department Telephone: (800) 924-6802
180 East Fifth Street
St. Paul, Minnesota 55101
</TABLE>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer except for reimbursement of mailing
expenses.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
$ .
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection with that exchange, as well as any other sale
or disposition of the Old Notes. Holders who instruct the Company to register
New Notes in the name of, or request that Old Notes not tendered or not accepted
in the Exchange Offer be returned to, a person other than the registered
tendering holder will be responsible for the payment of any applicable transfer
tax thereon.
CONSEQUENCES OF NOT EXCHANGING OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act, except pursuant to
an exemption from, or in a transaction not subject to, the Securities Act and
state securities laws. The Company does not currently anticipate that they will
register under the Securities Act any Old Notes which remain outstanding after
consummation of the Exchange Offer (subject to such limited exceptions if
applicable). To the extent that Old Notes are tendered and accepted in the
Exchange Offer, a holder's ability to sell untendered Old Notes could be
adversely affected.
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Holders of the Old and New Notes which remain outstanding after consummation
of the Exchange Offer will vote together as a single class for purposes of
determining whether holders of the requisite percentage thereof have taken
certain actions or exercised certain rights under the Indenture.
Upon consummation of the Exchange Offer, holders of Old Notes will not be
entitled to any further registration rights under the Registration Rights
Agreement, except under limited circumstances. See "Description of
Notes--Registration Rights; Liquidated Damages."
Based upon no-action letters issued by the staff of the Commission to third
parties, the Company believes the New Notes issued pursuant to the Exchange
Offer in exchange for the Old Notes may be offered for resale, resold or
otherwise transferred by a holder thereof (other than any (i) holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), (ii) an Initial Purchaser or holder of Old Notes who acquired the Old
Notes directly from the Company solely in order to resell pursuant to Rule 144A
of the Securities Act or any other available exemption under the Securities Act,
or (iii) a broker-dealer who acquired the Old Notes as a result of market making
or other trading activities) without compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's business and such
holder is not participating and has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such Notes. However, the Company has not sought its own no-action letter
and there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Exchange Offer as in such other
circumstances. Each holder, other than a broker-dealer, must acknowledge that it
is not engaged in, and does not intend to engage in, a distribution of New
Notes, and has no arrangement or understanding to participate in a distribution
of New Notes. If any holder is an affiliate of the Company, is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer, or
acquired the Old Notes as a result of market or other trading activities, such
holder (i) could not rely on the relevant determinations of the staff of the
Commission and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each broker-dealer that receives New Notes for its own account in
exchange for Old Notes must acknowledge that such Old Notes were acquired by
such broker dealer as a result of market-making activities or other trading
activities and that it will deliver a prospectus in connection with any resale
of such New Notes. See "Plan of Distribution." In addition, to comply with the
securities laws of certain jurisdictions, if applicable, the New Notes may not
be offered or sold unless they have been registered or qualified for sale in
such jurisdiction or an exemption from registration or qualification is
available and is complied with. The Company has agreed to register or qualify
the sale of the New Notes in such jurisdictions only in limited circumstances
and subject to certain conditions.
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BUSINESS
OVERVIEW
The Company owns and operates the Hard Rock Hotel & Casino in Las Vegas,
Nevada, the world's first casino resort with a rock music theme. The Resort is
modeled after the highly successful Hard Rock Cafe restaurant chain and is
decorated with an extensive collection of rare rock memorabilia as well as a
distinctive roof top guitar-shaped neon sign that extends 180 feet into the Las
Vegas skyline. The original Hard Rock Cafe was co-founded in 1971 by Peter A.
Morton, the Company's Chairman, Chief Executive Officer and President, and the
"Hard Rock" name has grown to become a widely recognized name throughout the
world. Since the Resort's opening in March 1995, it has developed a strong
following among its target customer base of youthful individuals, generally
between the ages of 25 and 45, who seek a vibrant, energetic entertainment and
gaming experience with the services and amenities associated with a boutique
luxury resort hotel.
The Resort currently consists of (i) an eleven-story hotel tower with 339
guest rooms (including 28 deluxe suites), (ii) a 28,000 square-foot casino, with
741 slot machines and 50 table games, (iii) a 2,000 square-foot retail shop,
(iv) The Joint, a nightclub and live music concert hall with a capacity of 1,400
persons, (v) an outdoor swimming pool area with a tropical theme, (vi) two
restaurants, (vii) three cocktail lounges and (viii) an exercise facility. The
Hotel's guest rooms and deluxe suites have an average size of 450 square feet
and are decorated in a modern, minimalist style that features black and white
photos of famous rock musicians. The Casino is designed with an innovative
circular layout around the Center Bar, which allows its patrons to see and be
seen from nearly every area of the Casino. Rock music is played continuously to
provide the Casino with an energetic and entertaining, club-like atmosphere. The
Retail Store has an innovatively designed decor with a guitar-shaped sales
counter, where customers purchase a wide variety of merchandise displaying the
popular "Hard Rock Hotel" and "HRH" logos. The Joint, a premier live music
venue, successfully draws audiences from Las Vegas visitors and from the local
Las Vegas population. The Beach Club features a 175-foot long, sand bottomed
pool with a waterslide and underwater rock music. The Resort's two restaurants
offer fine dining at Mortoni's and 24-hour casual dining in a rock music
inspired atmosphere at Mr. Lucky's.
In order to capitalize on the strong popularity of the Resort, the Company
is undertaking the Expansion designed to significantly enlarge and enhance the
Hotel, the Beach Club, the Retail Store and the variety of restaurants and
entertainment amenities offered to guests of the Resort. Current plans call for
key elements of the Expansion to include nearly doubling of the number of hotel
rooms, significantly increasing the size and features of the Beach Club, the
addition of three full-service restaurants, a 1,088 space parking garage, a
full-service health club and spa, a nightclub and larger convention and meeting
facilities. The Company is also moderately expanding the Casino by adding
approximately 60 slot machines and 11 table games, opening a new higher limit
gaming area and increasing the size of the race and sports book area by
approximately 30%. The Expansion is expected to be completed in the second
quarter of 1999 at a cost of $87.0 million.
BUSINESS STRATEGY
The Company's business and marketing strategy for the Resort is to create a
vibrant and energetic entertainment and gaming environment that primarily
appeals to a customer base of youthful individuals. The Company successfully
utilizes the Hard Rock theme, vibrant atmosphere and personalized service to
differentiate the facility from the substantially larger Strip "mega resorts."
Key elements of the Company's strategy include the following:
UNIQUE TARGET CLIENTELE. The Company has successfully differentiated itself
in the Las Vegas market by targeting a predominantly youthful and "hip" customer
base, which management believes consists primarily of rock music fans and
youthful individuals, as well as actors, musicians and other members of
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the entertainment industry. Management also believes that these customers form a
combined demographic group that is currently underserved by competing
facilities.
"HIP" ENTERTAINMENT. The Joint has hosted numerous famous rock singers and
popular music groups, such as The Rolling Stones, The Eagles, No Doubt, Fiona
Apple, The Wallflowers, Sheryl Crow and Jewel. Management believes that the
Joint has quickly become a favorite venue for musicians and guests due to its
relatively small capacity and intimate atmosphere. The Resort has also regularly
hosted special events such as segments of, and the post awards party for, the
Fox/Billboard Magazine Music Awards, MTV's dance program THE GRIND, VH-1's
Fairway To Heaven, a celebrity golf tournament, The King of the Beach
Invitational, a pro volleyball tournament, and the premiere of the major motion
picture CON AIR. The Company believes that The Joint's concerts and the Resort's
special events generate significant worldwide publicity and reinforces the
Resort's marquee image and unique position in the Las Vegas marketplace.
GAMING MIX TARGETED TO CUSTOMER BASE. The Casino currently includes 741
slot machines, 50 table games and a 1,000 square-foot race and sports book. The
Company's target gaming customer has a higher propensity to play table games and
the Company strives to create a fun and enthusiastic gaming environment through
the use of music themed gaming chips and playing surfaces as well as promoting
the interaction between table game dealers and customers. The Company also
features the latest slot machines, some of which also reflect the Company's rock
music theme, as well as more traditional machines to offer its customers a wide
variety of selections.
SIGNIFICANT REVENUE FROM NON-GAMING OPERATIONS. The Company derives a
majority of its revenues from non-gaming operations. The Company's Hotel, Beach
Club, retail, food and beverage and other operations allow the Resort to market
itself as a full-service destination resort. The diversified revenue base allows
the Company to be less dependent on the Casino as a source of revenues and
profits, which management believes results in less volatility in earnings.
UNSURPASSED CUSTOMER SERVICE. One of the cornerstones of the Company's
business strategy is to provide its customers with an extraordinary level of
personal service. Management trains its employees to interact with guests and
continually strives to instill in each employee a dedication to superior service
designed to exceed guests' expectations. Peter A. Morton is a visible proponent
of the Resort's emphasis on customer service and regularly speaks to employees
and customers. In addition, Mr. Morton and other members of management
personally respond to suggestions made on comment cards placed in each of the
Resort's hotel rooms.
The success of the Company's business strategy is evidenced by the large
number of awards the Resort has received. The Resort was selected in CONDE NAST
TRAVELER as one of "The 25 Coolest Places To Stay Now" in the world and was also
recognized in the 1997 LAS VEGAS REVIEW JOURNAL'S "Best of Las Vegas" issue as
being "The Best Place to Take Out-of-Town Visitors" and for having "The Best
Hotel Pool," "Best Blackjack Tables" and "Best Live Music Club." In addition,
the Beach Club, with its sand bottomed pool and underwater rock music, was
dubbed the "eighth wonder of Las Vegas" by VOGUE magazine.
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LOCATION
The followng map shows the location of the Resort relative to the Strip,
certain other hotel casinos in Las Vegas and McCarran International Airport.
[LOGO]
Map not to scale.
The Resort occupies one of the most highly visible and easily accessible
sites in Las Vegas. It is located on approximately 16.7 acres of land near the
intersection of Paradise Road and Harmon Avenue, approximately two miles from
McCarran International Airport and approximately one mile east of the Strip, the
main tourist area in Las Vegas. The Resort represents an attractive alternative
for tourists, business travelers and locals who wish to avoid the crowds and
congestion of the Strip, while maintaining close and easy access to the Strip.
The Company has agreements with major hotels and casinos and retail
establishments pursuant to which shuttle services are provided between such
locations and the Resort. The Resort's location is particularly attractive due
to its proximity to (i) a high concentration of popular Las Vegas restaurants
and nightclubs, (ii) the Las Vegas Convention Center, (iii) the Thomas & Mack
Center at the University of Nevada Las Vegas, Las Vegas' primary sporting and
special events arena and (iv) a number of non-gaming hotels, which have an
aggregate of more than 1,000 guest rooms.
THE RESORT
The Resort was modeled after the successful rock music oriented Hard Rock
Cafe restaurant chain and is decorated with an extensive collection of rare rock
memorabilia as well as a roof top guitar-shaped neon sign that extends 180 feet
into the Las Vegas skyline. The Resort currently consists of the Hotel, the
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Casino, the Retail Store, two restaurants, The Joint, the Beach Club, three
cocktail lounges and the Athletic Club. The Resort offers its patrons
high-quality customer service and excellent value in a vibrant, energetic
atmosphere that is both friendly and intimate.
THE HOTEL. The Hotel's eleven-story tower houses 339 spacious hotel rooms,
including 311 guest rooms and 28 deluxe suites. The guest rooms and deluxe
suites average approximately 450 square feet in size, which is larger than the
size of an average Las Vegas hotel room. Consistent with the Resort's
distinctive decor, the hotel rooms are stylishly furnished with modern
furniture, stainless steel bathroom sinks, leather headboards and
black-and-white photos of famous rock musicians. The rooms also include special
amenities such as large 27-inch screen televisions, stereo systems and French
doors that open to the outdoors. A full-service concierge and 24-hour room
service are available to all guests of the Hotel.
The Hotel's broad appeal to visitors to Las Vegas is reflected in its
consistently high occupancy rate and ADR. The Hotel has been operating at 100%
occupancy since February 1996, and reservations frequently must be made six
weeks to two months in advance. Management estimates that due to the Resort's
popularity and exclusivity, the Hotel turns away between 5,000 and 10,000
requests for reservations each month. Despite intense competition from other
hotels and a 9% growth in overall room capacity in Las Vegas, the Hotel
increased its occupancy rate from 99.5% in fiscal year 1996 to 100.0% in fiscal
year 1997 and increased its ADR from $91.60 in fiscal year 1996 to $96.36 in
fiscal year 1997.
THE CASINO. The innovative, distinctive style of the 28,000 square-foot
circular Casino is a major attraction for both Las Vegas visitors and local
residents. The Casino is designed with an innovative circular layout around the
elevated Center Bar, which allows the Casino's patrons to see and be seen from
nearly every area of the Casino. Rock music is played continuously to provide
the Casino with an energetic and entertaining, club-like atmosphere. In
addition, the Casino promotes a friendly, intimate atmosphere by encouraging its
employees to smile at and interact with Casino players. Dealers, for example,
are encouraged to "High Five" winning players.
The Casino houses 50 table games including Blackjack, Craps, Roulette,
Caribbean Stud Poker, Mini-Baccarat and Pai-Gow Poker, 741 slot and video poker
machines, some of which feature guitar-neck-shaped levers and motorcycle
seat-shaped stools, an approximate 1,000 square-foot race and sports book as
well as the 1,963 square-foot Center Bar. The Casino also offers patrons other
attractions such as cutting edge slot technology, proprietary slot graphics and
distinctive slot signage. For example, Silicon Gaming's Odyssey Slot Machines
have been added to attract Las Vegas tourists, local residents and repeat
customers. The Company's table game operations often reach service capacity on
weekends, holidays and during special events and concerts held in The Joint or
at the Beach Club. For special events, the Company sets up table games in The
Joint and outdoor table games in the Beach Club area. Consistent with the
Company's rock music theme, the Company utilizes rock star images on the chips
used in the Casino, many of which are kept by visitors as souvenirs (generating
additional income for the Company) and rock star likenesses on slot machine
reels and glass.
RETAIL. The Resort's retail operations consist of the Retail Store, a 2,000
square-foot retail shop, located at the Resort, and sales through its internet
web site. Because of the strong "Hard Rock Hotel" trademark and the Company's
experience in innovative retailing, the Retail Store generated sales for fiscal
year 1997 of approximately $7,700 per square foot. Visitors may purchase shirts,
hats, pins, golf bags, children's clothing, stationery, leather jackets,
collectible pin sets, sundry items and a variety of other merchandise displaying
the popular "Hard Rock Hotel" and "HRH" logos from the Retail Store, through the
web site and from a sundry store located in the Resort. The Company's retail
operations have been very successful and offer a convenient and inexpensive
outlet to market and advertise the "Hard Rock Hotel" trademark and attract other
Las Vegas visitors to the Resort. The Company's in-house design team is
responsible for maintaining the consistency of the Resort's image while creating
new merchandise to expand and diversify the retail selection.
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THE JOINT. As a live music venue with a capacity of 1,400 persons, The
Joint successfully draws audiences from Las Vegas visitors and from the local
Las Vegas population. Management believes that as a result of hosting concerts
by famous musicians such as The Rolling Stones, The Eagles, No Doubt, The
Wallflowers, Sheryl Crow, Fiona Apple and Jewel, The Joint has become a premiere
venue in Las Vegas for live popular music. Some of these performances have been
broadcast by Fox Television Network, MTV and VH-1 and are an important part of
the Company's marketing strategy not only because they generate publicity for
the Resort, and attract large audiences to The Joint, but also because they
provide an added source of visitors for the Hotel, the Casino, and the Resort's
retail and food and beverage operations. In order to increase and retain
customer traffic in the Casino, the Company recently began operating The Joint
as an after hours (12:30 a.m. to 4:00 a.m.) nightclub on Friday and Saturday
nights.
THE BEACH CLUB. Situated outside the Hotel, the Beach Club features a
175-foot long, sand bottomed pool with a waterslide and underwater rock music,
which was dubbed "the eighth wonder of Las Vegas" by VOGUE magazine and was
recognized in the 1997 LAS VEGAS REVIEW-JOURNAL as the "Best Hotel Pool" in Las
Vegas. The Beach Club also includes two beaches with white sand imported from
Monterey, California, rock outcroppings and two whirlpools. In addition, guests
of the Hotel can rent private cabanas at the Beach Club, which include water
misters, a refrigerator, a television and (for an additional fee) an on-site
massage service.
FOOD AND BEVERAGE. The Resort offers its patrons a selection of
high-quality food and beverages at multiple price points. The Resort's food and
beverage operations include two restaurants (Mortoni's and Mr. Lucky's), two
bars in the Casino (the Las Vegas Lounge and the Center Bar), two bars in The
Joint, a bar at the Beach Club and catering service for corporate events,
conventions, banquets and parties. Mortoni's, an elegant 2,250 square-foot
restaurant with seating capacity for approximately 110 persons, serves its
diners upscale Italian cuisine, while Mr. Lucky's, a 3,800 square-foot 24-hour
restaurant with seating capacity for approximately 200 persons, specializes in
high-quality, moderately priced American cuisine such as hamburgers, pizza, ribs
and salads. Both the 1,800 square-foot Las Vegas Lounge and the 1,963
square-foot Center Bar have become popular with both Las Vegas tourists and
local residents who are attracted to the Resort's entertainment and vibrant,
energetic atmosphere. As a result, these bars have often reached their service
capacity on weekends, holidays and when special events and concerts have been
held in The Joint or at the Beach Club. In addition, The Joint and the Beach
Club offer their customers a limited selection of menu items and beverages.
THE ATHLETIC CLUB. The Athletic Club includes treadmills, stair-masters,
stationary bicycles, CYBEX machines, a variety of free-weights, steam rooms,
showers and a massage room. Plans for the Expansion include adding new state of
the art health club and spa facilities featuring amenities such as massage,
facial and other personal services, making the Athletic Club a facility suitable
for a first-class destination resort.
BANQUETS AND CORPORATE EVENTS. The Resort hosts a number of corporate
events, conventions, banquets and private parties. Past clients include Callaway
Golf, Buena Vista Pictures, Jack Daniels, Netspeed, Miller Beer and Ziff-Davis.
Depending upon the size of the event, customers can choose to host their
corporate functions, conventions and banquets either indoors, at The Joint or in
the Resort's approximately 2,200 square-foot meeting room, or outdoors, around
the swimming pool at the Beach Club. The Resort's ability to cater such events,
however, has been constrained by its existing meeting space. Currently, the
Resort's indoor meeting space and The Joint, can hold up to 100 individuals and
1,400 individuals, respectively. The Resort has also hosted corporate events,
conventions and banquets falling in the 100 to 1,500 person range by catering
parties, when possible, around the existing pool at the Beach Club. Management
estimates that due to the limitations of its indoor meeting space, the Resort
turns down five to ten corporate events, conventions and banquets per month.
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THE EXPANSION
The Company has started construction on a program to significantly enlarge
and enhance the Resort. The purpose of the Expansion is (i) to attract a greater
number of guests to the Resort, especially during mid-week periods, and (ii) to
increase the amount of time and money guests spend at the Resort. Components of
the Expansion are planned to include the following:
- HOTEL. The Hotel's occupancy rate for fiscal years 1996 and 1997 was 99.5%
and 100.0%, respectively, and management believes there is significant
unmet demand for hotel rooms based on the number of reservation requests
that the Hotel declines. In order to address this demand, the Company
plans to construct a new eleven-story hotel tower that will feature 326
guest rooms, including approximately 32 suites. The new tower will be
attached to, and seamlessly integrated with the existing Hotel. The new
guest rooms and deluxe suites are expected to be decorated in the same
modern, minimalist style as the existing rooms and are designed to have an
average size of 465 square feet, which is slightly larger than the average
size of the guest rooms and deluxe suites in the existing tower. The
Company is also planning to add two private two-story bungalows
overlooking the Beach Club, with an average size of 1,200 square feet,
each featuring a private swimming pool.
- CASINO. The Resort currently has a lower proportion of hotel rooms to
gaming positions relative to other properties in Las Vegas. Management
believes the increase in hotel rooms and amenities as a result of the
Expansion will add customer traffic to the Resort and increase utilization
of the Casino. To capitalize on the expected demand, the Company is
planning to add approximately 60 slot machines and 11 table games, open a
new higher limit gaming area and increase the race and sports book area by
approximately 30%. Management intends to attract higher income gaming
patrons through the bungalows, hotel suites, amenities and special events.
However management does not anticipate targeting customers whose wagering
practices are significantly above those of the Company's current higher
income customer base.
- BEACH CLUB. The Expansion will significantly enlarge the Beach Club, one
of the Resort's key attractions. The Beach Club, which currently occupies
approximately one acre, will be expanded to approximately 2.5 acres. Added
attractions include a second, substantially larger swimming pool featuring
an island, a sand beach, a flowing stream (which will connect the new pool
area to the existing pool area), a new more thrilling waterslide, and
additional white sand beach areas. The Beach Club will also serve as an
outdoor concert venue with a capacity of approximately 3,000 people. Plans
call for the expanded Beach Club to also provide its patrons with an
open-air casino consisting of three table games in, and three table games
adjacent to, the stream connecting the two swimming pools and a bank of
approximately 20 slot machines built into a rock formation. In addition,
the Company plans to surround the pools with approximately 40 Tahitian
styled, thatched roof cabanas, which can be rented on a daily basis.
- RESTAURANTS. The Resort currently features two full-service restaurants.
In order to attract additional visitors and offer guests of the Resort a
greater variety of dining choices, management plans for the Expansion to
include three new premier restaurants including a steakhouse, a Japanese
restaurant to be designed and operated by an internationally renowned chef
and a Mexican restaurant. Plans for the Expansion also include the
addition of a coffee shop in the Hotel and additional food and beverage
service at the Beach Club. Management believes that the greater variety of
dining choices should be an effective tool in attracting additional gaming
customers and increasing the amount of time and money guests spend at the
Resort.
- RETAIL STORE. The Company plans to expand the Retail Store by
approximately 60% to a total of 3,045 square feet and to redesign and
reconfigure it to provide visitors with a variety of merchandise bearing
the "Hard Rock Hotel" and "HRH" logos.
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- PARKING FACILITY. The Company is constructing a six-story parking facility
with a planned capacity of 1,088 cars, effectively increasing the Resort's
parking capacity by approximately 500 cars (net of surface parking space
eliminated from construction of the new hotel tower) to an aggregate of
approximately 1,700 parking spaces. The new parking facility, which is
designed to allow for the future addition of 450 additional parking
spaces, is expected to be completed in the fall of 1998.
- CONVENTION AND MEETING FACILITIES. Due to the significant demand from
convention groups, businesses and other parties for large meetings and for
special events, plans for the Expansion include a new 6,000 square-foot
meeting facility, which can be utilized as one large ballroom or
reconfigured into up to three smaller rooms. The Company anticipates using
The Joint and the expanded Beach Club, restaurants and meeting space to
host receptions and special events and to attract larger meetings and
groups than it has hosted in the past.
- OTHER. Plans for the Expansion also include a new approximately 8,000
square-foot health club and spa, expanding capacity at The Joint by 170
seats to a total of 1,570 seats, a 4,000 square-foot nightclub and an
approximately 30,000 square-foot multi-functional warehouse, maintenance
and back of house facility. The health club and spa are expected to
feature state of the art exercise equipment as well as provide guests with
massage, facial and other personal services typically provided at
first-class destination resorts. The underground nightclub may also serve
as additional space that can be used for meetings, banquets and special
events.
Construction of the Expansion has been planned in three separate phases. The
Company plans to finish construction plans for each phase and obtain "Not to
Exceed" bids from experienced licensed general contractors for each phase. Phase
I consists of the construction of the parking facility, which began in February
1998 and is expected to be completed in the fall of 1998 at a cost of
approximately $8.0 million. The Company has arranged for additional parking at
an adjacent facility during the construction period. The Company has hired M.J.
Dean construction as the general contractor for Phase I. M.J. Dean has given the
Company a "Not to Exceed" contract for its portion of the construction. Phase II
involves the development of the new nightclub and warehouse facility and the
expansion of the Retail Store at a cost of approximately $10.0 million. The
existing Retail Store is expected to remain fully operational during the course
of construction. Phase III includes the development of the new hotel tower,
expanded Beach Club, health club and spa and the additional restaurants and
meeting space at an expected cost of approximately $69.0 million. The Company
has established a total construction budget for the Expansion of $87.0 million
(of which $4.2 million has been expended as of April 30, 1998), including
construction contingency, design costs, pre-opening costs and capitalized
construction period interest. Construction is expected to be completed in the
second quarter of 1999. Mr. Morton has agreed to provide a Completion Guaranty
for the Expansion. See "Risk Factors--Completion Guaranty" and "Completion
Guaranty."
MARKETING
The Company's marketing efforts are targeted at both the visitor market
(tourists and business travelers) as well as local patrons. The marketing
department uses both traditional and innovative marketing strategies to promote
the "Hard Rock Hotel" and "Hard Rock Casino" trademarks. The Company employs
targeted marketing programs through use of the Company's database which has
approximately 350,000 names. The Resort is aggressively marketed not only
through domestic and international public relations activities, direct mail,
print and radio advertising, but also through special arrangements with various
members of the entertainment industry. For example, for the past two years the
Company has provided a number of rooms for the BILLBOARD Music Awards televised
on Fox Network TV in exchange for frequent media exposure during the telecast.
The Resort also hosts many well-publicized and often televised events such as
segments of, and the post-awards party for, the Fox/Billboard Magazine Music
Awards, MTV's dance program THE GRIND, VH-1's Fairway to Heaven Celebrity Golf
Tournament, the King of the Beach Pro Volleyball Tournament and the premiere of
the major motion picture CON AIR. These types of events are held at the Resort
because its stylish and distinctive atmosphere is consistent with
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the theme of the events. The events, in turn, reinforce the Resort's image as a
destination resort among its target clientele. The concerts in The Joint by
popular artists, some of which have been televised, are another form of
promotional activity that reinforces the Resort's image.
The Casino marketing staff has developed the Back Stage Pass program for
visitors to the Casino. The Back Stage Pass is a casino player tracking card.
The program, which is available to all Casino visitors, tracks each patron's
gaming record, and based on the level of gaming activity, members may become
eligible for discount or complimentary services, invitations to special events
and merchandise at the Resort. Every visitor who joins the Back Stage Pass
program receives a Six-Pac of coupons redeemable at the Resort. The coupons are
redeemable for certain items available at the Resort such as a complimentary
shot glass or a complimentary beer at the Center Bar or the Las Vegas Lounge.
Management believes that the Expansion, as well as the Company's continued
marketing efforts, will further attract Las Vegas visitors, local residents and
repeat customers.
Management targets local residents through direct mail advertising as well
as through hosting special events and parties specifically geared to the local
population. For example, Swing Night, which is held every Wednesday evening
during the summer months, offers patrons the opportunity to dance to swing music
at the Beach Club and gamble at an outdoor blackjack pit. The Company has
attracted approximately 1,400 people each time it has hosted Swing Night. In
addition, management believes the off-Strip location and close proximity to a
variety of restaurants and nightclubs attracts local residents to the property.
TRADEMARKS
Hard Rock Hotel-Registered Trademark- and Hard Rock
Cafe-Registered Trademark- are registered trademarks of a wholly owned
subsidiary of Rank. Upon the sale of Mr. Morton's interest in the Hard Rock
Cafes to Rank in June 1996, Mr. Morton and Rank entered into a trademark
licensing agreement pursuant to which Rank granted to Mr. Morton an exclusive,
perpetual, royalty-free license (subject to certain termination provisions
designed to protect the quality of the trademarks) to use the "Hard Rock Hotel"
and "Hard Rock Casino" trademarks in connection with hotel casinos and casinos
in the Morton Territory. Mr. Morton has sublicensed to the Company the right to
use the "Hard Rock Hotel" and "Hard Rock Casino" trademarks at the Resort's
location in Las Vegas (subject to certain termination provisions designed to
protect the quality of the trademarks) for a term lasting as long as the Company
shall have any outstanding indebtedness pursuant to the Notes or the New Credit
Facility. The Company is currently a defendant in a lawsuit relating to the use
of certain marks and logos on the internet. See "--Legal Proceedings."
LAS VEGAS MARKET
Las Vegas is one of the fastest growing and largest entertainment markets in
the United States. For fiscal year 1997, gaming revenues in Clark County reached
a new 12 month record of $6.2 billion. The number of visitors traveling to Las
Vegas has increased at a steady and significant rate, from 16.2 million visitors
in 1987 to a record 30.5 million in 1997, representing a compound annual growth
rate of 6.5%. Aggregate expenditures by Las Vegas visitors increased at a
compound annual growth rate of 11.3% from $8.6 billion in 1987 to $22.5 billion
in 1996. The number of hotel and motel rooms in Las Vegas increased by
approximately 70.1% from 61,934 in 1988 to 105,347 in 1997, surpassing 100,000
rooms in January 1997, the first market to reach that level. Despite this
significant increase in the number of rooms, hotel occupancy rates exceeded on
average 92.1% for the years 1993 to 1997. According to the Las Vegas Convention
and Visitors Authority ("LVCVA"), by the end of the decade, it is expected that
in addition to the Company's hotel, approximately 20,000 additional hotel rooms
will be opened in Las Vegas, including the Bellagio, Venetian, Paris and
Mandalay Bay, which are currently under construction, the expansion at the MGM
Grand and the new developments planned at the current Aladdin site. Management
believes that the addition of quality themed hotel casinos and resorts will
continue to increase visitor traffic to Las Vegas and benefit the Company in
particular due to its unique niche and proximity to the Strip.
41
<PAGE>
The following table sets forth certain statistical information for the Las
Vegas market for the years 1993 through 1997, as reported by the LVCVA.
LAS VEGAS MARKET STATISTICS
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Visitor Volume (in thousands)................................ 23,523 28,214 29,002 29,637 30,465
Clark County Gaming Revenues (in millions)................... $ 4,727 $ 5,431 $ 5,718 $ 5,784 $ 6,152
Hotel/Motel Rooms............................................ 86,053 88,560 90,046 99,072 105,347
Average Hotel Occupancy Rate................................. 92.6% 92.6% 91.4% 93.4% 90.3%
Airport Passenger Traffic (in thousands)..................... 22,492 26,850 28,027 30,460 30,306
Convention Attendance (in thousands)......................... 2,440 2,684 2,925 3,306 3,519
</TABLE>
COMPETITION
The Company, located less than one mile east of the Strip, competes with
other high-quality Las Vegas resorts and other Las Vegas hotel casinos,
including those located on the Strip on the basis of overall atmosphere, range
of amenities, price, location, entertainment offered, theme and size. Currently,
there are approximately 24 major gaming properties located on or near the Strip,
13 additional major gaming properties in the downtown area and additional gaming
properties located in other areas of Las Vegas. Many of the competing
properties, such as the Rio, Sunset Station, The Mirage, Treasure Island,
Caesar's Place, Luxor, New York-New York and the MGM Grand have themes and
attractions which draw a significant number of visitors and directly compete
with the Company's operations. Some of these facilities are operated by
companies that have more than one operating facility and may have greater name
recognition and financial and marketing resources than the Company and market to
the same target demographic group as the Company. Additionally, some competing
properties may incorporate a music theme (and at least one has announced its
intention to do so) that may affect the Company negatively. In addition, a
significant number of additional hotel casinos are expected to open in Las Vegas
within the next three years. There can be no assurance that the Las Vegas market
will continue to grow or that hotel casino resorts will continue to be popular,
and a decline or leveling off of the growth or popularity of such facilities
would adversely effect the Company's financial condition and results of
operations.
The Company will also face competition from competing "Hard Rock" hotels and
hotel casinos that may be established in jurisdictions other than Las Vegas. The
Company has the exclusive right to use the "Hard Rock Hotel" and "Hard Rock
Casino" trademarks only in connection with the Resort in Las Vegas. Mr. Morton
holds the exclusive rights to exploit such trademarks in connection with hotel
casinos and casinos in other parts of the Morton Territory, and Rank holds such
rights in the remainder of the world. The Company has been informed that Rank
intends to open several hotels using the "Hard Rock" name in jurisdictions both
inside and outside the Morton Territory. See "Risk Factors--Risks Associated
with Shared Use of the 'Hard Rock' Brand Names."
To a lesser extent, the Resort competes with hotel casinos in the Mesquite,
Laughlin, Reno and Lake Tahoe areas of Nevada, and in Atlantic City, New Jersey.
The Company also competes with state-sponsored lotteries, on- and off-track
wagering, card parlors, riverboat and Native American gaming ventures and other
forms of legalized gaming in the United States, as well as with gaming on cruise
ships and international gaming operations. In addition, certain states have
recently legalized, and others may or are likely to legalize, casino gaming in
specific areas, and passage of the Indian Gaming Regulatory Act in 1988 has led
to rapid increases in Native American gaming operations. Continued proliferation
of gaming activities could significantly and adversely affect the Company's
business and prospects. In particular, the legalization of casino gaming in or
near any metropolitan area from which the Company intends to attract customers
would have a material adverse effect on the Company's financial condition and
results of operations. See "Risk Factors--Possible Legislation."
42
<PAGE>
Many of the Company's competitors in the hotel casino industry are
emphasizing or are expected to emphasize their non-gaming businesses, including
retail sales. Consequently, the Company has recently experienced (and expects to
continue to experience) increased competition in the retail sales market in Las
Vegas. The Company's retail departmental income decreased during fiscal year
1997 relative to fiscal year 1996, and there can be no assurance that retail
departmental income will not continue to decrease. See "Risk
Factors--Competition."
EMPLOYEES
As of February 28, 1998, the Company had approximately 875 full-time
employees and 150 on-call employees who are employed on an as-needed basis. Upon
completion of the Expansion, the Company intends to employ approximately 1,200
full-time employees and 250 on-call employees. None of the Company's employees
are members of unions. The Company considers its relations with its employees to
be good and has never experienced an organized work stoppage, strike or labor
dispute.
PROPERTIES
The Company owns approximately 16.7 acres of land in Las Vegas where the
Resort, its parking facility and the area on which the Expansion will occur are
located.
LEGAL PROCEEDINGS
On January 5, 1998, Hard Rock Cafe International (USA) Inc. (f/k/a Rank
Licensing, Inc.), a subsidiary of Rank, filed an amended complaint in the United
States District Court for the Southern District of New York against Peter A.
Morton and the Company. The Plaintiff contends that the reservation and use by
Mr. Morton and the Company of the internet domain names "hardrock.com" and
"hardrockhotel.com" (the "Domain Names"), and the use of certain marks and logos
(the "Logos") in, and in connection with merchandise offered on, internet
websites operated under the Domain Names, violate terms of certain agreements
with Mr. Morton and federal and state trademark and unfair competition law. The
Plaintiff seeks an injunction against the use of the Domain Names and Logos by
Mr. Morton and the Company, an order requiring Mr. Morton and the Company to
assign the Domain Names to the Plaintiff, and over $100 million in damages. On
May 8, 1998, Mr. Morton and the Company agreed to transfer the domain name
"hardrock.com" to the Plaintiff forty-five days therefrom. Trial is currently
set for June 15, 1998. Management and Mr. Morton believe that this lawsuit is
without merit and intend to defend vigorously the allegations in this complaint
and believe that the outcome of such litigation will not have a material adverse
effect on the Company, although there can be no assurance of the outcome of the
lawsuit. Revenues from sales of merchandise over the internet for fiscal year
1997 were less than $150,000.
Additionally, the Company is a defendant in various lawsuits relating to
routine matters incidental to its business. Management does not believe that the
outcome of any such litigation, in the aggregate, will have a material adverse
effect on the Company.
43
<PAGE>
REGULATION AND LICENSING
The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively the "Nevada Act"); and (ii) various local regulations.
The Company's gaming operations are subject to 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) to provide a source of state and local revenues
through taxation and licensing fees. Changes in such laws, regulations and
procedures could have an adverse effect on the Company's gaming operations.
The Company is required to be licensed by the Nevada Gaming Authorities. The
gaming license requires the periodic payment of fees and taxes and is not
transferable. No person may become a stockholder of, or receive any percentage
of profits from, the Company without first obtaining licenses and approvals from
the Nevada Gaming Authorities. The Company has obtained from the Nevada Gaming
Authorities the various approvals, permits and licenses required in order to
engage in its current gaming activities in Nevada. Additional approvals,
registrations and regulation waivers will be required for the Exchange Offer
contemplated herein.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company in order to
determine whether such individual is suitable or should be licensed as a
business associate of a gaming licensee. Officers, directors and certain key
employees of the Company must file applications with the Nevada Gaming
Authorities and may be required to be licensed or found suitable by the Nevada
Gaming Authorities. The Nevada Gaming Authorities may deny an application for
licensing for any cause which they deem reasonable. A finding of suitability is
comparable to licensing, and both require submission of detailed personal and
financial information followed by a thorough investigation in which the burden
of proving one's suitability is always on the applicant. The applicant for
licensing or a finding of suitability must pay all the costs of the
investigation. Changes in licensed positions must be reported to the Nevada
Gaming Authorities and in addition to their authority to deny an application for
a finding of suitability for license, the Nevada Gaming Authorities have
jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, the Company would have to sever all relationships
with such person. In addition, the Nevada Commission may require the Company to
terminate the employment of any person who refuses to file appropriate
applications. Determinations of suitability or of questions pertaining to
licensing are not subject to judicial review in Nevada.
The Company is required to submit detailed financial and operating reports
to the Nevada Commission. Substantially all material loans, leases, sales of
securities and similar financing transactions by the Company must be reported
to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by the Company, the
gaming licenses it holds could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory procedures. In
addition, the Company and the person 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 Company's gaming properties
44
<PAGE>
and, under certain circumstances, earnings generated during the supervisor's
appointment (except for the reasonable rental value of the Company's gaming
properties) 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
Company's gaming operations.
Any beneficial owner of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have his suitability as a beneficial owner of the Company's equity
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. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation. The Company
will remain privately held until such time as the Exchange Offer is effective
and until the Company's receipt of all regulatory approvals.
The Nevada Act requires that any person who acquires beneficial ownership of
more than 5% of a Registered Corporation's voting securities must report the
acquisition to the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of the Company's voting securities apply to the Nevada
Commission for a finding of suitability within thirty days after the Chairman of
the Nevada Board mails the written notice requiring such filing. Under certain
circumstances, an "institutional investor," as defined in the Nevada Act, which
acquires more than 10%, but not more than 15%, of the Company's voting
securities may apply to the Nevada Commission for a waiver of such finding of
suitability if such institutional investor holds the voting securities for
investment purposes only. An institutional investor shall not be deemed to hold
voting securities for investment purposes unless the voting securities were
acquired and are held in the ordinary course of business as an institutional
investor and not for the purpose of causing, directly or indirectly, the
election of a majority of the members of the Board of Directors of the Company,
any change in the Company's corporate charter, bylaws, management, policies or
operations of the Company, or any of its gaming affiliates, or any other action
which the Nevada Commission finds to be inconsistent with holding the 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) such other activities as the
Nevada Commission may determine to be consistent with such investment intent. If
the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada Board, may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock of a
Registered Corporation beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense. The Company is subject to
disciplinary action if, after it receives notice that a person is unsuitable to
be a stockholder or to have any other relationship with the Company, the Company
(i) pays that person any dividend or interest upon voting securities of the
Company, (ii) allows that person to exercise, directly or indirectly, any voting
right conferred through securities held by that person, (iii) pays remuneration
in any form to that person for services rendered or otherwise, or (iv) fails to
pursue all lawful efforts to require such unsuitable person to relinquish his
voting securities for cash at fair market value. Additionally, pursuant to the
Clark County Code the CCLGLB has the authority to approve all persons owning or
controlling the stock of any corporation controlling a gaming license.
45
<PAGE>
The Nevada Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated and
be found suitable to own the debt security of a Registered Corporation. If the
Nevada Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend, interest, or any
distribution whatsoever; (ii) recognizes any voting rights by such unsuitable
person in connection with such securities; (iii) pays the unsuitable person
remuneration in any form; or (iv) makes any payment to the unsuitable person by
way of principal, redemption, conversion, exchange, liquidation, or similar
transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. Due to the
fact that the Company is a corporate gaming licensee, the Company's stock
certificates carry a restrictive legend indicating the stock of the company is
subject to the Nevada Act. Furthermore, any negative covenant that restricts the
transfer of the stock of a corporate licensee may require the prior approval of
the Nevada Gaming Commission.
The Company may not make a public offering of its 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 Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful. The Company has applied for approval
of its debt offering as well as a waiver of certain regulations of the Nevada
Gaming Commission that prohibit a public offering by a corporation holding a
Nevada gaming license. However, there can be no assurances that the Nevada
Gaming Commission will grant such approval. Furthermore, any such approval if
given does not constitute a finding, recommendation or approval by the Nevada
Gaming Commission or the Nevada Board as to the accuracy or adequacy of the
prospectus or the investment merits of the debt securities offered. Any
representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock or
asset acquisition, management or consulting agreements, or any act or conduct by
a person whereby he obtains control, may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Board and Nevada Commission in a variety of
stringent standards prior to assuming control of such Registered Corporation.
The Nevada Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or involvement with
the entity proposing to acquire control, to be investigated and licensed as part
of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licenses, and Registered Corporations that are
affiliated with these 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 environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by
46
<PAGE>
management can be consummated. The Nevada Act also requires prior approval of a
plan of recapitalization proposed by the Company's Board of Directors in
response to a tender offer made directly to the Registered Corporation's
stockholders for the purposes of acquiring control of the Registered
Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada 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; (iii) the number of table games operated; or (iv) a
percentage of the room rate charged for each occupied room. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments. Nevada
licensees that hold a license as an operator of a slot route, or a
manufacturer's or distributor's license, also pay certain fees and taxes to the
State of Nevada.
Any person who is licensed, required to be licensed, registered, required to
be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada Commission if the Licensee knowingly violates
any laws of the foreign jurisdiction pertaining to the foreign gaming operation,
fails to conduct the foreign gaming operation in accordance with the standards
of honesty and integrity required of Nevada gaming operations, engages in
activities that are harmful to the State of Nevada or its ability to collect
gaming taxes and fees, or employs a person in the foreign operation who has been
denied a license or finding of suitability in Nevada on the ground of personal
unsuitability.
47
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following sets forth the names, ages and position of each person who is
a director, executive officer or key employee of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------- --------- --------------------------------------------------------------------
<S> <C> <C>
Peter A. Morton........... 50 Chairman of the Board, Chief Executive Officer, President and
Secretary
Gary R. Selesner.......... 44 Senior Vice President of Operations and General Manager
Bruce R. Dall............. 35 Chief Financial Officer and Treasurer
William R. Stephens....... 49 Vice President of Casino Operations
Christine R. Belcastro.... 49 Executive Director of Hotel Operations
Adam P. Titus............. 34 Executive Director of Construction
Gilbert B. Friesen........ 60 Director
Stephen A. Marks.......... 51 Director
</TABLE>
PETER A. MORTON. Mr. Morton has been the Chairman of the Board, Chief
Executive Officer and President of the Company since its formation and Secretary
of the Company since December 1997. Prior to June 1996, Mr. Morton was the
President and Chief Executive Officer of Hard Rock America. Mr. Morton, a third
generation restaurateur, co-founded the London Hard Rock Cafe in 1971, at the
age of 23. He also opened Mortons Restaurant in Los Angeles, California in 1979
and has developed Hard Rock Cafes in Aspen, Chicago, Hollywood, Honolulu,
Houston, Las Vegas, Los Angeles, Maui, New Orleans, Newport Beach, Phoenix, San
Diego, San Francisco and Sydney. In addition, Mr. Morton has developed the
following restaurants: Great American Disaster, London, England (1970); and
Mortons Bar and Grill, London, England (1975). Mr. Morton sits on the Board of
Trustees of the Natural Resources Defense Council.
GARY R. SELESNER. Mr. Selesner has been Senior Vice President of Operations
of the Company and General Manager of the Resort since October 1997. From March
1996 to October 1997 he was employed by Harveys as General Manager of the
Resort. From 1995 to 1996, he served as a Senior Vice President for Harveys
Casino Resorts. From 1992 to 1995, Mr. Selesner was Vice President--Sales and
Marketing of President Casinos, Inc., where he was responsible for all casino
marketing, player clubs, advertising, promotions, special events, marketing
analysis, public relations and communications. From 1990 to 1991, Mr. Selesner
served as President and Chief Operating Officer of Trump Plaza Hotel and Casino.
BRUCE R. DALL. Mr. Dall has been Chief Financial Officer and Treasurer at
the Company since December 1997. From October 1997 to December 1997, Mr. Dall
was employed by the Company as Director of Finance. From April 1996 to October
1997, Mr. Dall was employed by Harveys as the Controller of the Resort. From
1995 to 1996, he served as Controller of the Sheraton Desert Inn where he was
responsible for accounting, financial planning, cage, credit/collections,
purchasing and warehousing functions. From 1994 to 1995, Mr. Dall was the
Director of Financial Planning for the Desert Inn. From 1993 to 1994, he
established and ran Sheraton Gaming's Internal Audit Department. From 1988 to
1993, he served as Director of the Internal Audit Department at Caesars Palace.
WILLIAM R. STEPHENS. Mr. Stephens has been Vice President of Casino
Operations of the Company since December 1997. Mr. Stephens served as Director
of Casino Operations of the Company from October 1997 to December 1997. Mr.
Stephens was employed by Harveys as a Director of Casino Operations from 1993 to
October 1997. Mr. Stephens is responsible for directing all aspects of casino
operations for the Resort in accordance with corporate policy and Nevada Gaming
Regulations. He is also responsible for achieving revenue and income objectives,
market share and customer service objectives,
48
<PAGE>
casino marketing and sports book player development. From 1989 to 1993, he was a
Casino Shift Manager at both the Sands Hotel and Main Street Station in Las
Vegas.
CHRISTINE R. BELCASTRO. Ms. Belcastro has been Executive Director of Hotel
Operations of the Company since October 1997. From April 1996 to October 1997
Ms. Belcastro was employed by Harveys as Executive Director of Hotel Operations
of the Resort. From 1994 to 1996 she was employed by Harveys as Director of
Hotel Operations for the Resort. From 1992 to 1994, she was Director of Hotel
Operations at the Palace Station in Las Vegas, where she was responsible for
budgeting, forecasting and day-to-day operations of the Hotel Division,
including sales, PBX, room reservations, front desk, bell desk, valet parking,
internal maintenance, pool, transportation, housekeeping and lounge
entertainment. From 1991 to 1992, Ms. Belcastro served as Director of Hotel
Operations at the Sands Hotel.
ADAM P. TITUS. Mr. Titus has been the Executive Director of Construction of
the Company since October 1997. From August 1996 to October 1997 Mr. Titus was
employed by Harveys. From 1995 to August 1996 Mr. Titus was the Construction
Administrator for Caesars World, where he was responsible for completing
construction and installation of gaming equipment and services. From 1987 to
1995 Mr. Titus was the Chief Contracting Officer and Director of Construction
for Lady Luck where he was responsible for the construction of various casino
projects.
GILBERT B. FRIESEN. Mr. Friesen has been a Director of the Company since
December 1997. Currently, Mr. Friesen is a private investor. From 1994 to 1997,
he was Chairman of the Board of Classic Sports Network. Prior to 1994 he was a
private investor.
STEPHEN A. MARKS. Mr. Marks has been a Director of the Company since
December 1997. He is the founder of French Connection Group plc, an
international fashion company listed on the London Stock Exchange, and has been
its Chief Executive Officer and a Director since its formation in 1969.
COMPENSATION OF DIRECTORS
Directors of the Company receive no compensation for serving on the Board of
Directors. All directors are reimbursed for expenses incurred in connection with
attendance at board or committee meetings.
49
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by the Company to its
Chief Executive Officer and the four other most highly compensated executive
officers (the "Named Executive Officers") for fiscal year 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------- --------------------
NAME AND OTHER ANNUAL RESTRICTED STOCK
PRINCIPAL POSITION YEAR SALARY (1) BONUS COMPENSATION AWARD(S)
- ----------------------------------------- --------- ------------ ----------- ---------------- --------------------
<S> <C> <C> <C> <C> <C>
Peter A. Morton.......................... 1997 $ -- $ -- $ 1,556,435(3) $ --
Chairman of the Board, Chief Executive
Officer, President and Secretary
Gary R. Selesner......................... 1997 211,923 93,000 -- 951,250(4)
Senior Vice President of Operations and
General Manager
Bruce R. Dall............................ 1997 77,501 11,450 -- --
Chief Financial Officer and Treasurer
William R. Stephens...................... 1997 110,365 36,650 -- --
Vice President of Casino Operations
Christine R. Belcastro................... 1997 93,750 25,460 -- --
Executive Director of Hotel Operations
<CAPTION>
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION (2)
- ----------------------------------------- -------------------
<S> <C>
Peter A. Morton.......................... $ --
Chairman of the Board, Chief Executive
Officer, President and Secretary
Gary R. Selesner......................... 4,144
Senior Vice President of Operations and
General Manager
Bruce R. Dall............................ 1,358
Chief Financial Officer and Treasurer
William R. Stephens...................... 4,640
Vice President of Casino Operations
Christine R. Belcastro................... 4,369
Executive Director of Hotel Operations
</TABLE>
- ---------------
(1) Pursuant to the Management Agreement, Harveys provided for the procurement
of certain management services and in return the Company paid Harveys a
management fee. The Named Executive Officers, excluding Mr. Morton, were
employees of a subsidiary of Harveys through October 24, 1997 during which
time the Company reimbursed Harveys for the payment of salaries, bonuses and
benefits. On October 24, 1997, the Company and Harveys terminated the
Management Agreement. See "Certain Relationships and Related Party
Transactions".
(2) All Other Compensation consists of contributions made by the Company to the
Harveys 401(k) Plan on behalf of Mr. Selesner in the amount of $4,144, Mr.
Dall in the amount of $1,358, Ms. Belcastro in the amount of $3,917 and Mr.
Stephens in the amount of $4,083. In addition, All Other Compensation
consists of insurance premiums paid by the Company with respect to term life
insurance in the amount of $557 for Mr. Stephens and $452 for Ms. Belcastro.
(3) Mr. Morton received his compensation in the form of a supervisory fee. See
"Employment Agreements." A portion of the supervisory fee was paid directly
to the 510 Development Corporation, a corporation owned 100% by Mr. Morton.
(4) The Company estimates the value of the aggregate restricted stock holdings
at the end of the last completed fiscal year was $951,250. 768 shares of
non-voting common stock of the Company have been granted to Mr. Selesner,
20% of which will vest upon receipt of the requisite approvals of the Nevada
Gaming Authorities, provided that such 20% will be subject to forfeiture
upon Mr. Selesner's resignation or termination for Cause (as defined in the
Selesner Employment Agreement) prior to October 24, 1998. If Mr. Selesner is
not terminated by reason of death, disability, or Cause and does not resign,
an additional 20% of the shares will vest on each of October 24, 1998, 1999,
2000 and 2001, subject to receipt of the requisite approvals of the Nevada
Gaming Authorities. Each such 20% is subject to forfeiture upon Mr.
Selesner's resignation or termination for Cause within twelve months of the
date such 20% portion has vested. On October 24, 2001, 100% of such shares
will be vested. The shares are subject to certain transfer restrictions, put
rights and other provisions. See "--Employment Agreements."
EMPLOYMENT AGREEMENTS
Mr. Morton and the Company have entered into an amended and restated
supervisory agreement, which expires on December 31, 2022 (the "Supervisory
Agreement"). Mr. Morton has the option to renew the agreement for two successive
fifteen year terms. Pursuant to the terms of the agreement, Mr. Morton is to
provide consulting and supervisory services to the Company in exchange for 2.0%
of the Company's annual gross revenues (as defined therein), which excludes the
value of any complimentary goods or services. Such payments will be subordinated
to the Notes and the New Credit Facility. The Company will reimburse Mr. Morton
for all costs and expenses incurred by him in connection with services provided
to the Company. In the event either the Company or Mr. Morton is in Default (as
defined in the Supervisory
50
<PAGE>
Agreement), the non-defaulting party may terminate the agreement after the other
party has received the opportunity to cure such default.
Mr. Selesner has entered into an employment agreement, dated October 8, 1997
(the "Selesner Employment Agreement"), which has a term of four years. Mr.
Selesner will serve as Senior Vice President of Operations and General Manager
of the Company. The Company will pay Mr. Selesner a base salary of $250,000 per
year and an annual bonus determined by the Company's Board of Directors, which
will not in any event be less than $75,000 per year. In addition, Mr. Selesner
will receive use of an automobile. In the event of a Change in Control (as
defined in the Selesner Employment Agreement) all equity granted to Mr. Selesner
will vest and become exercisable. If Mr. Selesner is terminated without Cause
(as defined in the Selesner Employment Agreement), Mr. Selesner will (i) receive
his salary and bonus multiplied by the number of years, not less than one,
remaining in the employment term, (ii) vest in any non-vested equity granted to
him, (iii) receive health and medical benefits through the remainder of the
employment term (provided he does not breach the non-solicitation provision of
the Selesner Employment Agreement) and (iv) receive the amount of any
forfeitures that result from any non-vesting under any of the Company's employee
benefit plans.
Pursuant to an amended and restated letter agreement (the "Letter
Agreement") among the Company, Lily Pond Investments, Inc. ("Lily Pond") and Mr.
Selesner, the Company will issue to Mr. Selesner 768 shares of non-voting common
stock of the Company (the "Shares"), 20.0% of which vested on October 24, 1997
(subject to receipt of the requisite approvals of the Nevada Gaming
Authorities), provided that such 20% will be subject to forfeiture upon Mr.
Selesner's resignation or termination for Cause (as defined in the Selesner
Employment Agreement) prior to October 24, 1998. If Mr. Selesner is not
terminated by reason of death, disability, or Cause and does not resign, an
additional 20.0% of the Shares will vest on each of October 24, 1998, 1999, 2000
and 2001 (subject to receipt of the requisite approvals of the Nevada Gaming
Authorities). Each such 20.0% is subject to forfeiture upon Mr. Selesner's
resignation or termination for Cause within twelve months of the date such 20.0%
portion has vested. On October 24, 2001, 100% of such shares shall be vested. In
the event of a Change in Control (as defined in the Selesner Employment
Agreement) the remainder of the Shares not vested will immediately vest. Any
transfer of shares to Mr. Selesner may not be completed without the prior
approval of the Nevada Gaming Authorities. The Shares are subject to certain
transfer restrictions, put rights and other provisions contained in the Letter
Agreement. Among other things, if Mr. Selesner's employment is terminated for
any reason, other than voluntary resignation during the term of the Selesner
Employment Agreement or for Cause, upon written demand by Mr. Selesner, the
Company must purchase all of the vested shares for a price equal to $1,953.13
per share (or if an initial public offering has occurred, the initial public
offering price) (the "Purchase Price"). In addition, for a period of 30 days
from the second anniversary of the Commencement Date (as defined in the Selesner
Employment Agreement), Mr. Selesner may require the Company to purchase half of
the shares then vested for the Purchase Price. The Company has agreed to loan to
Mr. Selesner an amount equal to his Federal income tax liability due to the
vesting of the Shares.
Mr. Stephens has entered into an employment agreement, dated December 1,
1997, which has a term of two years and may be extended by mutual agreement for
successive one year terms on the same or mutually agreeable terms. Mr. Stephens
will serve as Vice President of Gaming Operations of the Company. The Company
will pay to Mr. Stephens a base salary of $125,000 per year and an annual bonus
to be determined by the Company's Board of Directors. If Mr. Stephens is
terminated by the Company without Cause (as defined in the agreement), the
Company will pay Mr. Stephens the lesser of $62,500 or the remainder of the base
salary which would otherwise be due under the agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee during 1997. Messrs.
Morton and Selesner each participated in the determination of officers'
compensation during 1997.
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<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS AND LIMITATION OF LIABILITY
Chapter 78 of the Nevada Revised Statutes (the "NRS"), Article SIXTH of the
Company's Articles of Incorporation and Article VII of the Company's Bylaws
contain provisions for indemnification of directors and officers of the Company.
The Bylaws require the Company to indemnify such persons to the fullest extent
permitted by Nevada law. Each person will be indemnified in any proceeding if he
acted in good faith and in a manner which he reasonably believed to be in, or
not opposed to, the best interests of the Company, and with respect to any
criminal proceeding, had no reasonable cause to believe, was unlawful.
Indemnification would cover expenses reasonably incurred, including attorneys'
fees, judgments, fines and amounts paid in settlement. The Company's Bylaws
provide that the Company's Board of Directors may cause the Company to purchase
and maintain insurance on behalf of any present or past director or officer
insuring against any liability asserted against such person incurred in the
capacity of director or officer or arising out of such status, regardless of
whether the Company would have the power to indemnify such person.
LIMITATION OF LIABILITY AND INDEMNIFICATION
In addition, the Company has, with the approval of the stockholders, entered
into an Indemnification Agreement with each of its directors. These agreements
will require the Company to indemnify any director, to the fullest extent
permitted by law, who is or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, or any inquiry or investigation
(including discovery), whether conducted by the Company or any other party, that
such director in good faith believes might lead to the institution of any
action, suit or proceeding, whether civil, criminal, administrative,
investigative or other by reason of (or arising in part out of) any event or
occurrence related to the fact that such director is or was a director, officer,
employee, agent or fiduciary of the Company, or is or was serving at the request
of the Company as a director, officer, employee, trustee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, or by reason of anything done or not done by such director in
any such capacity.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has 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.
The Company has included in its Articles of Incorporation a provision that
limits personal liability for breach of the fiduciary duty of its directors or
officers, except for liability for acts or omissions involving intentional
misconduct, fraud or a knowing violation of law and liability based on payments
of improper dividends.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with regard to the
beneficial ownership of the Company's Common Stock as of the date of this
Prospectus by (i) each person who, to the knowledge of management, owned
beneficially more than 5% of the outstanding shares of Common Stock or (ii) by
each director and Named Executive Officer and (iii) all directors and executive
officers as a group:
<TABLE>
<CAPTION>
COMMON STOCK OWNED(1)
----------------------------------------------
CLASS A CLASS B
(VOTING) (NON-VOTING)
---------------------- ----------------------
NAME AND ADDRESS OF OWNER NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------------------------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Lily Pond Investments, Inc.(2)........................................... 12,000 100.0% 59,487 92.9%
Peter A. Morton(2)....................................................... 12,000 100.0% 59,487 92.9%
Gary R. Selesner(3)...................................................... -- -- 153 *
Bruce R. Dall............................................................ -- -- -- --
Christine R. Belcastro................................................... -- -- -- --
William R. Stephens...................................................... -- -- -- --
Gilbert B. Friesen....................................................... -- -- 250 *
Stephen A. Marks......................................................... -- -- 1,000 1.6%
All directors and officers as a group (5 persons)........................ 12,000 100.0% 60,890 95.1%
</TABLE>
- ------------
* Less than one percent
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of a given date which such person
has the right to acquire within 60 days after such date. For purposes of
computing the percentage of outstanding shares held by each person or group
of persons named above on a given date, any security which such person or
persons has the right to acquire within 60 days after such date is deemed to
be outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage of ownership of any other person. The address for
each of the stockholders in this table is 4455 Paradise Road, Las Vegas,
Nevada 89109.
(2) As the majority stockholder of Lily Pond, Mr. Morton controls the voting and
disposition of all the voting securities of the Company.
(3) Upon receipt of the requisite approvals of the Nevada Gaming Authorities,
Gary R. Selesner will be issued 153 shares of the Company's non-voting
Common Stock. See "Management--Employment Agreements."
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS RELATED TO THE "HARD ROCK" BRAND NAME
Prior to the sale to Rank of Mr. Morton's interest in the Hard Rock Cafe
businesses and ancillary rights in June 1996, Hard Rock Cafe Licensing
Corporation, which was 40.0% owned by Mr. Morton, owned the right to use the
"Hard Rock" name in connection with hotel casinos and casinos in the Morton
Territory. Hard Rock Cafe Licensing Corporation licensed this right to Mr.
Morton, who in turn sublicensed the right to use the "Hard Rock Hotel" trademark
in Las Vegas to Lily Pond and Lily Pond assigned such right to the Company.
Upon the sale of his interest in the Hard Rock Cafes to Rank in June 1996,
Mr. Morton and Rank entered into a trademark licensing agreement whereby Mr.
Morton received an exclusive, perpetual, royalty-free license (subject to
certain termination provisions designed to protect the quality of the
trademarks) to use the "Hard Rock Hotel" and "Hard Rock Casino" trademarks in
connection with hotel casinos and casinos in the Morton Territory. Mr. Morton in
turn entered into a sublicensing agreement with the Company in which the Company
obtained the exclusive right (subject to certain termination provisions designed
to protect the quality of the trademarks) to use the "Hard Rock Hotel" and "Hard
Rock Casino" trademarks in connection with the Resort for a term lasting as long
as the Company shall have any outstanding indebtedness pursuant to the Notes or
the New Credit Facility.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
Peter A. Morton and the Company have entered into the Supervisory Agreement,
which expires on December 31, 2022. Subject to certain conditions, Mr. Morton
has the option to renew the agreement for two successive fifteen year terms.
Pursuant to the terms of the agreement, Mr. Morton is to provide consulting and
supervisory services to the Company in exchange for 2.0% of the Company's annual
gross revenues (as defined therein), which excludes the value of any
complimentary goods or services. The Company will reimburse Mr. Morton for all
costs and expenses incurred by him in connection with services he provides to
the Company. In the event either the Company or Mr. Morton is in Default (as
defined in the agreement), the non-defaulting party may terminate the agreement
after the other party has received the opportunity to cure such default. Total
supervisory fee expenses for fiscal years 1995, 1996 and 1997 were approximately
$1,123,000, $1,537,000, and $1,556,000, respectively.
Entities controlled by Peter A. Morton have provided, and will continue to
provide, additional support services for the development, opening and ongoing
improvement and operation of the Resort. These entities have, and will continue
to be, reimbursed for the expenses relating to the provision of these services
(including, without limitation, employee salary and benefits and allocated
overhead). Expenses related to these services aggregated approximately $923,857,
$224,858 and $281,000 for fiscal year 1995, fiscal year 1996 and fiscal year
1997, respectively.
Jeffrey Leeds, formerly Secretary/Treasurer and Director of the Company, is
currently President and co-founder of Leeds Group Inc. (the "Leeds Group"),
which has provided investment banking services to the Company and certain of its
affiliates, including providing advice on the Buyout and arranging the financing
of the Buyout. The Company paid the Leeds Group $0, $40,625, and $627,812 for
such investment banking services for fiscal years 1995, 1996 and 1997,
respectively. Jeffrey Leeds has periodically performed legal work for the
Company including the negotiation of employment agreements with key employees.
HARVEYS BUYOUT
In July 1997, the Company and Lily Pond entered into an agreement to effect
the Buyout, pursuant to which the Company redeemed Harveys' 40% interest in the
Company and terminated the Management
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<PAGE>
Agreement, which termination became effective October 24, 1997. Under the terms
of the Buyout, the Company paid Harveys $45.0 million in cash.
Pursuant to the Management Agreement, Harveys provided hotel and casino
management expertise and oversight and was responsible for the Resort's
management information systems, employee benefit programs and insurance
policies. In return, the Company paid Harveys a base management fee equal to
4.0% of annual gross revenues, as defined, which excludes the value of any
complimentary goods or services for each fiscal year. Harveys was also entitled
to an incentive fee of up to 2.0% of annual net revenues, upon exceeding certain
return on investment targets in the Management Agreement. The Company paid
management fees to Harveys of approximately $2.2 million, $3.1 million and $2.8
million for fiscal year 1995, fiscal year 1996 and fiscal year 1997,
respectively, and incentive fees totaling approximately $84,000, $239,000 and
$65,000 for fiscal year 1995, fiscal year 1996 and fiscal year 1997,
respectively.
For certain additional disclosure regarding affiliate transactions see
footnote 5 to the Company's Financial Statements.
COMPLETION GUARANTY
Pursuant to the Completion Guaranty, Peter A. Morton has guaranteed, subject
to certain conditions and limitations, payment of construction and development
costs in excess of $87.0 million, up to a maximum of $10.0 million. Mr. Morton's
obligations under the Completion Guaranty will be deferred during the pendency
of any FORCE MAJEURE event or any other event that makes completion of the
Expansion physically impossible or unlawful. The Completion Guaranty does not
provide for the incurrence by Mr. Morton, directly or indirectly, of any
obligation, contingent or otherwise, for the payment of the principal, premium
and interest on the Notes or any other indebtedness under the financings
described herein. The Company will not implement a discretionary change that
would cause budgeted construction and development costs to exceed $87.0 million,
unless Mr. Morton increases the maximum amount available under the Completion
Guaranty, in the amount of such budgeted excess. If Mr. Morton provides funds
under the Completion Guaranty, the amount of such funds will be treated as
preferred stock of the Company purchased by Mr. Morton, or a junior subordinated
loan from Mr. Morton to the Company. If such funds are treated as preferred
stock, such preferred stock will have a redemption date not less than 91 days
following the earlier of the maturity or repayment of the Notes and accrue
dividends at a rate not in excess of the annual rate of interest payable on the
Notes. If such funds are treated as junior subordinated indebtedness, such
indebtedness will have a stated maturity not less than 91 days following the
earlier of the maturity or repayment of the Notes and accrue interest at a rate
per annum not in excess of the rate of interest payable on the Notes. Dividends
or interest, as the case may be, will be payable in cash only to the extent the
Company is able to make Restricted Payments (as defined) under the "Restricted
Payments Covenant" in the Indenture. See "Risk Factors--Completion Guaranty" and
"--Reliance on Key Personnel, Control by Principal Shareholder."
In addition, pursuant to the Indenture, the Trustee, on behalf of the
holders of the Notes, may not compel payment or exercise any other remedies
under the Completion Guaranty if a payment default or non-payment default exists
with respect to certain specified Senior Indebtedness until such defaults have
been cured or waived by the holders of such specified Senior Indebtedness or, in
the case of a non-payment default, 179 days after the date on which the
applicable Payment Blockage Notice (as defined) has been received.
Mr. Morton has also entered into a make-well agreement under the New Credit
Facility (the "Make-Well Agreement") pursuant to which he will contribute
certain amounts to the Company to ensure the Company meets certain covenants
under the New Credit Facility beginning in the third fiscal quarter of 1998,
including certain maximum leverage ratio tests and minimum fixed charge coverage
ratio tests.
55
<PAGE>
DESCRIPTION OF NEW CREDIT FACILITY
The following summaries of certain provisions of the New Credit Facility,
including the definitions of certain terms therein, do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
all of the provisions in the New Credit Facility.
Concurrent with the closing of the Offering, the Company replaced the Prior
Credit Facility with the New Credit Facility through a group of banks for which
Bank of America National Trust and Savings Association ("Bank of America NT&SA")
acts as administrative agent (the "Administrative Agent") and Bear, Stearns &
Co. Inc. ("Bear Stearns") serves as co-agent. The New Credit Facility provided
the Company with $67.0 million of senior secured reducing revolving borrowings.
Management anticipates using the New Credit Facility to fund the Expansion and
for general corporate purposes.
The loans made pursuant to the New Credit Facility bear interest at one of
two rates to be selected by the Company: (i) the higher of (a) the Federal Funds
Rate as published by the Federal Reserve Bank of New York plus 0.5% and (b) the
Reference Rate (as defined) announced by the Administrative Agent from time to
time (the "Base Rate") or (ii) the London Interbank Offered Rate ("LIBOR")
adjusted for reserves, plus, in each case, the applicable margin (as described
below). Interest on loans that bear interest based upon the Base Rate will be
payable at the end of each calendar month and interest on loans that bear
interest based upon LIBOR will be payable at the end of the interest period
applicable thereto or every three months thereafter, whichever is earlier. The
applicable margin varies based on the ratio, on the last day of each fiscal
quarter of, (a) a measure of the average aggregate principal indebtedness of the
Company for the proceeding quarter and (b) the annualized EBITDA (as defined)
for the proceeding 12 month period (the "Total Leverage Ratio") and whether the
Company elects the Base Rate or LIBOR.
The Company has agreed to pay commitment fees equal to between 0.375% and
0.500% per annum on the daily average unutilized commitment, certain fees with
respect to the issuance of letters of credit, a construction service fee for
monitoring services in connection with the Expansion and customary
administration fees.
The amount available under the New Credit Facility will begin reducing on
February 28, 2000 to: $58.3 million as of the last day of fiscal year 2000,
$45.2 million as of the last day of fiscal year 2001, $32.2 million as of the
last day of fiscal year 2002, $19.2 million as of the last day of fiscal year
2003 and will expire on March 23, 2004.
The New Credit Facility permits the Company to make voluntary prepayments
without premium or penalty in most circumstances. The Company will also be
required to make prepayments on the New Credit Facility (a) on April 1, of each
year beginning on April 1, 2000, in an amount equal to 80% of the Company's
EBITDA minus cash paid with respect to (i) principal and interest payments on
indebtedness for borrowed money, (ii) capital expenditures and (iii) income
taxes, in each case for the preceding fiscal year, and (b) 100% of the net cash
proceeds to the Company of issuances of equity or permitted indebtedness. These
requirements will terminate should the Company's Total Leverage Ratio fall below
4.25:1.00 for a period of four consecutive fiscal quarters.
The New Credit Facility contains covenants customarily found in credit
agreements including, among other things, financial covenants, limitations on
the Company from disposing of capital stock, entering into mergers and certain
acquisitions, incurring liens or indebtedness, making certain investments,
issuing dividends on stock, selling assets, entering into transactions with
affiliates under certain circumstances, changing accounting practices and
amending material agreements. Further, the New Credit Facility requires the
Company to provide detailed financial and narrative reports regarding the
Company's existing and projected financial status.
The New Credit Facility also contains customary events of defaults including
defaults in the payment when due of the principal of or interest on the loans,
breach of certain covenants, representations or warranties, ERISA violations,
insolvency, bankruptcy, failure of any of the security documents or collateral
56
<PAGE>
securing the New Credit Facility, failure of any guaranty, including the
Completion Guaranty, and control by Peter A. Morton of less than 51% of the
voting capital stock of the Company.
Mr. Morton also entered into a Make-Well Agreement (as defined in the New
Credit Facility) pursuant to which he will contribute certain amounts to the
Company to ensure the Company meets certain covenants under the New Credit
Facility beginning in the third fiscal quarter of 1998, including certain
maximum leverage ratio tests and minimum fixed charge coverage ratio tests.
57
<PAGE>
DESCRIPTION OF NOTES
GENERAL
The New Notes will be issued pursuant to the Indenture, dated as of March
23, 1998 (the "Indenture"), between the Company and First Trust National
Association, as trustee (the "Trustee"), a copy of which has been filed as an
exhibit to the Registration Statement of which this prospectus constitutes a
part. The New Notes are identical in all material respects to the terms of the
Old Notes except for certain transfer restrictions and registration rights
relating to the Old Notes. See "--Registration Rights, Liquidated Damages." The
Trustee will authenticate and deliver New Notes for original issue only in
exchange for a like principal amount of Old Notes. Any Old Notes that remain
outstanding after the consummation of the Exchange Offer, together with the New
Notes will be treated as a single class of Securities under the Indenture. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Notes are subject to all such terms, and Holders of
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof.
The following summary of the material provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. The
definitions of certain terms used in the following summary are set forth under
"--Certain Definitions."
The indebtedness evidenced by the Notes is and will continue to be general
unsecured obligations of the Company and will be subordinated in right of
payment to all existing and future Senior Indebtedness of the Company and senior
in right of payment to all existing and future Subordinated Indebtedness of the
Company. As of April 30, 1998, the Company's outstanding Senior Indebtedness was
approximately $0.3 million. In addition, on April 30, 1998, the Company had
$67.0 million of undrawn availability under the New Credit Facility. The Company
anticipates incurring additional indebtedness under the New Credit Facility to
fund a portion of the Expansion. The Indenture permits the Company to incur
additional indebtedness in the future, subject to certain limitations.
In addition, the Notes are and will continue to be effectively subordinated
to all indebtedness and other liabilities and commitments (including trade
payables and lease obligations) of the Company's Subsidiaries. Any right of the
Company to receive assets of any of its Subsidiaries upon the latter's
liquidation or reorganization (and the consequent right of the Holders of the
Notes to participate in those assets) will be effectively subordinated to the
claims of that Subsidiary's creditors, except to the extent that the Company is
itself recognized as a creditor of such Subsidiary, in which case the claims of
the Company would still be subordinated to any security interests in the assets
of such Subsidiary and any indebtedness of such Subsidiary senior to that held
by the Company. As of the date hereof, the Company has no Subsidiaries. Under
certain circumstances, the Company will be able to designate future Subsidiaries
as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to
the restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Company issued $120.0 million in aggregate principal amount of Notes in
the Offering. The Notes will mature on April 1, 2005. Interest on the Notes
accrues at the rate of 9 1/4% per annum and is payable semi- annually in arrears
on April 1 and October 1, commencing on October 1, 1998, to Holders of record on
the immediately preceding March 15 and September 15, respectively. Interest on
the Notes will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from the date of original issuance. Interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months. Registered Holders of New Notes on the relevant record date for the
first interest payment date following the consummation of the Exchange Offer
will receive interest accruing from the most recent date to which interest has
been paid or, if no interest has been paid, from March 23, 1998. Old Notes
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<PAGE>
accepted for exchange will cease to accrue interest from and after the date of
consummation of the Exchange Offer. Holders whose Old Notes are accepted for
exchange will not receive any payment in respect of interest on such Old notes
otherwise payable on any interest payment date the record date for which occurs
on or after the consummation of the Exchange Offer. Principal, premium, if any,
and interest, if any, on the Notes will be payable at the office or agency of
the Company maintained for such purpose within the City and State of New York
or, at the option of the Company, payment of interest may be made by check
mailed to the Holders of the Notes at their respective addresses set forth in
the register of Holders of Notes. Until otherwise designated by the Company, the
Company's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of $1,000
and integral multiples thereof.
SUBORDINATION
The payment of principal of, and premium and interest, if any, on, the
Notes, and any other amounts payable by the Company with respect to the Notes,
is subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full of all Senior Indebtedness of the Company, whether outstanding
on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Indebtedness of the Company 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 at the rate specified in the applicable Senior Indebtedness) before
the holders of Notes will be entitled to receive any payment with respect to the
Notes, and until all Obligations with respect to Senior Indebtedness of such
Issuer are paid in full in cash, any distribution to which the holders of Notes
would be entitled shall be made to the holders of such Senior Indebtedness
(except that holders of Notes may receive Capital Stock or any debt securities
that are subordinated at least to the same extent as the Notes to Senior
Indebtedness and any securities issued in exchange for Senior Indebtedness and
payment made from the trust described under "--Legal Defeasance and Covenant
Defeasance").
The Company also may not make any payment upon or in respect of the Notes
and may not offer to repurchase Notes (except in Capital Stock or subordinated
debt securities referred to above or from the trust described under "--Legal
Defeasance and Covenant Defeasance") and the Trustee, on behalf of the Holders
may not compel payment or exercise any other remedies with respect to any
payment under the Completion Guaranty, if (i) a default in the payment of the
principal of or interest on Designated Senior Indebtedness or any other amount
due in respect of Designated Senior Indebtedness occurs and has not been cured
or waived in writing (a "payment default") or (ii) any other default occurs and
is continuing with respect to Designated Senior Indebtedness that permits
holders of the Designated Senior Indebtedness as to which such default relates
to accelerate its maturity (a "non-payment default") and the Trustee receives a
notice of such default (a "Payment Blockage Notice") from the Company or the
holders of any Designated Senior Indebtedness. The Company may and shall resume
payments on the Notes and the Trustee, on behalf of the Holders may exercise
remedies with respect to any payment under the Completion Guaranty, (a) in the
case of a payment default, upon the date on which such default is cured or
waived by the holders of Designated Senior Indebtedness in writing and (b) in
case of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived by the holders of Designated Senior Indebtedness in
writing or 179 days after the date on which the applicable Payment Blockage
Notice is received, unless the maturity of any Designated Senior Indebtedness
has been accelerated. No new period of payment blockage or blockage of remedies
under the Completion Guaranty may be commenced unless and until 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee by any holders of
Designated Senior Indebtedness, and which
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is known to the holders of such Designated Senior Indebtedness, shall be, or be
made, the basis for a subsequent Payment Blockage Notice (unless such nonpayment
default shall have been cured or waived for a period of not less than 181 days).
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not on account of the payment blockage
provision referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the Holders of the Notes to accelerate the
maturity thereof.
The Indenture further requires that the Company promptly notify holders of
Senior Indebtedness of the receipt of an acceleration notice following an Event
of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. At April 30,
1998, the Company had approximately $0.3 million of Senior Indebtedness
outstanding and the Company had additional availability of $67.0 million for
borrowings under the New Credit Facility, all of which was Senior Indebtedness
of the Company. In addition, the Notes are structurally subordinated to the
liabilities of Subsidiaries of the Company. The Company anticipates incurring
additional indebtedness under the New Credit Facility to fund a portion of the
Expansion. Although the Indenture contains limitations on the amount of
additional Indebtedness that the Company and its Subsidiaries may incur, under
certain circumstances the amount of such Indebtedness could be substantial and,
in any case, such Indebtedness may be Senior Indebtedness. See "--Certain
Covenants-- Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock."
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to April 1, 2002.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the applicable redemption date, if redeemed during the twelve-month
period beginning on April 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2002.............................................................................. 104.625%
2003.............................................................................. 102.313%
2004 and thereafter............................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time on or prior to April 1, 2001, the
Company may (but shall not have the obligation to) redeem, on one or more
occasions, up to an aggregate of 35% of the aggregate principal amount of Notes
originally issued at a redemption price equal to 109.25% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of one or more Equity
Offerings; PROVIDED that at least 65% of the aggregate principal amount of Notes
originally issued remain outstanding immediately after the occurrence of such
redemption; and PROVIDED FURTHER, that such redemption shall occur within 60
days of the date of the closing of such Equity Offering.
REGULATORY REDEMPTION
If any Gaming Authority requires that a Holder or beneficial owner of Notes
must be licensed, qualified or found suitable under any applicable gaming law
and such Holder or beneficial owner fails to apply for a license, qualification
or a finding of suitability within 30 days after being requested to do so by the
Gaming Authority (or such lesser period that may be required by such Gaming
Authority), or if such Holder or such beneficial owner is not so licensed,
qualified or found suitable, the Company shall have the
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right, at its option, (i) to require such Holder or beneficial owner to dispose
of such Holder's or beneficial owner's Notes within 30 days of receipt of such
notice of such finding by the applicable Gaming Authority or such earlier date
as may be ordered by such Gaming Authority or (ii) to call for the redemption of
the Notes of such Holder or beneficial owner at the lesser of the principal
amount thereof, the fair market value of such Notes on the date of redemption or
the price at which such Holder or beneficial owner acquired the Notes, together
with, in either case, accrued and unpaid interest to the earlier of the date of
redemption or such earlier date as may be required by such Gaming Authority or
the date of the finding of unsuitability by such Gaming Authority, which may be
less than 30 days following the notice of redemption, if so ordered by such
Gaming Authority. The Company shall notify the Trustee in writing of any such
redemption as soon as practicable and the redemption price of each Note to be
redeemed. The Holder of Notes or beneficial owner applying for a license,
qualification or a finding of suitability must pay all costs of the licensure
and investigation for such qualification or finding of suitability. Under the
Indenture, the Company is not required to pay or reimburse any Holder of the
Notes or beneficial owner who is required to apply for such license,
qualification or finding of suitability for the costs of the licensure and
investigation for such qualification or finding of suitability. Such expense
will, therefore, be the obligation of such Holder or beneficial owner. See "Risk
Factors--Government Regulation" and "Regulation and Licensing."
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed or repurchased in an offer
to purchase at any time, selection of Notes for redemption or repurchase will be
made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed, or, if the
Notes are not so listed, on a pro rata basis; PROVIDED that no Notes of $1,000
or less shall be redeemed or repurchased in part. Notices of redemption or
repurchase shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date or repurchase date to each Holder of Notes to be
redeemed or repurchased at its registered address. If any Note is to be redeemed
or repurchased in part only, the notice of redemption or repurchase that relates
to such Note shall state the portion of the principal amount thereof to be
redeemed or repurchased. A new Note in principal amount equal to the unredeemed
or unrepurchased portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note. On and after the redemption or
repurchase date, interest ceases to accrue on Notes or portions of them called
for redemption or repurchase.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required to
make an offer to repurchase all or any part (equal to $1,000 or an integral
multiple thereof), of each Holder's Notes pursuant to the offer described below
(the "Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of repurchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws
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and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the provisions of the Indenture
relating to a Change of Control Offer, the Company will comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations described under this caption "--Repurchase at the
Option of Holders" by virtue thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book-entry) to each Holder
a new Note equal in principal amount to the unpurchased portion of the Notes
surrendered, if any; PROVIDED that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
If the payment date in connection with a Change of Control Offer hereunder
is on or after an interest payment record date and on or before the associated
interest payment date, any accrued and unpaid interest (and Liquidated Damages,
if any, due on such interest payment date) will be paid to the person in whose
name a Note is registered at the close of business on such record date, and such
interest (or Liquidated Damages, if applicable) will not be payable to Holders
who tender Notes pursuant to such Change of Control Offer.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of the Notes to require that
the Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The New Credit Facility prohibits the Company from purchasing or redeeming
prior to maturity any Notes, and also provides that certain change of control
events with respect to the Company would constitute a default thereunder. Any
future credit agreements or other agreements to which the Company becomes a
party may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing or
redeeming Notes, the Company could seek the consent of its lenders to purchase
or redeem the Notes or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing or redeeming
Notes. In such case, the Company's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture, which would, in turn,
constitute a default under the New Credit Facility.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act), other than to the Permitted Holders, (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company, (iii) prior to
the first Equity Offering, the Permitted Holders cease to be the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of a majority of the Voting Stock of the Company
(as measured by voting power rather than number of shares),
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(iv) after the first Equity Offering, (A) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Permitted Holders,
becomes the "beneficial owner" (as defined above), directly or indirectly, of
35% or more of the Voting Stock of the Company (measured by voting power rather
than number of shares) and (B) the Permitted Holders "beneficially own" (as
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or
indirectly, in the aggregate a lesser percentage of the Voting Stock of the
Company (measured by voting power rather than number of shares) than such other
person, (v) after the first Equity Offering, Continuing Directors cease to
constitute a majority of the members of the Board of Directors of the Company or
(vi) the Company consolidates with, or merges with or into, any Person, other
than the Permitted Holders, or any Person, other than the Permitted Holders,
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding Voting Stock of the Company
is converted into or exchanged for cash, securities or other property, other
than any such transaction where the Voting Stock of the Company outstanding
immediately prior to such transaction is converted into or exchanged for Voting
Stock (other than Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock of such
surviving or transferee person (immediately after giving effect to such
issuance).
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"PERMITTED HOLDERS" means Peter A. Morton and Lily Pond and any of their
respective Related Parties.
"RELATED PARTY" with respect to any Person, means (a) any Affiliate, or
spouse or immediate family member (in the case of an individual) of such Person,
or (b) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding a majority
interest of which consist of such Person and/or such other Person referred to in
the immediately preceding clause (a), or (c) any trustee, executor or receiver
appointed to manage or administer the assets of a Person who is an individual
following the death of such individual.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (as determined
in good faith by the Board of Directors) of the assets or Equity Interests
issued or sold or otherwise disposed of and (ii) at least 80% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; PROVIDED that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to an agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are promptly, but in no event more than 30 days after
receipt,
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converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received), shall be deemed to be cash for purposes of this
provision.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or such Restricted Subsidiary may apply such Net Proceeds, at its
option, (a) to permanently reduce Senior Indebtedness (and to correspondingly
permanently reduce commitments with respect thereto in the case of revolving
borrowings), or (b) to the making of a capital expenditure in a Permitted
Business or the acquisition of other assets to be used in a Permitted Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce Indebtedness under the New Credit Facility or invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds
from Asset Sales that are not applied or invested as provided in the first
sentence of this paragraph will be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will
be required to make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture. To the extent that the aggregate amount of Notes
tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the
Company may use any remaining Excess Proceeds for general corporate purposes. If
the aggregate principal amount of Notes surrendered by Holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
If the payment date in connection with an Asset Sale Offer hereunder is on
or after an interest payment record date and on or before the associated
interest payment date, any accrued and unpaid interest (and Liquidated Damages,
if any, due on such interest payment date) will be paid to the person in whose
name a Note is registered at the close of business on such record date, and such
interest (or Liquidated Damages, if applicable) will not be payable to Holders
who tender Notes pursuant to such Asset Sale Offer.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions
of any securities laws or regulations conflict with the provisions of the
Indenture relating to an Asset Sale Offer, the Company will comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations described under this caption "--Repurchase at the
Option of Holders" by virtue thereof.
CERTAIN COVENANTS
EXPANSION
The Indenture provides that, except during the pendency of any force majeure
event or any other event that makes completion of the Expansion physically
impossible or unlawful, the Company will cause the Expansion to be prosecuted
with reasonable diligence and continuity.
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COMPLETION GUARANTY
The Indenture provides that the Company shall not implement a discretionary
change to the plans relating to the Expansion that would cause budgeted
construction and development costs to exceed $87.0 million, unless Peter A.
Morton increases the maximum amount available under the Completion Guaranty, in
the amount of such budgeted excess.
MATERIAL CHANGES TO THE EXPANSION
The Indenture provides that prior to making a discretionary change to the
plans relating to the Expansion that is materially different from certain
minimum requirements set forth below, the Company shall obtain the prior written
consent of the Holders of a majority in principal amount of the Notes then
outstanding. The minimum requirements are as follows: (i) construction of a new
hotel tower with not less than 290 rooms; provided, that if the planned average
size of the rooms or ratio of suites to regular rooms is increased, the new
hotel tower shall contain not less than 270 rooms, (ii) enlargement of the Beach
Club to include a new swimming pool, (iii) addition of at least three new food
services establishments, (iv) expansion of the Retail Store, (v) construction of
a new expandable parking facility that will initially provide at least 400 net
additional parking spaces, (vi) construction of a new meeting facility, (vii)
construction of a new health club, or expansion and renovation of the existing
health club, (viii) construction of a new multi-functional warehouse,
maintenance and back of house facility, (ix) construction of a new nightclub or
expansion and renovation of the existing nightclub (i.e. The Joint), (x)
expansion of the casino through an enlargement of the sports book area within
the casino and the addition of at least thirty new slot machines and at least
five new table games.
RESTRICTED PAYMENTS
The Indenture provides that, except as otherwise provided below, the Company
will not, and will not permit any of its Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted Subsidiaries'
Equity Interests including, without limitation, any dividend or distribution in
connection with any merger or consolidation involving the Company (other than
dividends or distributions by a Restricted Subsidiary so long as, in the case of
any dividend or distribution payable on or in respect of any class or series of
securities issued by a Restricted Subsidiary other than a Wholly Owned
Restricted Subsidiary, the Company or a Restricted Subsidiary receives at least
its PRO RATA share of such dividend or distribution in accordance with its
Equity Interests in such class or series of securities), or to the direct or
indirect holders of the Company's or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company; (iii) make any principal payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Subordinated Indebtedness, except a scheduled repayment of principal or a
payment of principal at Stated Maturity; (iv) make any payment of interest on
Subordinated Indebtedness issued pursuant to clause (xi) described under the
caption "Incurrence of Indebtedness and Issuance of Disqualified Stock," or (v)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (v) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the
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Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described below under caption "--Incurrence of Indebtedness and
Issuance of Disqualified Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (ii), (iii), (iv), (vi) and (vii) of the following paragraph) is
less than the sum (without duplication) of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the Issue Date to
the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale since the Issue Date
of Equity Interests of the Company (other than Disqualified Stock) or of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Restricted
Subsidiary of the Company), plus (iii) 100% of the aggregate net cash
proceeds received by the Company as an equity contribution from a holder or
holders of Equity Interests of the Company (other than Disqualified Stock)
but excluding Excluded Contributions, plus (iv) to the extent that any
Restricted Investment that was made after the Issue Date is sold or
otherwise liquidated or repaid, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment, plus (v) the
amount resulting from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries, such amount not to exceed the amount of Investments
made by the Company or any Restricted Subsidiary in such Unrestricted
Subsidiary since the date of the Indenture that was treated as a Restricted
Payment under the Indenture, plus (vi) to the extent not otherwise included
in Consolidated Net Income, the amount of the net reduction in Investments
in Unrestricted Subsidiaries resulting from the payment of cash dividends
received by the Company or any Restricted Subsidiary of the Company from
such Unrestricted Subsidiaries, plus (vii) $5.0 million.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of the Company in exchange for, or out
of the net cash proceeds of the substantially concurrent sale (other than to
a Restricted Subsidiary of the Company) of, other Equity Interests of the
Company (other than any Disqualified Stock); PROVIDED that the amount of any
such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded
from clause (c)(ii) or (iii) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
Subordinated Indebtedness in exchange for or with the net cash proceeds from
an incurrence of Permitted Refinancing Indebtedness or of the substantially
concurrent sale (other than to a Restricted Subsidiary of the Company) of
Equity Interests in the Company (other than any Disqualified Stock);
PROVIDED that the amount of any such net cash proceeds that are utilized for
any such defeasance, redemption, repurchase or other acquisition shall be
excluded from clause (c)(ii) or (iii) of the preceding paragraph;
(iv) the repurchase, retirement or other acquisition or retirement for
value of common Equity Interests of the Company held by any future, present
or former employee or director of the Company or any of the Company's
Restricted Subsidiaries or the estate, heirs or legatees of, or any entity
controlled by, any such employee or director, pursuant to any management
equity plan or stock option plan or any other management or employee benefit
plan or agreement in connection with the termination of such person's
employment for any reason (including by reason of death or disability);
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PROVIDED, HOWEVER, that the aggregate Restricted Payments made under this
clause (iv) does not exceed (A) in the aggregate, the sum of $1.5 million
plus $250,000 for each twelve month period following the Issue Date and (B)
$1.5 million in any calendar year;
(v) the redemption or repurchase of any Capital Stock or Indebtedness of
the Company or any of its Subsidiaries (other than any Capital Stock or
Indebtedness that is held or beneficially owned by any Permitted Holder)
required by the Regulatory Redemption provisions of the Indenture (or any
substantially comparable provision governing other Indebtedness), or by any
Governmental Authority or by the Board of Directors of the Company if, in
any such case, the ownership of such Capital Stock or Indebtedness by the
holder thereof will preclude, interfere with, threaten or delay the
issuance, maintenance, existence or reinstatement of any gaming or liquor
license, permit or approval, or result in the imposition or burdensome terms
or conditions on such license, permit or approval;
(vi) so long as no Default or Event of Default shall have occurred and
be continuing, the declaration and payment of dividends to holders of any
such class or series of Disqualified Stock of the Company issued in
accordance with the covenant entitled "--Incurrence of Indebtedness and
Issuance of Disqualified Stock"; and
(vii) repurchases of Equity Interests deemed to occur upon exercise of
stock options if such Equity Interests represent a portion of the exercise
price of such options.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation is permitted by this covenant and
otherwise would not cause a Default. For purposes of making such determination,
all outstanding Investments by the Company and its Restricted Subsidiaries
(except to the extent repaid in cash) in the Subsidiary so designated will be
deemed to be Restricted Payments at the time of such designation and will reduce
the amount available for Restricted Payments under the first paragraph of the
covenant. All such outstanding Investments will be deemed to constitute
Investments in an amount equal to the greatest of (x) the net book value of such
Investments at the time of such designation, (y) the fair market value of such
Investments at the time of such designation and (z) the original fair market
value of such Investments at the time they were made. Such designation will only
be permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment shall be based on the good faith determination of
the Board of Directors.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Indebtedness) and that the Company will not,
and will not permit any of its Restricted Subsidiaries to issue any shares of
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue preferred stock; PROVIDED, HOWEVER, that the Company and any Guarantor may
incur Indebtedness (including Acquired Indebtedness) or issue shares of
Disqualified Stock, and any Restricted Subsidiary may incur Acquired
Indebtedness, if the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock is issued would have been at least 2 to
1, determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
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The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) Indebtedness of the Company under the New Credit Facility with
respect thereto in an aggregate principal amount outstanding at any time not
to exceed $67.0 million, less the aggregate amount of all proceeds from all
Asset Sales that have been applied since the Issue Date to permanently
reduce the outstanding amount of such Indebtedness pursuant to the covenant
"Asset Sales";
(ii) the incurrence by the Company of Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes;
(iv) the incurrence by the Company or its Restricted Subsidiaries of
Indebtedness (including, without limitation, Indebtedness under the New
Credit Facility) represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price, lease or cost of
construction or improvement of property, plant or equipment (including
without limitation, slot machines and other gaming equipment) used in a
Permitted Business in an aggregate principal amount not to exceed $15.0
million at any time outstanding;
(v) the incurrence by the Company or its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred;
(vi) the incurrence by the Company or its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and its Restricted
Subsidiaries, PROVIDED, HOWEVER, that (i) if the Company is the obligor on
such Indebtedness, such Indebtedness is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes and
(ii) (A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or its Restricted Subsidiaries and (B) any sale or other transfer of
any such Indebtedness to a Person that is not the Company or a Restricted
Subsidiary shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Restricted Subsidiary;
(vii) the incurrence by the Company or its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating or variable rate
Indebtedness or for the purpose of protecting against fluctuation in
interest rates or the value of foreign currencies purchased or received, in
each case in respect of Indebtedness that is permitted by the terms of the
Indenture to be outstanding; PROVIDED, HOWEVER, that in the case of Hedging
Obligations that are incurred for the purpose of fixing or hedging interest
rate risks with respect to Indebtedness, the notional principal amount of
any such Hedging Obligation does not exceed the principal amount of the
Indebtedness to which such Hedging Obligation relates and in the case of
Hedging Obligations incurred for the purpose of protecting against
fluctuations in interest rates or the value of foreign currencies purchased
or received, such Hedging Obligations do not increase the Indebtedness of
the Company and its Restricted Subsidiaries outstanding other than as a
result of fluctuations in foreign currency exchange rates or by reason of
fees, indemnities and compensation payable thereunder;
(viii) Indebtedness incurred solely in respect of performance, surety and
similar bonds or completion guarantees, to the extent that such incurrence
does not result in the incurrence of any obligation for the payment of
borrowed money to others;
(ix) Indebtedness arising in the ordinary course of business out of
standby letters of credit covering workers compensation, performance or
similar obligations;
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(x) any guarantee of the Company of Indebtedness or other obligations of
any of its Restricted Subsidiaries so long as the incurrence of such
Indebtedness incurred by such Restricted Subsidiary is permitted under the
terms of the Indenture;
(xi) the incurrence by the Company of Subordinated Indebtedness payable
to Permitted Holders in respect of payments made under the Completion
Guaranty or the Make-Well Agreement, which indebtedness shall have a stated
maturity not less than 91 days following the earlier of the maturity or
repayment of the Notes and accrue interest at a rate per annum not in excess
of the rate of interest payable on the Notes. Such Subordinated Indebtedness
may be incurred by the Company only if the Company is unable to obtain
approval from the appropriate Gaming Authorities for the issuance of
preferred stock to a Permitted Holder in respect of payments made under the
Completion Guaranty, which preferred stock shall have a redemption date not
less than 91 days following the earlier of the maturity or repayment of the
Notes and accrue dividends at a rate not in excess of the rate of interest
payable on the Notes; and
(xii) the incurrence by the Company of additional Indebtedness
(including, without limitation, Indebtedness under the New Credit Facility)
in an aggregate principal amount (or accreted value, as applicable) at any
time outstanding not to exceed $5.0 million.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xii) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof. Accrual of interest, the accretion of accreted value and
the payment of interest in the form of additional Indebtedness will not be
deemed to be an incurrence of Indebtedness for purposes of this covenant.
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens, unless the
Notes are secured equally and ratably with (or prior to, in the case of
Subordinated Indebtedness) the obligation or liability secured by such Lien.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual encumbrance or
consensual restriction on the ability of any Restricted Subsidiary to
(i) (a) pay dividends or make any other distributions to the Company or
any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries,
(ii) make loans or advances to the Company or any of its Restricted
Subsidiaries or
(iii) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
The provisions of the first paragraph of this covenant will not apply to
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the Issue Date, (b) the New Credit Facility as in
effect as of the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, PROVIDED that such
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amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive with respect to
such dividend and other payment restrictions than those contained in the New
Credit Facility as in effect on the date of the Indenture, (c) the Indenture and
the Notes, (d) applicable law, rules or regulations, or any order or ruling by a
Governmental Authority or a Gaming Authority, (e) any instrument of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (but not created in connection with or in
contemplation 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, or the property or assets of the Person, so acquired, PROVIDED that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred, (f) customary non-assignment provisions in leases,
licenses, encumbrances, contracts or similar agreements entered into or acquired
in the ordinary course of business, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) on the property so acquired, (h) contracts for
the sale of assets, including, without limitation, customary restrictions with
respect to a Subsidiary pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital Stock or
assets of such Subsidiary; and (i) Permitted Refinancing Indebtedness, PROVIDED
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless
(i) the Company is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation
or merger (if other than the Company) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of the Company under the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of Default
exists;
(iv) except in the case of a merger of the Company with or into a Wholly
Owned Subsidiary of the Company, (A) the Company or the entity or Person
formed by or surviving any such consolidation or merger (if other than the
Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Disqualified Stock" or
(B) after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, the Fixed
Charge Coverage Ratio of the Company or such Person, as the case may be,
shall be at least 1.75 to 1 and greater than the consolidated Fixed Charge
Coverage Ratio of the Company prior to giving pro forma effect to such
transaction;
(v) such transactions would not require any Holder of Notes to obtain a
Gaming License or be qualified under the laws of any applicable Gaming
Jurisdiction, PROVIDED that such Holder would not
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have been required to obtain a Gaming License or be qualified under the laws
of any applicable Gaming Jurisdiction in the absence of such transactions;
and
(vi) such transactions would not result in a loss of any qualification
or any material license of the Company or its Restricted Subsidiaries
necessary for any Permitted Business then operated by the Company or its
Restricted Subsidiaries.
Notwithstanding the foregoing clause (iv), (a) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company and (b) the Company may merge with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
state of the United States so long as the amount of Indebtedness of the Company
and its Restricted Subsidiaries is not increased thereby.
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to or Investment in, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction") unless:
(i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person; and
(ii) the Company delivers to the Trustee (a) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1 million, a resolution of the Board
of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the disinterested members of
the Board of Directors and (b) with respect to any Affiliate Transaction or
series of related Affiliate Transactions involving aggregate consideration
in excess of $5 million, an opinion as to the fairness to the Holders of
such Affiliate Transaction from a financial point of view issued by an
investment banking firm of national standing in the United States, or in the
event such transaction is a type that investment bankers do not generally
render fairness opinions, a valuation or appraisal firm of national
standing.
The foregoing provisions will not apply to the following:
(i) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business of the Company or
such Restricted Subsidiary;
(ii) transactions between or among the Company and/or its Restricted
Subsidiaries;
(iii) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments";
(iv) (A) if no Default or Event of Default shall have occurred and be
continuing, the payment of a fee to Peter A. Morton in connection with the
rendering of services to or on behalf of the Company pursuant to the
Supervisory Agreement and (B) the reimbursement of expenses (including,
without limitation, allocated salaries and overhead) incurred by entities
controlled by Peter A. Morton in providing support and travel services to
the Company and its Restricted Subsidiaries in the ordinary course of
business, consistent with past practice;
(v) the payment of reasonable and customary fees paid to, and indemnity
provided on behalf of, officers, directors or employees of the Company or
any Restricted Subsidiary;
(vi) transactions in which the Company or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a letter from an
investment banking firm or valuation or appraisal firm, as the
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case may be, stating that such transaction meets the requirements of clause
(i) of the preceding paragraph;
(vii) loans to employees in the ordinary course of business of the
Company; PROVIDED that any such loan in excess of $200,000 must be approved
by a majority of the disinterested members of the Board of Directors of the
Company;
(viii) transactions contemplated by the Completion Guaranty and the New
Credit Facility; and
(ix) any agreement as in effect as of the Issue Date or any amendment
thereto (so long as any such amendment is no less favorable to the holders
of the Notes in any material respect than the original agreement as in
effect on the Issue Date) or any transaction contemplated thereby.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole. The
Company or its Restricted Subsidiaries may not enter into any Gaming
Jurisdictions in which the Company or its Restricted Subsidiary is not presently
licensed if all of the Holders of the Notes will be required to be licensed,
PROVIDED that this sentence shall not prohibit the Company or its Restricted
Subsidiary from entering any jurisdiction that does not require the licensing or
qualification of all of the Holders of the Notes, but reserves the discretionary
right to license or qualify any Holder of Notes.
SUBSIDIARY GUARANTEES
The Indenture provides that, prior to incurring any Indebtedness (other than
Acquired Indebtedness), a Restricted Subsidiary shall execute a guarantee (a
"Subsidiary Guarantee") and deliver an opinion of counsel relating to the
enforceability and authorization of such Subsidiary Guarantee in accordance with
the terms of the Indenture, pursuant to which such Subsidiary shall become a
Guarantor, on a senior subordinated basis (pursuant to subordination provisions
substantially similar to those described above under the caption
"--Subordination") of the Company's payment obligations under the Notes and the
Indenture.
The Indenture provides that, in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
PROVIDED that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. In addition, the
Indenture will provide that, in the event the Board of Directors of the Company
designates a Guarantor to be an Unrestricted Subsidiary, then such Guarantor
will be released and relieved of any obligations under its Guarantee; PROVIDED
that such designation is conducted in accordance with the applicable provisions
of the Indenture.
LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS
The Indenture provides that the Company will not directly or indirectly,
incur any Indebtedness (including Acquired Indebtedness) that is subordinate in
right of payment to any Indebtedness of the Company unless such Indebtedness is
either (a) PARI PASSU in right of payment with the Notes or (b) subordinate in
right of payment to the Notes.
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PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (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 if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of the Company and its
consolidated Subsidiaries and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports, in each case within the
time periods set forth in the Commission's rules and regulations. In addition,
whether or not required by the rules and regulations of the Commission, the
Company will file a copy of such information and report with the Commission for
public availability within the time periods set forth in the Commission's rules
and regulations (unless the Commission will not accept such a filing).
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default; (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Notes; (iii) failure by
the Company or any of its Restricted Subsidiaries to comply with the provisions
described under the captions "--Repurchase at the Option of the Holders--Change
of Control," "--Repurchase at the Option of the Holders--Asset Sales,"
"--Certain Covenants--Restricted Payments," "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock" or "--Certain
Covenants--Merger, Consolidation or Sale of Assets"; (iv) failure by the Company
or any of its Restricted Subsidiaries for 45 days after notice by the Trustee or
by the Holders of at least 25% of Notes then outstanding to comply with any of
its other agreements in the Indenture or the Notes; (v) default under any
mortgage, indenture or instrument under which there may be issued or by which
there may be secured or evidenced any Indebtedness for money borrowed by the
Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries), other than
Indebtedness owed to the Company or a Restricted Subsidiary, whether such
Indebtedness or guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay at final maturity
(giving effect to any applicable grace periods and any extensions thereof) the
principal amount of such Indebtedness (a "Payment Default") or (b) results in
the acceleration of such Indebtedness, prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$5.0 million or more; (vi) failure by the Company or any of its Subsidiaries to
pay final judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days (net of applicable
insurance coverage which is acknowledged in writing by the insurer); (vii) Peter
A. Morton purports to revoke or rescind the Completion Guaranty, or denies in
writing his obligations thereunder; (viii) the loss of the legal right to
operate any Casino by the Company or any of its Restricted Subsidiaries
resulting in a cessation of operations for a period of more than 90 days; (ix)
failure by Peter A. Morton to comply with any of his payment obligations in the
Completion Guaranty;
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and (x) certain events of bankruptcy or insolvency with respect to the Company
or any of its Significant Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, all outstanding Notes will become due
and payable without further action or notice. Holders of the Notes may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest Liquidated Damages, if any, premium, if any, on, or the principal of,
the Notes.
The Company is required to deliver to the Trustee annually an officers'
certificate regarding compliance with the Indenture, and the Company is required
upon becoming aware of any Event of Default, to deliver to the Trustee an
officers' certificate specifying such Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes or the Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages, if any, on such Notes when such payments are due from
the trust referred to below, (ii) the Company's obligations with respect to the
Notes concerning issuing temporary Notes, registration of Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust, (iii) the rights, powers,
trusts, duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium, if
any, and interest and Liquidated Damages, if any, on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may
be, and the Company must specify whether the Notes are being defeased to
maturity or to a particular redemption date;
(ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by, the Internal Revenue Service a ruling or (B)
since the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such opinion of counsel shall confirm that, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(vi) the Company must have delivered to the Trustee an opinion of
counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(vii) the Company must have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of Notes over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(viii) the Company must have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for in the Indenture relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted
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by the Indenture. The Company is not required to transfer or exchange any Note
selected for redemption. Also, the Company is not required to transfer or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the written consent of the Holders
of at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Without the consent of each Holder affected, an amendment, supplement or
waiver may not (with respect to any Notes held by a non-consenting Holder): (i)
reduce the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption price of the
Notes, (iii) reduce the rate of or change the time for payment of interest on or
Liquidated Damages, if any, with respect to any Note, (iv) waive a Default or
Event of Default in the payment of principal of or premium, if any, or interest
or Liquidated Damages, if any, on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the Notes and a waiver of the payment default that resulted from such
acceleration), (v) make any Note payable in money other than that stated in the
Notes, (vi) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Notes to receive payments
of principal of or premium, if any, or interest or Liquidated Damages, if any,
on the Notes (other than a payment required by one of the covenants described
above under the caption "--Repurchase at the Option of Holders") or (vii) make
any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions, however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder
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of Notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than in the ordinary course of business (provided that the
sale, lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Subsidiaries taken as a whole will be governed by
the provisions of the Indenture described above under the caption "--Redemption
at the Option of Holders--Change of Control" and/or the provisions described
above under the caption "--Certain Covenants--Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Restricted Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions that have a fair market value (as determined in good faith by the
Board of Directors) in excess of $1.0 million or for net cash proceeds in excess
of $1.0 million. Notwithstanding the foregoing: (i) a transfer of assets by the
Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company
or to another Restricted Subsidiary, (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary, (iii)
a Restricted Payment that is permitted by the covenant described above under the
caption "--Certain Covenants--Restricted Payments," (iv) a disposition of cash
or Cash Equivalents; (v) a disposition of either obsolete equipment or equipment
that is damaged, worn out or otherwise no longer useful in the business; (vi)
any sale of Equity Interests in, or Indebtedness or other securities of, an
Unrestricted Subsidiary; (vii) any sale and leaseback of an asset within 90 days
after the completion of construction or acquisition of such asset; and (viii)
any surrender or waiver of contract rights or a settlement, release or surrender
of contract, tort or other claims of any kind or a grant of any Lien not
prohibited by the Indenture shall not be considered an Asset Sale.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company,
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partnership or membership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing
Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the full faith and credit of the
United States government or any agency or instrumentality thereof having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the New Credit Facility or with any domestic commercial
bank having capital and surplus in excess of $500.0 million and a Keefe Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Corporation ("S&P") and in each case maturing within six
months after the date of acquisition, (vi) investment funds investing
substantially all of their assets in securities of the types described in
clauses (i)-(v) above and (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.
"CASINO" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
building, restaurant, hotel theater, parking facilities, retail shops, land,
golf courses and other recreation and entertainment facilities, vessel, barge,
ship and equipment.
"COMPLETION GUARANTY" means the completion guaranty by Peter A. Morton,
dated as of March 23, 1998, as such agreement may be amended, modified or
supplemented in accordance with the terms thereof.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the sum of, without duplication, the Consolidated Net Income of such Person for
such period plus (i) provision for taxes based on income or profits of such
Person and its Subsidiaries for such period, to the extent that such provision
for taxes was included in computing such Consolidated Net Income, plus (ii)
consolidated interest expense of such Person and its Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, amortization of
deferred financing fees, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus (iii) the product of (a) all cash dividend payments, on any series
of preferred stock of such Person or any of its Restricted Subsidiaries, other
than dividend payments on Equity Interests payable solely in Equity Interests
(other than Disqualified Stock) of the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local effective tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP, plus (iv) consolidated depreciation, amortization and other non-cash
charges of the Person and its Subsidiaries required to be reflected as expenses
on the books and records of the Person, minus (v) cash payments with respect to
any non-cash charges previously added back pursuant to clause (iv), plus (vi)
preopening costs incurred in connection with the Expansion that are required by
GAAP to be charged as an expense prior to or upon opening, to the extent that
such preopening costs were deducted in computing such Consolidated Net Income.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash charges of, a
Subsidiary of the referent Person shall be added to Consolidated Net Income
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to compute Consolidated Cash Flow only to the extent (and in same proportion)
that the Net Income of such Subsidiary was included in calculating the
Consolidated Net Income of such Person.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; PROVIDED
that (i) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Restricted Subsidiary thereof, (ii) the Net
Income of any Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
government approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, and (v) all other extraordinary gains
and extraordinary losses shall be excluded.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Indebtedness outstanding under
the New Credit Facility and (ii) any other Senior Indebtedness permitted under
the Indenture the principal amount of which is $25 million or more and that has
been designated by the Company as "Designated Senior Indebtedness."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature, PROVIDED, HOWEVER, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof (or of any
security into which it is convertible or for which it is exchangeable) have the
right to require the issuer to repurchase such Capital Stock (or such security
into which it is convertible or for which it is exchangeable) upon the
occurrence of any of the events constituting an Asset Sale or a Change of
Control shall not constitute Disqualified Stock if such Capital Stock (and all
such securities into which it is convertible or for which it is exchangeable)
provides that the issuer thereof will not repurchase or redeem any such Capital
Stock (or any such security into which it is convertible or for which it is
exchangeable) pursuant to such provisions prior to compliance by the Company
with the provisions of the Indenture described under the caption "Repurchase at
the Option of Holders-- Change of Control" or "Repurchase at the Option of
Holders--Asset Sales," as the case may be.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means any bona fide underwritten public offering of common
stock by the Company other than (i) issuances of Disqualified Stock, (ii)
issuances in payment of or to finance the purchase price of an acquisition or
(iii) issuances of common stock pursuant to employee benefit plans of the
Company or otherwise as compensation to employees of the Company.
"EXCLUDED CONTRIBUTIONS" means the net cash proceeds received by the Company
from Permitted Holders after the Issue Date and until the completion of the
Expansion from contributions to the equity capital of the Company and cash
proceeds received as a result of payments under the Completion Guaranty.
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"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"EXPANSION" means the expansion of the Company's hotel casino in Las Vegas,
Nevada, including (i) the construction of a new hotel tower, (ii) the addition
of new slot machines and table games, (iii) the construction of a new swimming
pool, (iv) the addition of new restaurant facilities, (v) an expansion of the
size of the retail store located in such hotel casino, (vi) the construction of
a new parking facility, (vii) the construction of a new health club and spa and
(viii) the construction of a new nightclub and warehouse facility.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees, repays or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee,
repayment or redemption of Indebtedness, or such issuance or redemption of
preferred stock, as if the same had occurred at the beginning of the applicable
four-quarter reference period and in the case of revolving credit borrowings,
the Fixed Charge Coverage Ratio shall be computed based on the average daily
balance of such Indebtedness during the applicable reference period. In
addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, (ii) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its
Subsidiaries following the Calculation Date, and (iv) in the case of
Indebtedness bearing interest at a floating rate which is being given pro forma
effect, the interest on such Indebtedness shall be calculated as if the rate in
effect on the Calculation Date had been the applicable rate for the entire
period (taking into account any Hedging Obligation applicable to such
Indebtedness).
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs (other than amortization
of debt issuance costs related to the Notes and the New Credit Facility) and
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or banker's acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all cash dividend payments, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries, other than
dividend payments
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on Equity Interests payable solely in Equity Interests (other than Disqualified
Stock) of the Company, times (b) a fraction, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state
and local effective tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accounts and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"GAMING AUTHORITY" means any Governmental Authority with the power to
regulate gaming in any Gaming Jurisdiction, and the corresponding Governmental
Authorities with the responsibility to interpret and enforce the laws and
regulations applicable to gaming in any Gaming Jurisdiction.
"GAMING JURISDICTION" means any Federal, state or local jurisdiction in
which any entity, in which the Company has a direct or indirect beneficial,
legal or voting interest, conducts casino gaming, now or in the future.
"GAMING LAW" means any law, rule, regulation or ordinance governing gaming
activities (including, without limitation, The Riverboat Gambling Act of
Illinois, The Louisiana Riverboat Economic Development and Gaming Control Act,
the Missouri Riverboat Gaming Act (Mo. Rev. Stat. Section 313.800 et seq.) and
the Nevada Gaming Control Act (Nev. Rev. Stat. Section 463.010 et seq.), in each
case including all amendments or modifications thereof), any administrative
rules or regulations promulgated thereunder, and any of the corresponding
statutes, rules and regulations in each Gaming Jurisdiction.
"GAMING LICENSE" means every license, franchise or other authorization
required to own, lease, operate or otherwise conduct gaming activities of the
Company or any of its Subsidiaries, including without limitation, all such
licenses granted under the Nevada Gaming Control Act, and the regulations
promulgated pursuant thereto, and other applicable federal, state, foreign or
local laws.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, any province or any city or
other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any maritime authority.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"GUARANTOR" means each Restricted Subsidiary that has executed a Subsidiary
Guarantee, and their respective successors and assigns, unless and until
released therefrom, in each case in accordance with the applicable provisions of
the Indenture.
"HEDGING OBLIGATIONS" means with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements with respect to Indebtedness that
is permitted by the terms of the Indenture and (ii) other agreements or
arrangements designed to protect such Person against fluctuation in interest
rates or the value of foreign currencies purchased or received by such Person in
the ordinary course of business.
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"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, (i) in respect of borrowed money, or (ii)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit or reimbursement agreements in respect thereof (other than letters of
credit securing obligations not constituting Indebtedness that are issued in the
ordinary course of business by a Person to the extent not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit) or bankers' acceptances, or (iii)
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property, except any such balance that constitutes an
accrued expense or trade payable, or (iv) representing any Hedging Obligations,
in each case if and to the extent any of the foregoing indebtedness (other than
letters of credit and Hedging Obligations) would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, as well as all
Indebtedness of others secured by a Lien on any asset of such Person (whether or
not such Indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or such other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of.
"ISSUE DATE" means March 23, 1998.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"LIQUIDATED DAMAGES" has the meaning given to such term in the Registration
Rights Agreement.
"MAKE-WELL AGREEMENT" means the make-well agreement by Peter A. Morton,
dated as of March 23, 1998, as such agreement may be amended, modified or
supplemented in accordance with the terms thereof.
"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 actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Subsidiaries and (ii) any
extraordinary
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or nonrecurring gain or loss, together with any related provision for taxes on
such extraordinary or nonrecurring gain or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"NEW CREDIT FACILITY" means that certain credit agreement, dated as of March
23, 1998, by and among the Company and Bank of America National Trust and
Savings Association, as administrative agent, and Bear Stearns as co-agent, and
the lenders parties thereto, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced, extended, restated
or refinanced from time to time, whether by the same or any other agent, lender
or group of lenders; provided that the total amount of Indebtedness is not
thereby increased beyond the amount that may then be incurred at such time
pursuant to the covenant described under the caption "--Incurrence of
Indebtedness and Issuance of Disqualified Stock."
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), as reflected in the express terms of the instrument governing such
Indebtedness, or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any Indebtedness (other than the
Notes being offered hereby) of the Company or any of its Restricted Subsidiaries
to declare a default on such other Indebtedness or cause the payment thereof to
be accelerated or payable prior to its stated maturity.
"OBLIGATIONS" means any principal, interest, penalties, fees
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED BUSINESS" means the gaming business and other businesses
necessary for, incident to, connected with or arising out of the gaming business
(including developing and operating lodging, dining and nightclub facilities,
sports or entertainment facilities, transportation services, retail operations
and other related activities or enterprises and any additions or improvements
thereto) or any business that is reasonably similar thereto or a reasonable
extension, development or expansion thereof or ancillary thereto.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Restricted Subsidiary; (b) any Investment in Cash Equivalents; (c) any
Investment by the Company or any Restricted Subsidiary in a Person, if as a
result of such Investment (i) such Person becomes a Restricted Subsidiary or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Restricted Subsidiary; (d) any Investment made as a result of
the receipt of non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales"; (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) any Investment existing on the Issue
Date; (g) any Investment acquired by the Company or any of its Restricted
Subsidiaries (A) in exchange for any other Investment or accounts receivable
held by the Company or any such Restricted Subsidiary in connection
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with or as a result of a bankruptcy, workout, reorganization or recapitalization
of the issuer of such other Investment or accounts receivable or (B) as a result
of the transfer of title with respect to any secured investment in default as a
result of a foreclosure by the Company or any of its Restricted Subsidiaries
with respect to such secured Investment; (h) Hedging Obligations permitted under
the "--Certain Covenants; Limitation of Incurrence of Indebtedness and Issuance
of Disqualified Stock" covenant; (i) loans and advances to officers, directors
and employees for business-related travel expenses, moving expenses and other
similar expenses, in each case, incurred in the ordinary course of business; (j)
other loans and advances to officers, directors and employees in an aggregate
amount not to exceed $250,000 outstanding at any time; (k) any guarantees
permitted to be made pursuant to the covenant entitled "Certain
Covenants--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock"; (l) credit extensions to gaming customers in connection
with their gambling activities at facilities of the Company or its Subsidiaries;
and (m) other Investments in any Person primarily engaged in a Permitted
Business having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (m)
that are at the time outstanding, not to exceed $2.0 million.
"PERMITTED LIENS" means (i) Liens on assets of the Company or any of its
Subsidiaries securing Senior Indebtedness that was permitted by the terms of the
Indenture to be incurred (including pursuant to the New Credit Facility); (ii)
Liens in favor of the Company; (iii) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Subsidiary of the Company; PROVIDED that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, PROVIDED that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory or regulatory obligations, leases, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (iv) of the second paragraph of
the covenant entitled "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Disqualified Stock" covering only the assets acquired with such
Indebtedness; (vii) Liens existing on the date of the Indenture; (viii) 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 provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) Liens incurred in the ordinary course of business of
the Company or any Subsidiary of the Company with respect to obligations that do
not exceed $5.0 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 business by the Company or
such Subsidiary; (x) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries; (xi) Liens of carriers,
warehousemen, mechanics, landlords, materialmen, repairmen and for crew wages or
salvage or other like Liens arising by operation of law in the ordinary course
of business and consistent with industry practices and Liens on deposits made to
obtain the release of such Liens if (A) the underlying obligations are not
overdue for a period of more than 60 days or (B) such Liens are being contested
in good faith and by appropriate proceedings by the Company or its Subsidiary
and adequate reserves with respect thereto are maintained on the books of the
Company or such Subsidiary, as the case may be, in accordance with GAAP; (xii)
easements, rights-of-way, zoning and similar restrictions and other similar
encumbrances or title defects incurred or imposed, as applicable, in the
ordinary course of business and consistent with industry practices which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto (as such
property is used by the Company or its Subsidiary) or interfere with the
ordinary conduct of the business of the Company or such Subsidiary; provided,
however, that any such Liens are not incurred in connection with any borrowing
of money or any
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commitment to loan any money or to extend any credit; and (xiii) customary Liens
(other than any Lien imposed by ERISA) incurred or deposits made in the ordinary
course of business in connection with worker's compensation, unemployment
insurance and other types of social security legislation.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund Indebtedness of the Company or any of its Restricted Subsidiaries;
PROVIDED that:(i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith including
premiums paid, if any, to the holders thereof); (ii) such Permitted Refinancing
Indebtedness has a final maturity date at or later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SENIOR INDEBTEDNESS" means (i) the Indebtedness of the Company under the
New Credit Facility and (ii) any other Indebtedness of the Company permitted to
be incurred by it under the terms of the Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Notes, including, with respect
to (i) and (ii), interest accruing subsequent to the filing of, or which would
have accrued but for the filing of, a petition for bankruptcy, whether or not
such interest is an allowable claim in such bankruptcy proceeding.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (1) any liability for federal, state, local or other taxes owed
or owing by the Company, (2) any obligation of the Company to any of its
Subsidiaries, (3) any accounts payable or trade liabilities of the Company
arising in the ordinary course of business (including instruments evidencing
such liabilities) other than obligations in respect of bankers' acceptances and
letters of credit under the New Credit Facility, (4) any Indebtedness that is
incurred in violation of the Indenture, (5) Indebtedness which, when incurred
and without respect to any election under Section 1111 (b) of Title 11, United
States Code, is without recourse to the Company, (6) any Indebtedness, guarantee
or obligation of the Company which is subordinate or junior to any other
Indebtedness, guarantee or obligation of the Company, (7) Indebtedness evidenced
by the Notes and (8) Capital Stock of the Company.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date
hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the
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original documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"SUBORDINATED INDEBTEDNESS" means all Indebtedness of the Company that is
subordinated in right of payment to the Notes.
"SUBORDINATION AGREEMENT" means the Subordination Agreement dated of the
date of the Indenture between the Company and Peter A. Morton, relating to the
subordination of the fees payable under the Supervisory Agreement.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"SUPERVISORY AGREEMENT" means the Amended and Restated Supervisory Agreement
dated as of October 21, 1997 between the Company and Peter A. Morton providing
for the payment by the Company of a management fee to Peter A. Morton in
connection with the rendering of management services to or on behalf of the
Company, which obligation of the Company to pay such management fee will be
subordinated to the prior payment in full of all obligations with respect to the
Notes pursuant to the Subordination Agreement and which obligation is otherwise
in lieu of the payment of any other compensation to Peter A. Morton in respect
of services rendered to the Company.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described above under the caption
"--Certain Covenants--Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing conditions as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock" the Company shall be in default
of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under the covenant described under the caption
"--Certain Covenants--
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Incurrence of Indebtedness and Issuance of Disqualified Stock," calculated on a
pro forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (ii) no Default or Event of Default would be
in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person
all of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person.
BOOK-ENTRY, DELIVERY AND FORM
The certificate representing the New Notes will be issued in fully
registered global form without interest coupons in minimum denominations of
$1,000 principal amount at maturity and integral multiples of $1,000 principal
amount at maturity in excess thereof (the "Global Notes"). Except as set forth
below, the Global Notes will be deposited with, or on behalf of, DTC, and
registered in the name of Cede & Co. ("Cede"), as DTC's nominee in the form of
one or more global certificates.
Except as set forth below, the record ownership of any Global Note may be
transferred, in whole or in part, only to DTC, another nominee of DTC or to a
successor of DTC or its nominee. Investors may hold their interests in any of
the Global Securities directly through DTC, or indirectly through organizations
which are participants in DTC ("Participants"). Transfers between Participants
will be effected in the ordinary way in accordance with DTC rules and will be
settled in immediately available funds.
Investors who are not Participants may beneficially own interests in a
Global Note held by DTC only through Participants, including certain banks,
brokers, dealers, trust companies and other parties that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly, and have indirect access to the DTC system ("Indirect
Participants"). So long as Cede, as the nominee of DTC, is the registered owner
of any Global Note, Cede for all purposes will be considered the sole Holder of
such Global Security. Except as provided below, owners of beneficial interests
in a Global Note will not be entitled to have certificates registered in their
names, will not receive or be entitled to receive physical delivery of
certificates in definitive form, and will not be considered the Holder thereof.
Neither the Company nor the Trustee (nor any registrar or paying agent) will
have any responsibility for the performance by DTC or its Participants or
Indirect Participants of its obligations under the rules and procedures
governing, its operations. DTC has advised the Company that it will take any
action permitted to be taken by a Holder of New Notes only at the direction of
one or more Participants whose accounts are credited with DTC interests in a
Global Security.
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Global notes, or notes held in street name have created gaming regulatory
concern in the past. Privately held gaming licensees must disclose all material
information regarding beneficial ownership of the securities of the corporate
gaming licensee. Companies registered with the Nevada Commission must render
maximum assistance to determine ownership of securities if requested to do so.
CERTIFICATED SECURITIES. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Notes and a successor depositary is not
appointed by the Company within 90 days, certificated securities will be issued
in exchange for the Global Notes.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The following summary of certain provisions of the Registration Rights
Agreement does not purport to be complete, is subject to and is qualified in its
entirety by reference to all the Provisions of the Registration Rights
Agreement, a copy of which is filed as an exhibit to the Registration Statement
to which this Prospectus forms a part.
Pursuant to the Registration Rights Agreement, the Company agreed to file
with the Commission the Exchange Offer Registration Statement on the appropriate
form under the Securities Act with respect to the New Notes, of which this
Prospectus forms a part. Upon the effectiveness of the Exchange Offer
Registration Statement and receipt of the requisite approvals of the Nevada
Gaming Authorities, the Company will offer to the Holders of Transfer Restricted
Securities pursuant to the Exchange Offer who are able to make certain
representations the opportunity to exchange their Transfer Restricted Securities
for New Notes. If (i) the Company is not required to file the Exchange Offer
Registration Statement or permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy or (ii)
any Holder of Transfer Restricted Securities notifies the Company within the
specified time period that (a) it is prohibited by law or Commission policy from
participating in the Exchange Offer or (b) that it may not resell the New Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the prospectus contained in the Exchange Offer Registration
Statement is not available for such resales or (c) that it is a broker-dealer
and owns Notes acquired directly from the Company or an affiliate of the
Company, the Company will file with the Commission a Shelf Registration
Statement to cover resales of the Notes by the Holders thereof who satisfy
certain conditions. For purposes of the foregoing, "Transfer Restricted
Securities" means each Old Note until (i) the date on which such Old Note has
been exchanged by a person other than a broker-dealer for an New Note in the
Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange
Offer of an Old Note for a New Note, the date on which such New Note is sold to
a purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of this Prospectus contained in the Exchange Offer Registration
Statement, (iii) the date on which such Old Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Old Note is distributed to
the public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Company file the
Exchange Offer Registration Statement with the Commission on or prior to 60 days
after the Closing Date, (ii) the Company will use its reasonable best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 180 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Company will commence the Exchange Offer and use its reasonable best efforts
to issue on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement was declared effective by the Commission, New Notes
in exchange for all Old Notes tendered prior thereto in the Exchange Offer and
(iv) if obligated to file the Shelf Registration Statement, the Company will use
its reasonable best efforts to file the Shelf Registration Statement with the
Commission on or prior to 60 days after such filing obligation arises and to
cause the Shelf Registration to be declared effective by the Commission on or
prior to 90 days after such obligation arises (or, if later, 180 days after the
Closing Date). If (a) the Company fails to file any of the Registration
Statements required by the Registration Rights Agreement on or before the date
specified for such filing, (b) any of
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such Registration Statements is not declared effective by the Commission on or
prior to the date specified for such effectiveness (the "Effectiveness Target
Date"), (c) the Company fails to consummate the Exchange Offer within 30
business days of the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement or (d) the Shelf Registration Statement or the
Exchange Offer Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of Transfer
Restricted Securities during the periods specified in the Registration Rights
Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Company will pay damages to each Holder of Old
Notes, with respect to the first 90-day period immediately following the
occurrence of such Registration Default, in an amount equal to $.05 per week per
$1,000 principal amount of Old Notes held by such Holder. Such damages, together
with damages accrued by the Company pursuant to the next succeeding sentence,
are collectively referred to herein as "Liquidated Damages." The amount of the
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal amount of Old Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.40 per week per $1,000 principal amount of Notes. All
accrued Liquidated Damages will be paid by the Company on each interest payment
date to the record Holders in the same manner as interest will be payable on the
Old Notes. Following the cure or waiver of all Registration Defaults, the
accrual of Liquidated Damages will cease.
A privately held corporate gaming licensee may not make a public offering of
any security issued by the corporate gaming licensee. The regulations applicable
to public offerings will be applicable to the Exchange Offer. Accordingly, the
Company will be required to obtain a waiver of the regulation prohibiting public
offerings by corporate gaming licensees. No assurance can be made that such
waiver will be obtained.
Furthermore, registration as a publicly traded company and approvals of a
public offering of debt securities requires registration with the Commission.
There can be no assurance that the application for approval of the public
offering and the regulatory waiver will be approved by the Nevada Gaming
Authorities within the 180 day closing period. Additionally, there can be no
guarantee that a shelf registration will be approved.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time period set forth in
the Registration Rights Agreement in order to have their Old Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES
The following is a summary of certain United States Federal income tax
consequences associated with the exchange of Old Notes for New Notes and the
disposition of the New Notes. This summary is based upon existing United States
Federal income tax law, which is subject to change, possibly retroactively. This
summary does not discuss all aspects of United States Federal income taxation
which may be important to particular holders in light of their individual
investment circumstances, such as Notes held by investors subject to special tax
rules (e.g., financial institutions, insurance companies, broker-dealers,
tax-exempt organizations, or, except to the extent described below, Non-U.S.
Holders (as defined below)) or to persons that hold the Old Notes or will hold
the New Notes as a part of a straddle, hedge, or synthetic security transaction
for United States Federal income tax purposes or that have a functional currency
other than the United States dollar, all of whom may be subject to tax rules
that differ significantly from those summarized below. In addition, this summary
does not discuss any foreign, state, or local tax considerations. This summary
assumes that investors hold their Old Notes and will hold their New Notes as
"capital assets" (generally, property held for investment) under the United
States Internal Revenue Code of 1986, as amended (the "Code"). Prospective
investors are urged to consult their tax advisors regarding the
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United States Federal, state, local and foreign income and other tax
considerations associated with the exchange of Old Notes for New Notes and the
disposition of the New Notes.
For purposes of this summary, a "U.S. Holder" is a beneficial owner of a
Note that is (i) an individual who is a citizen or resident of the United
States, (ii) a corporation or partnership created or organized under the laws of
the United States or any state or political subdivision thereof, (iii) an estate
that is subject to United States Federal income taxation without regard to the
source of its income, or (iv) a trust the administration of which is subject to
the primary supervision of a United States court and which has one or more
United States persons who have the authority to control all substantial
decisions of the trust. A "Non-U.S. Holder" is a beneficial owner of an Old Note
or New Note who is not a U.S. Holder.
U.S. HOLDERS AND NON-U.S. HOLDERS
There will be no United States Federal income tax consequences to a U.S.
Holder or Non-U.S. Holder exchanging an Old Note for a New Note pursuant to the
Exchange Offer and such holder will have the same adjusted basis and holding
period in the New Note as it had in the Old Note immediately before the
exchange.
U.S. HOLDERS
DISPOSITION OF NEW NOTES. In general, subject to the market discount rules
discussed below, a U.S. Holder of a New Note will recognize capital gain or loss
upon the sale, redemption, or other disposition of the New Note in an amount
equal to the difference between the amount realized (except to the extent
attributable to accrued but unpaid interest) in such disposition and the
holder's adjusted tax basis in the New Note. Net capital gain (i.e., generally,
capital gain in excess of capital loss) recognized by an individual holder upon
the disposition of a New Note that has been held for (i) more than 18 months
will generally be subject to tax at a rate not to exceed 20%, (ii) more than 12
months but not more than 18 months will be subject to tax at a rate not to
exceed 28%, and (iii) 12 months or less will be subject to tax at ordinary
income tax rates. In addition, capital gain recognized by a corporate holder
will be subject to tax at the ordinary income tax rates applicable to
corporations.
MARKET DISCOUNT. Holders, other than original purchasers of the Old Notes
in the original offering, should be aware that the sale of the New Notes may be
affected by the market discount provisions of the Code. These rules generally
provide that if a holder of a Note purchased such note, subsequent to the
original offering, at a market discount in excess of a statutorily defined DE
MINIMIS amount, and thereafter recognizes gain upon a disposition (including a
partial redemption) of the New Note received in exchange for such Old Note, the
lesser of such gain or the portion of the market discount that accrued while the
Old Note and New Note were held by such holder will be treated as ordinary
interest income at the time of disposition. The rules also provide that a holder
who acquires a Note at a market discount may be required to defer a portion of
any interest expense that may otherwise be deductible on any indebtedness
incurred or maintained to purchase or carry such note until the holder disposes
of such note in a taxable transaction. If a holder of such a note elects to
include market discount in income currently, both of the foregoing rules would
not apply.
NON-U.S. HOLDERS
PAYMENTS OF INTEREST. Interest paid by the Company to Non-U.S. Holders will
not be subject to United States Federal income or withholding tax provided that
(i) such holder does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to vote,
(ii) such holder is not a controlled foreign corporation that is related to the
Company through stock ownership, a foreign tax-exempt organization or foreign
private foundation for United States Federal
90
<PAGE>
income tax purposes, and (iii) the requirements of section 871(h) or 881(c) of
the Code are satisfied as described below under the heading "Owner's Statement
Requirement". Notwithstanding the above, a Non-U.S. Holder that is engaged in
the conduct of a United States trade or business will be subject to (i) United
States Federal income tax on interest that is effectively connected with the
conduct of such trade or business and (ii) if the Non-U.S. Holder is a
corporation, a United States branch profits tax equal to 30% of its "effectively
connected earnings and profits" as adjusted for the taxable year, unless the
holder qualifies for an exemption from such tax or a lower tax rate under an
applicable treaty.
GAIN ON DISPOSITION. A Non-U.S. Holder will generally not be subject to
United States Federal income tax on gain recognized on a sale, redemption, or
other disposition of a New Note unless (i) the gain is effectively connected
with the conduct of a trade or business within the United States by the Non-U.S.
Holder or (ii) in the case of a Non-U.S. Holder who is a nonresident alien
individual, such holder is present in the United States for 183 or more days
during the taxable year and certain other requirements are met. Any such gain
that is effectively connected with the conduct of a United States trade or
business by a Non-U.S. Holder will be subject to United States Federal income
tax on a net income basis in the same manner as if such holder were a United
States person, if such Non-U.S. Holder is a corporation, such gain may also be
subject to the 30% United States branch profits tax described above.
FEDERAL ESTATE TAXES. A New Note 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
United States Federal estate tax as a result of such individual's death,
provided that (i) the individual does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the Company
entitled to vote and (ii) the interest accrued on the New Note was not
effectively connected with a United States trade or business.
OWNER'S STATEMENT REQUIREMENT. Sections 871(h) and 881(c) of the Code
require that either the beneficial owner of a New Note or a securities clearing
organization, bank, or other financial institution that holds customer's
securities in the ordinary course of its trade or business (a "Financial
Institution") and that holds a New Note on behalf of such owner file a statement
with the Company or its agent to the effect that the beneficial owner is not a
United States person in order to avoid withholding of United States Federal
income tax. Under current regulations, this requirement will be satisfied if the
Company or its agent receives (i) a statement (an "Owner's Statement") from the
beneficial owner of a New Note in which such owner certifies, under penalties of
perjury, that such owner is not a United States person and provides such owner's
name and address or (ii) a statement from the Financial Institution holding the
New Note on behalf of the beneficial owner in which the Financial Institution
certifies, under penalties of perjury, that it has received the Owner's
Statement together with a copy of the Owner's Statement. The beneficial owner
must inform the Company or its agent (or, in the case of a statement described
in clause (ii) of the immediately preceding sentence, the Financial Institution)
within 30 days of any change in information on the Owner's Statement.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Current United States Federal
income tax law provides that in the case of payments of interest to Non-U.S.
Holders, the 31% backup withholding tax will not apply to payments made outside
the United States by the Company or a paying agent on a New Note if an Owner's
Statement is received or an exemption has otherwise been established; provided
in each case that the Company or the paying agent, as the case may be, does not
have actual knowledge that the payee is a United States person.
Under current Treasury Regulations, payments of the proceeds of the sale of
a New Note to or through a foreign office of a "broker" will not be subject to
backup withholding but will be subject to information reporting if the broker is
a United States person or a certain foreign entity with United States
connections, unless the broker has in its records documentary evidence that the
holder is not a United States person and certain other conditions are met or the
holder otherwise establishes an exemption.
91
<PAGE>
Payment of the proceeds of a sale to or through the United States office of a
broker is subject to backup withholding and information reporting unless the
holder certifies its non-United States status under penalties of perjury or
otherwise establishes an exemption.
Recently, the Treasury Department has promulgated final regulations (the
"Final Regulations") regarding the withholding and information reporting rules
discussed above. In general, the Final Regulations do not significantly alter
the substantive withholding and information reporting requirements but unify
current certification procedures and forms and clarify reliance standards. Under
the Final Regulations, special rules apply which permit the shifting of primary
responsibility for withholding to certain financial intermediaries acting on
behalf of beneficial owners. The Final Regulations are generally effective for
payments made after December 31, 1999, subject to certain transition rules.
92
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New 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 New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of at least 12
months after the date upon which the Registration Statement, of which this
Prospectus is a part, is declared effective by the Commission , it will make
this Prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until the Expiration Date,
all dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New 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 in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such New Notes. Any broker-dealer that resells New 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 New Notes may be
deemed to be an underwriter" within the meaning or the Securities Act and any
profit on any such resale of New Notes and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of at least 12 months after the date upon which the
Registration Statement of which this Prospectus is a part, is declared effective
by the Commission, the Company will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to pay all expenses in connection with the Exchange Offer and
reimburse the Initial Purchasers for the reasonable fees and expenses of counsel
for the holders of the Notes. Each holder will pay all expenses of its counsel
other than as described in the preceding sentence, transfer taxes, if any, and
any commissions or concessions of any brokers or dealers. The Company has agreed
in the Registration Rights Agreement to indemnify the holders of the Notes
(including any broker-dealer) against certain liabilities, including liabilities
under the Securities Act.
In addition, to comply with the securities laws of certain jurisdictions,
the New Notes may not be offered or sold unless they have been registered or
qualified for offer and sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement, subject to certain
limitations specified therein, to register or qualify the New Notes for offer or
sale under all applicable federal and state securities laws by the time the
Registration Statement (of which this Prospectus forms a part) is declared
effective by the Commission.
LEGAL MATTERS
Certain legal matters in connection with the validity issuance and sale of
the New Notes will be passed upon for the Company by Gordon & Silver, Ltd., Las
Vegas, Nevada.
93
<PAGE>
EXPERTS
The financial statements of the Company at November 30, 1996 and 1997, and
for each of the three years in the period ended November 30, 1997, appearing in
this 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.
94
<PAGE>
HARD ROCK HOTEL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Balance Sheets at November 30, 1997 and February 28, 1998 (Unaudited)...................................... F-2
Unaudited Statements of Operations for the three months ended February 28, 1997 and 1998................... F-3
Unaudited Statements of Shareholders' Equity (Deficit) for the three months ended February 28, 1998........ F-4
Unaudited Statements of Cash Flows for the three months ended February 28, 1997 and 1998................... F-5
Notes to Unaudited Financial Statements.................................................................... F-6
Report of Ernst & Young LLP, Independent Auditors.......................................................... F-8
Balance Sheets at November 30, 1996 and 1997............................................................... F-9
Statements of Operations for the years ended November 30, 1995, 1996 and 1997.............................. F-10
Statements of Shareholders' Equity (Deficit) for the years ended November 30, 1995, 1996 and 1997.......... F-11
Statements of Cash Flows for the years ended November 30, 1995, 1996 and 1997.............................. F-12
Notes to Financial Statements.............................................................................. F-13
</TABLE>
F-1
<PAGE>
HARD ROCK HOTEL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30,
1997
-------------- FEBRUARY 28,
1998
--------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 4,214,081 $ 2,970,907
Accounts receivable, net of allowance for doubtful accounts of $200,000 at
November 30, 1997 and $222,000 at February 28, 1998.......................... 2,966,562 3,692,298
Income tax refund receivable................................................... 2,443,041 2,277,021
Inventories.................................................................... 1,065,873 1,016,503
Prepaid and other current assets............................................... 835,071 1,123,980
Deferred income taxes.......................................................... 733,650 733,650
-------------- --------------
Total current assets............................................................. 12,258,278 11,814,359
Property and equipment, net, at cost............................................. 89,768,576 90,270,209
Other assets..................................................................... 4,634,505 4,516,669
Deferred income taxes............................................................ 2,894,386 2,894,386
-------------- --------------
Total assets..................................................................... $ 109,555,745 $ 109,495,623
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................................................... $ 2,892,768 $ 3,089,874
Accrued expenses............................................................... 4,462,868 5,029,728
Advances due to related party.................................................. 470,234 --
Current obligations under capital leases....................................... 108,325 108,325
Long-term debt due within one year............................................. 6,000,000 7,500,000
-------------- --------------
Total current liabilities........................................................ 13,934,195 15,727,927
Deferred income taxes............................................................ 3,628,036 3,628,036
Obligations under capital leases................................................. 204,490 178,665
Long-term debt due after one year................................................ 99,700,000 97,500,000
Commitments and contingencies.................................................... -- --
Redeemable common stock, no par value............................................ 25,000 100,000
Shareholders' equity (deficit)
Common stock, Class A voting, no par value:
Authorized shares--40,000
Issued and outstanding shares--12,000........................................ -- --
Common stock, Class B non-voting, no par value:
Authorized shares--160,000
Issued and outstanding shares--64,023........................................ -- --
Paid-in capital................................................................ 7,508,250 7,508,250
Retained earnings (accumulated deficit)........................................ (15,444,226) (15,147,255)
-------------- --------------
Total shareholders' equity (deficit)............................................. (7,935,976) (7,639,005)
-------------- --------------
Total liabilities and shareholders' equity (deficit)............................. $ 109,555,745 $ 109,495,623
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-2
<PAGE>
HARD ROCK HOTEL, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FEBRUARY
28,
------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
Revenues:
Casino..................................................................... $ 8,770,793 $ 10,062,099
Lodging.................................................................... 3,011,872 3,093,465
Food and beverage.......................................................... 3,773,315 4,239,992
Retail..................................................................... 3,788,900 3,246,967
Other income............................................................... 408,119 499,535
-------------- --------------
19,752,999 21,142,058
Less complimentaries....................................................... (1,409,128) (1,674,318)
-------------- --------------
Net Revenues................................................................. 18,343,871 19,467,740
Costs and expenses:
Casino..................................................................... 4,630,867 4,850,309
Lodging.................................................................... 1,017,063 908,045
Food and beverage.......................................................... 2,443,739 2,527,629
Retail..................................................................... 1,844,821 1,538,730
Other...................................................................... 195,014 179,700
Marketing.................................................................. 931,493 1,955,540
General and administrative................................................. 3,620,322 3,104,531
Depreciation and amortization.............................................. 1,386,746 1,395,817
-------------- --------------
Total costs and expenses..................................................... 16,070,065 16,460,301
-------------- --------------
Income from operations....................................................... 2,273,806 3,007,439
Interest and other:
Interest income (expense), net............................................. (1,208,940) (2,544,468)
Other expenses, net........................................................ (5,000)
-------------- --------------
(1,213,940) (2,544,468)
-------------- --------------
Income before provision for income taxes..................................... 1,059,866 462,971
Provision for income taxes................................................... 378,000 166,000
-------------- --------------
Net income................................................................... $ 681,866 $ 296,971
-------------- --------------
-------------- --------------
Basic earnings per share..................................................... $ 5.38 $ 3.91
-------------- --------------
-------------- --------------
Diluted earnings per share................................................... $ 5.38 $ 3.87
-------------- --------------
-------------- --------------
Shares used in calculating basic earnings per share.......................... 126,705 76,023
-------------- --------------
-------------- --------------
Shares used in calculating diluted earnings per share........................ 126,705 76,791
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
HARD ROCK HOTEL, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
CLASS A CLASS B TOTAL
COMMON STOCK COMMON STOCK RETAINED SHAREHOLDERS'
-------------------- -------------------- PAID-IN EARNINGS EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
--------- --------- --------- --------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at November 30, 1997.... 12,000 $ -- 64,023 $ -- $ 7,508,250 $ (15,444,226) $(7,935,976)
Net income....................... -- -- -- -- -- 296,971 296,971
--------- --------- --------- --------- ------------ -------------- -------------
Balances at February 28, 1998.... 12,000 $ -- 64,023 $ -- $ 7,508,250 $ (15,147,255) $(7,639,005)
--------- --------- --------- --------- ------------ -------------- -------------
--------- --------- --------- --------- ------------ -------------- -------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
HARD ROCK HOTEL, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FEBRUARY
28,
----------------------------
1997 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................................... $ 681,866 $ 296,971
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................................... 1,386,746 1,395,817
Amortization of loan fees and organizational costs.......................... 96,840 142,965
[Deferred Income Taxes].....................................................
Changes in operating assets and liabilities:
Accounts receivable....................................................... 375,279 (725,736)
Income tax refund receivable.............................................. -- 166,020
Inventories............................................................... 88,184 49,370
Prepaid and other current assets.......................................... (175,059) (431,874)
Accounts payable.......................................................... (759,632) 197,106
Accrued expenses.......................................................... 109,404 566,860
Income taxes payable...................................................... (522,000) --
------------- -------------
Net cash provided by operating activities....................................... 1,281,628 1,657,499
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment............................................. (208,947) (1,897,450)
Change in advances due to related parties....................................... 244,071 (470,234)
Decrease (increase) in other assets............................................. (315,978) 117,836
------------- -------------
Net cash used in investing activities........................................... (280,854) (2,249,848)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of obligations on property to be developed.............................. (93,398) --
Principal payments on long-term debt............................................ (2,400,000) (700,000)
Payments on capital lease obligations........................................... (24,425) (25,825)
Issuance of common stock as compensation........................................ -- 75,000
------------- -------------
Net cash used in financing activities........................................... (2,517,823) (650,825)
------------- -------------
Net increase in cash and cash equivalents....................................... (1,517,049) (1,243,174)
Cash and cash equivalents at beginning of period................................ 5,958,284 4,214,081
------------- -------------
Cash and cash equivalents at end of period...................................... $ 4,441,235 $ 2,970,907
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-5
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FEBRUARY 28, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Hard Rock Hotel, Inc.
(the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three-month period ended February 28, 1998 are not necessarily indicative of the
results that may be expected for the year ending November 30, 1998. The
unaudited interim financial statements contained herein should be read in
conjunction with the audited financial statements and footnotes for the year
ended November 30, 1997.
2. SUBSEQUENT EVENTS
In March, 1998 the Company obtained funding of approximately $115.3 million
in net proceeds from the offering of $120 million principal amount, 9 1/4%
Senior Subordinated Notes due in 2005. Of this amount, approximately $105.6
million was used to pay off the Company's Existing Credit Facility including
accrued interest. In addition, in March 1998, the Company secured a revolving
line of credit under a New Credit Facility of $67.0 million. Borrowings against
the line of credit may require repayments beginning in February 2000. In
connection with the retirement of the Existing Credit Facility, the Company will
incur an extraordinary pre-tax loss resulting from the write-off of $3.5 million
in unamortized loan fees and financing cost.
3. COMMITMENTS AND CONTINGENCIES
As part of the proposed expansion (the "Expansion") of the Hard Rock Hotel &
Casino in Las Vegas, Nevada (the "Resort"), the Company has signed a $7.4
million contract with MJ Dean Construction, Inc. to complete the intended 1,088
car parking garage.
LEGAL PROCEEDINGS
On January 5, 1998, Hard Rock Cafe International (USA) Inc. (f/k/a Rank
Licensing, Inc.), a subsidiary of Rank, filed an amended complaint in the United
States District Court for the Southern District of New York against Peter A.
Morton and the Company. The Plaintiff contends that the reservation and use by
Mr. Morton and the Company of the internet domain names "hardrock.com" and
"hardrockhotel.com" (the "Domain Names"), and the use of certain marks and logos
(the "Logos") in, and in connection with merchandise offered on, internet
websites operated under the Domain Names, violate terms of certain agreements
with Mr. Morton and federal and state trademark and unfair competition law. The
Plaintiff seeks an injunction against the use of the Domain Names and Logos by
Mr. Morton and the Company, an order requiring Mr. Morton and the Company to
assign the Domain Names to the Plaintiff, and over $100 million in damages. On
May 8, 1998, Mr. Morton and the Company agreed to transfer the domain name
"hardrock.com" to the Plaintiff forty-five days therefrom. Trial is currently
set for June 15, 1998. Management and Mr. Morton believe that this lawsuit is
without merit and intend to defend vigorously the allegations in this complaint
and believe that the outcome of such litigation will not have a material adverse
effect on the Company, although there can be no assurance of the outcome of the
lawsuit. Revenues from sales of merchandise over the internet for fiscal year
1997 were less than $150,000.
F-6
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FEBRUARY 28, 1998 (CONTINUED)
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Additionally, the Company is a defendant in various lawsuits relating to
routine matters incidental to its business. Management does not believe that the
outcome of any such litigation, in the aggregate, will have a material adverse
effect on the Company.
4. EARNINGS PER SHARE
The Company has adopted Financial Accounting Standards Board Statement No.
128, "Earnings Per Share." This Statement establishes standards for computing
and presenting both basic and diluted earnings per share and applies to entities
that are publicly held. The difference between the number of shares used to
calculate basic and diluted earnings per share in the first quarter of 1998 is a
result of the issuance of common stock as compensation to an executive of the
Company.
F-7
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Hard Rock Hotel, Inc.
We have audited the accompanying balance sheets of Hard Rock Hotel, Inc. as
of November 30, 1996 and 1997, and the related statements of operations,
shareholders' equity (deficit), and cash flows for each of the three years in
the period ended November 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Hard Rock Hotel, Inc. at
November 30, 1996 and 1997, and the result of its operations and its cash flows
for each of the three years in the period ended November 30, 1997, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Reno, Nevada
December 23, 1997
F-8
<PAGE>
HARD ROCK HOTEL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 5,958,284 $ 4,214,081
Accounts receivable, net of allowance for doubtful accounts of $350,000 in 1996
and $200,000 in 1997......................................................... 2,672,411 2,966,562
Income tax refund receivable................................................... -- 2,443,041
Inventories.................................................................... 1,028,680 1,065,873
Prepaid and other current assets............................................... 811,052 835,071
Deferred income taxes.......................................................... 824,041 733,650
-------------- --------------
Total current assets............................................................. 11,294,468 12,258,278
Property and equipment, net, at cost............................................. 93,026,107 89,768,576
Other assets..................................................................... 2,468,297 4,634,505
Deferred income taxes............................................................ 2,255,000 2,894,386
-------------- --------------
Total assets..................................................................... $ 109,043,872 $ 109,555,745
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................................................... $ 1,958,739 $ 2,892,768
Accrued expenses............................................................... 4,681,933 4,462,868
Income taxes payable........................................................... 869,401 --
Advances due to related party.................................................. 286,720 470,234
Current obligations under capital leases....................................... 102,025 108,325
Current obligations on property to be developed................................ 3,354,201 --
Long-term debt due within one year............................................. 5,100,000 6,000,000
-------------- --------------
Total current liabilities........................................................ 16,353,019 13,934,195
Deferred income taxes............................................................ 2,816,000 3,628,036
Obligations under capital leases................................................. 312,820 204,490
Long-term obligations on property to be developed................................ 3,500,000 --
Long-term debt due after one year................................................ 55,300,000 99,700,000
Commitments and contingencies (NOTE 9)...........................................
Redeemable common stock, no par value (NOTE 11).................................. -- 25,000
Shareholders' equity (deficit):
Common stock, Class A voting, no par value:
Authorized shares--40,000
Issued and outstanding shares--20,000 in 1996; 12,000 in 1997................ -- --
Common stock, Class B non-voting, no par value:
Authorized shares--160,000
Issued and outstanding shares--106,705 in 1996; 64,023 in 1997............... -- --
Paid-in capital................................................................ 28,717,250 7,508,250
Retained earnings (accumulated deficit)........................................ 2,044,783 (15,444,226)
-------------- --------------
Total shareholders' equity (deficit)............................................. 30,762,033 (7,935,976)
-------------- --------------
Total liabilities and shareholders' equity (deficit)............................. $ 109,043,872 $ 109,555,745
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-9
<PAGE>
HARD ROCK HOTEL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
--------------------------------------------
1995 1996 1997
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Casino........................................................... $ 26,261,832 $ 36,560,422 $ 35,394,705
Lodging.......................................................... 7,845,089 12,256,687 12,919,081
Food and beverage................................................ 10,060,911 15,003,133 16,704,645
Retail........................................................... 13,983,844 17,336,352 15,404,467
Other income..................................................... 1,290,535 1,901,256 2,075,603
------------- ------------- --------------
59,442,211 83,057,850 82,498,501
Less complimentaries............................................. (3,704,082) (5,768,697) (5,450,065)
------------- ------------- --------------
Net revenues....................................................... 55,738,129 77,289,153 77,048,436
Costs and expenses:
Casino........................................................... 12,398,732 18,158,298 17,920,669
Lodging.......................................................... 3,071,139 4,111,646 4,148,942
Food and beverage................................................ 6,877,024 10,117,756 10,360,347
Retail........................................................... 6,325,369 7,869,189 7,102,229
Other............................................................ 820,827 949,352 942,920
Marketing........................................................ 4,686,217 2,974,547 3,173,822
General and administrative, including $414,000 in non-recurring
financing fees in 1997......................................... 10,647,443 14,922,228 15,140,052
Depreciation and amortization.................................... 3,869,817 5,523,149 5,503,071
Pre-opening expenses............................................. 4,941,829 -- --
Charge for termination of Management
Agreement (NOTE 5)............................................. -- -- 24,715,000
------------- ------------- --------------
Total costs and expenses........................................... 53,638,397 64,626,165 89,007,052
------------- ------------- --------------
Income (loss) from operations...................................... 2,099,732 12,662,988 (11,958,616)
Interest and other:
Interest income (expense), net................................... (4,929,728) (5,616,600) (5,585,280)
Other expenses, net.............................................. (8,014) (54,612) (31,763)
------------- ------------- --------------
(4,937,742) (5,671,212) (5,617,043)
------------- ------------- --------------
Income (loss) before extraordinary loss and provision (benefit) for
income taxes..................................................... (2,838,010) 6,991,776 (17,575,659)
Provision (benefit) for income taxes............................... (857,400) 2,525,000 (1,168,000)
------------- ------------- --------------
Income (loss) before extraordinary loss............................ (1,980,610) 4,466,776 (16,407,659)
Extraordinary loss--early extinguishment of debt (NOTE 3).......... -- -- (1,081,350)
------------- ------------- --------------
Net income (loss).................................................. $ (1,980,610) $ 4,466,776 $ (17,489,009)
------------- ------------- --------------
------------- ------------- --------------
Basic earnings (loss) per share.................................... $ (15.98) $ 35.25 $ (143.84)
------------- ------------- --------------
------------- ------------- --------------
Diluted earnings (loss) per share.................................. $ (15.98) $ 35.25 $ (143.84)
------------- ------------- --------------
------------- ------------- --------------
Shares used in calculating basic earnings (loss) per share......... 123,965 126,705 121,586
------------- ------------- --------------
------------- ------------- --------------
Shares used in calculating diluted earnings (loss) per share....... 123,965 126,705 121,586
------------- ------------- --------------
------------- ------------- --------------
</TABLE>
See accompanying notes.
F-10
<PAGE>
HARD ROCK HOTEL, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
CLASS A CLASS B TOTAL
COMMON STOCK COMMON STOCK RETAINED SHAREHOLDERS'
-------------------- -------------------- PAID-IN EARNINGS EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIT)
--------- --------- --------- --------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at November 30,
1994........................ 20,000 $ -- 84,480 $ -- $ 18,716,000 $ (441,383) $ 18,274,617
Net loss...................... -- -- -- -- -- (1,980,610) (1,980,610)
Issuance of Class B common
stock....................... -- -- 22,225 -- 10,001,250 -- 10,001,250
--------- --------- --------- --------- -------------- -------------- --------------
Balances at November 30,
1995........................ 20,000 -- 106,705 -- 28,717,250 (2,421,993) 26,295,257
Net income.................... -- -- -- -- -- 4,466,776 4,466,776
--------- --------- --------- --------- -------------- -------------- --------------
Balances at November 30,
1996........................ 20,000 -- 106,705 -- 28,717,250 2,044,783 30,762,033
Net loss...................... -- -- -- -- -- (17,489,009) (17,489,009)
Charge to paid-in
capital--Buyout Agreement
(NOTE 5).................... (8,000) -- (42,682) -- (21,209,000) -- (21,209,000)
--------- --------- --------- --------- -------------- -------------- --------------
Balances at November 30,
1997........................ 12,000 $ -- 64,023 $ -- $ 7,508,250 $ (15,444,226) $ (7,935,976)
--------- --------- --------- --------- -------------- -------------- --------------
--------- --------- --------- --------- -------------- -------------- --------------
</TABLE>
See accompanying notes.
F-11
<PAGE>
HARD ROCK HOTEL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
---------------------------------------------
1995 1996 1997
-------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................................. $ (1,980,610) $ 4,466,776 $ (17,489,009)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization................................. 3,869,817 5,523,149 5,503,071
Amortization of loan fees and organization costs.............. 351,628 447,702 370,762
Early extinguishment of debt.................................. -- -- 1,081,350
Gain on sale of property and equipment........................ -- -- (35,834)
Deferred income taxes......................................... (1,152,088) 889,047 263,041
Changes in operating assets and liabilities:
Accounts receivable......................................... (1,647,883) (1,024,528) (294,151)
Income tax refund receivable................................ -- -- (2,443,041)
Inventories................................................. (1,041,447) 12,767 (37,193)
Prepaid and other current assets............................ (718,116) (9,847) (24,019)
Accounts payable............................................ 952,199 (1,384) 934,029
Accrued expenses............................................ 5,083,211 (617,140) (219,065)
Income taxes payable........................................ 281,188 588,213 (869,401)
-------------- ------------- --------------
Net cash provided by (used in) operating activities............... 3,997,899 10,274,755 (13,259,460)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment............................... (39,117,654) (4,005,685) (2,556,657)
Proceeds from sale of property and equipment...................... -- -- 346,951
Change in advances due to related parties......................... (35,052) (327,046) 183,514
Change in construction related payables........................... (8,280,984) -- --
Decrease (increase) in other assets............................... (784,686) 473,168 57,652
-------------- ------------- --------------
Net cash used in investing activities............................. (48,218,376) (3,859,563) (1,968,540)
CASH FLOWS FROM FINANCING ACTIVITIES
Charges to paid-in capital related to Buyout Agreement............ -- -- (21,209,000)
Incurrence of loan fees on Existing Credit Facility............... -- -- (3,675,972)
Proceeds from issuance of debt.................................... 38,014,098 500,000 105,700,000
Payment of obligations on property to be developed................ -- -- (6,854,201)
Principal payments on long-term debt.............................. (1,100,000) (4,500,000) (60,400,000)
Payments on capital lease obligations............................. (119,961) (90,502) (102,030)
Proceeds from issuance of stock................................... 10,001,250 -- --
Issuance of common stock as compensation.......................... -- -- 25,000
-------------- ------------- --------------
Net cash provided by (used in) financing activities............... 46,795,387 (4,090,502) 13,483,797
-------------- ------------- --------------
Net increase (decrease) in cash and cash equivalents.............. 2,574,910 2,324,690 (1,744,203)
Cash and cash equivalents at beginning of year.................... 1,058,684 3,633,594 5,958,284
-------------- ------------- --------------
Cash and cash equivalents at end of year.......................... $ 3,633,594 $ 5,958,284 $ 4,214,081
-------------- ------------- --------------
-------------- ------------- --------------
</TABLE>
See accompanying notes.
F-12
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1995, 1996 AND 1997
1. ACCOUNTING POLICIES
BASIS OF PRESENTATION AND NATURE OF BUSINESS
Hard Rock Hotel, Inc. (the "Company"), a Nevada corporation incorporated on
August 30, 1993, operates a hotel-casino in Las Vegas, Nevada. The Company was
formed as a joint venture between Lily Pond Investments, Inc. ("Lily Pond"), a
Nevada corporation wholly owned by Peter Morton, and Harveys Casino Resorts
("Harveys"), a Nevada corporation. Mr. Morton granted a sublicense to the
Company, pursuant to which the Company holds the exclusive right to use the
"Hard Rock Hotel" trademark for the Company's operations in Las Vegas. During
1997, the Company redeemed all of Harveys outstanding common stock in the
Company (Note 5).
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and in banks and interest
bearing deposits with maturities at the date of purchase of three months or
less. Cash equivalents are carried at cost which approximates market. The
Company maintains the majority of its cash and cash equivalents in one financial
institution. During the years ended November 30, 1995, 1996 and 1997, the
Company paid interest of approximately $5,020,000 (net of $1,212,000
capitalized), $5,358,000, and $5,230,000, respectively, and income taxes of
approximately $13,000, $1,050,000, and $2,025,000, respectively.
During the year ended November 30, 1995, the Company entered into non-cash
financing activities whereby capital lease obligations were incurred for new
equipment amounting to approximately $470,000. During the year ended November
30, 1996, the Company entered into non-cash investing activities whereby they
purchased property for future expansion (Note 6) in the amount of approximately
$6,354,000.
CONCENTRATIONS OF CREDIT RISK
Substantially all of the Company's accounts receivable are unsecured and are
due primarily from the Company's hotel and casino patrons and convention
functions. Non-performance by these parties would result in losses up to the
recorded amount of the related receivables. Management does not anticipate
significant non-performance, and believes that they have adequately provided for
uncollectible receivables in the Company's allowance for doubtful accounts.
INVENTORIES
Inventories are stated at the lower of cost (determined using the first-in,
first-out method), or market.
PRE-OPENING COSTS AND EXPENSES
Pre-opening costs and expenses associated with the acquisition, development,
and opening of the resort were capitalized and subsequently charged to expense
when the resort opened for business on March 9, 1995.
F-13
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995, 1996 AND 1997
1. ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION AND AMORTIZATION
Depreciation of buildings and improvements, equipment, furniture and
fixtures, and memorabilia is provided on the straight-line method over the
estimated useful lives of the respective assets which range from five to 45
years.
ADVERTISING COSTS
The Company expenses the costs of all advertising campaigns and promotions
as they are incurred. Total advertising expenses (exclusive of grand opening and
pre-opening) for the years ended November 30, 1995, 1996, and 1997 amounted to
approximately $626,000, $758,000, and $788,000, respectively. These expenses are
included in marketing expenses in the accompanying statements of operations.
INCOME TAXES
Deferred tax assets and liabilities are determined based on the differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
temporary differences are expected to reverse. Additionally, deferred tax assets
and liabilities are separated into current and non-current amounts based on the
classification of the related assets and liabilities for financial reporting
purposes.
CASINO REVENUES AND COMPLIMENTARIES
In accordance with industry practice, the Company recognizes as casino
revenues the net win from gaming activities, which is the difference between
gaming wins and losses. Revenues in the accompanying statements of operations
exclude the retail value of rooms, food and beverage, and other complimentaries
provided to customers without charge. The estimated costs of providing such
complimentaries have been classified as casino operating expenses through
interdepartmental allocations as follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
----------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Food and beverage................................... $ 1,900,006 $ 2,593,171 $ 2,415,203
Lodging............................................. 452,921 819,497 838,617
Other............................................... 91,231 195,930 122,371
------------ ------------ ------------
Total costs allocated to casino operating costs..... $ 2,444,158 $ 3,608,598 $ 3,376,191
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
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
accompanying notes. Actual results could differ from those estimates.
LONG-LIVED ASSETS
The Company has adopted the provisions of the Financial Accounting Standards
Board Statement of Financial Accounting No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived
F-14
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995, 1996 AND 1997
1. ACCOUNTING POLICIES (CONTINUED)
Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires impairment losses to
be recognized for long-lived assets and identifiable intangibles used in
operations when indicators of impairment are present and the estimated
undiscounted cash flows are not sufficient to recover the asset's carrying
amount. The impairment loss is measured by comparing the fair value of the asset
to its carrying amount.
EARNINGS PER SHARE
The Company has adopted Financial Accounting Standards Board Statement No.
128, "Earnings Per Share." This Statement establishes standards for computing
and presenting both basic and diluted earnings per share and applies to entities
that are publicly held.
NEW ACCOUNTING PRONOUNCEMENT
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income." The Statement established new rules for
the reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. This Statement is effective for
fiscal years beginning after December 15, 1997. Management of the Company does
not believe this Statement will have a material impact on the financial
statements of the Company.
FINANCIAL INSTRUMENTS
The carrying values of the Company's borrowings from banks (Note 7) and
obligations on property to be developed (Note 6) approximate their fair value at
November 30, 1996 and 1997, based on current incremental borrowing rates for
similar types of borrowing arrangements.
RECLASSIFICATIONS
Certain amounts in the 1996 financial statements have been reclassified to
conform with the 1997 presentation.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
Retail merchandise................................................ $ 649,883 $ 675,005
Restaurants and bars.............................................. 255,387 243,193
Operating supplies................................................ 123,410 147,675
------------ ------------
$ 1,028,680 $ 1,065,873
------------ ------------
------------ ------------
</TABLE>
F-15
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995, 1996 AND 1997
3. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
Unamortized loan fees and financing costs on the Existing Credit Facility (Note 7),
net of accumulated amortization of $36,039 in 1997.................................. $ -- $ 3,639,933
Unamortized loan fees and financing costs on the Old Credit Facility (Note 7), net of
accumulated amortization of $713,485 in 1996 and $1,015,157 in 1997 (see below)..... 1,383,022 --
Organization costs, net of accumulated amortization of $102,264 in 1996 and $135,315
in 1997............................................................................. 170,528 156,008
Prepaid gaming taxes.................................................................. 389,076 367,404
China, glassware, utensils, linens, and other supplies................................ 525,671 471,160
------------ ------------
$ 2,468,297 $ 4,634,505
------------ ------------
------------ ------------
</TABLE>
Loan fees and other financing costs are being amortized over the life of the
respective loans. Organization costs are being amortized over a period of five
years. Base stocks of china, glassware, utensils and linens are being amortized
using the straight-line method over three years to 25% of original cost, with
replacements expensed at the time of purchase.
In connection with the execution of the Existing Credit Facility, the
Company's Old Credit Facility was paid in its entirety in October 1997 (Note 7).
In connection with this early retirement, the Company wrote-off approximately
$1,081,000 in unamortized loan fee costs in October 1997, which amounts were
recorded as an extraordinary loss in the accompanying statements of operations
for the year ended November 30, 1997.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Land......................................................... $ 12,380,272 $ 21,015,060
Buildings and improvements................................... 65,514,502 65,593,316
Equipment, furniture and fixtures............................ 13,341,197 14,202,857
Memorabilia.................................................. 2,174,792 2,200,608
Construction in progress..................................... 303,328 1,256,112
Property to be developed (Note 6)............................ 8,559,952 --
-------------- --------------
102,274,043 104,267,953
Less accumulated depreciation and amortization............... (9,247,936) (14,499,377)
-------------- --------------
$ 93,026,107 $ 89,768,576
-------------- --------------
-------------- --------------
</TABLE>
Construction in progress relates to several existing property improvement
projects in progress at November 30, 1997.
F-16
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995, 1996 AND 1997
5. AGREEMENTS WITH RELATED PARTIES
In July 1997, the Company and Lily Pond entered into a Stock Purchase and
Management Buyout Agreement (the "Buyout Agreement") with Harveys to terminate
the existing Management Agreement between Harveys and the Company (below). This
Buyout Agreement became effective October 24, 1997. Under the terms of the
Buyout Agreement, the Company purchased from Harveys its 40% share of the
outstanding common stock of the Company and its rights under the Management
Agreement. In consideration for this buyout, the Company paid $45,000,000 in
cash to Harveys.
The Company accounted for this transaction in their November 30, 1997
financial statements with a charge to paid-in capital ($21,209,000), and a
charge to expense for the termination of the Management Agreement in the amount
of $24,715,000. These amounts include transaction costs aggregating
approximately $924,000.
The twenty-five year Management Agreement with Harveys provided for the
procurement of certain management services related to the design, construction,
maintenance, and continued management of the Company. As part of this agreement,
the Company paid Harveys a base management fee equal to four percent of annual
gross revenues, as defined, net of complimentaries for each fiscal year. In
addition, Harveys was entitled to an incentive fee of up to two percent of
annual gross revenues, net of complimentaries, upon exceeding certain return on
investment targets as defined in the Management Agreement. Total management fees
expenses for these services amounted to approximately $2,247,000, $3,075,000,
and $2,776,000 for the years ended November 30, 1995, 1996, and 1997,
respectively. Total incentive fees expenses for these services amounted to
approximately $84,000, $239,000, and $65,000 for the years ended November 30,
1995, 1996 and 1997, respectively. These expenses are included in general and
administrative expenses in the accompanying statements of operations. The unpaid
amounts at November 30, 1996 and 1997 ($542,000 and $0, respectively), are
included in accrued expenses in the accompanying balance sheets.
As discussed above, the Management Agreement was terminated during 1997 in
connection with the Buyout Agreement.
The Company entered into a twenty-five year Amended and Restated Supervisory
Agreement with Peter A. Morton, which provides for the supervision of the
development, improvement, operation, and maintenance of the Company through
2022. As part of this agreement, the Company pays to Morton a supervisory fee
equal to two percent of annual gross revenues (as defined) net of
complimentaries for each fiscal year. Total supervisory fee expenses for these
services for the years ended November 30, 1995, 1996 and 1997 amounted to
approximately $1,123,000, $1,537,000, and $1,556,000, respectively. These
expenses are included in general and administrative expenses in the accompanying
statements of operations. The unpaid amounts at November 30, 1996 and 1997
($127,000 and $140,000, respectively), are included in accrued expenses in the
accompanying balance sheets.
In December 1993, upon the funding of the Old Credit Facility (Note 7), all
rights and benefits accorded to the above two related parties were transferred
to the agent bank in the event of default on the loan by the Company.
In connection with its management of the resort, Harveys provides all
employees for the Company through one of its subsidiaries, Harveys L.V.
Management Company, Inc. (LVMC). The LVMC employees' compensation, including
benefits, are paid directly by the Company. Harveys also provides certain
administrative functions to the Company, including corporate information
systems, internal audit, and
F-17
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995, 1996 AND 1997
5. AGREEMENTS WITH RELATED PARTIES (CONTINUED)
group medical claims administration, and charges the Company for these services
based upon allocations of time spent and costs incurred. These charges are
included in the accompanying statements of operations and amounted to
approximately $1,147,000, $324,000, and $367,000 for the years ended November
30, 1995, 1996 and 1997, respectively. The Company has received advances from
Harveys for use in the payment of various costs and expenses. These advances are
repaid on a periodic basis. Amounts owing to Harveys related to these advances
and costs at November 30, 1996 and 1997, included on the accompanying balance
sheets, aggregated approximately $287,000 and $470,000, respectively.
Entities controlled by Peter Morton have provided additional technical
support services for the development, opening and ongoing improvement and
operation of the casino. These expenses aggregated approximately $924,000,
$225,000 and $281,000 for the years ended November 30, 1995, 1996 and 1997,
respectively, and are included in the accompanying statements of operations.
6. PROPERTY TO BE DEVELOPED
In July 1996, the Company entered into an exchange agreement whereby the
Company acquired property, developed and constructed a retail outlet on that
property, and exchanged it for land and a retail outlet adjacent to the
Company's existing hotel. After the exchange, which occurred in May 1997, the
Company demolished the acquired retail outlet to allow for a planned expansion
of its existing facilities. The cost of this transaction was approximately $8.6
million, of which $5,100,000 was expended prior to the exchange to acquire,
develop and construct the new retail outlet. The remaining cost consisted of a
$3.5 million promissory note payable to the seller, due in April 2000, with
interest payable at a rate of 7.5%. This note was classified as a long-term
liability at November 30, 1996 on the accompanying balance sheets. In connection
with the execution of the Existing Credit Facility, this note, along with
accrued interest, was paid in its entirety in 1997 (Note 7).
The cost of the acquisition was capitalized and recorded as property to be
developed and included in property and equipment on the accompanying balance
sheet at November 30, 1996. During 1997, upon completion of this project, this
asset was reclassified into land (Note 4). To finance this transaction, the
Company executed two lines of credit with Lily Pond and Harveys which allowed
the Company to borrow up to an aggregate of $8.5 million, with interest tied to
the Company's borrowing rate on the Old Credit Facility (Note 7). At November
30, 1996, the Company had outstanding borrowings of $500,000 on these lines,
which amount was included with current obligations on property to be developed
and classified as a current liability on the accompanying balance sheets. In
connection with the execution of the Existing Credit Facility as discussed in
Note 7, these lines of credit, along with accrued interest, were paid in their
entirety in 1997 and the lines were terminated.
7. LONG-TERM DEBT
In September 1997, the Company entered into a $120,000,000 credit agreement
(the "Existing Credit Facility") with a consortium of banks for the purpose of
financing the Buyout Agreement (Note 5) and retire existing debt (see below).
The Existing Credit Facility consists of promissory notes aggregating
$100,000,000 and a $20,000,000 revolving line of credit facility. Interest on
the promissory notes and the line of credit accrues on all individual borrowings
at an interest rate determined at the option of the Company, at either the LIBOR
Index plus an applicable margin (not to exceed 3.5% and aggregating 9.188% at
November 30, 1997), or the Alternate Base Rate, defined as the higher of the
Federal Funds
F-18
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995, 1996 AND 1997
7. LONG-TERM DEBT (CONTINUED)
Rate plus .5%, or the prime rate, plus an applicable margin (not to exceed 2.5%,
and aggregating 11% at November 30, 1997). These margins are dependent upon the
Company's total debt to EBITDA ratio, as defined. Interest accrued on the
promissory notes is due and payable quarterly up to the maturity dates of the
notes, which mature between 2003 and 2006. Principal is due and payable in 34
successive quarterly installments up to the maturity dates, at which time all
remaining amounts then owing are due in full. Interest and principal under the
line of credit are due and payable in June 2002, the specified maturity date of
the line.
Following are the scheduled principal reductions of the Existing Credit
Facility by fiscal year of the Company as of November 30, 1997:
<TABLE>
<S> <C>
1998.......................................................... $ 6,000,000
1999.......................................................... 6,000,000
2000.......................................................... 8,000,000
2001.......................................................... 9,000,000
2002.......................................................... 15,700,000
Thereafter.................................................... 61,000,000
-----------
$105,700,000
-----------
-----------
</TABLE>
These funds consist of borrowings made on the promissory notes in the amount
of $100,000,000 and borrowings made on the line of credit in the amount of
$5,700,000, and were used principally to fund the Buyout Agreement ($45,000,000)
as discussed in Note 5, pay principal and interest ($55,593,000) relating to the
Old Credit Facility, and pay principal and interest ($3,612,000) relating to the
promissory note on property to be developed as discussed in Note 6.
The Existing Credit Facility is secured by substantially all of the
Company's property at the Las Vegas site. Under the Existing Credit Facility,
the Company is required to maintain certain debt to EBITDA ratios and debt
service coverage ratios, as defined. The Existing Credit Facility also imposes
certain limitations on capital expenditures, investments, payment of dividends,
and incurrence of additional indebtedness.
Long-term debt at November 30, 1996 consisted of a $66,000,000 reducing
revolving credit agreement (the "Old Credit Facility") with a consortium of
banks, with interest at the LIBOR Index plus 2.25% (aggregating 7.875% at
November 30, 1996). Interest accrued on all individual borrowings at an interest
rate determined at the option of the Company, of either the LIBOR Index plus an
applicable margin (not to exceed 2.5%), or the agent bank's prime rate plus an
applicable margin (not to exceed 1%). These margins were dependent upon the
Company's funded debt to EBITDA ratio, as defined. Interest accrued was due and
payable monthly up to the maturity date of the loan, November 9, 2000. Principal
was due and payable in twenty successive quarterly installments up to the
maturity date, at which time all amounts then owing under the Old Credit
Facility were due in full.
The Old Credit Facility was secured by substantially all of the Company's
property at the Las Vegas site. Under the Old Credit Facility, the Company was
required to maintain minimum net worth levels, debt to EBITDA ratios, and debt
service coverage ratios, as defined. The Old Credit Facility also imposed
F-19
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995, 1996 AND 1997
7. LONG-TERM DEBT (CONTINUED)
certain limitations on capital expenditures, investments, advances to related
enterprises, payment of dividends, and incurrence of additional indebtedness.
In connection the execution of the Existing Credit Facility, the Old Credit
Facility was canceled and all outstanding principal and interest were paid in
their entirety in 1997.
8. INCOME TAXES
The provision (benefit) for income taxes presented in the accompanying
statements of operations consists of the following:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
------------------------------------------
1995 1996 1997
------------- ------------ -------------
<S> <C> <C> <C>
Current........................................... $ 294,688 $ 1,635,953 $ (905,000)
Deferred.......................................... (1,152,088) 889,047 (263,000)
------------- ------------ -------------
$ (857,400) $ 2,525,000 $ (1,168,000)
------------- ------------ -------------
------------- ------------ -------------
</TABLE>
The difference between the Company's provision (benefit) for income taxes as
presented in the accompanying statements of operations and the provision
(benefit) for income taxes computed at the federal statutory rate is comprised
of the items shown in the following table as a percentage of income (loss)
before income taxes:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Income tax provision (benefit) at the statutory rate............... (34.0%) 34.0% (34.0%)
Nondeductible meals and entertainment.............................. 4.0 2.5 .8
Valuation allowance................................................ -- -- 26.9
Other, net......................................................... (.2) (.4) --
--------- --------- ---------
(30.2%) 36.1% (6.3%)
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-20
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995, 1996 AND 1997
8. INCOME TAXES (CONTINUED)
The significant components of the deferred income tax assets and liabilities
included in the accompanying balance sheets are as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------------------
1996 1997
------------ -------------
<S> <C> <C>
Deferred income tax assets:
Preopening costs, net of amortization.......................... $ 1,200,000 $ 831,000
Accrued expenses............................................... 675,000 631,000
Net operating loss carryforwards............................... -- 6,922,000
Alternative minimum tax credit carryforwards................... 1,424,000 475,000
------------ -------------
3,299,000 8,859,000
Less: valuation allowance........................................ -- (5,011,000)
------------ -------------
Total deferred income tax assets................................. 3,299,000 3,848,000
Deferred income tax liabilities:
Depreciation and amortization.................................. 2,703,000 3,469,000
Prepaid expenses............................................... 220,000 220,000
Other.......................................................... 113,000 159,000
------------ -------------
Total deferred income tax liabilities............................ 3,036,000 3,848,000
------------ -------------
Net deferred income tax asset.................................... $ 263,000 $ --
------------ -------------
------------ -------------
</TABLE>
A valuation allowance has been established due to the Company's accumulated
losses as of November 30, 1997. The Company has an operating loss carryforward
of approximately $20 million to reduce future taxable income, which will expire
in 2012.
9. COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
A complaint has been filed in the United States District Court against the
Company and Mr. Morton involving the rights to the use of the Hard Rock name,
marks, and logos on the internet. The plaintiff is seeking monetary damages and
has sought an injunction against the use of the Hard Rock name and logos and an
order requiring Mr. Morton and the Company to assign the name to the plaintiff.
Management of the Company believes that this lawsuit is without merit and
intends to defend vigorously the allegation in this complaint, and believes that
the outcome of this litigation will not have a material adverse effect on the
Company.
LEASES
The Company leases certain equipment under leases classified as either
capital or operating leases.
F-21
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995, 1996 AND 1997
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
CAPITAL LEASES
Future minimum lease payments under capital leases, together with the
present value of the net minimum lease payments as of November 30, 1997 are as
follows:
<TABLE>
<S> <C>
1998............................................................. $ 137,258
1999............................................................. 120,533
2000............................................................. 97,920
---------
Minimum lease payments........................................... 355,711
Less amount representing interest................................ (42,896)
---------
Present value of minimum lease payments.......................... 312,815
Less amount due within one year.................................. (108,325)
---------
Amount due after one year........................................ $ 204,490
---------
---------
</TABLE>
OPERATING LEASES
The Company leases equipment under operating leases expiring through 1999.
Future minimum rental payments under these operating leases by fiscal year of
the Company are as follows:
<TABLE>
<S> <C>
1998............................................................... $ 45,000
1999............................................................... 42,000
2000............................................................... 6,000
---------
$ 93,000
---------
---------
</TABLE>
Total rental expense was approximately $171,000, $325,000, and $297,000
during the years ended November 30, 1995, 1996 and 1997, respectively, and is
included in general and administrative expenses in the accompanying statements
of operations.
SELF-INSURANCE
The Company is included with Harveys and certain of its subsidiaries (the
Group) under a plan of partial self-insurance for medical coverage for
substantially all full-time employees and their dependents. The Group carries
stop loss insurance for claims exceeding $125,000 per individual. The Group is
also self-insured for workers' compensation claims up to an annual stop loss of
$300,000 per claim. Under the terms of the Buyout Agreement (Note 5), the
Company continued to be covered under the Group's medical plan through December
1997, and will reimburse Harveys for all claims costs incurred. The Company has
adopted their own plan of self-insurance for workers' compensation claims,
effective November 1, 1997, up to an annual stop loss of $300,000 per claim.
Management has established reserves they consider adequate to cover estimated
future payments on claims incurred by the Company through November 30, 1997.
10. EMPLOYEE BENEFIT PLANS
The Company maintains a discretionary cash incentive bonus plan available to
eligible employees, based upon individual and company-wide goals that are
established by management and the Board of
F-22
<PAGE>
HARD ROCK HOTEL, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOVEMBER 30, 1995, 1996 AND 1997
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
Directors of the Company on an annual basis. During the years ended November 30,
1995, 1996 and 1997, the Company recorded approximately $427,000, $336,000 and
$494,000, respectively, for these bonuses, which are included in the
accompanying statements of operations.
The Company maintains a 401(k) profit sharing plan whereby substantially all
employees over the age of 21 who have completed one year of continuous
employment and 1,000 hours of service are eligible for the plan. Such employees
joining the plan may contribute, through salary deductions, no less than 1% nor
greater than 20% of their annual compensation. The Company, at its discretion,
will match 50% of the first 6% of compensation contributed by employees. During
the years ended November 30, 1995, 1996 and 1997, the Company recorded
approximately $21,000, $191,000 and $356,000, respectively, for its portion of
plan contributions, which are included in the accompanying statement of
operations.
11. ISSUANCE OF COMMON STOCK AS COMPENSATION
In October 1997, the Company, Lily Pond, and an employee of the Company
entered into an agreement whereby the employee will receive 768 shares of the
Company's Class B common stock from the Company, 20% of which will vest in
October of each year until 2001, at which point the remaining 40% will vest,
provided the vesting period does not end upon the resignation or termination for
cause, as defined. If the employee is terminated without cause or if there is a
change of control of the Company, all remaining shares will vest. The Company,
under certain circumstances and upon written demand from the employee, must
purchase the vested shares of the employee for a price of $1,953 per share. The
aggregate redemption amount ($1,500,000) will be recorded as compensation
expense over the vesting period of four years. During the year ended November
30, 1997, the Company recorded $25,000 in expense related to this agreement,
which has been included in general and administrative expenses on the
accompanying statements of operations.
F-23
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Chapter 78 of the Nevada Revises Statutes (the "NRS") empowers a Nevada
corporation to indemnify any persons who are, or are threatened to be made,
parties to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such corporation), by reason of the fact that
such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding, provided that such officer or director acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests, and, for criminal proceedings, had no reasonable
cause to believe his conduct was unlawful. A Nevada corporation may indemnify
officers and directors against expenses (including attorneys' fees) in an action
by or in the right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually and reasonably incurred.
Article VII of the By-laws of the Company, a copy of which is filed as
Exhibit 3.2 to this Registration Statement, allows the Company to maintain
director and officer liability insurance on behalf of any person who is or was a
director or officer of the Company or such person who serves or served as
director, officer, employee or agent, of another corporation, partnership or
other enterprise at the request of the Company. Article VII of the Company's
By-laws provides for indemnification of the officers and directors of the
Company to the fullest extend permitted by applicable law.
Pursuant to Article Sixth of the Second Amended and Restated Certificate of
Incorporation of the Company, a copy of which is filed as Exhibit 3.1 to this
Registration Statement, no director of the Company shall be personally liable to
the Company or its shareholders for monetary damages for any breach of his
fiduciary duty as a director; provided, however, that such clause shall not
apply to any liability of a director for acts or omissions involving intentional
misconduct, fraud or a knowing violation of law and liability based on payments
of improper dividends.
Additionally, the Company has entered into an Indemnification Agreement with
each of its directors, the form of which is filed as Exhibit 10.11 this
Registration Statement, that
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3. CERTIFICATE OF INCORPORATION AND BY-LAWS
3.1 Second Amended and Restated Certificate of Incorporation of the Company.
3.2 Second Amended and Restated By-Laws of the Company
4. INSTRUMENTS DEFINING THE RIGHT OF SECURITY HOLDERS, INCLUDING INDENTURES.
4.1 Indenture, dated as of March 23, 1998, between the Company, and First Trust National Association, as
Trustee, relating to the Notes.
4.2 Form of 9 1/4% Senior Subordinated Notes due 2005 (included in Exhibit 4.1).
4.3 Form of 9 1/4% Series B Senior Subordinated Note due 2005 (included in Exhibit 4.1).
4.4 Registration Rights Agreement, dated as of March 23, 1998, by and among the Company, Bear Stearns Co.
Inc., BancAmerica Robertson Stephens and Donaldson, Lufkin & Jenrette Securities Corporation.
4.5 Completion Guaranty, dated as of March 23, 1998, by and among Peter A. Morton, Bank of America National
Trust and Savings Association, and First Trust National Association.
5. OPINIONS.
*5.1 Opinion of Gordon & Silver, Ltd., special Nevada counsel to the Company.
9. VOTING TRUST AGREEMENTS.
9.1 Amendment, dated as of July 1, 1997 to Stockholder Agreement, dated August 30, 1993, among the Company
and certain stockholders listed therein.
9.2 Stockholder Agreement, dated as of August 30, 1993, among the Company and certain stockholders listed
therein.
10. MATERIAL CONTRACTS.
10.1 Loan Agreement, dated as of March 23, 1998, among the Company, as Borrowers, the Lenders party thereto,
Bank of America National Trust and Savings Association, as Agent, and Bear, Stearns & Co., Inc. as
Co-Agent.
10.2 Make Well Agreement, dated as of March 23, 1998, among Peter A. Morton, Bank of America National Trust
and Savings Association and the Lenders party to the Loan Agreement, dated as of March 23, 1998.
10.3 Amended and Restated Supervisory Agreement, dated as of October 21, 1997, between the Company and Peter
A. Morton.
10.4 Employment Agreement, dated October 8, 1997, between the Company and Gary R. Selesner.
10.5 Amended and Restated Letter Agreement, dated as of March 4, 1998, between the Company, Lily Pond
Investments, Inc. and Gary R. Selesner.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.6 Employment Agreement, dated December 1, 1997, between the Company and William R. Stephens.
10.7 Trademark Sublicense Agreement, dated October 24, 1997, between the Company and Peter A. Morton.
10.8 Amendment No.1 to Trademark Subliscense Agreement, dated as of March 23, 1998, between the Company and
Peter A. Morton.
10.9 Construction Contract, dated February 17, 1998, between the Company and KLAI:JUBA.
10.10 Letter of Intent, dated May 10, 1998, between the Company and Howa Construction, Inc.
12. RATIO OF EARNINGS TO FIXED CHARGES.
*12.1 Statement regarding the computation of ratio of earnings to fixed charges for the Company.
23. CONSENTS.
23.1 Consent of Ernst & Young LLP.
*23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company (included in Exhibit
5.1).
*23.3 Consent of Gordon & Silver, Ltd., Special Nevada counsel to the Company (included in Exhibit 5.2)
24. POWERS OF ATTORNEY.
24.1 Power of Attorney (included in signature page).
25. FORM T-1.
25.1 Statement of Eligibility and Qualification on Form T-1 of U.S. Bank Trust National Association, as
Trustee under the Indenture relating to the Company's 9 1/4% Series B Senior Subordinated Notes due
2005.
27. FINANCIAL DATA SCHEDULE.
27.1 Financial Data Schedule for fiscal quarters ended February 28, 1997 and 1998.
27.2 Financial Data Schedule for fiscal years ending November 30, 1993, 1994 and 1995.
27.3 Financial Data Schedule for fiscal years ending November 30, 1996 and 1997.
99. MISCELLANEOUS.
*99.1 Form of Letter of Transmittal.
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Letter of Brokers, Dealers , Commercial Banks, Trust Companies and Other Nominees.
*99.4 Form of Letter to Clients.
</TABLE>
- ------------
* To be filed by amendment.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act 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 Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of 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 Securities Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrants hereby undertake 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this Registration Statement to be signed on its behalf
by the undersigned, hereunto duly authorized in the City of Las Vegas, State of
Nevada on the day of May, 1998.
<TABLE>
<S> <C> <C>
HARD ROCK HOTEL, INC.
By: /s/ PETER A. MORTON
-----------------------------------------
Peter A. Morton
CHAIRMAN, PRESIDENT,
CHIEF EXECUTIVE OFFICER
AND SECRETARY
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Bruce R. Dall and Brian Ogaz his true and
lawful attorney-in-fact, each with full power of substitution and revocation,
for him and in his name, place and stead, in any and all capacities (including
his capacity as a director and/or officer of Hard Rock Hotel, Inc. to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and any registration statement relating to the same offering as this
Registration Statement that is to be effective upon filing pursuant to Rule
452(b) under the Securities Act of 1933, and to file the same with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto each such attorney-in-fact and agent, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as such person might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents or any of them, or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
/s/ PETER A. MORTON Chairman, Chief Executive
- ------------------------------ Officer, President and May , 1998
Peter A. Morton Secretary
/s/ BRUCE R. DALL Chief Financial Officer,
- ------------------------------ Treasurer (Principal May 19, 1998
Bruce R. Dall Accounting Officer)
/s/ GILBERT B. FRIESEN
- ------------------------------ Director May , 1998
Gilbert B. Friesen
/s/ STEPHEN A. MARKS
- ------------------------------ Director May 18, 1998
Stephen A. Marks
II-5
<PAGE>
EXHIBIT 3.1
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
HARD ROCK HOTEL, INC.,
a Nevada corporation
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, for the purpose of association to establish a
corporation for the transaction of business and the promotion and conduct of
the objects and purposes hereinafter stated, under the provisions of and
subject to the requirements of the laws of the State of Nevada, do make,
record and file these Articles of Incorporation in writing.
AND WE DO HEREBY CERTIFY:
FIRST: The name of the Corporation is:
HARD ROCK HOTEL, INC.
SECOND: The resident agent of the Corporation shall be SCHRECK, JONES,
BERNHARD, WOLOSON & GODFREY. The address of the registered office where
process may be served upon the Corporation is 600 E. Charleston Boulevard,
Las Vegas, Nevada 89104. The Corporation may, from time to time, in the
manner provided by law, change the resident agent and registered office
within the State of Nevada. The Corporation may also maintain an office or
offices at such other places within or outside the State of Nevada, as it may
from time to time determine. Corporate business of every kind and nature may
be conducted, and meetings of directors and stockholders held outside the
State of Nevada, the same as in the State of Nevada.
THIRD: The purposes for which the Corporation is formed are:
(a) To conduct gaming in the State of Nevada in accordance with the laws
of the State of Nevada and the United States of America; and
1
<PAGE>
(b) To engage in any other business or activity not forbidden by law or
these Articles of Incorporation.
FOURTH: This Corporation is authorized to issue two (2) classes of common
shares of stock, the total number of which is 200,000 shares, with no par value,
described as follows: (i) 40,000 shares of Class A voting common stock; and
(ii) 160,000 shares of Class B non-voting common stock. Such stock may be
issued by the Corporation from time to time by the Board of Directors thereof.
The holders of the Class A voting common stock shall be entitled to one (1) vote
for each share held by them.
FIFTH: (a) ISSUANCE OF SECURITIES. The Corporation shall not issue any
stock or securities except in accordance with the provisions of the Nevada
Gaming Control Act and the regulations thereunder. The issuance of any stock or
securities in violation thereof shall be ineffective and such stock or
securities shall be deemed not to be issued and outstanding until (i) the
Corporation shall cease to be subject to the jurisdiction of the Nevada Gaming
Commission, or (ii) the Nevada Gaming Commission shall, by affirmative action,
validate said issuance or waive any defect in issuance.
(b) TRANSFER OF SECURITIES. No stock or securities issued by
the Corporation and no interest, claim or charge therein or thereto shall be
transferred in any manner whatsoever, except in accordance with the provisions
of the Nevada Gaming Control Act and the regulations thereunder. Any transfer
in violation thereof shall be ineffective until (i) the Corporation shall cease
to be subject to the jurisdiction of the Nevada Gaming Commission, or (ii) the
Nevada Gaming Commission shall, by affirmative action, validate said transfer or
waive any defect in said transfer.
(c) UNSUITABILITY TO HOLD SECURITIES. If the Commission at any
time determines that a holder of stock or other securities of this Corporation
is unsuitable to hold such securities, then until such securities are owned by
persons
2
<PAGE>
found by the Commission to be suitable to own them, (i) the Corporation
shall not be required or permitted to pay any dividend or interest with regard
to the securities, (ii) the holder of such securities shall not be entitled to
vote on any matter as the holder of the securities, and such securities shall
not for any purposes be included in the securities of the Corporation entitled
to vote, and (iii) the Corporation shall not pay any remuneration in any form to
the holder of the securities.
SIXTH: No director or officer of this Corporation shall be liable to the
Corporation or its stockholders for any breach of fiduciary duty as officer or
director of the Corporation. This provision shall not affect liability for acts
or omissions which involve intentional misconduct, fraud, a knowing violation of
law, or the payment of dividends in violation of NRS 78.300.
All expenses incurred by officers or directors in defending a civil or
criminal action, suit, or proceeding, must be paid by the Corporation as they
are incurred in advance of a final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of a Director or
Officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction, that he or she did not act in good faith, and in the
manner he or she reasonably believed to be or not opposed to the best interests
of the Corporation.
SEVENTH: The members of the governing Board shall be styled Directors, and
the number of Directors shall not be less than three (3) pursuant to the terms
of NRS 78.115. The names and post office addresses of the current Board of
Directors, which shall consist of three (3) members is as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
PETER A. MORTON 510 North Robertson Boulevard
Los Angeles, California 90048
THOMAS M. YTURBIDE Highway 50 & Stateline Avenue
Post Office Box 128
Stateline, Nevada 89449
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
GERALD F. HOGAN c/o Home Shopping Network
11831 E. 30th court North
St. Petersburg, Florida 33716
</TABLE>
The number of directors of this Corporation may from time to time be
increased or decreased as set forth herein by an amendment to the Bylaws in that
regard, and without the necessity of amending these Articles of Incorporation.
EIGHTH: Each director and each officer shall meet the
qualifications for a license or finding of suitability as set forth in NRS
Section 463.170 and shall, in all other respects, comply with all requirements
of the Nevada Gaming Control Act for the filing and processing of licensing
applications. Each director and officer shall also comply with all applicable
state, local and municipal gaming and liquor licensing laws in Nevada and any
other jurisdiction in which the Corporation does business.
NINTH: The capital stock of this Corporation, after the amount of
the subscription price has been paid in cash or in kind, shall be and remain
non-assessable and shall not be subject to assessment to pay debts of the
Corporation.
TENTH: This Corporation shall have perpetual existence.
ELEVENTH: Each holder of any shares of the Corporation shall have
preemptive basis rights to purchase, subscribe for, or otherwise acquire on a
proportional basis additional shares of the Corporation of any class now or
hereafter authorized, or any securities exchangeable for or convertible into
such shares, or warrants or other instruments evidencing rights or options to
subscribe for, purchase or otherwise acquire such shares.
TWELFTH: This Corporation shall not be governed by the provisions
of NRS 78.411 to 78.444, inclusive.
4
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed these Restated
Articles of Incorporation as of the 31st day of August, 1994.
HARD ROCK HOTEL, INC.
By: /S/
--------------------------
PETER A. MORTON, President
By: /S/
--------------------------
THOMAS M. YTURBIDE, Secretary
5
<PAGE>
ACKNOWLEDGMENT
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
This instrument was acknowledged before me on August 31, 1994 by
PETER A. MORTON as President of HARD ROCK HOTEL, INC..
/S/
-------------------------------
(Signature of notarial officer)
(My commission expires: November 13, 1994)
STATE OF NEVADA )
) ss.
COUNTY OF DOUGLAS )
This instrument was acknowledged before me on August 26, 1994 by
THOMAS M. YTURBIDE as Secretary of HARD ROCK HOTEL, INC..
/S/
-------------------------------
(Signature of notarial officer)
(My commission expires: October 1, 1995)
6
<PAGE>
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
HARD ROCK HOTEL, INC.,
A NEVADA CORPORATION
We, the undersigned President and Secretary of Hard Rock Hotel,
Inc., a Nevada corporation (the "CORPORATION"), do hereby certify:
That the Board of Directors of the Corporation at a meeting duly
convened, held on the 20th day of October, 1997, adopted a resolution to amend
the Second Amended and Restated Articles of Incorporation as follows:
Article Second is hereby amended to read as follows:
SECOND: The resident agent of the Corporation shall
be GORDON & SILVER, LTD. The address of the registered
office where process may be served upon the Corporation
is 3800 Howard Hughes Parkway, Fourteenth Floor, Las
Vegas, Nevada 89109. The Corporation may, from time to
time, in the manner provided by law, change the resident
agent and registered office within the State of Nevada.
The Corporation may also maintain an office or offices at
such other places within or outside the State of Nevada,
as it may from time to time determine. Corporate
business of every kind and nature may be conducted, and
meetings of directors and stockholders held outside the
State of Nevada, the same as in the State of Nevada.
Article Twelfth is hereby amended to read as follows:
TWELFTH: This Corporation shall not be governed by
the following provisions contained in the Nevada Revised
Statutes: (i) N.R.S. 78.411 through 78.444, inclusive;
(ii) N.R.S. 78.378 through 78.3793, inclusive; and
(iii) N.R.S. 78.288(2)(b).
7
<PAGE>
The number of shares of the Corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 20,000; that the said
changes and amendments have been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
DATED: October 20, 1997.
------------------------------
Peter A. Morton, President
------------------------------
Thomas M. Yturbide, Secretary
STATE OF )
----------------
) ss.
COUNTY OF )
----------------
On October ___, 1997, personally appeared before me, a Notary
Public, Peter A. Morton, who acknowledged that he executed the above instrument.
------------------------------
(Signature of Notarial Officer)
STATE OF )
----------------
) ss.
COUNTY OF )
----------------
On October ___, 1997, personally appeared before me, a Notary
Public, Thomas M. Yturbide, who acknowledged that he executed the above
instrument.
------------------------------
(Signature of Notarial Officer)
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ADDENDUM TO SECOND AMENDED AND RESTATED ARTICLES
SECRETARY'S CERTIFICATE
HARD ROCK HOTEL, INC.
The undersigned, Thomas M. Yturbide, does hereby certify that:
1. He is the duly qualified and elected secretary of HARD ROCK HOTEL,
INC. (the "Company").
2. The undersigned, as secretary of the Company, and Peter A. Morton,
as president of the Company, were authorized to certify the Second Amended
and Restated Articles of Incorporation dated August 31, 1994, to which this
Certificate is attached as an addendum, by resolutions adopted by action of
the board of directors of the Company dated August 31, 1994 and by action of
the stockholders of the corporation dated August 31, 1994.
3. The name and post office box or street address of the original
incorporator of the Company is Alex C. Skiar, 3800 Howard Hughes Parkway,
Fourteenth Floor, Las Vegas, Nevada 89109.
IN WITNESS WHEREOF, I have caused this certificate to be duly executed
in my capacity as secretary of the Company as of the 16 day of January 1995.
/s/ THOMAS M. YTURBIDE
-----------------------------
Thomas M. Yturbide, Secretary
STATE OF NEVADA )
) ss
COUNTY OF Douglas )
This instrument was acknowledged before me on January 16, 1995 by Thomas
M. Yturbide as Secretary of Hard Rock Hotel, Inc.
/s/ DIANE BOOTH SHEVLIN
(NOTARY SEAL) ------------------------------
Signature of Notarial Officer
My Commission expires on December 26, 1998
RECEIVED
JAN 24, 1995
------------------
Secretary of State
<PAGE>
THIS FORM SHOULD ACCOMPANY AMENDED AND OR RESTATED
ARTICLES OF INCORPORATION FOR A NEVADA CORPORATION
1. Name of corporation: Hard Rock Hotel, Inc.
2. Date of adoption of Amended and/or Restated Articles: August __, 1994
("Second Amended and Restated Articles").
3. If the articles were amended, please indicate what changes have been
made:
(a) Was there a name change? Yes / / No /X/. If yes, what is the new
name?
(b) Did you change your resident agent? Yes / / No /X/. If yes,
please indicate new address.
(c) Did you change the purposes? Yes /X/ No / /. Did you add Banking?
Gaming? /X/, Insurance? / / None of these? / /.
(d) Did you change the capital stock? Yes / / No /X/ If yes, what is
the new capital stock?
(e) Did you change the directors? Yes / / No /X/ If yes, indicate the
change:
(f) Did you add the directors liability provisions? Yes / / No /X/.
(g) Did you change the period of existence? Yes / / No /X/. If yes,
what is the new existence?
(h) If none of the above apply, and you have amended or modified the
articles, how did you change your articles? N/A.
/s/ THOMAS M. YTURBIDE
--------------------------
Name and Title of Officer
Secretary
--------------------------
Date
STATE OF NEVADA )
) ss
COUNTY OF Clark )
This instrument was acknowledged before me on August 26, 1994 by Thomas
M. Yturbide, as Secretary of Hard Rock Hotel, Inc.
/s/ CONNIE M. FRIEDMAN
(NOTARY SEAL) ------------------------------
Signature of Notarial Officer
My Commission expires on 10/1/95
RECEIVED
JAN 06, 1995
------------------
Secretary of State
<PAGE>
EXHIBIT 3.2
SECOND AMENDED AND RESTATED BYLAWS
OF
HARD ROCK HOTEL, INC.,
a Nevada corporation
ARTICLE I
STOCKHOLDERS
Section 1.01 ANNUAL MEETING. An annual meeting of the stockholders of the
corporation shall be held at 2:00 o'clock in the afternoon on the second
Thursday of March in each year, commencing after the first anniversary of
incorporation, but if such date is a legal holiday, then on the next
succeeding business day, for the purpose of electing directors of the
corporation to serve during the ensuing year and for the transaction of such
other business as may properly come before the meeting. If the election of
the directors is not held on the day designated herein for any annual meeting
of the stockholders, or at any adjournment thereof, the president shall
cause the election to be held at a special meeting of the stockholders as
soon thereafter as is convenient.
Section 1.02 SPECIAL MEETINGS.
(a) Special meetings of the stockholders may be called by the
chairman, the president or the Board of Directors and shall be called by the
chairman, the president or the Board of Directors at the written request of
the holders of not less than 51% of the voting power of any class of the
corporation's stock entitled to vote.
(b) No business shall be acted upon at a special meeting except as
set forth in the notice calling the meeting, unless one of the conditions for
the holding of a meeting without notice set forth in Section 1.05 shall be
satisfied, in which case any business may be transacted and the meeting shall
be valid for all purposes.
Section 1.03 PLACE OF MEETINGS. Any meeting of the stockholders of
the corporation may be held at its registered office in the State of
Nevada or at such other place in or out of the United States as the
Board of Directors may designate. A waiver of notice signed by
stockholders entitled to vote may designate any place for the holding of
such meeting.
Section 1.04 NOTICE OF MEETINGS.
(a) The president, a vice president, the secretary, an
assistant secretary or any other individual designated by the Board of
Directors shall sign and deliver written notice of any meeting at least
ten (10) days, but not more than sixty (60) days, before the date of
such meeting. The notice shall state the place, date and time of the
meeting and the purpose or purposes for which the meeting is called.
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(b) In the case of an annual meeting, any proper business may be
presented for action, except that action on any of the following items shall
be taken only if the general nature of the proposal is stated in the notice:
(1) Action with respect to any contract or transaction between
the corporation and one or more of its directors or officers
or between the corporation and any corporation, firm or
association in which one or more of the corporation's
directors or officers is a director or officer or is
financially interested;
(2) Adoption of amendments to the Articles of Incorporation; or
(3) Action with respect to a merger, share exchange,
reorganization, partial or complete liquidation or dissolution
of the corporation.
(c) A copy of the notice shall be personally delivered or mailed
postage prepaid to each stockholder of record entitled to vote at the meeting
at the address appearing on the records of the corporation, and the notice
shall be deemed delivered the date the same is deposited in the United States
mail for transmission to such stockholder. If the address of any stockholder
does not appear upon the records of the corporation, it will be sufficient to
address any notice to such stockholder at the registered office of the
corporation.
(d) The written certificate of the individual signing a notice of
meeting, setting forth the substance of the notice or having a copy thereof
attached, the date the notice was mailed or personally delivered to the
stockholders and the addresses to which the notice was mailed, shall be prima
facie evidence of the manner and fact of giving such notice.
(e) Any stockholder may waive notice of any meeting by a signed
writing, either before or after the meeting.
Section 1.05 MEETING WITHOUT NOTICE.
(a) Whenever all persons entitled to vote at any meeting consent,
either by:
(1) A writing on the records of the meeting or filed with the
secretary;
(2) Presence at such meeting and oral consent entered on the
minutes; or
(3) Taking part in the deliberations at such meeting without
objection the doings of such meeting shall be as valid as if
had at a meeting regularly called and
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noticed.
(b) At such meeting any business may be transacted which is not
excepted from the written consent or to the consideration of which no
objection for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or of such
consent provided a quorum was present at such meeting, the proceedings of the
meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all parties
having the right to vote at such meeting.
(d) Such consent or approval may be by proxy or attorney, but all
such proxies and powers of attorney must be in writing.
Section 1.06 DETERMINATION OF STOCKHOLDERS OF RECORD.
(a) For the purpose of determining the stockholders entitled to
notice of and to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any distribution or the allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion, or exchange of stock or for the purpose of any other lawful
action, the directors may fix, in advance, a record date, which shall not be
more than sixty (60) days nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
(b) If no record date is fixed, the record date for determining
stockholders (i) entitled to notice of and to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the closing of
business on the date next preceding the day on which the meeting is held;
(ii) entitled to express consent to corporate action in writing without a
meeting shall be the day on which the first written consent is expressed; and
(iii) for any other purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at
any meeting of stockholders shall apply to any adjournment of the meeting;
PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for
the adjourned meeting.
Section 1.07 QUORUM; ADJOURNED MEETINGS.
(a) At the stockholders' meetings, the holders of two-thirds (2/3)
percentage of the entire issued and outstanding voting stock of the Company
shall constitute a quorum for all purposes of such meetings. If, on any
issue, voting by classes is required by the laws of the State of Nevada, the
Articles of Incorporation or these Bylaws, at least a majority of the voting
power within each such class is necessary to constitute a quorum of each such
class.
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(b) If a quorum is not represented, a majority of the voting power
so represented may adjourn the meeting from time to time until holders of the
voting power required to constitute a quorum shall be represented. At any
such adjourned meeting at which a quorum shall be represented. any business
may be transacted which might have been transacted as originally called.
When a stockholders' meeting is adjourned to another time or place hereunder,
notice need not be given of the adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. The
stockholders present at a duly convened meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum of the voting power.
Section 1.08 VOTING.
(a) Unless otherwise provided in the Articles of Incorporation, or
in the resolution providing for the issuance of the stock adopted by the
Board of Directors pursuant to authority expressly vested in it by the
provisions of the Articles of Incorporation, each stockholder of record, or
such stockholder's duly authorized proxy or attorney-is-fact, shall be
entitled to one (1) vote for each share of voting stock standing registered
in such stockholder's name on the record date.
(b) Except as otherwise provided herein, all votes with respect
to shares standing in the name of an individual on the record date
(including pledged shares) shall be cast only by that individual or such
individual's duly authorized proxy, attorney-in-fact, or voting
trustee(s) pursuant to a voting trust. With respect to shares held by
a representative of the estate of a deceased stockholder, guardian,
conservator, custodian or trustee, votes may be cast by such holder upon
proof of capacity, even though the shares do not stand in the name of
such holder. In the case of shares under the control of a receiver, the
receiver may cast votes carried by such shares even though the shares do
not stand in the name of the receiver; PROVIDED, HOWEVER, that the order
of the court of competent jurisdiction which appoints the receiver
contains the authority to cast votes carried by such shares. If shares
stand in the name of a minor, votes may be cast only by the duly
appointed guardian of the estate of such minor if such guardian has
provided the corporation with written proof of such appointment.
(c) With respect to shares standing in the name of another
corporation, partnership, limited liability company or other legal entity on
the record date, votes may be cast: (i) in the case of a corporation, by such
individual as the bylaws of such other corporation prescribe, by such
individual as may be appointed by resolution of the board of directors of
such other corporation or by such individual (including the officer making
the authorization) authorized in writing to do so by the chairman of the
board of directors, president or any vice-president of such corporation and
(ii) in the case of a partnership, limited liability company or other legal
entity, by an individual representing such stockholder upon presentation to
the corporation of satisfactory evidence of his
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authority to do so.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast for shares owned by this corporation or its subsidiaries,
if any. If shares are held by this corporation or its subsidiaries, if any,
in a fiduciary capacity, no votes shall be cast with respect thereto on any
matter except to the extent that the beneficial owner thereof possesses and
exercises either a right to vote or to give the corporation holding the same
binding instructions on how to vote.
(e) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder
is casting affirmative votes with respect to all shares held.
(f) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joist tenants,
tenants in common, husband and wife as community property, tenants by the
entirety, voting trustees, persons entitled to vote under a stockholder
voting agreement or otherwise and shares held by two or more persons
(including proxy holders) having the same fiduciary relationship in respect
to the same shares, votes may be cast in the following manner:
(1) If only one person votes, the vote of such person binds all.
(2) If more than one person casts votes, the act of the
majority so voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast
proportionately, as split.
(g) If a quorum is present, unless the Articles of Incorporation
provide for a different proportion, the affirmative vote of holders of at
least a majority of the voting power represented at the meeting and entitled
to vote on any matter shall be the act of the stockholders, unless voting by
classes is required for any action of the stockholders by the laws of the
State of Nevada, the Articles of Incorporation or these Bylaws, in which case
the affirmative vote of holders of a least a majority of the voting power of
each such class shall be required.
Section l.09 PROXIES. At any meeting of stockholders, any holder of
shares entitled to vote may designate, in a manner permitted by the laws of
the State of Nevada, another person or persons to act as a proxy or proxies.
No proxy is valid after the expiration of six (6) months from the date of its
creation, unless it is coupled with an interest or unless otherwise specified
in the proxy. In no event shall the term of a proxy exceed seven (7) years
from the date of its creation. Every proxy shall continue in full
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force and effect until its expiration or revocation in a manner permitted by
the laws of the State of Nevada.
Section 1.10 ORDER OF BUSINESS. At the annual stockholder's meeting, the
regular order of business shall be as follows:
1. Determination of stockholders present and existence of quorum,
in person or by proxy;
2. Reading and approval of the minutes of the previous meeting or
meetings;
3. Reports of the Board of Directors, and, if any, the president,
treasurer and secretary of the corporation;
4. Reports of committees;
5. Election of directors;
6. Unfinished business;
7. New business;
8. Adjournment.
Section 1.11 ABSENTEES' CONSENT TO MEETINGS. Transactions at any meeting
of the stockholders are as valid as though had at a meeting duly held after
regular call and notice if a quorum is represented, either in person or by
proxy, and if either before or after the meeting, each of the persons
entitled to vote, not represented in person or by proxy (and those who,
although present, either object at the beginning of the meeting to the
transaction of any business because the meeting has not been lawfully called
or convened or expressly object at the meeting to the consideration of
matters not included in the notice which are legally required to be included
therein), signs a written waiver of notice and/or consent to the holding of
the meeting or an approval of the minutes thereof. All such waivers,
consents and approvals shall be filed with the corporate records and made a
part of the minutes of the meeting. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person objects
at the beginning of the meeting to the transaction of any business because
the meeting is not lawfully called or convened and except that attendance at
a meeting is not a waiver of any right to object to the consideration of
matters not properly included in the notice if such objection is expressly
made at the time any such matters are presented at the meeting. Neither the
business to be transacted at nor the purpose of any regular or special
meeting of stockholders need be specified in any written waiver of notice or
consent, except as otherwise provided in Section 1.04(a) and (b) of these
Bylaws.
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Section 1.12 TELEPHONIC MEETINGS. Stockholders may participate in a
meeting of the stockholders by means of a telephone conference or similar
method of communication by which all individuals participating in the meeting
can hear each other. Participation in a meeting pursuant to this Section 1.12
constitutes presence in person at the meeting.
Section 1.13 ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of the stockholders may be taken without a meeting
if a written consent thereto is signed by the holders of the voting power of
the corporation that would be required at a meeting to constitute the act of
the stockholders. Whenever action is taken by written consent, a meeting of
stockholders need not be called or notice given. The written consent may be
signed in counterparts and must be filed with the minutes of the proceedings
of the stockholders.
ARTICLE II
DIRECTORS
Section 2.01 NUMBER, TENURE AND QUALIFICATIONS. Unless a larger number is
required by the laws of the State of Nevada or the Articles of Incorporation
or until changed in the manner provided herein, the Board of Directors of the
corporation shall consist of at least one (1) individual who shall be
elected at the annual meeting of the stockholders of the corporation and who
shall hold office for one (1) year or until his or her successor or
successors are elected and qualified. A director need not be a stockholder
of the corporation.
Section 2.02 CHANGE IN NUMBER. Subject to any limitations in the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, the
number of directors may be changed from time to time by resolution adopted by
the Board of Directors or the stockholders.
Section 2.03 REDUCTION IN NUMBER. No reduction of the number of directors
shall have the effect of removing any director prior to the expiration of his
term of office.
Section 2.04 RESIGNATION. Any director may resign effective upon giving
written notice to the chairman of the Board of Directors, the president, the
secretary, or in the absence of all of them, any other officer, unless the
notice specifies a later time for effectiveness of such resignation. A
majority of the remaining directors, though less than a quorum, may appoint a
successor to take office when the resignation becomes effective, each
director so appointed to hold office during the remainder of the term of
office of the resigning director.
Section 2.05 REMOVAL.
(a) The Board of Directors of the corporation, by majority vote, may
declare vacant the office of a director who has been declared incompetent by
an order
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of a court of competent jurisdiction or convicted of a felony.
(b) Any director may be removed from office by the vote or
written consent of stockholders representing not less than two-thirds of the
voting power of the issued and outstanding stock entitled to vote, except
that if the corporation's Articles of Incorporation provide for the election
of directors by cumulative voting, no director may be removed from office
except upon the vote of stockholders owning sufficient shares to have
prevented such director's election to office in the first instance.
Section 2.06 VACANCIES.
(a) All vacancies, including those caused by an increase in the
number of directors, may be filled by a majority of the remaining directors,
though less than a quorum unless it is otherwise provided in the Articles of
Incorporation unless, in the case of removal of a director, the stockholders
by a majority of voting power shall have appointed a successor to the removed
director. Subject to the provisions of Subsection (b) below, (i) in the case
of the replacement of a director, the appointed director shall hold office
during the remainder of the term of office of the replaced director, and (ii)
in the case of an increase in the number of directors, the appointed director
shall hold office until the next meeting of stockholders at which directors
are elected.
(b) If after the filling of any vacancy by the directors, the
directors then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office, any holder
or holders of an aggregate of five percent (5%) or more of the total voting
power entitled to vote may call a special meeting of the stockholders to
elect the entire Board of Directors. The term of office of any director shall
terminate upon such election of a successor.
Section 2.07 ANNUAL AND REGULAR MEETINGS. Immediately following the
adjournment of, and at the same place as, the annual or any special meeting
of the stockholders at which directors are elected other than pursuant to
Section 2.06 of this Article, the Board of Directors, including directors
newly elected, shall hold its annual meeting without notice, other than this
provision, to elect officers and to transact such further business as may be
necessary or appropriate. The Board of Directors may provide by resolution
the place, date and hour for holding regular meetings between annual meetings.
Section 2.08 SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the chairman, or if there be no chairman, by the president
or secretary and shall be called by the chairman, the president or the
secretary upon the request of any two (2) directors. If the chairman, or if
there be no chairman, both the president and secretary, refuses or neglects
to call such special meeting, a special meeting may be called by notice
signed by any two (2) directors.
Section 2.09 PLACE OF MEETINGS. Any regular or special meeting of the
directors of the corporation may be held at such place as the Board of
Directors, or in the
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absence of such designation, as the notice calling such meeting, may
designate. A waiver of notice signed by directors may designate any place for
the holding of such meeting.
Section 2.10 NOTICE OF MEETINGS. Except as otherwise provided in Section
2.07, there shall be delivered to all directors, at least forty-eight (48)
hours before the time of such meeting, a copy of a written notice of any
meeting by delivery of such notice personally by mailing such notice postage
prepaid or by telegram. Such notice shall be addressed in the manner
provided for notice to stockholders in Section 1.04(c). If mailed, the
notice shall be deemed delivered two (2) business days following the date the
same is deposited in the United States mail, postage prepaid. Any director
may waive notice of any meeting, and the attendance of a director at a
meeting and oral consent entered on the minutes or the waiver of notice of
such meeting. Attendance for the express purpose of objecting to the
transaction of business thereat because the meeting is not properly called or
convened shall not constitute presence nor a waiver of notice for purposes
hereof.
Section 2.11 QUORUM; ADJOURNED MEETINGS.
(a) All of the directors in office, at a meeting duly assembled,
are necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until a
quorum is present, and no notice of such adjournment shall be required. At
any adjourned meeting where a quorum is present, any business may be
transacted which could have been transacted at the meeting originally called.
Section 2.12 BOARD OF DIRECTORS' DECISIONS. The affirmative vote of a
majority of the directors present at a meeting at which a quorum is present
is the act of the Board of Directors.
Section 2.13 TELEPHONIC MEETINGS. Members of the Board of Directors or of
any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors or committee by means of a telephone
conference or similar method of communication by which all persons
participating in such meeting can hear each other. Participation in a meeting
pursuant to this Section 2.13 constitutes presence in person at the meeting.
Section 2.14 ACTION WITHOUT MEETING. Any action required or permitted
to be taken at a meeting of the Board of Directors or of a committee thereof
may be taken without a meeting if, before or after the action, a written
consent thereto is signed by all of the members of the Board of Directors or
the committee. The written consent may be signed in counterparts and must be
filed with the minutes of the proceedings of the Board of Directors or
committee.
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Section 2.15 POWERS AND DUTIES.
(a) Except as otherwise restricted in the laws of the State of
Nevada or the Articles of Incorporation, the Board of Directors has full
control over the affairs of the corporation. The Board of Directors may
delegate any of its authority to manage, control or conduct the business of
the corporation to any standing or special committee or to any officer or
agent and to appoint any persons to be agents of the corporation with such
powers, including the power to subdelegate, and upon such terms as may be
deemed fit.
(b) The Board of Directors may present to the stockholders at annual
meetings of the stockholders, and when called for by a majority vote of the
stockholders at an annual meeting or a special meeting of the stockholders
shall so present, a full and clear report of the condition of the corporation.
(c) The Board of Directors, in its discretion, may submit any
contract or act for approval or ratification at any annual meeting of the
stockholders or any special meeting properly called for the purpose of
considering any such contract or act, provided a quorum is present.
Section 2.16 COMPENSATION. The directors and members of committees shall
be allowed and paid all necessary expenses incurred in attending any meetings
of the Board of Directors or committees. Subject to any limitations contained
in the laws of the State of Nevada, the Articles of Incorporation or any
contract or agreement to which the corporation is a party, directors may
receive compensation for their services as directors as determined by the
Board of Directors, but only during such times as the corporation may legally
declare and pay distributions on its stock, unless the payment of such
compensation is first approved by the stockholders entitled to vote for the
election of directors.
Section 2.17 BOARD OF DIRECTORS' OFFICERS.
(a) At its annual meeting, the Board of Directors shall elect, from
among its members, a chairman who may serve as the chief executive officer of
the corporation and who shall preside at meetings of the Board of Directors
and may preside at meetings of the stockholders. The Board of Directors may
also elect such other officers of the Board of Directors and for such term as
it may, from time to time, determine advisable.
(b) Any vacancy in any office of the Board of Directors because of
death, resignation, removal or otherwise may be filled by the Board of
Directors for the unexpired portion of the term of such office.
Section 2.18 ORDER OF BUSINESS. The order of business at any meeting of
the Board of Directors shall be as follows:
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1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting or
meetings;
3. Reports of officers and committeemen;
4. Election of officers (annual meeting);
5. Unfinished business;
6. New business;
7. Adjournment.
ARTICLE III
OFFICERS
Section 3.01 ELECTION. The Board of Directors, at its annual meeting,
shall elect a president, a secretary and a treasurer to hold office for a
term of one (1) year or until their successors are chosen and qualify. Any
individual may hold two or more offices. The Board of Directors may, from
time to time, by resolution, elect one or more vice-presidents, assistant
secretaries and assistant treasurers and appoint agents of the corporation,
prescribe their duties and fix their compensation.
Section 3.02 REMOVAL; RESIGNATION. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without
cause. Any officer may resign at any time upon written notice to the
corporation. Any such removal or resignation shall be subject to the rights,
if any, of the respective parties under any contract between the corporation
and such officer or agent.
Section 3.03 VACANCIES. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 PRESIDENT.
(a) The president shall be the chief executive or operations officer
of the corporation, subject to the supervision and control of the Board of
Directors, and shall direct the corporate affairs, with full power to execute
all resolutions and orders of the Board of Directors not expressly delegated
to some other officer or agent of the corporation. If the Chairman of the
Board of Directors elects not to preside or is absent, the president shall
preside at meetings of the stockholders and Board of Directors and perform
such other duties as shall be prescribed by the Board of Directors.
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(b)The president shall have full power and authority on behalf of
the corporation to attend and to act and to vote, or designate such other
officer or agent of the corporation to attend and to act and to vote, at any
meetings of the stockholders of any corporation in which the corporation may
hold stock and, at any such meetings, shall possess and may exercise any and
all rights and powers incident to the ownership of such stock. The Board of
Directors, by resolution from time to time, may confer like powers on any
person or persons in place of the president to exercise such powers for these
purposes.
Section 3.05 VICE-PRESIDENTS. The Board of Directors may elect one or
more vice-presidents who shall be vested with all the powers and perform all
the duties of the president whenever the president is absent or unable to act
and such other duties as shall be prescribed by the Board of Directors or the
president.
Section 3.06 SECRETARY. The secretary shall keep, or cause to be kept,
the minutes of proceedings of the stockholders and the Board of Directors in
books provided for that purpose. The secretary shall attend to the giving and
service of all notices of the corporation, may sign with the president in the
name of the corporation all contracts in which the corporation is authorized
to enter, shall have the custody or designate control of the corporate seal,
shall affix the corporate seal to all certificates of stock duly issued by
the corporation, shall have charge or designate control of stock certificate
books, transfer books and stock ledgers, and such other books and papers as
the Board of Directors or appropriate committee may direct, and shall, in
general, perform all duties incident to the office of the secretary.
Section 3.07 ASSISTANT SECRETARIES. The Board of Directors may appoint
one or more assistant secretaries who shall have such powers and perform such
duties as may be prescribed by the Board of Directors or the secretary.
Section 3.08 TREASURER. The treasurer shall be the chief financial
officer of the corporation, subject to the supervision and control of the
Board of Directors, and shall have custody of all the funds and securities of
the corporation. When necessary or proper, the treasurer shall endorse on
behalf of the corporation for collection checks, notes and other obligations,
and shall deposit all monies to the credit of the corporation in such bank or
banks or other depository as the Board of Directors may designate, and shall
sign all receipts and vouchers for payments made by the corporation. Unless
otherwise specified by the Board of Directors, the treasurer may sign with
the president all bills of exchange and promissory notes of the corporation,
shall also have the care and custody of the stocks, bonds, certificates,
vouchers, evidence of debts, securities and such other property belonging to
the corporation as the Board of Directors shall designate, and shall sign all
papers required by law, by these Bylaws or by the Board of Directors to be
signed by the treasurer. The treasurer shall enter, or cause to be entered,
regularly in the financial records of the corporation, to be kept for that
purpose, full and accurate accounts of any monies received and paid on
account of the
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corporation and, whenever required by the Board of Directors, the treasurer
shall render a statement of any or all accounts. The treasurer shall at all
reasonable times exhibit the books of account to any director of the
corporation and shall perform any acts incident to the position of treasurer
subject to the control of the Board of Directors.
The treasurer shall, if required by the Board of Directors, give bond to
the corporation in such sum and with such security as shall be approved by
the Board of Directors for the faithful performance of any of the duties of
treasurer and for restoration to the corporation, in the event of the
treasurer's death, resignation, retirement or removal from office, of any
books, records, papers, vouchers, money and other property in the treasurer's
custody or control and belonging to the corporation. The expense of such bond
shall be borne by the corporation.
Section 3.09 ASSISTANT TREASURERS. The Board of Directors may appoint one
or more assistant treasurers who shall have such powers and perform such
duties as may be prescribed by the Board of Directors or the treasurer. The
Board of Directors may require an assistant treasurer to give a bond to the
corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for
restoration to the corporation, in the event of the assistant treasurer's
death, resignation, retirement or removal from office, of all books, records,
papers, vouchers, money and other property in the assistant treasurer's
custody or control and belonging to the corporation. The expense of such bond
shall be borne by the corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 ISSUANCE. Shares of the corporation's authorized stock
shall, subject to any provisions or limitations of the laws of the State of
Nevada, the Articles of Incorporation or any contracts or agreements to which
the corporation may be a party, be issued in such manner, at such times, upon
such conditions and for such consideration as shall be prescribed by the
Board of Directors.
Section 4.02 CERTIFICATES. Ownership in the corporation shall be
evidenced by certificates for shares of stock in such form as shall be
prescribed by the Board of Directors, shall be under the seal of the
corporation and shall be manually signed by the president or a vice-president
and also by the secretary or an assistant secretary; PROVIDED, HOWEVER,
whenever any certificate is countersigned or otherwise authenticated by a
transfer agent or transfer clerk, and by a registrar, then a facsimile of the
signatures of said officers of the corporation may be printed or lithographed
upon the certificate in lieu of the actual signatures. If the Corporation
uses facsimile signatures of its officers on its stock certificates, it shall
not act as registrar of its own stock, but its transfer agent and registrar
may be identical if the institution acting in those dual capacities
countersigns any stock certificates in both capacities. Each certificate
shall contain the name of the record holder, the number, designation, if any,
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class or series of shares represented, a statement or summary of any
applicable rights, preferences, privileges or restrictions thereon, and a
statement, if applicable, that the shares are assessable. All certificates
shall be consecutively numbered. If provided by the stockholder, the name,
address and federal tax identification number of the stockholder, the number
of shares, and the date of issue shall be entered in the stock transfer
records of the corporation.
Section 4.03 SURRENDERED; LOST OR DESTROYED CERTIFICATES. All
certificates surrendered to the corporation, except those representing shares
of treasury stock, shall be canceled and no new certificate shall be issued
until the former certificate for a like number of shares shall have been
canceled, except that in case of a lost, stolen, destroyed or mutilated
certificate, a new one may be issued therefor. However, any stockholder
applying for the issuance of a stock certificate in lieu of one alleged to
have been lost, stolen, destroyed or mutilated shall, prior to the issuance
of a replacement, provide the corporation with his, her or its affidavit of
the facts surrounding the loss, theft, destruction or mutilation and, if
required by the Board of Directors, an indemnity bond in an amount not less
than twice the current market value of the stock, and upon such terms as the
treasurer or the Board of Directors shall require which shall indemnify the
corporation against any loss, damage, cost or inconvenience arising as a
consequence of the issuance of a replacement certificate.
Section 4.04 REPLACEMENT CERTIFICATE. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, in the discretion of the Board of Directors,
including, without limitation, the merger of the corporation with another
corporation or the reorganization of the corporation, to cancel any
outstanding certificate for shares and issue a new certificate therefor
conforming to the rights of the holder, the Board of Directors may order any
holders of outstanding certificates for shares to surrender and exchange the
same for new certificates within a reasonable time to be fixed by the Board
of Directors. The order may provide that a holder of any certificate(s)
ordered to be surrendered shall not be entitled to vote, receive
distributions or exercise any other rights of stockholders of record until
the holder has complied with the order, but the order operates to suspend
such rights only after notice and until compliance.
Section 4.05 TRANSFER OF SHARES. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation of the
certificates therefor accompanied by an assignment or transfer by the
registered owner made either in person or under assignment. Whenever any
transfer shall be expressly made for collateral security and not absolutely,
the collateral nature of the transfer shall be reflected in the entry of
transfer in the records of the corporation.
Section 4.06 TRANSFER AGENT; REGISTRARS. The Board of Directors may
appoint one or more transfer agents, transfer clerk and registrars of
transfer and may require all certificates for shares of stock to bear the
signature of such transfer agent, transfer
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clerk and/or registrar of transfer.
Section 4.07 STOCK TRANSFER RECORDS. The stock transfer records shall be
closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of distributions as provided
in Article V hereof and during such periods as, from time to time, may be
fixed by the Board of Directors, and, during such periods, no stock shall be
transferable for purposes of Article V and no voting rights shall be deemed
transferred during such periods. Subject to the foregoing limitations,
nothing contained herein shall cause transfers during such periods to be void
or voidable.
Section 4.08 MISCELLANEOUS. The Board of Directors shall have the power
and authority to make such rules and regulations not inconsistent herewith as
it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the corporation's stock.
ARTICLE V
DISTRIBUTIONS
Section 5.01 DISTRIBUTIONS. Distributions may be declared, subject to the
provisions of the laws of the State of Nevada and the Articles of
Incorporation, by the Board of Directors at any regular or special meeting
and may be paid in cash, property, shares of corporate stock or any other
medium. The Board of Directors may fix in advance a record date, as provided
in Section 1.06, prior to the distribution for the purpose of determining
stockholders entitled to receive any distribution. The Board of Directors
may close the stock transfer books for such purpose for a period of not more
than ten (10) days prior to the date of such distribution.
ARTICLE VI
RECORDS, REPORTS, SEAL AND FINANCIAL MATTERS
Section 6.01 RECORDS. All original records of the corporation shall be
kept by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
Section 6.02 DIRECTORS' AND OFFICERS' RIGHT OF INSPECTION. Every director
and officer shall have the absolute right at any reasonable time for a
purpose reasonably related to the exercise of such individual's duties to
inspect and copy all of the corporation's books, records and documents of
every kind and to inspect the physical properties of the corporation and/or
its subsidiary corporations. Such inspection may be made in person or by
agent or attorney.
Section 6.03 CORPORATE SEAL. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to
be impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal
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to any document requiring it.
Section 6.04 FISCAL YEAR-END. The fiscal year-end of the corporation shall
be such date as may be fixed from time to time by resolution of the Board of
Directors.
Section 6.05 RESERVES. The Board of Directors may create, by resolution,
such reserves as the directors may, from time to time, in their discretion,
think proper to provide for contingencies, or to equalize distributions or to
repair or maintain any property of the corporation, or for such other purpose
as the Board of Directors may deem beneficial to the corporation, and the
directors may modify or abolish any such reserves in the manner in which they
were created.
Section 6.06 REQUIRED AUTHORIZATION FOR OBLIGATIONS. No agreement,
contract or obligation (other than checks in payment of indebtedness incurred
by authority of the Board of Directors) involving the payment of monies or
the credit of the corporation for more than Twenty-Five Thousand Dollars
($25,000), shall be made without the authority of the Board of Directors, or
of the Executive Committee acting as such.
ARTICLE VII
INDEMNIFICATION
Section 7.01 INDEMNIFICATION AND INSURANCE.
(a) INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(i) For purposes of this Article, (A) "Indemnitee" shall mean
each director or officer who was or is a party to, or is threatened to be
made a party to, or is otherwise involved in, any Proceeding (as hereinafter
defined), by reason of the fact that he or she is or was a director or
officer of the corporation or is or was serving in any capacity at the
request of the corporation as a director, officer, employee, agent, partner
or fiduciary of or in any other capacity for, another corporation or any
partnership, joint venture, trust or other enterprise; and (B) "Proceeding"
shall mean any threatened, pending or completed action or suit (including
without limitation an action, suit or proceeding by or in the right of the
corporation), whether civil, criminal, administrative or investigative.
(ii) Each Indemnitee shall be indemnified and held harmless by
the corporation for all actions taken by him or her and for all omissions
(regardless of the date of any such action or omission), to the fullest
extent permitted by Nevada law, against all expense, liability and loss
(including without limitation attorneys' fees, judgments, fines, taxes,
penalties and amounts paid or to be paid in settlement) reasonably incurred
or suffered by the Indemnitee in connection with any Proceeding.
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(iii) Indemnification pursuant to this Section shall continue
as to an Indemnitee who has ceased to be a director or officer and shall
inure to the benefit of his or her heirs, executors and administrators.
(b) INDEMNIFICATION OF EMPLOYEES AND OTHER PERSONS.
The corporation may, by action of its Board of Directors and to the
extent provided in such action, indemnify employees and other persons as
though they were Indemnities.
(c) NON-EXCLUSIVITY OF RIGHTS.
The rights to indemnification provided in this Article shall not be
exclusive of any other rights that any person may have or hereafter acquire
under any statute, provision of the corporation's Articles of Incorporation
or Bylaws, agreement, vote of stockholders or directors, or otherwise.
(d) INSURANCE.
The corporation may purchase and maintain insurance or make other
financial arrangements on behalf of any person who 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, partnership, joint venture, trust or other enterprise
for any liability asserted against him or her and liability and expenses
incurred by him or her in his or her capacity as a director, officer,
employee or agent, or arising out of his or her status as such, whether or
not the corporation has the authority to indemnify him or her against such
liability and expenses.
(e) OTHER FINANCIAL ARRANGEMENTS.
The other financial arrangements which may be made by the corporation
may include the following: (i) the creation of a trust fund; (ii) the
establishment of a program of self-insurance; (iii) the securing of its
obligation of indemnification by granting a security interest or other lien
on any assets of the corporation; or (iv) the establishment of a letter of
credit, guarantee or surety. No financial arrangement made pursuant to this
subsection may provide protection for a person adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable for intentional misconduct, fraud or a knowing violation of law,
except with respect to advancement of expenses or indemnification ordered by
a court.
(f) OTHER MATTERS RELATING TO INSURANCE OR FINANCIAL ARRANGEMENTS.
Any insurance or other financial arrangement made on behalf of a person
pursuant to this section may be provided by the corporation or any other
person
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approved by the Board of Directors, even if all or part of the other person's
stock or other securities is owned by the corporation. In the absence of
fraud:
(i) the decision of the Board of Directors as to the propriety
of the terms and conditions of any insurance or other financial arrangement
made pursuant to this Section and the choice of the person to provide the
insurance or other financial arrangement is conclusive; and
(ii) the insurance or other financial arrangement:
(A) is not void or voidable; and
(B) does not subject any director approving it to personal
liability for his action, even if a
director approving the insurance or other financial
arrangement is a beneficiary of the insurance or other
financial arrangement.
Section 7.02 AMENDMENT. The provisions of this Article relating to
indemnification shall constitute a contract between the corporation and each
of its directors and officers which may be modified as to any director or
officer only with that person's consent or as specially provided in this
Section. Notwithstanding any other provision of these Bylaws relating to
their amendment generally, any repeal or amendment of this Article which is
adverse to any director or officer shall apply to such director or officer
only on a prospective basis and shall not limit the rights of an Indemnitee
to indemnification with respect to any action or failure to act occurring
prior to the time of such repeal or amendment. Notwithstanding any other
provision of these Bylaws, no repeal or amendment of these Bylaws shall
affect any or all of this Article so as to limit or reduce the
indemnification in any manner unless adopted by (a) the unanimous vote of the
directors of the corporation then serving, or (b) by the stockholders as set
forth in Article VIII hereof; PROVIDED, HOWEVER, that no such amendment shall
have retroactive effect inconsistent with the preceding sentence.
Section 7.03 CHANGES IN NEVADA LAW. References in this Article to Nevada
law or to any provision thereof shall be to such law as it existed on the
date this Article was adopted or as such law thereafter may be changed;
PROVIDED, HOWEVER, that (a) in the case of any change which expands the
liability of directors or officers or limits the indemnification rights or
the rights to advancement of expenses which the corporation may provide, the
rights to limited liability, to indemnification and to the advancement of
expenses provided in the corporation's Articles of Incorporation and/or these
Bylaws shall continue as theretofore to the extent permitted by law; and (b)
if such change permits the corporation, without the requirement of any
further action by stockholders or directors, to limit further the liability
of directors (or limit the liability of officers) or to provide broader
indemnification rights or rights to the advancement of expenses than the
corporation was permitted to provide prior to such change, then liability
thereupon shall be so limited and the rights to indemnification and the
advancement of expenses
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shall be so broadened to the extent permitted by law.
ARTICLE VIII
AMENDMENT OR REPEAL
Section 8.01 AMENDMENT. Except as otherwise restricted in the Articles of
Incorporation or these Bylaws:
(a) Any provision of these Bylaws may be altered, amended or
repealed at the annual or any regular meeting of the Board of Directors
without prior notice, or at any special meeting of the Board of Directors if
notice of such alteration, amendment or repeal be contained in the notice of
such special meeting.
(b) These Bylaws may also be altered, amended, or repealed at a duly
convened meeting of the stockholders by the affirmative vote of the holders
of 51% of the voting power of the corporation entitled to vote. The
stockholders may provide by resolution that any Bylaw provision repealed,
amended, adopted or altered by them may not be repealed, amended, adopted or
altered by the Board of Directors.
ARTICLE IX
ACQUISITION OF A CONTROLLING INTEREST
Section 9.01 CONTROLLING INTEREST. The corporation shall not be governed
by the provisions of N.R.S. Sections 78.378 through 78.3793, inclusive, as
amended or such other similar statutory provision as may be adopted from time
to time.
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CERTIFICATION
The undersigned duly elected secretary of the corporation, does hereby
certify that the foregoing Bylaws were adopted by the Board of Directors on
the 20th day of October, 1997.
-----------------------------
Thomas M. Yturbide, Secretary
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INDENTURE
Dated as of March 23, 1998
Between
HARD ROCK HOTEL, INC.
as Company,
and
FIRST TRUST NATIONAL ASSOCIATION, as Trustee
---------------
up to $120,000,000
9 1/4% Senior Subordinated Notes due 2005
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TABLE OF CONTENTS
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DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Other Definitions . . . . . . . . . . . . . . 26
SECTION 1.3 Incorporation by Reference of Trust
Indenture Act . . . . . . . . . . . . . . . . 27
SECTION 1.4 Rules of Construction . . . . . . . . . . . . 27
THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 2.1 Form and Dating . . . . . . . . . . . . . . . 28
SECTION 2.2 Execution and Authentication. . . . . . . . . 30
SECTION 2.3 Registrar and Paying Agent. . . . . . . . . . 31
SECTION 2.4 Agent to Hold Money in Trust. . . . . . . . . 31
SECTION 2.5 Holder Lists. . . . . . . . . . . . . . . . . 32
SECTION 2.6 Transfer and Exchange . . . . . . . . . . . . 32
SECTION 2.7 Replacement Securities. . . . . . . . . . . . 50
SECTION 2.8 Outstanding Securities. . . . . . . . . . . . 51
SECTION 2.9 Treasury Securities . . . . . . . . . . . . . 51
SECTION 2.10 Temporary Securities. . . . . . . . . . . . . 52
SECTION 2.11 Cancellation. . . . . . . . . . . . . . . . . 52
SECTION 2.12 Defaulted Interest. . . . . . . . . . . . . . 52
SECTION 2.13 CUSIP Numbers . . . . . . . . . . . . . . . . 53
SECTION 2.14 Record Date . . . . . . . . . . . . . . . . . 53
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 3.1 Notices to Trustee. . . . . . . . . . . . . . 54
SECTION 3.2 Selection of Securities To Be Redeemed or
Repurchased . . . . . . . . . . . . . . . . . 54
SECTION 3.3 Notice of Redemption or Repurchase. . . . . . 54
SECTION 3.4 Effect of Notice of Redemption. . . . . . . . 55
SECTION 3.5 Deposit of Redemption Price . . . . . . . . . 56
SECTION 3.6 Securities Redeemed in Part . . . . . . . . . 56
SECTION 3.7 Optional and Regulatory Redemption. . . . . . 56
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.1 Payment of Securities . . . . . . . . . . . . 57
SECTION 4.2 Maintenance of Office or Agency; Exchange
Listing . . . . . . . . . . . . . . . . . . . 57
SECTION 4.3 Limitation on Transactions with Affiliates. . 58
SECTION 4.4 Limitation on Incurrence of Additional
Indebtedness and Issuance of Disqualified
Stock . . . . . . . . . . . . . . . . . . . . 60
SECTION 4.5 Limitation on Asset Sales . . . . . . . . . . 63
SECTION 4.6 Limitation on Restricted Payments . . . . . . 66
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SECTION 4.7 Corporate Existence . . . . . . . . . . . . . 70
SECTION 4.8 Payment of Taxes and Other Claims . . . . . . 70
SECTION 4.9 Notice of Defaults. . . . . . . . . . . . . . 71
SECTION 4.10 Maintenance of Properties . . . . . . . . . . 71
SECTION 4.11 Compliance Certificate. . . . . . . . . . . . 71
SECTION 4.12 Provision of Financial Information. . . . . . 72
SECTION 4.13 Waiver of Stay, Extension or Usury Laws . . . 72
SECTION 4.14 Change of Control . . . . . . . . . . . . . . 73
SECTION 4.15 Limitation on other Senior Subordinated
Indebtedness. . . . . . . . . . . . . . . . . 74
SECTION 4.16 Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries . . . . . 75
SECTION 4.17 Limitation on Liens . . . . . . . . . . . . . 76
SECTION 4.18 Limitation on Business Activities . . . . . . 77
SECTION 4.19 Payments for Consent. . . . . . . . . . . . . 77
SECTION 4.21 Subsidiary Guarantees . . . . . . . . . . . . 77
SECTION 4.22 Completion Guaranty . . . . . . . . . . . . . 78
SECTION 4.23 Material Changes to the Expansion . . . . . . 78
MERGERS; SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 5.1 Restriction on Mergers, Consolidations and
Certain Sales of Assets . . . . . . . . . . . 79
SECTION 5.2 Successor Corporation Substituted . . . . . . 80
DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 6.1 Events of Default . . . . . . . . . . . . . . 81
SECTION 6.2 Acceleration. . . . . . . . . . . . . . . . . 83
SECTION 6.3 Other Remedies. . . . . . . . . . . . . . . . 84
SECTION 6.4 Waiver of Past Default. . . . . . . . . . . . 84
SECTION 6.5 Control by Majority . . . . . . . . . . . . . 85
SECTION 6.6 Limitation on Suits . . . . . . . . . . . . . 85
SECTION 6.7 Rights of Holders To Receive Payment. . . . . 86
SECTION 6.8 Collection Suit by Trustee. . . . . . . . . . 86
SECTION 6.9 Trustee May File Proofs of Claim. . . . . . . 86
SECTION 6.10 Priorities. . . . . . . . . . . . . . . . . . 87
SECTION 6.11 Undertaking for Costs . . . . . . . . . . . . 87
TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 7.1 Duties of Trustee . . . . . . . . . . . . . . 88
SECTION 7.2 Rights of Trustee . . . . . . . . . . . . . . 89
SECTION 7.3 Individual Rights of Trustee. . . . . . . . . 91
SECTION 7.4 Trustee's Disclaimer. . . . . . . . . . . . . 91
SECTION 7.5 Notice of Defaults. . . . . . . . . . . . . . 91
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SECTION 7.6 Reports by Trustee to Holders . . . . . . . . 91
SECTION 7.7 Compensation and Indemnity. . . . . . . . . . 92
SECTION 7.8 Replacement of Trustee. . . . . . . . . . . . 93
SECTION 7.9 Successor Trustee by Merger, etc. . . . . . . 94
SECTION 7.10 Eligibility; Disqualification . . . . . . . . 95
SECTION 7.11 Preferential Collection of Claims Against the
Company . . . . . . . . . . . . . . . . . . . 95
SECTION 7.12 Money Held In Trust . . . . . . . . . . . . . 95
SECTION 7.13 Completion Guaranty . . . . . . . . . . . . . 95
SUBORDINATION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . 96
SECTION 8.1 Agreement to Subordinate. . . . . . . . . . . 96
SECTION 8.2 Liquidation, Dissolution, Bankruptcy. . . . . 96
SECTION 8.3 Default on Designated Senior Indebtedness . . 97
SECTION 8.4 Acceleration of Securities. . . . . . . . . . 99
SECTION 8.5 When Distribution Must Be Paid Over . . . . . 99
SECTION 8.6 Notice By The Company . . . . . . . . . . . . 99
SECTION 8.7 Subrogation . . . . . . . . . . . . . . . . . 100
SECTION 8.8 Relative Rights . . . . . . . . . . . . . . . 100
SECTION 8.9 Subordination May Not Be Impaired By the
Company . . . . . . . . . . . . . . . . . . . 100
SECTION 8.10 Distribution Or Notice To Representative. . . 101
SECTION 8.11 Rights Of Trustee And Paying Agent. . . . . . 101
SECTION 8.12 Authorization To Effect Subordination . . . . 102
SECTION 8.13 No Waiver . . . . . . . . . . . . . . . . . . 102
DISCHARGE OF INDENTURE; DEFEASANCE . . . . . . . . . . . . . . . . . . . . . 103
SECTION 9.1 Termination of Company's Obligations. . . . . 103
SECTION 9.2 Application of Trust Money. . . . . . . . . . 105
SECTION 9.3 Repayment to the Company. . . . . . . . . . . 106
SECTION 9.4 Reinstatement . . . . . . . . . . . . . . . . 106
AMENDMENTS, SUPPLEMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . 107
SECTION 10.1 Without Consent of Holders. . . . . . . . . . 107
SECTION 10.2 With Consent of Holders . . . . . . . . . . . 107
SECTION 10.3 Compliance with Trust Indenture Act . . . . . 109
SECTION 10.4 Revocation and Effect of Consents . . . . . . 109
SECTION 10.5 Notation on or Exchange of Securities . . . . 110
SECTION 10.6 Trustee To Sign Amendments, etc. . . . . . . 110
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
SECTION 11.1 Trust Indenture Act Controls. . . . . . . . . 111
SECTION 11.2 Notices . . . . . . . . . . . . . . . . . . . 111
SECTION 11.3 Communications by Holders with Other Holders. 112
SECTION 11.4 Certificate and Opinion as to Conditions
Precedent . . . . . . . . . . . . . . . . . . 113
iii
<PAGE>
<CAPTION>
Page
----
<S> <C>
SECTION 11.5 Statements Required in Certificate or
Opinion . . . . . . . . . . . . . . . . . . . 113
SECTION 11.6 Rules by Trustee, Paying Agent, Registrar . . 114
SECTION 11.7 Governing Law . . . . . . . . . . . . . . . . 114
SECTION 11.8 No Recourse Against Others. . . . . . . . . . 114
SECTION 11.9 Successors. . . . . . . . . . . . . . . . . . 114
SECTION 11.10 Counterpart Originals . . . . . . . . . . . . 114
SECTION 11.11 Severability. . . . . . . . . . . . . . . . . 114
SECTION 11.12 No Adverse Interpretation of Other
Agreements. . . . . . . . . . . . . . . . . . 115
SECTION 11.13 Legal Holidays. . . . . . . . . . . . . . . . 115
SECTION 11.14 Submission to Jurisdiction. . . . . . . . . . 115
</TABLE>
- ----------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a
part of this Indenture.
iv
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Indenture
Trust Indenture Act Section Section
---------
<S> <C>
Section 310(a)(1). . . . . . . . . . . . . . . 7.10
(a)(2). . . . . . . . . . . . . . . . . . . 7.10
(a)(3). . . . . . . . . . . . . . . . . . . N.A.
(a)(4). . . . . . . . . . . . . . . . . . . N.A.
(a)(5). . . . . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . . . . 7.8; 7.10
(c) . . . . . . . . . . . . . . . . . . . . N.A.
Section 311(a) . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . N.A.
Section 312(a) . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . 11.3
(c) . . . . . . . . . . . . . . . . . . . . 11.3
Section 313(a) . . . . . . . . . . . . . . . . 7.6
(b)(1). . . . . . . . . . . . . . . . . . . N.A.
(b)(2). . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . 7.6; 11.2
(d) . . . . . . . . . . . . . . . . . . . . 7.6
Section 314(a) . . . . . . . . . . . . . . . . 4.11; 4.12
(b) . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1). . . . . . . . . . . . . . . . . . . 11.4
(c)(2). . . . . . . . . . . . . . . . . . . 11.4
(c)(3). . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . 11.5
(f) . . . . . . . . . . . . . . . . . . . . N.A.
Section 315(a) . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . 7.5; 11.2
(c) . . . . . . . . . . . . . . . . . . . . 7.1(a)
(d) . . . . . . . . . . . . . . . . . . . . 7.3(c)
(e) . . . . . . . . . . . . . . . . . . . . 6.11
Section 316(a)(last sentence). . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B) . . . . . . . . . . . . . . . . . 6.4
(a)(2). . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . 6.7
(c) . . . . . . . . . . . . . . . . . . . . 10.4
Section 317(a)(1). . . . . . . . . . . . . . . 6.8
(a)(2). . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . 2.4
Section 318(a) . . . . . . . . . . . . . . . . 11.1
(a) . . . . . . . . . . . . . . . . . . . . 11.1
</TABLE>
- ----------------
N.A. means Not Applicable.
v
<PAGE>
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be
a part of this Indenture.
vi
<PAGE>
INDENTURE dated as of March 23, 1998 between HARD ROCK HOTEL, INC.
(the "COMPANY," as more specifically defined herein) and First Trust National
Association, a national banking organization, as trustee (the "Trustee" as more
specifically defined herein).
The parties hereto hereby agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the Company's
9 1/4% Senior Subordinated Notes due 2005, Series A (the "INITIAL SECURITIES")
and the Company's 9 1/4% Senior Subordinated Notes due 2005, Series B (the
"EXCHANGE SECURITIES," as more specifically defined herein and, together with
the Initial Securities, the "SECURITIES"):
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS.
"144A GLOBAL SECURITY" means the Global Security in the form of
EXHIBIT A hereto bearing the Global Security Legend and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Securities sold in reliance on Rule 144A.
"ACQUIRED INDEBTEDNESS" means with respect to any specified Person,
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
<PAGE>
"AGENT" means any Registrar, Paying Agent or Co-Registrar.
"APPLICABLE PROCEDURES" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Security, the rules and
procedures of the DTC, Euroclear or Cedel that apply to such transfer or
exchange.
"ASSET SALE" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than in the ordinary course of business (provided that
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of the Company and its Subsidiaries taken as a whole will be governed
by Section 4.14 and/or Article V and not by Section 4.5, and (ii) the issue or
sale by the Company or any of its Restricted Subsidiaries of Equity Interests of
any of the Company's Restricted Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions
that have a fair market value (as determined in good faith by the Board of
Directors) in excess of $1.0 million or for net cash proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary, (iii)
a Restricted Payment that is permitted by Section 4.6, (iv) a disposition of
cash or Cash Equivalents; (v) a disposition of either obsolete equipment or
equipment that is damaged, worn out or otherwise no longer useful in the
business; (vi) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary; (vii) any sale and leaseback of an
asset within 90 days after the completion of construction or acquisition of such
asset; and (viii) any surrender or waiver of contract rights or a settlement,
release or surrender of contract, tort or other claims of any kind or a grant of
any Lien not prohibited by this Indenture shall not be considered an Asset Sale.
"BANKRUPTCY LAW" means (i) Title 11 of the U.S. Code or (ii) any other
law of the United States, any political subdivision thereof or any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors or composition with creditors.
"BOARD OF DIRECTORS" means, as to any Person, the board of directors
of such Person or any duly authorized committee thereof.
"BOARD RESOLUTION" means, with respect to any Person, a copy of a
resolution certified by the secretary, an assistant secretary or director of
such Person to
<PAGE>
have been duly adopted by the Board of Directors of such Person
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"BUSINESS DAY" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"CALCULATION DATE" has the meaning given to such term in the
definition of "Fixed Charge Coverage Ratio" in this Indenture.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the full faith and credit
of the United States government or any agency or instrumentality thereof having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the New Credit Facility or with any domestic commercial
bank having capital and surplus in excess of $500.0 million and a Keefe Bank
Watch Rating of "B" or better, (iv) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(ii) and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's or S&P and in each case maturing within
six months after the date of acquisition, (vi) investment funds investing
substantially all of their assets in securities of the types described in
clauses (i)-(v) above and (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.
3
<PAGE>
"CASINO" means any gaming establishment and other property or assets
directly ancillary thereto or used in connection therewith, including any
building, restaurant, hotel theater, parking facilities, retail shops, land,
golf courses and other recreation and entertainment facilities, vessel, barge,
ship and equipment.
"CEDEL" means Cedel Bank, sociedad anonyme.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act), other than to the
Permitted Holders,
(ii) the adoption of a plan relating to the liquidation or dissolution
of the Company,
(iii) prior to the first Equity Offering, the Permitted Holders
cease to be the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), directly or indirectly, of a
majority of the Voting Stock of the Company (as measured by voting power
rather than number of shares),
(iv) after the first Equity Offering, (A) the consummation of any
transaction (including, without limitation, any merger or consolidation)
the result of which is that any "person" (as defined above), other than the
Permitted Holders, becomes the "beneficial owner" (as defined above),
directly or indirectly, of 35% or more of the Voting Stock of the Company
(measured by voting power rather than number of shares) and (B) the
Permitted Holders "beneficially own" (as defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), directly or indirectly, in the aggregate a
lesser percentage of the Voting Stock of the Company (measured by voting
power rather than number of shares) than such other person,
(v) after the first Equity Offering, Continuing Directors cease to
constitute a majority of the members of the Board of Directors of the
Company or
4
<PAGE>
(vi) the Company consolidates with, or merges with or into, any
Person, other than the Permitted Holders, or any Person, other than the
Permitted Holders, consolidates with, or merges with or into, the Company,
in any such event pursuant to a transaction in which the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, other than any such transaction where the Voting Stock of
the Company outstanding immediately prior to such transaction is converted
into or exchanged for Voting Stock (other than Disqualified Stock) of the
surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee person
(immediately after giving effect to such issuance).
"COMPANY" means the party named as the "Company" in the first
paragraph of this Indenture until a successor replaces such party pursuant to
the applicable provisions of Article V, and thereafter, "Company" shall mean
such successor.
"COMPLETION GUARANTY" means the completion guaranty by Peter A.
Morton, dated as of the date hereof, as such agreement may be amended, modified
or supplemented in accordance with the terms thereof.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the sum of, without duplication, the Consolidated Net Income of such
Person for such period plus (i) provision for taxes based on income or profits
of such Person and its Subsidiaries for such period, to the extent that such
provision for taxes was included in computing such Consolidated Net Income, plus
(ii) consolidated interest expense of such Person and its Subsidiaries for such
period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of original issue discount, amortization of
deferred financing fees, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), to the
extent that any such expense was deducted in computing such Consolidated Net
Income, plus (iii) the product of (a) all cash dividend payments, on any series
of preferred stock of such Person or any of its Restricted Subsidiaries, other
than dividend payments on Equity Interests payable solely in Equity Interests
(other than Disqualified Stock) of the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local effective tax rate of such Person,
expressed as
5
<PAGE>
a decimal, in each case, on a consolidated basis and in accordance with GAAP,
plus (iv) consolidated depreciation, amortization and other non-cash charges
of the Person and its Subsidiaries required to be reflected as expenses on
the books and records of the Person, minus (v) cash payments with respect to
any non-cash charges previously added back pursuant to clause (iv), plus (vi)
preopening costs incurred in connection with the Expansion that are required
by GAAP to be charged as an expense prior to or upon opening, to the extent
that such preopening costs were deducted in computing such Consolidated Net
Income. Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation and amortization and other non-cash
charges of, a Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in same proportion) that the Net Income of such Subsidiary was included
in calculating the Consolidated Net Income of such Person.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Restricted Subsidiary thereof, (ii) the
Net Income of any Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Subsidiary
of that Net Income is not at the date of determination permitted without any
prior government approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary or its stockholders, (iii) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition shall be excluded, (iv) the cumulative effect of a
change in accounting principles shall be excluded, and (v) all other
extraordinary gains and extraordinary losses shall be excluded.
"CONTINUING DIRECTORS" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date hereof or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
6
<PAGE>
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 11.2 or such other address as the Trustee may give
notice to the Company.
"DEFAULT" means an event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"DEFINITIVE SECURITY" means a certificated Security registered in the
name of the Holder thereof and issued in accordance with Section 2.6 hereof, in
the form of EXHIBIT A hereto except that such Security shall not bear the Global
Security Legend and shall not have the "Schedule of Exchanges of Interests in
the Global Security" attached thereto.
"DEPOSITARY" means, with respect to the Securities issuable or issued
in whole or in part in global form, the Person specified in Section 2.3 hereof
as the Depositary with respect to the Securities, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Indebtedness outstanding
under the New Credit Facility and (ii) any other Senior Indebtedness permitted
under this Indenture the principal amount of which is $25 million or more and
that has been designated by the Company as "Designated Senior Indebtedness."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof,
in whole or in part, on or prior to the date that is 91 days after the date
on which the Securities mature, PROVIDED, HOWEVER, that any Capital Stock
that would constitute Disqualified Stock solely because the holders thereof
(or of any security into which it is convertible or for which it is
exchangeable) have the right to require the issuer to repurchase such Capital
Stock (or such security into which it is convertible or for which it is
exchangeable) upon the occurrence of any of the events constituting an Asset
Sale or a Change of Control shall not constitute Disqualified Stock if such
Capital Stock (and all such securities into which it is convertible or for
which it is exchangeable) provides that the issuer thereof will not
repurchase or redeem any such Capital Stock (or any such security into which
7
<PAGE>
it is convertible or for which it is exchangeable) pursuant to such
provisions prior to compliance by the Company with Section 4.5 or Section
4.14, as the case may be.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means any bona fide underwritten public offering of
common stock by the Company other than (i) issuances of Disqualified Stock, (ii)
issuances in payment of or to finance the purchase price of an acquisition or
(iii) issuances of common stock pursuant to employee benefit plans of the
Company or otherwise as compensation to employees of the Company.
"EUROCLEAR" means Morgan Guaranty Trust Company of New York (Brussels
Office) as operator of the Euroclear system.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.
"EXCHANGE OFFER" has the meaning set forth in the Registration Rights
Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in
the Registration Rights Agreement.
"EXCHANGE SECURITIES" means the Securities issued in the Exchange
Offer pursuant to Section 2.6(f).
"EXCLUDED CONTRIBUTIONS" means the net cash proceeds received by the
Company from Permitted Holders after the Issue Date and until the completion of
the Expansion from contributions to the equity capital of the Company and cash
proceeds received as a result of payments under the Completion Guaranty.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the New Credit Facility) in
existence on the date hereof, until such amounts are repaid.
"EXPANSION" means the expansion of the Company's hotel casino in Las
Vegas, Nevada, including (i) the construction of a new hotel tower, (ii) the
addition of
8
<PAGE>
new slot machines and table games, (iii) the construction of a new swimming
pool, (iv) the addition of new restaurant facilities, (v) an expansion of the
size of the retail store located in such hotel casino, (vi) the construction
of a new parking facility, (vii) the construction of a new health club and
spa and (viii) the construction of a new nightclub and warehouse facility.
"FAIR MARKET VALUE" means, unless otherwise specified, 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 pressure or compulsion to complete the
transactions. Fair market value shall be determined by the Board of Directors
of the Company acting reasonably and in good faith and shall be evidenced by a
Board Resolution.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Company or any of its Subsidiaries incurs, assumes, Guarantees, repays or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee,
repayment or redemption of Indebtedness, or such issuance or redemption of
preferred stock, as if the same had occurred at the beginning of the applicable
four-quarter reference period and in the case of revolving credit borrowings,
the Fixed Charge Coverage Ratio shall be computed based upon the average daily
balance of such Indebtedness during the applicable reference period. In
addition, for purposes of making the computation referred to above, (i)
acquisitions that have been made by the Company or any of its Subsidiaries,
including through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income, (ii) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but
9
<PAGE>
only to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the referent Person or any of its Subsidiaries
following the Calculation Date, and (iv) in the case of Indebtedness bearing
interest at a floating rate which is being given pro forma effect, the
interest on such Indebtedness shall be calculated as if the rate in effect on
the Calculation Date had been the applicable rate for the entire period
(taking into account any Hedging Obligation applicable to such Indebtedness).
"FIXED CHARGES" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs (other than
amortization of debt issuance costs related to the Securities and the New Credit
Facility) and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or banker's
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations) and (ii) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) the product of (a) all cash dividend payments,
on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests (other than Disqualified Stock) of the Company, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local effective tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accounts and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"GAMING AUTHORITY" means any Governmental Authority with the power to
regulate gaming in any Gaming Jurisdiction, and the corresponding Governmental
10
<PAGE>
Authorities with the responsibility to interpret and enforce the laws and
regulations applicable to gaming in any Gaming Jurisdiction.
"GAMING JURISDICTION" means any Federal, state or local jurisdiction
in which any entity, in which the Company has a direct or indirect beneficial,
legal or voting interest, conducts casino gaming, now or in the future.
"GAMING LAW" means any law, rule, regulation or ordinance governing
gaming activities (including, without limitation, The Riverboat Gambling Act of
Illinois, The Louisiana Riverboat Economic Development and Gaming Control Act,
the Missouri Riverboat Gaming Act (Mo. Rev. Stat. Section 313.800 et seq.) and
the Nevada Gaming Control Act (Nev. Rev. Stat. Section 463.010 et. seq.), in
each case including all amendments or modifications thereof), any administrative
rules or regulations promulgated thereunder, and any of the corresponding
statutes, rules and regulations in each Gaming Jurisdiction.
"GAMING LICENSE" means every license, franchise or other authorization
required to own, lease, operate or otherwise conduct gaming activities of the
Company or any of its Subsidiaries, including without limitation, all such
licenses granted under the Nevada Gaming Control Act, and the regulations
promulgated pursuant thereto, and other applicable federal, state, foreign or
local laws.
"GLOBAL SECURITIES" means, individually and collectively, each of the
Restricted Global Securities and the Unrestricted Global Securities, in the form
of EXHIBIT A or EXHIBIT B hereto issued in accordance with Section 2.1, 2.6(b),
2.6(d) or 2.6(f) hereof.
"GLOBAL SECURITY LEGEND" means the legend set forth in Section
2.6(g)(ii), which is required to be placed on all Global Securities issued under
this Indenture.
"GOVERNMENTAL AUTHORITY" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or foreign government, any state, any province or any city or
other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any maritime authority.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any
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manner (including, without limitation, letters of credit and reimbursement
agreements in respect thereof), of all or any part of any Indebtedness.
"GUARANTOR" means each Restricted Subsidiary that has executed a
Subsidiary Guarantee, and their respective successors and assigns, unless and
until released therefrom, in each case in accordance with the applicable
provisions of the Indenture.
"HEDGING OBLIGATIONS" means with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements with respect to
Indebtedness that is permitted by the terms of this Indenture and (ii) other
agreements or arrangements designed to protect such Person against fluctuation
in interest rates or the value of foreign currencies purchased or received by
such Person in the ordinary course of business.
"HOLDER" means a Person in whose name a Security is registered on the
books of the Registrar or any co-Registrar.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, (i) in respect of borrowed money, or
(ii) evidenced by bonds, notes, debentures or similar instruments or letters of
credit or reimbursement agreements in respect thereof (other than letters of
credit securing obligations not constituting Indebtedness that are issued in the
ordinary course of business by a Person to the extent not drawn upon or, if and
to the extent drawn upon, such drawing is reimbursed no later than the tenth
Business Day following receipt by such Person of a demand for reimbursement
following payment on the letter of credit) or bankers' acceptances, or (iii)
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property, except any such balance that constitutes an
accrued expense or trade payable, or (iv) representing any Hedging Obligations,
in each case if and to the extent any of the foregoing indebtedness (other than
letters of credit and Hedging Obligations) would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, as well as all
Indebtedness of others secured by a Lien on any asset of such Person (whether or
not such Indebtedness is assumed by such Person) and, to the extent not
otherwise included, the Guarantee by such Person of any Indebtedness of any
other Person.
"INDENTURE" means this Indenture as amended or supplemented from time
to time.
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"INDIRECT PARTICIPANT" means a Person who holds a beneficial interest
in a Global Security through a Participant.
"INITIAL PURCHASERS" means Bear, Stearns & Co. Inc., BancAmerica
Robertson Stephens and Donaldson, Lufkin & Jenrette Securities Corporation.
"INITIAL SECURITIES" has the meaning assigned to it in the preamble to
this Indenture.
"INTEREST PAYMENT DATE" means the stated maturity of an installment of
interest on the Securities.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or such other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or
would be classified as investments on a balance sheet prepared in accordance
with GAAP. If the Company or any Restricted Subsidiary of the Company sells
or otherwise disposes of any Equity Interests of any direct or indirect
Restricted Subsidiary of the Company such that, after giving effect to any
such sale or disposition, such Person is no longer a Restricted Subsidiary of
the Company, the Company shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in Section 4.6(d).
"ISSUE DATE" means the date on which the Initial Securities are
originally issued.
"LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared
by the Company and sent to all Holders for use by such Holders in connection
with the Exchange Offer.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or
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agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction).
"LIQUIDATED DAMAGES" has the meaning given to such term in the
Registration Rights Agreement.
"MAKE-WELL AGREEMENT" means the make-well agreement by Peter A.
Morton, dated as of the date hereof, as such agreement may be amended, modified
or supplemented in accordance with the terms thereof.
"MATURITY DATE" means the date, which is set forth on the face of the
Securities, on which the Securities will mature.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"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 actually incurred in
connection with such issuance or sale and net of taxes paid or payable as a
result thereof.
"NET INCOME" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Subsidiaries and (ii) any
extraordinary or nonrecurring gain or loss, together with any related provision
for taxes on such extraordinary or nonrecurring gain or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the
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repayment of Indebtedness secured by a Lien on the asset or assets that were
the subject of such Asset Sale and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"NEW CREDIT FACILITY" means that certain credit agreement, dated as of
the date hereof, by and among the Company and Bank of America National Trust and
Savings Association as administrative agent and Bear, Stearns & Co. Inc. as
co-agent and the lenders parties thereto, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced, extended, restated or refinanced from time to time, whether by the
same or any other agent, lender or group of lenders; provided that the total
amount of Indebtedness is not thereby increased beyond the amount that may then
be incurred at such time pursuant to Section 4.4.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), as reflected in the express terms of the instrument governing
such Indebtedness, or (c) constitutes the lender; and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any Indebtedness (other than the
Securities being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity.
"NON-U.S. PERSON" means a person who is not a U.S. Person.
"OBLIGATIONS" means any principal, interest, penalties, fees
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICER" means with respect to the Company, the Chairman, any Vice
Chairman, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Secretary or any director or manager
or similar position of the Company.
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"OFFICERS' CERTIFICATE" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company
complying with Sections 11.4 and 11.5, to the extent applicable.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"PARTICIPANT" means, with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"PERMITTED BUSINESS" means the gaming business and other businesses
necessary for, incident to, connected with or arising out of the gaming business
(including developing and operating lodging, dining and nightclub facilities,
sports or entertainment facilities, transportation services, retail operations
and other related activities or enterprises and any additions or improvements
thereto) or any business that is reasonably similar thereto or a reasonable
extension, development or expansion thereof or ancillary thereto.
"PERMITTED DEBT" has the meaning assigned to it in Section 4.4.
"PERMITTED HOLDERS" means Peter A. Morton and Lily Pond Investments,
Inc. and any of their respective Related Parties.
"PERMITTED INVESTMENTS" means
(a) any Investment in the Company or in a Restricted Subsidiary;
(b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary
in a Person, if as a result of such Investment (i) such Person becomes a
Restricted Subsidiary or (ii) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary;
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(d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.5;
(e) any acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Company;
(f) any Investment existing on the Issue Date;
(g) any Investment acquired by the Company or any of its
Restricted Subsidiaries (A) in exchange for any other Investment or accounts
receivable held by the Company or any such Restricted Subsidiary in connection
with or as a result of a bankruptcy, workout, reorganization or recapitalization
of the issuer of such other Investment or accounts receivable or (B) as a result
of the transfer of title with respect to any secured investment in default as a
result of a foreclosure by the Company or any of its Restricted Subsidiaries
with respect to such secured Investment;
(h) Hedging Obligations permitted under Section 4.4;
(i) loans and advances to officers, directors and employees for
business-related travel expenses, moving expenses and other similar expenses, in
each case, incurred in the ordinary course of business;
(j) other loans and advances to officers, directors and
employees in an aggregate amount not to exceed $250,000 outstanding at any time;
(k) any guarantees permitted to be made pursuant to Section 4.4;
(l) credit extensions to gaming customers in connection with
their gambling activities at facilities of the Company or its Subsidiaries; and
(m) other Investments in any Person primarily engaged in a
Permitted Business having an aggregate fair market value (measured on the date
each such Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (m) that are at the time outstanding, not to exceed $2.0 million.
"PERMITTED LIENS" means
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(i) Liens on assets of the Company or any of its Subsidiaries
securing Senior Indebtedness that was permitted by the terms of this
Indenture to be incurred (including pursuant to the New Credit Facility);
(ii) Liens in favor of the Company;
(iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Subsidiary of
the Company; PROVIDED that such Liens were in existence prior to the
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company;
(iv) Liens on property existing at the time of acquisition thereof
by the Company or any Subsidiary of the Company, PROVIDED that such Liens
were in existence prior to the contemplation of such acquisition;
(v) Liens to secure the performance of statutory or regulatory
obligations, leases, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business;
(vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by Section 4.4(d) covering only the assets acquired
with such Indebtedness;
(vii) Liens existing on the date hereof;
(viii) 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 provision as
shall be required in conformity with GAAP shall have been made therefor;
(ix) Liens incurred in the ordinary course of business of the
Company or any Subsidiary of the Company with respect to obligations that
do not exceed $5.0 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
business by the Company or such Subsidiary;
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(x) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries;
(xi) Liens of carriers, warehousemen, mechanics, landlords,
materialmen, repairmen and for crew wages or salvage or other like Liens
arising by operation of law in the ordinary course of business and
consistent with industry practices and Liens on deposits made to obtain the
release of such Liens if (A) the underlying obligations are not overdue for
a period of more than 60 days or (B) such Liens are being contested in good
faith and by appropriate proceedings by the Company or its Subsidiary and
adequate reserves with respect thereto are maintained on the books of the
Company or such Subsidiary, as the case may be, in accordance with GAAP;
(xii) easements, rights-of-way, zoning and similar restrictions
and other similar encumbrances or title defects incurred or imposed, as
applicable, in the ordinary course of business and consistent with industry
practices which, in the aggregate, are not substantial in amount, and which
do not in any case materially detract from the value of the property
subject thereto (as such property is used by the Company or its Subsidiary)
or interfere with the ordinary conduct of the business of the Company or
such Subsidiary; provided, however, that any such Liens are not incurred in
connection with any borrowing of money or any commitment to loan any money
or to extend any credit; and
(xiii) customary Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business in connection
with worker's compensation, unemployment insurance and other types of
social security legislation.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund Indebtedness of the Company or any of its Restricted Subsidiaries;
PROVIDED that: (i) the principal amount (or accreted value, if applicable) of
such Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith including
premiums paid, if any, to the holders thereof); (ii) such Permitted Refinancing
Indebtedness has a final maturity date at or later than the final maturity date
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of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Securities, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Securities on terms at least as favorable to the Holders of Securities as
those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in Section
2.6(g)(i) to be placed on all Securities issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"REDEMPTION DATE" when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"REDEMPTION PRICE" when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Security annexed as Exhibit A or B.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated the date hereof among the Company and the Initial Purchasers.
"REGULATION S" means Regulation S promulgated under the Securities Act
(including any successor regulation thereto) as in effect on the date hereof.
"REGULATION S GLOBAL SECURITY" means a Regulation S Temporary Global
Security or Regulation S Permanent Global Security, as appropriate.
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"REGULATION S PERMANENT GLOBAL SECURITY" means a permanent global
Security in the form of EXHIBIT A hereto bearing the Global Security Legend
and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Regulation S
Temporary Global Security upon expiration of the Restricted Period.
"REGULATION S TEMPORARY GLOBAL SECURITY" means a temporary global
Security in the form of EXHIBIT B hereto bearing the Global Security Legend,
the Private Placement Legend and the legend set forth in Section 2.6(g)(iii)
hereto, and deposited with or on behalf of and registered in the name of the
Depositary or its nominee, issued in a denomination equal to the outstanding
principal amount of the Securities initially sold in reliance on Rule 903 of
Regulation S.
"RELATED PARTY" with respect to any Person, means (i) any
Affiliate, or spouse or immediate family member (in the case of an
individual) of such Person, or (ii) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding a majority interest of which consist of such Person
and/or such other Person referred to in the immediately preceding clause (i),
or (iii) any trustee, executor or receiver appointed to manage or administer
the assets of a Person who is an individual following the death of such
individual.
"REPRESENTATIVE" means the indenture trustee or other trustee,
agent or representative in respect of any Designated Senior Indebtedness;
PROVIDED that if, and for so long as, any Designated Senior Indebtedness
lacks such a representative, then the Representative for such Designated
Senior Indebtedness shall be the holders of a majority in outstanding
principal amount of such Designated Senior Indebtedness in respect of any
Designated Senior Indebtedness.
"RESPONSIBLE OFFICER" means any officer within the corporate trust
department (or any successor group) of the Trustee including any vice
president, assistant vice president, senior trust officer, trust officer,
assistant secretary or any other officer or assistant officer of the Trustee
customarily performing functions similar to those performed by the persons
who at that time shall be such officers, and also means, with respect to a
particular corporate trust matter, any other officer to whom such trust
matter is referred because of his knowledge of and familiarity with the
particular subject.
"RESTRICTED BROKER-DEALER" has the meaning set forth in the
Registration Rights Agreement.
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"RESTRICTED DEFINITIVE SECURITY" means a Definitive Security bearing
the Private Placement Legend.
"RESTRICTED GLOBAL SECURITY" means a Global Security bearing the
Private Placement Legend.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED PERIOD" means the 40-day restricted period as defined in
Regulation S.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"RULE 144" means Rule 144 promulgated under the Securities Act.
"RULE 144A" means Rule 144A promulgated under the Securities Act.
"S&P" means Standard & Poor's Corporation and its successors.
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES" has the meaning assigned to it in the preamble to this
Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"SECURITY CUSTODIAN" means the Trustee, as custodian with respect to
the Securities in global form, or any successor entity thereto.
"SENIOR INDEBTEDNESS" means (i) the Indebtedness of the Company
under the New Credit Facility and (ii) any other Indebtedness of the Company
permitted to be incurred by it under the terms of this Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that
it is on a parity with or subordinated in right of payment to the Securities,
including, with respect to (i) and (ii), interest accruing subsequent to the
filing of, or which would have accrued but for the filing of, a petition
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for bankruptcy, whether or not such interest is an allowable claim in such
bankruptcy proceeding. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness will not include (1) any liability for
federal, state, local or other taxes owed or owing by the Company, (2) any
obligation of the Company to any of its Subsidiaries, (3) any accounts
payable or trade liabilities of the Company arising in the ordinary course of
business (including instruments evidencing such liabilities) other than
obligations in respect of bankers' acceptances and letters of credit under
the New Credit Facility, (4) any Indebtedness that is incurred in violation
of this Indenture, (5) Indebtedness which, when incurred and without respect
to any election under Section 1111 (b) of Title 11, United States Code, is
without recourse to the Company, (6) any Indebtedness, guarantee or
obligation of the Company which is subordinate or junior to any other
Indebtedness, guarantee or obligation of the Company, (7) Indebtedness
evidenced by the Securities and (8) Capital Stock of the Company.
"SHELF REGISTRATION STATEMENT" shall have the meaning set forth in
the Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act, as such Regulation is in
effect on the date hereof.
"STATED MATURITY" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"SUBORDINATED INDEBTEDNESS" means all Indebtedness of the Company
that is subordinated in right of payment to the Securities.
"SUBORDINATION AGREEMENT" means the Subordination Agreement dated
as of the date hereof between the Company and Peter A. Morton, subordinating
payments from the Company to Peter A. Morton due pursuant to the Supervisory
Agreement.
"SUBSIDIARY" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of
the total voting power
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of shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"SUPERVISORY AGREEMENT" means the Amended and Restated Supervisory
Agreement dated as of October 21, 1997 between the Company and Peter A.
Morton providing for the payment by the Company of a management fee to Peter
A. Morton in connection with the rendering of management services to or on
behalf of the Company, which obligation of the Company to pay such management
fee will be subordinated to the prior payment in full of all obligations with
respect to the Securities pursuant to the Subordination Agreement, and which
obligation is otherwise in lieu of the payment of any other compensation to
Peter A. Morton in respect of services rendered to the Company.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of this Indenture, except as provided
in Section 10.3.
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"UNRESTRICTED DEFINITIVE SECURITY" means one or more Definitive
Securities that do not bear and are not required to bear the Private
Placement Legend.
"UNRESTRICTED GLOBAL SECURITY" means a permanent Global Security in
the form of EXHIBIT A attached hereto that bears the Global Security Legend
and that has the "Schedule of Exchanges of Interests in the Global Security"
attached thereto, and that is deposited with or on behalf of and registered
in the name of the Depositary, but does not bear the Private Placement Legend.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant
to a Board Resolution; but only to the extent that such Subsidiary: (a) has
no Indebtedness other than Non-Recourse Debt; (b) is not party to any
agreement, contract, arrangement or understanding with the
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Company or any Restricted Subsidiary of the Company unless the terms of any
such agreement, contract, arrangement or understanding are no less favorable
to the Company or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of the Company; (c)
is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly
or indirectly provided credit support for any Indebtedness of the Company or
any of its Restricted Subsidiaries. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by Section 4.6. If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing conditions as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of this Indenture and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.4, the Company shall be in default
of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that such designation shall be deemed to be an incurrence of Indebtedness by
a Restricted Subsidiary of the Company of any outstanding Indebtedness of
such Unrestricted Subsidiary and such designation shall only be permitted if
(i) such Indebtedness is permitted under Section 4.4 calculated on a pro
forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (ii) no Default or Event of Default would
be in existence following such designation.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations of, and
obligations guaranteed by, the United States of America for the payment of
which the full faith and credit of the United States of America is pledged.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"U.S. PERSON" means (i) any individual resident in the United
States, (ii) any partnership or corporation organized or incorporated under
the laws of the United States, (iii) any estate of which an executor or
administrator is a U.S. Person (other than an estate governed by foreign law
and of which at least one executor or administrator
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<PAGE>
is a non-U.S. Person who has sole or shared investment which at least one
executor or administrator is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets), (iv) any trust of which
any trustee is a U.S. Person (other than a trust of which at least one
trustee is a non-U.S. Person who has sole or shared investment discretion
with respect to its assets and no beneficiary of the trust (and no settler,
if the trust is revocable) is a U.S. Person), (v) any agency or branch of a
foreign entity located in the United States, (vi) any non-discretionary or
similar account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. person, (vii) any
discretionary or similar account (other than an estate or trust) held by a
dealer or other fiduciary organized, incorporated or (if an individual)
resident in the United States (other than such an account held for the
benefit or account of a non-U.S. Person), (viii) any partnership or
corporation organized or incorporated under the laws of a foreign
jurisdiction and formed by a U.S. Person principally for the purpose of
investing in securities not registered under the Securities Act (unless it is
organized or incorporated and owned, by "accredited investors" within the
meaning of Rule 501(a) under the Securities Act who are not natural persons,
estates or trusts); PROVIDED, HOWEVER, that the term "U.S. Person" shall not
include (A) a branch or agency of a U.S. Person that is located and operating
outside the United States for valid business purposes as a locally regulated
branch or agency engaged in the banking or insurance business, (B) any
employee benefit plan established and administered in accordance with the
law, customary practices and documentation of a foreign country and (C) the
international organizations set forth in Section 902(o)(7) of Regulation S
under the Securities Act and any other similar international organizations,
and their agencies, affiliates and pension plans.
"VOTING STOCK" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the
sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required
payments of principal, including payment at final maturity, in respect
thereof, by (b) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment, by (ii)
the then outstanding principal amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other
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ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person.
SECTION 1.2 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Term Defined in Section
---- ------------------
<S> <C>
"Affiliate Transaction" 4.3(a)
"Asset Sale Offer" 4.5
"Change of Control Offer" 4.14(a)
"Change of Control Payment" 4.14(a)
"Change of Control Payment Date" 4.14(a)
"Covenant Defeasance" 9.1
"Custodian" 6.1
"DTC" 2.3
"Event of Default" 6.1
"Excess Proceeds" 4.5
"incur" 4.4
"Judgment Currency" 11.15
"Legal Defeasance" 9.1
"non-payment default" 8.3
"Offer Amount" 4.5
"Offer Period" 4.5
"Paying Agent" 2.3
"Payment Blockage Notice" 8.3
"Payment Default" 6.1
"Process Agent" 11.14
"Purchase Date" 4.5
"Registrar" 2.3
"Restricted Payments" 4.6
</TABLE>
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
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Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"INDENTURE SECURITIES" means the Securities.
"INDENTURE SECURITY HOLDER" means a Holder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on the indenture securities means the Company or any
other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by Commission
rule and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP in effect on the date
hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and
words in the plural include the singular;
(5) provisions apply to successive events and
transactions; and
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(6) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
ARTICLE II
THE SECURITIES
SECTION 2.1 FORM AND DATING.
The Securities and the Trustee's certificate of authentication
shall be substantially in the form set forth in EXHIBIT A or EXHIBIT B
hereto. The Securities may have notations, legends or endorsements required
by law (including, without limitation, Gaming Law), stock exchange rules,
agreements to which the Company is subject, or usage, as designated by the
Company. Each Security shall be dated the date of its authentication. The
Securities shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Securities shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture
expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Security conflicts with the
express provisions of this Indenture, the provisions of this Indenture shall
govern and be controlling.
Securities issued in global form shall be substantially in the form
set forth in EXHIBITS A or B attached hereto (including the Global Security
Legend and the "Schedule of Exchanges in the Global Security" attached
thereto). Securities issued in definitive form shall be substantially in the
form of EXHIBIT A attached hereto (but without the Global Security Legend and
without the "Schedule of Exchanges of Interests in the Global Security"
attached thereto). Each Global Security shall represent such of the
outstanding Securities as shall be specified therein and each shall provide
that it shall represent the aggregate principal amount
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<PAGE>
of outstanding Securities from time to time endorsed thereon and that the
aggregate principal amount of outstanding Securities represented thereby may
from time to time be reduced or increased, as appropriate, to reflect
exchanges and redemptions. Any endorsement of a Global Security to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Securities represented thereby shall be made by the Trustee or
the Security Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.6 hereof.
Securities offered and sold to QIBs shall be issued initially in the form of
one or more Global Securities, which shall be deposited 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 the accounts of DTC's participants.
Securities offered and sold in reliance on Regulation S shall be
issued initially in the form of the Regulation S Temporary Global Security,
which shall be deposited on behalf of the purchasers of the Securities
represented thereby with the Trustee, at its New York office, as custodian
for the Depositary, and registered in the name of the Depositary or the
nominee of the Depositary for the accounts of designated agents holding on
behalf of Euroclear or Cedel, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. Within a reasonable time after
expiration of the Restricted Period the Regulation S Temporary Global
Securities will be exchanged for the Regulation S Permanent Global Securities
upon the receipt by the Trustee of (i) a written certificate from the
Depositary, together with copies of certificates from Euroclear and Cedel
certifying that they have received certification of non-United States
beneficial ownership of 100% of the aggregate principal amount of the
Regulation S Temporary Global Security (except to the extent of any
beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who will take delivery of a beneficial ownership interest
in a 144A Global Security or a Restricted Global Security bearing a Private
Placement Legend, all as contemplated by Section 2.6(a)(ii) hereof), and (ii)
an Officers' Certificate from the Company. Following such period, beneficial
interests in the Regulation S Temporary Global Security shall be exchanged
for beneficial interests in Regulation S Permanent Global Securities pursuant
to the Applicable Procedures. Simultaneously with the authentication of
Regulation S Permanent Global Securities, the Trustee shall cancel the
Regulation S Temporary Global Security. The aggregate principal amount of
the Regulation S Temporary Global Security and the Regulation S Permanent
Global Securities may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
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The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Security and the Regulation S Permanent Global Security that are held by
the agent members through Euroclear or Cedel.
SECTION 1.6 EXECUTION AND AUTHENTICATION.
One Officer of the Company shall sign the Securities for the Company
by manual or facsimile signature, which signature shall be attested to by any
other person. Such signatures and attestation may be in counterparts, all of
which taken together shall constitute one and the same instrument.
If an Officer whose signature is on a Security no longer holds that
office at the time such Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate the Initial Securities for original issue up to
$120,000,000 in aggregate principal amount and shall authenticate the Exchange
Securities for original issue up to $120,000,000; PROVIDED that the Exchange
Securities shall be issuable only upon the valid surrender for cancellation of
Initial Securities of a like aggregate principal amount. The aggregate
principal amount of Securities outstanding at any time may not exceed
$120,000,000 except as provided in Section 2.7 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
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Securities shall be issuable only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof.
SECTION 1.7 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("REGISTRAR") and an
office or agency where Securities are to be presented for payment ("PAYING
AGENT"). The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may appoint one or more co-registrars and
one or more additional Paying Agents. The term "Registrar" includes any
co-registrar and the term "Paying Agent" includes any additional paying agent.
The Company may change any Paying Agent or Registrar without notice to any
Holder. The Company shall notify the Trustee in writing of the name and address
of any Agent not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act as
such. The Company may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Security Custodian with respect to the Global
Securities, and by its signature hereto, the Trustee agrees to so act.
The Trustee is authorized to enter into a letter of representations
with DTC in the form provided to the Trustee by the Company and to act in
accordance with such letter.
SECTION 1.8 AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, Liquidated Damages, if any, or interest on the
Securities, and will notify the Trustee of any default by the Company in making
any such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee,
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<PAGE>
the Paying Agent (if other than the Company) shall have no further liability
for the money. If the Company acts as Paying Agent, it shall segregate and
hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent. Upon any bankruptcy or reorganization proceedings
relating to the Company, the Trustee shall serve as Paying Agent for the
Securities.
SECTION 1.9 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee
is not the Registrar, the Company shall furnish to the Trustee at least three
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Securities and the Company shall otherwise comply with TIA Section 312(a).
SECTION 1.10 TRANSFER AND EXCHANGE.
(a) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. A Global
Security may not be transferred as a whole except by the Depositary to a
nominee of the Depositary, by a nominee of the Depositary to the Depositary
or to another nominee of the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Securities
will be exchanged by the Company for Definitive Securities if (i) the
Company delivers to the Trustee notice from the Depositary that it is
unwilling or unable to continue to act as Depositary or that it is no longer
a clearing agency registered under the Exchange Act and, in either case, a
successor Depositary is not appointed by the Company within 90 days after the
date of such notice from the Depositary, (ii) the Company in its sole
discretion determines that the Global Securities (in whole but not in part)
should be exchanged for Definitive Securities and delivers a written notice
to such effect to the Trustee or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Securities and the Trustee
has received a request from the Depository to issue Definitive Securities;
PROVIDED that in no event shall the Regulation S Temporary Global Security be
exchanged by the Company for Definitive Securities prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates determined by the Company to be required pursuant to Rule
903 under the Securities Act. Upon the occurrence of either of the preceding
events in (i) or (ii) above, the Company will notify the Trustee in writing
that Definitive Securi-
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<PAGE>
ties shall be issued in such names as the Depositary and the participants
shall instruct the Trustee. Global Securities also may be exchanged or
replaced, in whole or in part, as provided in Sections 2.7 and 2.11 hereof.
Every Security authenticated and delivered in exchange for, or in lieu of, a
Global Security or any portion thereof, pursuant to Section 2.7 or 2.11
hereof, shall be authenticated and delivered in the form of, and shall be, a
Global Security. A Global Security may not be exchanged for another Security
other than as provided in this Section 2.6(a), however, beneficial interests
in a Global Security may be transferre d and exchanged as provided in Section
2.6(b), (c) or (f) hereof.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE
GLOBAL SECURITIES. The transfer and exchange of beneficial interests in the
Global Securities shall be effected through the Depositary, in accordance
with the provisions of this Indenture and the Applicable Procedures.
Beneficial interests in the Restricted Global Securities shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. Transfers of beneficial interests in the
Global Securities also shall require compliance with either subparagraph (i)
or (ii) below, as applicable, as well as subparagraph (iii) or (iv), as
applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL SECURITY.
Beneficial interests in any Restricted Global Security may be transferred
to Persons who take delivery thereof in the form of a beneficial interest
in the same Restricted Global Security in accordance with the transfer
restrictions set forth in the Private Placement Legend; PROVIDED, HOWEVER,
that prior to the expiration of the Restricted Period transfers of
beneficial interests in the Regulation S Temporary Global Security may not
be made to a U.S. Person or for the account or benefit of a U.S. Person
(other than an Initial Purchaser). Beneficial interests in any
Unrestricted Global Security may be transferred only to Persons who take
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Security. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this
Section 2.6(b)(i).
(ii) ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN
GLOBAL SECURITIES. In connection with all transfers and exchanges of
beneficial interests (other than a transfer of a beneficial interest in a
Global Security to a Person who takes delivery thereof in the form of a
beneficial interest in the same Global Security), the transferor of such
beneficial interest must
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<PAGE>
deliver to the Registrar either (1)(A) a written order from a Participant or
an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a benefi cial interest in another Global Security in an amount equal
to the beneficial interest to be transferred or exchanged and (B)
instructions given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such
increase or (2)(A) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Definitive
Security in an amount equal to the beneficial interest to be transferred or
exchanged and (B) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such Definitive
Security shall be registered to effect the transfer or exchange referred to
in (1) above; PROVIDED that in no event shall Definitive Securities be issued
upon the transfer or exchange of beneficial interests in the Regulation S
Temporary Global Security prior to (x) the expiration of the Restricted
Period and (y) the receipt by the Registrar of any certificates determined by
the Company to be required pursuant to Rule 903 under the Securities Act;
PROVIDED, FURTHER, that in no event shall an Indirect Participant who holds a
beneficial interest in the Regulation S Temporary Global Security transfer or
exchange such interest to a U.S. Person who takes delivery in the form of an
interest in U.S. Global Securities prior to the satisfaction of clauses (x)
and (y) in the immediately preceding proviso. Upon an Exchange Offer by the
Company in accordance with Section 2.6(f) hereof, the requirements of this
Section 2.6(b)(ii) shall be deemed to have been satisfied upon receipt by the
Registrar of the instructions contained in the Letter of Transmittal
delivered by the Holder of such beneficial interests in the Restricted Global
Securities. Upon satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Securities contained in this
Indenture, the Securities and otherwise applicable under the Securities Act,
the Trustee shall adjust the principal amount of the relevant Global Security
or Securities pursuant to Section 2.6(h) hereof.
(iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED
GLOBAL SECURITY. A beneficial interest in any Restricted Global Security
may be transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Security if the transfer
complies with the requirements of clause (ii) above and the Registrar
receives the following:
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(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Security, then the transferor
must deliver a certificate in the form of EXHIBIT C hereto, including
the certifications in item 1 thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Security or
the Regulation S Global Security, then the transferor must deliver a
certificate in the form of EXHIBIT C hereto, including the
certifications in item 2 thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the Restricted Global Security, then the
transferor must deliver (x) a certificate in the form of EXHIBIT C
hereto, including the certifications required by item 3 thereof, if
applicable.
(iv) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RESTRICTED
GLOBAL SECURITY FOR BENEFICIAL INTERESTS IN THE UNRESTRICTED GLOBAL
SECURITY. A beneficial interest in any Restricted Global Security may be
exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Security or transferred to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Security if the exchange or transfer complies with the requirements of
clause (ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer, is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Securities or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
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(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Security proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global Security,
a certificate from such holder in the form of EXHIBIT D hereto,
including the certifications in item 1(a) thereof;
(2) if the holder of such beneficial interest in a
Restricted Global Security proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Security, a certificate
from such holder in the form of EXHIBIT C hereto, including the
certifications in item 4 thereof; and
(3) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form reasonably acceptable to
the Registrar to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are not
required in order to maintain compliance with the Securities Act or
any Gaming Law.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Security has not yet been issued,
the Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.2 hereof, the Trustee shall authenticate one or more
Unrestricted Global Securities in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraph
(B) or (D) above.
Beneficial interests in an Unrestricted Global Security cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Security.
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(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE
SECURITIES.
(i) If any holder of a beneficial interest in a Restricted Global
Security proposes to exchange such beneficial interest for a Definitive
Security or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Definitive Security, then, upon receipt
by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a
Restricted Global Security proposes to exchange such beneficial
interest for a Definitive Security, a certificate from such holder in
the form of EXHIBIT D hereto, including the certifications in item
2(a) thereof;
(B) if such beneficial interest is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in EXHIBIT C hereto, including the
certifications in item 1 thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in EXHIBIT C hereto, including the certifications in item 2
thereof;
(D) if such beneficial interest is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in EXHIBIT C hereto, including the
certifications in item 3(a) thereof;
(E) if such beneficial interest is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in EXHIBIT C hereto, including the certifications in item
3(b) thereof; or
(F) if such beneficial interest is being transferred
pursuant to an effective registration statement under the Securities
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Act, a certificate to the effect set forth in EXHIBIT C hereto,
including the certifications in item 3(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable Global
Security to be reduced accordingly pursuant to Section 2.6(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Security in the appropriate
principal amount. Any Definitive Security issued in exchange for a beneficial
interest in a Restricted Global Security pursuant to this Section 2.6(c) shall
be registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Securities to
the Persons in whose names such Securities are so registered. Any Definitive
Security issued in exchange for a beneficial interest in a Restricted Global
Security pursuant to this Section 2.6(c)(i) shall bear the Private Placement
Legend and shall be subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.6(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Security may not
be (A) exchanged for a Definitive Security prior to (x) the expiration of
the Restricted Period and (y) the receipt by the Registrar of any
certificates determined by the Company to be required pursuant to Rule
903(c)(3)(B) under the Securities Act or (B) transferred to a Person who
takes delivery thereof in the form of a Definitive Security prior to the
conditions set forth in clause (A) above or unless the transfer is pursuant
to an exemption from the registration requirements of the Securities Act
other than Rule 903 or Rule 904.
(iii) Notwithstanding 2.6(c)(i) hereof, a holder of a beneficial
interest in a Restricted Global Security may exchange such beneficial
interest for an Unrestricted Definitive Security or may transfer such
beneficial interest to a Person who takes delivery thereof in the form of
an Unrestricted Definitive Security only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
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Exchange Securities or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Security proposes to exchange such beneficial
interest for a Definitive Security that does not bear the Private
Placement Legend, a certificate from such holder in the form of
EXHIBIT D hereto, including the certifications in item 1(b) thereof;
(2) if the holder of such beneficial interest in a
Restricted Global Security proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the form of a
Definitive Security that does not bear the Private Placement Legend, a
certificate from such holder in the form of EXHIBIT C hereto,
including the certifications in item 4 thereof; and
(3) in each such case set forth in this
subparagraph (D), an Opinion of Counsel in form reasonably acceptable to
the Company, to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are not required in order to
maintain compliance with the Securities Act or any Gaming
(iv) If any holder of a beneficial interest in an Unrestricted
Global Security proposes to exchange such beneficial interest for a
Definitive Security or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Definitive Security, then, upon
satisfaction of the conditions set forth in Section 2.6(b)(ii) hereof, the
Trustee shall cause the
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aggregate principal amount of the applicable Global Security to be reduced
accordingly pursuant to Section 2.6(h) hereof, and the Company shall
execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Security in the appropriate
principal amount. Any Definitive Security issued in exchange for a
beneficial interest pursuant to this Section 2.6(c)(iv) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Securities
to the Persons in whose names such Securities are so registered. Any
Definitive Security issued in exchange for a beneficial interest pursuant
to this Section 2.6(c)(iv) shall not bear the Private Placement Legend. A
beneficial interest in an Unrestricted Global Security cannot be exchanged
for a Definitive Security bearing the Private Placement Legend or
transferred to a Person who takes delivery thereof in the form of a
Definitive Security bearing the Private Placement Legend.
(d) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES FOR
BENEFICIAL INTERESTS.
(i) if any Holder of a Restricted Definitive Security proposes to
exchange such Security for a beneficial interest in a Restricted Global
Security or to transfer such Definitive Securities to a Person who takes
delivery thereof in the form of a beneficial interest in a Restricted
Global Security, then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive Security
proposes to exchange such Security for a beneficial interest in a
Restricted Global Security, a certificate from such Holder in the form
of EXHIBIT D hereto, including the certifications in item 2(b)
thereof;
(B) if such Definitive Security is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in EXHIBIT C hereto, including the
certifications in item 1 thereof;
(C) if such Definitive Security is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with
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Rule 903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in EXHIBIT C hereto, including the certifications in
item 2 thereof;
(D) if such Definitive Security is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in EXHIBIT C hereto, including the
certifications in item 3(a) thereof;
(E) if such Definitive Security is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in EXHIBIT C hereto, including the certifications in item 3(b)
thereof; or
(F) if such Definitive Security is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in EXHIBIT C hereto,
including the certifications in item 3(c) thereof,
the Trustee shall cancel the Definitive Security, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A) above,
the appropriate Restricted Global Security, in the case of clause (B) above, the
144A Global Security, in the case of clause (C) above, the Regulation S Global
Security, and in all other cases, the Restricted Global Security.
(ii) A Holder of a Restricted Definitive Security may exchange such
Security for a beneficial interest in an Unrestricted Global Security or
transfer such Restricted Definitive Security to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Security only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Securities or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
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(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Securities
proposes to exchange such Securities for a beneficial interest in the
Unrestricted Global Security, a certificate from such Holder in the
form of EXHIBIT D hereto, including the certifications in Item 1(c)
thereof;
(2) if the Holder of such Definitive Securities
proposes to transfer such Securities to a Person who shall take
delivery thereof in the form of a beneficial interest in the
Unrestricted Global Security, a certificate from such Holder in the
form of EXHIBIT C hereto, including the certifications in item 4
thereof, and
(3) in each such case set forth in this subparagraph
(D), an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in compliance
with the Securities Act, that the restrictions on transfer contained
herein and in the Private Placement Legend are not required in order
to maintain compliance with the Securities Act, and such Definitive
Securities are being exchanged or transferred in compliance with any
applicable blue sky securities laws of any State of the United States
or any Gaming Law.
Upon satisfaction of the conditions of any of the subparagraphs in this Section
2.6(d)(ii), the Trustee shall cancel the Definitive Securities and increase or
cause to be increased the aggregate principal amount of the Unrestricted Global
Security.
(iii) A Holder of an Unrestricted Definitive Security may exchange
such Security for a beneficial interest in an Unrestricted Global Security
or transfer such Definitive Securities to a Person who takes delivery
thereof in
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the form of a beneficial interest in an Unrestricted Global Security at
any time. Upon receipt of a request for such an exchange or transfer,
the Trustee shall cancel the applicable Unrestricted Definitive Security
and increase or cause to be increased the aggregate principal amount of
one of the Unrestricted Global Securities.
If any such exchange or transfer from a Definitive Security to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Security has not yet been
issued, the Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.2 hereof, the Trustee shall authenticate one or more
Unrestricted Global Securities in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above.
(e) TRANSFER AND EXCHANGE OF DEFINITIVE SECURITIES FOR
DEFINITIVE SECURITIES. Upon request by a Holder of Definitive Securities and
such Holder's compliance with the provisions of this Section 2.6(e), the
Registrar shall register the transfer or exchange of Definitive Securities.
Prior to such registration of transfer or exchange, the requesting Holder shall
present on surrender to the Registrar the Definitive Securities duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney, duly authorized in
writing. In addition, the requesting Holder shall provide any additional
certifications, documents and information, as applicable, pursuant to the
provisions of this Section 2.6(e).
(i) Restricted Definitive Securities may be transferred to and
registered in the name of Persons who take delivery thereof if the
Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of EXHIBIT C hereto, including the
certifications in item 1 thereof;
(B) if the transfer will be made pursuant to Rule 903 or
Rule 904 under the Securities Act, then the transferor must deliver a
certificate in the form of EXHIBIT C hereto, including the
certifications in item 2 thereof; and
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(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a certificate in the form of EXHIBIT
C hereto, including the certifications, required by item 3 thereof.
(ii) Any Restricted Definitive Security may be exchanged by the Holder
thereof for an Unrestricted Definitive Security or transferred to a Person
or Persons who take delivery thereof in the form of an Unrestricted
Definitive Security if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Securities or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Restricted
Broker-Dealer pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive
Securities proposes to exchange such Securities for an Unrestricted
Definitive Security, a certificate from such Holder in the form of
EXHIBIT D hereto, including the certifications in item 1 (a) thereof,
(2) if the Holder of such Restricted Definitive
Securities proposes to transfer such Securities to a Person who shall
take delivery thereof in the form of an Unrestricted Definitive
Security, a certificate from such Holder in the form of EXHIBIT C
hereto, including the certifications in item 4 thereof, and
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(3) in each such case set forth in this subparagraph
(D), an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in compliance
with the Securities Act, that the restrictions on transfer contained
herein and in the Private Placement Legend are not required in order
to maintain compliance with the Securities Act, and such Restricted
Definitive Security is being exchanged or transferred in compliance
with any applicable blue sky securities laws of any State of the
United States or any Gaming Law.
(iii) A Holder of Unrestricted Definitive Securities may transfer
such Securities to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Security. Upon receipt of a request for such a
transfer, the Registrar shall register the Unrestricted Definitive
Securities pursuant to the instructions from the Holder thereof.
Unrestricted Definitive Securities cannot be exchanged for or transferred
to Persons who take delivery thereof in the form of a Restricted Definitive
Security.
(f) EXCHANGE OFFER. Upon the occurrence of the Exchange
Offer in accordance with the Registration Rights Agreement, the Company shall
issue and, upon receipt of an authentication order in accordance with Section
2.2 and an Officers' Certificate, the Trustee shall authenticate (i) one or
more Unrestricted Global Securities in an aggregate principal amount equal to
the principal amount of the beneficial interests in the Restricted Global
Securities tendered for acceptance by persons that are not (x) broker-dealers,
(y) Persons participating in the distribution of the Exchange Securities or
(z) Persons who are affiliates (as defined in Rule 144) of the Company and
accepted for exchange in the Exchange Offer and (ii) Definitive Securities in
an aggregate principal amount equal to the principal amount of the Restricted
Definitive Securities tendered for acceptance by persons that are not
(x) broker-dealers, (y) persons participating in the distribution of the
Exchange Securities or (z) Persons who are affiliates (as defined in Rule
144) of the Company and accepted for exchange in the Exchange Offer.
Concurrent with the issuance of such Securities, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Securities to
be reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of
Definitive Securities so accepted Definitive Securities in the appropriate
principal amount.
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Concurrent with the issuance of the Exchange Securities in the Exchange
Offer, the Company shall deliver an Opinion of Counsel to the Trustee to the
effect that the Exchange Securities have been duly authorized and, when
executed and authenticated in accordance with the provisions of this
Indenture and delivered in exchange for Initial Securities in accordance with
this Indenture and the Exchange Offer, will be entitled to the benefits of
this Indenture and will be valid and binding obligations of the Company,
enforceable in accordance with their terms except as (x) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (y) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles of
general applicability.
(g) LEGENDS. The following legends shall appear on the face of
all Global Securities and Definitive Securities issued under this Indenture
unless specifically stated otherwise in the applicable provisions of this
Indenture.
(i) PRIVATE PLACEMENT LEGEND.
(A) Except as permitted by subparagraph (B) below, each
Global Security and each Definitive Security (and all Securities
issued in exchange therefor or substitution thereof) shall bear the
legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSORS) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED
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HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER. BY ITS ACQUISITION HEREOF,
THE HOLDER REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S.
PERSON AND IS NOT ACQUIRING THIS SECURITY FOR THE
ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT). THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO
A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A
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TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED
STATES TO A NON-U.S. PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT
AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Security or
Definitive Security issued pursuant to subparagraphs (b)(iv),
(c)(iii), (c)(iv), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.6 (and all Securities issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
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(ii) GLOBAL SECURITY LEGEND. Each Global Security shall bear a legend
in substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A SECURITY IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE
OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK)
("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
(iii) REGULATION S TEMPORARY GLOBAL SECURITY LEGEND. The
Regulation S Temporary Global Security shall bear a legend in substantially
the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED SECURITIES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS
REGULATION S TEMPORARY GLOBAL SECURITY SHALL BE ENTITLED TO RECEIVE
PAYMENT OF INTEREST HEREON."
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(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL SECURITIES. At
such time as all beneficial interests in a particular Global Security have been
exchanged for Definitive Securities or a particular Global Security has been
redeemed, repurchased or cancelled in whole and not in part, each such Global
Security shall be returned to or retained and cancelled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Security is exchanged for or transferred to
a Person who will take delivery thereof in the form of a beneficial interest in
another Global Security or for Definitive Securities, the principal amount of
Securities represented by such Global Security shall be reduced accordingly and
an endorsement shall be made on such Global Security, by the Trustee or by the
Depositary at the direction of the Trustee, to reflect such reduction; and if
the beneficial interest is being exchanged for or transferred to a Person who
will take delivery thereof in the form of a beneficial interest in another
Global Security, such other Global Security shall be increased accordingly and
an endorsement shall be made on such Global Security, by the Trustee or by the
Depositary at the direction of the Trustee, to reflect such increase.
(i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Securities and
Definitive Securities upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Security or to a Holder of a Definitive Security for
any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer taxes or similar governmental charge payable upon exchange or
transfer pursuant to Sections 2.10, 3.6, 4.5, 4.14 and 10.5 hereof).
(iii) The Registrar shall not be required (A) to register the
transfer of or to exchange Securities during a period beginning at the
opening of business 15 days before the day of mailing of notice of
redemption and ending at the close of business on the day of such mailing,
(B) to register the transfer of or to exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Security being redeemed in part
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or (C) to register the transfer of or to exchange a Security between a
record date and the next succeeding Interest Payment Date.
(iv) All Global Securities and Definitive Securities issued upon any
registration of transfer or exchange of Global Securities or Definitive
Securities shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Global Securities or Definitive Securities surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required (1) to issue, to register
the transfer of or to exchange Securities during a period beginning at
the opening of business 15 days before the day of mailing of notice of
redemption and ending at the close of business on the day of such
mailing, (2) to register the transfer of or to exchange any Security so
selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part or (C) to register the
transfer of or to exchange a Security between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Security, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Security is registered as the absolute owner of
such Security for the purpose of receiving payment of principal of,
premium, if any, Liquidated Damages, if any, and interest on such
Securities and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Securities and
Definitive Securities in accordance with the provisions of Section 2.2
hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.6 to
effect a transfer or exchange may be submitted by facsimile, PROVIDED
original copies are promptly sent to the Registrar.
(ix) Each Holder of a Security agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange
or assignment of such Holder's Security in violation of any provision
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of this Indenture and/or applicable United States federal or state
securities law.
(x) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Security (including any transfers between
or among Depositary participants or beneficial owners of interests in any
Global Security) other than to require delivery of such certificates and
other documentation or evidence as are expressly required by, and to do so
if and when expressly required by the terms of, this Indenture, and to
examine the same to determine substantial compliance as to form with the
express requirements hereof.
SECTION 2.7 REPLACEMENT SECURITIES.
If any mutilated Security is surrendered to the Trustee or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Security, the Company shall issue and the Trustee, upon the
written order of the Company signed by two Officers of the Company, shall
authenticate a replacement Security if the Trustee's requirements are met. An
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Trustee and the Company to protect the Company, the Trustee, any Agent
and any authenticating agent from any loss that any of them may suffer if a
Security is replaced. The Company may charge for its expenses in replacing a
Security.
Every replacement Security is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
SECTION 2.8 OUTSTANDING SECURITIES.
The Securities outstanding at any time are all the Securities authenti
cated by the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.9 hereof, a
Security does not cease to be outstanding because the Company or an Affiliate of
the Company holds such Security.
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If a Security is replaced pursuant to Section 2.7 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the principal amount of any Security is considered paid under
Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate, of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay all of the principal, Liquidated Damages, if any, and interest
and premium, if any, due on the Securities payable on that date, then on and
after that date such Securities shall be deemed to be no longer outstanding and
shall cease to accrue interest.
SECTION 2.9 TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or by any Person directly or indirectly controlling or controlled
by or under direct or indirect common control with the Company, shall be
considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Securities that a Responsible Officer of the
Trustee actually knows are so owned shall be so disregarded.
SECTION 2.10 TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities upon a written
order of the Company signed by two Officers of the Company. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities
and as shall be reasonably acceptable to the Trustee. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate definitive
Securities in exchange for temporary Securities.
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Holders of temporary Securities shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11 CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Securities surrendered
for registration of transfer, exchange, payment, replacement or cancellation and
shall destroy cancelled Securities (subject to the record retention requirements
of the Exchange Act). Certification of the destruction of all Securities shall
be delivered to the Company. Subject to Section 2.7 hereof, the Company may not
issue new Securities to replace Securities that it has paid or that have been
delivered to the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent lawful
under applicable law, interest payable on the defaulted interest, to the Persons
who are Holders on a subsequent special record date, in each case at the rate
provided in the Securities and in Section 4.1 hereof. Such defaulted interest,
and the interest thereon, may be paid by the Company, at its election in each
case, as provided in clause (i) or (ii) below.
(i) The Company shall notify the Trustee in writing of the amount of
defaulted interest, plus interest payable thereon, proposed to be paid on
each Security and the date of the proposed payment. The Company shall fix
or cause to be fixed each such special record date and payment date,
PROVIDED that no such special record date shall be less than 10 days prior
to the related payment date for such defaulted interest. At least 15 days
before the special record date, the Company (or, upon the written request
of the Company, the Trustee in the name and at the expense of the Company)
shall mail or cause to be mailed to Holders a notice that states the
special record date, the related payment date and the amount of such
interest to be paid, and, at the same time, the Company shall deposit with
the Trustee an amount of U.S. Legal Tender equal to the aggregate amount
proposed to be paid in respect of such defaulted interest and shall make
arrangements satisfactory to the Trustee for such deposit prior to the date
of the proposed payment. Such U.S. Legal
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Tender shall be held in trust for the benefit of the Persons entitled to
such defaulted interest; or
(ii) The Company may make payment on any defaulted interest and on the
interest thereon in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant
to this clause, such manner shall be deemed practicable by the Trustee.
SECTION 2.13 CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; PROVIDED that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the "CUSIP" numbers.
SECTION 2.14 RECORD DATE.
The record date for purposes of determining the identity of Holders of
Securities entitled to vote or consent to any action by vote or consent
authorized or permitted under this Indenture shall be determined as provided for
in TIA Section 316(c).
ARTICLE III
REDEMPTION
SECTION 3.1 NOTICES TO TRUSTEE.
If the Company elects to redeem Securities pursuant to paragraph 5 or
6 of the Securities at the applicable redemption price set forth therein, it
shall notify
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the Trustee and the Paying Agent in writing of the redemption date and the
principal amount of Securities to be redeemed.
The Company shall give the notice provided for in this Section 3.1 at
least 45 days before the redemption date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions contained herein.
SECTION 3.2 SELECTION OF SECURITIES TO BE REDEEMED OR REPURCHASED.
If less than all of the Securities are to be redeemed or repurchased
in an offer to purchase at any time, selection of Securities for redemption or
repurchase will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Securities are
listed, or, if the Securities are not so listed, on a PRO RATA basis, by lot or
by such method as the Trustee shall deem fair and appropriate; PROVIDED, that no
Securities of a principal amount of $1,000 or less shall be redeemed or
repurchased in part.
SECTION 3.3 NOTICE OF REDEMPTION OR REPURCHASE.
Subject to Section 11.2 hereof, at least 30 days but not more than 60
days before a redemption date or repurchase date, the Company shall mail or
cause to be mailed, by first-class mail a notice of redemption or repurchase to
each Holder whose Securities are to be redeemed or repurchased at its registered
address.
The notice shall identify the Securities to be redeemed or repurchased
and shall state:
(1) the redemption date or repurchase date, as the
case may be;
(2) the redemption price or repurchase price, as the
case may be;
(3) the CUSIP or CINS number, if any;
(4) the name and address of the Paying Agent to which
the Securities are to be surrendered for redemption or repurchase;
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(5) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price or
repurchase price, as the case may be, and accrued interest, if any;
(6) that, unless the Company defaults in making the
redemption or repurchase payment, interest on Securities called for
redemption or repurchase ceases to accrue on and after the redemption
date or repurchase date, as the case may be, and the only remaining
right of the Holders is to receive payment of the redemption price or
repurchase price, as the case may be, upon surrender to the Paying
Agent;
(7) if any Security is being redeemed or repurchased
in part, the portion of the principal amount of such Security to be
redeemed or repurchased and that, after the redemption date or
repurchase date, as the case may be, upon surrender of such Security,
a new Security or Securities in principal amount equal to the
unredeemed or unrepurchased portion thereof will be issued.
On receipt of a request signed by an Officer of the Company, the
Trustee shall give the notice of redemption or repurchase on behalf of the
Company, in the name of the Company and at the Company's expense.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued and unpaid interest and Liquidated Damages, if
any, to the redemption date.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE.
At least one Business Day before the redemption date, the Company
shall deposit with the Paying Agent money sufficient to pay the redemption price
of, Liquidated Damages, if any, and accrued interest on all Securities to be
redeemed on
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that date other than Securities or portions thereof called for redemption on
that date which have been delivered by the Company to the Trustee for
cancellation.
If the Company complies with the provisions of the preceding paragraph
and payment of the Securities called for redemption is not otherwise prohibited
or prevented, on and after the redemption date, interest shall cease to accrue
on the Securities or the portions of Securities called for redemption. If a
Security is redeemed on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Security was registered at the close of
business on such record date. If any Security called for redemption shall not
be so paid upon surrender for redemption because of the failure of the Company
to comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest or Liquidated Damages, if any, not paid on such
unpaid principal, in each case at the rate provided in the Securities and in
Section 4.1 hereof.
SECTION 3.6 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed or repurchased in part,
the Company shall issue and, upon the Company's written request, the Trustee
shall authenticate for the Holder at the expense of the Company a new Security
equal in principal amount to the unredeemed or unrepurchased portion of the
Security surrendered.
SECTION 3.7 OPTIONAL AND REGULATORY REDEMPTION.
The Securities shall not be redeemable at the Company's option except
as set forth in the optional and regulatory redemption provisions set forth in
paragraphs 5 and 6 of Exhibits A and B attached hereto.
ARTICLE IV
COVENANTS
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SECTION 4.1 PAYMENT OF SECURITIES.
The Company shall pay the principal of, premium, if any, Liquidated
Damages, if any, and interest on the Securities in the manner provided in the
Securities. An installment of principal or interest or other amount shall be
considered paid on the date due if the Trustee or Paying Agent holds on that
date money designated for and sufficient to pay the installment in full and is
not prohibited from paying such money to the Holders of the Securities pursuant
to the terms of this Indenture. The Company shall pay all Liquidated Damages, if
any, in the same manner on the dates and in the amounts set forth in the
Registration Rights Agreement.
The Company shall pay interest on overdue principal at the same rate
PER ANNUM borne by the Securities. The Company shall pay interest on overdue
installments of interest and Liquidated Damages, if any, at the same rate PER
ANNUM borne by the Securities, to the extent lawful.
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY; EXCHANGE LISTING.
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.2.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
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The Company hereby designates the Trustee as one such office or agency
of the Company.
SECTION 4.3 LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to or Investment in, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "AFFILIATE
TRANSACTION") unless:
(i) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(ii) the Company delivers to the Trustee (x) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $1 million, a resolution of the Board
of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such
Affiliate Transaction has been approved by a majority of the disinterested
members of the Board of Directors and (y) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $5 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view issued
by an investment banking firm of national standing in the United States, or
in the event such transaction is a type that investment bankers do not
generally render fairness opinions, a valuation or appraisal firm of
national standing.
(b) The restrictions set forth in clause (a) shall not apply to:
(i) any employment agreement entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business of the
Company or such Restricted Subsidiary;
(ii) transactions between or among the Company and/or its Restricted
Subsidiaries;
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(iii) Restricted Payments that are permitted by Section 4.6;
(iv) (A) if no Default or Event of Default shall have occurred and be
continuing, the payment of a fee to Peter A. Morton in connection with the
rendering of services to or on behalf of the Company pursuant to the
Supervisory Agreement and (B) the reimbursement of expenses (including,
without limitation, allocated salaries and overhead) incurred by entities
controlled by Peter A. Morton in providing support and travel services to
the Company and its Restricted Subsidiaries in the ordinary course of
business consistent with past practices;
(v) the payment of reasonable and customary fees paid to, and
indemnity provided on behalf of, officers, directors or employees of the
Company or any Restricted Subsidiary;
(vi) transactions in which the Company or any of its Restricted
Subsidiaries, as the case may be, delivers to the Trustee a letter from an
investment banking firm or valuation or appraisal firm, as the case may be,
stating that such transaction meets the requirements of clause (i) of
subparagraph (a) of this Section;
(vii) loans to employees in the ordinary course of business of the
Company; PROVIDED that any such loan in excess of $200,000 must be approved
by a majority of the disinterested members of the Board of Directors of the
Company;
(viii) transactions contemplated by the Completion Guaranty and the
New Credit Facility; and
(ix) any agreement as in effect as of the Issue Date or any amendment
thereto (so long as any such amendment is no less favorable to the holders
of the Securities in any material respect than the original agreement as in
effect on the Issue Date) or any transaction contemplated thereby.
SECTION 4.4 LIMITATION ON INCURRENCE OF ADDITIONAL INDEBTEDNESS AND ISSUANCE
OF DISQUALIFIED STOCK.
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The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Indebtedness) and that the Company shall not, and shall not permit any of its
Restricted Subsidiaries to issue any shares of Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue preferred stock; PROVIDED,
HOWEVER, that the Company and any Guarantor may incur Indebtedness (including
Acquired Indebtedness) or issue shares of Disqualified Stock, and any Restricted
Subsidiary may incur Acquired Indebtedness if the Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(a) Indebtedness of the Company under the New Credit Facility
with respect thereto in an aggregate principal amount outstanding at any time
not to exceed $77.0 million, less the aggregate amount of all proceeds from all
Asset Sales that have been applied since the Issue Date to permanently reduce
the outstanding amount of such Indebtedness pursuant to Section 4.5;
(b) the incurrence by the Company of Existing Indebtedness;
(c) the incurrence by the Company of Indebtedness represented by
the Securities;
(d) the incurrence by the Company or its Restricted Subsidiaries
of Indebtedness (including, without limitation, Indebtedness under the New
Credit Facility) represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case incurred for the purpose of
financing all or any part of the purchase price, lease or cost of construction
or improvement of
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property, plant or equipment (including without limitation, slot machines and
other gaming equipment) used in a Permitted Business in an aggregate principal
amount not to exceed $15.0 million at any time outstanding;
(e) the incurrence by the Company or its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by this Indenture to be incurred;
(f) the incurrence by the Company or its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
its Restricted Subsidiaries, PROVIDED, HOWEVER, that (i) if the Company is
the obligor on such Indebtedness, such Indebtedness is expressly subordinated
to the prior payment in full in cash of all Obligations with respect to the
Securities and (ii) (1) any subse quent issuance or transfer of Equity
Interests that results in any such Indebtedne ss being held by a Person other
than the Company or its Restricted Subsidiaries and (2) any sale or other
transfer of any such Indebtedne ss to a Person that is not the Company or a
Restricted Subsidiary shall be deemed, in each case, to constitute an
incurrence of such Indebtedne ss by the Company or such Restricted Subsidiary;
(g) the incurrence by the Company or its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating or variable rate Indebtedness or
for the purpose of protecting against fluctuation in interest rates or the value
of foreign currencies purchased or received, in each case in respect of
Indebtedness that is permitted by the terms of this Indenture to be outstanding;
PROVIDED, HOWEVER, that in the case of Hedging Obligations that are incurred for
the purpose of fixing or hedging interest rate risks with respect to
Indebtedness, the notional principal amount of any such Hedging Obligation does
not exceed the principal amount of the Indebtedness to which such Hedging
Obligation relates and in the case of Hedging Obligations incurred for the
purpose of protecting against fluctuations in interest rates or the value of
foreign currencies purchased or received, such Hedging Obligations do not
increase the Indebtedness of the Company and its Restricted Subsidiaries
outstanding other than as a result of fluctuations in foreign currency exchange
rates or by reason of fees, indemnities and compensation payable thereunder;
(h) Indebtedness incurred solely in respect of performance,
surety and similar bonds or completion guarantees, to the extent that such
incurrence
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does not result in the incurrence of any obligation for the payment
of borrowed money to others;
(i) Indebtedness arising in the ordinary course of business out
of standby letters of credit covering workers compensation, performance or
similar obligations;
(j) any guarantee of the Company of Indebtedness or other
obligations of any of its Restricted Subsidiaries so long as the incurrence of
such Indebtedness incurred by such Restricted Subsidiary is permitted under the
terms of this Indenture;
(k) the incurrence by the Company of Subordinated Indebtedness
payable to Permitted Holders in respect of payments made under the Completion
Guaranty or the Make-Well Agreement, which indebtedness shall have a stated
maturity not less than 91 days following the earlier of the maturity or
repayment of the Securities and accrue interest at a rate per annum not in
excess of the rate of interest payable on the Securities. Such Subordinated
Indebtedness may be incurred by the Company only if the Company is unable to
obtain approval from the appropriate Gaming Authorities for the issuance of
preferred stock to a Permitted Holder in respect of payments made under the
Completion Guaranty, which preferred stock shall have a redemption date not less
than 91 days following the earlier of the maturity or repayment of the
Securities and accrue dividends at a rate not in excess of the rate of interest
payable on the Securities; and
(l) the incurrence by the Company of additional Indebtedness
(including, without limitation, Indebtedness under the New Credit Facility) in
an aggregate principal amount (or accreted value, as applicable) at any time
outstanding not to exceed $5.0 million.
For purposes of determining compliance with this Section 4.4, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (a) through (l) above or is
entitled to be incurred pursuant to the first paragraph of this Section 4.4, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest, the accretion of accreted
value and the payment of interest in the
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form of additional Indebtedness will not be deemed to be an incurrence of
Indebtedness for purposes of this Section 4.4.
SECTION 4.5 LIMITATION ON ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (as determined in good
faith by the Board of Directors) of the assets or Equity Interests issued or
sold or otherwise disposed of and (ii) at least 80% of the consideration
therefor received by the Company or such Restricted Subsidiary is in the form of
cash or Cash Equivalents; PROVIDED that the amount of (x) any liabilities (as
shown on the Company's or such Restricted Subsidiary's most recent balance
sheet) of the Company or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the
Securities or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to an agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are promptly, but in no event more than 30 days after
receipt, converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 270 days after the receipt of any Net Proceeds from an Asset
Sale, the Company or such Restricted Subsidiary may apply such Net Proceeds, at
its option, (a) to permanently reduce Senior Indebtedness (and to
correspondingly permanently reduce commitments with respect thereto in the case
of revolving borrowings), or (b) to the making of a capital expenditure in a
Permitted Business or the acquisition of other assets to be used in a Permitted
Business. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce Indebtedness under the New Credit Facility or invest such
Net Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "EXCESS PROCEEDS."
When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company
will be required to make an offer to all Holders of Securities (an "ASSET SALE
OFFER") to purchase the maximum principal amount of Securities that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accor-
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dance with the procedures set forth in this Indenture. To the extent that the
aggregate amount of Securities tendered pursuant to an Asset Sale Offer is
less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Securities surrendered by Holders thereof exceeds the amount of Excess
Proceeds, the Trustee shall select the Securities to be purchased on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Securities pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section 4.5,
the Company will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under this Section 4.5.
In the event that, pursuant to this Section 4.5, the Company shall be
required to commence an Asset Sale Offer, it shall follow the procedures
specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "OFFER PERIOD"). No later than
five Business Days after the termination of the Offer Period (the "PURCHASE
DATE"), the Company shall purchase the principal amount of Securities required
to be purchased pursuant to this Section 4.5 (the "OFFER AMOUNT") or, if less
than the Offer Amount has been tendered, all Securities tendered in response to
the Asset Sale Offer. Payment for any Securities so purchased shall be made in
the same manner as interest payments are made.
If the Purchase Date is on or after an interest payment record date
and on or before the associated Interest Payment Date, any accrued and unpaid
interest (and Liquidated Damages, if any, due on such Interest Payment Date)
shall be paid to the Person in whose name a Security is registered at the close
of business on such record date, and such interest (or Liquidated Damages, if
applicable) shall not be payable to Holders who tender Securities pursuant to
the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy
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to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Asset
Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 4.5 and the length of time the Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Security not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment,
any Security accepted for payment pursuant to the Asset Sale Offer shall cease
to accrue interest on or after the Purchase Date;
(e) that Holders electing to have a Security purchased pursuant
to an Asset Sale Offer may only elect to have all of such Security purchased and
may not elect to have only a portion of such Security purchased;
(f) that Holders electing to have a Security purchased pursuant
to any Asset Sale Offer shall be required to surrender the Security, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Security completed, or transfer by book-entry transfer, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if
the Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Security purchased;
(h) that, if the aggregate principal amount of Securities
surrendered by Holders exceeds the Offer Amount, the Trustee shall select the
Securities to be purchased on a PRO RATA basis (with such adjustments as may be
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deemed appropriate by the Trustee so that only Securities in denominations of
$1,000, or integral multiples thereof, shall be purchased); and
(i) that Holders whose Securities were purchased only in part
shall be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a PRO RATA basis to the extent necessary, the
Offer Amount of Securities or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Securities
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Securities or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 4.5. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Securities tendered by such Holder
and accepted by the Company for purchase, and the Company shall promptly issue a
new Security and the Trustee, upon written request from the Company shall
authenticate and mail or deliver such new Security to such Holder, in a
principal amount equal to any unpurchased portion of the Security surrendered.
Any Security not so accepted shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce the results
of the Asset Sale Offer on the Purchase Date.
SECTION 4.6 LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly: (1) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests including, without
limitation, any dividend or distribution in connection with any merger or
consolidation involving the Company (other than dividends or distributions by a
Restricted Subsidiary so long as, in the case of any dividend or distribution
payable on or in respect of any class or series of securities issued by a
Restricted Subsidiary other than a Wholly Owned Restricted Subsidiary, the
Company or a Restricted Subsidiary receives at least its PRO RATA share of such
dividend or distribution in accordance with its Equity Interests in such class
or series of securities), or to the direct or indirect holders of the Company's
or any of its Restricted Subsidiaries' Equity Interests in their capacity as
such (other than dividends or distributions payable in Equity Interests (other
than Disqualified
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Stock) of the Company); (2) purchase, redeem or otherwise acquire or retire
for value (including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or
any direct or indirect parent of the Company; (3) make any principal payment
on or with respect to, or purchase, redeem, defease or otherwise acquire or
retire for value any Subordinated Indebtedness, except a scheduled repayment
of principal or a payment of principal at Stated Maturity; (3) make any
payment of interest on Subordinated Indebtedness issued pursuant to Section
4.4(k); or (5) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (5) above being collectively
referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after
giving effect to such Restricted Payment:
(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(ii) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.4; and
(iii) such Restricted Payment, together with the aggregate amount
of all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (ii), (iii), (iv), (vi), and (vii) of Section 4.6(b)) is less
than the sum (without duplication) of (1) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after the Issue Date
to the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit), plus (2) 100% of the aggregate net cash
proceeds received by the Company from the issue or sale since the Issue
Date of Equity Interests of the Company (other than Disqualified
Stock) or of Disqualified Stock or debt securities of the Company
that have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold
to a Restricted Subsidiary of the Company), plus (3) 100% of the
aggregate net cash proceeds received by the Company as an equity
contribu-
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tion from a holder or holders of Equity Interests of the Company
(other than Disqualified Stock) but excluding Excluded Contributions,
plus (4) to the extent that any Restricted Investment that was made
after the Issue Date is sold or otherwise liquidated or repaid, the
lesser of (x) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (y) the initial
amount of such Restricted Investment, plus (5) the amount resulting from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries,
such amount not to exceed the amount of Investments made by the Company
or any Restricted Subsidiary in such Unrestricted Subsidiary since the
date hereof that was treated as a Restricted Payment under this
Indenture, plus (6) to the extent not otherwise included in Consolidated
Net Income, the amount of the net reduction in Investments in
Unrestricted Subsidiaries resulting from the payment of cash dividends
received by the Company or any Restricted Subsidiary of the Company from
such Unrestricted Subsidiaries, plus (7) $5.0 million.
(b) The foregoing provisions of this Section 4.6 will not
prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of this Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of the Company in exchange for, or out
of the net cash proceeds of the substantially concurrent sale (other than
to a Restricted Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); PROVIDED that the amount
of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded
from clause (iii)(B) or (C) of Section 4.6(a);
(iii) the defeasance, redemption, repurchase or other acquisition
of Subordinated Indebtedness in exchange for or with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness or of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of Equity Interests in the Company (other than any Disqualified
Stock); PROVIDED that the amount of any such net cash proceeds that are
utilized for
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any such defeasance, redemption, repurchase or other acquisition shall be
excluded from clause (iii)(B) or (C) of Section 4.6(a);
(iv) the repurchase, retirement or other acquisition or retirement
for value of common Equity Interests of the Company held by any future,
present or former employee or director of the Company or any of the
Company's Restricted Subsidiaries or the estate, heirs or legatees of,
or any entity controlled by, any such employee or director, pursuant to
any management equity plan or stock option plan or any other management
or employee benefit plan or agreement in connection with the termination
of such person's employment for any reason (including by reason of death
or disability); PROVIDED, HOWEVER, that the aggregate Restricted
Payments made under this clause (iv) does not exceed (A) in the
aggregate, the sum of $1.5 million plus $250,000 for each twelve month
period following the Issue Date and (B) $1.5 million in any calendar
year;
(v) the redemption or repurchase of any Capital Stock or
Indebtedness of the Company or any of its Subsidiaries (other than any
Capital Stock or Indebtedness that is held or beneficially owned by any
Permitted Holder) required by the Regulatory Redemption provisions of
this Indenture (or any substantially comparable provision governing
other Indebtedness), or by any Governmental Authority or by the Board of
Directors of the Company if, in any such case, the ownership of such
Capital Stock or Indebtedness by the holder thereof will preclude,
interfere with, threaten or delay the issuance, maintenance, existence
or reinstatement of any gaming or liquor license, permit or approval, or
result in the imposition or burdensome terms or conditions on such
license, permit or approval;
(vi) so long as no Default or Event of Default shall have occurred
and be continuing, the declaration and payment of dividends to holders
of any such class or series of Disqualified Stock of the Company issued
in accordance with Section 4.4; and
(vii) repurchases of Equity Interests deemed to occur upon exercise
of stock options if such Equity Interests represent a portion of the
exercise price of such options.
(c) The Board of Directors may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if such designation is permitted by
this
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covenant and otherwise would not cause a Default. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments
under Section 4.6(a). All such outstanding Investments will be deemed to
constitute Investments in an amount equal to the greatest of (x) the net book
value of such Investments at the time of such designation, (y) the fair
market value of such Investments at the time of such designation and (z) the
original fair market value of such Investments at the time they were made.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
(d) The amount of all Restricted Payments (other than cash)
shall be the fair market value on the date of the Restricted Payment of the
asset(s) or securities proposed to be transferred or issued by the Company or
such Subsidiary, as the case may be, pursuant to the Restricted Payment. The
fair market value of any non-cash Restricted Payment shall be based on the good
faith determination of the Board of Directors.
SECTION 4.7 CORPORATE EXISTENCE.
Except as provided in Article V, the Company shall do or shall cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence and the corporate, partnership or other existence of
each of the Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each such Restricted Subsidiary and
the rights (charter and statutory) and material franchises of the Company and
its Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company shall not be
required to preserve any such right, or the corporate, partnership, limited
liability or other existence of any Restricted Subsidiary if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of such Restricted Subsidiary and each of its
respective Subsidiaries, taken as a whole, and that the loss thereof is not, and
will not be, adverse in any material respect to the Holders.
SECTION 4.8 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all material taxes, assessments
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and governmental charges levied or imposed upon it or any of its Subsidiaries
or upon the income, profits or property of it or any of its Subsidiaries and
(ii) all lawful claims for labor, materials and supplies which, in each case,
if unpaid, might by law become a material liability, or Lien upon the
property, of it or any of its Subsidiaries; PROVIDED, HOWEVER, that the
Company shall not be required to pay or discharge or cause to be paid or
discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which appropriate provision has been made.
SECTION 4.9 NOTICE OF DEFAULTS.
(a) In the event that $5.0 million or more of Indebtedness of
the Company or any of its Subsidiaries is declared due and payable before its
maturity because of the occurrence of any default under such Indebtedness, the
Company shall promptly give written notice to the Trustee of such declaration,
the status of such default and what action the Company is taking or proposes to
take with respect thereto.
(b) Upon becoming aware of any Event of Default, the Company
shall promptly deliver an Officers' Certificate to the Trustee specifying the
Event of Default.
SECTION 4.10 MAINTENANCE OF PROPERTIES.
The Company and each of its Restricted Subsidiaries shall cause all
material properties owned by or leased to it and used or useful in the conduct
of its business to be maintained and kept in normal condition, repair and
working order and supplied with all necessary equipment and shall cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company or such Restricted Subsidiary may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; PROVIDED, HOWEVER, that
nothing in this Section 4.10 shall prevent the Company or any of its Restricted
Subsidiaries from discontinuing the use, operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Board of Directors of the Company or of the Board of
Directors of the Restricted Subsidiary concerned, or of an officer (or other
agent employed by the Company or of any of its Restricted
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Subsidiaries) of the Company or such Restricted Subsidiary having managerial
responsibility for any such property, desirable in the conduct of the
business of the Company or any of its Restricted Subsidiaries, and if such
discontinuance or disposal is not adverse in any material respect to the
Holders.
SECTION 4.11 COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of, premium, if any, Liquidated Damages, if
any, or interest on the Securities is prohibited or if such event has occurred,
a description of the event and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.12 PROVISION OF FINANCIAL INFORMATION.
Whether or not required by the rules and regulations of the
Commission, so long as any Securities are outstanding, the Company will
furnish to the Holders of Securities (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 if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition
and results of operations of the Company and its consolidated Subsidiaries
and, with respect to the annual information only, a report thereon by the
Company's certified independent accountants and (ii) all current reports that
would be required to be filed with the Commission on Form 8-K if the Company
were required to file such reports, in each case within the time periods set
forth in the Commission's rules and regulations. In addition, whether or not
required by the rules and regulations of the Commission, the Company will
file a copy of such informa-
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tion and report with the Commission for public availability within the time
periods set forth in the Commission's rules and regulations (unless the
Commission will not accept such a filing). In addition, until the
effectiveness of the registration statement relating to the Exchange Offer
pursuant to the Registration Rights Agreement, the Company will furnish to
the Holders and to prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.13 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants hereby (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of, premium, if any, Liquidated
Damages, if any, and interest on or with respect to the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.14 CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, the Company will
be required to make an offer to repurchase all or any part (equal to $1,000 or
an integral multiple thereof), of each Holder's Securities pursuant to the offer
described below (the "CHANGE OF CONTROL OFFER") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of repurchase (the
"CHANGE OF CONTROL PAYMENT"). Within 30 days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Securities on the date specified in such notice, which date shall be no earlier
than 30 days and no later than 60 days from the date such notice is mailed (the
"CHANGE OF CONTROL PAYMENT DATE"), pursuant to the procedures required by this
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws
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and regulations are applicable in connection with the repurchase of the
Securities as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with the provisions
of this Indenture relating to a Change of Control Offer, the Company will
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations described under this Section 4.14 by
virtue thereof.
(b) On the Change of Control Payment Date, the Company will,
to the extent lawful, (A) accept for payment all Securities or portions
thereof properly tendered pursuant to the Change of Control Offer, (B)
deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Securities or portions thereof so tendered and (C)
deliver or cause to be delivered to the Trustee the Securities so accepted
together with an Officers' Certificate stating the aggregate principal amount
of Securities or portions thereof being purchased by the Company. The Paying
Agent will promptly mail to each Holder of Securities so tendered the Change
of Control Payment for such Securities, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book-entry) to each
Holder a new Security equal in principal amount to the unpurchased portion of
the Securities surrendered, if any; PROVIDED that each such new Security will
be in a principal amount of $1,000 or an integral multiple thereof. The
Company will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
(c) If the payment date in connection with a Change of Control
Offer hereunder is on or after an interest payment record date and on or before
the associated Interest Payment Date, any accrued and unpaid interest (and
Liquidated Damages, if any, due on such Interest Payment Date) will be paid to
the person in whose name a Security is registered at the close of business on
such record date, and such interest (or Liquidated Damages, if applicable) will
not be payable to Holders who tender Securities pursuant to such Change of
Control Offer.
(d) Except as described in this Section 4.14, this Indenture
does not contain provisions that permit the Holders of the Securities to require
that the Company repurchase or redeem the Securities in the event of a takeover,
recapitalization or similar transaction.
The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth
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in this Indenture applicable to a Change of Control Offer made by the
Company and purchases all Securities validly tendered and not withdrawn under
such Change of Control Offer.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Securities pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with this Section
4.14, the Company will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.14.
SECTION 4.15 LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS.
The Company shall not, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) that is subordinate in right of payment to any
Indebtedness of the Company unless such Indebtedness is either (a) PARI PASSU in
right of payment with the Securities or (b) subordinate in right of payment to
the Securities.
SECTION 4.16 LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to:
(i) (1) pay dividends or make any other distributions to the Company
or any of its Restricted Subsidiaries (A) on its Capital Stock or (B) with
respect to any other interest or participation in, or measured by, its
profits, or of its Restricted Subsidiaries;
(ii) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
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(iii) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.
(b) The provision of Section 4.16(a) will not apply to
encumbrances or restrictions existing under or by reason of:
(i) Existing Indebtedness as in effect on the Issue Date;
(ii) the New Credit Facility as in effect as of the date hereof, and
any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, PROVIDED
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no more
restrictive with respect to such dividend and other payment restrictions
than those contained in the New Credit Facility as in effect on the date
hereof;
(iii) this Indenture and the Securities;
(iv) applicable law, rules or regulations, or any order or ruling by
a Governmental Authority or a Gaming Authority;
(v) any instrument of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (but
not created in connection with or in contemplation 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, or the property
or assets of the Person, so acquired, PROVIDED that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this
Indenture to be incurred;
(vi) customary non-assignment provisions in leases, licenses,
encumbrances, contracts or similar agreements entered into or acquired in
the ordinary course of business;
(vii) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (iii) of Section 4.16(a) on the property so acquired;
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(viii) contracts for the sale of assets, including, without
limitation, customary restrictions with respect to a Subsidiary pursuant to
an agreement that has been entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Subsidiary; and
(ix) Permitted Refinancing Indebtedness, PROVIDED that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in
the agreements governing the Indebtedness being refinanced.
SECTION 4.17 LIMITATION ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens, unless the Securities
are secured equally and ratably with (or prior to, in the case of Subordinated
Indebtedness) the obligation or liability secured by such Lien.
SECTION 4.18 LIMITATION ON BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business other than Permitted Businesses, except to such
extent as would not be material to the Company and its Subsidiaries taken as a
whole. The Company or its Restricted Subsidiaries may not enter into any Gaming
Jurisdictions in which the Company or its Restricted Subsidiary is not presently
licensed if all of the Holders of the Securities will be required to be
licensed, PROVIDED that this sentence shall not prohibit the Company or its
Restricted Subsidiary from entering any jurisdiction that does not require the
licensing or qualification of all of the Holders of the Securities, but reserves
the discretionary right to license or qualify any Holder of Securities.
SECTION 4.19 PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Securities for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the
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Securities unless such consideration is offered to be paid or is paid to all
Holders of the Securities that consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
SECTION 4.20 DILIGENCE WITH RESPECT TO THE EXPANSION
Except during the pendency of any force majeure event or any other
event that makes completion of the Expansion physically impossible or unlawful,
the Company will cause the Expansion to be prosecuted with reasonable diligence
and continuity.
SECTION 4.21 SUBSIDIARY GUARANTEES
(a) Prior to incurring any Indebtedness (other than Acquired
Indebtedness), a Restricted Subsidiary shall execute a guarantee (a "Subsidiary
Guarantee") in substantially the form of Exhibit E attached hereto and deliver
an opinion of counsel relating to the enforceability and authorization of such
Subsidiary Guarantee in accordance with the terms of this Indenture, pursuant to
which such Subsidiary shall become a Guarantor, on a senior subordinated basis,
of the Company's payment obligations under the Securities and this Indenture.
(b) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Guarantor) shall be released and
relieved of any obligations under its Subsidiary Guarantee; provided that the
Net Proceeds of such sale or other disposition are applied in accordance with
the provisions of Section 4.5 hereof. In addition, in the event the Board of
Directors of the Company designates a Guarantor to be an Unrestricted
Subsidiary, then such Guarantor will be released and relieved of any obligations
under its Guarantee; provided that such designation is conducted in accordance
with the applicable provisions hereof.
SECTION 4.22 COMPLETION GUARANTY
The Company shall not implement a discretionary change to the plans
relating to the Expansion that would cause budgeted construction and development
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costs to exceed $87.0 million, unless Peter A. Morton increases the maximum
amount available under the Completion Guaranty, in the amount of such budgeted
excess.
SECTION 4.23 MATERIAL CHANGES TO THE EXPANSION
Prior to making a discretionary change to the plans relating to the
Expansion that is materially different from minimum requirements listed on Sched
ule A hereto, the Company shall obtain the prior written consent of the Holders
of a majority in principal amount of the Securities then outstanding.
ARTICLE V
MERGERS; SUCCESSOR CORPORATION
SECTION 5.1 RESTRICTION ON MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF
ASSETS.
The Company may not consolidate or merge with or into (whether or not
the Company is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another corporation, Person or
entity unless:
(i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation
organized or existing under the laws of the United States, any state of the
United States or the District of Columbia;
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(ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or
Person to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made assumes all the obligations of
the Company under the Securities and this Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists;
(iv) except in the case of a merger of the Company with or into a
Wholly Owned Subsidiary of the Company,
(1) the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company),
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made will, after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of Section 4.4 or
(2) after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, the Fixed Charge Coverage Ratio of the Company or such Person,
as the case may be, shall be at least 1.75 to 1 and greater than the
consolidated Fixed Charge Coverage Ratio of the Company prior to giving
pro forma effect to such transaction;
(v) such transactions would not require any Holder of Securities
to obtain a Gaming License or be qualified under the laws of any
applicable Gaming Jurisdiction, PROVIDED that such Holder would not have
been required to obtain a Gaming License or be qualified under the laws
of any applicable Gaming Jurisdiction in the absence of such
transactions; and
(vi) such transactions would not result in a loss of any
qualification or any material license of the Company or its Restricted
Subsidiaries neces sary for any Permitted Business then operated by the
Company or its Restricted Subsidiaries.
Notwithstanding the foregoing clause (iv), (A) any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company and (B) the Company may merge with an
Affiliate incorpo-
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rated solely for the purpose of reincorporating the Company in another state
of the United States so long as the amount of Indebtedness of the Company and
its Restricted Subsidiaries is not increased thereby.
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all
of the assets of the Company in accordance with Section 5.1 hereof, the
successor corporation formed by such consolidation or into or with which the
Company is merged or to which such sale, assignment, transfer, lease,
conveyance or other disposition is made shall succeed to, and be substituted
for (so that from and after the date of such consolidation, merger, sale,
lease, conveyance or other disposition, the provisions of this Indenture
referring to the "Company" shall refer instead to the successor corporation
and not to the Company and may exercise every right and power of the Company
under this Indenture with the same effect as if such successor Person had
been named as the Company herein; PROVIDED, HOWEVER, that the predecessor
Company shall not be relieved from the obligation to pay the principal of,
premium, if any, Liquidated Damages, if any, and interest on the Securities
except in the case of a sale of all of the Company's assets that meets the
requirements of Section 5.1 hereof.
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT.
The following events are defined as "EVENTS OF DEFAULT":
(i) default for 30 days in the payment when due of interest on,
or Liquidated Damages, if any, with respect to, the Securities;
(ii) default in payment when due of the principal of or premium,
if any, on the Securities;
(iii) failure by the Company or any of its Restricted Subsidiaries
to comply with the provisions described under Sections 4.4, 4.5, 4.6, 4.14
or Article V;
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(iv) failure by the Company or any of its Restricted Subsidiaries
for 45 days after notice by the Trustee or by the Holders of at least
25% of Securities then outstanding to comply with any of its other
agreements in this Indenture or the Securities;
(v) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries), other than Indebtedness
owed to the Company or a Restricted Subsidiary, whether such
Indebtedness or guarantee now exists, or is created after the date
hereof, which default (a) is caused by a failure to pay at final
maturity (giving effect to any applicable grace periods and any
extensions thereof) the principal amount of such Indebtedness (a
"PAYMENT DEFAULT") or (b) results in the acceleration of such
Indebtedness, prior to its express maturity and, in each case, the
principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more;
(vi) failure by the Company or any of its Subsidiaries to pay a
final judgment or judgments aggregating in excess of $5.0 million, which
final judgments are not paid, discharged or stayed for a period of 60
days (net of applicable insurance coverage which is acknowledged in
writing by the insurer);
(vii) Peter A. Morton purports to revoke or rescind the
Completion Guaranty or denies in writing his obligations thereunder;
(viii) the loss of the legal right to operate any Casino by the
Company or any of its Restricted Subsidiaries resulting in a cessation
of operations for a period of more than 90 days;
(ix) a failure by Peter A. Morton to comply with any of his
payment obligations in the Completion Guaranty;
(x) the Company or any of the Company's Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a
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Significant Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case or proceeding,
(B) consents to the entry of an order for relief against it
in an involuntary case or proceeding,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) ceases or suspends generally payment of its debts or
announces an intention so to do or is (or is deemed for the purposes of
any law applicable to it to be) unable to pay its debts as they fall
due, commences negotiations with, or makes a proposal to, its creditors
generally with a view to a readjustment or rescheduling of its
indebtedness or makes a general assignment for the benefit of or a
composition with its creditors generally or a moratorium is declared in
respect of any of its indebtedness; and
(xi) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any of the Company's
Significant Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary in an involuntary case
or proceeding;
(B) appoints a Custodian of the Company or any of the
Company's Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary or for all
or substantially all of its property;
(C) orders the liquidation of the Company or any of the
Company's Significant Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary;
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and, in each case, the order or decree remains unstayed and in effect
for 60 consecutive days; PROVIDED, HOWEVER, that if the entry of such
order or decree is appealed and dismissed on appeal then the Event of
Default hereunder by reason of the entry of such order or decree shall
be deemed to have been cured.
The term "CUSTODIAN" means any receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law.
SECTION 6.2 ACCELERATION.
If an Event of Default (other than an Event of Default with respect
to the Company or any of the Company's Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, specified in clause (x) or (xi) of Section 6.1) shall occur and
be continuing, the Trustee or the Holders of at least 25% in principal amount
of the then outstanding Securities may declare all the Securities to be due
and payable immediately. Upon any such declaration, the Securities shall
become due and payable immediately. If an Event of Default specified in
clause (x) or (xi) of Section 6.1 shall occur and be continuing with respect
to the Company or any of the Company's Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, then all outstanding Securities shall become due and payable
immediately without further action or notice.
At any time after a declaration of acceleration with respect to the
Securities as described in the preceding paragraph, the Holders of a majority
in aggregate principal amount of the Securities then outstanding may rescind
and cancel such declaration and its consequences (i) if the rescission would
not conflict with any judgment or decree, (ii) if all existing Events of
Default have been cured or waived except nonpayment of principal, premium,
Liquidated Damages or interest that has become due solely because of the
acceleration, (iii) to the extent the payment of such interest is lawful,
interest on overdue installments of interest and Liquidated Damages, if any,
and overdue principal, which has become due otherwise than by such
declaration of acceleration, has been paid, (iv) if the Company has paid the
Trustee its reasonable compensation and reimbursed the Trustee for its
expenses, disbursements and advances and (v) in the event of the cure or
waiver of an Event of Default of the type described in clause (v) of Section
6.1, the Trustee shall have received an Officers' Certificate and an Opinion
of Counsel that such Event of Default has been
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cured or waived. No such rescission shall affect any subsequent Default or
impair any right consequent thereto.
SECTION 6.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, premium, if any, Liquidated Damages, if any, or
interest on the Securities or to enforce the performance of any provision of
the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or
remedy maturing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are cumulative to
the extent permitted by law.
SECTION 6.4 WAIVER OF PAST DEFAULT.
Holders of not less than a majority in aggregate principal amount
of the then outstanding Securities by notice to the Trustee may on behalf of
the Holders of all of the Securities waive an existing Default or Event of
Default and its consequences hereunder, except a continuing Default or Event
of Default in the payment of interest, Liquidated Damages, if any, premium,
if any, on, or principal of, the Securities (including in connection with an
offer to purchase) (PROVIDED, HOWEVER, that the Holders of a majority in
aggregate principal amount of the then outstanding Securities may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured for every purpose of this Indenture; but no such waiver shall
extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION 6.5 CONTROL BY MAJORITY.
Holders of the Securities may not enforce this Indenture or the
Securities except as provided in this Article VI and under the TIA. The Holders
of not less than a majority in principal amount of the outstanding Securities
may direct
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the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on it.
However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, that the Trustee determines may be unduly prejudicial
to the rights of another Holder, or that may involve the Trustee in personal
liability; PROVIDED, HOWEVER, that the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with such direction.
In the event the Trustee takes any action or follows any direction pursuant
to this Indenture, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against any loss, cost, expense or
liability caused by taking such action or following such direction.
SECTION 6.6 LIMITATION ON SUITS.
No Holder of any Securities may pursue any remedy with respect to
this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of
a continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal
amount of the outstanding Securities make a written request to the
Trustee to pursue a remedy;
(3) such Holder or Holders offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(4) the Trustee does not comply with the request
within 60 days after receipt of the notice, request and the offer and,
if requested, the provision of indemnity; and
(5) during such 60-day period the Holders of a
majority in principal amount of the outstanding Securities (excluding
the Company or Affiliates of the Company) do not give the Trustee a
direction which, in the opinion of the Trustee, is inconsistent with
the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
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SECTION 6.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of, premium, if any, Liquidated
Damages, if any, or interest on the Security, on or after the respective due
dates expressed or provided for in the Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder; PROVIDED, however,
that the rights of any Holder shall be subject to the regulatory redemption
provisions set forth in paragraph 6 of Exhibits A and B hereto.
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(i) or (ii) occurs
and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company or any other obligor on the
Securities for the whole amount of principal of, premium, if any, Liquidated
Damages, if any, and interest remaining unpaid, together with interest
overdue on principal and to the extent that payment of such interest is
lawful, interest on overdue installments of interest and Liquidated Damages,
if any, in each case at the rate PER ANNUM borne by the Securities and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disburse ments and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to any of the Company
(or any other obligor upon the Securities), its creditors or its property and
shall be entitled and empowered to collect and receive any monies or other
securities or property payable or deliverable upon the conversion or exchange
of the securities or upon any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Holder to make such payments to the Trustee and, in the event
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that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent
and counsel, and any other amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee
to vote in respect of the claim of any Holder in any such proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money or property pursuant to this
Article VI, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to Holders for amounts due and unpaid on the Securities for
principal, premium, if any, Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal, premium, if any,
Liquidated Damages, if any, and interest, respectively; and
Third: the balance, if any, to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted
by it as Trustee, a court in its discretion may require the filing by any
party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having
due regard to the merits and good faith of the claims or defenses made by the
party litigant. This Section 6.11 shall not apply to a suit by the Trustee, a
suit by a Holder or group of Holders of more than 10% in aggregate principal
amount of the outstanding Securities, or to any suit instituted by any Holder
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for the enforcement or the payment of the principal of, premium, if any,
Liquidated Damages, if any, or interest on any Securities on or after the
respective due dates expressed or provided for in the Security.
ARTICLE VII
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.
(b) Except during the continuance of a Default:
(i) The Trustee will perform such duties and only such duties as are
specifically set forth herein and no implied covenants or obligations shall
be read into this Indenture against the Trustee; and
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions conforming to
the requirements of this Indenture; however, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of paragraph (b) of this
Section 7.1;
(ii) The Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts;
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(iii) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5; and
(iv) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of
any of its rights or powers, if it shall have reasonable grounds to
believe that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(d) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(e) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law.
(f) Every provision of this Indenture that in any way relates to
the Trustee is subject to the provisions of this Section 7.1 and to the
provisions of the TIA.
(g) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity satisfactory to it
against the losses, costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction.
SECTION 7.2 RIGHTS OF TRUSTEE.
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate and an Opinion of Counsel. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such certificate or opinion.
(c) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent (other than an agent
who is an employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be authorized or
within its rights or powers provided that the Trustee's conduct does not
constitute bad faith, wilful misconduct or negligence.
(e) The Trustee shall not be charged with knowledge of any
Default or Event of Default unless either (i) a Responsible Officer shall have
actual knowledge thereof or (ii) the Trustee shall have received notice thereof
in accordance with Section 11.2 hereof from the Company or any Holder.
(f) The Trustee or Paying Agent shall not be liable for interest
on any money received by it except as the Trustee or Paying Agent may agree in
writing with the Company. Money held in trust by the Trustee or Paying Agent
need not be segregated from other funds except to the extent required by law and
except for money held in trust under Article IX of this Indenture.
(g) Except with respect to Section 4.1, the Trustee shall have
no duty to inquire as to the performance of the Company with respect to the
covenants contained in Article 4. In addition, the Trustee shall not be deemed
to have knowledge of an Event of Default except
(i) any Default or Event of Default occurring pursuant
to Sections 4.1, 6.1(i) or 6.1(ii) or
(ii) any Default or Event of Default of which the
Trustee shall have received written notifications or obtained actual
knowledge.
(h) Delivery of reports, information and documents to the
Trustee under Section 4.12 is for informational purposes only and the Trustee's
receipt of the foregoing shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of their covenants
hereunder (as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
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SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. However, the Trustee is subject to
Sections 7.10 and 7.11.
SECTION 7.4 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in this Indenture or any document issued in connection with the sale
of Securities or any statement in the Securities other than the Trustee's
certificate of authentication. The Trustee shall not be responsible for
filing any notice in any public office at any time or times.
SECTION 7.5 NOTICE OF DEFAULTS.
If a Default or an Event of Default occurs and is continuing and if
it is known to the Trustee, the Trustee shall mail to each Holder notice of
the Default or Event of Default within 90 days after the occurrence thereof.
Except in the case of a Default or Event of Default in payment of principal
of, premium, if any, Liquidated Damages, if any, or interest on any Security,
the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is
in the interests of the Holders.
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.
If required by TIA Section 313(a), within 60 days after each May 15
beginning with May 15, 1998, the Trustee shall mail to each Holder a report
dated as of such reporting date that complies with TIA Section 313(a). The
Trustee also shall comply with TIA Section 313(b), (c) and (d).
A copy of each such report at the time of its mailing to the
Holders shall be filed with the SEC and each stock exchange, if any, on which
the Securities are listed.
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The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to time agree in
writing for its services. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances (including reasonable fees, disbursements and expenses of its
agents and counsel) incurred or made by it in addition to the compensation
for its services except any such disbursements, expenses and advances as may
be attributable to the Trustee's negligence or bad faith. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 9.1 hereof.
The Company shall indemnify each of the Trustee, Paying Agent and
Registrant for, and hold it harmless against any and all loss, damage,
claims, liability or expense, including taxes (other than franchise taxes
imposed on the Trustee and taxes based upon, measured by or determined by the
income of the Trustee), arising out of or in connection with the acceptance
or administration of the trust or trusts hereunder, including the reasonable
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.7) and of defending itself against any claim (whether asserted
by any Holder or the Company) or liability in connection with the exercise or
performance of any of its powers or duties hereunder, except to the extent
that such loss, damage, claim, liability or expense is due to its own
negligence, wilful misconduct or bad faith. The Trustee shall notify the
Company promptly of any claim asserted against the Trustee for which it may
seek indemnity. However, the failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense (and
may employ its own counsel) at the Company's expense; PROVIDED, HOWEVER, that
the Company's reimbursement obligation with respect to counsel employed by
the Trustee will be limited to the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need
not reimburse any expense or indemnify against any
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loss or liability incurred by the Trustee as a result of the violation of
this Indenture by the Trustee caused by the Trustee's negligence or wilful
misconduct.
To secure the Company's payment obligations in this Section 7.7,
the Trustee shall have a Lien prior to the Securities against all money or
property held or collected by the Trustee, in its capacity as Trustee, except
money or property held in trust to pay principal of, premium, if any,
Liquidated Damages, if any, or interest on particular Securities. The
Trustee's right to receive payment of any amounts due under this Section 7.7
shall not be subordinated to any of the liabilities or indebtedness of the
Company (notwithstanding that the Securities may be subordinated).
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.1(x) or (xi) occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and
the compensation for the services shall be preferred over the status of the
Holders in a proceeding under any Bankruptcy Law and (without prejudice to
any other rights available to the Trustee under applicable law) are intended
to constitute expenses of administration under any Bankruptcy Law. The
Company's obligations under this Section 7.7 and any claim arising hereunder
shall survive the resignation or removal of any Trustee, the termination of
this Indenture, the discharge of the Company's obligations pursuant to
Article IX and any rejection or termination under any Bankruptcy Law.
SECTION 7.8 REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Company
in writing and may appoint a successor Trustee with the Company's consent.
The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent
under any Bankruptcy Law;
(3) a custodian or other public officer takes charge
of the Trustee or its property;
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(4) the Trustee becomes incapable of acting; or
(5) the Trustee is unable or unwilling to secure any
approval required by a Gaming Authority.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable thereafter, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.7, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.7, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties
of the Trustee under this Indenture. A successor Trustee shall mail notice
of its succession to each Holder. Once the resignation or removal of the
retiring Trustee has become effective, the retiring Trustee shall have no
further obligations under this Indenture and no liability in respect of acts
or omissions of the successor Trustee.
If a successor Trustee does not take office within 30 days after
the retiring Trustee resigns or is removed, the retiring Trustee, the Company
or the Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder who
has been a bona fide holder of a Security for at least six months may
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
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SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to,
another corporation or banking association, the resulting, surviving or
transferee corporation or banking association without any further act shall
be the successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee which shall be eligible
to act as Trustee under TIA Sections 310(a)(1), 310(a)(2) and 310(a)(5). The
Trustee shall have a combined capital and surplus of at least $50,000,000, or
be part of a bank holding company with a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition. If the Trustee has or shall acquire any "conflicting interest"
within the meaning of TIA Section 310(b), the Trustee and the Company shall
comply with the provisions of TIA Section 310(b) (subject to the penultimate
paragraph thereof). If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect hereinbefore specified in this
Article Seven.
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
SECTION 7.12 MONEY HELD IN TRUST.
The Trustee or Paying Agent shall not be liable for interest on any
money received by it except as the Trustee or Paying Agent may agree in
writing with the Company. Money held in trust by the Trustee or Paying Agent
need not be segregated from other funds except to the extent required by law
and except for money held in trust under Article IX of this Indenture.
SECTION 7.13 COMPLETION GUARANTY.
By accepting a Security, the Holder thereof hereby authorizes and
directs the Trustee to execute and deliver, on behalf of the Holder, the
Completion
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Guaranty. The Trustee shall, upon a breach by the Completion Guarantor of
the Completion Guaranty, enforce the rights of the Trustee and the Holders
thereunder as directed by the Holders of a majority in principal amount of
the Securities then outstanding.
ARTICLE VIII
SUBORDINATION OF SECURITIES
SECTION 8.1 AGREEMENT TO SUBORDINATE.
The Company agrees for itself and for its successors, and each
Holder by accepting a Security agrees, that the payment of principal of, and
premium, interest, Liquidated Damages, if any, on, and any other amounts
payable by the Company with respect to, the Securities is subordinated in
right of payment, to the extent and in the manner provided in this Article
VIII, to the prior payment in full of all Senior Indebtedness (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Senior Indebtedness. This Article VIII shall constitute a continuing offer
to all Persons or entities who become holders of, or continue to hold, Senior
Indebtedness. Notwithstanding anything to the contrary in this Indenture or
the Securities, the provisions of this Article VIII are made for the benefit
of the holders of Senior Indebtedness, each of whom is an obligee hereunder
and is entitled to enforce such holder's rights hereunder, without any act or
notice of acceptance hereof or reliance hereon. No amendment, modification
or discharge of any provision of this Article VIII shall be effective against
any holder of Senior Indebtedness unless expressly consented to in writing by
such holder. The provisions of this Article VIII apply notwithstanding
anything to the contrary contained in the Securities or this Indenture. Upon
the maturity of any Senior Indebtedness by lapse of time, acceleration or
otherwise, all principal thereof and interest thereon and other amounts due
in connection therewith shall first be paid in full, or such payment duly
provided for in cash or in manner satisfactory to the holders of such Senior
Indebtedness, before any payment is made on account of the Securities or this
Indenture.
SECTION 8.2 LIQUIDATION, DISSOLUTION, BANKRUPTCY.
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Upon any distribution to creditors of the Company in a liquidation
or dissolution of the Company or in a bankruptcy (whether voluntary or
involuntary), reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property, an assignment for the benefit of
creditors or any marshalling of the Company's assets and liabilities:
(a) holders of Senior Indebtedness of the Company shall be
entitled to receive payment in full and in cash of all principal, interest,
fees, expenses and other Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness)
before the Holders of Securities shall be entitled to receive any payment
with respect to the Securities (except that Holders of Securities may receive
securities that are subordinated at least to the same extent as the
Securities to Senior Indebtedness and any securities issued in exchange for
Senior Indebtedness and payments made from the trust described in Section 9.2
hereof); and
(b) until all principal, interest, fees, expenses and other
Obligations with respect to Senior Indebtedness of the Company are paid in
full, any distribution to which the Holders of Securities would be entitled
but for this Section 8.2 shall be made to the holders of such Senior
Indebtedness (except that Holders of Securities may receive Capital Stock or
any debt securities that are subordinated at least to the same extent as the
Securities to Senior Indebtedness and any securities issued in exchange for
Senior Indebtedness and payments made from the trust described in Section 9.2
hereof).
SECTION 8.3 DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
The Company may not make, and no Holder shall ask for, demand, sue
for or otherwise exercise remedies with respect to any payment upon or in
respect of the Securities, and may not offer to repurchase Securities (other
than in the form of Capital Stock or any debt securities that are
subordinated to the same extent as the Securities to Senior Indebtedness and
any securities issued in exchange for Senior Indebtedness and payments made
from the trust described in Section 9.2 hereof) and the Trustee and the
Holders shall not compel payment or exercise any other remedies with respect
to any payment under the Completion Guaranty if:
(i) a default in the payment of the principal of, or premium or
interest on, or fees or other amounts owing with respect to, Designated
Senior
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Indebtedness occurs and has not been cured or waived in writing (a
"PAYMENT DEFAULT"); or
(ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits holders of the Designated
Senior Indebtedness as to which such default relates to accelerate its
maturity (a "NON-PAYMENT DEFAULT") and the Trustee receives a notice of
such default (a "PAYMENT BLOCKAGE NOTICE") from the Company or the holders
of any Designated Senior Indebtedness.
The Company may and shall resume payments on the Securities and the
Trustee and the Holders may compel payment with respect to any payment under
the Completion Guaranty:
(a) in the case of default referred to in Section 8.3(i)
hereof, upon the date on which such default is cured or waived by the holders
of Designated Senior Indebtedness in writing, and
(b) in case of a default referred to in Section 8.3(ii)
hereof, the earlier of the date on which such nonpayment default is cured or
waived by the holders of Designated Senior Indebtedness in writing or 179
days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Designated Senior Indebtedness has been
accelerated.
The Trustee, for the benefit of the Holders, may exercise other
remedies under the Completion Guaranty:
(x) in the case of default referred to in Section 8.3(i) hereof, only
upon the earlier of the date on which such payment default is cured or
waived by the holders of Designated Senior Indebtedness in writing or 179
days after the inception of such default, and
(y) in the case of a default referred to in Section 8.3(ii), only upon
the earlier of the date on which such default is cured or waived by the
holders of Designated Senior Indebtedness in writing or 179 days after the
date on which the applicable Payment Blockage Notice is received.
No new period of payment blockage or blockage of remedies under the
Completion Guaranty may be commenced unless and until 360 days have elapsed
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since the effectiveness of the immediately prior Payment Blockage Notice. No
nonpayment default referred to in Section 8.3(ii) hereof that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee by holders of Designated Senior Indebtedness and which is known to
the holders of such Designated Senior Indebtedness, shall be, or be made, the
basis for a subsequent Payment Blockage Notice (unless such nonpayment
default shall have been cured or waived for a period of not less than 181
days).
SECTION 8.4 ACCELERATION OF SECURITIES.
The Company and the Trustee shall promptly notify holders of Senior
Indebtedness of the issuance by the Trustee or the receipt of an acceleration
notice following an Event of Default, whereupon the Trustee shall promptly
notify the holders of Designated Senior Indebtedness of such acceleration
notice, provided that failure to give such notice shall not affect the
subordination of the Securities to the Senior Indebtedness as provided in
this Article VIII.
SECTION 8.5 WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Securities at a time when the Trustee or
such Holder, as applicable, in violation of this Article VIII, such payment
shall be held by the Trustee or such Holder, in trust for the benefit of and
shall be paid forthwith over and delivered to, the holders of Senior
Indebtedness as their interests may appear or their Representative under the
credit facility, indenture or other agreement (if any) pursuant to which
Senior Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of all Obligations with respect to
Senior Indebtedness remaining unpaid to the extent necessary to pay such
obligations in full in accordance with their terms, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article VIII, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Indebtedness, and shall not
be liable to any such holders if the Trustee shall pay over or distribute to
or on behalf of Holders or the Company or any other Person money or assets to
which any holders of Senior Indebtedness shall be
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entitled by virtue of this Article VIII, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
SECTION 8.6 NOTICE BY THE COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent
of any facts known to the Company that would cause a payment of any
Obligations with respect to the Securities to violate this Article VIII, but
failure to give such notice shall not affect the subordination of the
Securities to the Senior Indebtedness as provided in this Article VIII.
SECTION 8.7 SUBROGATION.
After all Senior Indebtedness is irrevocably paid in full in cash
or Cash Equivalents satisfactory to the holders thereof and until the
Securities are paid in full, Holders shall be subrogated (equally and ratably
with all other Indebtedness PARI PASSU with the Securities) to the rights of
holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the
Holders have been applied to the payment of Senior Indebtedness. A
distribution made under this Article VIII to holders of Senior Indebtedness
that otherwise would have been made to Holders is not, as between the Company
and Holders, a payment by the Company on the Securities.
SECTION 8.8 RELATIVE RIGHTS.
This Article VIII defines the relative rights of Holders and
holders of Senior Indebtedness. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their terms;
(b) affect the relative rights of Holders and creditors of
the Company other than their rights in relation to holders of Senior
Indebtedness; or
(c) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the rights
of holders and owners of Senior Indebtedness to receive distributions and
payments otherwise payable to Holders.
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If the Company fails because of this Article VIII to pay principal
of or interest on a Security on the due date, the failure is still a Default
or Event of Default.
SECTION 8.9 SUBORDINATION MAY NOT BE IMPAIRED BY THE COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Securities shall be
impaired by any act or failure to act by the Company or any Holder or by the
failure of the Company or any Holder to comply with this Indenture.
SECTION 8.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders
of Senior Indebtedness, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company referred
to in this Article VIII, the Trustee and the Holders shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the
Holders for the purpose of ascertaining the Persons entitled to participate
in such distribution, the holders of Senior Indebtedness and other
Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article VIII.
SECTION 8.11 RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article VIII or any other
provision of this Indenture, the Trustee shall not be charged with knowledge
of the existence of any facts that would prohibit the making of any payment
or distribution by the Trustee, and the Trustee and the Paying Agent may
continue to make payments on the Securities, unless the Trustee shall have
received at its Trustee Office prior to the date of such payment written
notice of facts that would cause the payment of any obligations with respect
to the Securities to violate this Article VIII. Nothing in this Article VIII
shall impair the claims of, or payments to, the Trustee under or pursuant to
Section 7.7 hereof.
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The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior
Indebtedness (or a Representative of such holder) to establish that such
notice has been given by a holder of Senior Indebtedness (or a Representative
of any such holder). In the event that the Trustee determines in good faith
that further evidence is required with respect to the right of any Person as
a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article VIII, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article VIII, and if such
evidence is not furnished, the Trustee may defer any payment which it may be
required to make for the benefit of such person pursuant to the terms of this
Indenture pending judicial determination as to the rights of such Person to
receive such payment.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 8.12 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Security by the Holder's acceptance thereof
authorizes and directs the Trustee on the Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as
provided in this Article VIII, and appoints the Trustee to act as the
Holder's attorney-in-fact for any and all such purposes. If the Trustee does
not file a proper proof of claim or proof of debt in the form required in any
proceeding referred to in Section 6.9 hereof at least 30 days before the
expiration of the time to file such claim, the agents of the lenders under
the New Credit Facility are hereby authorized to file an appropriate claim
for and on behalf of the Holders of the Securities.
SECTION 8.13 NO WAIVER.
No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act, in good faith, by any such holder,
or by any noncompliance by the Company with the terms and provisions and
covenants of this Indenture, regardless of any knowledge thereof which any
such holder may have or be otherwise charged
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with. The holders of Senior Indebtedness or any security or guarantee
thereof, or therefor, may release, sell, exchange or enforce such security or
guarantee or elect any right or remedy, or delay in enforcing, or release any
right or remedy or otherwise deal freely with the Company and any security
for the Senior Indebtedness all without notice to the Holders and all without
affecting the liabilities and obligations of the parties to this Indenture,
even if any right or reimbursement or subrogation or other right or remedy of
the Holders is extinguished, affected or impaired thereby. No provision of
any supplement or amendment to this Indenture or the Securities which
adversely affects in any way the holders of Senior Indebtedness shall be
effective against the holders of Senior Indebtedness who have not consented
thereto in writing.
ARTICLE IX
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.1 TERMINATION OF COMPANY'S OBLIGATIONS.
This Indenture will be discharged and will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange
of the Securities, as expressly provided for in this Indenture) as to all
outstanding Securities when (a) either (i) all the Securities, theretofore
authenticated and delivered (except lost, stolen or destroyed Securities
which have been replaced and Securities for whose payment money has
theretofore been deposited in trust and thereafter repaid to the Company
pursuant to Section 9.3) have been delivered to the Trustee for cancellation
or (ii) all Securities not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Securities not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, Liquidated Damages, if any, and interest on the Securities
to the date of deposit together with irrevocable instructions from the
Company directing the Trustee to apply such funds to the payment thereof at
maturity or redemption, as the case may be; (b) the Company has paid all
other sums payable by the Company under this Indenture; and (c) the Company
has delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel stating that all conditions precedent under this Indenture relating
to the satisfaction and discharge of this Indenture have been complied with.
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The Company may, at its option and at any time, elect to have all
of its obligations discharged with respect to the outstanding Securities
("LEGAL DEFEASANCE") except for (i) the rights of Holders of outstanding
Securities to receive payments in respect of the principal of, premium, if
any, and interest and Liquidated Damages, if any, on such Securities when
such payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Securities concerning issuing temporary
Securities, registration of Securities, mutilated, destroyed, lost or stolen
Securities and the maintenance of an office or agency for payment and money
for security payments held in trust, (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and the Company's obligations in connection
therewith and (iv) this Section 9.1. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company released
with respect to Sections 4.3 through 4.6, Sections 4.10 through 4.12,
Sections 4.14 through Section 4.18, Sections 4.20 and 4.21 and Article V
("COVENANT DEFEASANCE") and thereafter any omission to comply with such
obligations shall not constitute a Default or Event of Default with respect
to the Securities. In the event Covenant Defeasance occurs, events described
under clauses (iii), (iv) (each to the extent relating to a default with
respect to any of Sections 4.3 through 4.6, Sections 4.10 through 4.12,
Sections 4.14 through 4.18, Sections 4.20 and 4.21 and Article V), (v) and
(vi) of Section 6.1 (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) will no longer constitute an Event of
Default with respect to the Securities.
In order to exercise either Legal Defeasance or Covenant
Defeasance,
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders of the Securities, cash in United
States dollars, non-callable Government Securities, or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal of,
premium, if any, and interest and Liquidated Damages, if any, on the
outstanding Securities on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Securities
are being defeased to maturity or to a particular redemption date;
(b) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the
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date hereof, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders of the outstanding Securities will
not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(c) in the case of Covenant Defeasance, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Securities will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had
not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under any
material agreement or instrument (other than this Indenture) to which the
Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound;
(f) the Company must have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company must have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders of Securities over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and
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(h) the Company must have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for in this Indenture relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
SECTION 9.2 APPLICATION OF TRUST MONEY.
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender
or U.S. Government Obligations deposited with it pursuant to Section 9.1, and
shall apply the deposited U.S. Legal Tender and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of
the principal of, premium, if any, Liquidated Damages, if any, and interest
on the Securities. The Trustee shall be under no obligation to invest said
U.S. Legal Tender or U.S. Government Obligations except as it may agree in
writing with the Company.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed on or assessed against the Legal Tender or U.S.
Government Obligations deposited pursuant to Section 9.1 or the interest
received in respect thereof other than any such tax, fee or other charge
which by law is for the account of the Holders of outstanding Securities.
SECTION 9.3 REPAYMENT TO THE COMPANY.
Subject to Section 9.1, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess (as determined by the
Trustee) U.S. Legal Tender or U.S. Government Obligations held by them at any
time and thereupon shall be relieved from all liability with respect to such
money. The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal of, premium, if
any, Liquidated Damages, if any, or interest on the Securities that remains
unclaimed for two years; PROVIDED, HOWEVER, that the Trustee or such Paying
Agent, before being required to make any payment, may at the expense of the
Company cause to be published once in a newspaper of general circulation in
the City of New York or mail to each Holder entitled to such money notice
that such money remains unclaimed and that after a date specified therein
which shall be at least 30 days from the date of such publication or mailing
any unclaimed balance of such money then remaining will be repaid to the
Company. After payment to the Company, Holders entitled to such money must
look to the Company for payment as general creditors unless an applicable law
designates another Person.
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SECTION 9.4 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 9.1 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this Indenture
and the Securities shall be revived and reinstated as though no deposit had
occurred pursuant to Section 9.1 until such time as the Trustee or Paying
Agent is permitted to apply all such U.S. Legal Tender or U.S. Government
Obligations in accordance with Section 9.1; PROVIDED, HOWEVER, that if the
Company has made any payment of principal of, premium, if any, Liquidated
Damages, if any, or interest on any Securities because of the reinstatement
of its obligations, the Company shall be subrogated to the rights of the
Holders of such Securities to receive such payment from the U.S. Legal Tender
or U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE X
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.1 WITHOUT CONSENT OF HOLDERS.
From time to time, the Company and the Trustee, without the consent
of the Holders, may amend or supplement this Indenture or the Securities for
certain specified purposes, including, without limitation:
(i) to cure any ambiguity, defect or inconsistency;
(ii) to effect the assumption by a successor Person of all
obligations of the Company under the Securities and this Indenture in
connection with any transaction complying with Article V of this Indenture;
(iii) to provide for uncertificated Securities in addition to or
in place of certificated Securities;
(iv) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
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(v) to make any change that would provide any additional benefit or
rights to the Holders;
(vi) to make any other change that does not adversely affect the
rights of any Holder under this Indenture in any material respects;
(vii) to add to the covenants of the Company and its Restricted
Subsidiaries for the benefit of the Holders, or to surrender any right or
power herein conferred upon the Company;
PROVIDED, HOWEVER, that the Company has delivered to the Trustee an Opinion
of Counsel stating that such amendment or supplement complies with the
provisions of this Section 10.1.
SECTION 10.2 WITH CONSENT OF HOLDERS.
Subject to Section 6.7, the Company and the Trustee may amend or
supplement this Indenture, the Securities and the Completion Guaranty with
the written consent of the Holders of a majority in principal amount of the
Securities then outstanding (including, without limitation, consents obtained
in connection with a purchase of, or tender offer or exchange offer for,
Securities). Subject to Section 6.7, the Holders of at least a majority in
principal amount of the outstanding Securities may waive (including by
consents obtained in connection with a tender offer or exchange offer for
Securities) any existing default or compliance by the Company with any
provision of this Indenture or the Securities. However, without the consent
of each affected Holder, an amendment, supplement or waiver, including a
waiver pursuant to Section 6.4, may not (with respect to any Securities held
by a non-consenting Holder):
(i) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any
Security or alter the provisions with respect to the redemption price of
the Securities (other than provisions relating to Sections 4.5 or 4.14);
(iii) reduce the rate of or change the time for payment of
interest on or Liquidated Damages, if any, with respect to any Security;
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(iv) waive a Default or Event of Default in the payment of principal
of, premium, if any, or interest or Liquidated Damages, if any, on the
Securities (except a rescission of acceleration of the Securities by the
Holders of at least a majority in aggregate principal amount of the
Securities and a waiver of the payment default that resulted from such
acceleration and other than a payment required pursuant to Section 4.5 or
4.14);
(v) make any Security payable in money other than that stated in the
Securities;
(vi) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Securities to receive
payments of principal of, premium, if any, or interest or Liquidated
Damages, if any, on the Securities (other than payments required pursuant
to Section 4.5 or Section 4.14); or
(vii) make any change in the foregoing amendment and waiver
provisions.
An amendment under this Section 10.2 may not make any change under
Article VIII, Article IX or Article XI or the definitions used therein that
adversely affects the rights of any holder of Senior Indebtedness then
outstanding unless the holders of such Senior Indebtedness (or any trustee or
representative thereof authorized to give a consent) shall have consented to
such change.
It shall not be necessary for the consent of the Holders under this
Section 10.2 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 10.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 10.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
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SECTION 10.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on
such Security. Subject to the following paragraph, any such Holder or
subsequent Holder may revoke the consent as to such Holder's Security or portion
of such Security by notice to the Trustee or the Company received before the
date on which the Trustee receives an Officers' Certificate certifying that the
Holders of the requisite principal amount of Securities have consented (and not
theretofore revoked such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
sentence of the immediately preceding paragraph, those persons who were Holders
at such record date (or their duly designated proxies), and only those Persons,
shall be entitled to consent to such amendment, supplement or waiver or to
revoke any consent previously given, whether or not such persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder.
SECTION 10.5 NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 10.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
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The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article X is
authorized or permitted by this Indenture and that such amendment or supplement
constitutes the legal, valid and binding obligation of the Company, enforceable
in accordance with its terms. The Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver which affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise. In signing any
amendment, supplement or waiver, the Trustee shall be entitled to receive an
indemnity reasonably satisfactory to it.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 TRUST INDENTURE ACT CONTROLS.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies any
TIA provision that may be so modified, such TIA provision shall be deemed to
apply to this Indenture as so modified. If any provision of this Indenture
excludes any TIA provision that may be so excluded, such TIA provision shall be
excluded from this Indenture.
The provisions of TIA Sections 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.2 NOTICES.
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in person, or mailed by
first-class mail
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(registered or certified, return receipt requested), telecopier
or overnight courier guaranteeing next day delivery, to the other party's
address:
if to the Company:
Hard Rock Hotel, Inc.
4455 Paradise Road
Las Vegas, Nevada 89109
Attention: Chief Financial Officer
Facsimile: (702) 693-5050
Telephone: (702) 693-5000
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071-3144
Attention: Michael A. Woronoff
Facsimile: (213) 687-5600
Telephone: (213) 687-5253
if to the Trustee:
U.S. Bank Trust National Association
180 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Trust Department
Facsimile: (612) 244-0711
Telephone: (612) 244-0721
The Company or the Trustee by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to the Trustee
or to Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and
the next business Day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.
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Any notice or communication to the Trustee shall be deemed to have
been duly given to the Trustee when received at the Corporate Trust Office of
the Trustee.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect the sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities.
The Company, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).
SECTION 11.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form satisfactory to the
Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel in form satisfactory to the
Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with; PROVIDED, HOWEVER,
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that with respect to matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 11.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.
SECTION 11.6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 11.7 GOVERNING LAW.
The laws of the State of New York shall govern this Indenture and the
Securities without regard to the principles of conflicts of law to the extent
that the application of the law of another jurisdiction would be required
thereby.
SECTION 11.8 NO RECOURSE AGAINST OTHERS.
No director, officer, employee, incorporator or stockholder of the
Company shall have any liability for any obligations of the Company under the
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Securities, this Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. Each Holder of Securities by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Securities.
SECTION 11.9 SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 11.10 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.11 SEVERABILITY.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
and a Holder shall have no claim therefor against any party hereto.
SECTION 11.12 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.13 LEGAL HOLIDAYS.
If a payment date is not a Business Day, payment may be made on the
next succeeding Business Day, and no interest shall accrue for the intervening
period.
SECTION 11.14 SUBMISSION TO JURISDICTION.
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To the fullest extent permitted by applicable law, the Company
irrevocably submits to the jurisdiction of any Federal or State court in the
City, County and State of New York, United States of America, in any suit or
proceeding based on or arising under this Agreement (solely in connection with
any such suit or proceeding), and irrevocably agree that all claims in respect
of such suit or proceeding may be determined in any such court. The Company
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. To the extent that the Company has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service of note, attachment prior to judgment,
attachment in aid of execution, executor or otherwise) with respect to itself or
its property, the Company hereby irrevocably waives such immunity in respect of
its obligations under this Agreement, to the extent permitted by law.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
HARD ROCK HOTEL, INC.
By: /s/ Peter Morton
------------------------------
Name: Peter Morton
Title: CEO
By: /s/ Bruce R. Dall
------------------------------
Name: Bruce R. Dall
Title: CFO
FIRST TRUST NATIONAL ASSOCIATION, as Trustee
By: /s/ Richard H. Prokosch
------------------------------
Name: Richard H. Prokosch
Title: Assistant Vice President
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SCHEDULE A
DESCRIPTION OF THE PLANNED EXPANSION OF THE HARD ROCK HOTEL, LAS VEGAS, NEVADA
1. Construction of a new hotel tower with not less than 290 rooms; provided,
that if the planned average size of the rooms or ratio of suites to regular
rooms is increased, the new hotel tower shall contain not less than 270
rooms.
2. Enlargement of the Beach Club to include a new swimming pool.
3. Addition of at least three new food services establishments.
4. Expansion of the Retail Store.
5. Construction of a new expandable parking facility that will initially
provide at least 400 net additional parking spaces.
6. Construction of a new meeting facility.
7. Construction of a new health club, or expansion and renovation of the
existing health club.
8. Construction of a new multi-functional warehouse, maintenance and back of
house facility.
9. Construction of a new nightclub or expansion and renovation of the existing
nightclub (i.e. The Joint).
10. Expansion of the casino through an enlargement of the sports book area
within the casino and the addition of at least thirty new slot machines and
at least five new table games.
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EXHIBIT A
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A SECURITY IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK,
NEW YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
THE SECURITY (OR ITS PREDECESSORS) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. BY ITS
ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B)
IT IS NOT A U.S. PERSON AND IS NOT ACQUIRING THIS SECURITY FOR THE ACCOUNT OR
BENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT). THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
A-1
<PAGE>
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE
THE UNITED STATES TO A NON-U.S. PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
(AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
HARD ROCK HOTEL, INC.
9 1/4% Senior Subordinated Notes due 2005
CUSIP ___________________
No. ______________ $________________________
Hard Rock Hotel, Inc., a Nevada corporation (the "COMPANY"), promises
to pay to Cede & Co. or registered assigns, the principal sum of
____________________________________ Dollars on April 1, 2005.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
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<PAGE>
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
A-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
HARD ROCK HOTEL, INC.
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
Attest:
By:
-----------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
First Trust National Association, as Trustee certifies that this is
one of the 9 1/4% Senior Subordinated Notes due 2005 referred to in the within-
mentioned Indenture.
First Trust National Association, as Trustee
By: Dated:
-------------------------------- ------------------------------
Authorized Signatory
A-4
<PAGE>
[REVERSE OF SECURITY]
HARD ROCK HOTEL, INC.
9 1/4% Senior Subordinated Notes due 2005
1. INTEREST.
Hard Rock Hotel, Inc., a Nevada corporation (the "COMPANY"),
promises to pay interest at the rate of 9 1/4% PER ANNUM on the principal
amount of this Security semi-annually in arrears on each Interest Payment
Date referred to on the face hereof commencing on October 1, 1998, until the
principal hereof is paid or made available for payment. Interest on the
Securities will accrue from and including the most recent date to which
interest has been paid or duly provided for, or if no interest has been paid
or duly provided for, from and including March 23, 1998, through but
excluding the date on which the principal hereof is paid or made available
for payment. If an Interest Payment Date falls on a day that is not a
Business Day, the interest payment to be made on such Interest Payment Date
will be made on the next succeeding Business Day with the same force and
effect as if made on such Interest Payment Date, and no additional interest
will accrue as a result of such delayed payment. Interest will be computed on
the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company will pay interest on the Securities (except defaulted
interest) and Liquidated Damages, if any, to the Persons who are registered
Holders of Securities at the close of business on the March 15 or September
15 next preceding the Interest Payment Date. The Securities will be payable
as to principal, premium, if any, Liquidated Damages, if any, and interest at
the office or agency of the Company maintained for such purpose within the
city and State of New York, or, at the option of the Company, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
Holders at their addresses set forth in the register of Holders; PROVIDED
that all payments with respect to Securities the Holders of which have given
wire transfer instructions to the Company shall be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof until the date the Exchange Offer is consummated.
Thereafter, such payments, except to DTC, will be made by check. Such
payment shall be in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private
debts.
3. PAYING AGENT.
Initially, First Trust National Association (the "Trustee") will
act as Paying Agent. The Company may change any Paying Agent, without notice
to the Holders of Securities.
A-5
<PAGE>
4. INDENTURE.
This Security is one of a duly authorized issue of Securities of
the Company, designated as its 9 1/4% Senior Subordinated Notes due 2005 (the
"Securities"), limited in aggregate principal amount to $120,000,000 (except
for Securities issued in substitution for destroyed, lost or stolen
Securities) issuable under an indenture, dated as of March 23, 1998 (the
"Indenture"), between the Company and the Trustee. The terms of the
Securities include those stated in the Indenture and those made part of the
Indenture by the Trust Indenture Act of 1939, as amended (the "Act") (15 U.S.
Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture and the
date the Indenture is qualified under the Act. The Securities are subject to
all such terms, and Holders of Securities are referred to the Indenture and
the Securities Act for a statement of them. Each Holder, by accepting a
Security, agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
The Securities are subordinated in right of payment to all Senior
Indebtedness of the Company to the extent and in the manner provided in the
Indenture.
5. OPTIONAL REDEMPTION.
a. The Securities will not be redeemable at the Company's option prior
to April 1, 2002. Thereafter, the Securities will be subject to redemption at
any time at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . 104.625%
2003 . . . . . . . . . . . . . 102.313%
2004 and thereafter. . . . . . 100.000%
</TABLE>
b. Notwithstanding the foregoing, at any time on or prior to April 1,
2001, the Company may (but shall not have the obligation to) redeem, on one
or more occasions, up to an aggregate of 35% of the aggregate principal
amount of Securities originally issued at a redemption price equal to
109 1/4% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date, with the net cash
proceeds of one or more Equity Offerings; PROVIDED that at least 65% of the
aggregate principal amount of Securities originally issued remain outstanding
immediately after the occurrence of such redemption; and PROVIDED FURTHER,
that such redemption shall occur within 60 days of the date of the closing of
such Equity Offering.
A-6
<PAGE>
6. REGULATORY REDEMPTION.
If any Gaming Authority requires that a Holder or beneficial owner
of Securities must be licensed, qualified or found suitable under any
applicable gaming law and such Holder or beneficial owner fails to apply for
a license, qualification or a finding of suitability within 30 days after
being requested to do so by the Gaming Authority (or such lesser period that
may be required by such Gaming Authority), or if such Holder or such
beneficial owner is not so licensed, qualified or found suitable, the Company
shall have the right, at its option, (i) to require such Holder or beneficial
owner to dispose of such Holder's or beneficial owner's Securities within 30
days of receipt of such notice of such finding by the applicable Gaming
Authority or such earlier date as may be ordered by such Gaming Authority or
(ii) to call for the redemption of the Securities of such Holder or
beneficial owner at the lesser of the principal amount thereof, the fair
market value of such Securities on the date of redemption or the price at
which such Holder or beneficial owner acquired the Securities, together with,
in either case, accrued and unpaid interest to the earlier of the date of
redemption or such earlier date as may be required by such Gaming Authority
or the date of the finding of unsuitability by such Gaming Authority, which
may be less than 30 days following the notice of redemption, if so ordered by
such Gaming Authority. The Company shall notify the Trustee in writing of
any such redemption as soon as practicable and the redemption price of each
Security to be redeemed. The Holder of Securities or beneficial owner
applying for a license, qualification or a finding of suitability must pay
all costs of the licensure and investigation for such qualification or
finding of suitability. The Company is not required to pay or reimburse any
Holder of the Securities or beneficial owner who is required to apply for
such license, qualification or finding of suitability for the costs of the
licensure or investigation for such qualification or finding of suitability.
Such expense will, therefore, be the obligation of such Holder or beneficial
owner.
7. PURCHASE UPON OCCURRENCE OF A CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, the Company will be
required to make an offer to repurchase all or any part (equal to $1,000 or
an integral multiple thereof), of each Holder's Securities pursuant to the
Company's "Change of Control Offer" as described in the Indenture, at an
offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to
the date of purchase.
8. ASSET SALES.
In the event of certain Asset Sales, the Company may be required to
make an offer to purchase all or a portion of the Securities at a purchase
price equal to 100% of their principal amount plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase in
accordance with the procedures set forth in the Indenture.
A-7
<PAGE>
9. DENOMINATIONS: TRANSFER; EXCHANGE.
The Securities are in registered form without coupons in
denominations of $1,000 and integral multiples of $1,000. The transfer of
Securities may be registered and Securities may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents, and
the Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company need not exchange or register the
transfer of any Security or portion of a Security selected for redemption,
except for the unredeemed portion of any Security being redeemed in part.
Also, it need not exchange or register the transfer of any Securities for a
period of 15 days before the mailing of a notice of redemption or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS.
The Holder of this Security may be treated as the owner of this
Security for all purposes.
11. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
The Indenture will be discharged and cancelled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of
all the Securities or upon the irrevocable deposit with the Trustee of funds
or U.S. Government Obligations sufficient for such payment or redemption.
12. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the outstanding Securities, and any past
default or compliance with any provision may be waived with the consent of
the Holders of at least a majority in principal amount of the outstanding
Securities. Without notice to or the consent of any Holder, the Company and
the Trustee may amend or supplement the Indenture or the Securities to cure
any ambiguity, defect or inconsistency, or to make any other change that does
not adversely affect the rights of any Holder of Securities.
13. DEFAULTS AND REMEDIES.
If an Event of Default shall occur and be continuing, the principal
of all of the outstanding Securities, plus all accrued and unpaid interest,
if any, and Liquidated Damages, if any, to the date the Securities become due
and payable, may be declared due and payable in the manner and with the
effect provided in the Indenture.
A-8
<PAGE>
14. TRUSTEE DEALINGS WITH COMPANY AND ITS AFFILIATES.
The Trustee in its individual or any other capacity, may become the
owner or pledgee of Securities and make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal
with the Company or its Affiliates, as if it were not Trustee.
15. NO RECOURSE AGAINST OTHERS.
No director, officer, employee, incorporator or stockholder of the
Company shall have any liability for any obligations of the Company under the
Securities, the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Holder of Securities by
accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Securities.
16. AUTHENTICATION.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
17. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
18. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Company,
Bear, Stearns & Co., Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and BancAmerica Robertson Stephens, as initial purchasers, the
Company will be obligated to consummate an exchange offer pursuant to which
the Holder of this Security shall have the right to exchange the Company's
9 1/4% Senior Subordinated Notes due 2005, Series A for the Company's 9 1/4%
Senior Subordinated Notes due 2005, Series B (the "Exchange Securities"), the
issuance of which shall have been registered under the Securities Act, in
like principal amount and having terms identical in all material respects as
the Securities. The Holders of the Securities shall be entitled to receive
certain additional interest payments in the event such Exchange Offer is not
consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement and the
Indenture. Each Holder of a Security, by his acceptance thereof,
acknowledges and agrees to the provisions of the Registration Rights
Agreement including without limitation the obligations of the
A-9
<PAGE>
Holders with respect to a registration and the indemnification of the Company
to the extent provided therein.
19. GOVERNING LAW.
The laws of the State of New York shall govern the Indenture and
this Security without regard to the principles of conflicts of law to the
extent that the application of the law of another jurisdiction would be
required thereby.
The Company will furnish to any Holder of record of Securities upon
written request and without charge a copy of the Indenture.
20. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (=Custodian), and U/G/M/A/ (= Uniform Gifts to Minors
Act).
A-10
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS
IN THE GLOBAL SECURITY
The following exchanges of a part of this Global Security for an
interest in another Global Security or for a Definitive Security, or
exchanges of a part of another Global Security or Definitive Security for an
interest in this Global Security, have been made:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THIS
AMOUNT OF DECREASE AMOUNT OF INCREASE GLOBAL SECURITY FOLLOWING SIGNATURE OF AUTHORIZED
IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT SUCH DECREASE SIGNATORY OF TRUSTEE OR
DATE OF EXCHANGE OF THIS GLOBAL SECURITY OF THIS GLOBAL SECURITY (OR INCREASE) SECURITY CUSTODIAN
- ---------------- ----------------------- ----------------------- ------------------------- -----------------------
<S> <C> <C> <C> <C>
</TABLE>
A-11
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- -----------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________________________________
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:
--------- ------------------------------------------------
(Sign exactly as your name appears on the face
of this Security)
Signature Guarantee:
-------------------------------------------
A-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant to
Section 4.5 or 4.14 of the Indenture, check the box below:
/ / Section 4.5 / / Section 4.14
If you want to elect to have only part of the Security purchased by the Company
pursuant to Section 4.5 or Section 4.14 of the Indenture, state the amount you
elect to have purchased:
$
-----------------
Date:__________ Your signature:
---------------------------------------
(sign exactly as your name appears on the face of this
Security)
Tax Identification No.:
-------------------------------
Signature Guarantee:
----------------------------------
A-13
<PAGE>
EXHIBIT B
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED SECURITIES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR
THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL SECURITY SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A SECURITY IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE SECURITY (OR ITS PREDECESSORS) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. BY ITS ACQUISITION HEREOF, THE
HOLDER REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS NOT
ACQUIRING THIS SECURITY FOR THE ACCOUNT OR BENEFIT OF A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION
S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT). THE
HOLDER OF THE SECURITY EVIDENCED
B-1
<PAGE>
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR
(d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER
IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
HARD ROCK HOTEL, INC.
9 1/4% Senior Subordinated Notes due 2005
CINS
---------------
$
-----------------
No.
-----------
Hard Rock Hotel, Inc., a Nevada corporation (the "Company"), promises
to pay to Cede & Co. or registered assigns, the principal sum of ____________
Dollars on April 1, 2005.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
B-2
<PAGE>
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
B-3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
HARD ROCK HOTEL, INC.
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Title:
Attest:
By:
-----------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
First Trust National Association, as Trustee, certifies that this is
one of the 9 1/4% Senior Subordinated Notes due 2005 referred to in the within-
mentioned Indenture.
First Trust National Association,
as Trustee
By: Dated:
----------------------------- -----------------------------
Authorized Signatory
B-4
<PAGE>
[REVERSE OF SECURITY]
HARD ROCK HOTEL, INC.
9 1/4% Senior Subordinated Notes due 2005
1. INTEREST.
Hard Rock Hotel, Inc., a Nevada corporation (the "COMPANY"), promises
to pay interest at the rate of 9 1/4% PER ANNUM on the principal amount of this
Security semi-annually in arrears on each Interest Payment Date referred to on
the face hereof commencing on October 1, 1998, until the principal hereof is
paid or made available for payment. Interest on the Securities will accrue from
and including the most recent date to which interest has been paid or duly
provided for, or if no interest has been paid or duly provided for, from and
including March 23, 1998, through but excluding the date on which the principal
hereof is paid or made available for payment. If an Interest Payment Date falls
on a day that is not a Business Day, the interest payment to be made on such
Interest Payment Date will be made on the next succeeding Business Day with the
same force and effect as if made on such Interest Payment Date, and no
additional interest will accrue as a result of such delayed payment. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT.
The Company will pay interest on the Securities (except defaulted
interest) and Liquidated Damages, if any, to the Persons who are registered
Holders of Securities at the close of business on March 15 or September 15 next
preceding the Interest Payment Date. The Securities will be payable as to
principal, premium, if any, Liquidated Damages, if any, and interest at the
office or agency of the Company maintained for such purpose within the city and
State of New York, or, at the option of the Company, payment of interest and
Liquidated Damages, if any, may be made by check mailed to the Holders at their
addresses set forth in the register of Holders; PROVIDED that all payments with
respect to Securities the Holders of which have given wire transfer instructions
to the Company shall be required to be made by wire transfer of immediately
available funds to the accounts specified by the Holders thereof until the date
the Exchange Offer is consummated. Thereafter, such payments, except to DTC,
will be made by check. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. PAYING AGENT.
Initially, First Trust National Association (the "Trustee") will act
as Paying Agent. The Company may change any Paying Agent, without notice to the
Holders of Securities.
B-5
<PAGE>
4. INDENTURE.
This Security is one of a duly authorized issue of Securities of the
Company, designated as its 9 1/4% Senior Subordinated Notes due 2005 (the
"Securities"), limited in aggregate principal amount to $120,000,000 (except for
Securities issued in substitution for destroyed, lost or stolen Securities)
issuable under an indenture, dated as of March 23, 1998 (the "Indenture"),
between the Company and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by the Trust
Indenture Act of 1939, as amended (the "Act") (15 U.S. Code Sections 77aaa-
77bbbb) as in effect on the date of the Indenture and the date the Indenture is
qualified under the Act. The Securities are subject to all such terms, and
Holders of Securities are referred to the Indenture and the Securities Act for a
statement of them. Each Holder, by accepting a Security, agrees to be bound by
all of the terms and provisions of the Indenture, as the same may be amended
from time to time.
The Securities are subordinated in right of payment to all Senior
Indebtedness of the Company to the extent and in the manner provided in the
Indenture.
5. OPTIONAL REDEMPTION.
a. The Securities will not be redeemable at the Company's option prior to
April 1, 2002. Thereafter, the Securities will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002 . . . . . . . . . . . . . . . . . 104.625%
2003 . . . . . . . . . . . . . . . . . 102.313%
2004 and thereafter. . . . . . . . . . 100.000%
</TABLE>
b. Notwithstanding the foregoing, at any time on or prior to April 1,
2001, the Company may (but shall not have the obligation to) redeem, on one or
more occasions, up to an aggregate of 35% of the aggregate principal amount of
Securities originally issued at a redemption price equal to 109 1/4% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
one or more Equity Offerings; PROVIDED that at least 65% of the aggregate
principal amount of Securities originally issued remain outstanding immediately
after the occurrence of such redemption; and PROVIDED FURTHER, that such
redemption shall occur within 60 days of the date of the closing of such Equity
Offering.
6. REGULATORY REDEMPTION.
B-6
<PAGE>
If any Gaming Authority requires that a Holder or beneficial owner of
Securities must be licensed, qualified or found suitable under any applicable
gaming law and such Holder or beneficial owner fails to apply for a license,
qualification or a finding of suitability within 30 days after being requested
to do so by the Gaming Authority (or such lesser period that may be required by
such Gaming Authority), or if such Holder or such beneficial owner is not so
licensed, qualified or found suitable, the Company shall have the right, at its
option, (i) to require such Holder or beneficial owner to dispose of such
Holder's or beneficial owner's Securities within 30 days of receipt of such
notice of such finding by the applicable Gaming Authority or such earlier date
as may be ordered by such Gaming Authority or (ii) to call for the redemption of
the Securities of such Holder or beneficial owner at the lesser of the principal
amount thereof, the fair market value of such Securities on the date of
redemption or the price at which such Holder or beneficial owner acquired the
Securities together with, in either case, accrued and unpaid interest and Holder
or beneficial owner acquired the Securities, together with, in either case,
accrued and unpaid interest to the earlier of the date of redemption or such
earlier date as may be required by such Gaming Authority or the date of the
finding of unsuitability by such Gaming Authority, which may be less than 30
days following the notice of redemption, if so ordered by such Gaming Authority.
The Company shall notify the Trustee in writing of any such redemption as soon
as practicable and the redemption price of each Security to be redeemed. The
Holder of Securities or beneficial owner applying for a license, qualification
or a finding of suitability must pay all costs of the licensure and
investigation for such qualification or finding of suitability. The Company is
not required to pay or reimburse any Holder of the Securities or beneficial
owner who is required to apply for such license, qualification or finding of
suitability for the costs of the licensure or investigation for such
qualification or finding of suitability. Such expense will, therefore, be the
obligation of such Holder or beneficial owner.
7. PURCHASE UPON OCCURRENCE OF A CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, the Company will be
required to make an offer to repurchase all or any part (equal to $1,000 or an
integral multiple thereof), of each Holder's Securities pursuant to the
Company's "Change of Control Offer" as described in the Indenture, at an offer
price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase.
8. ASSET SALES.
In the event of certain Asset Sales, the Company may be required to
make an offer to purchase all or a portion of the Securities at a purchase price
equal to 100% of their principal amount plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase in accordance with the
procedures set forth in the Indenture.
9. DENOMINATIONS: TRANSFER; EXCHANGE.
B-7
<PAGE>
The Securities are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. The transfer of Securities may be
registered and Securities may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents, and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company need not exchange or register the transfer of any Security or
portion of a Security selected for redemption, except for the unredeemed portion
of any Security being redeemed in part. Also, it need not exchange or register
the transfer of any Securities for a period of 15 days before the mailing of a
notice of redemption or during the period between a record date and the
corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS.
The Holder of this Security may be treated as the owner of this
Security for all purposes.
11. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
The Indenture will be discharged and cancelled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the irrevocable deposit with the Trustee of funds or U.S.
Government Obligations sufficient for such payment or redemption.
12. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Holders of at least a majority
in principal amount of the outstanding Securities, and any past default or
compliance with any provision may be waived with the consent of the Holders of
at least a majority in principal amount of the outstanding Securities. Without
notice to or the consent of any Holder, the Company and the Trustee may amend or
supplement the Indenture or the Securities to cure any ambiguity, defect or
inconsistency, or to make any other change that does not adversely affect the
rights of any Holder of Securities.
13. DEFAULTS AND REMEDIES.
If an Event of Default shall occur and be continuing, the principal of
all of the outstanding Securities, plus all accrued and unpaid interest, if any,
and Liquidated Damages, if any, to the date the Securities become due and
payable, may be declared due and payable in the manner and with the effect
provided in the Indenture.
14. TRUSTEE DEALINGS WITH COMPANY AND ITS AFFILIATES.
B-8
<PAGE>
The Trustee in its individual or any other capacity, may become the
owner or pledgee of Securities and make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not Trustee.
15. NO RECOURSE AGAINST OTHERS.
No director, officer, employee, incorporator or stockholder of the
Company shall have any liability for any obligations of the Company under the
Securities, the Indenture or for any claim based on, in respect of or by reason
of such obligations or their creation. Each Holder of Securities by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Securities.
16. AUTHENTICATION.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
17. CINS NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CINS numbers to be
printed on the Securities and has directed the Trustee to use CINS numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Securities or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
18. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Company, Bear,
Stearns & Co., Inc., BancAmerica Robertson Stephens and Donaldson, Lufkin &
Jenrette Securities Corporation, as initial purchasers, the Company will be
obligated to consummate an Exchange Offer pursuant to which the Holder of this
Security shall have the right to exchange the Company's 9 1/4% Senior
Subordinated Notes due 2005, Series A for the Company's 9 1/4% Senior
Subordinated Securities due 2005, Series B (the "Exchange Securities"), the
issuance of which shall have been registered under the Securities Act, in like
principal amount and having terms identical in all material respects as the
Securities. The Holders of the Securities shall be entitled to receive certain
additional interest payments in the event such Exchange Offer is not consummated
and upon certain other conditions, all pursuant to and in accordance with the
terms of the Registration Rights Agreement and the Indenture. Each Holder of a
Security, by his acceptance thereof, acknowledges and agrees to the provisions
of the Registration Rights Agreement including without limitation the
obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.
B-9
<PAGE>
19. GOVERNING LAW.
The laws of the State of New York shall govern the Indenture and this
Security without regard to the principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
The Company will furnish to any Holder of record of Securities upon
written request and without charge a copy of the Indenture.
20. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and
not as tenants in common), CUST (=Custodian), and U/G/M/A/ (= Uniform Gifts
to Minors Act).
B-10
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS
IN THE GLOBAL SECURITY
The following exchanges of a part of this Global Security for an interest
in another Global Security or for a Definitive Security, or exchanges of a part
of another Global Security or Definitive Security for an interest in this Global
Security, have been made:
<TABLE>
<CAPTION>
Principal Amount of this
Amount of decrease Amount of increase Global Security Signature of authorized
in Principal Amount in Principal Amount following such decrease signatory of Trustee or
Date of Exchange of this Global Security of this Global Security (or increase) Security Custodian
---------------- ----------------------- ----------------------- ----------------------- -------------------------
<S> <C> <C> <C> <C>
</TABLE>
B-11
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
- -----------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________________________
to transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:
--------------------------- -----------------------------
(Sign exactly as your name
appears on the face of
this Security)
Signature Guarantee:
-----------------------------
B-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company pursuant to
Section 4.5 or 4.14 of the Indenture, check the box below:
/ / Section 4.5 / / Section 4.14
If you want to elect to have only part of the Security purchased by the Company
pursuant to Section 4.5 or Section 4.14 of the Indenture, state the amount you
elect to have purchased:
$
------------------------
Date: Your Signature:
--------------------------- -----------------------------
(Sign exactly as your name
appears on the face of
this Security)
Tax Identification No.:
--------------------------
Signature Guarantee:
----------------------------
B-13
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF TRANSFER
Hard Rock Hotel, Inc.
4455 Paradise Road
Las Vegas, Nevada 89109
First Trust National Association
180 East 5th Street, Suite 200
St. Paul, Minnesota 55101
Attention: Corporate Trust Division
Re: 9 1/4% SENIOR SUBORDINATED NOTES DUE 2005 OF HARD ROCK HOTEL, INC.
Reference is hereby made to the Indenture, dated as of March 23, 1998
(the "INDENTURE"), between Hard Rock Hotel, Inc., as issuer (the "COMPANY"), and
First Trust National Association, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
______________________ (the "TRANSFEROR") owns and proposes to
transfer the Security or Securities or interest in such Security or Securities
specified in Annex A hereto, in the principal amount of $_________ in such
Security or Securities or interests (the "TRANSFER"), to _________________ (the
"TRANSFEREE") as further specified in Annex A hereto. In connection with the
Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE 144A GLOBAL SECURITY OR A DEFINITIVE SECURITY PURSUANT TO
RULE 144A. The Transfer is being effected pursuant to and in accordance with
Rule 144A under the United States Securities Act of 1933, as amended (the
"SECURITIES ACT"), and, accordingly, the Transferor hereby further certifies
that the beneficial interest or Definitive Security is being transferred to a
Person that the Transferor reasonably believed and believes is purchasing the
beneficial interest or Definitive Security for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A and such Transfer is in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Security will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Security and/or the Definitive Security and
in the Indenture and the Securities Act.
2. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE REGULATION S TEMPORARY GLOBAL SECURITY, THE REGULATION S
GLOBAL SECURITY OR A DEFINITIVE SECURITY PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and, accordingly, the Transferor hereby
further certifies that (i) the transfer is not being made to a person in the
United States and
C-1
<PAGE>
(x) at the time the buy order was originated, the transferee was outside the
United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities
of a designated offshore securities market and neither such Transferor nor
any person acting on its behalf knows that the transaction was prearranged
with a buyer in the United States, (ii) no directed selling efforts have been
made in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act, (iii) the transaction is not part of a
plan or scheme to evade the registration requirements of the Securities Act,
and (iv) if the proposed transfer is being made prior to the expiration of
the Restricted Period, the transfer is not being made to a U.S. Person or for
the account or benefit of a U.S. Person (other than an Initial Purchaser).
Upon consummation of the proposed transfer in accordance with the terms of
the Indenture, the transferred beneficial interest or Definitive Security
will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Security, the Temporary
Regulation S Global Security and/or the Definitive Security and in the
Indenture and the Securities Act.
3. / / CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN THE RESTRICTED GLOBAL SECURITY OR A DEFINITIVE
SECURITY PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A
OR REGULATION S. The Transfer is being effected in compliance with the
transfer restrictions applicable to beneficial interests in Restricted Global
Securities and Restricted Definitive Securities and pursuant to and in
accordance with the Securities Act and any applicable blue sky securities
laws of any state of the United States, and accordingly the Transferor hereby
further certifies that (check one):
(a) / / such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act; or
(b) / / such Transfer is being effected to the Company or a
subsidiary thereof; or
(c) / / such Transfer is being effect pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act.
4. / / CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN AN UNRESTRICTED GLOBAL SECURITY OR OF AN UNRESTRICTED DEFINITIVE
SECURITY.
(a) / / CHECK IF TRANSFER IF PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Security will not longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Securities, on Restricted Definitive Securities and in the Indenture.
C-2
<PAGE>
(b) CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effect pursuant to and in accordance with Rule 903 or rule 904
under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indentures, the transferred
beneficial interest or Definitive Security will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Securities, on Restricted Definitive Securities and in the
Indenture.
(c) CHECK IF TRANSFER IF PURSUANT TO OTHER EXEMPTION. (i)
The Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule 144m,
Rule 903 or Rule 904 and in compliance with the transfer restrictions in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Security will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Securities or Restricted Definitive Securities and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Trustee and the Company.
-----------------------------
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
Dated: ,
--------------------- -------
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ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ON OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Security (CUSIP _____), or
(ii) / / Regulation S Global Security (CUSIP _____), or
(iii) / / Restricted Global Security (CUSIP _____); or
(b) / / a Restricted Definitive Security.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Security (CUSIP _____), or
(ii) / / Regulation S Global Security (CUSIP _____), or
(iii) / / Restricted Global Security (CUSIP _____); or
(iv) / / (CUSIP _____), or Unrestricted Global Security (CUSIP ____);
or
(b) / / a Restricted Definitive Security; or
(c) / / an Unrestricted Definitive Security.
in accordance with the terms of the Indenture.
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EXHIBIT D
FORM OF CERTIFICATE OF TRANSFER OR EXCHANGE
Hard Rock Hotel, Inc.
4455 Paradise Road
Las Vegas, Nevada 89109
First Trust National Association
180 East 5th Street, Suite 200
St. Paul, Minnesota 55101
Attention: Corporate Trust Division
Re: 9 1/4% SENIOR SUBORDINATED NOTES DUE 2005 OF HARD ROCK HOTEL, INC.
Reference is hereby made to the Indenture, dated as of March 23, 1998 (the
"INDENTURE"), between Hard Rock Hotel, Inc., as issuer (the "COMPANY"), and
First Trust National Association, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
_________________ (the "OWNER") owns and proposed to exchange the Security
or Securities specified herein, in the principal amount of $______________ in
such Security or Securities or interests (the "EXCHANGE"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL
INTERESTS IN A RESTRICTED GLOBAL SECURITY FOR UNRESTRICTED DEFINITIVE SECURITIES
OR BENEFICIAL INTERESTS IN AN UNRESTRICTED GLOBAL SECURITY
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL SECURITY TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL
SECURITY. In connection with he Exchange of the Owner's beneficial interest
in a Restricted Global Security for a beneficial interest in an Unrestricted
Global Security in an equal principal amount, the Owner hereby certifies (i)
the beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Global Securities and pursuant to and
in accordance with he United States Securities Act of 1933, as amended (the
"SECURITIES ACT"), (iii) the restriction on transfer contained in the
Indenture and the Private Placement Legend are not the restrictions on
transfer contained in the Indenture and the private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Security is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL SECURITY TO UNRESTRICTED DEFINITIVE SECURITY. In
connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Security for an Unrestricted Definitive Security, the Owner
hereby certifies (i) the Definitive Security is being acquired for the
Owner's
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own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted Global
Securities and pursuant to and in accordance with the Securities Act, (iii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the Definitive Security is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(c) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL SECURITY. In connection with
the Owner's Exchange of a Restricted Definitive Security for a beneficial
interest in an Unrestricted Global Security, the Owner hereby certifies (i)
the beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Securities and
pursuant to and in accordance with the Securities Act, (iii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act, and
(iv) the beneficial interest is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(d) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY
TO UNRESTRICTED DEFINITIVE SECURITY. In connection with the Owner's Exchange
of a Restricted Definitive Security for n Unrestricted Definitive Security,
the Owner hereby certifies (i) the Unrestricted Definitive Security is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
restricted Definitive Securities and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive
Security is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES OR BENEFICIAL
INTERESTS IN RESTRICTED GLOBAL SECURITIES FOR RESTRICTED DEFINITIVE SECURITY OR
BENEFICIAL INTERESTS IN RESTRICTED GLOBAL SECURITY
(a) / / CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL SECURITY TO RESTRICTED DEFINITIVE SECURITY. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global
Security for a Restricted Definitive Security with an equal principal amount,
the Owner hereby certifies that the Restricted Definitive Security is being
acquired for the Owner's own account without transfer. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture,the
restricted Definitive Security issued will continue to be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the Restricted Definitive Security and in the Indenture and the Securities
Act.
(b) / / CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE SECURITY
TO BENEFICIAL INTEREST ON A RESTRICTED GLOBAL SECURITY. In connection with
the Exchange of the
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Owner's Restricted Definitive Security for a beneficial interest in the
[CHECK ONE] / / 144A Global Security, / / Regulation S Global Security, / /
Restricted Global Security, with an equal principal amount, the Owner hereby
certifies (i) the beneficial interest is being acquired for the Owner's own
account without transfer and (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted Global
Securities and pursuant to and in accordance with the Securities Act, and in
compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the beneficial interest issued will be subject to
the restrictions on transfer enumerated in the Private Placement Legend
printed on the relevant Restricted Global Security and in the Indenture and
the Securities Act.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Trustee and the Company.
---------------------------------
[Insert Name of Owner]
By:
-------------------------------
Name:
Title:
Dated: ,
-------------------- ------
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EXHIBIT E
Form of Subsidiary Guarantee
THIS GUARANTEE (as the same may be amended, modified or supplemented
from time to time, this "Guarantee"), dated as of ________, is made by
________________ (hereinafter referred to as the "Guarantor") in favor of [
], a national banking association, as trustee under the Indenture
hereinafter described (the "Trustee"), for the ratable benefit of the holders
from time to time (the "Holders") of the Securities (as hereinafter defined).
All terms not otherwise defined herein shall have for the purposes
hereof the meanings set forth in the Indenture (as hereinafter defined)
unless the context otherwise requires.
Recitals
A. Hard Rock Hotel, Inc. (the "Company") is a party to that
certain indenture dated as of March 23, 1998 (as amended, supplemented or
otherwise modified from time to time, the "Indenture") between the Company
and the Trustee, pursuant to which the Company issued $120.0 million
principal amount of their 9 1/4% Senior Subordinated Notes due 2005
(including all Initial Securities and Exchange Securities issued from time to
time pursuant to the Indenture, collectively, the "Securities"); and
B. The Guarantor is a direct or indirect Restricted Subsidiary of
the Company, and will derive both direct and indirect economic benefit from
the proceeds of the Securities and other financial accommodations made to the
Company under the Indenture.
C. The Indenture requires that the Guarantor, prior to incurring
any Indebtedness (other than Acquired Indebtedness), execute and deliver this
Guarantee to guarantee the payment and performance by the Company of all of
its obligations under the Indenture and the Securities, including, in each
case, all reasonable costs of collection and enforcement thereof and interest
thereon which would be owing by the Company or such Guarantor but for the
effect of the Bankruptcy Code, 11 U.S.C. (S) 101 et seq. (collectively, the
"Guaranteed Obligations").
NOW, THEREFORE, for and in consideration of the foregoing and of
any financial accommodations or extensions of credit (including, without
limitation, any loan or advance by renewal, refinancing or extension of the
Indenture or otherwise) heretofore, now or hereafter made to or for the
benefit of the Company pursuant to the Indenture or any other agreement,
instrument or document executed pursuant to or in connection therewith, and
for other good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the Guarantor and the Trustee agree as follows:
1. THE GUARANTEE. The Guarantor hereby absolutely,
unconditionally and irrevocably guarantees the full and punctual payment
(whether at stated maturity, upon acceleration or otherwise) of the
Guaranteed Obligations; provided, however, the obligations of the Guarantor
hereunder shall be limited to the maximum amount which may be paid hereunder
without resulting in any payment hereunder being deemed to constitute a
fraudulent
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conveyance. This Guarantee is a guarantee of payment and not of collection.
All payments made by the Guarantor under this Guarantee shall be paid at the
place and in the manner specified in the Indenture and the Securities.
2. AMENDMENTS, ETC. WITH RESPECT TO THE GUARANTEED OBLIGATIONS;
WAIVER OF RIGHTS. The Guarantor shall remain obligated hereunder
notwithstanding that without any reservation of rights against the Guarantor
and without notice to or further assent by the Guarantor any demand for
payment of any of the Guaranteed Obligations made by the Trustee or the
Holders may be rescinded by them and any of the Guaranteed Obligations
continued, and the Guaranteed Obligations, or the liability of any other
party upon or for any part thereof, or guarantee therefor or right of offset
with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Trustee or the Holders, and the Indenture and
any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Trustee or the Holders may deem advisable from time to time or as provided in
the Indenture, and any guarantee or right of offset at any time held by the
Trustee for the payment of the Guaranteed Obligations may be sold, exchanged,
waived, surrendered or released.
3. GUARANTEE ABSOLUTE AND UNCONDITIONAL. The Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by the Trustee or
the Holders upon this Guarantee, the Guaranteed Obligations, and any of them
shall conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon this Guarantee; and
all dealings between the Issuers and the Guarantor, on the one hand, and the
Trustee and the Holders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Guarantee.
The Guarantor waives diligence, presentment, protest, demand for payment and
notice of default or nonpayment to or upon the Company or the Guarantor with
respect to the Guaranteed Obligations. The Guarantor understands and agrees
that this Guarantee shall be construed as a continuing, absolute and
unconditional guarantee of payment without regard to (a) the validity,
regularity or enforceability of the Indenture or any of the Securities, any
of the Guaranteed Obligations or guarantee or right of offset with respect
thereto at any time or from time to time held by the Trustee or the Holders,
(b) any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the
Company against the Trustee or the Holders, or (c) any other circumstances
whatsoever (with or without notice to or knowledge of the Company or such
Guarantor) which constitute, or might be construed to constitute, an
equitable or legal discharge of the Company for the Guaranteed Obligations,
or of the Guarantor under this Guarantee, in bankruptcy or in any other
instance. When pursuing its rights and remedies hereunder against the
Guarantor, the Trustee and/or the Holders may, but shall be under no
obligation to, pursue such rights and remedies as it or they may have against
the Company or any other Person or against any guarantee for the Guaranteed
Obligations or any right of offset with respect thereto, and any failure by
the Trustee or the Holders to pursue such other rights or remedies or to
collect any payments from the Company or any such other Person or to realize
upon any such guarantee or to exercise any such right of offset, or any
release of
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the Company or any such other Person or any such guarantee or right of
offset, shall not relieve the Guarantor of any liability hereunder, and shall
not impair or affect the rights and remedies, whether express, implied or
available on a matter of law, of the Trustee and/or the Holders against the
Guarantor. This Guarantee shall remain in full force and effect and be
binding in accordance with and to the extent of its terms upon the Guarantor
and its successors and assigns thereof, and shall inure to the benefit of the
Trustee, and its successors, indorsees, transferees and assigns, and the
Holders from time to time of the Securities until all the Guaranteed
Obligations and the obligations of the Guarantor under this Guarantee shall
have been satisfied by payment in full, notwithstanding that from time to
time during the term of the Indenture the Company may be free from any
Guaranteed Obligations.
4. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. The Guarantor's obligations hereunder shall remain in full
force and effect until the Guaranteed Obligations shall have been paid in
full or released pursuant to Section 4.21 of the Indenture. If at any time
any payment of the Guaranteed Obligations is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of the
Company or otherwise, the Guarantor's obligations hereunder with respect to
such payment shall be reinstated at such time as though such payment had been
due but not made at such time.
5. WAIVER BY THE GUARANTOR. The Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided
for herein, as well as any requirement that at any time any action be taken
by any Person against the Company or any other Person.
6. SUBROGATION. Notwithstanding any payments made by the
Guarantor under this Guarantee, the Guarantor shall not be entitled to be
subrogated to any of the rights of any other Guarantor, the Trustee or any
Holder against the Company until all amounts of principal of and interest and
premium on the Securities and all other amounts payable by the Company under
the Indenture and the Securities and by the Guarantor under its Guarantee
have been paid in full. If any amount shall be paid to the Guarantor on
account of such subrogation rights at any time when all of the Guaranteed
Obligations shall not have been paid in full, such amount shall be held by
the Guarantor in trust for the Trustee segregated from other funds of the
Guarantor, and shall, forthwith upon receipt by the Guarantor, be turned over
to the Trustee in the exact form received by the Guarantor (duly indorsed by
the Guarantor to the Trustee, if required), to be applied against the
Guaranteed Obligations, whether matured or unmatured, at such time and in
such order as the Trustee may determine.
7. STAY OF ACCELERATION. In the event that acceleration of the
time for payment of any of the Guaranteed Obligations is stayed upon
insolvency, bankruptcy or reorganization of the Company, all such amounts
otherwise subject to acceleration under the terms of the Indenture and the
Securities shall nonetheless be payable by the Guarantor forthwith on demand
by the Trustee.
8. SUBORDINATION.
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a. DEFINITIONS. As used in this Section 8, the terms set forth
below shall have the following meanings:
"Designated Guarantor Senior Indebtedness" shall mean (i) the
guarantee, if any, by the Guarantor of Indebtedness under the New Credit
Facility and (ii) other Guarantor Senior Indebtedness permitted to be
incurred by the Guarantor under the terms of the Indenture the principal
amount of which is $25 million or more and that has been designated by the
Board of Directors as "Designated Guarantor Senior Indebtedness."
"Guarantor Senior Indebtedness" shall mean (i) the guarantee, if
any, by the Guarantor of Indebtedness under the New Credit Facility and (ii)
any other Indebtedness permitted to be incurred by the Guarantor under the
terms of the Indenture, unless the instrument under which such Indebtedness
is incurred expressly provides that it is subordinated in right of payment to
any Guarantor Senior Indebtedness. Notwithstanding anything to the contrary
in the foregoing, Guarantor Senior Indebtedness will not include (a) any
liability for federal, state, local or other taxes owed or owing by the
Guarantor, (b) any Indebtedness of the Guarantor to any of its Subsidiaries
or other Affiliates, (c) any trade payables or (d) any Indebtedness that is
incurred in violation of the Indenture.
b. AGREEMENT TO SUBORDINATE. The Guarantor agrees, and each
Holder by accepting a Security agrees, that the payment of the Guaranteed
Obligations is subordinated in right of payment, to the extent and in the
manner provided in this Section 8, to the prior payment in full of all
Guarantor Senior Indebtedness (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Guarantor Senior
Indebtedness.
c. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to
creditors of the Guarantor in a liquidation or dissolution of the Guarantor
or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Guarantor or its property, an assignment for the
benefit of creditors or any marshalling of the Guarantor's assets and
liabilities:
(i) holders of Guarantor Senior Indebtedness of the Guarantor shall
be entitled to receive payment in full of all Obligations due in respect of
such Guarantor Senior Indebtedness (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Guarantor Senior Indebtedness) before the Holders shall be entitled to
receive any payment with respect to the Guarantee (except that Holders may
receive securities that are subordinated at least to the same extent as the
Guarantees to Guarantor Senior Indebtedness and any securities issued in
exchange for Guarantor Senior Indebtedness); and
(ii) until all Obligations with respect to Guarantor Senior
Indebtedness of the Guarantor are paid in full, any distributions to which
the Holders of Securities would be entitled but for this Section 8 shall be
made to the holders of such Guarantor Senior Indebtedness (except that
Holders may receive securities that are subordinated at least
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to the same extent as the Guarantee to Guarantor Senior Indebtedness and
any securities issued in exchange for Guarantor Senior Indebtedness).
d. DEFAULT ON DESIGNATED GUARANTOR SENIOR INDEBTEDNESS. The
Guarantor may not make any payment upon or in respect of the Guarantee (except
that Holders may receive securities that are subordinated to the same extent as
the Securities to Guarantor Senior Indebtedness and any securities issued in
exchange for Guarantor Senior Indebtedness) if:
(i) a default in the payment of the principal of, or premium or
interest on, or fees or other amounts owing with respect to, Designated
Guarantor Senior Indebtedness occurs and has not been cured or waived in
writing; or
(ii) any other default occurs and is continuing with respect to
Designated Guarantor Senior Indebtedness that permits holders of the
Designated Guarantor Senior Indebtedness as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Guarantor or the holders of
any Designated Guarantor Senior Indebtedness.
Payments on the Guarantee may and shall be resumed:
(y) in the case of default referred to in Section 8(d)(i), upon the
date on which such default is cured or waived by the holders of Designated
Guarantor Senior Indebtedness, and
(z) in case of a default referred to in Section 8(d)(ii), the earlier
of the date on which such nonpayment default is cured or waived by the
holders of Designated Guarantor Senior Indebtedness or 179 days after the
date on which the applicable Payment Blockage Notice is received, unless
the maturity of any Designated Guarantor Senior Indebtedness has been
accelerated.
No new period of payment blockage may be commenced unless and until
360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice. No nonpayment default referred to in Section
8(d)(ii) hereof that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice (unless such nonpayment default shall have
been cured or waived for a period of not less than 180 days).
e. ACCELERATION OF GUARANTEE. The Guarantor shall promptly notify
holders of Guarantor Senior Indebtedness of the receipt by the Company of an
acceleration notice following an Event of Default under the Indenture.
f. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the
Trustee or any Holder receives any payment of any Obligations with respect to
the Guarantee at a time when the Trustee or such Holder, as applicable, has
actual knowledge that such payment is prohibited by Section 8(d) hereof, such
payment shall be held by the Trustee or such Holder, in trust for
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the benefit of and, upon written request, shall be paid forthwith over and
delivered to, the holders of Guarantor Senior Indebtedness as their interests
may appear or their Representative under the indenture or other agreement (if
any) pursuant to which Guarantor Senior Indebtedness may have been issued, as
their respective interests may appear, for application to the payment of all
obligations with respect to Guarantor Senior Indebtedness remaining unpaid to
the extent necessary to pay such Obligations in full in accordance with their
terms, after giving effect to any concurrent payment or distribution to or
for the holders of Guarantor Senior Indebtedness.
With respect to the holders of Guarantor Senior Indebtedness, the
Trustee undertakes to perform only such obligations on the part of the
Trustee as are specifically set forth in this Section 8, and no implied
covenants or obligations with respect to the holders of Guarantor Senior
Indebtedness shall be read into this Guarantee against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of
Guarantor Senior Indebtedness, and shall not be liable to any such holders if
the Trustee shall pay over or distribute to or on behalf of Holders or the
Guarantor or any other Person money or assets to which any holders of
Guarantor Senior Indebtedness shall be entitled by virtue of this Section 8,
except if such payment is made as a result of the willful misconduct or gross
negligence of the Trustee.
g. NOTICE BY THE GUARANTOR. The Guarantor shall promptly notify
the Trustee and the Paying Agent of any facts known to the Guarantor that
would cause a payment of any obligations with respect to the Guarantee to
violate this Section 8, but failure to give such notice shall not affect the
subordination of the Guarantee to the Guarantor Senior Indebtedness as
provided in this Section 8.
h. SUBROGATION. After all Guarantor Senior Indebtedness is
irrevocably paid in full in cash or cash equivalents reasonably satisfactory
to the holders thereof and until the Guaranteed Obligations are paid in full,
Holders shall be subrogated (equally and ratably with all other Indebtedness
pari passu with the Guarantee) to the rights of holders of Guarantor Senior
Indebtedness to receive distributions applicable to Guarantor Senior
Indebtedness to the extent that distributions otherwise payable to the
Holders have been applied to the payment of Guarantor Senior Indebtedness. A
distribution made under this Section 8 to holders of Guarantor Senior
Indebtedness that otherwise would have been made to Holders is not, as
between the Guarantor and Holders, a payment by the Guarantor on the
Guarantee.
i. RELATIVE RIGHTS. This Section 8 defines the relative rights of
Holders and holders of Guarantor Senior Indebtedness. Nothing in this
Guarantee shall:
(i) impair, as between the Guarantor and Holders, the obligation of
the Guarantor, which is absolute and unconditional, to pay the Guaranteed
Obligations in accordance with the terms of this Guarantee;
(ii) affect the relative rights of Holders and creditors of the
Guarantor other than their rights in relation to holders of Guarantor
Senior Indebtedness; or
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(iii) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Guarantor Senior Indebtedness to receive
distributions and payments otherwise payable to Holders.
j. SUBORDINATION MAY NOT BE IMPAIRED BY THE GUARANTOR. No right
of any holder of Guarantor Senior Indebtedness to enforce the subordination
of the Indebtedness evidenced by the Guarantee shall be impaired by any act
or failure to act by the Guarantor or any Holder or by the failure of the
Guarantor or any Holder to comply with this Guarantee.
k. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a
distribution is to be made or a notice given to holders of Guarantor Senior
Indebtedness, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Guarantor
referred to in this Section 8, the Trustee and the Holders shall be entitled
to rely upon any order or decree made by any court of competent jurisdiction
or upon any certificate of such Representative or of the liquidating trustee
or agent or other Person making any distribution to the Trustee or to the
Holders for the purpose or ascertaining the Persons entitled to participate
in such distribution, the holders of Guarantor Senior Indebtedness and other
Indebtedness of the Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Section 8.
l. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the
provisions of this Section 8 or any other provision of the Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts
that would prohibit the making of any payment or distribution by the Trustee,
and the Trustee and the Paying Agent may continue to make payments on the
Guarantee, unless the Trustee shall have received at its Corporate Trust
Office at least five Business Days prior to the date of such payment written
notice of facts that would cause the payment of any Obligations with respect
to the Guarantee to violate this Section 8. Only the Guarantor or a
Representative may give the notice. Nothing in this Section 8 shall impair
the claims of, or payments to, the Trustee under or pursuant to Section 7.7
of the Indenture.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Guarantor
Senior Indebtedness (or a Representative of such holder) to establish that
such notice has been given by a holder of Guarantor Senior Indebtedness (or a
Representative of any such holder). In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of
any person as a holder of Guarantor Senior Indebtedness to participate in any
payment or distribution pursuant to this Section 8, the Trustee may request
such person to furnish evidence to the reasonable satisfaction of the Trustee
as to the amount of Guarantor Senior Indebtedness held by such person, the
extent to which such person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such person under
this Section 8, and if such evidence is not furnished, the Trustee may defer
any payment which it may be required to make for the benefit
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of such person pursuant to the terms of this Guarantee pending judicial
determination as to the rights of such Person to receive such payment.
The Trustee in its individual or any other capacity may hold
Guarantor Senior Indebtedness with the same rights it would have if it were
not Trustee. Any Agent may do the same with like rights.
m. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of a
Security by the Holder's acceptance thereof authorizes and directs the
Trustee on the Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination as provided in this Section 8,
and appoints the Trustee to act as the Holder's attorney-in-fact for any and
all such purposes. If the Trustee does not file a proper proof of claim or
proof of debt in the form required in any proceeding referred to in Section
6.9 of the Indenture at least 30 days before the expiration of the time to
file such claim, the holders of Guarantor Senior Indebtedness (or a
Representative of any such holder) are hereby authorized to file an
appropriate claim for and on behalf of the Holders.
n. AMENDMENTS. The provisions of this Section 8 shall not be
amended or modified without the written consent of the holders of all
Guarantor Senior Indebtedness.
9. MERGER, CONSOLIDATION OR SALE OF ASSETS.
a. The Guarantor may not, in a single transaction or series of
transactions, consolidate with or merge with or into (whether or not the
Guarantor is the surviving Person) another corporation, Person or entity,
whether or not affiliated with the Guarantor, unless (i) subject to the
provisions of Section 9(b), the Person formed by or surviving any such
consolidation or merger (if other than the Guarantor) assumes all the
obligations of the Guarantor, pursuant to a supplemental Guarantee in form
and substance reasonably satisfactory to the Trustee, under the Guarantee;
(ii) immediately after giving effect to such transaction, no Default or Event
of Default exists; (iii) except in the case of a merger of the Guarantor with
or into a Wholly Owned Subsidiary of the Guarantor, the Guarantor or the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Guarantor), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made will, after
giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in Section 4.4 of the Indenture or after giving pro
forma effect thereto as if such transaction had occurred at the beginning of
the applicable four-quarter period, the Fixed Charge Coverage Ratio of the
Guarantor or such Person, as the case may be, shall be at least 1.75 to 1 and
greater than the consolidated Fixed Charge Coverage Ratio of the Guarantor
prior to giving pro forma effect to such transaction.
b. In the event of a sale or other disposition of all of the
assets of the Guarantor, by way of merger, consolidation or otherwise, or a
sale or other disposition of all of the capital stock of the Guarantor, then
the Guarantor (in the event of a sale or other disposition, by way of such a
merger, consolidation or otherwise, of all of the capital stock of the
Guarantor) or the
E-8
<PAGE>
corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of the Guarantor) will be released and
relieved of any obligations under this Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in accordance with
Section 4.5 of the Indenture. In addition, in the event the Board of
Directors of the Company designates the Guarantor to be an Unrestricted
Subsidiary, then the Guarantor shall be released and relieved of any
obligations under this Guarantee; provided that such designation is conducted
in accordance with the applicable provisions of the Indenture.
10. MISCELLANEOUS.
a. BENEFITS OF GUARANTEE; SUCCESSORS AND ASSIGNS. Nothing in this
Guarantee, expressed or implied, shall give to any person, other than
Trustee, the Holders and their respective successors, transferees and assigns
hereunder, any benefit or any legal or equitable rights, remedy or claim
under this Guarantee. This Guarantee shall be binding upon the Guarantor,
its successors and assigns, and inure, together with the rights and remedies
of Trustee hereunder, to the benefit of Trustee, the Holders and their
respective successors, transferees and assigns. The Guarantor shall not,
without the prior written consent of Trustee, assign any rights, duties or
obligations under this Guarantee.
b. NOTICES. All notices, demands and other communications
hereunder shall be given and shall be effective in accordance with the
Indenture, except that notices to the Guarantor shall be given to its address
set forth on the signature page hereof, or to such other address as the
Guarantor may specify in writing from time to time to the Trustee.
c. AMENDMENTS. Neither this Guarantee nor any provision hereof
may be amended, modified, waived, discharged or terminated other than
pursuant to the provisions of the Indenture.
d. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES,
PARTNERS AND STOCKHOLDERS. No past, present or future director, officer,
employee, incorporator, partner or stockholder of the Guarantor, as such,
shall have any liability for any obligations of the Guarantor under this
Guarantee or for any claim based on, in respect of, or by reason of, this
Guarantee. Each Holder by accepting a Security has waived and released all
such liability. The waiver and release are past of the consideration for
issuance of this Guarantee.
e. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, SHALL GOVERN AND BE USED
TO CONSTRUE THIS GUARANTEE.
f. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Guarantee
may not be used to interpret any other guarantee, indenture, loan or debt
agreement of the Company, the Guarantor or their respective Subsidiaries or
of any other Person. Any such guarantee, indenture, loan or debt agreement
may not be used to interpret this Guarantee.
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<PAGE>
g. SUCCESSORS. All agreements of the Guarantor in this Guarantee
shall bind its successors. All agreements of the Trustee in this Guarantee
shall bind its successors.
h. SEVERABILITY. In case any provision in this Guarantee shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
i. COUNTERPART ORIGINALS. The parties may sign any number of
copies of this Guarantee. Each signed copy shall be an original, but all of
them together represent the same agreement.
j. HEADINGS, ETC. The headings of the sections of this Guarantee
have been inserted for convenience of reference only, are not to be
considered a part of this Guarantee and shall in no way modify or restrict
any of the terms or provisions hereof.
(Signature Pages Follow)
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<PAGE>
IN WITNESS WHEREOF, the undersigned Guarantor has caused this
instrument to be duly executed and delivered to the Trustee as of the date
first above written.
[GUARANTOR]
[Address]
By:
--------------------------------
Name:
Title:
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<PAGE>
----------------------------------------------------------------------
HARD ROCK HOTEL, INC.
$120,000,000
9 1/4% Senior Subordinated Notes due 2005
PURCHASE AGREEMENT
March 17, 1998
BEAR, STEARNS & CO. INC.
BANCAMERICA ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HARD ROCK HOTEL, INC.
----------------------------------------------------------------------
<PAGE>
$120,000,000
9 1/4% Senior Subordinated Notes due 2005
PURCHASE AGREEMENT
March 17, 1998
New York, New York
BEAR, STEARNS & CO. INC.
BANCAMERICA ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
Hard Rock Hotel, Inc., a Nevada corporation (the "COMPANY"),
proposes to issue and sell to Bear, Stearns & Co. Inc. ("BEAR STEARNS"),
BancAmerica Robertson Stephens ("BANCAMERICA") and Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ" and together with Bear Stearns and
BancAmerica, the "INITIAL PURCHASERS") an aggregate of $120,000,000 principal
amount of 9 1/4% Senior Subordinated Notes due 2005 (the "SERIES A NOTES"),
subject to the terms and conditions set forth herein. The Series A Notes
will be issued pursuant to an indenture (the "INDENTURE"), to be dated the
Closing Date (as defined below), between the Company and First Trust National
Association, as trustee (the "TRUSTEE"). The Series A Notes are more fully
described in the Offering Memorandum referred to below.
1. ISSUANCE OF SECURITIES.
The Company proposes, upon the terms and subject to the conditions
set forth herein, to issue and sell to the Initial Purchasers an aggregate of
$120,000,000 principal amount of Series A Notes. The Series A Notes and the
Series B Notes (as defined below) issuable in exchange therefor are
collectively referred to herein as the "SECURITIES." The proceeds to the
Company from the sale to the Initial Purchasers of the
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<PAGE>
Series A Notes will be used as described under "Use of Proceeds" in the
Offering Memorandum (as defined below).
Upon original issuance thereof, and until such time as the same is
no longer required under the applicable requirements of the Securities Act of
1933, as amended (the "ACT"), the Series A Notes (and all securities issued
in exchange therefor or in substitution thereof) shall bear the following
legend:
THE SECURITY (OR ITS PREDECESSORS) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER
OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS NOT
ACQUIRING THIS SECURITY FOR THE ACCOUNT OR BENEFIT OF A U.S.
PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT). THE HOLDER
OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE RE-
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<PAGE>
QUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(c) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED
UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO
THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF
THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
2. OFFERING.
The Series A Notes will be offered and sold to the Initial
Purchasers pursuant to an exemption from the registration requirements under
the Act. The Company has prepared a preliminary offering memorandum, dated
March 4, 1998 (the "PRELIMINARY OFFERING MEMORANDUM"), and a final offering
memorandum, dated March 17, 1998 (the "OFFERING MEMORANDUM"), relating to the
Company and the issuance of the Series A Notes.
The Initial Purchasers have advised the Company that the Initial
Purchasers will make offers of the Series A Notes on the terms set forth in
the Offering Memorandum, as amended or supplemented, solely to persons whom
the Initial Purchasers reasonably believe to be "qualified institutional
buyers," as defined in Rule 144A under the Act ("QIBS") and to persons
permitted to purchase the Series A Notes in offshore transactions in reliance
upon Regulation S under the Act (each a "REGULATION S PURCHASER"). The QIBs
and the Regulation S Purchasers are referred to herein as the "ELIGIBLE
PURCHASERS." Sales to Eligible Purchasers contemplated by this Agreement are
referred to herein as "EXEMPT RESALES." The Initial Purchasers will offer the
Series A
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<PAGE>
Notes to such Eligible Purchasers initially at a price equal to 100% of the
principal amount thereof. Such price may be changed at any time without
notice.
Holders of the Securities will be subject to certain provisions of
the Nevada Gaming Control Act. Holders (including subsequent transferees) of
the Series A Notes will have the registration rights set forth in the
registration rights agreement relating thereto (the "REGISTRATION RIGHTS
AGREEMENT"), to be dated the Closing Date, in substantially the form of
EXHIBIT A hereto, for so long as such Series A Notes constitute "Transfer
Restricted Securities" (as defined in the Registration Rights Agreement).
Pursuant to terms and conditions contained in the Registration Rights
Agreement, the Company will agree to use its best efforts to file with the
Securities and Exchange Commission (the "COMMISSION"), under the
circumstances set forth therein, (i) a registration statement under the Act
(the "EXCHANGE OFFER REGISTRATION STATEMENT") relating to the 9 1/4% Senior
Subordinated Notes due 2005 (the "SERIES B NOTES") to be offered in exchange
for the Series A Notes (the "EXCHANGE OFFER") and (ii) a shelf registration
statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION
STATEMENT") relating to the resale by certain holders of the Series A Notes,
and to use its best efforts to cause such Registration Statements to be
declared effective and consummate the Exchange Offer. This Purchase
Agreement (this "AGREEMENT"), the Securities, the Indenture and the
Registration Rights Agreement are hereinafter sometimes referred to
collectively as the "OPERATIVE DOCUMENTS."
3. PURCHASE, SALE AND DELIVERY.
(a) On the basis of the representations, warranties and covenants
contained in this Agreement, and subject to its terms and conditions, the
Company agrees to issue and sell to each Initial Purchaser, and each Initial
Purchaser agrees, severally and not jointly, to purchase from the Company,
that aggregate principal amount of Series A Notes set forth opposite its name
on Schedule I hereto. Each of the Initial Purchasers shall pay a purchase
price equal to 97.375% of the principal amount of the Series A Notes to be
purchased by such Initial Purchaser.
(b) Delivery of, and payment of the purchase price for, the Series
A Notes shall be made at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York 10017 or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 9:30 a.m.
New York City time on March 23, 1998 or at such other date and time as shall
be agreed upon by the Initial Purchasers and the Company. The time and date
of such delivery and the payment of the purchase price are herein called the
"CLOSING DATE."
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<PAGE>
(c) On the Closing Date, one or more of the Series A Notes in
definitive form, registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"), having an aggregate principal amount of
$120,000,000 shall be delivered by the Company to the Initial Purchasers (or
as the Initial Purchasers direct), against payment by the Initial Purchasers
of the purchase price therefor by wire transfer of same day funds to an
account or accounts designated by the Company, provided that the Company
shall give at least two business days' prior written notice to the Initial
Purchasers of the information required to effect such wire transfer. The
Series A Notes shall be made available to the Initial Purchasers for
inspection not later than 9:30 a.m. New York City time on the business day
immediately preceding the Closing Date.
4. AGREEMENTS OF THE COMPANY.
The Company covenants and agrees with the Initial Purchasers as
follows:
(a) To advise the Initial Purchasers promptly and, if requested by
the Initial Purchasers, confirm such advice in writing, of (i) the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any of the Series A Notes
for offering or sale in any jurisdiction, or the initiation of any proceeding
for such purpose by any state securities commission or other regulatory
authority and (ii) the happening of any event that makes any statement of a
material fact made in the Preliminary Offering Memorandum or the Offering
Memorandum untrue or that requires the making of any additions to or changes
in the Preliminary Offering Memorandum or the Offering Memorandum in order to
make the statements therein, in the light of the circumstances under which
they are made, not misleading. The Company shall use its best efforts to
prevent the issuance of any stop order or order suspending the qualification
or exemption of any of the Series A Notes under any state securities or Blue
Sky laws and, if at any time any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption of any of the Series A Notes under any state securities or Blue Sky
laws, the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest practicable time.
(b) To furnish the Initial Purchasers and those persons identified
by the Initial Purchasers to the Company, without charge, as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum, and any
amendments or supplements thereto, as the Initial Purchasers may reasonably
request.
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<PAGE>
The Company consents to the use of the Preliminary Offering Memorandum (prior
to the availability of the Offering Memorandum) and the Offering Memorandum,
and any amendments and supplements thereto required pursuant hereto, by the
Initial Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum
or the Offering Memorandum prior to the Closing Date unless the Initial
Purchasers shall previously have been advised thereof and shall have
consented to, or not have reasonably objected thereto, in writing within a
reasonable time after being furnished a copy thereof. The Company shall
promptly prepare, upon the Initial Purchasers' request, any amendment or
supplement to the Preliminary Offering Memorandum or the Offering Memorandum
that the Initial Purchasers and the Company believe may be necessary or
advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any
Exempt Resale, any event shall occur as a result of which, in the judgment of
the Company or in the opinion of counsel for the Company or counsel for the
Initial Purchasers, it becomes necessary to amend or supplement the
Preliminary Offering Memorandum or the Offering Memorandum in order to make
the statements therein, in the light of the circumstances when such Offering
Memorandum is delivered to an Eligible Purchaser which is a prospective
purchaser, not misleading, or if it is necessary to amend or supplement the
Preliminary Offering Memorandum (prior to the availability of the Offering
Memorandum) or the Offering Memorandum to comply with applicable law, (i) to
notify the Initial Purchasers and (ii) forthwith to prepare an appropriate
amendment or supplement to such Preliminary Offering Memorandum or Offering
Memorandum so that the statements therein as so amended or supplemented will
not, in the light of the circumstances when it is so delivered, be
misleading, or so that such Preliminary Offering Memorandum or Offering
Memorandum will comply with applicable law.
(e) To cooperate with the Initial Purchasers and counsel for the
Initial Purchasers in connection with the qualification or registration of
the Series A Notes under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may reasonably request and to
continue such qualification in effect so long as required for the Exempt
Resales; PROVIDED, HOWEVER that the Company shall not be required in
connection therewith to register or qualify as a foreign corporation where it
is not now so qualified or to take any action that would subject it to
service of process in suits or taxation, in each case, except as to matters
and transactions relating to Exempt Resales, in any jurisdiction where it is
not now so subject.
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<PAGE>
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement becomes effective or is terminated, to pay
all costs, reasonable expenses, fees and taxes (other than transfer taxes) in
connection with this Agreement and the transactions contemplated hereby and
by the other Operative Documents, including without limitation all costs,
reasonable expenses, fees and taxes (other than transfer taxes) relating to:
(i) the preparation, printing, filing and distribution of the Preliminary
Offering Memorandum and the Offering Memorandum (including, without
limitation, financial statements, and fees and expenses of counsel for the
Initial Purchasers and all amendments and supplements thereto required
pursuant hereto, (ii) the preparation (including, without limitation,
duplication costs) and delivery of this Agreement, the other Operative
Documents and all other agreements, memoranda, correspondence and other
documents prepared and delivered in connection herewith and with the Exempt
Resales, (iii) the issuance, transfer and delivery by the Company of the
Securities to the Initial Purchasers, (iv) the qualification or registration
of the Securities for offer and sale under the securities or Blue Sky laws of
the jurisdictions referred to in paragraph (e) above (including, without
limitation, the cost of printing and mailing a preliminary and final Blue Sky
Memorandum and the reasonable fees and disbursements of counsel to the
Initial Purchasers relating thereto), (v) furnishing such copies of the
Preliminary Offering Memorandum and the Offering Memorandum, and all
amendments and supplements thereto, as may be reasonably requested for use in
connection with Exempt Resales, (vi) the preparation of certificates for the
Securities (including, without limitation, printing and engraving thereof),
(vii) the reasonable fees, disbursements and expenses of counsel to the
Company and its independent public accountants, (viii) all expenses and
listing fees in connection with the application for quotation of the Series A
Notes in the National Association of Securities Dealers, Inc. ("NASD")
Automated Quotation System PORTAL ("PORTAL"), (ix) all fees and expenses
(including reasonable fees and expenses of counsel to the Company) of the
Company in connection with the approval of the Securities by The Depository
Trust Company ("DTC") for "book-entry" transfer and the costs and charges of
Euroclear and CEDEL, (x) rating the Securities by rating agencies, (xi) the
reasonable fees and expenses of the Trustee and its counsel in connection
with the Indenture and the Securities, (xii) reasonable expenses of marketing
the Series A Notes, including any expenses in connection with any road show
or investors conference and (xiii) the performance by the Company of its
other obligations under this Agreement and the other Operative Documents;
PROVIDED that if the transactions contemplated by this Agreement are
consummated, the Initial Purchasers shall pay their own attorneys fees and
expenses (except as provided in the parenthetical in clause (iv)).
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<PAGE>
(g) To use the proceeds from the sale of the Series A Notes in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) Not to claim voluntarily, and to resist actively any attempts
to claim, the benefit of any usury laws against the holders of any Securities.
(i) To do and perform all things required to be done and performed
under this Agreement by it that are within its control prior to the Closing
Date and use its reasonable best efforts to satisfy all conditions precedent
that are within its control on its part to the delivery of the Series A Notes.
(j) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Series A Notes in a manner that
would require the registration under the Act of the sale to the Initial
Purchasers, the QIBs or the Regulation S Purchasers of the Series A Notes.
(k) For so long as any of the Series A Notes remain outstanding
and during any period in which the Company is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), to make available to any holder of Series A Notes in connection with
any sale thereof and any prospective purchaser of such Series A Notes
designated by such holder, the information required by Rule 144A(d)(4) under
the Act.
(l) To cause the Exchange Offer to be made in accordance with and
subject to the terms set forth in the Registration Rights Agreement in the
appropriate form to permit registered Series B Notes to be offered in
exchange for the Series A Notes and to comply with all applicable federal and
state securities laws in connection with the Exchange Offer.
(m) To comply in all material respects with all of the agreements
set forth in the Operative Documents and in the representation letter of the
Company to DTC relating to the approval of the Securities by DTC for
"book-entry" transfer.
(n) To cooperate with the Initial Purchasers to effect the
inclusion of the Series A Notes in the PORTAL market and to obtain approval
of the Series A Notes by DTC for "book-entry" transfer.
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(o) During a period of five years following the Closing Date, to
deliver without charge to the Initial Purchasers promptly upon their becoming
available, copies of (i) all reports or other publicly available information
that the Company shall mail or otherwise make available to its stockholders
and (ii) all reports, financial statements and proxy or information
statements filed by the Company with the Commission or any national
securities exchange and such other publicly available information concerning
the Company and its subsidiaries including without limitation, press
releases, as the Initial Purchasers may reasonably request.
(p) Not to, and to cause its affiliates not to, offer, sell,
contract to sell or grant any option to purchase or otherwise transfer or
dispose of any Securities or any other debt security issued by the Company
(other than a private loan, credit or financing agreement with a bank or
similar financing institution) or any security convertible into or
exchangeable or exercisable for any such debt security, for a period of 90
days after the Closing Date, without the Initial Purchasers' prior written
consent, except for (i) sales or transfers between affiliates of the Company
and (ii) the issue and exchange of Series B Notes for Series A Notes in the
Exchange Offer.
(q) Prior to the Closing Date, to furnish to the Initial
Purchasers, as soon as they have been prepared by the Company, a copy of any
unaudited interim financial statements for any period subsequent to the
periods covered by the financial statements appearing in the Offering
Memorandum.
(r) Not to take, directly or indirectly, any action designed to,
or that might reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of either the Series A Notes or the Series B Notes. Except as
permitted by the Act, the Company will not distribute any (i) preliminary
offering memorandum, including, without limitation, the Preliminary Offering
Memorandum, (ii) offering memorandum, including, without limitation, the
Offering Memorandum or (iii) other offering material, in connection with the
offering and sale of the Securities.
(s) The Company, its affiliates and any person acting on its
behalf (other than the Initial Purchasers and their respective affiliates)
will not solicit any offer to buy or offer or sell the Series A Notes by
means of any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act.
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<PAGE>
(t) The Company shall take all reasonable action necessary to
enable Standard & Poor's Corporation ("S&P") and Moody's Investors Service,
Inc. ("MOODY'S") to provide their respective credit ratings of the Series A
Notes.
(u) During the period from the Closing Date to two years after the
Closing Date, the Company and its subsidiaries, if any, will not, and will
not permit any of their "affiliates" (as defined in Rule 144 under the Act)
to resell any of the Series A Notes that have been reacquired by them, except
for Series A Notes purchased by the Company and its subsidiaries or any of
their affiliates and resold in a transaction registered under the Act.
(v) None of the Company, its affiliates and any person acting on
their behalf (other than the Initial Purchasers) will engage in any directed
selling efforts (as that term is defined in Regulation S) with respect to the
Series A Notes sold pursuant to Regulation S, and the Company and its
affiliates and each person acting on their behalf (other than the Initial
Purchasers) will comply with the offering restrictions of Regulation S with
respect to those Series A Notes sold pursuant thereto.
(w) The sale of the Series A Notes pursuant to Regulation S is not
part of a plan or scheme on the part of the Company to evade the registration
provisions of the Act.
(x) The Company, its affiliates and all persons acting on their
behalf (other than the Initial Purchasers, as to whom the Company makes no
representation) have complied with and will comply with the offering
restrictions requirements of Regulation S in connection with the offering of
the Series A Notes outside the United States.
5. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to the Initial Purchasers
that as of the date hereof (except as otherwise expressly provided):
(i) The Preliminary Offering Memorandum and the Offering
Memorandum have been prepared in connection with the Exempt Resales. The
Preliminary Offering Memorandum and the Offering Memorandum do not, and
any supplement or amendment to them will not, contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under which
they were
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made, not misleading, except that the representations and warranties
contained in this paragraph shall not apply to statements in or omissions
from the Preliminary Offering Memorandum and the Offering Memorandum
(or any supplement or amendment thereto) made in reliance upon and in
conformity with information relating to the Initial Purchasers furnished
to the Company in writing by or on behalf of the Initial Purchasers
expressly for use therein. No stop order preventing the use of the
Preliminary Offering Memorandum or the Offering Memorandum, or any
amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.
(ii) There are no securities of the Company that are listed on a
national securities exchange under Section 6 of the Exchange Act or that
are quoted in a United States inter-dealer quotation system.
(iii) The Company (x) has been duly organized and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, (y) has all requisite corporate power and
authority to carry on its business as it is being conducted currently and
as described in the Offering Memorandum and to own, lease and operate its
properties, and (z) is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the
nature of its business or its ownership or leasing of property requires
such qualification, except where the failure to be so qualified (a) could
not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the properties, business, results of operations
or financial condition of the Company or (b) could not, individually or in
the aggregate, reasonably be expected to materially interfere with or
materially adversely affect the issuance of the Securities pursuant hereto
(any of the events set forth in clauses (a) or (b), a "MATERIAL ADVERSE
EFFECT").
(iv) All of the outstanding shares of capital stock of the
Company have been duly authorized, validly issued, and are fully paid and
nonassessable and were not issued in violation of any preemptive or similar
rights. As of November 30, 1997, after giving PRO FORMA effect to the
issuance and sale of the Series A Notes pursuant hereto and the other
transactions described therein, the Company would have had an authorized
and outstanding capitalization as set forth in the Offering Memorandum
under the caption "Capitalization," subject to the notes and assumptions
included therein.
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(v) The Company currently has no direct or indirect subsidiaries.
(vi) The Company has all requisite corporate power and authority
to execute, deliver and perform its obligations under the Operative
Documents and to consummate the transactions contemplated hereby and
thereby, including, without limitation, the corporate power and authority
to issue, sell and deliver the Securities as provided herein and therein.
(vii) When the Series A Notes are issued and delivered pursuant to
this Agreement, no Series A Note will be of the same class (within the
meaning of Rule 144A under the Act) as securities of the Company that are
listed on a national securities exchange under Section 6 of the Exchange
Act or that are quoted in a United States automated inter-dealer quotation
system.
(viii) This Agreement has been duly and validly authorized,
executed and delivered by the Company and (assuming the due authorization,
execution and delivery of this Agreement by the Initial Purchasers) is the
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except as rights of indemnity or
contribution, or both, may be limited by state or federal securities laws,
and except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the rights
of creditors generally and subject to general principles of equity.
(ix) The Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company (assuming the
due authorization, execution and delivery of the Indenture by the Trustee),
will be the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as rights of
indemnity or contribution, or both, may be limited by state or federal
securities laws, and except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
laws affecting the rights of creditors generally and subject to general
principles of equity. The Indenture will conform in all material respects
to the description thereof in the Offering Memorandum.
(x) The Registration Rights Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by
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the Company (assuming the due authorization, execution and delivery of
the Registration Rights Agreement by the Initial Purchasers), will be the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as rights of indemnity or
contribution, or both, may be limited by state or federal securities laws,
and except as such enforceability may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization or similar laws affecting the rights
of creditors generally and subject to general principles of equity. The
Registration Rights Agreement will conform in all material respects to the
description thereof in the Offering Memorandum.
(xi) The Company's new senior secured revolving credit agreement
(together with all exhibits, agreements and schedules entered into in
connection therewith, the "NEW CREDIT AGREEMENT") to be dated the Closing
Date, will, on or prior to the Closing Date, have been duly and validly
authorized, executed and delivered by the Company and upon the execution
and delivery thereof (assuming the due authorization, execution and
delivery thereof by the other parties thereto) will be the legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
laws affecting the rights of creditors generally and subject to general
principles of equity. The New Credit Agreement and the Completion Guaranty
provided by Peter A. Morton to be dated the Closing Date (the "Completion
Guaranty") will conform in all material respects to the description thereof
in the Offering Memorandum.
(xii) The Series A Notes have been duly and validly authorized by
the Company for issuance and sale to the Initial Purchasers pursuant to
this Agreement and, when issued and authenticated in accordance with the
terms of the Indenture and delivered against payment therefor in accordance
with the terms hereof and thereof, will be the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms and entitled to the benefits of the Indenture, except as
rights of indemnity or contribution, or both, may be limited by state or
federal securities laws, and except as such enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
laws affecting the rights of creditors generally and subject to general
principles of equity. The Series A Notes, when issued, authenticated and
delivered, will conform in all material respects to the description thereof
in the Offering Memorandum.
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(xiii) When the Series B Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in
accordance with the terms of the Exchange Offer and the Indenture, the
Series B Notes will be the legal, valid, binding and enforceable
obligations of the Company, enforceable against the Company in accordance
with their terms and entitled to the benefits of the Indenture, except as
rights of indemnity or contribution, or both, may be limited by state or
federal securities laws, and except as such enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization or similar
laws affecting the rights of creditors generally and subject to general
principles of equity. The Series B Notes, when issued, authenticated and
delivered, will conform in all material respects to the description thereof
in the Offering Memorandum.
(xiv) The Company is not (A) in violation of its articles of
incorporation or bylaws, (B) in default in the performance of any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is bound or to which any
of its properties is subject, or (C) in violation of any local, state,
federal or foreign law, statute, ordinance, rule, regulation, judgment or
court decree applicable to it or any of its assets or properties (whether
owned or leased), except, in the case of clauses (B) and (C), for any such
violation or default that could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the Company, there exists no condition that, with notice or
the passage of time or both, would constitute such a default under any such
document or instrument except for any such default that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(xv) Except as described in the Offering Memorandum, none of (A)
the execution, delivery or performance by the Company of this Agreement and
the other Operative Documents, (B) the issuance and sale of the Securities,
nor (C) the execution, delivery and performance by the Company of the New
Credit Agreement violates, conflicts with or constitutes a breach of any of
the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or
requires consent (other than those consents that have been obtained or will
be obtained prior to the Closing Date) under, or, except as provided in the
New Credit Agreement, results in the imposition of a lien or encumbrance on
any properties of the Company, or an acceleration of any indebtedness of
the Company pursuant to,
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(i) the articles of incorporation or bylaws of the Company, (ii) any
bond, debenture, note, indenture, mortgage, deed of trust or other
agreement or instrument to which the Company is a party or by which the
Company is bound or to which any of its properties is subject, (iii) any
statute, rule or regulation applicable to the Company or its assets or
properties or (iv) any judgment, order or decree of any court or
governmental agency or authority having jurisdiction over the Company or
its assets or properties, except for any such violation, default, consent,
imposition of a lien or acceleration that could not, in the case of clauses
(ii), (iii) and (iv), singly or in the aggregate, have a Material Adverse
Effect. Except as described in the Offering Memorandum, and except for
filings to perfect the security interests contemplated by the New Credit
Agreement, no consent, approval, authorization or order of, or filing,
registration, qualification, license or permit of or with, any court or
governmental agency, body or administrative agency is required for (1) the
execution, delivery and performance by the Company of this Agreement and
the other Operative Documents, (2) the execution, delivery and performance
by the Company of the New Credit Agreement or (3) the issuance and sale of
the Securities and the transactions contemplated thereby, except such as
have been obtained and made (or, in the case of the Registration Rights
Agreement will be obtained and made).
(xvi) There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or, to the knowledge of the Company, threatened or
contemplated to which the Company is or may be a party or to which the
business or property of the Company is or is reasonably likely to be
subject, (ii) no statute, rule, regulation or order that has been enacted,
adopted or issued by any governmental agency or, to the knowledge of the
Company, that has been proposed by any governmental body, and (iii) no
injunction, restraining order or order of any nature by a federal or state
court or foreign court of competent jurisdiction to which the Company is or
is reasonably likely to be subject or to which the business, assets, or
property of the Company is or is reasonably likely to be subject, that, in
the case of clauses (i), (ii) and (iii) above, could, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
(xvii) No action has been taken by the Company and no statute,
rule, regulation or order has been enacted, adopted or issued by any
governmental agency that prevents the issuance of the Securities (except
that various approvals and a waiver from the Nevada Gaming Commission will
be required in order for the Company to issue the Series B Notes and
related transactions)
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<PAGE>
or prevents or suspends the use of the Offering Memorandum; to the
knowledge of the Company, no injunction, restraining order or order of
any nature by a federal or state court of competent jurisdiction has
been issued that prevents the issuance of the Securities or prevents
or suspends the sale of the Securities in any jurisdiction referred to
in Section 4(e) hereof; and, to the knowledge of the Company, every
request of any securities or gaming authority or agency of any
jurisdiction for additional information has been complied with in all
material respects.
(xviii) There is (i) no significant unfair labor practice complaint
pending against the Company, nor, to the knowledge of the Company,
threatened against it, before the National Labor Relations Board, any state
or local labor relations board or any foreign labor relations board, and no
significant grievance or significant arbitration proceeding arising out of
or under any collective bargaining agreement is so pending against the
Company or, to the knowledge of the Company, threatened against it, (ii) no
significant strike, labor dispute, slowdown or stoppage pending against the
Company nor, to the knowledge of the Company, threatened against it and
(iii) to the knowledge of the Company, no union organizing or union
representation question existing with respect to the employees of the
Company that, in the case of clauses (i), (ii) or (iii), would reasonably
be expect to result in a Material Adverse Effect. No claim has been filed
against the Company alleging violation of (A) any federal, state or local
law or foreign law relating to discrimination in hiring, promotion or pay
of employees, (B) any applicable wage or hour laws or (C) any provision of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or the rules and regulations thereunder, except, in the case of clause (A),
(B) or (C), as could not reasonably be expected to have a Material Adverse
Effect.
(xix) Neither the Company, nor, to the knowledge of the Company,
any of its officers, directors, employees, agents or affiliates or any
other person acting on its behalf has, directly or indirectly, given or
agreed to give any money, gift or similar benefit to any customer,
supplier, employee or agent of a customer or supplier, official or employee
of any governmental agency, instrumentality of any government or any
political party or candidate for office (domestic or foreign) or other
person who was, at the time, in a position to help or hinder the business
of the Company (or assist the Company in connection with any actual or
proposed transaction) which would at the time have been reasonably likely
to subject the Company to any damage or penalty
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in any civil, criminal or governmental litigation or proceeding (domestic
or foreign) except for such damages or penalties, either individually or
in the aggregate, that could not reasonably be expected to have a Material
Adverse Effect.
(xx) The Company has (A) good and marketable title to all of the
properties and assets material to the business of the Company as owned by
it or is part of the Expansion (as defined in the Offering Memorandum),
free and clear of all liens, charges, encumbrances and restrictions (except
(i) liens constituting Permitted Liens under the Indenture and (ii) liens,
charges, encumbrances and restrictions that do not in the aggregate
materially detract from the value of such properties and assets or
materially impair the use thereof in the operation of the business of the
Company or are contemplated by any existing credit agreement and the New
Credit Agreement), (B) peaceful and undisturbed possession under all
material leases to which it is a party as lessee and each of which lease is
valid and binding and no default which would have a Material Adverse Effect
exists thereunder, (C) all licenses, certificates, permits, authorizations,
approvals, franchises and other rights from, and has made all declarations
and filings with, all federal, state and local authorities, all self-
regulatory authorities and all courts and other tribunals (each, an
"AUTHORIZATION") necessary to engage in the business conducted by the
Company in the manner described in the Offering Memorandum, except as could
not reasonably be expected to have a Material Adverse Effect and except for
certain permits relating to the construction forming part of the Expansion
and (D) no reason to believe that any governmental body or agency is
considering limiting, suspending or revoking any such Authorization or that
permits necessary for the Expansion will not be obtained. All such
Authorizations are valid and in full force and effect and the Company is in
compliance in all material respects with the terms and conditions of all
such Authorizations and with the rules and regulations of the regulatory
authorities having jurisdiction with respect thereto. All leases to which
the Company is a party are valid and binding and no default by the Company
has occurred and is continuing thereunder and no material defaults by the
landlord are existing under any such lease, except in each case as could
not reasonably be expected to have a Material Adverse Effect.
(xxi) All Federal income and other material tax returns required
to be filed by the Company in all jurisdictions have been so filed. All
Federal and other material taxes and similar assessments (whether imposed
directly or through withholdings) claimed to be due from such entities or
that are due and
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(xxii) To the knowledge of the Company and without independent
verification or duty to investigate, the properties of the Company are
structurally sound with no known defects which would have a Material
Adverse Effect, are in operating condition and good repair (reasonable wear
and tear excepted) and are adequate for their current uses.
(xxiii) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "INVESTMENT COMPANY ACT"),
or analogous foreign laws and regulations.
(xxiv) There are no holders of securities of the Company (other
than the Securities) who, by reason of the execution by the Company of this
Agreement or any other Operative Document or the consummation by the
Company of the transactions contemplated hereby and thereby, have the right
to request or demand that the Company register under the Act securities
held by them.
(xxv) The Company believes that it maintains a system of internal
accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets,
(iii) access to cash and cash equivalents is permitted only in accordance
with management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect thereto.
(xxvi) The Company maintains insurance covering its material
properties, operations, personnel and businesses, including the Expansion
in amounts customary for businesses in the hotel gaming industry. To the
knowledge of the Company, such insurance insures against such losses and
risks
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as are adequate in accordance with customary industry practice to
protect the Company and its businesses. The Company has not received
notice from any insurer or agent of such insurer that substantial capital
improvements or other material expenditures will have to be made in order
to continue such insurance. All such insurance is outstanding and duly in
force on the date hereof.
(xxvii) The Company will own, possess or have the right on either an
exclusive or non-exclusive basis to use the names "Hard Rock Hotel" and the
logo on Annex A, and to the Company's knowledge, the Company will own,
possess or have the right on either an exclusive or non-exclusive basis to
use all other patents, patent rights, licenses (including all state, local
or other jurisdictional regulatory licenses), inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, software, systems or procedures),
trademarks, service marks and trade names, technical data and information
(collectively, the "INTELLECTUAL PROPERTY") presently used by the Company
in connection with the businesses now operated by the Company, free and
clear of and without violating any right, claimed right, charge,
encumbrance, pledge, security interest, restriction or lien of any kind of
any other person, except as contemplated by the New Credit Agreement, or as
disclosed in the Offering Memorandum, or where the failure to so own,
possess, or employ such Intellectual Property free and clear and without
violation either individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect. Other than as disclosed in the
Offering Memorandum, the Company has not received any notice of
infringement of or conflict with asserted rights of others with respect to
the names "Hard Rock Hotel" and the logo set forth on Annex A or the other
Intellectual Property except as could not reasonably be expected to have a
Material Adverse Effect. Other than as disclosed in the Offering
Memorandum, to the knowledge of the Company the use of the Intellectual
Property in connection with the business and operations of the Company does
not infringe on the rights of any person, except as would not reasonably be
expected to have a Material Adverse Effect.
(xxviii) The Company (a) has not violated any environmental, safety
or similar law or regulation applicable to it or its business or property
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (b) does not lack, or has not lacked, any permit,
license or other approval required of it under applicable Environmental
Laws and (c) has not violated any term or condition of such permit, license
or approval which in the
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case of clauses (a), (b) and (c), would reasonably be expected to, either
individually or in the aggregate, have a Material Adverse Effect.
(xxix) The Company has not (i) taken, directly or indirectly, any
action designed to, or that might reasonably be expected to, cause or
result in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Series A Notes or (ii)
since the date of the Preliminary Offering Memorandum sold, bid for,
purchased or paid any person any compensation for soliciting purchases of
the Series A Notes or paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of the Company.
(xxx) No registration under the Act of the Series A Notes is
required for the sale of the Series A Notes to the Initial Purchasers as
contemplated hereby or for the Exempt Resales assuming (i) that the
purchasers who buy the Series A Notes in the Exempt Resales are either QIBs
or Regulation S Purchasers and (ii) the accuracy of the Initial Purchasers'
representations regarding the absence of general solicitation in connection
with the sale of Series A Notes to the Initial Purchasers and the Exempt
Resales contained herein. No form of general solicitation or general
advertising was used by the Company or any of its representatives (although
no representation or warranty is made as to actions taken by the Initial
Purchasers and their representatives) in connection with the offer and sale
of any of the Series A Notes or in connection with Exempt Resales,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising. No securities
of the same class as the Series A Notes have been issued and sold by the
Company within the six-month period immediately prior to the date hereof.
(xxxi) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Series A Notes to be purchased by
the QIBs and the Regulation S Purchasers will not involve any prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of
the Internal Revenue Code of 1986. The representations made in the
preceding sentence are made in reliance upon and subject to the accuracy
of, and compliance with, the representations and covenants made or deemed
made by the QIBs and the Regulation S Purchasers as set forth in the
Offering Memorandum under the caption "Notice to Investors."
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(xxxii) (i) The Company is in compliance in all material respects
with all presently applicable provisions of ERISA, (ii) no "reportable
event" (as defined in ERISA) has occurred with respect to any "pension
plan" (as defined in ERISA) for which the Company would have any liability,
(iii) the Company has not incurred and does not expect to incur liability
(x) under Title IV of ERISA with respect to termination of, or withdrawal
from, any "pension plan" or (y) for an "accumulated funding deficiency"
under Section 412 or excise taxes under Section 4971 of the Internal
Revenue Code of 1986, as amended, including the regulations and published
interpretations thereunder (the "CODE"), and (iv) each "pension plan" for
which the Company would have any liability that is intended to be qualified
under Section 401(a) of the Code is so qualified in all material respects
and nothing has occurred, whether by action or by failure to act, which
would cause the loss of such qualification.
(xxxiii) Subsequent to the respective dates as of which information
is given in the Offering Memorandum and up to the Closing Date, except as
set forth in the Offering Memorandum, (A) the Company has not incurred any
liabilities or obligations, direct or contingent, which are material,
individually or in the aggregate, to the Company and has not entered into
any material transaction not in the ordinary course of business, (B) there
has not been, individually or in the aggregate, any change or development
of which the Company is aware which could reasonably be expected to result
in a Material Adverse Effect of the type described in clause (a) of such
definition and (C) there has been no dividend or distribution of any kind
declared, paid or made by the Company on any class of its capital stock.
(xxxiv) None of the execution, delivery and performance of this
Agreement, the issuance and sale of the Securities, the application of the
proceeds from the issuance and sale of the Securities and the consummation
of the transactions contemplated thereby as set forth in the Offering
Memorandum, will violate Regulations G, T, U or X promulgated by the Board
of Governors of the Federal Reserve System.
(xxxv) The accountants who have certified or will certify the
financial statements included or to be included as part of the Offering
Memorandum are independent accountants. The historical financial
statements of the Company included in the Offering Memorandum comply as to
form in all material respects with the requirements applicable to
registration statements on Form S-1 under the Act and present fairly in all
material respects the financial
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position and results of operations of the Company at the respective dates
and for the respective periods indicated. Such financial statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods presented.
(xxxvi) The financial statements of the Company included in the
Offering Memorandum present fairly the financial position of the Company as
of the dates indicated and the results of its operations for the periods
specified and have been prepared in accordance with generally accepted
accounting principles in the United States ("GAAP") applied on a consistent
basis during the period covered by such financial statements.
(xxxvii) Except pursuant to this Agreement, there are no contracts,
agreements or understandings between or among the Company and any other
person that would reasonably be expected to give rise to a valid claim
against the Company for a brokerage commission, finder's fee or like
payment in connection with the issuance, purchase and sale of the Series A
Notes contemplated hereby.
(xxxviii) The Company does not intend to, nor does it believe that it
will, incur debts beyond its ability to pay or refinance such debts as they
mature. After giving effect to the transactions contemplated by the
Offering Memorandum, the present fair market value of the assets of the
Company will exceed the present value of the amounts that will be required
to be paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Company when and as they become
absolute and matured. After giving effect to such transactions, the assets
of the Company will not constitute unreasonably small capital to carry out
the business of the Company, as conducted or as proposed to be conducted.
(xxxix) There exist no conditions that would constitute a default by
the Company (or an event which with notice or the lapse of time, or both,
would constitute a default) under the Indenture.
(xl) (i) None of the Company, any of its affiliates as defined in
Role 501(b) under the Act or any person acting on behalf of any such person
(excluding any Initial Purchaser, as to which no representation is made)
has engaged in any directed selling efforts (as such term is defined in
Regulation S of the Act) in the United States with respect to the Series A
Notes and (ii) each of the Company and any of its affiliates as defined in
Rule 501(b) under the Act
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and any person acting on behalf of any such person (other than the
Initial Purchasers and their respective affiliates, as to whom the
Company makes no representation) has complied with the offering
restrictions requirement of Regulation S.
(xli) Each certificate signed by any officer of the Company and
delivered to the Initial Purchasers or counsel for the Initial Purchasers
shall be deemed to be a representation and warranty by the Company to the
Initial Purchasers as to the matters covered thereby.
The Company acknowledges that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Section 8
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.
(b) Each of the Initial Purchasers represents, warrants and covenants
to the Company and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Series A Notes.
(ii) Such Initial Purchaser (A) is not acquiring the Series A
Notes with a view to any distribution thereof that would violate the Act or
the securities laws of any state of the United States or any other
applicable jurisdiction and (B) will be reoffering and reselling the Series
A Notes only to QIBs in reliance on the exemption from the registration
requirements of the Act provided by Rule 144A and to Regulation S
Purchasers in a private placement exempt from the registration requirements
of the Act.
(iii) No form of general solicitation or general advertising has
been or will be used by such Initial Purchaser or any of its
representatives in connection with the offer and sale of any Series A
Notes, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine, or similar medium or
broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising.
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(iv) Such Initial Purchaser agrees that, in connection with the
Exempt Resales, it will solicit offers to buy the Series A Notes only from,
and will offer to sell the Series A Notes only to, QIBs and Regulation S
Purchasers. Such Initial Purchaser further agrees (A) that it will offer to
sell the Series A Notes only to, and will solicit offers to buy the Series
A Notes only from (1) QIB's who in purchasing such Series A Notes will be
deemed to have represented and agreed that they are purchasing the Series A
Notes for their own accounts or accounts with respect to which they
exercise sole investment discretion and that they or such accounts are QIBs
and (2) Regulation S Purchasers and (B) that, in the case of such QIBs and
Regulation S Purchasers, such Series A Notes will not have been registered
under the Act and may be resold, pledged or otherwise transferred only
(x)(I) to a person who the seller reasonably believes is a QIB in a
transaction meeting the requirements of Rule 144A, (II) in a transaction
meeting the requirements of Rule 144, (III) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under
the Act or (IV) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel reasonably
acceptable to the Company if the Company so requests), (y) to the Company
or (z) pursuant to an effective registration statement under the Act and,
in each case, in accordance with any applicable securities laws of any
state of the United States or any other applicable jurisdiction and (C)
that the holder will, and each subsequent holder is required to, notify any
purchaser from it of the security evidenced thereby of the resale
restrictions set forth in (B) above.
(v) The Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S have been and will be
offered and sold only in offshore transactions.
(vi) Such Initial Purchaser acknowledges and agrees that the
Series A Notes may be offered and sold to persons outside the United States
and in offshore transactions to non-U.S. persons in accordance with
Regulation S (i) as part of its distribution at any time and (ii) otherwise
until 40 days after the later of the commencement of the offering of the
Series A Notes pursuant hereto and the Closing Date, except in cases in
accordance with Regulation S of the Act and confirms that neither it nor
its affiliates nor any person acting on behalf of any such person has
engaged in any "directed selling efforts" (as such term is defined in
Regulation S) with respect to the Series A Notes and that it and its
affiliates have complied with the offering restriction requirements of
Regulation S.
24
<PAGE>
(vii) Such Initial Purchaser agrees that, at or prior to
confirmation of a sale of Series A Notes by it to any distributor, dealer
or person receiving a selling concession, fee or other remuneration during
the 40-day restricted period referred to in Rule 903(c)(2) under the Act,
it will send to such distributor, dealer or person receiving a selling
concession, fee or other remuneration a confirmation or notice to
substantially the following effect:
"The Series A Notes have not been registered under the U.S. Securities
Act of 1933, as amended (the "SECURITIES ACT"), and may not be offered
and sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of your distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the
Offering and the Closing Date, except in accordance with Regulation S
under the Securities Act."
(viii) Such Initial Purchaser agrees that the Series A Notes
offered and sold in reliance on Regulation S will be represented upon
issuance by a global security that may not be exchanged for definitive
securities until the expiration of the 40-day restricted period referred to
in Rule 903(c)(3) of the Act and only upon certification of beneficial
ownership of such Series A Notes by non-U.S. persons or U.S. persons who
purchased such Series A Notes in transactions that were exempt from the
registration requirements of the Act.
(ix) Such Initial Purchaser agrees that it will not (i) make any
offers to sell the Series A Notes without concurrently therewith delivering
a copy of the Preliminary Offering Memorandum or the Offering Memorandum,
as applicable, in either case as amended or supplemented through the date
of such offer and (ii) complete any sales of the Series A Notes unless at
or prior to completion of such sale, a copy of the Offering Memorandum, as
then amended or supplemented, is delivered to the purchaser.
(x) Each Initial Purchaser further represents and agrees that
(i) it and its affiliates have not offered or sold or invited any person to
offer to purchase and, prior to the expiry of the period of six months from
the date the Securities are purchased by the Initial Purchasers, will not
offer to sell any Securities to persons or invite any person to purchase
any such Securities in the United Kingdom except persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their business or
otherwise in circumstances which have not
25
<PAGE>
resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities
Regulations 1995; (ii) it and its affiliates have complied and will
comply with all applicable provisions of the Financial Services Act 1986
of Great Britain with respect to anything done by it in relation to the
Securities in, from or otherwise involving the United Kingdom, and (iii)
it and its affiliates have only issued or passed on and will only issue
or pass on, in the United Kingdom, any document received by it in
connection with the issue of the Securities, to a person who is of a
kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements)(Exemptions) Order 1995 or is a person to
whom such document may otherwise lawfully be issued or passed on.
Such Initial Purchaser understands that the Company and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to
Section 8 hereof, counsel to the Company and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless, to the fullest
extent permitted by applicable law, the Initial Purchasers, each person, if any,
who controls the Initial Purchasers within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of the Initial Purchasers or any
controlling persons, against any and all losses, liabilities, claims, damages
and expenses whatsoever (including but not limited to reasonable attorneys' fees
and any and all reasonable expenses whatsoever incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever, and any and all amounts paid in settlement of any claim or
litigation (collectively, "LOSSES")), joint or several, to which they or any of
them may become subject under the Act, the Exchange Act or otherwise, insofar as
such Losses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum, or in any supplement
thereto or amendment thereof, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; PROVIDED, HOWEVER, that the Company
will not be liable in any such case to the extent, but only to the extent, that
any such Loss arises out of or is
26
<PAGE>
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in the Preliminary Offering Memorandum or the Offering
Memorandum (i) in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Initial Purchasers expressly
for use therein or (ii) in the Preliminary Offering Memorandum or the
Offering Memorandum, as the case may be, if a copy of the Offering Memorandum
(as then amended or supplemented) was not sent or given by or on behalf of
such Initial Purchasers to the person asserting any such loss, claim, damage,
liability or expense, at or prior to the written confirmation of the sale of
the Series A Notes and the Offering Memorandum (as then amended or
supplemented) could have corrected such untrue or alleged untrue statement or
such omission or alleged omission. This indemnity agreement will be in
addition to any liability which the Company may otherwise have, including
under this Agreement.
(b) The Initial Purchasers agree to indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and the respective
officers, directors, partners, employees, representatives and agents of the
Company or any controlling persons, against any and all Losses to which they may
become subject under the Act, the Exchange Act or otherwise, insofar as such
Losses (or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum, or in any amendment
thereof or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in each case to the extent, but only
to the extent, that any such Loss arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Initial Purchasers expressly for use therein;
PROVIDED, HOWEVER, that in no case shall the Initial Purchasers be liable or
responsible for any amount in excess of the discounts and commissions received
by the Initial Purchasers, unless such Losses are a result of the gross
negligence or willful misconduct of the Initial Purchasers. This indemnity will
be in addition to any liability which the Initial Purchasers may otherwise have,
including under this Agreement.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in
27
<PAGE>
writing of the commencement thereof (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 6, except to the extent that it has been prejudiced in any
material respect by such failure, or from any liability which it may
otherwise have). In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
it may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume
the defense thereof with counsel reasonably satisfactory to such indemnified
party. Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of such indemnified
party or parties unless (i) the employment of such counsel shall have been
authorized in writing by the indemnifying parties in connection with the
defense of such action and the indemnifying party has agreed in writing to
pay the fees and expenses of such counsel, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded, upon the
advice of counsel, that there may be defenses available to it or them which
are different from or additional to those available to one or all of the
indemnifying parties (in which case the indemnifying parties shall not have
the right to direct the defense of such action on behalf of the indemnified
party or parties), in any of which events such fees and expenses of counsel
shall be borne by the indemnifying parties; PROVIDED, HOWEVER, that the
indemnifying party under subsection (a) or (b) above, shall only be liable
for the legal expenses of one counsel (in addition to any local counsel) for
all indemnified parties in each jurisdiction in which any claim or action is
brought. Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or
action effected without its prior written consent; PROVIDED, HOWEVER, that
such consent was not unreasonably withheld. In addition, the indemnifying
party will not, without the prior written consent of the indemnified party,
which consent may not be unreasonably withheld, settle or compromise or
consent to entry of any judgment in any pending or threatened claim, action
or proceeding of which indemnification may be sought hereunder (whether or
not any indemnified party is an actual or potential party to such claim,
action, or proceeding) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability arising
out of such claim, action or proceeding.
7. CONTRIBUTION.
28
<PAGE>
In order to provide for contribution in circumstances in which the
indemnification provided for in Section 6 is for any reason held to be
unavailable or is insufficient to hold harmless a party indemnified thereunder,
the Company, on the one hand, and the Initial Purchasers, on the other hand,
shall contribute to the aggregate Losses of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting in the case of
Losses suffered by the Company, any contribution received by the Company from
persons, other than the Initial Purchasers, who may also be liable for
contribution, including persons who control the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act) to which the Company
and the Initial Purchasers may be subject, in such proportion as is appropriate
to reflect the relative benefits received by the Company, on the one hand, and
the Initial Purchasers, on the other hand, from the offering of the Series A
Notes or, if such allocation is not permitted by applicable law or
indemnification is not available as a result of the indemnifying party not
having received notice as provided in Section 6, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company, on the one hand, and the Initial Purchasers,
on the other hand, in connection with the statements or omissions which resulted
in such Losses, as well as any other relevant equitable considerations. The
relative benefits received by the Company, on the one hand, and the Initial
Purchasers, on the other hand, shall be deemed to be in the same proportion as
(x) the total proceeds from the offering of Series A Notes (net of discounts and
commissions but before deducting expenses) received by the Company, and (y) the
discounts and commissions received by the Initial Purchasers, respectively, in
each case as set forth in the table on the cover page of the Offering
Memorandum. The relative fault of the Company, on the one hand, and of the
Initial Purchasers, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, on the one hand, or the Initial Purchasers,
on the other hand, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by PRO RATA
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 7, (i) in no case shall the Initial Purchasers be required to
contribute any amount in excess of the amount by which the discounts and
commissions applicable to the Series A Notes purchased by the Initial Purchasers
pursuant to this Agreement exceeds the amount of any damages which the Initial
Purchasers have otherwise been
29
<PAGE>
required to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person,
if any, who controls the Initial Purchasers within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act and the respective officers,
directors, partners, employees, representatives and agents of the Initial
Purchasers or any controlling persons shall have the same rights to
contribution as the Initial Purchasers, and each person, if any, who controls
the Company, within the meaning of Section 15 of the Act or Section 20(a) of
the Exchange Act and the respective officers, directors, partners, employees,
representatives and agents of the Company or any controlling persons shall
have the same rights to contribution as the Company, subject in each case to
clauses (i) and (ii) of this Section 7. Any party entitled to contribution
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution
may be made against another party or parties under this Section 7, notify
such party or parties from whom contribution may be sought, but the failure
to so notify such party or parties shall not relieve the party or parties
from whom contribution may be sought from any obligation it or they may have
under this Section 7 or otherwise. No party shall be liable for contribution
with respect to any action or claim settled without its prior written
consent; PROVIDED that such written consent was not unreasonably withheld.
8. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS.
The obligations of the Initial Purchasers to purchase and pay for the
Series A Notes, as provided herein, shall be subject to the following
conditions:
(a) All of the representations and warranties of the Company
contained in this Agreement shall be true and correct on the date hereof and on
the Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively. The Company shall have performed or
complied with all of the agreements herein contained and required to be
performed or complied with by it at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers in Los Angeles, California, as soon as
practicable after the date of this Agreement but not later than 9:30 a.m.,
Pacific Standard time, on the day following the date of this Agreement or at
such later date and time as to which the Initial Purchasers may agree, and no
stop order suspending the qualification or
30
<PAGE>
exemption from qualification of the Series A Notes in any jurisdiction
referred to in Section 4(e) shall have been issued and no proceeding for that
purpose shall have been commenced or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule, regulation
or order shall have been enacted, adopted or issued by any governmental agency
that could, as of the Closing Date, reasonably be expected to have a Material
Adverse Effect; no action, suit or proceeding shall have been commenced and be
pending against or affecting or, to the knowledge of the Company, threatened
against, the Company before any court or arbitrator or any governmental body,
agency or official that, if adversely determined, could reasonably be expected
to result in a Material Adverse Effect other than as disclosed in the Offering
Memorandum; and no stop order shall have been issued preventing the use of the
Offering Memorandum, or any amendment or supplement thereto, or that could
reasonably be expected to have a Material Adverse Effect.
(d) Since the dates as of which information is given in the Offering
Memorandum and other than as set forth in the Offering Memorandum, (i) there
shall not have been any material and adverse change or any development that is
reasonably likely to result in a material and adverse change in the long-term
debt, or material increase in the short-term debt, of the Company from that set
forth in the Offering Memorandum, (ii) no dividend or distribution of any kind
shall have been declared, paid or made by the Company on any class of its
capital stock, and (iii) the Company shall not have incurred any liabilities or
obligations other than contracts entered into in the ordinary course of business
(except for the New Credit Agreement and the Completion Guaranty), direct or
contingent, that individually or in the aggregate could have a Material Adverse
Effect and that are required to be disclosed on a balance sheet or notes thereto
in accordance with generally accepted accounting principles and are not
disclosed on the latest balance sheet or notes thereto included in the Offering
Memorandum. Since the date hereof and since the dates as of which information
is given in the Offering Memorandum, there shall not have occurred any material
adverse change in the properties, business, results of operations, condition
(financial or otherwise), affairs or prospects of the Company.
(e) The Initial Purchasers shall have received a certificate, dated
the Closing Date, signed on behalf of the Company by its president and chief
executive officer and its chief financial officer confirming as of the Closing
Date, the matters set forth in paragraphs (a), (b), (c), (d) and (k) of this
Section 8.
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<PAGE>
(f) The Initial Purchasers shall have received on the Closing Date
(i) the opinion, dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom
LLP, special counsel to the Company, substantially to the effect set forth in
EXHIBIT B hereto and (ii) the opinion, dated the Closing Date, of Gordon &
Silver, Ltd., special Nevada counsel to the Company, substantially to the effect
set forth in EXHIBIT C hereto. In providing such opinion, Skadden, Arps, Slate,
Meagher & Flom LLP, shall opine as to the federal laws of the United States and
the laws of the State of New York.
(g) The Initial Purchasers shall have received on the Closing Date
the opinion, dated the Closing Date, of Simpson Thacher & Bartlett, counsel to
the Initial Purchasers, covering such matters as are customarily covered in such
opinions.
(h) At the time this Agreement is executed and at the Closing Date
the Initial Purchasers shall have received from Ernst & Young, L.L.P.,
independent public accountants for the Company, dated as of the date of this
Agreement and as of the Closing Date, customary comfort letters addressed to the
Initial Purchasers and in form and substance previously agreed upon by the
Initial Purchasers and counsel to the Initial Purchasers with respect to the
financial statements and certain financial information of the Company contained
in the Offering Memorandum.
(i) The Company and the Trustee shall have entered into the Indenture
and the Initial Purchasers shall have received counterparts, conformed as
executed, thereof.
(j) The Company shall have entered into the Registration Rights
Agreement and the Initial Purchasers shall have received counterparts, conformed
as executed, thereof.
(k) Each condition to the closing contemplated by the New Credit
Agreement (other than the issuance and sale of the Series A Notes pursuant
hereto) will, on or prior to the Closing Date, have been satisfied or waived.
There shall exist at and as of the Closing Date no conditions that would
constitute a default (or an event that with notice or the lapse of time, or
both, would constitute a default) under the New Credit Agreement. In addition,
at the Closing Date, any and all amounts outstanding under the Existing Credit
Facility (as defined in the Offering Memorandum) and any fees related thereto
shall be paid and such credit facility shall be cancelled.
(l) Simpson Thacher & Bartlett shall have been furnished with such
documents, in addition to those set forth above, as they may reasonably require
for the
32
<PAGE>
purpose of enabling them to review or pass upon the matters referred to
in this Section 8 and in order to evidence the accuracy, completeness or
satisfaction in all material respects of any of the representations, warranties
or conditions herein contained.
(m) Prior to the Closing Date, the Company shall have furnished to
the Initial Purchasers such further information, certificates and documents as
the Initial Purchasers may reasonably request.
(n) Peter A. Morton shall have entered into the Completion Guaranty
(as defined in the New Credit Agreement) and the Initial Purchasers shall have
received counterparts, conformed as executed, thereof.
All opinions, certificates, letters and other documents required by
this Section 8 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to the Initial Purchasers and their counsel. The Company will furnish the
Initial Purchasers with such conformed copies of such opinions, certificates,
letters and other documents as they shall reasonably request.
9. INITIAL PURCHASERS' INFORMATION.
The Company and the Initial Purchasers severally acknowledge that the
statements with respect to the offering of the Series A Notes set forth in the
last paragraph of the cover page and (ii) the second paragraph, the third
sentence of the third paragraph under the caption "Plan of Distribution" in such
Offering Memorandum constitute the only information furnished in writing by or
on behalf of the Initial Purchasers expressly for use in the Offering
Memorandum.
10. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS.
All representations and warranties, covenants and agreements of the
Initial Purchasers and the Company contained in this Agreement, including
without limitation, the agreements contained in Sections 4(f) and 11(d), the
indemnity agreements contained in Section 6 and the contribution agreements
contained in Section 7, shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Initial Purchasers,
any controlling person thereof or by or on behalf of the Company or any
controlling person thereof, and shall survive delivery of and payment for the
Series A Notes to and by the Initial Purchasers. The representations contained
in Section 5 and the agreements contained in Sections 4(f), 6, 7 and
33
<PAGE>
11(d) shall survive the termination of this Agreement, including any
termination pursuant to Section 11.
11. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective upon execution and delivery
of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate this
Agreement at any time prior to the Closing Date by notice to the Company from
the Initial Purchasers, without liability (other than as provided in Section 10)
on the Initial Purchasers' part to the Company if, on or prior to such date, (i)
the Company shall have failed, refused or been unable to perform in any material
respect any agreement on its part to be performed hereunder, (ii) any other
condition to the obligations of the Initial Purchasers hereunder as provided in
Section 8 is not fulfilled when and as required in any material respect, or
(iii) (A) any domestic or international event or act or occurrence has
materially disrupted, or in the reasonable opinion of the Initial Purchasers
will in the immediate future materially disrupt, the United States or
international securities markets; or (B) trading in securities generally on
either of the New York or American Stock Exchanges shall have been suspended or
materially limited, or minimum or maximum prices for trading shall have been
established, or maximum ranges for prices for securities shall have been
required, on such exchange, or by such exchange or other regulatory body or
governmental authority having jurisdiction; or (C) a banking moratorium shall
have been declared by federal or state authorities, or a moratorium in foreign
exchange trading by major international banks or persons shall have been
declared; or (D) there is an outbreak or escalation of armed hostilities
involving the United States on or after the date hereof, or if there has been a
declaration by the United States of a national emergency or war, the effect of
which shall be, in the Initial Purchasers' judgment, to make it inadvisable or
impracticable to proceed with the offering or delivery of the Series A Notes on
the terms and in the manner contemplated in the Offering Memorandum; or
(E) there shall have been such a material adverse change in general economic,
political or financial conditions or if the effect of international conditions
on the financial markets in the United States shall be such as, in the Initial
Purchasers' judgment, makes it inadvisable or impracticable to proceed with the
offering or delivery of the Series A Notes as contemplated thereby; or (F) (1)
there shall have occurred a downgrading in the rating accorded the Series A
Notes by any "nationally recognized statistical rating organization" as that
term is defined by the Commission for purposes of Rule 436(g)(2) of the rules
and regulations of the Commission under the Act or (2) any such organization
shall have publicly announced
34
<PAGE>
that it has under surveillance or review (other than an announcement with
positive implications of a possible upgrading), its rating of the Series A
Notes.
(c) Any notice of termination pursuant to this Section 11 shall be by
telephone, telex, telephonic facsimile, or telegraph, confirmed in writing by
letter within three days thereof.
(d) If this Agreement shall be terminated pursuant to any of the
provisions hereof (other than a termination pursuant to Section 11(b)(iv)) or if
the sale of the Series A Notes provided for herein is not consummated because
any condition to the obligations of the Initial Purchasers set forth herein is
not satisfied or because of any refusal, inability or failure on the part of the
Company to perform any agreement herein or comply with any provision hereof, the
Company will, subject to demand by the Initial Purchasers, reimburse the Initial
Purchasers for all reasonable out-of-pocket expenses (including the reasonable
fees and expenses of Initial Purchasers' counsel), incurred by the Initial
Purchasers in connection herewith.
12. NOTICE.
All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and, if sent to the Initial Purchasers
shall be mailed, delivered, or telexed, telegraphed or telecopied and confirmed
in writing to Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York
10167, Attention: Corporate Finance Department, telecopy number: (212) 272-
3092; and if sent to the Company, shall be mailed, delivered or telexed,
telegraphed or telecopied and confirmed in writing to Hard Rock Hotel, Inc.,
4455 Paradise Road, Las Vegas, Nevada 89109, Attention: Brian Ogaz, telecopy
number: (310) 652-8747, with copies to Skadden, Arps, Slate, Meagher & Flom
LLP, 300 South Grand Avenue, Suite 3400, Los Angeles, California 90071,
Attention: Michael A. Woronoff, telecopy number: (213) 687-5600; PROVIDED,
HOWEVER, that any notice pursuant to Sections 6 or 7 shall be mailed, delivered
or telexed, telegraphed or telecopied and confirmed in writing within three days
thereof.
13. PARTIES.
This Agreement shall inure solely to the benefit of, and shall be
binding upon, the Initial Purchasers, the Company and the controlling persons
and agents referred to in Sections 6 and 7, and their respective successors and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained.
35
<PAGE>
The term "SUCCESSORS AND ASSIGNS" shall not include a purchaser, in its
capacity as such, of Series A Notes from the Initial Purchasers.
14.A. CONSTRUCTION.
This Agreement shall be construed in accordance with the internal laws
of the State of New York.
14.B. SUBMISSION TO JURISDICTION.
To the fullest extent permitted by applicable law, the Company
irrevocably submits to the jurisdiction of any Federal or State court in the
City, County and State of New York, United States of America, in any suit or
proceeding based on or arising under this Agreement (solely in connection with
any such suit or proceeding), and irrevocably agree that all claims in respect
of such suit or proceeding may be determined in any such court. The Company
irrevocably and fully waives the defense of an inconvenient forum to the
maintenance of such suit or proceeding. To the extent that the Company has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service of note, attachment prior to judgment,
attachment in aid of execution, executor or otherwise) with respect to itself or
its property, the Company hereby irrevocably waives such immunity in respect of
its obligations under this Agreement, to the extent permitted by law.
15. CAPTIONS.
The captions included in this Agreement are included solely for
convenience of reference and are not to be considered a part of this Agreement.
36
<PAGE>
16. COUNTERPARTS.
This Agreement may be executed in various counterparts which together
shall constitute one and the same instrument.
Very truly yours,
HARD ROCK HOTEL, INC.
By:
-------------------------------
Name:
Title:
Accepted and agreed to as of
the date first above written:
BEAR, STEARNS & CO. INC.
By:
------------------------------------
Name:
Title:
BANCAMERICA ROBERTSON STEPHENS
By:
------------------------------------
Name:
Title:
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By:
------------------------------------
Name:
Title:
37
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Aggregate Principal
Initial Purchasers Amount of Series A Notes
- ------------------ ------------------------
<S> <C>
Bear, Stearns & Co. Inc. $60,000,000
BancAmerica Robertson & Stephens $30,000,000
Donaldson, Lufkin & Jenrette Securities Corporation $30,000,000
Total $120,000,000
</TABLE>
S-1
<PAGE>
EXHIBIT A
Form of Registration Rights Agreement
A-1
<PAGE>
EXHIBIT B
Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
1. Each of the Operative Documents has been duly executed and
delivered by the Company (to the extent such execution and delivery are
governed by the laws of the State of New York).
2. Each of the Indenture and the Registration Rights Agreement
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms.
3. Assuming due authorization of the Series A Notes by the
Company, the Series A Notes, when executed by the Company and authenticated
by the Trustee in the manner provided in the Indenture and delivered to and
paid for by the Initial Purchasers in accordance with the Purchase Agreement,
will constitute valid and binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable against the Company in accordance
with their terms.
4. Assuming due authorization of the Series B Notes by the
Company, the Series B Notes, when executed by the Company and authenticated
in accordance with the provisions of the Indenture and issued and delivered
in exchange for the Series A Notes in accordance with the terms of the
Indenture and the Registration Rights Agreement, will constitute valid and
legally binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their terms.
5. The issuance and sale of the Series A Notes and the execution
and delivery by the Company of the Operative Documents and the New Credit
Agreement and the performance by the Company of its obligations thereunder,
each in accordance with its terms, do not (i) constitute a violation of or a
default under any Applicable Contracts (as hereinafter defined) or (ii) cause
the creation of any security interest or lien (other than Permitted Liens (as
defined in the Indenture)) upon any of the property of the Company pursuant
to any Applicable Contracts. Such counsel need not express any opinion,
however, as to whether the execution, delivery or performance by the Company
of the Operative Documents and each document and instrument contemplated
thereby or the New Credit Agreement will constitute a violation of or a
B-1
<PAGE>
default under any covenant, restriction or provision with respect to
financial ratios or tests or any aspect of the financial condition or results
of operations of the Company. "Applicable Contracts" shall mean those
agreements or instruments set forth on a schedule to such opinion.
6. No Governmental Approval (as hereinafter defined), which has
not been obtained or taken and is not in full force and effect, is required
to authorize or is required in connection with the execution, delivery or
performance of any of the Operative Documents or the New Credit Agreement by
the Company. "Governmental Approval" means any consent, approval, license,
authorization or validation of, or filing, recording or registration with,
any Governmental Authority pursuant to any Applicable Law (as hereinafter
defined). "Applicable Laws" means those laws, rules and regulations of the
State of New York that, in our experience, are normally applicable to
transactions of the type contemplated by the Operative Documents other than
state securities or Blue Sky laws.
7. Assuming (i) the accuracy of the representations and
warranties of the Company and the Initial Purchasers in the Purchase
Agreement, (ii) the due performance by the Company and the Initial Purchasers
of the covenants and agreements set forth in the Purchase Agreement, (iii)
compliance by the Initial Purchasers with the offering and transfer
procedures and restrictions described in the Offering Memorandum, (iv) the
accuracy of the representations and warranties made in accordance with the
Purchase Agreement and the Offering Memorandum by purchasers to whom the
Initial Purchasers initially resell Series A Notes and (v) that purchasers to
whom the Initial Purchasers initially resell Series A Notes receive a copy of
the Offering Memorandum prior to such sale, the offer, sale and delivery of
the Series A Notes to the Initial Purchasers in the manner contemplated by
the Purchase Agreement and the Offering Memorandum and the initial resale of
the Series A Notes by the Initial Purchasers in the manner contemplated in
the Offering Memorandum and the Purchase Agreement, do not require
registration under the Securities Act of 1933, as amended, and prior to the
consummation of the Exchange Offer or the effectiveness of the Shelf
Registration Statement (as defined in the Registration Rights Agreement) the
Indenture does not require qualification under the Trust Indenture Act of
1939, as amended, it being understood that such counsel need not express any
opinion as to any subsequent resale of any Note.
8. The Company is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended (the "Investment
B-2
<PAGE>
Company Act"), and the Company is not registered or otherwise required to be
registered under the Investment Company Act.
9. The information in the Offering Memorandum under the caption
"Description of Notes," to the extent that it constitutes matters of law,
summaries of legal matters, documents or proceeding, or legal conclusions,
has been reviewed by such counsel and fairly summarizes such matters.
10. The information in the Offering Memorandum under the caption
"Certain United States Federal Income Tax Consequences to Non-U.S. Holders,"
does not purport to discuss all possible United States federal income tax
consequences applicable to a Non-U.S. Holder who receives Series B Notes in
exchange for Series A Notes pursuant to the Exchange Offer (including the
consequences of owning and disposing of such Notes), but in such counsel's
opinion such discussion constitutes, in all material respects, a fair and
accurate summary of the United States federal income tax consequences
generally applicable to a Non-U.S. Holder who receives Series B Notes in
exchange for Series A Notes pursuant to the Exchange Offer (including the
consequences of owning and disposing of such Notes), based upon current law.
There can be no assurances that any of the opinions expressed herein will be
accepted by the Internal Revenue Service or if challenged, by a court.
In addition, such counsel shall also have furnished to the Initial
Purchasers a written statement, in form and substance satisfactory to the
Initial Purchasers, to the effect that it has participated in conferences
with offIcers and other representatives of the Company, representatives of
the independent certified public accountants of the Company and the Initial
Purchasers and their representatives and counsel at which the contents of the
Offering Memorandum and related matters were discussed, although it has not
undertaken to investigate or verify independently, and does not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Offering Memorandum, and have made no independent check or
verification thereof such counsel advises the Initial Purchasers that, on the
basis of the foregoing, no facts have come to its attention that caused such
counsel to believe that the Offering Memorandum (other then the sections
thereof appearing under the captions, "Risk Factors-Government Regulation"
and "Regulation and Licensing" as to which such counsel need express no
statement), as of its date or the Closing Date, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except as to
financial statements and related notes and other financial and statistical
data included therein, as
B-3
<PAGE>
to which no opinion need be expressed). For purposes of the foregoing, such
counsel may note that the Offering Memorandum has been prepared in the
context of a Rule 144A transaction and not as part of a registration
statement under the Securities Act.
In rendering such opinion, such counsel shall opine as to the federal
laws of the United States of America and the laws of the State of New York.
Such counsel will be permitted to take customary exceptions from its opinions.
In addition, such counsel shall be permitted to assume the accuracy of the
opinion of Gordon and Silver Ltd., delivered pursuant to Section 8(f) of the
Purchase Agreement.
B-4
<PAGE>
EXHIBIT C
Form of Opinion of Gordon & Silver, Ltd.
1. The Company has all requisite corporate power and authority to execute
and deliver the Operative Documents, the New Credit Agreement and the
Completion Guaranty, and to consummate the transactions contemplated thereby.
2. The Company (A) has been duly incorporated and is validly
existing and in good standing under the laws of the State of Nevada and (B)
has all power and authority necessary to own its properties and conduct the
businesses in which it is engaged as described in the Offering Memorandum.
3. The Completion Guaranty has been duly and validly authorized,
executed and delivered by Peter Morton and constitutes a valid and legally
binding agreement enforceable against Peter Morton in accordance with its
terms.
4. Each of the Purchase Agreement, the Registration Rights
Agreement, the Indenture, the New Credit Agreement, the Series A Notes and
the Series B Notes has been duly authorized by the Company.
5. None of (A) the execution, delivery or performance by the
Company of the Operative Documents, (B) the issuance and sale of the Series A
Notes, nor (C) the execution, delivery and performance by the Company of the
New Credit Agreement and the Completion Guaranty, will (a) violate any
provision of the articles of incorporation or bylaws (or equivalent
documents) of the Company, or (b) to such counsel's knowledge, violate any
statute, rule, regulation, judgment, order or decree of any court or
governmental agency or authority having jurisdiction over the Company or its
assets or properties, except in the case of clause (b) for (i) any such
violation that could not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect; and (ii) the requisite approvals
and waivers of the Nevada Gaming Authorities for the issuance of the Series B
Notes and related transactions.
6. All of the issued and outstanding shares of common stock of
the Company have been duly authorized and issued and are fully paid and
nonassessable.
7. Except (i) as may be required under applicable state
securities laws and the requisite approvals and waivers of the Nevada Gaming
Authorities for the
C-1
<PAGE>
issuance of the Series B Notes and related transactions and (ii) except for
the filing of a registration statement under the Act and the qualification of
the Indenture under the Trust Indenture Act in connection with the
Registration Rights Agreement, no consent, authorization, approval, filing,
notice, registration or other action of any court or governmental agency or
commission or public or quasi-public body or authority is necessary for the
execution and delivery by the Company of the Operative Documents or the New
Credit Agreement, the validity or enforceability against the Company of the
Operative Documents or the New Credit Agreement, the issuance or delivery of
the Series A Notes by the Company to the Initial Purchasers, the validity,
payment or enforceability of the Series A Notes, against the Company, or the
execution delivery and performance by Peter Morton of the Completion
Guaranty, except such as have been obtained and made and except where the
failure to obtain such consents or waivers would not, individually or in the
aggregate, have a Material Adverse Effect.
8. None of (A) the execution, delivery or performance by the
Company of the Operative Documents, (B) the issuance and sale of the Series A
Notes, (C) the execution, delivery and performance by the Company of the New
Credit Agreement nor (D) the execution, delivery and performance by Peter
Morton of the Completion Guaranty, will to such counsel's knowledge, (i)
violate, or be in conflict with, or constitute a default (or an event that
with notice or the lapse of time, or both, would constitute a default) under,
or breach of, (ii) result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of any
liability or obligation, or (iii) result in the creation or imposition of any
lien (except pursuant to the Indenture) upon any of the assets of the Company
under, in each case, any note, bond, mortgage, indenture, deed of trust,
agreement or instrument to which the Company is a party or by which the
Company is bound or affected or to which any of its assets is subject, except
for any such violation, default, consent, imposition of a lien or
acceleration that could not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect.
9. The statements under the captions "Risk Factors-Government
Regulation," "Regulation and Licensing" and "Description of Notes-Regulatory
Redemption" in the Offering Memorandum, insofar as such statements constitute
a summary of the Nevada Gaming Control Act and the regulations promulgated
thereunder as they may relate to the issuance of Securities fairly present in
all material respects such legal matters.
10. To such counsel's knowledge, as of such date, no action has
been taken and no statute, rule, regulation, injunction or order has been
enacted, adopted or
C-2
<PAGE>
issued by any Nevada court of competent jurisdiction or by any governmental
agency that prevents or suspends the issuance or sale of the Series A Notes
or the use of the Offering Memorandum.
Such counsel shall also have furnished to the Initial Purchasers a
written statement, in form and substance satisfactory to the Initial
Purchasers, to the effect that (x) such counsel has participated in the
preparation of the Offering Memorandum and (y) to such counsel's knowledge,
the sections of the Offering Memorandum appearing under the captions "Risk
Factors-Government Regulation," "Regulation and Licensing" and "Description
of Notes-Regulatory Redemption," as of its date and as of the Closing Date,
contained an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading (except as to
the financial statements including the notes thereto and the related
schedules and other financial or statistical data included therein).
In rendering such opinion, such counsel shall opine as to the laws of
the State of Nevada.
C-3
<PAGE>
ANNEX A
Annex A-1
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of March 23, 1998
by and among
HARD ROCK HOTEL, INC.,
BEAR, STEARNS & CO. INC.,
BANCAMERICA ROBERTSON STEPHENS
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made
and entered into as of March 23, 1998 by and among Hard Rock Hotel, Inc., a
Nevada corporation (the "COMPANY"), Bear, Stearns & Co. Inc. ("BEAR
STEARNS"), BancAmerica Robertson Stephens ("BANCAMERICA") and Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ"). Bear Stearns, BancAmerica
and DLJ are hereafter referred to collectively as the "INITIAL PURCHASERS."
Pursuant to the Purchase Agreement, dated March 17, 1998 (the
"PURCHASE AGREEMENT"), by and among the Company and the Initial Purchasers,
the Initial Purchasers have agreed to purchase $120,000,000 aggregate
principal amount of the Company's 9 1/4% Senior Subordinated Notes due 2005
(the "NOTES").
In order to induce the Initial Purchasers to enter into the
Purchase Agreement and purchase the Notes, the Company has agreed to provide
the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchasers set forth in Section 3 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
ACT: The Securities Act of 1933, as amended.
BROKER-DEALER: Any broker or dealer registered under the
Exchange Act.
BUSINESS DAY: Any day except a Saturday, Sunday or other day in
the City of New York on which banks are authorized to close or a federal
holiday, consisting, in each case, of the time period from 12:00 a.m. through
11:59 p.m. Eastern time.
CLOSING DATE: The date of this Agreement.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum
period required pursuant to Section 3(b) hereof, and (iii) the delivery by
the Company to the Trustee under the Indenture of Exchange Notes in the same
aggregate principal amount as the aggregate principal amount of the Notes
that were validly tendered by Holders thereof pursuant to the Exchange Offer.
DAMAGES PAYMENT DATE: With respect to the Notes, each Interest
Payment Date.
1
<PAGE>
EFFECTIVENESS TARGET DATE: As defined in Section 5 hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE NOTES: The Company's 9 1/4% Senior Subordinated Notes
due 2005 to be issued pursuant to the Indenture in the Exchange Offer or
pursuant to a Shelf Registration Statement, in each case in exchange for
Notes.
EXCHANGE OFFER: The registration by the Company under the Act
of the Exchange Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company offers the Holders of all outstanding Transfer
Restricted Securities the opportunity to exchange all such outstanding
Transfer Restricted Securities held by such Holders for Exchange Notes in an
aggregate principal amount equal to the aggregate principal amount of the
Transfer Restricted Securities validly tendered in such exchange offer by
such Holders.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration
Statement relating to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial
Purchasers propose to sell the Notes to (i) certain "qualified institutional
buyers," as such term is defined in Rule 144A under the Act in reliance upon
the exemption from the registration requirements of the Act provided by Rule
144A under the Act or (ii) non-U.S. Persons in reliance upon Regulation S
under the Act.
HOLDER: As defined in Section 2(b) hereof.
INDENTURE: The Indenture, dated as of March 23, 1998, between
the Company and First Trust National Association, as trustee (the "TRUSTEE"),
pursuant to which the Securities are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms
thereof.
INITIAL PURCHASERS: As defined in the preamble hereto.
INTEREST PAYMENT DATE: As defined in the Indenture and the
Securities.
LIQUIDATED DAMAGES: As defined in Section 5 hereof.
NASD: National Association of Securities Dealers, Inc.
NOTES: As defined in the preamble hereto.
PERSON: An individual, partnership, corporation, limited
liability company, joint venture, association, joint stock company, trust or
other organization whether or not a legal entity, or a government or agency
or political subdivision thereof.
PROSPECTUS: The prospectus included in a Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective Registration Statement in reliance
2
<PAGE>
upon Rule 430A promulgated under the Act), as amended or supplemented by any
prospectus supplement and by all other amendments thereto, including
post-effective amendments, and all material incorporated by reference into
such Prospectus.
PURCHASE AGREEMENT: As defined in the preamble hereto.
RECORD HOLDER: With respect to any Damages Payment Date
relating to the Securities, each Person who is a Holder of the Securities on
the record date with respect to the Interest Payment Date on which such
Damages Payment Date shall occur.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the
Company relating to (a) an offering of Exchange Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, which is filed pursuant to the
provisions of this Agreement, in each case, including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
SECURITIES: The Notes and the Exchange Notes.
SHELF FILING DEADLINE: As defined in Section 4 hereof.
SHELF REGISTRATION: A registration effected by the filing of a
Shelf Registration Statement pursuant to Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939, as amended (15 U.S.C.
Section 77aaa-77bbbb) as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each of the Securities, upon
original issuance thereof, until the earliest to occur, with respect to a
particular Security, of (a) the date on which such Security is exchanged by a
Holder other than a Broker-Dealer in the Exchange Offer and entitled to be
resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the Act, (b) following the exchange by a
Broker-Dealer in the Exchange Offer of a Note for an Exchange Note, the date
on which the Exchange Note is sold to a purchaser who receives from such
Broker-Dealer on or prior to the date of such sale a copy of the Prospectus
contained in the Exchange Offer Registration Statement, (c) the date on which
such Security has been effectively registered under the Act and disposed of
in accordance with a Shelf Registration Statement, (d) the date on which such
Security may be distributed to the public pursuant to Rule 144 under the Act
or by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by
the Exchange Offer Registration Statement (including delivery of the
Prospectus contained therein) or (e) the date on which such Security ceases
to be outstanding.
3
<PAGE>
UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A
registration on a Shelf Registration Statement in which securities of the
Company are sold to an underwriter for re-offering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) TRANSFER RESTRICTED SECURITIES. The Securities entitled
to the benefits of this Agreement are the Transfer Restricted Securities.
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is
deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER")
whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (so long as the procedures set forth in
Section 6(a) below are being or have been complied with), the Company shall
(i) use its reasonable best efforts to cause to be filed with the Commission,
on or prior to 60 days after the Closing Date, the Exchange Offer
Registration Statement, (ii) use its reasonable best efforts to cause such
Exchange Offer Registration Statement to be declared effective by the
Commission on or prior to 180 days after the Closing Date, (iii) in
connection with the foregoing, file (A) all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause
such Exchange Offer Registration Statement to become effective, (B) if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Act, (C) cause all necessary
filings in connection with the registration and qualification of the Exchange
Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit Consummation of the Exchange Offer, except as would
subject the Company to service of process or general taxation where it is not
currently subject, and (D) obtain all necessary approvals of the Nevada
Gaming Commission in connection with the issuance of the Exchange Notes, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer.
The Exchange Offer shall be on an appropriate form permitting
registration of the Exchange Notes to be offered in exchange for the Notes
and to permit resales of Securities held by Broker-Dealers as contemplated by
Section 3(c) below. If, after such Exchange Offer Registration Statement
initially is declared effective by the Commission, the Exchange Offer or the
issuance of Exchange Notes thereunder or the sale of Transfer Restricted
Securities pursuant thereto as contemplated by Section 3(c) below is
interfered with by any stop order, injunction or other order or requirement
of the Commission or any other governmental agency or court, such Exchange
Offer Registration Statement shall be deemed not to have become effective for
purposes of this Agreement during the period that such stop order, injunction
or other similar order or requirement shall remain in effect.
(b) The Company shall use its reasonable best efforts to cause
the Exchange Offer Registration Statement to be effective continuously and
shall keep the Exchange Offer open for a
4
<PAGE>
period of not less than the minimum period required under applicable federal
and state securities laws to Consummate the Exchange Offer; PROVIDED,
HOWEVER, that in no event shall such period be less than 20 Business Days.
The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. The Company shall use its reasonable best
efforts to cause the Exchange Offer to be Consummated on or prior to 30
Business days after the Exchange Offer Registration Statement has become
effective.
(c) The Company shall indicate in a "Plan of Distribution"
section contained in the Prospectus included in the Exchange Offer
Registration Statement that any Broker-Dealer who holds Notes that are
Transfer Restricted Securities and that were acquired for its own account as
a result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Company), may
exchange such Notes pursuant to the Exchange Offer; PROVIDED, HOWEVER, such
Broker-Dealer may be deemed to be an "underwriter" within the meaning of the
Act and must, therefore, deliver a prospectus meeting the requirements of the
Act in connection with any resales of the Exchange Notes received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery requirement
may be satisfied by the delivery by such Broker-Dealer of the Prospectus
contained in the Exchange Offer Registration Statement. Such "Plan of
Distribution" section shall also contain all other information with respect
to such resales by Broker-Dealers that the Commission may require in order to
permit such resales pursuant thereto, but such "Plan of Distribution" shall
not name any such Broker-Dealer or disclose the amount of Securities held by
any such Broker-Dealer except to the extent required by the Commission.
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented
and amended as required by the provisions of Section 6(c) below to the extent
necessary to ensure that it is available for resales of Securities acquired
by Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities, and to ensure that it conforms with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
twelve months from the date on which the Exchange Offer Registration
Statement is declared effective or such longer period, if extended pursuant
to the provisions of Section 6(d) hereof.
The Company shall provide sufficient copies of the latest
version of such Prospectus to Broker-Dealers promptly upon request at any
time during such period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Company is not permitted
to file an Exchange Offer Registration Statement or consummate the Exchange
Offer because the Exchange Offer is not permitted by applicable law or
Commission policy (after the procedures set forth in Section 6(a) below have
been complied with) or (ii) any Holder of Transfer Restricted Securities
shall notify the Company on or prior to the 20th Business Day following the
consummation of the Exchange Offer that (A) such Holder is prohibited by a
change in applicable law or Commission policy from participating in the
Exchange Offer, or (B) such Holder may not resell the Exchange Notes to be
acquired by it in the Exchange Offer to the public without delivering a
prospectus and that the
5
<PAGE>
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder, or (C) that such
Holder is a Broker-Dealer and holds Notes acquired directly from the Company
or an affiliate of the Company, then the Company shall:
(x) use its reasonable best efforts to cause to be
filed a shelf registration statement pursuant to Rule 415
under the Act, which may be an amendment to the Exchange
Offer Registration Statement (in either event, the "SHELF
REGISTRATION STATEMENT"), on or prior to the 60th day after
the obligation to file such Shelf Registration Statement
arises (the "SHELF FILING DEADLINE"), which Shelf
Registration Statement shall provide for resales of all
Transfer Restricted Securities, the Holders of which shall
have provided the information required pursuant to
Section 4(b) hereof; and
(y) use its reasonable best efforts to cause such
Shelf Registration Statement to be declared effective by the
Commission on or before the 90th day after the obligation to
file such Shelf Registration Statement arises (or, if later,
180 days after the Closing Date).
The Company shall use its reasonable best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Securities by the
Holders of Transfer Restricted Securities entitled to the benefit of this
Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission
as announced from time to time, for a period of two years following the
Closing Date (or such longer period, if extended pursuant to the provisions
of Section 6(d) hereof), or such shorter period ending when either (1) all
Transfer Restricted Securities covered by the Shelf Registration Statement
have been sold in the manner set forth and as contemplated in the Shelf
Registration Statement or (2) there cease to be outstanding any Transfer
Restricted Securities.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION
WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such
Holder furnishes to the Company in writing, within 10 Business Days after
receipt of a written request therefor, such information specified in Item 507
and Item 508, as applicable, of Regulation S-K under the Act or any other
information required by the Act or applicable state securities laws for use
in connection with any Shelf Registration Statement or Prospectus or
preliminary Prospectus included therein. Each Holder as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to the
Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading. No Holder of Transfer Restricted Securities shall be entitled to
Liquidated Damages pursuant to Section 5 hereof unless and until such Holder
shall have used its best efforts to provide all such reasonably requested
information.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this
Agreement is not filed with the Commission on or prior to the date specified
for such filing in this Agreement, (ii) any of such Registration Statements
has not been declared effective by the Commission on or prior to the date
6
<PAGE>
specified for such effectiveness in this Agreement (the "EFFECTIVENESS TARGET
DATE"), (iii) the Company fails to commence, accept tenders and, in the case
of accepted tenders, issue Exchange Notes, under the Exchange Offer within 30
Business Days after the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement or (iv) any Registration Statement
required by this Agreement is filed and declared effective but thereafter
ceases to be effective or fails to be usable for its intended purpose without
being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself immediately
declared effective (each such event referred to in clauses (i) through (iv),
a "REGISTRATION DEFAULT"), the Company hereby agrees to pay liquidated
damages ("LIQUIDATED DAMAGES") to each Holder of Transfer Restricted
Securities on each Interest Payment Date following the occurrence of a
Registration Default. Liquidated Damages shall accrue from and after the
date of each Registration Default, and continuing thereafter until such
Registration Default has been cured or waived, in an amount equal to $.05 per
week per $1,000 principal amount of the Transfer Restricted Securities during
the first 90-day period immediately following the occurrence of the first
such Registration Default, which amount shall increase by an additional $.05
per week per $1,000 principal amount of the Transfer Restricted Securities
during each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of Liquidated Damages of $.40 per week per
$1,000 principal amount of the Transfer Restricted Securities. The Company
shall notify the Trustee within five Business Days after (i) each and every
Registration Default and (ii) the date such Registration Default has been so
cured. All accrued Liquidated Damages shall be paid to Record Holders by the
Company in New York, New York by wire transfer of immediately available funds
or by federal funds check on each Interest Payment Date following the
occurrence of a Registration Default as provided in the Indenture. Following
the cure or waiver of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of Liquidated Damages with
respect to such Transfer Restricted Securities will cease.
All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted
Security shall survive until such time as all such obligations with respect
to such security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with
the Exchange Offer, the Company shall comply with all of the provisions of
Section 6(c) below, shall use its reasonable best efforts to effect such
Exchange Offer to permit the sale of Transfer Restricted Securities being
sold in accordance with the intended method or methods of distribution
thereof, and shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to the Company
there is a question as to whether the Exchange Offer is permitted by
applicable law, the Company hereby agrees to seek a no-action letter
or other favorable decision from the Commission, including oral advice
from the staff of the Commission, allowing the Company to Consummate
an Exchange Offer for such Notes. The Company hereby agrees to pursue
the issuance of such a decision to the Commission staff level but
shall not be required to take commercially unreasonable action to
effect a change of Commission policy. In connection with the
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foregoing, the Company hereby agrees, however, to (A) participate in
telephonic conferences with the Commission, (B) deliver to the
Commission staff an analysis prepared by counsel to the Company
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursue a resolution of such submission (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the
Company (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement
or understanding with any Person to participate in, a distribution of
the Exchange Notes to be issued in the Exchange Offer and (C) it is
acquiring the Exchange Notes in its ordinary course of business. Each
Holder hereby acknowledges and agrees that any Broker-Dealer who
acquired Notes directly from the Company or any affiliate of the
Company and any such Holder intending to use the Exchange Offer to
participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on
the date of this Agreement rely on the position of the Commission
enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991)
and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as
interpreted in the Commission's letter to Shearman & Sterling, dated
July 2, 1993, and similar no-action letters (including any no-action
letter obtained pursuant to clause (i) above), and (2) must comply
with the registration and prospectus delivery requirements of the Act
in connection with a secondary resale transaction and that such a
secondary resale transaction should be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K or any other information required by the Act or applicable state
securities laws if the resales are of Exchange Notes obtained by such
Holder in exchange for Notes acquired by such Holders directly from
the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement and if requested by the Commission, the Company shall
provide a supplemental letter to the Commission (A) stating that the
Company is registering the Exchange Offer in reliance on the position
of the Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION
(available May 13, 1988), MORGAN STANLEY AND CO., INC. (available June
5, 1991) and, if applicable, any no-action letter obtained pursuant to
clause (i) above, (B) including a representation that the Company has
not entered into any arrangement or understanding with any Person to
distribute the Exchange Notes to be received in the Exchange Offer and
that, to the best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the Exchange Notes in
its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of
the Exchange Notes received in the Exchange Offer.
(b) SHELF REGISTRATION STATEMENT. In connection with the
Shelf Registration Statement, the Company shall comply with all the
provisions of Section 6(c) below and shall use its reasonable best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company will as expeditiously
as practicable prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which
form shall be
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available for the sale of the Transfer Restricted Securities in accordance
with the intended method or methods of distribution thereof.
(c) GENERAL PROVISIONS. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities (including, without
limitation, any Registration Statement and the related Prospectus required to
permit resales of Securities by Broker-Dealers), the Company shall:
(i) prepare and file with the Commission such Registration
Statement and use its reasonable best efforts to cause such
Registration Statement to become effective and keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this
Agreement, as applicable; upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted
Securities during the period required by this Agreement, the Company
shall file promptly an appropriate amendment to such Registration
Statement, in the case of clause (A), correcting any such material
misstatement or omission, and, in the case of either clause (A) or
(B), use its reasonable best efforts to cause such amendment to be
declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
reasonably practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective
for the applicable period set forth in Section 3 or 4 of the
Agreement, as applicable, or such shorter period as will terminate
when all Transfer Restricted Securities covered by such Registration
Statement have been exchanged or sold or until such Transfer
Restricted Securities no longer constitute Transfer Restricted
Securities or are no longer outstanding; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act (or any
similar provisions then in force), and to comply fully with the
applicable provisions of Rules 424 and 430A under the Act (or any
similar provisions then in force) in a timely manner; and comply with
the provisions of the Act, the Exchange Act and the rules and
regulations of the Commission promulgated thereunder applicable to it
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Registration Statement or supplement to the
Prospectus;
(iii) promptly advise the underwriter(s), if any, and selling
Holders and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the Commission
for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the
Act or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Securities for offering or
sale in any jurisdiction, or the initiation of any proceeding for any
of the preceding purposes or (D) of the existence of any fact or the
happening of any event
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<PAGE>
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto, or
any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the
Registration Statement or the Prospectus in order to make the
statements therein not misleading (in the case of the Prospectus, in
the light of the circumstances under which they were made). If at any
time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky
laws, the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest practicable time;
(iv) furnish to the Initial Purchasers, each selling Holder
named in any Registration Statement or Prospectus and each of the
underwriter(s) in connection with such sale, if any, before filing
with the Commission, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements to any
such Registration Statement or Prospectus if requested by such Person,
which documents will be subject to the review and comments of such
underwriter(s) in connection with such sale, if any, and the Company
will not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or
Prospectus if requested by such Person to which a selling Holder of
Transfer Restricted Securities covered by such Registration Statement
or the underwriter(s) in connection with such sale, if any, shall
reasonably object within five Business Days after the receipt
thereof. A selling Holder or underwriter, if any, shall be deemed to
have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission
or fails to comply with the applicable requirements of the Act;
(v) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or
accountant retained by such selling Holders or any underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such Holder, underwriter, attorney or accountant in connection with
such Registration Statement subsequent to the filing thereof and prior
to its effectiveness;
(vi) if requested by any selling Holders or any underwriter in
connection with such sale, if any, promptly include in any
Registration Statement or Prospectus, pursuant to a supplement or
post-effective amendment if necessary, such information as such
selling Holders and such underwriter, if any, may reasonably request
to have included therein, including, without limitation, information
relating to the "Plan of Distribution" of the Transfer Restricted
Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to such underwriter(s), the
purchase price being paid therefor and any other terms of the offering
of the Transfer Restricted Securities to be sold in such offering; and
make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be included in such Prospectus supplement
or post-effective amendment;
(vii) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
rated with the appropriate rating agencies, if so requested by
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<PAGE>
the Holders of a majority in aggregate principal amount of Notes
covered thereby or the underwriter(s), if any;
(viii) furnish to each selling Holder and each underwriter, if
any, without charge, at least one copy of the Registration Statement,
as first filed with the Commission, and of each amendment thereto,
including all documents incorporated by reference therein and all
exhibits thereto, if so requested by such Person;
(ix) deliver to each selling Holder and each of the
underwriter(s) in connection with such sale, if any, without charge,
as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons
reasonably may request; the Company hereby consents to the use of the
Prospectus and any amendment or supplement thereto by each of the
selling Holders and each of the underwriter(s), if any, in connection
with the offering and the sale of the Transfer Restricted Securities
covered by the Prospectus or any amendment or supplement thereto;
(x) in the case of the Shelf Registration Statement, enter
into such agreements (including an underwriting agreement), and make
such representations and warranties, and take all such other actions
in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to such
Shelf Registration Statement contemplated by this Agreement, all to
such extent as may be reasonably acceptable to the Company and
reasonably requested by the Initial Purchasers or by the Holders of a
majority in aggregate principal amount of Transfer Restricted
Securities or the managing underwriter in connection with any sale or
resale pursuant to such Shelf Registration Statement contemplated by
this Agreement; and whether or not an underwriting agreement is
entered into and whether or not the registration is an Underwritten
Registration, the Company shall:
(A) use its reasonable best efforts to furnish to each selling
Holder and each underwriter, if applicable, in such substance and
scope as they may reasonably request and as are customarily made by
issuers to underwriters in primary underwritten offerings, upon the
effectiveness of the Shelf Registration Statement or, in the case
of an Underwritten Registration, on the closing date of any
underwriting (and, in the case of clause (3) below, on the date of
execution of the underwriting agreement):
(1) certificates, dated the delivery date thereof, signed by
the president, chief operating officer and principal financial
officer of the Company, confirming, as the date thereof, (x) the
matters set forth in paragraphs (a), (b) and (c) of Section 8 of
the Purchase Agreement and (y) that since the dates as of which
information is given in the Registration Statement and other
than as set forth in the Registration Statement, (i) there shall
not have been any material and adverse change or any development
that is reasonably likely to result in a material nd adverse
change in the long-term debt, or material increase in the short-
term debt, of the Company from that set forth in the
Registration Statement, (ii) no dividend or distribution of any
kind shall have been declared, paid or made by the Company on
any class of its capital stock, and (iii) the Company shall not
have incurred any liabilities or obligations other than
contracts entered into in the ordinary course of business,
direct or contingent, that individually or in the aggregate
could have a Material Adverse Effect and that are required to be
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disclosed on a balance sheet or notes thereto in accordance with
generally accepted accounting principles and are not disclosed
on the latest balance sheet or notes thereto included in the
Registration Statement. Since the date hereof and since the
dates as of which information is given in the Registration
Statement, there shall not have occurred any material adverse
change in the properties, business, results of operations,
condition (financial or otherwise), affairs or prospects of the
Company;
(2) opinions, dated the delivery date thereof, of counsel
for the Company, covering the matters customarily covered in
opinions requested in primary underwritten offerings; and
(3) a customary comfort letter or letters, dated the
delivery date or dates thereof, from the Company's independent
auditors, in the customary form and covering matters of the type
customarily covered in comfort letters by underwriters in
connection with primary underwritten offerings;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section;
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company pursuant to this clause (xi), if any; and
if at any time the representations and warranties of the Company
contemplated in clause (A)(1) above cease to be true and correct, the
Company shall so advise the underwriter(s), if any, and each Holder
promptly and, if requested by such Persons, shall confirm such advice
in writing;
(xi) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling
Holders or underwriter(s), if any, may reasonably request and do any
and all other acts or things necessary or advisable (including,
without limitation, the imposition of such restrictions on offers or
sales of the Securities as are referred to in paragraph 3(b) of this
Agreement) to enable the disposition in such jurisdictions of the
Transfer Restricted Securities covered by the applicable Registration
Statement; PROVIDED, HOWEVER, that the Company shall not be required
to register or qualify as a foreign corporation in any jurisdiction
where it is not now so qualified or to take any action that would
subject it to general consent to service of process in any
jurisdiction where it is not now so subject or to subject itself to
general taxation in any such jurisdiction;
(xii) upon the request of any Holder of Notes covered by the
Shelf Registration Statement, the Company shall issue Exchange Notes
having an aggregate principal amount equal to the aggregate principal
amount of Notes surrendered to the Company by such Holder in exchange
therefor or being sold by such Holder; such Exchange Notes to be
registered in the name
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of such Holder or in the name of the purchaser(s) of such Exchange
Notes, as the case may be; in return, the Notes held by such
Holder shall be surrendered to the Company for cancellation;
(xiii) cooperate with the selling Holders and the
underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities
to be sold and not bearing any restrictive legends; and to register
such Transfer Restricted Securities in such denominations (which
denominations shall be in a minimum of $1,000 and integral multiples
thereof) and such names as the Holders or the underwriter(s), if any,
may request at least two Business Days prior to such sale of Transfer
Restricted Securities made by such underwriter(s);
(xiv) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers
thereof or the underwriter(s), if any, to consummate the disposition
of such Transfer Restricted Securities;
(xv) if any fact or event contemplated by Section 6(c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-
effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee with printed certificates for the Transfer Restricted
Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the
rules and regulations of the NASD, and use its reasonable best efforts
to cause such Registration Statement to become effective and approved
by such governmental agencies or authorities as may be necessary to
enable the Holders selling Transfer Restricted Securities to
consummate the disposition of such Transfer Restricted Securities;
(xviii) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make
generally available to Holders, as soon as reasonably practicable, a
consolidated earnings statement meeting the requirements of Rule 158
under the Act (which need not be audited) covering a twelve-month
period beginning after the effective date of the applicable
Registration Statement;
(xix) use its reasonable best efforts to cause the Indenture to
be qualified under the TIA not later than the effective date of the
first Registration Statement required by this Agreement, and, in
connection therewith, cooperate, with the Trustee and the Holders of
Securities to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of
the TIA; and execute, and use its reasonable best efforts to cause the
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Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with
the Commission to enable such Indenture to be so qualified in a timely
manner; and
(xx) provide promptly to each Holder, upon request, each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15 of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by its
acquisition of a Transfer Restricted Security that, upon receipt of any
notice from the Company of the existence of any fact of the kind described in
Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "ADVICE") by the Company that the use
of the Prospectus may be resumed, and has received copies of any additional
or supplemental filings that are incorporated by reference in the Prospectus.
If so directed by the Company, each Holder will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the
event the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by the number of days during the
period from and including the date of the giving of such notice pursuant to
Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have received the copies
of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi)
hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees
and expenses incurred in connection with compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing
(including printing certificates for the Exchange Notes to be issued in the
Exchange Offer and printing of prospectuses), messenger and delivery services
and telephone incurred by the Company; (iv) all fees and disbursements of
counsel for the Company, and in accordance with Section 7(b) below, counsel
to the Holders of Transfer Restricted Securities; (v) if applicable, all
application and filing fees in connection with listing Securities on a
national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
auditors of the Company (including the expenses of any special audit and
comfort letters required by or incident to such performance).
The Company will bear its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and
the fees and expenses of any Person, including special experts, retained by
the Company.
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(b) In connection with any Registration Statement required by
this Agreement (excluding the Exchange Offer Registration Statement), the
Company will reimburse the Initial Purchasers and the Holders of Transfer
Restricted Securities being tendered in the Exchange Offer and/or resold
pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one U.S. counsel, which shall be Simpson Thacher & Bartlett (a partnership
which includes professional corporations) or such other counsel as may be chosen
by the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each of the
Holders, each Person, if any, who controls any Holder within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act and the respective
officers, directors, partners, employees, representatives and agents of each
Holder or any controlling Person, against any and all losses, liabilities,
claims, damages and expenses whatsoever (including but not limited to reasonable
attorneys' fees and expenses and all other expenses whatsoever incurred in
investigating, preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever, and any and all amounts paid
in settlement of any claim or litigation) (collectively, "LOSSES"), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or related
Prospectus, or in any supplement thereto or amendment thereof, or arise out of
or are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that the Company will not be liable in any such case to the
extent, but only to the extent, that any such Loss arises out of or is based
upon any (i) untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any Holders expressly
for use in the Registration Statement and related Prospectus or in any
supplement or amendment thereto or (ii) any untrue statement or alleged untrue
statement or omission or alleged omission from any related preliminary
prospectus if a copy of the related Prospectus (as then amended or supplemented)
was not delivered by or on behalf of any Holder seeking indemnification to the
Person asserting the claim or action, if required by law to have been so
delivered by such Holder and the untrue statement or alleged omission from such
preliminary prospectus was corrected in the related Prospectus. This indemnity
will be in addition to any liability which the Company may otherwise have,
including, under this Agreement.
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(b) Each of the Holders agrees, severally and not jointly, to
indemnify and hold harmless the Company, each Person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and the respective officers, directors, partners, employees,
representatives and agents of the Company or any controlling Person, against any
and all Losses, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or otherwise, insofar as such Losses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
any such Loss arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Holder expressly for use therein; PROVIDED, HOWEVER, that in no
case shall any Holder be liable or responsible for any amount in excess of the
dollar amount of the proceeds received by such Holder upon the sale of the
Securities giving rise to such indemnification obligation. This indemnity will
be in addition to any liability which any Holder may otherwise have, including
under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve such indemnifying
party from any liability which it may have under this Section 8 except to the
extent that it has been prejudiced in any material respect by such failure, or
from any liability which it may otherwise have). In case any such action is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action and the indemnifying party has
agreed in writing to pay the fees and expenses of such counsel, (ii) the
indemnifying parties shall not have employed counsel to take charge of the
defense of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have reasonably
concluded, upon the advice of counsel, that there may be defenses available to
it or them which are different from or additional to those available to one or
all of the indemnifying parties (in which case the indemnifying parties shall
not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses of
counsel shall be borne by the indemnifying parties; PROVIDED, HOWEVER, that the
indemnifying party under subsection (a) or (b) above, shall only be liable for
the legal expenses of one counsel (in addition to any local counsel) for all
indemnified parties in each jurisdiction in which any claim or action is
brought. Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its written consent; PROVIDED, HOWEVER, that such consent was
not unreasonably withheld. In addition, the indemnifying party will not,
without the prior written consent of the indemnified party, which consent may
not be unreasonably withheld, settle or compromise or consent to entry of any
judgment in any pending or threatened claim, action or proceeding of which
indemnification may be sought hereunder (whether or not any indemnified party is
an actual or potential party to such claim, action, or proceeding) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action or
proceeding.
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(d) In order to provide for contribution in circumstances in which
the indemnification provided for in this Section 8 is for any reason held to be
unavailable or is insufficient to hold harmless a party indemnified hereunder,
the Company, on the one hand, and each Holder, on the other hand, shall
contribute to the aggregate Losses of the nature contemplated by such
indemnification provision (including any investigation, legal and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claims asserted, but after deducting in the case of
Losses suffered by the Company any contribution received by the Company from
Persons, other than the Holders, who may also be liable for contribution,
including Persons who control the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act) to which the Company and such
Holder may be subject, in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and any such Holder,
on the other hand, or, if such allocation is not permitted by applicable law or
if indemnification is not available as a result of the indemnifying party not
having received notice as provided in this Section 8, in such proportion as is
appropriate to reflect not only the relative benefits referred to above but also
the relative fault of the Company, on the one hand, and the Holders, on the
other hand, in connection with the statements or omissions which resulted in
such Losses, as well as any other relevant equitable considerations. The
relative benefits received by the Company, on the one hand, and any Holder, on
the other hand, shall be deemed to be in the same proportion as (x) the total
proceeds from the offering of the Securities (net of discounts and commissions
but before deducting expenses) received by the Company and (y) the total
proceeds received by such Holder upon its sale of Securities which would
otherwise give rise to the indemnification obligation, respectively. The
relative fault of the Company, on the one hand, and of the Holders, on the other
hand, shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company, on the one hand, or the Holders, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and each Holder agree that it
would not be just and equitable if contribution pursuant to this Section 8 were
determined by PRO RATA allocation (even if all Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to above.
Notwithstanding the provisions of this Section 8, (i) no Holder shall be
required to contribute, in the aggregate, any amount in excess of the U.S.
dollar amount by which the proceeds received by such Holder with respect to the
sale of its Securities exceeds the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission and (ii) no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each Person, if
any, who controls a Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of a Holder or any controlling
Person shall have the same rights to contribution as such Holder, and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and the respective officers, directors,
partners, employees, representatives and agents of the Company or any
controlling Person shall have the same rights to contribution as the Company,
subject in each case to clauses (i) and (ii) of this Section 8(d). Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this Section
8, notify such party or parties from whom contribution may be sought, but the
failure to so notify such party or parties shall not relieve the
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party or parties from whom contribution may be sought from any obligation it
or they may have under this Section 8 or otherwise. No party shall be liable
for contribution with respect to any action or claim settled without its
prior written consent; PROVIDED, HOWEVER, that such written consent was not
unreasonably withheld.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection
with any sale thereof and any prospective purchaser of such Transfer
Restricted Securities from such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and
(b) completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the
Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering. In any such Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a
majority in aggregate principal amount of the Transfer Restricted Securities
included in such offering; PROVIDED, that such investment bankers and
managers must be reasonably satisfactory to the Company (it being understood
that Bear Stearns, BancAmerica and DLJ are reasonably satisfactory); such
investment banker or investment bankers and manager or managers are referred
to herein as the "underwriters".
SECTION 12. MISCELLANEOUS
(a) REMEDIES. Each Holder, in addition to being entitled to
exercise all rights provided herein, in the Indenture, in the Purchase
Agreement or granted by law, including recovery of Liquidated Damages or
other damages, will be entitled to specific performance of its rights under
this Agreement. The Company agrees that monetary damages (including the
Liquidated Damages contemplated hereby) would not be adequate compensation
for any loss incurred by reason of a
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breach by it of the provisions of this Agreement and hereby agree to waive
the defense in any action for specific performance that a remedy at law would
be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not, on or
after the date of this Agreement, enter into any agreement with respect to
its securities that is inconsistent with the rights granted to the Holders in
this Agreement or otherwise conflicts with the provisions hereof. The
Company has not previously entered into any agreement granting any
registration rights with respect to the Securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to holders of the Company's securities
under any agreement in effect on the date hereof.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose Securities are being
tendered pursuant to the Exchange Offer or registered pursuant to the Shelf
Registration and that does not affect directly or indirectly the rights of
other Holders whose Securities are not being tendered pursuant to such
Exchange Offer or registered pursuant to the Shelf Registration may be given
by the Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities being tendered or registered, as applicable.
(d) NOTICES. All notices and other communications provided
for or permitted hereunder shall be made in writing by hand-delivery,
first-class mail (registered or certified, return receipt requested), telex,
telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company:
Hard Rock Hotel, Inc.
510 North Robertson Boulevard
Los Angeles, CA 90048
Phone No.: (310) 854-3366
Telecopier No.: (310) 854-6747
Attention: Brian Ogaz
With copies to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, CA 90071-3144
Phone No.: (213) 687-5000
Telecopier No.: (213) 687-5600
Attention: Michael A. Woronoff, Esq.
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All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; ten
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and
on the second Business Day, if timely delivered to an air courier
guaranteeing two day delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
at the address specified in the Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; PROVIDED,
HOWEVER, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such
successor or assign acquired Transfer Restricted Securities from such Holder.
(f) COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) SUBMISSION TO JURISDICTION. To the fullest extent
permitted by applicable law, the Company irrevocably submits to the
jurisdiction of any Federal or State court in the City, County and State of
New York, United States of America, in any suit or proceeding based on or
arising under this Agreement (solely in connection with any such suit or
proceeding), and irrevocably agree that all claims in respect of such suit or
proceeding may be determined in any such court. The Company irrevocably and
fully waives the defense of an inconvenient forum to the maintenance of such
suit or proceeding. To the extent that the Company has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service of note, attachment prior to judgment, attachment in
aid of execution, executor or otherwise) with respect to itself or its
property, the Company hereby irrevocably waives such immunity in respect of
its obligations under this Agreement, to the extent permitted by law.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.
(k) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor
any of its security holders (other than the Holders of Transfer Restricted
Securities in such capacity) has any right (other than a right which has been
irrevocably waived) to include any securities of the Company in any
Registration Statement other than Transfer Restricted Securities. The
Company covenants that it will not enter into any instrument, agreement or
understanding which will grant to any person piggyback registration rights
which are
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exercisable with respect to any Exchange Offer Registration Statement or
otherwise confer a right to include securities in any Exchange Offer
Registration Statement other than Transfer Restricted Securities.
(l) ENTIRE AGREEMENT. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties hereto as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Transfer Restricted Securities. This Agreement
supersedes all prior agreements and understandings among the parties with
respect to the subject matter hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
HARD ROCK HOTEL, INC.
By: /s/ Peter A. Morton
----------------------------------
Name: Peter A. Morton
Title: CEO
BEAR, STEARNS & CO. INC.
By: /s/ J. Andrew Bugas
-------------------------------
Name: J. Andrew Bugas
Title: Senior Managing Director
BANCAMERICA ROBERTSON STEPHENS
By: /s/ Zed Frances III
-------------------------------
Name: Zed Frances III
Title: Executive Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ [Illegible]
-------------------------------
Name: [Illegible]
Title: Vice President
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COMPLETION GUARANTY
This Completion Guaranty (this "Agreement") dated as of March 23, 1998
is entered into by Peter A. Morton ("Completion Guarantor") in favor of (a)
Bank of America National Trust and Savings Association, as Administrative
Agent under the Loan Agreement described below, and for the benefit of the
Lenders party to the Loan Agreement from time to time, and (b) First Trust
National Association, as Trustee (the "Trustee") under the Indenture
described below for the benefit of the holders from time to time of the
Senior Subordinated Notes referred to below (the "Noteholders"). The parties
hereto agree with reference to the following facts:
RECITALS
A. Concurrently herewith, the Administrative Agent is entering into a
Loan Agreement of even date herewith (the "Loan Agreement") with Hard Rock
Hotel, Inc., a Nevada corporation ("Borrower"), pursuant to which Bank of
America National Trust and Savings Association and each Lender which may
hereafter become a party to such Loan Agreement will make Loans to
Borrower. The initial amount of the lending commitment under the Loan
Agreement is $67,000,000.
B. Borrower has agreed to use the Loans under the Loan Agreement for the
purposes described in Section 5.9 thereof, including financing for the
construction of the Proposed Expansion described below.
C. Borrower is concurrently issuing $120,000,000 aggregate principal
amount of 9 1/4 % senior subordinated notes due 2005 (the "Senior
Subordinated Notes") pursuant to an Indenture dated as of March 23, 1998
between Borrower and the Trustee (the "Indenture").
D. Completion Guarantor is executing this Agreement to induce the Lenders
to make Loans to Borrower under the Loan Agreement and in order to induce
the Noteholders to purchase the Senior Subordinated Notes.
NOW THEREFORE, Completion Guarantor hereby agrees as follows:
1. DEFINITIONS. This Agreement is the Completion Guaranty referred to
in the Loan Agreement and the Indenture and is one of the Loan Documents
referred to in the Loan Agreement. Capitalized terms used but not defined in
this Agreement are used with the meanings set forth for those terms in the
Loan Agreement (without regard to any amendments after the date hereof). In
addition, the following terms are used with the meanings set forth after each:
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"BENEFICIARIES" means, collectively, (a) the Administrative Agent, for the
benefit of itself and the Lenders under the Loan Agreement, and (b) the
Trustee for the benefit of itself (in its capacity as trustee) and the
Noteholders.
"BUDGET" means the construction budget attached hereto as Exhibit A,
together with any changes hereafter agreed upon by the parties hereto in
writing.
"CAPITAL CONTRIBUTIONS" has the meaning set forth in Section 2(b) hereof.
"COMPLETION" and "COMPLETE" mean, when modifying the Proposed Expansion,
that (a) the Proposed Expansion, and all related amenities described on
Exhibit C, are substantially completed in accordance with applicable Laws
and the Plans, and at an aggregate cost not exceeding the Budget plus the
amount of all Capital Contributions, (b) the Proposed Expansion and such
amenities are open and ready to accommodate hotel guests and gaming
patrons, (c) a certificate of occupancy has been issued with respect to
the Proposed Expansion together with any permits required for the operation
of the Proposed Expansion under applicable Gaming Laws, and (d) that the
Proposed Expansion is free and clear of all Liens (other than Permitted
Encumbrances and those described in Schedule B to the Title Policy and
other Liens permitted under the Indenture which are approved in writing by
the Administrative Agent in its sole discretion).
"COMPLETION DATE" means August 1, 1999, PROVIDED that if a Force Majeure
Event occurs during the period between the Closing Date and August 1,
1999, the Completion Date shall be extended one day for each day during
which any Force Majeure Event has occurred and remains continuing.
"FORCE MAJEURE EVENT" means the occurrence of any strikes, lockouts or
other labor trouble; the occurrence of fire, flood, earthquake, tornado,
sandstorm or other casualty; governmental preemption; breakdown, accident
or other acts of God; acts of war, insurrection, civil strife and
commotion; any enactment, promulgation or amendments of any statute, rule,
order or regulation of any legislature or governmental agency or any
department or subdivision thereof; any litigation not caused by Borrower,
Completion Guarantor or their respective Affiliates; or any other event
that occurs after the date of this Agreement that is outside the control of
Borrower or Completion Guarantor (excluding any event or circumstance which
with reasonable diligence or investigation is foreseeable as of the date of
this Agreement); in each such case which shall make it physically
impossible, unlawful or commercially impracticable to continue construction
of or Complete the Proposed Expansion; PROVIDED, however, that the
following shall not constitute Force Majeure Events: any increase in the
Budget to an amount in excess of $87,000,000 as a result of (i) any
condition, defect, or physical circumstance of the land, buildings or
improvements which either now exists or which results from the demolition,
development or construction of the Hard Rock Hotel or the Proposed
Expansion which
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should have been known or discovered with the exercise of reasonable
diligence or investigation, including errors, omissions or defects in
construction, plans or development, (ii) the completion or amendment
of the Plans after the date hereof not approved by the Administrative
Agent with the consent of the Requisite Lenders (or, to the extent
that such amendments materially change the requirements of Exhibit C
hereto, the Trustee on behalf of the majority of the Noteholders) or
omissions or defects in the construction plans in existence on the date
hereof, (iii) increase in the cost of labor, materials and equipment as the
result of ordinary cyclical or seasonal forces, or general inflation,
(iv) any failure of any contractor or subcontractor, vendor or other
supplier that itself is not caused by a Force Majeure Event to perform at
the times, at the price or in the manner contracted for or to adhere to the
Plans, or (v) any defects, errors or omissions in any construction
contract, subcontract, supply contract, or the Budget.
"INSOLVENCY PROCEEDING" means a proceeding under any Debtor Relief Law,
including without limitation any bankruptcy or other voluntary or
involuntary proceeding, in or out of court, for the adjustment of debtor-
creditor relationships.
"LOANS" means, collectively, any cash loans made to Borrower pursuant to
the Loan Agreement, together with any letters of credit and other credit
accommodations granted to Borrower by the Administrative Agent or any
Lender pursuant to the terms of the Loan Documents.
"OBLIGATIONS" means, collectively, the obligations and indebtedness of
Borrower to the Beneficiaries under the Loan Agreement, the Loan Documents
referred to therein, and the Indenture.
"PERSONAL LINE OF CREDIT" means the personal line of credit established in
favor of the Completion Guarantor by the Administrative Agent by its
Private Banking - Century City Unit pursuant to that certain, as at any
time amended or replaced.
"PLANS" means the construction plans attached hereto as Exhibit B, together
with any changes hereafter agreed upon by the parties hereto in writing.
"PROPOSED EXPANSION" has the meaning set forth in the Loan Agreement, as
the same may be amended from time to time with the consent of the Requisite
Lenders thereunder, PROVIDED THAT in the event that the Loan Agreement is
terminated, "Proposed Expansion" means the proposed expansion of the Hard
Rock Hotel with the amenities described on Exhibit C hereto or amenities
which are not materially different therefrom. Notwithstanding the
foregoing, no amendment to such definition which materially changes the
requirements set forth on Exhibit C shall affect or modify the rights and
remedies of the Trustee under this Agreement without its prior written
consent.
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"SUBJECT PROPERTY" means the Property subject to the Deed of Trust
described in the Loan Agreement.
"TITLE POLICY" means the ALTA lenders policy of title insurance issued to
the Administrative Agent as of the Closing Date.
2. COMPLETION GUARANTY. Subject to the limitations set forth in
Section 3, Completion Guarantor hereby guarantees and agrees as follows:
(a) Completion Guarantor absolutely, irrevocably and unconditionally
guarantees to the Beneficiaries that:
(i) Completion Guarantor shall cause Borrower to Complete the
construction of the Proposed Expansion not later than the Completion
Date and, during the pendency of any Force Majeure Event, shall use
its best efforts to remove and ameliorate the circumstances giving
rise to the Force Majeure Event (PROVIDED that, to the extent that the
Proposed Expansion is otherwise Complete Completion Guarantor shall
not be deemed in default of this clause (i) by reason of his
inability to demonstrate the absence of prohibited Liens for 120
days, provided that no such Liens are of record); and
(ii) Completion Guarantor shall cause the Completion of the
Proposed Expansion for an aggregate cost which is not in excess of
that set forth in the Budget PLUS the amount of any Capital
Contributions actually made by Completion Guarantor in accordance with
this Agreement.
(b) In the event that the Proposed Expansion is otherwise
Complete, but has been Completed for a cost which is in excess of the
aggregate cost set forth in the Budget, then Completion Guarantor shall
promptly, and in any event within five days following a request by either
Beneficiary, purchase either (i) preferred stock of Borrower having the
characteristics described on Exhibit D hereto, or (ii) junior subordinated
Indebtedness of Borrower of the type described in Section 6.10(g) of the
Loan Agreement and having the characteristics described on Exhibit D
hereto, PROVIDED that such Indebtedness may be incurred by Borrower only if
Borrower is unable to obtain approval from the appropriate Gaming
Authorities for the issuance of the preferred stock contemplated by clause
(i), in each case in an amount which is equal to such excess (the "Capital
Contributions"), or (ii) reimburse either Beneficiary (or pay third parties
designated by the Beneficiaries directly), at such Beneficiary's
discretion, for all costs of third parties actually incurred which are
required to be paid for by the Completion Guarantor hereunder (and, in the
case of any such reimbursement, Completion Guarantor shall be deemed to
have made a Capital Contribution in an amount equal to the reimbursed
amount).
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(c) Completion Guarantor shall, within 90 days following the
Completion Date, cause Commonwealth Land Title Company (or its successors)
to issue an endorsement reasonably acceptable to the Administrative Agent
assuring the absence of all materialmens', contractors, and all other Liens
other than those set forth on Schedule B to the Title Policy as of the date
hereof, Permitted Encumbrances and other Liens permitted under the
Indenture which are approved in writing by the Administrative Agent in its
sole discretion.
(d) Completion Guarantor shall indemnify the Beneficiaries from any
loss, cost, damage or expense (including reasonable attorneys fees) which
may be caused by its failure to perform its obligations under this Section
2 or the other provisions of this Agreement.
3. LIMITATION AS TO AMOUNT. The liability of Completion Guarantor
hereunder shall be limited to the principal amount of $10,000,000, PLUS the
amount of any increase to the amount of the Budget hereafter approved in writing
by Completion Guarantor (and, to the extent then required by the Loan Agreement
or the Indenture, the approval of the relevant Beneficiaries thereunder), PLUS
interest at the Default Rate from the date of any demand for payment hereunder
through the date of such payment, PLUS any costs and expenses of the type
contemplated by Section 22 (without duplication as to amounts under that
Section). If Borrower proposes to amend the Budget in accordance with Section
6.17 of the Loan Agreement, Completion Guarantor shall promptly and in any event
within five Banking Days deliver a writing acceptable to the Administrative
Agent consenting to such change, and affirming the corresponding increase to the
limitation of his liability hereunder. Completion Guarantor hereby agrees that
the Administrative Agent may establish, and maintain while this Completion
Guaranty is in effect, a reserve of $10,000,000 against the Personal Line of
Credit, and ten Business Days following any demand for payment hereunder, that
the Administrative Agent (without limitation of the rights of the Administrative
Agent hereunder) may debit the Personal Line of Credit in the amount of the
required payment, and may either advance such funds to Borrower (as Capital
Contributions on behalf of the Completion Guarantor) or as deemed Capital
Contributions in accordance with Section 2(b)(ii).
4. AVAILABILITY OF LOAN FUNDS. In the event that the Administrative
Agent has sent Completion Guarantor written notice to perform its obligations
under Section 2 above, the Lenders shall continue to make undisbursed Loans
available to Borrower to the extent of the Commitment at the direction of
Completion Guarantor for the purposes of Completing the Proposed Expansion and
fulfilling its other obligations under this Agreement, so long as:
(a) Completion Guarantor is not in default under this Agreement;
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(b) Completion Guarantor cures any outstanding Defaults and Events of
Default under the Loan Documents and thereafter performs all obligations
assumed by it under this Agreement up to the time of the Completion of the
Proposed Expansion; and
(c) All conditions of the Loan Documents to the disbursement of Loans
are satisfied.
Borrower consents to the arrangements set forth in this Section 4. The Trustee
and the Noteholders shall have no rights under this Section 4.
5. REMEDIES. If Completion Guarantor fails promptly to perform its
obligations under this Agreement, the Beneficiaries shall have (in addition to
their other rights and remedies specified hereunder) the following remedies (in
the case of the Trustee, subject to the subordination provisions of the
Indenture):
(a) If they choose to do so in their sole discretion, the
Beneficiaries may perform any or all of Completion Guarantor's obligations
under this Agreement on Completion Guarantor's behalf. In any such event,
Completion Guarantor shall reimburse the Beneficiaries immediately on
demand for all reasonable costs and expenses, including reasonable
attorneys' fees, that the Beneficiaries may incur in performing those
obligations, together with interest on those sums from and after the dates
they are incurred at the Default Rate.
(b) In addition, the Beneficiaries may bring any action at Law or in
equity or both on behalf of themselves, or commence any reference or
arbitration proceeding to compel Completion Guarantor to perform its
obligations under this Agreement, and to collect compensation for all loss,
cost, damage, injury and expense which may be sustained or incurred by the
Beneficiaries as a direct or indirect consequence of Completion Guarantor's
failure to perform those obligations, including interest at the Default
Rate. The Beneficiaries may from time to time bring such an action or
commence such a reference or arbitration proceeding, regardless of whether
they have first required performance by Borrower, or whether the
Beneficiaries have exhausted any security for the Obligations.
(c) The Beneficiaries may require Completion Guarantor to
reimburse the Beneficiaries upon demand for all reasonable costs and
expenses (including without limitation reasonable attorneys' fees and
disbursements (including the allocated costs of any internal counsel to the
Administrative Agent) incurred in connection with the enforcement of their
respective rights under this Agreement or in connection with the removal of
any Liens not permitted by Section 2(a) hereof and clause (d) of the
definition of "Completion" (irrespective of whether the validity, priority
or enforceability thereof has been adjudicated) to the extent that the
Beneficiaries are not immediately paid the
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same by Borrower within any applicable periods of grace provided by the
Loan Agreement and the Indenture;
PROVIDED THAT the obligations of Completion Guarantor shall be limited as set
forth in Section 3.
6. RIGHTS OF THE BENEFICIARIES. Completion Guarantor authorizes the
Beneficiaries to perform any or all of the following acts at any time in their
sole discretion, all without notice to Completion Guarantor and without
affecting Completion Guarantor's obligations under this Agreement:
(a) The Beneficiaries may alter any terms of the Indenture or of any
of the Loan Documents to which Completion Guarantor is not a party,
including renewing, compromising, extending or accelerating, or otherwise
changing the time for payment of, or increasing or decreasing the rate of
interest on, the Obligations or any part of them.
(b) The Beneficiaries may take and hold security for the Obligations
or this Agreement, accept additional or substituted security for either,
and subordinate, exchange, enforce, waive, release, compromise, fail to
perfect and sell or otherwise dispose of any such security.
(c) The Beneficiaries may direct the order and manner of any sale of
all or any part of any security now or later to be held for the Obligations
or this Agreement, and may also bid at any such sale.
(d) The Beneficiaries may apply any payments or recoveries from
Borrower, Completion Guarantor or any other source, and any proceeds of any
security, to the Obligations in such manner, order and priority as they may
elect, whether or not those obligations are guarantied by this Agreement or
secured at the time of the application.
(e) The Beneficiaries may release Borrower or any other Person from
the portion of the Obligations held by them or any portion of them or any
guaranty thereof.
(f) The Beneficiaries may substitute, add or release any one or more
guarantors or endorsers.
(g) The Beneficiaries may extend other credit to Borrower in addition
to the Obligations, and may take and hold security for the credit so
extended, all without affecting Completion Guarantor's liability under this
Agreement.
(h) The Administrative Agent and the Lenders may change the terms or
conditions of disbursement of the Loans in accordance with the terms of the
Loan Agreement.
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<PAGE>
7. AGREEMENT ABSOLUTE. Completion Guarantor agrees that until each and
every term, covenant and condition of this Agreement is fully performed,
Completion Guarantor shall not be released by or because of:
(a) Any act or event which might otherwise discharge, reduce, limit
or modify Completion Guarantor's obligations under this Agreement;
(b) Any waiver, extension, modification, forbearance, delay or other
act or omission of the Beneficiaries, or any failure to proceed promptly or
otherwise as against Borrower, Completion Guarantor or any security or
guarantor;
(c) Any action, omission or circumstance which might increase the
likelihood that Completion Guarantor may be called upon to perform under
this Agreement or which might affect the rights or remedies of Completion
Guarantor as against Borrower; or
(d) Any dealings occurring at any time between Borrower and the
Beneficiaries, whether relating to the Obligations or otherwise.
Completion Guarantor hereby expressly waives and surrenders any defense to
its liability under this Agreement based upon any of the foregoing acts,
omissions, agreements, waivers or matters. It is the purpose and intent of this
Agreement that the obligations of Completion Guarantor under it shall be
absolute and unconditional under any and all circumstances.
8. COMPLETION GUARANTOR'S WAIVERS. Completion Guarantor waives:
(a) All statutes of limitations as a defense to any action or
proceeding brought against Completion Guarantor by the Beneficiaries, or
either of them, to the fullest extent permitted by Law;
(b) Any right it may have to require the Beneficiaries to proceed
against Borrower, proceed against or exhaust any security held from
Borrower, or pursue any other remedy in their power to pursue;
(c) Any defense based on any claim that Completion Guarantor's
obligations exceed or are more burdensome than those of Borrower;
(d) Any defense based on: (i) any legal disability of Borrower, (ii)
any release, discharge, modification, impairment or limitation of the
liability of Borrower under the Loan Documents or the Indenture from any
cause, whether consented to by the Beneficiaries or arising by operation of
Law or from an Insolvency Proceeding, (iii) any rejection or disaffirmance
of the Obligations or any security held for the Obligations, in any such
Insolvency Proceeding and (iv) Completion Guarantor's rights under Nevada
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Revised Statutes ("NRS") 104.3605, Completion Guarantor specifically
agreeing that this clause (iv) shall constitute a waiver of discharge under
NRS 104.3605;
(e) Any defense based on any action taken or omitted by the
Beneficiaries in any Insolvency Proceeding involving Borrower, including
any election to have a claim allowed as being secured, partially secured or
unsecured, any extension of credit by the Beneficiaries, or any of them, to
Borrower in any Insolvency Proceeding, and the taking and holding by the
Beneficiaries of any security for any such extension of credit;
(f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices
of acceptance of this Agreement and of the existence, creation, or
incurring of new or additional indebtedness, and demands and notices of
every kind except for any demand or notice expressly provided for in this
Agreement;
(g) Any defense based on or arising out of any defense that Borrower
may have to the payment or performance of the Obligations or any portion of
the Obligations; and
(h) Any defense or benefit based on NRS 40.430 and judicial decisions
relating thereto and NRS 40.451 ET SEQ. and judicial decisions relating
thereto (to the fullest extent that the same may be waived under the NRS,
Completion Guarantor agreeing that the waiver in this paragraph (h) is
intended to take advantage of the two waivers permitted by NRS 40.495 to
the maximum extent permitted under the NRS.
9. SUBROGATION AND OTHER RIGHTS.
(a) Upon the occurrence of any Event of Default, the Beneficiaries
may, in their sole discretion, without prior notice to or consent of
Completion Guarantor: (i) foreclose either judicially or nonjudicially
against any real or personal property security for the Obligations, (ii)
accept a transfer of any such security in lieu of foreclosure, (iii)
compromise or adjust the Obligations or any part thereof or make any other
accommodation with Borrower or Completion Guarantor, or (iv) exercise any
other remedy against Borrower or any security. No such action by the
Beneficiaries shall release or limit the liability of Completion Guarantor,
who shall remain liable under this Agreement after the action, even if the
effect of the action is to deprive Completion Guarantor of any subrogation
rights, rights of indemnity, or other rights to collect reimbursement from
Borrower for any sums paid to the Beneficiaries, whether contractual or
arising by operation of Law or otherwise. Completion Guarantor expressly
agrees that under no circumstances shall it be deemed to have any right,
title, interest or claim in or to any real or personal property to be held
by the Beneficiaries or any third
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<PAGE>
party after any foreclosure or transfer in lieu of foreclosure of any
security for the Obligations.
(b) Regardless of whether Completion Guarantor may have made any
payments to the Beneficiaries, Completion Guarantor hereby defers and
subordinates, until all obligations and indebtedness of Borrower to the
Beneficiaries are paid in full and in cash: (i) all rights of subrogation,
all rights of indemnity, and any other rights to collect reimbursement from
Borrower for any sums paid to the Beneficiaries, whether contractual or
arising by operation of Law (including the United States Bankruptcy Code or
any successor or similar statute) or otherwise, (ii) all rights to enforce
any remedy that the Beneficiaries may have against Borrower, and (iii) all
rights to participate in any security now or later to be held by the
Beneficiaries.
(c) To the extent permitted by applicable law (if at all), Completion
Guarantor understands and acknowledges that if the Beneficiaries foreclose
judicially or nonjudicially against any real property security for the
Obligations, that foreclosure could impair or destroy any ability that
Completion Guarantor may have to seek reimbursement, contribution or
indemnification from Borrower or others based on any right Completion
Guarantor may have of subrogation, reimbursement, contribution or
indemnification for any amounts paid by Completion Guarantor under this
Agreement. Completion Guarantor further understands and acknowledges that
in the absence of this Section 9, such potential impairment or destruction
of Completion Guarantor's rights, if any, may entitle Completion Guarantor
to assert a defense to this Agreement. By executing this Agreement,
Completion Guarantor freely, irrevocably and unconditionally: (i) waives
and relinquishes that defense and agrees that Completion Guarantor will be
fully liable under this Agreement even though the Beneficiaries may
foreclose judicially or nonjudicially against any real property security
for the Obligations; (ii) agrees that Completion Guarantor will not assert
that defense in any action or proceeding which the Beneficiaries may
commence to enforce this Agreement; and (iii) acknowledges and agrees that
the Beneficiaries are relying on this waiver in making the Obligations, and
that this waiver is a material part of the consideration which they are
receiving for making the Obligations.
10. REVIVAL AND REINSTATEMENT. If the Beneficiaries are required to pay,
return or restore to Borrower or any other person any amounts previously paid on
the Obligations because of any Insolvency Proceeding of Borrower, any stop
notice or any other reason, the obligations of Completion Guarantor shall be
reinstated and revived and the rights of the Beneficiaries shall continue with
regard to such amounts, all as though they had never been paid.
11. INFORMATION REGARDING BORROWER AND THE SUBJECT PROPERTY. Before
signing this Agreement, Completion Guarantor investigated the financial
condition and business operations of Borrower, the present and former condition,
uses and ownership of the Subject Property, and
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such other matters as Completion Guarantor deemed appropriate to assure
itself of Borrower's ability to discharge its obligations under the Loan
Documents. Completion Guarantor assumes full responsibility for that due
diligence, as well as for keeping informed of all matters which may affect
Borrower's ability to pay and perform its obligations to the Beneficiaries.
The Beneficiaries have no duty to disclose to Completion Guarantor any
information which they may have or receive about Borrower's financial
condition or business operations, the condition or uses of the Subject
Property, or any other circumstances bearing on Borrower's ability to perform
its obligations to the Beneficiaries.
12. SUBORDINATION. All rights of Completion Guarantor, whether now
existing or later arising, to receive payment on account of any Capital
Contribution (including interest thereon) or to receive Distributions from
Borrower on account of the Capital Contributions, shall at all times be
subordinate as to lien and right of payment and in all other respects to the
full and prior repayment of the Obligations (in the case of subordination to the
obligations under the Indenture, in the manner and to the extent set forth
therein), PROVIDED that the right of Completion Guarantor to receive Supervisory
Fees shall be excluded from this Section, and shall instead be subordinated in
the manner, and to the extent, set forth in the Subordination Agreement
described in the Loan Agreement and in the Indenture. Completion Guarantor
shall not be entitled to enforce or receive payment of any sums hereby
subordinated until the Obligations have been paid and performed in full and any
such sums received in violation of this Agreement shall be received by
Completion Guarantor in trust for the Beneficiaries.
13. FINANCIAL INFORMATION. Within ninety days after the end of each
calendar year, Completion Guarantor shall deliver to the Administrative Agent a
personal financial statement, including a balance sheet and statement of cash
flows as of the last day of such calendar year and for the year then ended and a
Liquidity Report in the form described in the Loan Agreement as of the date
hereof. The Administrative Agent is authorized to distribute the Liquidity
Reports to the Lenders but shall retain the confidentiality of the annual
financial report in accordance with Section 11.14 of the Loan Agreement (but is
authorized to describe any discrepancies between the Liquidity Report and such
financial statements to the Lenders, without any liability for any failure to do
so). Completion Guarantor shall promptly provide the Administrative Agent with
such other information concerning his affairs and properties as the
Administrative Agent may reasonably request.
14. COMPLETION GUARANTOR'S REPRESENTATIONS AND WARRANTIES. Completion
Guarantor represents and warrants that:
(a) This agreement is the valid and binding obligation of the
Completion Guarantor, enforceable in accordance with its terms;
(b) All financial statements and other financial information
furnished (it being understood that no projections or other forward looking
information have been provided
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<PAGE>
by Completion Guarantor) or to be furnished to the Administrative Agent
or the Lenders by Completion Guarantor are true and correct in all
material respects and fairly represent the financial condition of
Completion Guarantor (including all contingent liabilities);
(c) There has been no material adverse change in Completion
Guarantor's financial condition since the dates of the statements most
recently furnished to the Administrative Agent; and
(d) The execution, delivery and performance of this Agreement do not
and will not (i) constitute a default or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the
obligation to create or impose) any Lien with respect to, any material
bond, note, debenture or other evidence of Indebtedness or any indenture,
mortgage, deed of trust or other agreement or instrument to which
Completion Guarantor is a party or bound, or to which any properties of
Completion Guarantor may be subject, (ii) contravene any order of any court
or governmental agency (including, without limitation, any gaming authority
in any state of the United States or foreign country or body having
jurisdiction over Completion Guarantor or any of its properties), or
(iii) violate or conflict with any statute, rule or regulation or
administrative or court decree applicable to Completion Guarantor or to
which any of its properties may be subject.
15. EVENTS OF DEFAULT. The Beneficiaries may declare Completion Guarantor
to be in default under this Agreement upon the occurrence of any of the
following events ("Events of Default"):
(a) Completion Guarantor fails to perform any of its obligations
under this Agreement; or
(b) Completion Guarantor purports to revoke or rescind this
Agreement, denies its continuing liability hereunder, or fails to reaffirm
its obligations hereunder in writing within five days following a written
request to do so by either Beneficiary; or
(c) Any representation or warranty made or given by Completion
Guarantor to the Beneficiaries proves to be false or misleading in any
material respect as of the date when made or reaffirmed; or
(d) Completion Guarantor becomes insolvent or the subject of any
Insolvency Proceeding; or
(e) Completion Guarantor dies or is declared incompetent by a court
of competent jurisdiction;
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<PAGE>
and in any such case the Administrative Agent and the Trustee (in the case of
the Trustee, subject to the terms of the subordination provisions of the
Indenture) shall be entitled to exercise all remedies provided hereby.
16. REFERENCE AND ARBITRATION.
(a) JUDICIAL REFERENCE. In any judicial action between or among the
parties, including any action or cause of action arising out of or relating
to this Agreement (including without limitation those based on or arising
from an alleged tort), all decisions of fact and Law shall at the request
of any party be referred to a referee. The parties shall designate to the
court a referee or referee selected under the auspices of the American
Arbitration Association ("AAA") in the same manner as arbitrators are
selected in AAA-sponsored proceedings. The presiding referee of the panel,
or the referee if there is a single referee, shall be an active attorney or
retired judge. Judgment upon the award rendered by such referee or
referees shall be entered in the court in which such proceeding was
commenced.
(b) MANDATORY ARBITRATION. Any controversy or claim between or
among the parties, including those arising out of or relating to this
Agreement and any claim based on or arising from an alleged tort, shall
at the request of any party be determined by arbitration, PROVIDED THAT
this Section shall not limit the right of the Beneficiaries to proceed
judicially to foreclosure under any document providing collateral
security to them. The arbitration shall be conducted in accordance
with the United States Arbitration Act (Title 9, U.S. Code),
notwithstanding any choice of Law provision in this Agreement, and
under the Commercial Rules of the AAA. The arbitrators shall give
effect to statutes of limitation in determining any claim. Any
controversy concerning whether an issue is arbitrable shall be
determined by the arbitrators. Judgment upon the arbitration award may
be entered in any court having jurisdiction. The institution and
maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the
right of any party, including the plaintiffs, to submit the controversy
or claim to arbitration if any other party contests such action for
judicial relief.
(c) REAL PROPERTY COLLATERAL. Notwithstanding the provisions of
Section 16(b), no controversy or claim shall be submitted to arbitration
without the consent of all parties if, at the time of the proposed
submission, such controversy or claim arises from or relates to an
obligation of Completion Guarantor or Borrower to the Beneficiaries which
is secured by real property collateral. If all parties do not consent to
submission of such a controversy or claim to arbitration, the controversy
or claim shall be determined by reference as provided in Section 16(a).
(d) PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No provision of
this Section 16 shall limit the right of any party to exercise self-help
remedies such as setoff,
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<PAGE>
foreclosure against or sale of any real or personal property collateral
or security, or to obtain provisional or ancillary remedies from a
court of competent jurisdiction before, after, or during the pendency
of any arbitration or other proceeding. The exercise of a remedy does
not waive the right of any party to resort to arbitration or reference.
At the relevant Beneficiary's option, foreclosure under a deed of
trust or mortgage may be accomplished either by exercise of power of
sale under the deed of trust or mortgage or by judicial foreclosure.
17. ADDITIONAL AND INDEPENDENT OBLIGATION. Completion Guarantor's
obligations under this Agreement are in addition to its obligations under the
Make Well Agreement described in the Loan Agreement and any future agreements
which may be entered into among Completion Guarantor and either Beneficiary.
Completion Guarantor's obligations under this Agreement are independent of those
of Borrower under the Loan Agreement, the other Loan Documents and the
Indenture. The Beneficiaries may bring a separate action, or commence a
separate reference or arbitration proceeding against Completion Guarantor
without first proceeding against Borrower, any other person or any security that
the Beneficiaries may hold, and without pursuing any other remedy. The rights
under this Agreement shall not be exhausted by any action by the Beneficiaries
until the Obligations have been paid and performed in full or the Proposed
Expansion Completed in accordance with the terms hereof.
18. NO WAIVER; CONSENTS; CUMULATIVE REMEDIES. Each waiver by the
Beneficiaries must be in writing, and no waiver shall be construed as a
continuing waiver. No waiver shall be implied from any delay by the
Beneficiaries in exercising or failure to exercise any right or remedy against
Borrower, Completion Guarantor or any security. Consent by the Beneficiaries to
any act or omission by Borrower or Completion Guarantor shall not be construed
as a consent to any other or subsequent act or omission, or as a waiver of the
requirement for their consent to be obtained in any future or other instance.
All remedies of the Beneficiaries against Borrower and Completion Guarantor are
cumulative.
19. RELEASE. Completion Guarantor shall not be released from its
obligations under this Agreement except by a writing signed by each of the
Beneficiaries or upon the Completion of the Proposed Expansion. Upon Completion
of the Proposed Expansion in accordance with the terms hereof, at the written
request of Completion Guarantor, the Beneficiaries shall each execute a writing
reasonably acceptable to the Completion Guarantor indicating the release of this
Agreement.
20. SUCCESSORS AND ASSIGNS; PARTICIPATIONS. The terms of this Agreement
shall bind and benefit the legal representatives, successors and assigns of the
Beneficiaries and Completion Guarantor; provided, however, that Completion
Guarantor may not assign this Agreement, or assign or delegate any of its rights
or obligations under this Agreement, without the prior written consent of the
Beneficiaries in each instance. The Beneficiaries may sell or assign
participations or other interests in the Obligations and their respective rights
under this Agreement, in whole or
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<PAGE>
in part, all without notice to or the consent of Completion Guarantor and
without affecting Completion Guarantor's obligations under this Agreement.
Subject to Section 11 hereof, without notice to or the consent of Completion
Guarantor, the Beneficiaries may disclose any and all information in their
possession concerning Completion Guarantor, this Agreement and any security
for this Agreement to any actual or prospective purchaser of the Obligations
or their rights hereunder or to any participant therein (provided in each
case that such disclosure is subject to a written confidentiality agreement).
21. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the local Laws of the State of Nevada without reference to the
conflicts of laws or choice of laws provisions thereof.
22. COSTS AND EXPENSES. If any lawsuit, reference or arbitration is
commenced which arises out of, or which relates to this Agreement, the
prevailing party shall be entitled to recover from each other party such sums as
the court, referee or arbitrator may adjudge to be reasonable attorneys' fees
(including reasonably allocated costs for services of in-house counsel to the
Administrative Agent) in the action or proceeding, in addition to costs and
expenses otherwise allowed by Law. In all other situations, including any
Insolvency Proceeding, Completion Guarantor agrees to pay all of the
Beneficiaries' reasonable costs and expenses, including reasonable attorneys'
fees (including reasonably allocated costs for services of their in-house
counsel to the Administrative Agent) which may be incurred in any effort to
collect or enforce the terms of this Agreement. From the time incurred until
paid in full, all sums shall bear interest at the Default Rate.
23. CONSIDERATION. Completion Guarantor acknowledges that it expects to
benefit from the extension of the Obligations to Borrower because of its
relationship to Borrower, and that it is executing this Agreement in
consideration of that anticipated benefit.
24. INTEGRATION; MODIFICATIONS. This Agreement (a) integrates all the
terms and conditions mentioned in or incidental to this Agreement, (b)
supersedes all oral negotiations and prior writings with respect to its subject
matter, and (c) is intended by Completion Guarantor and the Beneficiaries as the
final expression of the agreement with respect to the terms and conditions set
forth in this Agreement and as the complete and exclusive statement of the terms
agreed to by Completion Guarantor and the Beneficiaries with respect to the
subject matter of this Agreement. No representation, understanding, promise or
condition shall be enforceable against any party unless it is contained in this
Agreement.
25. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH
RESPECT TO THE THIS
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<PAGE>
AGREEMENT, OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
26. NOTICES. Notices hereunder shall be in writing and shall be delivered
in the manner prescribed for notices in the Loan Agreement to the address for
each party set forth in the signature pages to this Agreement.
27. MISCELLANEOUS. The illegality or unenforceability of one or more
provisions of this Agreement shall not affect any other provision.
28. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
29. SEVERABILITY. The rights of the Administrative Agent and the Trustee
hereunder are severable. No waiver, action or omission by the Administrative
Agent shall affect the rights of the Trustee against the Completion Guarantor
hereunder (subject to the subordination provisions of the Indenture). No
waiver, action or omission by the Trustee shall affect the rights of the
Administrative Agent against the Completion Guarantor hereunder.
30. RIGHTS TO BE EXERCISED BY ADMINISTRATIVE AGENT AND TRUSTEE; RIGHTS OF
TRUSTEE SUBORDINATED. The rights, benefits and privileges of the Beneficiaries
hereunder shall be exercised on their behalf solely by the Administrative Agent
and the Trustee (including their successors in such capacities), and neither the
Lenders nor any Noteholder shall have any rights to directly enforce this
Agreement against the Completion Guarantor. The rights and privileges of the
Trustee under this Agreement are junior and subordinate to those of the
Administrative Agent hereunder in the manner, and to the extent, set forth in
the Indenture. No provision of this Agreement shall, as between the Trustee and
the Administrative Agent, be construed in derogation of the subordination
provisions of the Indenture.
IN WITNESS WHEREOF, Completion Guarantor has executed this Agreement as of
the date first written above.
/s/ Peter A. Morton
------------------------------
Peter A. Morton, an individual
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<PAGE>
Address for Notices
Hard Rock Hotel and Casino
--------------------------------------------------
510 N. Robertson Blvd.
--------------------------------------------------
Los Angeles, CA 90045
--------------------------
Telephone (310) 358-1710
---------------------------------
Telecopier (310) 652-8747
---------------------------------
Accepted:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By: /s/ Scott Faber
------------------------------
Title: Vice President
---------------------------
Address for Notices:
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Attn: Agency Management Services
Telephone 213 228 9681
Telecopier 213 620 1398
FIRST TRUST NATIONAL ASSOCIATION, as Trustee
By: /s/ Richard H. Prokosch
------------------------------
Title: Assistant Vice President
---------------------------
Address for Notices:
180 East 5th Street
- --------------------------------
St. Paul, MN 55101
- --------------------------------
- --------------------------------
Telephone (612) 244-0721
----------------------
Telecopier (612) 244-0711
----------------------
By executing this Agreement in the space
provided below, the Borrower consents to the
terms hereof, and agrees that it shall not take any
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action which is in contravention of the terms of this Agreement.
HARD ROCK HOTEL, INC.
By:
------------------------------
Title:
---------------------------
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Exhibit A - Budget
Exhibit B - Plans
Exhibit C - Material Features and Amenities
Exhibit D - Terms of Preferred Stock and Sub Debt
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<PAGE>
EXECUTION COPY
AMENDMENT, dated as of July 1, 1997 (this "AMENDMENT"), to the
Stockholders Agreement, dated as of August 30, 1993 (the "STOCKHOLDERS
AGREEMENT"), by and among HARD ROCK HOTEL, INC., a Nevada corporation (the
"COMPANY"), HARVEYS CASINO RESORTS, a Nevada corporation formerly known as
Harvey's Wagon Wheel, Inc. ("HARVEYS"), and LILY POND INVESTMENTS, INC., a
Nevada corporation ("LILY POND"; and, together with Harveys, the
"STOCKHOLDERS").
W I T N E S S E T H:
WHEREAS, the Company, Harveys and Lily Pond are parties to the
Stockholders Agreement; and
WHEREAS, the Stockholders wish to amend the Stockholders Agreement and
waive certain provisions thereof in the manner provided for herein.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto hereby agree as follows:
A. DEFINED TERMS. Terms defined in the Stockholders Agreement and used
herein shall have the meanings given to them in the Stockholders Agreement.
B. AMENDMENT TO STOCKHOLDERS AGREEMENT.
1. AMENDMENT TO SECTION 3.2. Section 3.2 of the Stockholders Agreement
is hereby amended by inserting the following at the end of clause (ii) thereof:
"PROVIDED that each such agreement shall be deemed terminated upon
the closing of a transaction pursuant to which a transfer in
accordance with Section 4.2(a) is made".
2. AMENDMENT TO SECTION 3.3. Section 3.3 of the Stockholders Agreement
is hereby amended by deleting such section in its entirety and substituting
in lieu thereof the following:
"CAPITAL EXPENDITURES. Notwithstanding anything to the contrary
contained herein, the Company may make, or enter into agreements
to make, such expenditures for computer hardware and software as
are reasonably necessary to enable the Company to operate the
Property as a first-class Project independent of the support
and/or resources of the Project Manager".
<PAGE>
2
3. AMENDMENT TO SECTION 4.2 Subsection 4.2(d) of the Stockholders
Agreement is hereby amended by deleting such subsection in its entirety and
substituting in lie thereof the following:
"(d) Except as provided above, the transfer of the Class A Stock by
Lily Pond or Harvey's to a third party".
4. AMENDMENT TO SECTION 4.6. Section 4.6 of the Stockholders Agreement
is hereby amended by deleting such section in its entirety and substituting
in lieu thereof the following:
"TERMINATION OF OBLIGATIONS. As of the effective date of any
transfer not prohibited hereunder by a Stockholder of its Shares
in the Company, such Stockholder's rights and obligations hereunder
shall terminate".
5. AMENDMENT TO SECTION 7.1. Subsection 7.1(c) of the Stockholders
Agreement is hereby amended by inserting the following proviso at the end
thereof:
"PROVIDED, that this subsection 7.1(c) shall not apply to any such
notification pursuant to an application by Lily Pond to acquire
Harvey's Shares and control the operations of the Project;".
6. AMENDMENT TO SECTION 9.11. Section 9.11 of the Stockholders
Agreement is hereby amended by deleting such section in its entirety.
C. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective
on the date (the "AMENDMENT EFFECTIVE DATE") on which the following condition
precedent has been satisfied or waived:
1. The closing of the transactions contemplated by the Stock Purchase
and Management Buyout Agreement, dated as of the date hereof (the "STOCK
PURCHASE AND MANAGEMENT BUYOUT AGREEMENT"), among Harveys L.V. Management
Company, Inc., Harveys, Lily Pond and the Company shall have occurred;
PROVIDED, HOWEVER, that in respect of item B.2 above, this Amendment shall
become effective as of the date hereof and; PROVIDED, FURTHER, that anything
to the contrary notwithstanding, if the closing of the transactions
contemplated by the Stock Purchase and Management Buyout Agreement shall not
have occurred solely because the Stockholders will have been advised,
formally or informally, by the Nevada Gaming Authorities that they will not
be scheduled for a hearing because Peter Morton does not meet the criteria
for licensing by the Nevada Gaming Authorities, or are otherwise advised by
the Nevada Gaming Authorities that Peter Morton does not meet the criteria
for such licensing, then this Amendment shall become effective in respect of
item B.3 above only.
<PAGE>
3
D. GENERAL
1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by each of the Stockholders in the Stockholders Agreement are true and
correct in all material respects on and as of the Amendment Effective Date,
before and after giving effect to the effectiveness of this Amendment, as if
made on and as of the Amendment Effective Date.
2. CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. (a) Each of
the Stockholders has the corporate power and authority, and the legal right,
to make and deliver this Amendment and to perform its respective obligations
under the Stockholders Agreement, as amended by this Amendment, and has taken
all necessary corporate action to authorize the execution, delivery and
performance of this Amendment and the performance of its obligations under
the Stockholders Agreement, as so amended.
(b) No consent or authorization of, approval by, notice to, filing with
or other act by or in respect of, any Governmental Authority or any other
Person (each as defined in the Stock Purchase and Management Buyout Agreement)
is required in connection with the execution and delivery of this Amendment
by either Harveys or Lily Pond, or with the performance of their respective
obligations under the Stockholders Agreement, as amended by this Amendment.
(c) This Amendment has been duly executed and delivered on behalf of the
parties hereto.
(d) This Amendment constitutes a legal, valid and binding obligation of
each of Harveys, Lily Pond and the Company, enforceable against each such
party in accordance with its terms, except as affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting the enforcement of creditors' rights
generally, general equitable principles (whether considered in a proceeding
in equity or at law) and an implied covenant of good faith and fair dealing.
3. NO OTHER AMENDMENTS; CONFIRMATION. Except as expressly amended,
modified and supplemented hereby, the provisions of the Stockholders
Agreement are and shall remain in full force and effect.
4. GOVERNING LAW; COUNTERPARTS. (a) THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEVADA.
(b) This Amendment may be executed by one or more of the parties to
this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. This Amendment may be delivered by facsimile transmission of the
relevant signature pages hereof.
<PAGE>
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed and delivered by their respective proper and duly
authorized officers as of the day and year first above written.
HARD ROCK HOTEL, INC.
By: /s/ Peter Morton
-----------------------------
Title
By: /s/ Thomas M. Yturbide
-----------------------------
Title: Secretary
HARVEYS CASINO RESORTS
By: Charles Scharer
-----------------------------
Title: President/CEO
By: /s/ William B. Ledbetter
-----------------------------
Title: Secretary
LILY POND INVESTMENTS, INC.
By: /s/ Peter Morton
-----------------------------
Title:
<PAGE>
-------------------
STOCKHOLDERS AGREEMENT
BY AND AMONG:
HARD ROCK HOTEL, INC., A NEVADA CORPORATION,
HARVEY'S WAGON WHEEL, INC., A NEVADA CORPORATION,
AND
LILY POND INVESTMENTS, INC., A NEVADA CORPORATION,
WHOLLY OWNED BY PETER MORTON
-------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
TABLE OF CONTENTS................................................... i-iii
RECITALS............................................................ 1
ARTICLE I DEFINITIONS........................................... 1
1.1 DEFINED TERMS......................................... 1
1.1.1 ADDITIONAL CAPITAL CONTRIBUTIONS............... 1
1.1.2 AFFILIATE OR AFFILIATED ENTITY................. 2
1.1.3 ANNUAL PLAN AND ANNUAL OPERATING BUDGET........ 2
1.1.4 ARTICLES OF INCORPORATION...................... 2
1.1.5 ASSIGNMENT AND ASSUMPTION AGREEMENT............ 2
1.1.6 BYLAWS......................................... 2
1.1.7 CLASS A STOCK.................................. 2
1.1.8 CLASS B STOCK.................................. 2
1.1.9 COMPUTATION DATE............................... 2
1.1.10 CONTRIBUTION LOAN.............................. 2
1.1.11 DIRECTORS AND BOARD OF DIRECTORS............... 2
1.1.12 EFFECTIVE DATE................................. 2
1.1.13 EVENT OF DEFAULT, DEFAULTING STOCKHOLDER, AND
NON-DEFAULTING STOCKHOLDER..................... 3
1.1.14 HARVEY'S GUARANTEE............................ 3
1.1.15 IMPROVEMENTS.................................. 3
1.1.16 INDEPENDENT DIRECTOR.......................... 3
1.1.17 LICENSING AGREEMENT........................... 3
1.1.18 LOAN OR LOANS................................. 3
1.1.19 MANAGEMENT AGREEMENT.......................... 3
1.1.20 NEVADA GAMING AUTHORITIES..................... 3
1.1.21 PERCENTAGE INTEREST........................... 4
1.1.22 PROJECT....................................... 4
1.1.23 PROJECT MANAGER............................... 4
1.1.24 PROPERTY...................................... 4
1.1.25 SHARES........................................ 4
1.1.26 SUBLICENSE AGREEMENT.......................... 4
1.1.27 SUPERVISORY AGREEMENT......................... 4
1.1.28 TRANSFERRING STOCKHOLDER AND TRANSFER......... 4
1.1.29 TRANSFEROR AND TRANSFEREE..................... 4
ARTICLE II ORGANIZATION AND MANAGEMENT........................... 4
2.1 ISSUANCE AND DISTRIBUTION OF SHARES................... 5
2.2 PURPOSE OF THE AGREEMENT.............................. 5
2.3 ARTICLES AND BYLAWS................................... 5
2.4 BOARD OF DIRECTORS.................................... 5
2.5 REMOVAL............................................... 5
2.6 VACANCIES............................................. 6
2.7 COVENANT TO VOTE...................................... 6
2.8 REPLACEMENT OF INDEPENDENT DIRECTOR................... 6
2.9 VOTING REQUIREMENTS................................... 6
2.10 OTHER DECISIONS....................................... 7
2.11 PREEMPTIVE RIGHTS..................................... 7
2.12 CERTIFICATES TO BE LEGENDED........................... 7
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<PAGE>
ARTICLE III COVENANTS AND WARRANTIES.............................. 7
3.1 SUBLICENSE AGREEMENT.................................. 7
3.2 MANAGEMENT AGREEMENT.................................. 8
3.3 OTHER OPPORTUNITIES................................... 8
3.4 PRINCIPAL OFFICE...................................... 9
3.5 PROJECT LOANS......................................... 9
3.6 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS........ 10
3.6.1 HARVEY'S REPRESENTATIONS AND WARRANTIES....... 10
3.6.2 LILY POND'S AND MORTON'S REPRESENTATIONS AND
WARRANTIES.................................... 10
3.6.3 SCHEDULES AND INFORMATION PROVIDED............ 11
3.7 MODIFICATION OF EXISTING PLANS........................ 11
3.8 EQUITY PARTICIPATION.................................. 12
3.9 CONTRACTS WITH RELATED PARTIES........................ 12
3.10 OTHER BUSINESS ACTIVITIES............................. 12
3.11 TRANSFER TO TRUST..................................... 12
ARTICLE IV SALE, TRANSFER OR MORTGAGE............................ 13
4.1 RESTRICTION ON TRANSFER............................... 13
4.2 PERMITTED TRANSFERS................................... 13
4.3 RESTRAINING ORDER..................................... 14
4.4 GAMING COMMISSION APPROVAL............................ 14
4.5 PUBLIC OFFERINGS...................................... 14
4.6 TERMINATION OF OBLIGATIONS............................ 15
4.7 AGREEMENTS WITH TRANSFEREES........................... 15
ARTICLE V ADDITIONAL CAPITAL CONTRIBUTIONS AND DIVIDENDS........ 16
5.1 ADDITIONAL CAPITAL CONTRIBUTIONS...................... 16
5.1.1 GENERAL....................................... 16
5.1.2 NOTICE BY COMPANY............................. 16
5.1.3 CONTRIBUTION LOANS............................ 16
5.1.4 REPAYMENT THROUGH DISTRIBUTIONS............... 16
5.1.5 REMEDIES...................................... 17
5.1.6 NO THIRD PARTY RIGHTS......................... 18
5.2 INTEREST ON CAPITAL................................... 19
5.2.1 .............................................. 19
5.2.2 .............................................. 19
5.3 DIVIDENDS............................................. 19
ARTICLE VI ACCOUNTING AND TAX PREPARATION........................ 19
6.1 BOOKS AND RECORDS..................................... 19
6.1.1 GENERAL....................................... 19
6.1.2 ACCOUNTING BASIS.............................. 20
6.1.3 INFORMATION TO STOCKHOLDER.................... 20
6.2 RIGHTS OF INSPECTION.................................. 20
6.3 FISCAL YEAR........................................... 20
6.4 AUDIT................................................. 20
6.5 BANK ACCOUNTS......................................... 20
6.6 OTHER ACCOUNTING DECISIONS............................ 20
6.7 PREPARATION OF TAX RETURNS............................ 20
6.8 TAX DECISIONS NOT SPECIFIED........................... 21
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<PAGE>
ARTICLE VII DEFAULT AND DISSOLUTION............................... 21
7.1 EVENTS OF DEFAULT..................................... 21
7.2 CAUSES OF DISSOLUTION................................. 21
7.3 ELECTION OF NON-DEFAULTING STOCKHOLDER................ 22
7.3.1 PURCHASE OF INTEREST.......................... 22
7.3.2 CLOSING....................................... 22
7.3.3 UNSUITABILITY................................. 22
7.4 DISPOSITION OF DOCUMENTS AND RECORDS.................. 23
ARTICLE VIII APPRAISAL............................................. 23
8.1 GENERAL............................................... 23
8.2 APPRAISAL PROCEDURE................................... 23
ARTICLE IX GENERAL PROVISIONS.................................... 24
9.1 COMPLETE AGREEMENT; AMENDMENT......................... 24
9.2 NOTICES............................................... 24
9.2.1 ADDRESSES..................................... 24
9.2.2 NOTICE EFFECTIVE DATE......................... 25
9.2.3 CHANGES....................................... 25
9.3 ATTORNEY FEES......................................... 25
9.4 VALIDITY.............................................. 25
9.5 SURVIVAL OF RIGHTS.................................... 25
9.6 GOVERNING LAW AND VENUE............................... 26
9.7 WAIVER................................................ 26
9.8 REMEDIES IN EQUITY.................................... 26
9.9 TERMINOLOGY........................................... 26
9.10 COUNTERPARTS.......................................... 27
9.11 SURVIVAL OF INDEMNITY OBLIGATIONS, EXCLUSIVE RIGHTS,
AND REPRESENTATIONS AND WARRANTIES.................... 27
9.12 FEES AND COMMISSIONS.................................. 27
9.13 FURTHER ASSURANCES.................................... 27
9.14 REIMBURSEMENT OF EXPENSES............................. 27
9.15 SEVERABILITY.......................................... 27
9.16 SPOUSAL CONSENTS...................................... 28
9.17 RESTRICTIONS TO RUN WITH SHARES....................... 28
9.18 ADDITIONAL STOCKHOLDERS............................... 28
9.19 TERMINATION........................................... 28
</TABLE>
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<PAGE>
STOCKHOLDERS AGREEMENT
This Stockholders Agreement (this "Agreement") dated as of August 30,
1993, is by and among Hard Rock Hotel, Inc., a Nevada corporation (the
"Company"), Harvey's Wagon Wheel, Inc., a Nevada corporation ("Harvey's"),
and Lily Pond Investments, Inc., a Nevada corporation ("Lily Pond") wholly
owned by Peter Morton ("Morton"). Each of the parties hereto (other than the
Company) and any other holder of Shares (as defined below) of the Company who
shall hereafter become a party to or agree to be bound by the relevant
provisions of this Agreement is sometimes hereinafter referred to as a
"Stockholder" and all of such parties are sometimes hereinafter referred to
as the "Stockholders."
RECITALS
A. Morton has acquired from Hard Rock Cafe Licensing Corporation, a
New York corporation ("Licensor"), a right and license to use the "Hard Rock
Hotel" name and mark ("Hotel Brand"). Morton and Harvey's have entered into a
letter of intent dated March 30, 1993 concerning the organization and joint
ownership of an entity to own, develop and operate a hotel/casino utilizing
the Hotel Brand and Harvey's management experience and expertise.
B. The parties hereto deem it in their respective best interests and
in the best interest of the Company to provide consistent and uniform
management for the Company, to regulate certain of their rights in connection
with their interests in the Company and to restrict the sale, assignment,
transfer, encumbrance or other disposition of the Shares (as defined below)
to be issued to the Stockholders and to provide for certain rights and
obligations with respect thereto, and desire to enter into this Agreement in
order to effectuate those purposes and the transactions contemplated herein.
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings:
1.1.1 "ADDITIONAL CAPITAL CONTRIBUTION(S)" shall refer to the
capital contributions by the Stockholders to the Company as provided in
Section 5.1, to the extent the Company requires funds in addition to the
capital contributions provided for in Section 2.1, and any loan or other
third party financing in such amounts as are sufficient to enable the Company
to carry out the purposes of this Agreement.
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<PAGE>
1.1.2 "AFFILIATE" or "AFFILIATED ENTITY" shall refer to any person
or entity which, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with the subject
entity. The term "CONTROL" shall mean having ownership of twenty percent
(20%) or more of the (i) voting equity interests in an entity; (ii) partnership
interests in a partnership; (iii) general partnership interests in a limited
partnership; or (iv) voting or economic benefit of any other type of entity.
1.1.3 "ANNUAL PLAN" and "ANNUAL OPERATING BUDGET" shall have the
meanings as described in the Management Agreement.
1.1.4 "ARTICLES OF INCORPORATION" shall mean the articles of
incorporation executed and acknowledged by the incorporators pursuant to the
provisions of N.R.S. Chapter 78 which shall be in the form attached hereto as
Exhibit "A."
1.1.5 "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the
document attached as Exhibit "D-1."
1.1.6 "BYLAWS" shall mean the bylaws of the Company which shall be
initially in the form attached hereto as Exhibit "B."
1.1.7 "CLASS A STOCK" shall mean the authorized 20,000 shares of
common stock of the Company with full voting rights.
1.1.8 "CLASS B STOCK" shall mean the authorized 80,000 shares of
non-voting common stock of the Company.
1.1.9 "COMPUTATION DATE" shall refer to the effective date of the
notice of the election of the contributing Stockholder to treat the
outstanding principal balance of the Contribution Loan (excluding accrued
interest) as a contribution to capital as provided in Section 5.1.5 of this
Agreement.
1.1.10 "CONTRIBUTION LOAN" shall refer to the advancement directly
to the Company the funds required as a loan in the event any Stockholder
fails to make an Additional Capital Contribution within the time specified as
provided in Section 5.1.3 of this Agreement.
1.1.11 "DIRECTORS" and "BOARD OF DIRECTORS" shall refer to the
board of directors of the Company.
1.1.12 "EFFECTIVE DATE" shall mean the later date upon which all
parties have properly executed this Agreement and the Articles of
Incorporation have been filed.
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<PAGE>
1.1.13 "EVENT OF DEFAULT," "DEFAULTING STOCKHOLDER," and
"NON-DEFAULTING STOCKHOLDER" shall have the meanings as described in Sections
7.1 and 7.3.1, respectively, of this Agreement.
1.1.14 "HARVEY'S GUARANTEE" refers to Harvey's agreement to
individually guarantee up to Sixty Million Dollars ($60,000,000.00) in Loans
(as defined below) on behalf of the Company as provided in Section 3.5 of
this Agreement.
1.1.15 "IMPROVEMENTS" shall mean such buildings and other
improvements to be constructed as part of the Project (as defined below).
1.1.16 "INDEPENDENT DIRECTOR" shall mean the Director selected
jointly by Harvey's and Lily Pond, as provided in subsection 2.4(b) of this
Agreement, who shall serve subject to Section 2.8 of this Agreement.
1.1.17 "LICENSING AGREEMENT" shall mean the licensing agreement
entered into between Morton and the Licensor for the right to use the Hotel
Brand in the State of Nevada, County of Clark, and other jurisdictions as
agreed to by the parties thereto.
1.1.18 "LOAN" or "LOANS" shall refer to agreements by the Company
with third party lender(s) for loan(s) to finance the construction of the
Improvements, development and operation of the Project, as provided in
Section 3.5 of this Agreement.
1.1.19 "MANAGEMENT AGREEMENT" shall mean the management agreement
entered into between Harvey's and the Company in the form set forth as
Exhibit "C" attached to this Agreement granting to Harvey's the right to
manage the Project (as defined below) and designating Harvey's as the Project
Manager (as defined below).
1.1.20 "NEVADA GAMING AUTHORITIES" shall mean, without limitation,
the Nevada Gaming Commission, the Nevada State Gaming Control Board, the City
of Las Vegas, the Clark County Liquor and Gaming Licensing Board and any
other applicable governmental or administrative state, county, city,
municipal or other governmental agency involved in the regulation of gaming
and gaming activities conducted in the State of Nevada and having
jurisdiction over the Company.
1.1.21 "PERCENTAGE INTEREST" shall mean each Stockholders
percentage ownership interest in Class A Stock, Class B Stock and the Company.
1.1.22 "PROJECT" shall mean the development, construction, financing
and operation of the Property, to be comprised generally of a 305 room hotel
and 28,000 square foot
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<PAGE>
casino, two (2) restaurants and several bars, Hotel Brand retail store,
parking garage, outdoor swim park, and other amenities.
1.1.23 "PROJECT MANAGER" shall be in reference to Harvey's in its
capacity as manager of the Project pursuant to the Management Agreement.
1.1.24 "PROPERTY" shall mean certain real property situated in the
County of Clark, City of Las Vegas, State of Nevada, consisting of
approximately 7.6 acres of land, located at the intersection of Paradise Road
and Harmon Avenue, together with all rights, appurtenances, easements, rights
of way and other interests appertaining thereto.
1.1.25 "SHARES" shall mean the aggregate of Class A Stock and
Class B Stock held by a Stockholder in the Company at a particular time.
1.1.26 "SUBLICENSE AGREEMENT" shall mean the sublicense agreement
between Morton and Lily Pond attached hereto as Exhibit "D" which shall be
assigned to the Company pursuant to the assignment and assumption agreement
attached hereto as Exhibit "D-1."
1.1.27 "SUPERVISORY AGREEMENT" shall mean the supervisory
agreement between Morton and the Company in the form set forth as Exhibit "E"
attached to this Agreement.
1.1.28 "TRANSFERRING STOCKHOLDER," and "TRANSFER" shall have the
meanings as described in Section 4.1 of this Agreement.
1.1.29 "TRANSFEROR" and "TRANSFEREE" shall have the same meaning
as defined in Section 4.7 of this Agreement.
ARTICLE II
ORGANIZATION AND MANAGEMENT
2.1 ISSUANCE AND DISTRIBUTION OF SHARES. Upon the Effective Date, the
Company shall cause or have caused the issuance of Shares to the Stockholders
as follows (and no other Shares shall have been issued, subscribed, or
contracted):
<TABLE>
<CAPTION>
CLASS A CLASS B
CLASS STOCK CLASS STOCK TOTAL
STOCK- A %AGE OF B %AGE OF %AGE
HOLDER STOCK INTEREST STOCK INTEREST INTEREST
------ ----- -------- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Harvey's 8,000 40% 32,000 40% 40%
Lily Pond 12,000 60% 48,000 60% 60%
</TABLE>
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<PAGE>
2.1.1 Harvey's shall make a capital contribution to the Company
of $10,000,000 upon the Effective Date in consideration of its Shares. Lily
Pond shall be deemed to have made a capital contribution of $10,000,000 by
virtue of the transfer of the Property upon the Effective Date free and clear
of all liens and encumbrances, in consideration of its Shares.
2.2 PURPOSE OF THE AGREEMENT. The Stockholders desire to operate the
Company in corporate form to provide for centralized management, to preserve
value of assets, to protect management and control of the Company against
undesired intervention by persons not acceptable to the Stockholders.
2.3 ARTICLES AND BYLAWS. Whenever there is an inconsistency or
discrepancy between the Articles of Incorporation or Bylaws of the Company
and the terms of this Agreement, the terms of this Agreement shall control.
2.4 BOARD OF DIRECTORS. The management of the Company shall be vested
in the Board of Directors. Upon the occurrence of the Effective Date and
subject to the following provisions, Harvey's and Lily Pond shall cause the
Board of Directors of the Company to consist of seven (7) Directors,
initially designated in the manner set forth below.
(a) DESIGNATION OF DIRECTORS. Harvey's shall designate three (3)
Directors and Lily Pond shall designate three (3) Directors.
(b) INDEPENDENT DIRECTOR. In addition to the Directors designated
above, Harvey's and Lily Pond shall jointly choose an Independent Director
who shall serve as a Director subject to Section 2.8 below.
(c) COMMITTEES OF THE BOARD OF DIRECTORS. The rights to designate
directors provided in subsections 2.4(a) and (b) shall also apply,
proportionately, to any committees of the Board of Directors.
2.5 REMOVAL. If a Director designated pursuant to Section 2.4 hereof:
(a) has been designated by Harvey's and Harvey's requests that
such Director be removed by written notice thereof to the other Stockholders;
or
(b) has been designated by Lily Pond and Lily Pond requests that
such Director be removed by written notice thereof to the other Stockholders;
then each Stockholder shall take all actions required by Section 2.7 to
effect such result.
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<PAGE>
2.6 VACANCIES. In the event that a vacancy is created on the Board of
Directors at any time by the death, disability, retirement, resignation or
removal of any Director, or otherwise there shall exist or occur any vacancy
on the Board, each of Harvey's and Lily Pond hereby agrees to cause the
Director(s) to vote for that individual designated to fill such vacancy and
serve as a Director by whichever of the Stockholders that had designated
(pursuant to Section 2.4 hereof) the Director (including the Independent
Director) whose death, disability, retirement, resignation or removal
resulted in such vacancy on the Board; PROVIDED, HOWEVER, that such other
individual so designated may not previously have been a Director of the
Company who was removed for cause from the Board.
2.7 COVENANT TO VOTE. Harvey's and Lily Pond hereby agree to take all
actions necessary to call, or cause the Company or the appropriate officers
or Directors of the Company to call, a special or annual meeting of
Stockholders of the Company and to vote all Class A Stock owned or held of
record at any such annual or special meeting in favor of, or to consent by
written consent in lieu of any such meeting to, the election of a Board of
Directors consistent with, and the taking of any other action to effect the
intent of, this Article II. In addition, Harvey's and Lily Pond agree to
vote, or consent with respect to, the Class A Stock owned or held of record
upon any other matter arising under this Agreement submitted to a vote or
consent of the Company's Stockholders in a manner so as to implement the
terms of this Agreement.
2.8 REPLACEMENT OF INDEPENDENT DIRECTOR. Upon the occurrence of any
event which results in the release of the Harvey's Guarantee, the
Stockholders shall take all necessary action as to cause the Independent
Director to resign and Lily Pond shall have the right, in its sole
discretion, to select a replacement Director.
2.9 VOTING REQUIREMENTS. Except as provided otherwise in this
Agreement, the Company shall not, without the prior written unanimous consent
of all of the Directors:
(a) voluntarily dissolve the Company or voluntarily adopt a plan
of liquidation of the Company;
(b) make any decisions relating to the financing or refinancing of
the Property, the Project and Improvements, future capital acquisitions and
improvements excluded from the Annual Plan or Annual Operating Budget (as
defined in the Management Agreement);
(c) enter into transactions between the Company and Affiliates of
either Harvey's or Lily Pond; or
(d) approve the Annual Plan and Annual Operating Budget.
-6-
<PAGE>
2.10 OTHER DECISIONS. All other decisions of the Company, except as
otherwise specified in this Agreement, shall be determined by a simple
majority vote of the Directors.
2.11 PREEMPTIVE RIGHTS. Each Stockholder shall have preemptive rights
to purchase or subscribe additional Shares on a proportional basis. Preemptive
rights granted hereby are untransferable, in whole or in part, by the
Stockholder. Neither the Company's remaining Stockholders nor any third party
may exercise such Stockholder's rights to subscribe if any such Stockholder
waives exercise of its preemptive rights. The preemptive rights shall
terminate upon the decision of Lily Pond to engage in a public offering of
stock of the Company pursuant to Section 4.5 below.
2.12 CERTIFICATES TO BE LEGENDED. Each Stockholder understands and
agrees that each certificate representing Shares will bear a legend on the
face thereof (or on the reverse thereof with a reference to such legend on
the face thereof) in substantially the form set forth below, which legend
restricts the sale, transfer or other disposition of Shares in accordance
with this Agreement of which this Section 2.12 is a part:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
"EACH STOCKHOLDER ALSO UNDERSTANDS AND AGREES THAT EACH CERTIFICATE
REPRESENTING SHARES MAY ALSO CONTAIN ANY OTHER LEGEND REQUIRED BY THE LAWS
AND REGULATIONS OF THE STATE OF NEVADA WHICH MAY FURTHER RESTRICT TRANSFERS
OF SUCH SHARES.
"THESE SHARE(S) ARE SUBJECT TO A STOCKHOLDER'S AGREEMENT, DATED
AUGUST ____, 1933 AMONG THE STOCKHOLDERS AND THE COMPANY WHEREIN, AMONG OTHER
MATTERS, THE TRANSFER, SALE, HYPOTHECATION, PLEDGE OR OTHER DISPOSITION OF
SHARES IS SUBSTANTIALLY RESTRICTED. ANY VIOLATION OF THE AGREEMENT IS NULL
AND VOID AB INITIO. THIS AGREEMENT IS AUTOMATICALLY BINDING UPON ANY PERSON
OR ENTITY WHO ACQUIRES THE SHARES. A COPY OF THE AGREEMENT IS AVAILABLE FOR
INSPECTION AT THE COMPANY'S PRINCIPAL OFFICE DURING NORMAL BUSINESS HOURS."
ARTICLE III
COVENANTS AND WARRANTIES
3.1 SUBLICENSE AGREEMENT. Prior to the Effective Date, Morton shall
enter into the Licensing Agreement with Licensor for the right to use the Hotel
Brand in the State of Nevada, County of Clark, and other jurisdictions as
agreed to therein. On the Effective Date, Morton shall enter into a
Sublicense Agreement with Lily Pond which will be assigned to the Company by
the Assignment and Assumption Agreement, incorporating by reference the terms
of the Licensing Agreement, for a term of
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<PAGE>
fifty-five (55) years to transfer the exclusive right to use the Hotel Brand
for the Project to the Company or its successors in interest for the sum of
One Hundred Dollars ($100.00) annually upon the terms and conditions set
forth therein.
3.2 MANAGEMENT AGREEMENT. On the Effective Date, the Stockholders shall
cause the Company to enter into (i) the Management Agreement with Harvey's,
granting to Harvey's the right to manage the Project and designating Harvey's
as the Project Manager and (ii) the Supervisory Agreement with Morton,
regarding certain supervisory and oversight rights and duties with respect to
the Project.
3.2.1 During any period of time in which there shall not be a
Project Manager actively serving in such capacity, the Directors shall carry
out all responsibilities otherwise imposed on the Project Manager pursuant to
the Management Agreement.
3.3 OTHER OPPORTUNITIES. Morton and Harvey's agree to jointly pursue
expansion opportunities for the Hotel Brand in markets other than Las Vegas,
by the use of or apart from the Company, to be established and operated as
set forth herein. In consideration of the duties and obligations of Harvey's
as described herein, Morton hereby grants to Harvey's the right to jointly
participate with Morton, with respect to both equity ownership and management,
in additional "Hard Rock Hotel" projects which include as a source of revenue
a casino operation as distinct from new "Hard Rock Hotels" that do not
include a source of revenue a casino operation, in the event Morton in his
sole discretion pursues such projects. Harvey's right to participate in
future projects consists of those locations anywhere within the United States
where Morton has or may have in the future the right to the use of "Hard
Rock" tradename brand, mark and logo and those foreign locations within the
geographical area where Morton has the current right to use the "Hard Rock"
tradename, brand, mark and logo as set forth in the Licensing Agreement, in
each case solely in connection with the operation of a hotel and casino as
provided above. Any such future projects between Morton and Harvey's shall be
based upon similar capital contributions, equity ownership ratio, guaranty of
debt, and otherwise on the terms and conditions as set forth in this
Agreement, unless agreed otherwise by Morton and Harvey's. In the event that
Morton and Harvey's cannot agree upon the terms and conditions of the
ownership structure of such future projects, if any, the dispute shall be
settled by arbitration administered by the American Arbitration Association
in accordance with its Commercial Arbitration Rules in Las Vegas, Nevada.
Morton grants to Harvey's the right to jointly participate in any expansion
of the Hard Rock Cafe (the restaurant) to any locations in the Reno/Tahoe
area, on the same equity percentage as described herein, in the event that
Morton in his sole discretion pursues the same. The rights and obligations
described in this Section 3.3. shall cease if (i) Harvey's
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<PAGE>
ceases to be the Project Manager (due to a default of Harvey's pursuant to
Article VI of the Management Agreement or a termination of the Management
Agreement pursuant to Sections 7.4, 7.5, or 7.7 thereof or otherwise agreed
by the unanimous consent of the Stockholders); (ii) this Agreement is
terminated due to a default of Harvey's; or (iii) Harvey's reduces its total
Percentage Interest below twenty percent (20%). After thirty (30) days prior
written notice by Morton, if Harvey's does not accept such opportunity in
writing to participate in any such future ventures, Morton may pursue such
opportunities with other parties. If the current shareholders of Harvey's
cease to own forty percent (40%) or more of the overall voting power of
Harvey's (including without limitation, the right to elect directors),
participation by Harvey's in future ventures is subject to Morton's approval.
3.4 PRINCIPAL OFFICE. The principal office of the Company in the State
of Nevada shall be located at Harvey's Resort Hotel/Casino, Highway 50, City
of Stateline, County of Douglas, State of Nevada until the Project is
Opening (as defined in the Management Agreement), at which time the
principal office shall be the Project premises. The parties may have such
other offices, either within or without the State of Nevada, as the
Stockholders may designate, or as the business of the Company may from time
to time require. In order to comply with Nevada gaming regulations, the
Company shall maintain an office on the Project premises.
3.5 PROJECT LOANS. The Company may enter into agreement(s) with third
party lenders(s) for loan(s) (the "Loan" or "Loans") to finance the
construction of the Improvements and development and operation of the
Project, if the amount and terms of any such Loan are approved by the
unanimous consent of the Directors. Harvey's agrees to individually guarantee
up to Sixty Million Dollars ($60,000,000.00) in Loans on behalf of the
Company ("Harvey's Guarantee"). However, after the Harvey's Guarantee has
been retired, refinanced, or released, Harvey's shall have no further
obligation to incur or guarantee debt on behalf of the Company. Harvey's
represents and warrants that the Loans will not contain any covenants or
conditions enabling the lender to hold the Company in default by virtue of
any act or omission of Harvey's in its capacity solely as guarantor
including, without limitation, any violation of a financial covenant which
results in an acceleration of the Loan. If the Company is unable to obtain
the Loans within six (6) months of the Effective Date, then this Agreement
shall terminate, the Company shall be dissolved and each Stockholder shall be
responsible for its own predevelopment and construction costs, except for
those out of pocket expenses that uniquely benefit the Company, including but
not limited to, the preparation and drafting of organizational and
development documents, financing fees, and loan commitment costs. Payment of
such expenses shall be shared in proportion to the Stockholder's Percentage
Interest. Notwithstanding anything contained herein to the contrary,
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Lily Pond and Harvey's agree to vote their Class A Stock to approve a
refinancing designed to release the Harvey's Guarantee provided such a
refinancing is on terms no less favorable to the Company.
3.6 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
3.6.1 HARVEY'S REPRESENTATIONS AND WARRANTIES.
Harvey's represents and warrants that the following are true and
correct as of the date this Agreement is entered into:
(a) ORGANIZATION AND GOOD STANDING.
Harvey's is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, with all requisite power and
authority to carry on the business in which it is engaged, to own the
properties it owns and to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.
(b) AUTHORIZATION AND VALIDITY. The execution, delivery
and performance by Harvey's of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby, have been duly authorized by the governing board of Harvey's.
(c) NO VIOLATION. Neither the execution and performance of
this Agreement, or the other agreements contemplated hereby, nor the
transactions contemplated herein, will (i) conflict with, or result in a
breach of the terms of, or constitute a default under any agreement,
contract, commitment, letter of intent, indenture or other instrument under
which Harvey's is bound, or (ii) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public body
having jurisdiction over the properties or assets of Harvey's.
3.6.2 LILY POND'S AND MORTON'S REPRESENTATIONS AND WARRANTIES.
Lily Pond and Morton represent and warrant that the following are true and
correct as of the date this Agreement is entered into:
(a) ORGANIZATION AND GOOD STANDING. Lily Pond is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada, with all requisite power and authority to carry
on the business in which it is engaged, to own the properties it owns and to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
(b) AUTHORIZATION AND VALIDITY. The execution, delivery
and performance by Lily Pond and Morton of this Agreement and the other
agreements contemplated hereby, and the consummation of the transactions
contemplated hereby, have been
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duly authorized by the governing board of Lily Pond and by Morton.
(c) NO VIOLATION. Neither the execution and performance of
this Agreement, or the other agreements contemplated hereby, nor the
transactions contemplated herein, will (i) conflict with, or result in a
breach of the terms of, or consitute a default under any agreement, contract,
commitment, letter of intent, indenture or other instrument under which Lily
Pond or Morton are bound, or (ii) violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public body
having jurisdiction over Lily Pond or Morton or the properties or assets of
Lily Pond or Morton.
3.6.3 SCHEDULES AND INFORMATION PROVIDED. Lily Pond, Morton, and
Harvey's represent and warrant that as of the date of execution of this
Agreement, each has provided the information as required in subsections (a)
through (e) below, and as attached hereto as Exhibits "F" to "J," and that
such information as provided is true and accurate to the best of the
knowledge of the party furnishing such information.
(a) Each material contract or agreement, whether written or
oral between either Stockholder and any third party, relating to the
Property, Hotel Brand and the Project, including those entered into prior to
this Agreement.
(b) Each permit, license or other evidence of approval in
connection with the Project, or any predecessor.
(c) Each claim or proceeding now pending, or to the
knowledge of either Stockholder, threatened against, or in any way involving
the Project, or any predecessor, the Hotel Brand or the Property.
(d) All correspondence with governmental authorities
concerning compliance with applicable laws and regulations including toxic or
hazardous substance surveys of the Property.
(e) Such other information concerning the financial and
business condition of each of the Stockholders, as the Stockholders or their
representatives may reasonably request.
3.7 MODIFICATION OF EXISTING PLANS. Harvey's and Lily Pond shall use
their best efforts to secure the rights for the Company to acquire a 2.2 acre
(more or less) portion of vacant land contiguous to the Property for the
purpose of expanding the Project footprint, on terms mutually acceptable to
Harvey's and Lily Pond. The Directors, by unanimous consent, shall make such
changes to existing plans to improve the facility layout and enhance
operational effectiveness, in the event the 2.2. acre parcel is obtained.
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3.8 EQUITY PARTICIPATION. It is the intention of the Stockholders that
the management personnel and other representatives of the Stockholders be
given certain incentives to promote the success of the Project, including
equity participation interests in the Company or in any successor corporation
of the Company. If approved, such interests shall be distributed to the
representatives of each Stockholder as unanimously agreed upon by the
Directors acting in their discretion at a future date, but in no event later
than an initial public offering of stock in the Company (or any successor
corporation). The equity interest shall be divided among all Stockholder(s)
based upon their total Percentage Interest.
3.9 CONTRACTS WITH RELATED PARTIES. Except for those agreements
described herein, neither the Project Manager, nor the Company shall
knowingly enter into any agreement or other arrangement for the furnishing to
or by the Company of goods or services with any Affiliates of either
Stockholder unless such agreement or arrangement has been fully approved by
the Stockholder after the relationship or affiliation has been fully
disclosed in writing. Further, unless unanimously agreed otherwise by the
Stockholders, neither the Company nor Harvey's shall be permitted to do
business directly or indirectly with Rank, P.L.C., or Planet Hollywood.
3.10 OTHER BUSINESS ACTIVITIES. Each of the Stockholders understands
that the other Stockholder(s) or its Affiliates may be interested, directly
or indirectly, in various other businesses or undertakings not included in
the business of the Company. The Stockholders hereby agree that the creation
of the Company shall not affect their rights (or the rights of their
Affiliates) to have such other interests and activities and to receive
profits or compensation therefrom. Each Stockholder waives any rights to
share or participate in such other existing interests or activities of the
other Stockholder(s) or its Affiliates, except as provided for herein. The
Stockholders may engage in or possess any interest in any other business
venture of any nature or description, independently or with others, and
neither the Company nor the other Stockholders shall have any right by virtue
of this Agreement in and to such business venture of the income or profits
derived therefrom, with the exception of the rights of Harvey's to
participate in future projects as described in Section 3.3.
3.11 TRANSFER TO TRUST. In the event the Company and Harvey's (as
Project Manager) receive all necessary licenses and permits to commence
Project operations before Morton or Lily Pond qualify for final Nevada Gaming
Authorities' approval, the Stockholders agree to set aside in trust or by
such other arrangement as may be mutually acceptable to the Stockholders and
the Nevada Gaming Authorities any and all rights and interests the
Stockholders may have in the Company and the Project until all necessary
licenses and permits have been issued.
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ARTICLE IV
SALE, TRANSFER OR MORTGAGE
4.1 RESTRICTION ON TRANSFER. Except as expressly permitted in Section
4.2 below, no Stockholder (the "Transferring Stockholder") shall sell,
assign, transfer, mortgage, charge or otherwise encumber, or suffer any third
party to sell, assign, transfer, mortgage, charge or otherwise encumber, or
contract to do or permit any of the foregoing, whether voluntarily or by
operation of law (herein sometimes collectively called a "transfer"), any
part or all of its Shares.
4.2 PERMITTED TRANSFERS. Notwithstanding the restrictions set forth in
Section 4.1 above, the following transfers shall be permitted, subject to the
provisions of this Article IV:
(a) Transfer of a Stockholder's Class A Stock or Class B Stock to
the Company.
(b) Transfer of Class A Stock or Class B Stock between Harvey's,
Morton or Lily Pond.
(c) Transfer by Lily Pond of its Shares to (i) Morton's spouse,
lineal descendants or his spouse's lineal descendants; (ii) to an affiliate
of Morton which Morton controls directly or indirectly by virtue of having
ownership of fifty percent (50%) or more of voting equity interests in the
entity, partnership interests in a partnership, general partnership interests
in a limited partnership, or voting or economic interests of any other type
of entity; (iii) Morton's personal representative appointed in the event of
his disability; or (iv) to a revocable living trust for the benefit of Morton
and/or any of the parties described in (i) or (ii) above to the extent
allowed by law. The trustee of any such trust shall hold an equity interest
of the Company subject to the provisions of this Agreement. In the event of a
transfer or transfers to any such party or parties set forth above, the
transferee(s) shall be subject to the identical rights and restrictions of
transfer as Morton, as if Morton has retained such interest;
(d) Except as provided above, the transfer of the Class A Stock by
Lily Pond or Harvey's to a third party, provided that Lily Pond or Harvey's
promptly notifies the other in writing of the terms of such transfer, and the
non-transferring party shall have the right and option, exercisable within
thirty (30) days after receipt of such written notification to send written
notice to the other that it intends to purchase the interest to be conveyed
by the transferring party on the same terms and conditions offered by the
thirty party transferee. The written notification of the transferring party
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to the non-transferring party shall include (i) the name, address, and
taxpayer identification number of the proposed transferee; (ii) the amount
of Class A Stock to be transferred; (iii) the amount, type, and terms of
consideration for such transfer (iv) the qualifications and licensing of the
proposed transferee, if any; and (v) a copy of a true and correct offer,
signed by the proposed transferee. Notwithstanding the foregoing to the
contrary, such right of first refusal of Harvey's shall terminate at such
time as Harvey's disposes of its Shares;
(e) Transfer by Harvey's of its Shares to an affiliate, which
Harvey's controls directly or indirectly by virtue of having ownership of
fifty percent (50%) or more of voting equity interests in the entity,
partnership interests in a partnership, general partnership interests in a
limited partnership, or voting or economic interests of any other type of
entity; and
(f) Transfer of Class B Stock to any third party, whether or not
an original or existing Stockholder of the Company.
4.3 RESTRAINING ORDER. In the event that any Stockholder shall at any
time transfer or attempt to transfer its Shares in violation of the
provisions of this Agreement and any rights hereby granted, then any other
Stockholder shall, in addition to all rights and remedies at law and
in equity, be entitled to a decree or order restraining and enjoining such
transfer and the offending Stockholder shall not plead in defense thereto
that there would be an adequate remedy at law; it being hereby expressly
acknowledged and agreed that damages at law will be an inadequate remedy for
a breach or threatened breach of the violation of the provisions concerning
transfer set forth in this Agreement.
4.4 GAMING COMMISSION APPROVAL. Notwithstanding any other provision of
this Article IV, no sale, assignment, transfer, pledge or other disposition
of any interest in the Company shall be permitted, if the Company holds a
Nevada State gaming license, unless approved in advance by the applicable
Nevada Gaming Authorities. Every transferee of Shares must be individually
licensed as required by the Nevada Gaming Authorities, as long as the Company
is subject to its jurisdiction. Furthermore, all persons required by
applicable gaming law or regulations who are required to be licensed or found
suitable for licensing shall timely submit all applications and other
information required for such licensing or approval.
4.5 PUBLIC OFFERINGS. Notwithstanding anything contained herein to the
contrary, any Stockholder may, at any time, engage in a public offering of
equity ownership of such entity which holds the Shares or other transfer of
equity ownership in the Stockholders without triggering a default under this
Agreement or the application of this Article IV regarding restrictions on
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transfer subject, in all events, to compliance with Section 4.4 above. Any
such transfer may be made without the consent of any other Stockholder. If
Harvey's engages in a public offering, Lily Pond shall have the right to
review any "Hard Rock" material used by Harvey's in its prospectus, "road
show," or annual securities reporting obligations. The determination as to
whether the Company may make a public offering of equity ownership shall be
made in the sole discretion of Lily Pond and, in the event Lily Pond decides
to take the Company public, Harvey's shall support such decision and do all
things reasonably necessary to effectuate a public offering including without
limitation, an amendment of the Articles of Incorporation deleting the
preemptive rights.
4.6 TERMINATION OF OBLIGATIONS. As of the effective date of any
transfer not prohibited hereunder by a Stockholder of its of its Shares in
the Company, such Stockholder's rights and obligations hereunder shall
terminate except as to items accrued as of such date and except as to any
indemnity obligations of such Stockholder attributable to acts or events
occurring prior to such date. Thereupon, except as limited by the preceding
sentence, this Agreement shall terminate as to the transferring Stockholder,
but shall remain in effect as to the remaining Stockholders, provided there
are at least two (2) remaining Stockholders.
4.7 AGREEMENTS WITH TRANSFEREES. In the event that pursuant to the
provisions of this Article IV, any Stockholder (the "Transferor") shall
transfer its Shares to any person or entity other than any remaining
Stockholder ("Transferee"), no such transfer shall be made or shall be
effective to make such Transferee a Stockholder or entitle such Stockholder
to any benefits or rights hereunder until the proposed Transferee agrees in
writing to assume and be bound by all the obligations of the Transferor and
be subject to all the restrictions to which the Transferor is subject under
the terms of this Agreement, the Management Agreement, Supervisory Agreement
and any further agreement with respect to the Project contemplated by this
Agreement to which the Transferor is then subject or is then required to be a
party. In the event a Stockholder's Shares are transferred by operation of
law and the Transferee fails to sign such a writing within ninety (90) days
of the date it is determined such transfer has been made, such failure shall
entitle the other Stockholder(s) (i) to treat such failure as an Event of
Default under this Agreement, or (ii) if the Stockholder(s) elects not to
treat such failure to sign as an Event of Default hereunder, nonetheless to
invoke the dissolution procedures as set forth in Article VII hereof or the
appraisal as set forth in Article VIII hereof, and in such event, such
Transferee shall be treated in the same manner as a "Defaulting Stockholder"
under Section 7.3. Except as provided in Section 4.2 above, in no event may a
Transferee become a Stockholder, or have the right to participate in the
business
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and affairs of the Company, except with the unanimous written consent of the
remaining Stockholder(s)
ARTICLE V
ADDITIONAL CAPITAL CONTRIBUTIONS AND DIVIDENDS
5.1 ADDITIONAL CAPITAL CONTRIBUTIONS.
5.1.1 GENERAL. To the extent the Company requires funds in
addition to the capital contributions provided for above in Section 2.1, and
any loan or other third party financing unanimously approved by the Directors
pursuant to Section 2.9, the Stockholder's agree to make Additional Capital
Contributions from time to time in such amounts as are sufficient to enable
the Company to carry out the purposes of this Agreement upon the unanimous
consent of the Stockholders, in return for the issuance of additional Class B
Stock by the Company to the contributing Stockholders. Any such Additional
Capital Contributions shall be made in proportion to the total Percentage
Interest in the Company unless agreed otherwise by the unanimous consent of
the Stockholders.
5.1.2 NOTICE BY COMPANY. If Additional Capital Contributions are
required to be made pursuant to this Section 5.1, the Company shall give
notice to each Stockholder, in the manner provided in Section 9.2. Any such
notice shall specify the amount and purpose of such Additional Capital
Contributions. The Stockholders shall, within thirty (30) days after receipt
of such notice from the Company, deposit the Additional Capital Contribution
required by such notice in the Company's bank account(s).
5.1.3 CONTRIBUTION LOANS.
(a) In the event any Stockholder fails to make an Additional
Capital Contribution within the time specified, each other Stockholder shall
have the right, but shall have no obligation whatsoever, to advance directly
to the Company the funds required as a loan to the other Stockholder
("Contribution Loan").
(b) In the event such other Stockholder(s) does not elect to
advance the full amount of the additional funds required as a Contribution
Loan, then such other Stockholder(s) shall be entitled to treat the failure
to make the Additional Capital Contribution as an Event of Default, or,
alternatively, may pursue the remedies as set forth in subsection 5.1.4.
5.1.4 REPAYMENT THROUGH DISTRIBUTIONS. In the event a Stockholder
elect to make a Contribution Loan, then the Contribution Loan shall bear
interest at a rate equal to the grater of (a) the prime rate in effect from
time to time at
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First Interstate Bank of Nevada, N.A., plus three (3) percentage points, or
(b) eighteen percent (18%) and, except as set forth in subsection 5.1.5,
shall be repaid out of any subsequent distributions made pursuant to this
Agreement to which the noncontributing Stockholder would otherwise be
entitled, which amounts shall be applied first to interest and then to
principal, until the Contribution Loan is paid in full. Repayment of the
Contribution Loan shall be secured by the noncontributing Stockholder's
Shares, and each noncontributing Stockholder hereby grants a security
interest in its Shares to the Stockholder(s) making the Contribution Loan and
appoints such Stockholder(s), and any of its agents, officers or employees,
as its attorneys-in-fact with full power and authority to prepare and execute
any documents, instruments and agreements, including but not limited to, any
Note evidencing the Contribution Loan, and such Uniform Commercial Code
financing and continuation statements, and other security instruments as may
be appropriate to perfect and continue such security interest.
5.1.5 REMEDIES. In the event any Contribution Loan has not been
repaid in full within ninety (90) days after the date the Contribution Loan
is made, then, in addition to any other rights or remedies available to the
Stockholder at law or in equity, at any time thereafter, the Stockholder may
elect to proceed under subparagraph (a) or (b) below.
(a) Upon thirty (30) days' prior written notice to the
noncontributing Stockholder, the Stockholder may elect to treat the
outstanding principal balance of the Contribution Loan (excluding accrued
interest) as a contribution to capital, and the Class B Stock Percentage
Interest of each Stockholder shall thereupon be recalculated (except that any
such recalculation shall not otherwise impair or affect the Class A Stock
Percentage Interest of each Stockholder which shall remain unchanged) as of
the effective date of the notice of such election (the "Computation Date"),
as follows:
(i) The numerator of each Stockholder's Class B Stock
Percentage interest shall equal the sum of the fair market value of the at
Stockholder's Shares as determined pursuant to subsection 5.1.5(c) and the
amount, if any, of that Stockholder's Additional Capital Contribution; and
(ii) the denominator of each Stockholder's Class B Stock
Percentage Interest shall equal the sum of all of the amounts determined for
each Stockholder pursuant to subsection 5.1.5(c) and all Additional Capital
Contributions;
(b) The Stockholders may elect to make written demand upon
the noncontributing Stockholder for payment in full of the Contribution Loan,
including accrued interest attributable to the Contribution Loan. Upon
failure to pay the
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Contribution Loan and interest in full upon demand, the Stockholder may elect
(i) to treat such failure to pay as an Event of Default as provided in
Section 7.1 hereof, or (ii) to enforce its security interest in the
noncontributing Stockholder's Class B Stock.
(c) the fair market value of each Stockholder's Class B Stock
for purposes of subsection 5.1.5 (a) immediately prior to the date the
Additional Capital Contribution is made to the Company, shall be equal to (i)
the Net Fair Market Value of the Company as of the close of the calendar
month in which the Additional Capital Contribution occurred, multiplied by
(ii) such Stockholder's Class B Stock Percentage Interest. For purposes of
Section 8.1, to arrive at the value of such assets, the Stockholders shall
attempt in good faith to reach agreement as to the value of such assets. If,
within a period of fifty (50) days after the date of the Additional Capital
Contribution (or such later date as is agreed to between the Stockholders) an
agreement has not been reached with respect to the value of such assets, then
the Stockholders shall select, and pay for, an appraisal of such assets,
pursuant to the provisions set forth in Section 8.2, and the value of such
assets shall be based upon such appraisal.
(d) In exercising its rights under this subsection 5.1.5, the
Stockholder shall be entitled to transfer to or encumber in favor of a third
party, without complying with the provisions of Article IV or other
provisions of this Agreement, a portion of such Stockholder's Class B Stock
in the Company in order to finance the Contribution Loan, but such third
party shall have no right to become admitted as a Stockholder with voting
rights under any circumstances.
(e) Until the Stockholder has elected to proceed under
subparagraph (a) or (b) above or has elected to pursue any other remedy
available to it at law or in equity, the Contribution Loan shall remain in
place and shall bear interest and be repaid as provided in subsections 5.1.4
above. The rights of the Stockholders under subparagraph (a) or (b) above
shall be mutually exclusive, and by electing to proceed under subparagraph
(a) or (b) above a Stockholder shall waive its rights to proceed under the
subparagraph not so elected as to that particular Contribution Loan.
5.1.6 NO THIRD PARTY RIGHTS. The rights of the Company or the
Stockholders to require any contributions or payments under the terms of this
Agreement shall not be construed as conferring any rights or benefits to or
upon any party not a party to this Agreement, including, but not limited to,
any holder of an obligation secured by a mortgage, deed of trust, security
interest or other lien or encumbrance upon or affecting the Company or any
interest of a Stockholder therein or the Property or Improvements or the
Project, or any part thereof or interest therein.
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5.2 INTEREST ON CAPITAL.
5.2.1 No Stockholder shall be entitled to interest on its
capital contributions, except for those Contribution Loans as described under
subsection 5.1.3.
5.2.2 Except as provided in subsection 5.1.3 with respect to
the payment of interest on a Contribution Loan, interest earned on Company
funds shall inure solely to the benefit of the Company, and no other interest
shall be paid upon any contributions or advances to the capital of the
Company nor upon any undistributed or reinvested income or profits of the
Company.
5.3 DIVIDENDS. The Board of Directors may, from time to time in their
sole discretion make a distribution of dividends to the Stockholders.
ARTICLE VI
ACCOUNTING AND TAX PREPARATION
6.1 BOOKS AND RECORDS.
6.1.1 GENERAL. The Company shall maintain the books and records
of the Company, including the information and records required pursuant to
N.R.S. Chapter 78 and the gaming statutes and regulations, or any amended or
successor regulations, at the principal place of business of the Company,
including, without limitation, the following:
(a) A current list of the full name and last known
business, residence or mailing address of each Stockholder, both past and
present;
(b) A copy of the filed Articles of Incorporation and
all amendments thereto, together with executed copies of any powers of
attorney pursuant to which any document has been executed;
(c) Copies of the Company's federal, state and local
income tax returns and reports, if any, for the three (3) most recent years;
(d) Copies of any currently effective written operating
agreements and of any financial statements of the Company for the three (3)
most recent years; and
(e) Other books and records normally kept in the
ordinary course of business.
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6.1.2 ACCOUNTING BASIS. The Company shall have its books of
account and other financial and accounting records maintained on the accrual
basis.
6.1.3 INFORMATION TO STOCKHOLDER. Each Stockholder shall be
entitled to any additional information necessary for the Stockholder to
adjust its financial basis statement to a tax basis as the Stockholder's
individual needs may dictate.
6.2 RIGHTS OF INSPECTION. Each Stockholder, or its authorized
representative, shall have the right to inspect, examine and copy, at its own
expenses and during normal business hours, the books, records and files of
the Company. All such books, records and files, including that information
described in Section 6.1, shall be available for inspection by the applicable
Nevada Gaming Authorities, and their authorized agents, at all reasonable
times and without notice.
6.3 FISCAL YEAR. The fiscal year of the Company shall end on November
30 of each year.
6.4 AUDIT. The Company shall engage as independent auditors for the
Company a nationally recognized Big 6 accounting firm of independent
certified public accountants, with expertise in gaming. Such independent
auditors shall be determined in the sole discretion of Lily Pond and each
Stockholder shall vote their Shares accordingly. The independent auditors
shall at the end of each fiscal year (a) audit the records and accounts of
the Company, (b) render their opinion on the statement of financial condition
of the Company as of the end of each fiscal year and of the results of its
operations, the changes in its financial, condition and its income and new
cash flow for each fiscal year, (c) render their opinion on the annual net
cash flow computations, and (d) prepare and file all necessary reports as
required by the Nevada Gaming Authorities.
6.5 BANK ACCOUNTS. Funds of the Company shall be deposited in an
account or accounts of a type, in form and name and in a bank or banks
approved by the Board of Directors. Withdrawals from bank accounts shall be
made by the Project Manager and such parties as may be approved by the
Stockholders.
6.6 OTHER ACCOUNTING DECISIONS. All accounting decisions for the
Company (other than those specifically provided for in this Agreement or the
Management Agreement) shall be approved by the Board of Directors.
6.7 PREPARATION OF TAX RETURNS. Federal, state and local income tax
returns of the Company shall be prepared under the direction of the Project
Manager, reviewed by the independent auditors, and approved by the Board of
Directors. Copies of all tax returns of the Company shall be furnished for
review and approval at least ten (10) days prior to the statutory date for
filing, including extensions thereof, if any. If the Board of
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Directors shall fail to approve any such return, applications for extension
of time to file shall be timely filed by the Company.
6.8 TAX DECISIONS NOT SPECIFIED. Tax decisions and elections for the
Company not provided for herein must be approved by the Board of Directors.
ARTICLE VII
DEFAULT AND DISSOLUTION
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an event of default ("Event of Default") hereunder on the
part of the Stockholder ("Defaulting Stockholder") with respect to whom such
event occurs if within thirty (30) days following notice of such default from
the other Stockholder (ten (10) days if the default is due solely to the
nonpayment of monies), the Defaulting Stockholder fails to pay such monies,
or in the case of non-monetary defaults, fails to commence substantial
efforts to cure such default or thereafter fails within a reasonable time to
prosecute to completion with diligence and continuity the curing of such
default for a period not to exceed ninety (90) days; PROVIDED, HOWEVER, that
the occurrence of any of the events described in subparagraphs (b) and (c)
below shall constitute an Event of Default immediately upon such occurrence
without any requirement of notice or passage of time except as specifically
set forth in any such subparagraph.
(a) The failure by a Stockholder to make any Additional
Capital Contribution to the Company as required pursuant to the provisions of
Section 5.1 unless any other Stockholder(s) elects to make a Contribution
Loan.
(b) The violation by a Stockholder of any of the
restrictions set forth in Article IV of this Agreement regarding the right of
a Stockholder to transfer its interest in the Company;
(c) Notification of the Company by the Nevada Gaming
Commission that a Stockholder is unsuitable to hold an interest in the
Company or unable to perform the duties required of them in the Management
Agreement;
(d) Default in performance of or failure to comply with
any other agreements, obligations or undertakings of a Stockholder herein
contained; and
(e) Any other matter specifically deemed an Event of
Default hereunder.
7.2 CAUSES OF DISSOLUTION. The Company shall be dissolved in the event
all of the Stockholders mutually agree in writing to dissolve the Company.
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7.3 ELECTION OF NON-DEFAULTING STOCKHOLDER.
7.3.1 PURCHASE OF INTEREST. Upon the occurrence of an Event
of Default by a Stockholder ("Defaulting Stockholder"), the non-Defaulting
Stockholder ("Non-Defaulting Stockholder") shall have the right to acquire
the Shares of the Defaulting Stockholder for cash, except as provided in
subsection 7.3.2 hereof, at a price determined pursuant to the appraisal
procedure set forth in Article VIII. In furtherance of such right, the
Non-Defaulting Stockholder may notify the Defaulting Stockholder at any time
following an Event of Default of its election to institute the appraisal
procedure set forth in Article VIII. Within fifteen (15) days of receipt of
notice of determination of the net fair market value of the Company, the
Non-Defaulting Stockholder may notify the Defaulting Stockholder of its
election to purchase the interest of the Defaulting stockholder.
7.3.2 CLOSING. Closing of the purchase shall take place as
agreed to between the parties; PROVIDED, HOWEVER, that upon the closing of
such purchase the Non-Defaulting Stockholder may elect to offset against the
purchase price the amount of any loss, damage or injury, the amount of which
has been established by a final non-appealable judgment, caused to it by the
default of the Defaulting Stockholder.
7.3.3 UNSUITABILITY. Notwithstanding any other provision of
this Section 7.3, if the Event of Default occurs pursuant to subsection
7.1(c), then the Company, within ten (10) days within which it receives
notice from the Nevada Gaming Authorities as to the unsuitability of a
Stockholder, shall return to that Stockholder, in cash, the amount of that
Stockholder's capital contribution, [which in the case of cash contributions
will be the amount of such contribution, and in the case of a property
contribution will be the fair market value of such property at the time of
contribution]. Beginning on the date upon which the Company is served with
notice by the Navada Gaming Authorities of a determination of the
unsuitability of the Stockholder, it shall be unlawful for the unsuitable
Stockholder:
(a) To receive any share of the dividends or other
distributions of profits of the Company or any payments upon dissolution of
the Company;
(b) To exercise any voting rights conferred by the Class A
Stock;
(c) To participate in the management of the Company; or
(d) To receive any remuneration in any form from the Company
for services rendered or otherwise.
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7.4 DISPOSITION OF DOCUMENTS AND RECORDS. All documents and
records of the Company, including, without limitation, all financial records,
vouchers, canceled checks and bank statements, shall be delivered to Harvey's
upon dissolution of the Company, with a copy of all documents to Lily Pond
upon Lily Pond's request and at Lily Pond's expense. Unless otherwise
approved by any other Stockholder, Harvey's shall retain such documents and
records for a period of not less than seven (7) years at its principal place
of business, and shall make such documents and records available during
normal business hours to the other Stockholders for inspection and copying at
the other Stockholder's cost and expense.
ARTICLE VIII
APPRAISAL
8.1 GENERAL. Other than as provided for specifically in this
Agreement, whenever this Agreement expressly provides for the valuation of an
interest in the Company to be purchased or sold, the value of such interest
in the Company shall be determined as follows: The parties shall first
attempt to agree upon the "net fair market value" of the Company. The "net
fair market value" of the Company shall mean the cash price which a
sophisticated purchaser would pay on the effective date of the appraisal for
all tangible and intangible assets of the Company in excess of the financing
and any other liabilities then encumbering the Company assets. Such
valuation is to be made on the assumption that such assets of the Company are
subject to any agreements, including, without limitation, leases, management,
supervisory and service agreements then in effect, except this Agreement. A
sophisticated purchaser shall be one who would take into account the nature,
extent, maturity date, and other terms of the liabilities of the Company,
whether fixed or contingent, including the favorable or unfavorable nature of
any financing then encumbering the Project or other Company assets, and the
prospects that the income from the Project would be sufficient to satisfy
such liabilities when due, excluding any liability under any financing
already taken into account. The "net fair market value" of a Stockholder's
Shares shall mean the amount such Stockholder would receive if the Company
were sold for such net fair market value and the proceeds distributed in
liquidation in accordance with N.R.S. Chapter 78.
8.2 APPRAISAL PROCEDURE. In the event the Stockholders are unable to
mutually agree upon the net fair market value of the Company within thirty
(30) days of the date the appraisal procedure of this Article VIII is
instituted as provided in this Agreement, the Stockholders shall then attempt
to agree upon the appointment of an appraiser who shall be a member of the
American Institute of Real Estate Appraisers within seventy-five (75) days
of the date the appraisal procedure is instituted as provided in this
Agreement, then a petition may be made by any
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Stockholder to the presiding judge of the Eighth Judicial District, County of
Clark, State of Nevada, for such selection. Each Stockholder shall have the
right to submit the names of two (2) appraisers so qualified and the judge
shall select the appraiser from the names so submitted. The appraiser so
selected shall furnish the Stockholders and the certified public accountants
for the Company with a written appraisal within ninety (90) days of his or
her selection, setting forth his determination of the net fair market value
of the Project and other tangible and intangible assets owned by the Company
as of the date of the application to the District Court. Such appraisal
shall assume that the Project shall be the highest and best use of the
Property. Determination of the appraiser shall be final and binding on the
Stockholders. The cost of the appraisal shall be an expense of the Company.
ARTICLE IX
GENERAL PROVISIONS
9.1 COMPLETE AGREEMENT; AMENDMENT. This Agreement constitutes the
entire agreement between the Lily Pond, Morton and Harvey's and supersedes
all agreements, letters of intent, representations, warranties, statements,
promises and understandings, whether oral or written, with respect to the
subject matter hereof, and neither party hereto shall be bound by nor charged
with any oral or written agreements, representations, warranties, statements,
promises or understandings not specifically set forth in this Agreement, the
exhibits hereto, or any other agreement referred to herein. This Agreement
may not be amended, altered or modified except by a writing signed and
approved by both the Lily Pond and Harvey's.
9.2 NOTICES.
9.2.1 ADDRESSES. All notices under this Agreement shall be
in writing and shall be delivered by personal service, reputable overnight
courier, or by certified or registered mail, postage prepaid, return receipt
requested, to the Stockholders at the addresses herein set forth and to the
Company at its principal place of business.
The addresses for notices are as follows:
HARVEY'S: LILY POND:
HARVEY'S WAGON WHEEL, INC. LILY POND INVESTMENTS, INC.
P.O. Box 128 a Nevada corporation
Highway 50 510 North Robertson Boulevard
Stateline, Nevada 89449 Los Angeles, California 90048
Attention: President/
Chief Executive Officer
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with copies to: with copies to:
SCARPELLO & ALLING GORDON & SILVER, LTD.
P.O. Box 3390 3800 Howard Hughes Parkway
276 Kingsbury Grade Fourteenth Floor
Suite 2000 Las Vegas, Nevada 89109
Stateline, Nevada 89449-3390
and to:
Jeffrey T. Leeds
LEEDS GROUP, INC.
230 Park Avenue, Suite 1440
New York, New York 10169
9.2.2 NOTICE EFFECTIVE DATE. All notices, demands and requests
shall be effective upon being deposited with any reputable overnight courier
or in the United States mail. However, the time period in which a response to
any such notice, demand or request must be given shall commence to run from
the date of receipt of the return receipt of the notice, demand or request by
the addressee thereof. Rejection or other refusal to accept or the inability
to deliver because of changed address of which no notice was given as
provided in subsection 9.2.3 shall be deemed to be receipt of the notice,
demand or request sent.
9.2.3 CHANGES. By giving to the other parties at least thirty
(30) day's written notice thereof, the parties hereto and their respective
permitted successors and assigns shall have the right from time to time and
at any time during the term of this Agreement to change of their respective
addresses for notice and each shall have the right to specify as its address
for notices any other address within the United States of America.
9.3 ATTORNEY FEES. Should any litigation be commenced between the
parties hereto or their representatives or should any party institute any
proceeding in a bankruptcy or similar court which has jurisdiction over any
other party hereto or any or all of its property or assets concerning any
provision of this Agreement or the rights and duties of any person or entity
in relation thereto, the party or parties prevailing in such litigation shall
be entitled, in addition to such other relief as may be granted, to a
reasonable sum as and for its or their attorney fees and court costs in such
litigation which shall be determined by the court in such litigation or in a
separate action brought for that purpose.
9.4 VALIDITY. In the event that any provision of this Agreement shall
be held to be invalid or unenforceable, the same shall not affect in any
respect whatsoever the validity or enforceability of the remainder of this
Agreement.
9.5 SURVIVAL OF RIGHTS. Except as provided herein to the contrary,
this Agreement shall be binding upon and inure to the benefit of the parties
signatory hereto, their respective heirs,
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executors, legal representatives and permitted successors and assigns.
9.6 GOVERNING LAW AND VENUE. This Agreement has been entered into in
the State of Nevada and all questions with respect to this Agreement and the
rights of the parties hereto shall be governed by the laws of the State of
Nevada. The parties agree that venue for any action related to this Agreement
shall be in any state or federal court in Clark County, Nevada having
jurisdiction.
9.7 WAIVER. No consent or waiver, express or implied, by a
Stockholder to or of any breach or default by the other Stockholder in the
performance by such other Stockholder of its obligations hereunder shall be
deemed or construed to be a consent or waiver to or of any other breach or
default in the performance by such other Stockholder of the same or any other
obligations of such other Stockholder hereunder. Failure on the part of a
Stockholder to complain of any act or failure to act of the other Stockholder
or to declare the other Stockholder in default, irrespective of how long such
failure continues, shall not constitute a waiver by such Stockholder of its
rights hereunder. The giving of consent by a Stockholder in any one instance
shall not limit or waive the necessity to obtain such consent in any future
instance.
9.8 REMEDIES IN EQUITY. The rights and remedies of either of the
Stockholders hereunder shall not be mutually exclusive, i.e., the exercise of
one or more of the provisions hereof shall not preclude the exercise of any
other provisions hereof. Each of the Stockholders confirms that damages at
law will be an inadequate remedy for a breach or threatened breach of this
Agreement and agree that, in the event of a breach or threatened breach of
any provision hereof, the respective rights and obligations hereunder shall
be enforceable by specific performance, injunction or other equitable remedy,
but nothing herein contained is intended to, nor shall it, limit or affect
any rights at law or by statute or otherwise of any party aggrieved as
against the other for a breach or threatened breach of any provision hereof,
it being the intention of this Section 9.8 to make clear the agreement of the
Stockholders that the respective rights and obligations of the Stockholders
hereunder shall be enforceable in equity as well as at law or otherwise.
9.9 TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine, feminine, or neuter gender, shall include all
other genders; and the singular shall include the plural and vice versa.
Titles of Articles, Sections and Subsections are for convenience only, and
neither limit nor amplify the provisions of this Agreement itself. The use
herein of the word "including," when following any general statement, term or
matter, shall not be construed to limit such statement, term or matter to the
specific items or matters set forth immediately following such word or to
similar items or
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matters, whether or not non-limiting language (such as "without limitation,"
or "but not limited to," or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items or matters
that could reasonably fall within the broadest possible scope of such general
statement, term or matter.
9.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which shall constitute one and the same agreement.
9.11 SURVIVAL OF INDEMNITY OBLIGATIONS, EXCLUSIVE RIGHTS, AND
REPRESENTATIONS AND WARRANTIES. Any and all indemnity obligations of either
party hereto shall survive any termination of the Company or this Agreement.
The representations and warranties as set forth in Section 3.6 shall survive
until all applicable statutes of limitation have expired.
9.12 FEES AND COMMISSIONS. Each Stockholder hereby represents and
warrants that as of the date of this Agreement there are no known claims for
brokerage or other commissions or finder's or other similar fees in
connection with the transactions covered by this Agreement insofar as such
claims shall be based on actions, arrangements or agreements taken or made by
or on its behalf, and each Stockholder hereby agrees to indemnify and hold
harmless the other Stockholder from and against any liabilities, costs,
damages, and expenses from any party making any such claims through such
Stockholder.
9.13 FURTHER ASSURANCES. Each party hereto agrees to do all acts and
things and to make, execute and deliver such written instruments, as shall
from time to time be reasonably required to carry out the terms and
provisions of this Agreement.
9.14 REIMBURSEMENT OF EXPENSES. Lily Pond and Harvey's shall each pay
all of their own costs, including attorney fees, in connection with the
formation of the Company and legal representation in connection with the
transactions contemplated by this Agreement. Notwithstanding the above, the
Company reserves the right to reimburse the Stockholders for expenses
incurred for the benefit of the Company, in the discretion of the Company as
determined by the Directors. This Agreement shall not be deemed to create a
general partnership between the Stockholders with respect to any activities.
9.15 SEVERABILITY. The provisions of this Agreement are severable. If
any one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any
partially unenforceable provision, to the extent enforceable, shall,
nevertheless, be binding and enforceable.
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<PAGE>
9.16 SPOUSAL CONSENTS. Any natural person to whose benefit this
Agreement may now or hereafter inure shall obtain the acknowledgment and
consent of his spouse, whether such party is now married or marries or
remarries hereafter, in the form attached hereto following the signature page.
9.17 RESTRICTIONS TO RUN WITH SHARES. The covenants, conditions and
restrictions herein shall be and constitute covenants, conditions and
restrictions running with all Shares now or hereafter owned by any
stockholder at any time, directly or indirectly, whether the same have been
issued or not, and none of the Shares shall be sold, assigned, transferred,
encumbered, pledged, Bypothecated, given as a gift or otherwise disposed of
or alienated in any way by any person except in accordance with this
Agreement. The parties agree that stop order instructions prohibiting
transfer of certificates for Shares will be issued and filed by the Company
on its records or with the Company's transfer agent to prevent any disposition
otherwise than strictly in accordance with this Agreement and agree to cause
the officers of the Company to refuse to record on the books of the Company
any assignments or transfers made or attempted to be made except in
accordance with this Agreement and to cause said officers to refuse to cancel
certificates, or issue or deliver new certificates therefor, where the
purchaser, assignee, pledgee, donee or other transferee has acquired
certificates or any shares represented thereby otherwise strictly in
accordance with this Agreement. Any person who acquires any Shares or any
interest therein shall hold such Shares or interest subject to this Agreement
and shall be deemed to be a Stockholder for all purposes of this Agreement.
9.18 ADDITIONAL STOCKHOLDERS. If the Company shall at a future time
desire to issue or reissue Shares to any person or firm (including any
Stockholder's), all such issues shall become parties to this Agreement and
their spouses shall acknowledge and consent thereto as provided in Section
9.16), with respect to such Shares by executing a writing agreeing to be
bound hereby.
9.19 TERMINATION. This Agreement shall terminate on the earliest of (i)
the written agreement of the Company and of all Shareholders owning voting
stock of the Company, or (ii) the dissolution, bankruptcy, insolvency, or
receivership of the Company
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IN WITNESS WHEREOF, the Stockholders have executed this Agreement as of
the date and year first above set forth.
<TABLE>
<CAPTION>
HARVEY'S: LILY POND:
<S> <C>
HARVEY'S WAGON WHEEL, INC. a LILY POND INVESTMENTS, INC.
Nevada corporation a Nevada corporation
By: /s/ Richard Kudrna By: /s/ Peter A. Morton
----------------------------- -------------------------------
RICHARD KUDRNA, SR. PETER A. MORTON, President
Chairman of the Board
By: /s/ William B. Ledbetter /s/ Peter A. Morton
----------------------------- -------------------------------
WILLIAM LEDBETTER, President PETER A. MORTON, individually
as to Sections 3.3 and 3.6.2
and any other provision of
By: /s/ Beverlee Ledbetter this Agreement pertaining
----------------------------- specifically to Morton
BEVERLEE LEDBETTER, Secretary
COMPANY:
HARD ROCK HOTEL, INC., a
Nevada Corporation
By: /s/ Peter A. Morton
-------------------------------
PETER A. MORTON, President
By: /s/ Tom Yturbide
-------------------------------
TOM YTURBIDE, Secretary
</TABLE>
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<PAGE>
SPOUSAL CONSENT
The undersigned hereby consent to the terms and provisions of the
foregoing Agreement and agree to be bound thereby.
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
<PAGE>
EXHIBIT "A"
ARTICLES OF INCORPORATION
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EXHIBIT "B"
BY-LAWS
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EXHIBIT "C"
MANAGEMENT AGREEMENT
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EXHIBIT "D"
SUBLICENSE AGREEMENT
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EXHIBIT "D-1"
ASSIGNMENT AND ASSUMPTION AGREEMENT
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EXHIBIT "E"
SUPERVISORY AGREEMENT
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EXHIBIT "F"
MATERIAL CONTRACT DISCLOSURE SCHEDULE
Reference: 1.8.3 SCHEDULES AND INFORMATION PROVIDED: (a) Each material
contract agreement or understanding whether written or oral between either
Stockholder and any third party, relating to the Property and the Project,
including those entered into prior to this Agreement, and which may have
expired.
1. Agreement between and among Hard Rock Cafe, Peter A. Morton, and
Gerald Garapich & Associates, on or about___________, 1991, covering Mr.
Garapich's provision of certain design, development and approval consulting
services on the Project. (See also attached list of Project Consultants,
provided by Gerald Garapich & Associates to Harvey's Wagon Wheel, Inc. in
February 1993.)
2. Construction and Term Senior Bank Financing Commitment Letter from
First Interstate Bank of Nevada, N.A., to Hard Rock Hotel & Casino, Inc. (c/o
Promus Companies), dated September 15, 1992.
3. DRAFT Construction and Term Senior Bank Financing Commitment Letter
from First Interstate Bank of Nevada, N.A., to Hard Rock Hotel [& Casino,
Inc.], LLC, (c/o Harvey's Wagon Wheel, Inc.), dated July 27, 1993.
4. Hard Rock Hotel & Casino Private Placement Memorandum, prepared by
Donaldson Lufkin & Jenrette, and dated June 1991.
5. Management Agreement between Hard Rock Hotel & Casino, L.P. and
Harrah's, Inc., dated November 6, 1990.
6. Financing Proposal/Package, dated June 1993 and revised July 15,
1993, presented by Project developers and Stockholders to First Interstate
Bank of Nevada, N.A., in support of financing activities and commitments (see
# 3 above), and to officers, executives and financial associates of
Stockholders. (Ninety (90) original packages traced by numbers 1 through 90.)
7. Fair Market value appraisal on Harvey's Resort Hotel/Casino at Lake
Tahoe, dated July 19, 1993, and completed by Timothy R. Morse and Associates
in support of financing activities of the Stockholders. (See # 3 above.)
8. Fair market value appraisal on Hard Rock Hotel (and Casino) in Las
Vegas, dated July 30, 1993, and completed by Burke Hanson, Inc. in support of
financing activities of the Stockholders. (See # 3 above.)
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9. Preliminary Title Report of Nevada Title Company, dated October 7,
1992 on the property, in which title is currently held by Red, White & Blue
Pictures, Inc. with copies of title exceptions, the most notable being a
Parking Easement in favor of Hard Rock Cafe and a Trust Deed in favor of
Security Pacific National Bank.
10. Engagement letter for financial services between Donaldson Lufkin &
Jenrette and Hard Rock Hotel & Casino, Inc., dated July 18, 1991.
11. Sales agency letter regarding financial services rendered between
Donaldson Lufkin & Jenrette and Hard Rock Hotel & Casino, Inc., dated July 1,
1991.
12. Ancillary agreements, referenced herein, will be executed
concurrently with this Agreement and will be incorporated by reference with
this Agreement and as Exhibits to the Management Agreement (2.2.1.):
Sub-Licensing Agreement (1.1.4.); and Supervisory Agreement (Recital G).
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EXHIBIT "G"
PROJECT APPROVAL DISCLOSURE SCHEDULE
Reference: 1.8.3. SCHEDULES AND INFORMATION PROVIDED: (b) Each permit,
license or other evidence of approval in connection with the Project, or any
predecessor.
1. Blueline copies (two sets) of existing construction drawings,
provided by Gerald Garapich & Associates.
2. Color copies of renderings, site plan, floor plan, design concepts,
memorabilia and aerial photograph of neighborhood, contained in original
Private Placement Memorandum by Donaldson Lufkin & Jenrette, dated June 1991.
3. Hard Rock Hotel & Casino internal construction and pre- opening
budget, dated November 4, 1992.
4. Hard Rock Hotel & Casino Cost Estimate Proposal, submitted to
Harvey's Wagon Wheel, Inc. by Sundt Corporation, dated May 24, 1993.
5. Private report prepared by Gerald Garapich & Associates for
Harvey's Wagon Wheel, Inc., dated February 1993, and detailing status of
agency approvals and contract documents for the Project, including but not
limited to: local and Clark County planning and zoning agencies; McCarran
Airport and Federal Aviation authorities; and local and regional utility and
transportation districts. [See also attached list of Project approvals and
documents, provided by Gerald Garapich & Associates to Harvey's Wagon Wheel,
Inc. in February 1993.]
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EXHIBIT "H"
LITIGATION AND OTHER CLAIM DISCLOSURE
Reference: 1.8.3. SCHEDULES AND INFORMATION PROVIDED; (c) Each claim or
proceeding now pending, or to the knowledge of either Stockholder, threatened
against, or in any way involving the Project, or any predecessor, the Hotel
Brand or the Property.
1. Settlement Agreement, dated May 23, 1985 between and among Isaac
Tigrett, Tigrett Affiliates, Peter A. Morton and Morton Affiliates,
referencing MORTON VS M.L. INTERNATIONAL, LTD., ETC. ET AL USDC, case No.
83-1086, together with exhibits, including but not limited to Exhibit H-2,
License Agreement between Hard Rock Cafe Licensing Corporation and Morton,
dated May 23, 1985.
2. KOAR, INC. AND KOAR-LAS VEGAS, L.P. VS PETER MORTON, HARD ROCK
HOTEL & CASINO INVESTORS LIMITED PARTNERSHIP AND HARD ROCK CAFE AND HOTEL I,
INC., case No. BC 050 781: This action was filed in Los Angeles Superior
Court on March 13, 1992. The operative facts are set out in a Fifth Amended
Complaint ("Complaint") filed on March 4, 1993. The Complaint alleges that
(1) In November 1990, Koar, Inc. formed a California limited partnership
designated Koar-Las Vegas, L.P. (2) Pursuant to the terms of the Partnership,
Koar-Las Vegas, L.P., had a sixteen and two-thirds percent (16.667%) interest
in the Partnership. (3) The remainder of the Partnership was owned by Hard
Rock Cafe & Hotel I, Inc. (4) Plaintiffs expended ."..effort, time and
money..." to fulfill the purpose of the Partnership Agreement which
."..effort, time and Money..." were not reimbursed. Morton disputes these
allegations. Based upon these facts, Plaintiffs filed for instant action
seeking: (1) An accounting between Defendants and Plaintiffs; (2) A judgment
for breach of oral contract or unjust enrichment in the sum of Three hundred
Seventeen Thousand, Four Hundred Twenty-Two Dollars and Sixty-Eight Cents
($317,422.68); (3) Alternatively, a judgment for the reasonable value of
Plaintiffs' services (quantum merit); and (4) Damages for the alleged
wrongful dissolution of the Partnership in violation of California
Corporations Code Section 15038. (The Court assigned to this matter has
previously determined that Defendants had the unfettered right to terminate
the Partnership. Consequently, this Cause of Action for violation of
California Corporations Code Section 15038 is apparently without merit.) In
conclusion, this action involves claims for damages only for settlement of
accounts and the approximate amount of Three Hundred Thousand Dollars
($300,000.00).
3. MILTON OKUN VS PETER MORTON ET AL, case No. C540970: Litigation is
pending between Milton Okun and Peter Morton, et al, in the Superior Court of
the State of California for the County of Los Angeles. Each party is
asserting rights against the other to define and refine their respective
relationships
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with respect to business opportunities utilizing the name "Hard Rock Cafe" or
similar name. Okun has asserted that he is entitled to a twenty percent (20%)
share of any business opportunity or business venture of Peter Morton,
including, but not limited to ownership of the property and of predecessors
of the Project. Morton vigorously opposes Okun's contention and has
affirmatively filed his own action to declare that Morton's rights and
ownership of the Property, the Project, or any predecessor, are owned one
hundred percent (100%) by Morton free and clear of any right of participation
by Okun particularly, where, as here, Okun has been offered opportunities to
participate in predecessor projects and expressly rejected or refused any
such opportunity. The gravamen of the litigation is not Okun's right to
acquire the ownership interest in the Project or Property, but whether Okun
has a right to share in Morton's interest in a twenty percent/eighty percent
(20%/80%) basis.
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EXHIBIT "I"
REGULATORY COMPLIANCE DISCLOSURE SCHEDULE
Reference: 1.8.3. SCHEDULES AND INFORMATION PROVIDED: (d) All correspondence
with governmental authorities concerning compliance with applicable laws and
regulations, including toxic or hazardous substance surveys of the Property.
1. Soils and Foundation Investigation (Report) on Hard Rock Hotel &
Casino, prepared by Converse Consultants Southwest, Inc. and dated June 30,
1993.
2. Private report prepared by Gerald Garapich & Associates for Harvey's
Wagon Wheel, Inc., dated February 1993, detailing status of and providing
correspondence with various city, county, state and federal agencies on
required project permits and approvals.
3. Private report prepared by Gerald Garapich & Associates for
Stockholders, dated April 5, 1993, and research reports prepared by The Paul
Laxalt Group, dated May 13, and June 10, 1993, detailing status of, detailed
communications and correspondence with McCarran Airport and the Federal
Aviation authorities on approvals requested for the rooftop guitar monument.
4. Phase I Environmental Site Assessment, dated September 27, 1989, on
the subject Property, prepared by Western Technologies, Inc. for predecessor
developers, Dimension Development, Inc.
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EXHIBIT "J"
FINANCIAL AND BUSINESS DISCLOSURE SCHEDULES
Reference: 1.8.3. SCHEDULES AND INFORMATION PROVIDED: (e) Such other
information concerning the financial and business condition of each of the
Stockholders, as the Stockholders and their representatives may reasonably
request.
1. Hard Rock Cafe America, L.P., Consolidated Audited Financial
Statements and Other Financial Information, year ended December 27, 1992 with
Report of Independent Auditors, Ernst & Young.
2. Hard Rock Cafe Investors, Ltd., Consent Solicitation/Offering
Memorandum for Hard Rock Cafe America, L.P., dated May 14, 1992.
3. Harvey's Wagon Wheel, Inc. and Subsidiary, Consolidated Financial
Statements and Report of Independent Certified Public Accountants, Grant
Thornton, as of November 30, 1992 and 1991.
4. Hard Rock Cafe Operations Manuals.
5. Hard Rock Cafe - Las Vegas Hourly Benefits Package and Employee
Handbook.
6. Hard Rock Cafe America Management Benefit Package and Employee
Handbook (Main Office and Managers).
7. Harvey's Resort Hotel/Casino Lake Tahoe facility food and beverage
manuals by outlet (25).
8. Harvey's Resort Hotel/Casino Lake Tahoe facility Employee Handbook,
benefit and other employment program manuals.
9. Harvey's Resort Hotel/Casino Lake Tahoe facility Hotel Procedures
and Training program.
10. Harvey's Resort Hotel/Casino Lake Tahoe facility Operating and
Service Standards (by department and position).
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EXHIBIT 10.1
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- -------------------------------------------------------------------------------
LOAN AGREEMENT
Dated as of March 23, 1998
among
HARD ROCK HOTEL, INC.
as Borrower,
The Lenders and Co-Agent referred to herein
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Administrative Agent
- -------------------------------------------------------------------------------
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TABLE OF CONTENTS
<TABLE>
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Page
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Article 1 DEFINITIONS AND ACCOUNTING TERMS . . . . . . . . . . . . . . . .1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Use of Defined Terms. . . . . . . . . . . . . . . . . . . . . 27
1.3 Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . 27
1.4 Rounding. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
1.5 Exhibits and Schedules. . . . . . . . . . . . . . . . . . . . 27
1.6 References to "Borrower and its Subsidiaries" . . . . . . . . 27
1.7 References to Times . . . . . . . . . . . . . . . . . . . . . 28
1.8 Miscellaneous Terms . . . . . . . . . . . . . . . . . . . . . 28
Article 2 LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.1 Loans-General . . . . . . . . . . . . . . . . . . . . . . . . 29
2.2 Base Rate Loans . . . . . . . . . . . . . . . . . . . . . . . 30
2.3 LIBOR Loans . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.4 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . 31
2.5 Voluntary Reduction of Commitment . . . . . . . . . . . . . . 34
2.6 Scheduled Mandatory Reductions of Commitment. . . . . . . . . 35
2.7 Other Mandatory Reductions of Commitment. . . . . . . . . . . 35
2.8 Administrative Agent's Right to Assume Funds Available for
Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
2.9 Swing Line. . . . . . . . . . . . . . . . . . . . . . . . . . 36
Article 3 PAYMENTS AND FEES. . . . . . . . . . . . . . . . . . . . . . . 38
3.1 Principal and Interest. . . . . . . . . . . . . . . . . . . . 38
3.2 Upfront Fees. . . . . . . . . . . . . . . . . . . . . . . . . 39
3.3 Commitment Fees . . . . . . . . . . . . . . . . . . . . . . . 39
3.4 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . 39
3.5 Agency Management Fees. . . . . . . . . . . . . . . . . . . . 40
3.6 Construction Services Fees. . . . . . . . . . . . . . . . . . 40
3.7 Increased Commitment Costs. . . . . . . . . . . . . . . . . . 40
3.8 LIBOR Costs and Related Matters . . . . . . . . . . . . . . . 41
3.9 Late Payments . . . . . . . . . . . . . . . . . . . . . . . . 44
3.10 Computation of Interest and Fees. . . . . . . . . . . . . . . 44
3.11 Non-Banking Days. . . . . . . . . . . . . . . . . . . . . . . 45
3.12 Manner and Treatment of Payments. . . . . . . . . . . . . . . 45
3.13 Funding Sources . . . . . . . . . . . . . . . . . . . . . . . 46
3.14 Failure to Charge Not Subsequent Waiver . . . . . . . . . . . 46
3.15 Administrative Agent's Right to Assume Payments
</TABLE>
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Will be Made by Borrower. . . . . . . . . . . . . . . . . . . 46
3.16 Fee Determination Detail. . . . . . . . . . . . . . . . . . . 47
3.17 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Article 4 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 48
4.1 Existence and Qualification; Power; Compliance With Laws . . 48
4.2 Authority; Compliance With Other Agreements and
Instruments and Government Regulations. . . . . . . . . . . . 48
4.3 No Governmental Approvals Required. . . . . . . . . . . . . . 49
4.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 49
4.5 Financial Statements. . . . . . . . . . . . . . . . . . . . . 49
4.6 No Material Adverse Changes . . . . . . . . . . . . . . . . . 49
4.7 Title to Property . . . . . . . . . . . . . . . . . . . . . . 49
4.8 Intangible Assets . . . . . . . . . . . . . . . . . . . . . . 49
4.9 Public Utility Holding Company Act. . . . . . . . . . . . . . 50
4.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.11 Binding Obligations . . . . . . . . . . . . . . . . . . . . . 50
4.12 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.14 Regulations G, T, U and X; Investment Company Act . . . . . . 51
4.15 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.16 Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . 51
4.17 Projections . . . . . . . . . . . . . . . . . . . . . . . . . 51
4.18 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . 51
4.19 Gaming Laws . . . . . . . . . . . . . . . . . . . . . . . . . 52
4.20 Security Interests. . . . . . . . . . . . . . . . . . . . . . 52
Article 5 AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING
REQUIREMENTS).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.1 Payment of Taxes and Other Potential Liens. . . . . . . . . . 53
5.2 Preservation of Existence . . . . . . . . . . . . . . . . . . 53
5.3 Maintenance of Properties . . . . . . . . . . . . . . . . . . 53
5.4 Maintenance of Insurance. . . . . . . . . . . . . . . . . . . 53
5.5 Compliance With Laws. . . . . . . . . . . . . . . . . . . . . 54
5.6 Inspection Rights - Completion of Construction. . . . . . . . 54
5.7 Keeping of Records and Books of Account . . . . . . . . . . . 54
5.8 Compliance With Agreements. . . . . . . . . . . . . . . . . . 54
5.9 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 54
5.10 Hazardous Materials Laws. . . . . . . . . . . . . . . . . . . 55
Article 6 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
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<TABLE>
<S> <C> <C>
6.1 Prepayment of Indebtedness. . . . . . . . . . . . . . . . . . 56
6.2 Payment of Subordinated Obligations . . . . . . . . . . . . . 56
6.3 Disposition of Property . . . . . . . . . . . . . . . . . . . 56
6.4 Hostile Tender Offers . . . . . . . . . . . . . . . . . . . . 57
6.5 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.6 Distributions . . . . . . . . . . . . . . . . . . . . . . . . 57
6.7 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.8 Change in Nature of Business. . . . . . . . . . . . . . . . . 58
6.9 Liens, Negative Pledges and Rights of Others. . . . . . . . . 58
6.10 Indebtedness and Contingent Obligations . . . . . . . . . . . 58
6.11 Transactions with Affiliates. . . . . . . . . . . . . . . . . 60
6.12 Senior Leverage Ratio . . . . . . . . . . . . . . . . . . . . 60
6.13 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . 60
6.14 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . 61
6.15 Acquisitions and Investments. . . . . . . . . . . . . . . . . 61
6.17 Construction of the Proposed Expansion. . . . . . . . . . . . 62
6.18 Changes to the Subordinated Obligations or Codes,
Covenants and Restrictions. . . . . . . . . . . . . . . . . . 64
Article 7 INFORMATION AND REPORTING REQUIREMENTS . . . . . . . . . . . . 65
7.1 Financial and Business Information. . . . . . . . . . . . . . 65
7.2 Compliance Certificates . . . . . . . . . . . . . . . . . . . 67
Article 8 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 69
8.1 Initial Advances on the Closing Date. . . . . . . . . . . . . 69
8.2 Any Advance . . . . . . . . . . . . . . . . . . . . . . . . . 72
Article 9 EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT . . . . . 74
9.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . 74
9.2 Remedies Upon Event of Default. . . . . . . . . . . . . . . . 76
Article 10 THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . 80
10.1 Appointment and Authorization . . . . . . . . . . . . . . . . 80
10.2 Administrative Agent and Affiliates . . . . . . . . . . . . . 80
10.3 Proportionate Interest in any Collateral. . . . . . . . . . . 80
10.4 Lenders' Credit Decisions . . . . . . . . . . . . . . . . . . 81
10.5 Action by Administrative Agent. . . . . . . . . . . . . . . . 81
10.6 Liability of Administrative Agent . . . . . . . . . . . . . . 82
10.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 83
10.8 Successor Administrative Agent. . . . . . . . . . . . . . . . 83
10.9 Foreclosure on Collateral . . . . . . . . . . . . . . . . . . 84
</TABLE>
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10.10 No Obligations of Borrower. . . . . . . . . . . . . . . . . . 84
Article 11 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 85
11.1 Cumulative Remedies; No Waiver. . . . . . . . . . . . . . . . 85
11.2 Amendments; Consents. . . . . . . . . . . . . . . . . . . . . 85
11.3 Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . 86
11.4 Nature of Lenders' Obligations. . . . . . . . . . . . . . . . 87
11.5 Survival of Representations and Warranties. . . . . . . . . . 87
11.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
11.7 Execution of Loan Documents . . . . . . . . . . . . . . . . . 88
11.8 Binding Effect; Assignment. . . . . . . . . . . . . . . . . . 88
11.9 Right of Setoff . . . . . . . . . . . . . . . . . . . . . . . 90
11.10 Sharing of Setoffs. . . . . . . . . . . . . . . . . . . . . . 90
11.11 Indemnity by Borrower . . . . . . . . . . . . . . . . . . . . 91
11.12 Nonliability of the Lenders . . . . . . . . . . . . . . . . . 92
11.13 No Third Parties Benefited. . . . . . . . . . . . . . . . . . 93
11.14 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 93
11.15 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 93
11.16 Integration . . . . . . . . . . . . . . . . . . . . . . . . . 94
11.17 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 94
11.18 Severability of Provisions. . . . . . . . . . . . . . . . . . 94
11.19 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 94
11.20 Time of the Essence . . . . . . . . . . . . . . . . . . . . . 94
11.21 Foreign Lenders and Participants. . . . . . . . . . . . . . . 94
11.22 Hazardous Material Indemnity. . . . . . . . . . . . . . . . . 95
11.23 Gaming Boards . . . . . . . . . . . . . . . . . . . . . . . . 96
11.24 Waiver of Right to Trial by Jury. . . . . . . . . . . . . . . 96
11.25 Purported Oral Amendments . . . . . . . . . . . . . . . . . . 96
</TABLE>
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Exhibits
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A - Assignment Agreement
B - Compliance Certificate
C - Liquidity Report
D - Note
E - Request for Loan
F - Request for Letter of Credit
Schedules
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1.1A Description of Proposed Expansion
1.1B Timetable
1.1C Pro Rata Shares of the Banks
4.3 Governmental Approvals
4.8 Intellectual Property
4.18 Environmental Matters
6.8 Permitted Title Exceptions
6.9 Existing Liens
6.10 Existing Indebtedness
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<PAGE>
LOAN AGREEMENT
Dated as of March 23, 1998
This Loan Agreement ("Agreement") is entered into by and among
Hard Rock Hotel, Inc., a Nevada corporation ("Borrower"), each lender whose
name is set forth on the signature pages of this Agreement and each lender
which may hereafter become a party to this Agreement pursuant to Section 11.8
(collectively, the "Lenders" and individually, a "Lender") and Bank of
America National Trust and Savings Association, as Administrative Agent.
In consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:
Article 1
DEFINITIONS AND ACCOUNTING TERMS
A. DEFINED TERMS. As used in this Agreement, the following terms shall
have the meanings set forth below:
"ACQUISITION" means any transaction, or any series of
related transactions, by which Borrower directly or indirectly
(i) acquires any going business or all or substantially all of
the assets of any firm, partnership, joint venture, limited
liability company, corporation or division thereof, whether
through purchase of assets, merger or otherwise, or
(ii) acquires (in one transaction or as the most recent
transaction in a series of transactions) control of at least a
majority in ordinary voting power of the securities of a
corporation which have ordinary voting power for the election
of directors, or (iii) acquires control of a 50% or more
ownership interest in any partnership, limited liability
company or joint venture.
"ADMINISTRATIVE AGENT" means Bank of America, when acting
in its capacity as the Administrative Agent under any of the
Loan Documents, or any successor Administrative Agent.
"ADMINISTRATIVE AGENT'S OFFICE" means the Administrative
Agent's address as set forth on the signature pages of this
Agreement, or such other address as the Administrative Agent
hereafter may designate by written notice to Borrower and the
Lenders.
"ADVANCE" means any advance made or to be made by any
Lender to Borrower as provided in Article 2, and includes each
Base Rate Advance and each LIBOR Advance.
"AFFILIATE" means, as to any Person, any other Person
which directly or indirectly controls, or is under common
control with, or
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is controlled by, such Person. As used in this definition,
"control" (and the correlative terms, "controlled by" and
"under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of
securities or partnership or other ownership interests, by
contract or otherwise); PROVIDED that, in any event, any
Person that owns, directly or indirectly, 10% or more of the
securities having ordinary voting power for the election of
directors or other governing body of a corporation that has
more than 100 record holders of such securities, or 10% or
more of the partnership or other ownership interests of any
other Person that has more than 100 record holders of such
interests, will be deemed to control such corporation,
partnership or other Person.
"AGGREGATE EFFECTIVE AMOUNT" means, as of any date of
determination and with respect to all Letters of Credit, the
SUM of (a) the aggregate effective face amounts of all
outstanding Letters of Credit PLUS (b) the aggregate amounts
paid by the Issuing Lender under Letters of Credit not then
reimbursed to the Issuing Lender by Borrower pursuant to
Section 2.4(d) and not then the subject of Advances made
pursuant to Section 2.4(e).
"AGREEMENT" means this Loan Agreement, either as
originally executed or as it may from time to time be
supplemented, modified, amended, restated or extended.
"ANNUALIZED EBITDA" means as of the last day of each
Fiscal Quarter which ends:
(a) prior to the date which is one full fiscal
quarter following the Opening, EBITDA for the twelve month
period ending as of the last day of that Fiscal Quarter;
(b) at any later date prior to the date which is
four full Fiscal Quarters following the Opening, EBITDA
for each full Fiscal Quarter which has occurred since the
Opening TIMES (i) four, if there is one such Fiscal
Quarter, (ii) two, if there are two such Fiscal Quarters,
and (ii) one and one third, if there are three such Fiscal
Quarters; and
(c) at any later date, EBITDA for the four most
recently ended Fiscal Quarters.
"ARRANGER" means BancAmerica Robertson Stephens. The
Arranger shall have no obligations or liabilities under this
Agreement or the Loan Documents, but shall be entitled to the
benefits of Sections 11.3 and 11.11.
"ASSIGNMENT AGREEMENT" means an Assignment Agreement
substantially in the form of Exhibit A.
"BANK OF AMERICA" means Bank of America National Trust and
Savings Association, its successors and assigns.
"BANKING DAY" means any Monday, Tuesday, Wednesday,
Thursday or
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Friday, OTHER THAN a day on which banks are authorized or
required to be closed in California or Nevada.
"BASE RATE" means, as of any date of determination, the
rate per annum (rounded upwards, if necessary, to the next
1/100 of 1%) equal to the HIGHER OF (a) the Reference Rate in
effect on such date and (b) the Federal Funds Rate in effect on
such date plus 1/2 of 1%.
"BASE RATE ADVANCE" means an Advance made hereunder and
specified to be a Base Rate Advance in accordance with
Article 2.
"BASE RATE LOAN" means a Loan made hereunder and specified
to be a Base Rate Loan in accordance with Article 2.
"BASE RATE MARGIN" means, for each Pricing Period, the
percentage set forth opposite the Total Leverage Ratio as of
the last day of the Fiscal Quarter ending two months prior to
the first day of that Pricing Period:
<TABLE>
<CAPTION>
TOTAL LEVERAGE RATIO BASE RATE MARGIN
-------------------- -----------------
<S> <C>
Greater than or equal to 5.75:1.00 2.25%
Less than 5.75:1.00 but greater than
or equal to 5.25:1.00 2.00%
Less than 5.25:1.00 but greater than
or equal to 4.75:1.00 1.75%
Less than 4.75:1.00 but greater than
or equal to 4.25:1.00 1.50%
Less than 4.25:1.00 but greater than
or equal to 3.75:1.00 1.25%
Less than 3.75:1.00 but greater than
or equal to 3.25:1.00 1.00%
Less than 3.25:1.00 but greater than
or equal to 2.75:1.00 0.50%
Less than 2.75:1.00 0.25%
</TABLE>
"BORROWER" means Hard Rock Hotel, Inc., a Nevada
corporation, its successors and permitted assigns.
"BUDGET" means the budget for design, development and
construction of the Proposed Expansion submitted to the
Administrative Agent and the Lenders on the Closing Date
accordance with Section 8.1, as supplemented or amended from
time to time in accordance with Section 6.17.
"CAPITAL EXPENDITURE" means any expenditure that is
considered a capital expenditure under Generally Accepted
Accounting Principles, INCLUDING any amount which is required
to be treated as an asset
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subject to a Capital Lease Obligation.
"CAPITAL LEASE OBLIGATIONS" means all monetary obligations
of a Person under any leasing or similar arrangement which, in
accordance with Generally Accepted Accounting Principles, is
classified as a capital lease.
"CASH" means, when used in connection with any Person, all
monetary and non-monetary items owned by that Person that are
treated as cash in accordance with Generally Accepted
Accounting Principles, consistently applied.
"CASH EQUIVALENTS" means, when used in connection with any
Person, that Person's Investments in:
a. Government Securities due within one year after the
date of the making of the Investment;
b. readily marketable direct obligations of any State
of the United States of America or any political subdivision of any
such State or any public agency or instrumentality thereof given on
the date of such Investment a credit rating of at least Aa by Moody's
Investors Service, Inc. or AA by Standard & Poor's Ratings Group, in
each case due within one year from the making of the Investment;
c. certificates of deposit issued by, bank deposits
in, eurodollar deposits through, bankers' acceptances of, and
repurchase agreements covering Government Securities executed by, any
Lender or any bank incorporated under the Laws of the United States of
America, any State thereof or the District of Columbia and having on
the date of such Investment combined capital, surplus and undivided
profits of at least $250,000,000, in each case due within one year
after the date of the making of the Investment;
d. certificates of deposit issued by, bank deposits
in, eurodollar deposits through, bankers' acceptances of, and
repurchase agreements covering Government Securities executed by, any
branch or office located in the United States of America of a bank
incorporated under the Laws of any jurisdiction outside the United
States of America having on the date of such Investment combined
capital, surplus and undivided profits of at least $500,000,000, in
each case due within one year after the date of the making of the
Investment; and
e. readily marketable commercial paper of corporations
doing business in and incorporated under the Laws of the United States
of America or any State thereof or of any corporation that is the
holding company for a bank described in clause (c) or (d) above given
on the date of such Investment a credit rating of at least P-1 by
Moody's Investors Service, Inc. or A-1 by Standard & Poor's Ratings
Group, in each case due within 90 days after the date of the making of
the Investment.
"CERTIFICATE OF A RESPONSIBLE OFFICIAL" means a
certificate signed by a Responsible Official of the Person
providing the
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certificate.
"CHANGE OF CONTROL" means (a) any transaction or series of
related transactions in which any Unrelated Person or two or
more Unrelated Persons acting in concert acquire beneficial
ownership (within the meaning of Rule 13d-3(a)(1) under the
Securities Exchange Act of 1934, as amended), directly or
indirectly, of 35% or more of the outstanding common stock of
Borrower or (b) following the public offering of any equity
securities of Borrower, during any period of 24 consecutive
months, individuals who at the beginning of such period were
members of the board of directors of Borrower (together with
any new or replacement directors whose election by the board of
directors, or whose nomination for election, was approved by a
vote of at least a majority of the directors then still in
office who were either directors at the beginning of such
period or whose election or nomination for reelection was
previously so approved) cease for any reason to constitute a
majority of the directors then in office, or (c) Peter A.
Morton, his spouse or immediate family members (or any trusts
established for their benefit) or any trustee, executor or
receiver appointed to manage or administer the assets of any
such Person who is an individual following the death of such
individual, fail to directly or indirectly own, and hold the
power to vote, at least 51% of Borrower's capital stock
entitled to ordinary voting power.
"CLOSING DATE" means the time and Banking Day on which the
conditions set forth in Section 8.1 are satisfied or waived.
The Administrative Agent shall notify Borrower and the Lenders
of the date that is the Closing Date.
"CO-AGENT" means Bear, Stearns & Co. Inc. The Co-Agent
shall have no obligations or liabilities under this Agreement
or the Loan Documents, but shall be entitled to the benefits of
Sections 11.3 and 11.11.
"CODE" means the Internal Revenue Code of 1986, as amended
or replaced and as in effect from time to time.
"COLLATERAL" means all of the collateral covered by the
Collateral Documents.
"COLLATERAL DOCUMENTS" means, collectively, the Security
Agreement, the Deed of Trust, the Completion Guaranty, the Make
Well Agreement, the Trademark Assignment and any other security
agreement, pledge agreement, deed of trust, mortgage or other
collateral security agreement hereafter executed and delivered
by Peter Morton, Borrower or its Subsidiaries to secure the
Obligations.
"COMMITMENT" means $67,000,000 or such lesser amount to
which the Commitment may be reduced from time to time pursuant
to the terms of Sections 2.5, 2.6 and 2.7. As of the Closing
Date, the Commitments of the Banks are set forth on Schedule
1.1C.
"COMMITMENT FEE RATE" means, for each Pricing Period, the
percentage set forth opposite the Total Leverage Ratio as of
the last day of the Fiscal Quarter ending two months prior to
the first day of
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that Pricing Period:
<TABLE>
<CAPTION>
Total Leverage Ratio Commitment Fee Rate
-------------------- -------------------
<S> <C>
Greater than or equal to 3.75:1.00 .500%
Less than 3.75:1.00 .375%
</TABLE>
"COMPLETION DATE" means August 1, 1999, PROVIDED that if a
Force Majeure Event occurs with respect to the Proposed
Expansion during the period between the Closing Date and
August 1, 1999, the Completion Date shall be extended by one
day for each day during which the Force Majeure Event remains
continuing.
"COMPLETION GUARANTY" means a Completion Guaranty issued
by Peter A. Morton on the Closing Date in favor of the
Administrative Agent and the Trustee under the Indenture,
either as originally executed or as it may from time to time be
supplemented, modified, amended, restated or extended.
"COMPLIANCE CERTIFICATE" means a certificate in the form
of Exhibit B, properly completed and signed by a Senior Officer
of Borrower.
"CONSTRUCTION PROGRESS REPORT" means a report prepared by
CSG or its designated representative in a form which is
reasonably acceptable to the Administrative Agent.
"CONTINGENT OBLIGATION" means, as to any Person, any
(a) guarantee by that Person of Indebtedness of, or other
obligation performable by, any other Person or (b) assurance
given by that Person to an obligee of any other Person with
respect to the performance of an obligation by, or the
financial condition of, such other Person, whether direct,
indirect or contingent, INCLUDING any purchase or repurchase
agreement covering such obligation or any collateral security
therefor, any agreement to provide funds (by means of loans,
capital contributions or otherwise) to such other Person, any
agreement to support the solvency or level of any balance sheet
item of such other Person or any "keep-well" or other
arrangement of whatever nature given for the purpose of
assuring or holding harmless such obligee against loss with
respect to any obligation of such other Person; PROVIDED,
HOWEVER, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated
or determinable amount of the related primary obligation
(unless the Contingent Obligation is limited by its terms to a
lesser amount, in which case to the extent of such amount) or,
if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by the
Person in good faith.
"CONTRACTUAL OBLIGATION" means, as to any Person, any
provision of any outstanding security issued by that Person or
of any material
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<PAGE>
agreement, instrument or undertaking to which that Person is
a party or by which it or any of its Property is bound.
"CREDITORS" means, collectively, the Administrative Agent,
the Issuing Lender, the Swing Line Lender, the Lenders, the
Arranger and the Co-Agent.
"CSG" means Bank of America's Construction Services Group.
"DEBTOR RELIEF LAWS" means the Bankruptcy Code of the
United States of America, as amended from time to time, and all
other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws from time to time
in effect affecting the rights of creditors generally.
"DEED OF TRUST" means the Construction Deed of Trust,
Assignment of Rents and Fixture Filing executed and delivered
by Borrower on the Closing Date, either as originally executed
or as it may from time to time be supplemented, modified,
amended, extended or supplanted.
"DEFAULT" means any event that, with the giving of any
applicable notice or passage of time specified in Section 9.1,
or both, would be an Event of Default.
"DEFAULT RATE" means the interest rate prescribed in
Section 3.9.
"DESIGNATED EURODOLLAR MARKET" means, with respect to any
LIBOR Loan, (a) the London Eurodollar Market, (b) if prime
banks in the London Eurodollar Market are at the relevant time
not accepting deposits of Dollars or if the Administrative
Agent determines in good faith that the London Eurodollar
Market does not represent at the relevant time the effective
pricing to the Lenders for deposits of Dollars in the London
Eurodollar Market, the Cayman Islands Eurodollar Market or
(c) if prime banks in the Cayman Islands Eurodollar Market are
at the relevant time not accepting deposits of Dollars or if
the Administrative Agent determines in good faith that the
Cayman Islands Eurodollar Market does not represent at the
relevant time the effective pricing to the Lenders for deposits
of Dollars in the Cayman Islands Eurodollar Market, such other
Eurodollar Market as may from time to time be selected by the
Administrative Agent with the approval of Borrower and the
Requisite Lenders.
"DISBURSEMENT ACCOUNT" means a deposit account to be
maintained by Borrower with Bank of America, as from time to
time designated by Borrower by written notification to the
Administrative Agent.
"DISPOSITION" means the voluntary sale, transfer or other
disposition of any asset of Borrower or any of its Subsidiaries
OTHER THAN (a) Cash, Cash Equivalents, inventory or other
assets sold, leased or otherwise disposed of in the ordinary
course of business of Borrower or its Subsidiaries,
(b) equipment sold or otherwise disposed of where substantially
similar equipment in replacement
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<PAGE>
thereof has theretofore been acquired, or thereafter within
90 days is acquired, by Borrower or its Subsidiaries, (c) leases
of retail space on the Project Site in the ordinary course of the
business of Borrower and in a manner consistent with other similar
hotel-casinos and (d) a disposition to Borrower or any of its
Subsidiaries.
"DISTRIBUTION" means, with respect to shares of capital
stock or any warrant or option to purchase an equity security
or other equity security issued by a Person, (i) the
retirement, redemption, purchase, or other acquisition for Cash
or for Property by such Person of any such security, (ii) the
declaration or (without duplication) payment by such Person of
any dividend in Cash or in Property on or with respect to any
such security, (iii) any Investment by such Person in the
holder of 5% or more of any such security if a purpose of such
Investment is to avoid characterization of the transaction as a
Distribution, and (iv) any other payment in Cash or Property by
such Person constituting a distribution under applicable Laws
with respect to such security.
"DOLLARS" or "$" means United States dollars.
"EBITDA" means, for any fiscal period, the SUM of (a) Net
Income for that period, PLUS (b) any extraordinary loss
reflected in such Net Income, MINUS (c) any extraordinary gain
reflected in such Net Income, PLUS (d) Interest Expense for
that period, PLUS (e) the aggregate amount of federal and state
taxes on or measured by income of Borrower and its Subsidiaries
for that period (whether or not payable during that period),
PLUS (f) depreciation, amortization and all other non-cash
expenses for that period, MINUS (g) to the extent not
previously deducted from Net Income, the Supervisory Fees and
any other management fees paid in Cash to Peter A. Morton or
his Affiliates by Borrower or its Subsidiaries during that
period, PLUS (h) management fees paid to Harvey's Casino
Resorts during that period (including to the extent that the
same were paid during that period, the approximately
$24,000,000 payment made by Borrower to terminate Borrower's
management contract with Harvey's Casino Resorts), PLUS (i)
during each period which includes the month of September, 1997,
transactional expenses of $600,000, PLUS (j) the amount of
Borrower's litigation expense incurred during that period
associated with Borrower's lawsuit with Rank Organization PLC
(provided that the aggregate amount added to EBITDA pursuant to
this clause (j) shall not exceed $1,000,000 during the term of
this Agreement), PLUS (k) expenses classified as "pre-opening
expenses" on the applicable financial statements of Borrower or
its Subsidiaries for that period, in each case determined in
accordance with Generally Accepted Accounting Principles and,
in the case of items (d), (f), (h) and (i), only to the extent
deducted in the determination of Net Income for that period.
"ELIGIBLE ASSIGNEE" means, (a) another Lender, (b) with
respect to any Lender, any Affiliate of that Lender, (c) any
commercial bank having a combined capital and surplus of
$100,000,000 or more, (d) any (i) savings bank, savings and
loan association or similar financial institution or (ii)
insurance company engaged in the business of writing insurance
which, in either case (A) has a net
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worth of $200,000,000 or more, (B) is engaged in the business
of lending money and extending credit under credit facilities
substantially similar to those extended under this Agreement
and (C) is operationally and procedurally able to meet the
obligations of a Lender hereunder to the same degree as a
commercial bank and (e) any other financial institution
(INCLUDING a mutual fund or other fund) having total assets
of $250,000,000 or more which meets the requirements set
forth in subclauses (B) and (C) of clause (d) above; PROVIDED
that (I) each Eligible Assignee must either (a) be organized
under the Laws of the United States of America, any State
thereof or the District of Columbia or (b) be organized under
the Laws of the Cayman Islands or any country which is a
member of the Organization for Economic Cooperation and
Development, or a political subdivision of such a country,
and (i) act hereunder through a branch, agency or funding
office located in the United States of America and (ii) be
exempt from withholding of tax on interest and deliver the
documents related thereto pursuant to Section 11.21 and (II)
to the extent required under applicable Gaming Laws, each
Eligible Assignee must be registered with, approved by, or
not disapproved by (whichever may be required under
applicable Gaming Laws), all applicable Gaming Boards.
"ERISA" means the Employee Retirement Income Security Act
of 1974, and any regulations issued pursuant thereto, as
amended or replaced and as in effect from time to time.
"EURODOLLAR BASE RATE" means, with respect to any LIBOR
Loan, the interest rate per annum (rounded upward, if
necessary, to the next 1/16 of 1%) at which deposits in Dollars
are offered by the Administrative Agent to prime banks in the
Designated Eurodollar Market at or about 11:00 a.m. local time
in the Designated Eurodollar Market, two Market Days before the
first day of the applicable Interest Period in an aggregate
amount approximately equal to the amount of the Advance made by
the Bank of America with respect to such LIBOR Loan and for a
period of time comparable to the number of days in the
applicable Interest Period. The determination of the LIBOR
Base Rate by the Administrative Agent shall be conclusive in
the absence of manifest error.
"EURODOLLAR MARKET" means a regular established market
located outside the United States of America by and among banks
for the solicitation, offer and acceptance of Dollar deposits
in such banks.
"EURODOLLAR OBLIGATIONS" means eurocurrency liabilities,
as defined in Regulation D.
"EVENT OF DEFAULT" shall have the meaning provided in
Section 9.1.
"EXCESS CASH FLOW" means, for any period, (a) EBITDA for
that period MINUS (b) principal and interest payments made by
Borrower and its Subsidiaries in Cash during that period with
respect to Indebtedness for borrowed money, MINUS (c) Capital
Expenditures made by Borrower and its Subsidiaries during that
period in Cash, MINUS (d) cash payments made by Borrower and
its Subsidiaries during that period with respect to federal and
state taxes on or measured by
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<PAGE>
income of Borrower and its Subsidiaries.
"EXISTING CREDIT FACILITY" means Borrower's existing
senior credit facilities with Wells Fargo Bank, N.A. under the
Credit Agreement dated as of September 26, 1997, between
Borrower and Wells Fargo Bank, N.A.
"FEDERAL FUNDS RATE" means, as of any date of
determination, the rate set forth in the weekly statistical
release designated as H.15(519), or any successor publication,
published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such date opposite the caption
"Federal Funds (Effective)". If for any relevant date such
rate is not yet published in H.15(519), the rate for such date
will be the rate set forth in the daily statistical release
designated as the Composite 3:30 p.m. Quotations for
U.S. Government Securities, or any successor publication,
published by the Federal Reserve Bank of New York (including
any such successor, the "Composite 3:30 p.m. Quotation") for
such date under the caption "Federal Funds Effective Rate". If
on any relevant date the appropriate rate for such date is not
yet published in either H.15(519) or the Composite 3:30 p.m.
Quotations, the rate for such date will be the arithmetic mean
of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York City time) on that
date by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrative
Agent. For purposes of this Agreement, any change in the Base
Rate due to a change in the Federal Funds Rate shall be
effective as of the opening of business on the effective date
of such change.
"FIRREA" means the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, as it may be amended from time to
time.
"FISCAL QUARTER" means the fiscal quarter of Borrower
consisting of a three-month fiscal period ending on each
February 28 (or 29th), May 31, August 31 and November 30.
"FISCAL YEAR" means the fiscal year of Borrower consisting
of a twelve-month period ending on each November 30.
"FIXED CHARGE COVERAGE RATIO" means, as of each date of
determination, the ratio of (a) Annualized EBITDA as of that
date PLUS Supervisory Fees paid in Cash during the twelve month
period preceding that date, to (b) the SUM of (i) required
payments of principal and interest and mandatory prepayments
made in Cash by Borrower and its Subsidiaries with respect to
Indebtedness made during such twelve month period, (ii)
Maintenance Capital Expenditures made during the same period,
(iii) taxes actually paid in cash with respect to income of
Borrower and its Subsidiaries during the same period, and (iv)
Supervisory Fees paid in cash during the same period.
"FORCE MAJEURE EVENT" means the occurrence of any strikes,
lockouts or other labor trouble; the occurrence of fire, flood,
earthquake, tornado, sandstorm or other casualty; governmental
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preemption; breakdown, accident or other acts of God; acts of
war, insurrection, civil strife and commotion; any enactment,
promulgation or amendments of any statute, rule, order or
regulation of any legislature or governmental agency or any
department or subdivision thereof; any litigation not commenced
by Borrower, Peter A. Morton or their respective Affiliates; or
any other event that occurs after the date of this Agreement
that is outside the control of Borrower or Peter A. Morton
(excluding any event or circumstance which with reasonable
diligence or investigation is foreseeable as of the date of
this Agreement); in each such case which shall make it
physically impossible, unlawful or commercially impracticable
to continue construction of or complete the Proposed Expansion;
PROVIDED, however, that the following shall not constitute
Force Majeure Events: any increase in the Budget to an amount
in excess of $87,000,000 as a result of (i) any condition,
defect, or physical circumstance of the land, buildings or
improvements which either now exists or which results from the
demolition, development or construction of the Hard Rock Hotel
or the Proposed Expansion which should have been known or
discovered with the exercise of reasonable diligence or
investigation, including errors, omissions or defects in
construction, plans or development, (ii) the completion or
amendment of the Plans after the date hereof not approved by
the Administrative Agent with the consent of the Requisite
Lenders or omissions or defects in the construction plans in
existence on the date hereof, (iii) increase in the cost of
labor, materials and equipment as the result of ordinary
cyclical or seasonal forces, or general inflation, (iv) any
failure of any contractor or subcontractor, vendor or other
supplier that itself is not caused by a Force Majeure Event to
perform at the times, at the price or in the manner contracted
for or to adhere to the Plans, or (v) any defects, errors or
omissions in any construction contract, subcontract, supply
contract, or the Budget.
"GAMING BOARD" means, collectively, (a) the Nevada Gaming
Commission, (b) the Nevada State Gaming Control Board, and
(c) any other Governmental Agency that holds regulatory,
licensing or permit authority over gambling, gaming or casino
activities conducted by Borrower and its Subsidiaries within
its jurisdiction.
"GAMING LAWS" means all Laws pursuant to which any Gaming
Board possesses regulatory, licensing or permit authority over
gambling, gaming or casino activities conducted by Borrower and
its Subsidiaries within its jurisdiction.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means, as of
any date of determination, accounting principles (a) set forth
as generally accepted in then currently effective Opinions of
the Accounting Principles Board of the American Institute of
Certified Public Accountants, (b) set forth as generally
accepted in then currently effective Statements of the
Financial Accounting Standards Board or (c) that are then
approved by such other entity as may be approved by a
significant segment of the accounting profession in the United
States of America. The term "CONSISTENTLY APPLIED," as used in
connection therewith, means that the accounting principles
applied are consistent in all material respects with those
applied at prior
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dates or for prior periods.
"GOVERNMENT SECURITIES" means readily marketable
(a) direct full faith and credit obligations of the
United States of America or obligations guaranteed by the full
faith and credit of the United States of America, or
(b) obligations of an agency or instrumentality of, or
corporation owned, controlled or sponsored by, the United
States of America that are generally considered in the
securities industry to be implicit obligations of the United
States of America.
"GOVERNMENTAL AGENCY" means (a) any international,
foreign, federal, state, county or municipal government, or
political subdivision thereof, (b) any governmental or
quasi-governmental agency, authority, board, bureau,
commission, department, instrumentality or public body, or
(c) any court or administrative tribunal of competent
jurisdiction.
"HAZARDOUS MATERIALS" means substances regulated as
hazardous substances pursuant to (a) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
42 U.S.C. Section 9601 et seq., or as hazardous or toxic wastes or
pollutants pursuant to the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., or (b) any other Law
regulating hazardous substances or hazardous or toxic wastes or
pollutants or regulating the generation, use, storage,
treatment, handling or transportation of any such substances,
in each case as such Laws are amended from time to time.
"HAZARDOUS MATERIALS LAWS" means all federal, state or
local laws, ordinances, rules or regulations governing the
disposal, transfer, generation, storage or treatment of
Hazardous Materials applicable to any of the Real Property.
"INDEBTEDNESS" means, as to any Person (without
duplication), (a) indebtedness of such Person for borrowed
money or for the deferred purchase price of Property (excluding
trade and other accounts payable in the ordinary course of
business in accordance with customary trade terms), INCLUDING
any Contingent Obligation for any such indebtedness,
(b) indebtedness of such Person of the nature described in
clause (a) that is non-recourse to the credit of such Person
but is secured by assets of such Person, to the extent of the
value of such assets, (c) Capital Lease Obligations of such
Person, (d) indebtedness of such Person arising under bankers'
acceptance facilities or under facilities for the discount of
accounts receivable of such Person, (e) any direct or
contingent obligations of such Person under letters of credit
issued for the account of such Person and (f) any net
obligations of such Person under a Swap Agreement.
"INDENTURE" means the Indenture dated March 23, 1998
between Borrower and First Trust National Association, N.A., as
Trustee, governing Borrowers' $120,000,000 9.25% senior
subordinated notes due 2005.
"INTANGIBLE ASSETS" means assets that are considered
intangible
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assets under Generally Accepted Accounting Principles, INCLUDING
customer lists, goodwill, computer software, copyrights, trade
names, trademarks and patents.
"INTEREST DIFFERENTIAL" means, with respect to any
prepayment of a LIBOR Loan on a day other than the last day of
the applicable Interest Period and with respect to any failure
to borrow a LIBOR Loan on the date or in the amount specified
in any Request for Loan, (a) the per annum interest rate
payable (or, with respect to a failure to borrow, the interest
rate which would have been payable) pursuant to Section 3.1(c)
with respect to the LIBOR Loan MINUS (b) the LIBOR on, or as
near as practicable to, the date of the prepayment or failure
to borrow for a LIBOR Loan with an Interest Period commencing
on such date and ending on the last day of the Interest Period
of the LIBOR Loan so prepaid or which would have been borrowed
on such date.
"INTEREST EXPENSE" means, as of the last day of any fiscal
period, the SUM of (a) all interest, fees, charges and related
expenses paid or payable (without duplication) for that fiscal
period to a lender in connection with borrowed money or the
deferred purchase price of assets that are considered "interest
expense" under Generally Accepted Accounting Principles, PLUS
(b) the portion of rent paid or payable (without duplication)
for that fiscal period under Capital Lease Obligations that
should be treated as interest in accordance with Financial
Accounting Standards Board Statement No. 13.
"INTEREST PERIOD" means, as to each LIBOR Loan, the period
commencing on the date specified by Borrower pursuant to
Section 2.1(b) and ending 1, 2, 3 or 6 months thereafter, as
specified by Borrower in the applicable Request for Loan;
PROVIDED that:
(a) The first day of any Interest Period shall be a
Market Day;
(b) Any Interest Period that would otherwise end on
a day that is not a Market Day shall be extended to the next
succeeding Market Day unless such Market Day falls in another
calendar month, in which case such Interest Period shall end on
the next preceding Market Day;
(c) Borrower may not specify a Interest Period that
extends beyond any Reduction Date unless the SUM of (i) the
aggregate principal amount of the LIBOR Loans having a Interest
Period ending after such Reduction Date PLUS (ii) the aggregate
maximum amount available for drawing under Letters of Credit
for which the expiry date is after such Reduction Date, does
not exceed the Commitment (after giving effect to any reduction
thereto scheduled to be made on such Reduction Date pursuant to
Section 2.6); and
(d) No Interest Period shall extend beyond the
Maturity Date.
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"INVESTMENT" means, when used in connection with any
Person, any investment by or of that Person, whether by means
of purchase or other acquisition of stock or other securities
of any other Person or by means of a loan, advance creating a
debt, capital contribution, guaranty or other debt or equity
participation or interest in any other Person, INCLUDING any
partnership and joint venture interests of such Person. The
amount of any Investment shall be the amount actually invested,
without adjustment for subsequent increases or decreases in the
value of such Investment.
"ISSUING LENDER" means Bank of America National Trust and
Savings Association, or any successor thereto.
"LAWS" means, collectively, all federal, state and local
statutes, rules, regulations, ordinances, codes and
administrative or judicial precedents, or other matters having
the force of law and binding upon the parties hereto.
"LENDERS" has the meaning set forth in the preamble
hereto.
"LETTERS OF CREDIT" means any of the Letters of Credit
issued by the Issuing Lender under the Commitment pursuant to
Section 2.4, either as originally issued or as the same may be
supplemented, modified, amended, renewed, extended or
supplanted.
"LIBOR" means, with respect to any LIBOR Loan, an interest
rate per annum (rounded upward, if necessary, to the nearest
1/16 of one percent) determined pursuant to the following
formula:
LIBOR Base Rate
LIBOR = -----------------------------
1.00 - Reserve Percentage
"LIBOR ADVANCE" means an Advance made hereunder and
specified to be a LIBOR Advance in accordance with Article 2.
"LIBOR LOAN" means a Loan made hereunder and specified to
be a LIBOR Loan in accordance with Article 2.
"LIBOR MARGIN" means, for each Pricing Period, the
percentage set forth opposite the Total Leverage Ratio as of
the last day of the Fiscal Quarter ending two months prior to
the first day of that Pricing Period:
<TABLE>
<CAPTION>
Total Leverage Ratio LIBOR Margin
-------------------- -------------
<S> <C>
Greater than or equal to 5.75:1.00 3.50%
Less than 5.75:1.00 but greater than
or equal to 5.25:1.00 3.25%
Less than 5.25:1.00 but greater than
or equal to 4.75:1.00 3.00%
Less than 4.75:1.00 but greater than
or equal to 4.25:1.00 2.75%
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Less than 4.25:1.00 but greater than
or equal to 3.75:1.00 2.50%
Less than 3.75:1.00 but greater than
or equal to 3.25:1.00 2.25%
Less than 3.25:1.00 but greater than
or equal to 2.75:1.00 1.75%
Less than 2.75:1.00 1.50%
</TABLE>
"LIBOR OFFICE" means, as to each Lender, its office or
branch so designated by written notice the Administrative Agent
as its LIBOR Office. If no LIBOR Office is designated by a
Lender, its LIBOR Office shall be its office at its address for
purposes of notices hereunder.
"LICENSE REVOCATION" means the revocation, failure to
renew or suspension of, or the appointment of a receiver,
supervisor or similar official with respect to, any casino,
gambling or gaming license issued by any Gaming Board covering
any casino or gaming facility of Borrower and its Subsidiaries.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment for security, security interest,
encumbrance, lien or charge of any kind, whether voluntarily
incurred or arising by operation of Law or otherwise, affecting
any Property, INCLUDING any agreement to grant any of the
foregoing, any conditional sale or other title retention
agreement, any lease in the nature of a security interest,
and/or the filing of or agreement to give any financing
statement (OTHER THAN a precautionary financing statement with
respect to a lease that is not in the nature of a security
interest) under the Uniform Commercial Code or comparable Law
of any jurisdiction with respect to any Property.
"LIQUIDITY REPORT" means a report in the form of Exhibit C
stating that Peter A. Morton owns as of the date of his
personal financial report delivered in accordance with Section
7.1, unencumbered Cash and Cash Equivalents in an amount not
less than $30,000,000 and signed by a Person authorized to
deliver the same on behalf of Peter A. Morton.
"LOAN" means the aggregate of the Advances made at any one
time by the Lenders pursuant to Article 2.
"LOAN DOCUMENTS" means, collectively, this Agreement, the
Notes, the Swing Line Documents, the Collateral Documents, any
Secured Swap Agreement, the Subordination Agreement, each
Request for Letter of Credit, each Request for Loan, the letter
described in Sections 3.2, 3.4, 3.5 and 3.6, each Compliance
Certificate, each Construction Progress Report and any other
agreements of any type or nature hereafter executed and
delivered by Borrower or any of its Subsidiaries or Affiliates,
or by Peter A. Morton, to the Administrative Agent or to any
Lender in any way relating to or in
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furtherance of this Agreement, in each case either as originally
executed or as the same may from time to time be supplemented,
modified, amended, restated, extended or supplanted.
"MAKE WELL AGREEMENT" means the Make Well Agreement,
executed by Peter A. Morton on the Closing Date, either as
originally executed or as it may from time to time be
supplemented, modified, amended, extended or supplanted.
"MAINTENANCE CAPITAL EXPENDITURES" means any Capital
Expenditure for the maintenance, repair, restoration or
refurbishment of any portion of the Hard Rock Hotel existing as
of the Closing Date (and after completion of the Proposed
Expansion, of the Proposed Expansion), but not any Capital
Expenditure which adds to or further improves such property.
"MARGIN STOCK" means "margin stock" as such term is
defined in Regulation G, T, U or X.
"MARKET DAY" means any Banking Day on which dealings in
Dollar deposits are conducted by and among banks in the
Designated Eurodollar Market.
"MATERIAL ADVERSE EFFECT" means any set of circumstances
or events which (a) has or could reasonably be expected to have
any material adverse effect whatsoever upon the validity or
enforceability of any Loan Document, (b) is or could reasonably
be expected to be material and adverse to the condition
(financial or otherwise), business operations or prospects of
Borrower and its Subsidiaries, taken as a whole, or
(c) materially impairs or could reasonably be expected to
materially impair the ability of Borrower and its Subsidiaries,
taken as a whole, to perform the Obligations.
"MATURITY DATE" means March 23, 2004.
"MULTIEMPLOYER PLAN" means any employee benefit plan of
the type described in Section 4001(a)(3) of ERISA.
"NEGATIVE PLEDGE" means a Contractual Obligation that
contains a covenant binding on Borrower or any of its
Subsidiaries that prohibits Liens on any of its or their
Property, OTHER THAN (a) any such covenant contained in a
Contractual Obligation granting a Lien permitted under Section
6.9 which affects only the Property that is the subject of such
permitted Lien and (b) any such covenant that does not apply to
Liens securing the Obligations.
"NET INCOME" means, with respect to any fiscal period, the
consolidated net income of Borrower and its Subsidiaries for
that period, determined in accordance with Generally Accepted
Accounting Principles, consistently applied.
"NET CASH PROCEEDS" means with respect to any Disposition
or any offerings of Indebtedness or equity securities of
Borrower or its Subsidiaries, the gross sales proceeds received
by Borrower and its Subsidiaries from such Disposition or
offering (INCLUDING Cash,
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Property and the assumption by the purchaser of any liability
of Borrower or its Subsidiaries) NET OF brokerage commissions,
legal expenses and other transactional costs payable by Borrower
and its Subsidiaries with respect to such Disposition and NET
OF an amount determined in good faith by Borrower to be the
estimated amount of income taxes payable by Borrower attributable
to such Disposition.
"NOTE" means any of the promissory notes made by Borrower
to a Lender evidencing Advances under that Lender's Pro Rata
Share of the Commitment, substantially in the form of Exhibit
D, either as originally executed or as the same may from time
to time be supplemented, modified, amended, renewed, extended
or supplanted.
"OBLIGATIONS" means all present and future obligations of
every kind or nature of Borrower or any other Obligor at any
time and from time to time owed to the Administrative Agent or
the Lenders or any one or more of them, under any one or more
of the Loan Documents, whether due or to become due, matured or
unmatured, liquidated or unliquidated, or contingent or
noncontingent, INCLUDING obligations of performance as well as
obligations of payment, and INCLUDING interest that accrues
after the commencement of any proceeding under any Debtor
Relief Law by or against Borrower or any Subsidiary or
Affiliate of Borrower.
"OBLIGOR" means any Person other than the Creditors, which
now or hereafter is a party to any of the Loan Documents.
"OPENING" means the date upon which (a) the Proposed
Expansion, together with each of the amenities described on
Schedule 1.1A, is open and ready to accommodate hotel guests
and gaming patrons, (b) a certificate of occupancy has been
issued with respect to the Proposed Expansion, and (c) Borrower
has delivered a Certificate to the Administrative Agent,
executed by a Senior Officer of Borrower, stating that (i) the
Proposed Expansion, including all related amenities described
on Schedule 1.1A, have been substantially completed in
accordance with applicable Laws, the Plans and the Budget, (ii)
the Proposed Expansion is free and clear of all record Liens
and encumbrances (other than Permitted Encumbrances and those
described in Schedule B to the Title Policy described in
Section 8.1(a)(20) other than any Liens and encumbrances which
are the subject of bonds and indemnities which are reasonably
acceptable to the Administrative Agent) and Borrower has paid
all known claims against the Proposed Expansion, and (iii)
Borrower has obtained all necessary licenses, permits and
approvals (including without limitation all permits and
licenses required under Gaming Laws) for the operation of the
Proposed Expansion.
"OPINIONS OF COUNSEL" means the favorable written legal
opinions of Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to Borrower and its Subsidiaries, and Gordon & Silver,
Ltd., special Nevada counsel to Borrower and its Subsidiaries,
in each case issued on the Closing Date, together with copies
of all factual certificates and legal opinions upon which such
counsel have relied.
"OUTSTANDING OBLIGATIONS" means, as of each date of
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determination, and giving effect to the making of any such
credit accommodations requested on that date, the SUM of (i)
the aggregate principal amount of the outstanding Loans, plus
(ii) the Swing Line Outstandings, PLUS (iii) the Aggregate
Effective Amount of all Letters of Credit.
"PBGC" means the Pension Benefit Guaranty Corporation or
any successor thereof established under ERISA.
"PENSION PLAN" means any "employee pension benefit plan"
(as such term is defined in Section 3(2) of ERISA), OTHER THAN
a Multiemployer Plan, which is subject to Title IV of ERISA and
is maintained by Borrower or any of its Subsidiaries or to
which Borrower or any of its Subsidiaries contributes or has an
obligation to contribute.
"PERMITTED ENCUMBRANCES" means:
(a) inchoate Liens incident to construction on or
maintenance of Real Property; or Liens incident to construction
on or maintenance of Real Property now or hereafter filed of
record for which adequate reserves have been set aside (or
deposits made pursuant to applicable Law) and which are being
contested in good faith by appropriate proceedings and have not
proceeded to judgment, PROVIDED that, by reason of nonpayment
of the obligations secured by such Liens, no such Real Property
is subject to a material risk of loss or forfeiture;
(b) Liens for taxes and assessments on Real Property
which are not yet past due; or Liens for taxes and assessments
on Real Property for which adequate reserves have been set
aside and are being contested in good faith by appropriate
proceedings and have not proceeded to judgment, PROVIDED that,
by reason of nonpayment of the obligations secured by such
Liens, no such Real Property is subject to a material risk of
loss or forfeiture;
(c) minor defects and irregularities in title to any
Real Property which in the aggregate do not materially impair
the fair market value or use of the Real Property for the
purposes for which it is or may reasonably be expected to be
held;
(d) easements, exceptions, licenses, reservations,
or other agreements for the purpose of pipelines, conduits,
cables, telecommunications, wire communication lines, power
lines and substations, streets, trails, walkways, drainage,
irrigation, water, and sewerage purposes, dikes, canals,
ditches, the removal of oil, gas, coal, or other minerals, and
other like purposes affecting Real Property, facilities, or
equipment which in the aggregate do not materially burden or
impair the fair market value or use of such Real Property for
the purposes for which it is or may reasonably be expected to
be held;
(e) rights reserved to or vested in any Governmental
Agency to control or regulate, or obligations or duties to any
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Governmental Agency with respect to, the use of any Real Property;
(f) rights reserved to or vested in any Governmental
Agency to control or regulate, or obligations or duties to any
Governmental Agency with respect to, any right, power,
franchise, grant, approval, license, or permit;
(g) present or future zoning laws and ordinances or
other Laws and ordinances restricting the occupancy, use, or
enjoyment of Real Property;
(h) statutory Liens, other than those described in
clauses (a) or (b) above, arising in the ordinary course of
business with respect to obligations which are not delinquent
or are being contested in good faith by appropriate
proceedings, PROVIDED that, if delinquent, adequate reserves
have been set aside with respect thereto and, by reason of
nonpayment, no Property is subject to a material risk of loss
or forfeiture;
(i) rights of tenants under leases and rental
agreements covering Real Property entered into in the ordinary
course of business of the Person owning such Real Property;
(j) Liens consisting of pledges or deposits to
secure obligations under workers' compensation laws or similar
legislation, including Liens of judgments thereunder which are
not currently dischargeable;
(k) other non-consensual Liens incurred in the
ordinary course of business but not in connection with an
extension of credit, which do not in the aggregate, when taken
together with all other Liens, materially impair the value or
use of the Property of Borrower and the Subsidiaries of
Borrower, taken as a whole; and
(l) the matters disclosed on Schedule B to the ALTA
lenders policy of title insurance delivered to the
Administrative Agent pursuant to Section 8.1(a).
"PERMITTED RIGHT OF OTHERS" means a Right of Others
consisting of (a) an interest (other than a legal or equitable
co-ownership interest, an option or right to acquire a legal or
equitable co-ownership interest and any interest of a ground
lessor under a ground lease), that does not materially impair
the value or use of Property for the purposes for which it is
or may reasonably be expected to be held, and (b) an option or
right to acquire a Lien that would be a Permitted Encumbrance.
"PERSON" means any individual or entity, INCLUDING a
trustee, corporation, limited liability company, general
partnership, limited partnership, joint stock company, trust,
estate, unincorporated organization, business association,
firm, joint venture, Governmental Agency, or other entity.
"PLANS" means all drawings, plans and specifications
prepared by or for Borrower or its Subsidiaries or Affiliates
with respect to
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the Proposed Expansion, as amended or supplemented from time
to time, and, if required, submitted to and approved by the Clark
County Building Department, all of which plans and specifications
describe and show the intended construction of the Proposed Expansion
and the labor and materials necessary for the construction thereof
together with the Budget.
"PRICING PERIOD" means (a) the period beginning on the
Closing Date and ending on April 30, 1998, and (b) each of the
succeeding three month periods beginning on each subsequent
May 1, August 1, November 1 and February 1.
"PROJECT SITE" means the 16.7 acre site which is the
location of the Hard Rock Hotel, including the proposed
location for the Proposed Expansion, which real property is
further described on the ALTA/ASCM Land Title Survey prepared
by HMH Engineering and Surveying, Inc. as their job 02031 dated
March 17, 1998.
"PROJECTIONS" means the financial projections dated
January 21, 1998, prepared based on information provided by
Borrower and previously delivered to the Administrative Agent.
"PROPERTY" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or
intangible.
"PROPOSED EXPANSION" means the proposed expansion of the
Hard Rock Hotel facility consisting of not less than 290 rooms,
swimming pool enhancements, three restaurants, a five story
parking structure (providing for not less than 1000 parking
spaces and a net increase of not less than 400 parking spaces
at the Project Site), a conference center, and including
without limitation the amenities described on Schedule 1.1A,
together with related furnishings and equipment.
"PRO RATA SHARE" means, as of each date of determination
and with respect to each Lender, the percentage of the
Commitment owned by that Lender (or, if the Commitment has been
terminated, the percentage of the Outstanding Obligations owned
by that Lender). The records of the Administrative Agent shall
be presumed to correctly reflect the Pro Rata Share of the
Lenders then party to the Loan Agreement.
"QUARTERLY PAYMENT DATE" means each May 31, August 31,
November 3[1] and February 28 (or, in a leap year, February 29)
to occur following the date of this Agreement.
"REAL PROPERTY" means, as of any date of determination,
all real Property then or theretofore owned, leased or occupied
by Borrower or any of its Subsidiaries, INCLUDING the Project
Site.
"REDUCTION AMOUNT" means, as to each Reduction Date, the
amount set forth opposite that Reduction Date below, or such
lesser amount to which that Reduction Amount may be reduced in
accordance with the second sentence of Section 2.5 or the last
sentence of Section 2.7:
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<TABLE>
<CAPTION>
Reduction Dates Reduction Amount
----------------- ----------------
<S> <C>
February 28, 2000 $2,175,000
May 31, 2000 $2,175,000
August 31, 2000 $2,175,000
November 30, 2000 $2,175,000
February 28, 2001 $3,262,500
May 31, 2001 $3,262,500
August 31, 2001 $3,262,500
November 30, 2001 $3,262,500
February 28, 2002 $3,262,500
May 31, 2002 $3,262,500
August 31, 2002 $3,262,500
November 30, 2002 $3,262,500
February 28, 2003 $3,262,500
May 31, 2003 $3,262,500
August 31, 2003 $3,262,500
November 30, 2003 $3,262,500
February 28, 2004 $4,785,000
Maturity Date $14,365,000
</TABLE>
"REDUCTION DATE" means February 28, 2000, and the last day
of each succeeding May, August, November and February through
the Maturity Date.
"REFERENCE RATE" means the rate of interest publicly
announced from time to time by Bank of America in
San Francisco, California, as its "reference rate." It is a
rate set by Bank of America based upon various factors
including Bank of America's costs and desired return, general
economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at,
above, or below such announced rate. Any change in the
Reference Rate announced by Bank of America shall take effect
at the opening of business on the day specified in the public
announcement of such change.
"REGULATION D" means Regulation D, as at any time amended,
of the Board of Governors of the Federal Reserve System, or any
other regulation in substance substituted therefor.
"REGULATIONS G, T, U and X" means Regulations G, T, U
and X, as at any time amended, of the Board of Governors of the
Federal Reserve System, or any other regulations in substance
substituted therefor.
"REQUEST FOR LETTER OF CREDIT" means a written request for
a Letter of Credit substantially in the form of Exhibit E,
signed by a Responsible Official of Borrower, on its behalf,
and properly completed to provide all information required to
be included therein.
"REQUEST FOR LOAN" means a written request for a Loan
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substantially in the form of Exhibit F, signed by a Responsible
Official of Borrower and properly completed to provide all
information required to be included therein.
"REQUIREMENT OF LAW" means, as to any Person, the articles
or certificate of incorporation and by-laws or other
organizational or governing documents of such Person, and any
Law, or judgment, award, decree, writ or determination of a
Governmental Agency, in each case applicable to or binding upon
such Person or any of its Property or to which such Person or
any of its Property is subject.
"REQUISITE LENDERS" means, as of each date of
determination (a) if the Commitment is then in effect, Lenders
having Pro Rata Shares constituting 66 2/3% or more of the
Commitment, and (b) if the Commitment has then been terminated
and there are then any Obligations outstanding, Lenders holding
66 2/3% or more of the Outstanding Obligations.
"RESERVE PERCENTAGE" means, with respect to any LIBOR
Loan, the maximum reserve percentage (expressed as a decimal,
rounded upward, if necessary, to the nearest 1/100th of 1%) in
effect on the date the LIBOR Base Rate for that LIBOR Loan is
determined (whether or not applicable to any Lender) under
regulations issued from time to time by the Federal Reserve
Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal
reserve requirement) with respect to eurocurrency funding
(currently referred to as "eurocurrency liabilities") having a
term comparable to the Interest Period for such LIBOR Loan.
The determination by the Administrative Agent of any applicable
Reserve Percentage shall be conclusive in the absence of
manifest error.
"RESPONSIBLE OFFICIAL" means (a) when used with reference
to a Person other than an individual, any officer of such
Person, general partner of such Person, officer of a corporate
general partner of such Person, or corporate officer of a
corporate general partner of a partnership that is a general
partner of such Person, or any other responsible official
thereof duly acting on behalf thereof, and (b) when used with
reference to a Person who is an individual, such Person. Any
document or certificate hereunder that is signed or executed by
a Responsible Official of another Person shall be conclusively
presumed to have been authorized by all necessary corporate,
partnership and/or other action on the part of such other
Person.
"RIGHT OF OTHERS" means, as to any Property in which a
Person has an interest, any legal or equitable right, title or
other interest (other than a Lien) held by any other Person in
that Property, and any option or right held by any other Person
to acquire any such right, title or other interest in that
Property, INCLUDING any option or right to acquire a Lien.
"SECURED SWAP AGREEMENT" means a Swap Agreement between
Borrower and a Lender.
"SECURITY AGREEMENT" means the security agreement executed
and
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delivered by Borrower on the Closing Date, either as
originally executed or as it may from time to time be
supplemented, modified, amended, extended or supplanted.
"SENIOR DEBT" means, as of each date of determination,
Total Debt MINUS Subordinated Obligations.
"SENIOR LEVERAGE RATIO" means, as of the last day of each
Fiscal Quarter, the ratio of (a) the average principal amount
of the outstanding Senior Debt as of the last day of each of
the three constituent calendar months in that Fiscal Quarter,
to (b) Annualized EBITDA as of such date.
"SENIOR OFFICER" means the (a) chief executive officer,
(b) president, (c) any vice president, (d) chief financial
officer, (e) treasurer or (f) assistant treasurer of the Person
designated.
"SPECIAL LIBOR CIRCUMSTANCE" means the application or
adoption after the Closing Date of any Law or interpretation,
or any change therein or thereof, or any change in the
interpretation or administration thereof by any Governmental
Agency, central bank or comparable authority charged with the
interpretation or administration thereof, or compliance by any
Lender or its LIBOR Office with any request or directive
(whether or not having the force of Law) of any such
Governmental Agency, central bank or comparable authority, or
the existence or occurrence of circumstances affecting the
Designated Eurodollar Market generally that are beyond the
reasonable control of the Lenders.
"SUBORDINATED OBLIGATIONS" means (a) the Indebtedness of
Borrower pursuant to the Indenture, and (B) any other
Indebtedness of Borrower which is subordinated in right of
payment to the Obligations, the terms of which are approved by
the Administrative Agent, acting with the consent of the
Requisite Lenders, in writing.
"SUBORDINATION AGREEMENT" means the Subordination
Agreement, executed by Peter A. Morton regarding Supervisory
Fees on the Closing Date, either as originally executed or as
it may from time to time be supplemented, modified, amended,
extended or supplanted.
"SUBSIDIARY" means, as of any date of determination and
with respect to any Person, any corporation, limited liability
company or partnership (whether or not, in either case,
characterized as such or as a "joint venture"), whether now
existing or hereafter organized or acquired: (a) in the case
of a corporation or limited liability company, of which a
majority of the securities having ordinary voting power for the
election of directors or other governing body (other than
securities having such power only by reason of the happening of
a contingency) are at the time beneficially owned by such
Person and/or one or more Subsidiaries of such Person, or
(b) in the case of a partnership, of which a majority of the
partnership or other ownership interests are at the time
beneficially owned by such Person and/or one or more of its
Subsidiaries.
"SUPERVISORY FEES" means fees paid to Peter A. Morton on a
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monthly basis pursuant to the Amended and Restated Supervisory
Agreement dated as of October 21, 1997, between Peter A. Morton
and Borrower, as in effect on the Closing Date.
"SWAP AGREEMENT" means a written agreement between
Borrower and one or more financial institutions providing for
"swap", "cap", "collar" or other interest rate protection with
respect to any Indebtedness.
"SWING LINE" means the revolving line of credit
established by the Swing Line Lender in favor of Borrower
pursuant to Section 2.9.
"SWING LINE ADVANCES" means loans made by the Swing Line
Lender to Borrower pursuant to Section 2.9.
"SWING LINE LENDER" means Bank of America, through its
Nevada Commercial Banking Division, or any successor thereto.
"SWING LINE DOCUMENTS" means the $2,000,000 promissory
note of even date herewith (as at any time amended) and any
other documents executed by Borrower in favor of the Swing Line
Lender in connection with the Swing Line.
"SWING LINE OUTSTANDINGS" means, as of any date of
determination, the aggregate principal Indebtedness of Borrower
on all Swing Line Loans then outstanding.
"TIMETABLE" means the construction timetable attached
hereto as Schedule 1.1B, together with any modifications
thereto approved by the Requisite Lenders.
"TITLE COMPANY" means Commonwealth Land Title Insurance
Company or such other title insurance company as is reasonably
acceptable to the Administrative Agent.
"TOTAL DEBT" means, as of each date of determination, the
aggregate principal Indebtedness of Borrower and its
Subsidiaries for borrowed money and Capital Lease Obligations
on that date (including any Contingent Obligations in support
of such Indebtedness or Capital Lease Obligations to the extent
then required by Borrower's independent auditors to be shown on
Borrower's consolidated balance sheet as of that date in
accordance with Generally Accepted Accounting Principles).
"TOTAL LEVERAGE RATIO" means, as of the last day of each
Fiscal Quarter, the ratio of (a) the average principal amount
of the outstanding Total Debt as of the last day of each of the
three constituent calendar months in that Fiscal Quarter, to
(b) Annualized EBITDA as of such date.
"TO THE BEST KNOWLEDGE OF" means, when modifying a representation,
warranty or other statement or any Person, that the fact or situation
described therein is known by the Person (or, in the case of a Person
other than a natural Person, known by a Responsible Official of that
Person) making the representation,
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warranty or other statement, or with the exercise of reasonable due
diligence under the circumstances (in accordance with the standard of what
a reasonable Person in similar circumstances would have done) would have
been known by the Person (or, in the case of a Person other than a natural
Person, would have been known by a Responsible Official of that Person).
"TRADEMARK ASSIGNMENT" means the Trademark Security
Interest Assignment, executed by Borrower on the Closing Date,
either as originally executed or as it may from time to time be
supplemented, modified, amended, extended or supplanted.
"TRIGGER DATE" means the date, not earlier than one year
following the Opening, upon which Borrower has delivered a
Compliance Certificate indicating that the Total Leverage Ratio
as of that date is less than 4.25:1.00.
"TYPE", when used with respect to any Loan or Advance,
means the designation of whether such Loan or Advance is a Base
Rate Loan or Advance, or a LIBOR Loan or Advance.
"UNRELATED PERSON" means any Person OTHER THAN (i) an
employee stock ownership plan or other employee benefit plan
covering the employees of Borrower and its Subsidiaries or
(ii) an Affiliate of any Person or group of related Persons
which as of the date of this Agreement is the beneficial owner
of 25% or more (in the aggregate) of the outstanding common
stock of Borrower.
1.2 USE OF DEFINED TERMS. Any defined term used in the
plural shall refer to all members of the relevant class, and any
defined term used in the singular shall refer to any one or more of
the members of the relevant class.
1.3 ACCOUNTING TERMS. All accounting terms not
specifically defined in this Agreement shall be construed in
conformity with, and all financial data required to be submitted by
this Agreement shall be prepared in conformity with, Generally
Accepted Accounting Principles applied on a consistent basis, EXCEPT
as otherwise specifically prescribed herein. In the event that
Generally Accepted Accounting Principles change during the term of
this Agreement such that the covenants contained in Sections 6.12
through 6.14 would then be calculated in a different manner or with
different components, (a) Borrower and the Lenders agree to amend this
Agreement in such respects as are necessary to conform those covenants
as criteria for evaluating Borrower's financial condition to
substantially the same criteria as were effective prior to such change
in Generally Accepted Accounting Principles and (b) Borrower shall be
deemed to be in compliance with the covenants contained in the
aforesaid Sections during the 120-day period following any such change
in Generally Accepted Accounting Principles if and to the extent that
Borrower would have been in compliance therewith under Generally
Accepted Accounting Principles as in effect immediately prior to such
change.
1.4 ROUNDING. Any financial ratios required to be
maintained by Borrower pursuant to this Agreement shall be calculated
by dividing the appropriate component by the other component, carrying
the result to one place more than the number of places by which such
ratio is expressed in
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this Agreement and rounding the result up or down to the nearest number (with
a round-up if there is no nearest number) to the number of places by which
such ratio is expressed in this Agreement.
1.5 EXHIBITS AND SCHEDULES. All Exhibits and Schedules
to this Agreement, either as originally existing or as the same may
from time to time be supplemented, modified or amended, are
incorporated herein by this reference.
1.6 REFERENCES TO "BORROWER AND ITS SUBSIDIARIES". Any
reference herein to "Borrower and its Subsidiaries" or the like shall
refer solely to Borrower during such times as Borrower shall have no
Subsidiaries. No use of the term "Subsidiary" or any derivative
thereof in the Loan Documents shall imply a right in Borrower to make
any Investments in or Acquisitions of any Person.
1.7 REFERENCES TO TIMES. Each reference to a time of day
set forth in the Loan Documents shall, unless expressly stated to the
contrary, be a reference to the then prevailing time in the city in
which the Administrative Agent's Office is located.
1.8 MISCELLANEOUS TERMS. The term "or" is disjunctive;
the term "and" is conjunctive. The term "shall" is mandatory; the
term "may" is permissive. Masculine terms also apply to females;
feminine terms also apply to males. The term "including" is by way of
example and not limitation.
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Article 2
LOANS
2.1 LOANS-GENERAL.
(a) Subject to the terms and conditions set forth in
this Agreement, from time to time from the Closing Date through
the Maturity Date each Lender shall, pro rata according to that
Lender's Pro Rata Share of the then applicable Commitment, make
revolving Advances to Borrower under the Commitment in such
amounts as Borrower may request that do not result in the
Outstanding Obligations being in excess of the Commitment.
Subject to the limitations set forth herein, Borrower may
borrow, repay and reborrow under the Commitment without premium
or penalty.
(b) Subject to the next sentence, each Loan shall be
made pursuant to a Request for Loan which shall specify the
requested (i) date of such Loan, (ii) type of Loan,
(iii) amount of such Loan, and (iv) in the case of a LIBOR
Loan, the Interest Period for such Loan. Unless the
Administrative Agent has previously notified Borrower to the
contrary (which notice may be given in the sole and absolute
discretion of the Administrative Agent), Loans may be requested
by telephone by a Responsible Official of Borrower, in which
case Borrower shall confirm such request by promptly delivering
a Request for Loan in person or by telecopier conforming to the
preceding sentence to the Administrative Agent. Neither the
Administrative Agent nor any Lender shall incur any liability
whatsoever hereunder in acting upon any telephonic request for
a Loan purportedly made by a Responsible Official of Borrower,
which hereby agrees to indemnify the Administrative Agent and
the Lenders from any loss, cost, expense or liability as a
result of so acting.
(c) Promptly following receipt of a Request for
Loan, the Administrative Agent shall notify each Lender by
telephone or telecopier (and if by telephone, promptly
confirmed by telecopier) of the date and type of the Loan, the
applicable Interest Period, and that Lender's Pro Rata Share of
the Loan. Not later than 11:00 a.m. on the date specified for
any Loan (which must be a Banking Day), each Lender shall make
its Pro Rata Share of the Loan in immediately available funds
available to the Administrative Agent at the Administrative
Agent's Office. Upon satisfaction or waiver of the applicable
conditions set forth in Article 8, all Advances shall be
credited on that date in immediately available funds to the
Disbursement Account.
(d) Unless the Requisite Lenders otherwise consent,
each Loan shall be in an amount which is an integral multiple
of $500,000 which, in the case of any LIBOR Loan, is not less
than $1,000,000.
(e) The Advances made by each Lender shall be
evidenced by that Lender's Note.
(f) A Request for Loan shall be irrevocable upon the
Administrative Agent's receipt thereof (or, in the case of a
telephonic request for Loan referred to in the second sentence
of Section 2.1(b), upon the Administrative Agent's receipt of
that
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telephone call).
(g) If no Request for Loan (or telephonic request
for Loan referred to in the second sentence of Section 2.1(b),
if applicable) has been made within the requisite notice
periods set forth in Section 2.2 or 2.3 in connection with a
Loan which, if made and giving effect to the application of the
proceeds thereof, would not increase the outstanding principal
Indebtedness evidenced by the Notes, then Borrower shall be
deemed to have requested, as of the date upon which the related
then outstanding Loan is due pursuant to Section 3.1(e), a Base
Rate Loan in an amount equal to the amount necessary to cause
the outstanding principal Indebtedness evidenced by the Notes
to remain the same and the Lenders shall make the Advances
necessary to make such Loan notwithstanding Sections 2.1(b),
2.2 and 2.3.
(h) If a Loan is to be made on the same date that
another Loan is due and payable, Borrower or the Lenders, as
the case may be, shall at the request of the Administrative
Agent make available to the Administrative Agent the net amount
of funds giving effect to both such Loans and the effect for
purposes of this Agreement shall be the same as if separate
transfers of funds had been made with respect to each such
Loan.
2.2 BASE RATE LOANS. Each request by Borrower for a Base
Rate Loan shall be made pursuant to a Request for Loan (or telephonic
or other request for loan referred to in the second sentence of
Section 2.1(b), if applicable) received by the Administrative Agent,
at the Administrative Agent's Office, not later than 10:00 a.m. on the
date (which must be a Banking Day) of the requested Base Rate Loan.
All Loans shall constitute Base Rate Loans unless properly designated
as LIBOR Loans pursuant to Section 2.3.
2.3 LIBOR LOANS.
(a) Each request by Borrower for a LIBOR Loan shall
be made pursuant to a Request for Loan (or telephonic or other
request for Loan referred to in the second sentence of
Section 2.1(b), if applicable) received by the Administrative
Agent, at the Administrative Agent's Office, not later than
10:00 a.m. at least three Market Days before the first day of
the applicable Interest Period.
(b) On the date which is two Market Days before the
first day of the applicable Interest Period, the Administrative
Agent shall confirm its determination of the applicable LIBOR
(which determination shall be conclusive in the absence of
manifest error) and promptly shall give notice of the same to
Borrower and the Lenders by telephone or telecopier (and if by
telephone, promptly confirmed by telecopier).
(c) Unless the Administrative Agent and the
Requisite Lenders otherwise consent, no more than twelve LIBOR
Loans shall be outstanding at any one time.
(d) No LIBOR Loan may be requested where a Default
or Event of Default has occurred and remains continuing.
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(e) Nothing contained herein shall require any
Lender to fund any LIBOR Advance in the Designated Eurodollar
Market.
2.4 LETTERS OF CREDIT.
(a) Subject to the terms and conditions hereof, at
any time and from time to time from the Closing Date through
the Banking Day immediately prior to the Maturity Date, the
Issuing Lender shall issue such Letters of Credit under the
Commitment as Borrower may request by a Request for Letter of
Credit; PROVIDED that (i) giving effect to all such Letters of
Credit, the Outstanding Obligations do not exceed the then
applicable Commitment and (ii) the Aggregate Effective Amount
under all outstanding Letters of Credit shall not exceed
$2,000,000. Each Letter of Credit shall be in a form
reasonably acceptable to the Issuing Lender. Unless all the
Lenders otherwise consent in a writing delivered to the
Administrative Agent, no Letter of Credit shall have a term
which exceeds one year or extends beyond the Maturity Date.
(b) Each Request for Letter of Credit shall be
submitted to the Issuing Lender, with a copy to the
Administrative Agent, at least two Banking Days prior to the
date upon which the related Letter of Credit is proposed to be
issued. The Administrative Agent shall promptly notify the
Issuing Lender whether such Request for Letter of Credit, and
the issuance of a Letter of Credit pursuant thereto, conforms
to the requirements of this Agreement. Upon issuance of a
Letter of Credit, the Issuing Lender shall promptly notify the
Administrative Agent, who shall promptly notify the Lenders, of
the amount and terms thereof.
(c) Upon the issuance of a Letter of Credit, each
Lender shall be deemed to have purchased a pro rata
participation in such Letter of Credit from the Issuing Lender
in an amount equal to that Lender's Pro Rata Share. Without
limiting the scope and nature of each Lender's participation in
any Letter of Credit, to the extent that the Issuing Lender has
not been reimbursed by Borrower for any payment required to be
made by the Issuing Lender under any Letter of Credit, each
Lender shall, pro rata according to its Pro Rata Share, pay the
purchase price for such participation to the Issuing Lender
through the Administrative Agent promptly upon demand therefor.
The obligation of each Lender to so pay the participation
purchase price to the Issuing Lender shall be absolute and
unconditional and shall not be affected by the occurrence of an
Event of Default or any other occurrence or event. Any such
payment of the purchase price shall not relieve or otherwise
impair the obligation of Borrower to reimburse the Issuing
Lender for the amount of any payment made by the Issuing Lender
under any Letter of Credit together with interest as
hereinafter provided.
(d) Borrower agrees to pay to the Issuing Lender
through the Administrative Agent an amount equal to any payment
made by the Issuing Lender with respect to each Letter of
Credit upon demand by the Issuing Lender therefor, together
with interest on such amount from the date of any payment made
by the Issuing Lender at the Default Rate. The principal
amount of any such payment shall be used to reimburse the
Issuing Lender for the payment made by it under the Letter of
Credit and, to the extent that the Lenders have not reimbursed
the Issuing Lender pursuant to Section 2.4(c), the
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interest amount of any such payment shall be for the account of the
Issuing Lender. Each Lender that has paid the participation
purchase price to the Issuing Lender pursuant to Section 2.4(c)
shall thereupon acquire a pro rata participation, to the extent
of such payment, in the claim of the Issuing Lender against
Borrower for reimbursement of principal and interest under this
Section 2.4(d) and shall share, in accordance with that
pro rata participation, in any principal payment made by
Borrower with respect to such claim and in any interest payment
made by Borrower (but only with respect to periods subsequent
to the date such Lender paid the participation purchase price
to the Issuing Lender) with respect to such claim.
(e) Borrower may, pursuant to a Request for Loan,
request that Advances be made pursuant to Section 2.1(a) to
provide funds for the payment required by Section 2.4(d) and,
for this purpose, the conditions precedent set forth in
Article 8 shall not apply. The proceeds of such Advances shall
be paid directly to the Issuing Lender to reimburse it for the
payment made by it under the Letter of Credit.
(f) If Borrower fails to make the payment required
by Section 2.4(d) on a timely basis then, in lieu of the
payment of the participation purchase price to the Issuing
Lender under Section 2.4(c), the Issuing Lender may (but is not
required to), without notice to or the consent of Borrower,
instruct the Administrative Agent to cause Base Rate Advances
to be made by the Lenders under their Pro Rata Shares of the
Commitment in an aggregate amount equal to the amount paid by
the Issuing Lender with respect to that Letter of Credit and,
for this purpose, the conditions precedent to Advances set
forth in Article 8 shall not apply. The proceeds of such
Advances shall be paid directly to the Issuing Lender to
reimburse it for the payment made by it under the Letter of
Credit.
(g) The issuance of any supplement, modification,
amendment, renewal, or extension to or of any Letter of Credit
shall be treated in all respects the same as the issuance of a
new Letter of Credit, PROVIDED that this clause (g) shall not
require the payment of any letter of credit fees except to the
extent that such supplementation, modification, amendment,
renewal or extension results in an increase to the amount of
the related Letter of Credit or any extension of its tenor.
(h) The obligation of Borrower to pay to the Issuing
Lender the amount of any payment made by the Issuing Lender
under any Letter of Credit shall be absolute, unconditional,
and irrevocable, subject only to performance by the Issuing
Lender of its obligations to Borrower under Uniform Commercial
Code Section 5109, as in effect in the State of Nevada.
Without limiting the foregoing, the obligations of Borrower to
the Issuing Lender shall not be affected by any of the
following circumstances:
(i) any lack of validity or enforceability of the
Letter of Credit, this Agreement, or any other Agreement or
instrument relating thereto;
(ii) any amendment or waiver of the terms of the
Letter of Credit, or any consent to departure from the
Letter of Credit, this Agreement, or any other Agreement or
instrument
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relating thereto;
(iii) the existence of any claim, setoff, defense,
or other rights which Borrower may have at any time against
any Creditor, any beneficiary of the Letter of Credit (or
any persons or entities for whom any such beneficiary may be
acting) or any other Person, whether in connection with the
Letter of Credit, this Agreement, or any other Agreement or
instrument relating thereto, or any unrelated transactions;
(iv) any demand, statement, or any other document
presented under the Letter of Credit proving to be forged,
fraudulent, invalid, or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect
whatsoever so long as any such document appeared to comply
with the terms of the Letter of Credit;
(v) payment by the Issuing Lender in good faith
under the Letter of Credit against presentation of a draft
or any accompanying document which does not strictly comply
with the terms of the Letter of Credit;
(vi) the existence, character, quality, quantity,
condition, packing, value or delivery of any Property
purported to be represented by documents presented in
connection with any Letter of Credit or any difference
between any such Property and the character, quality,
quantity, condition, or value of such Property as described
in such documents;
(vii) the time, place, manner, order or contents of
shipments or deliveries of Property as described in
documents presented in connection with any Letter of Credit
or the existence, nature and extent of any insurance
relative thereto;
(viii) the solvency or financial responsibility of
any party issuing any documents in connection with a Letter
of Credit;
(ix) any failure or delay in notice of shipments
or arrival of any Property;
(x) any error in the transmission of any message
relating to a Letter of Credit, or any delay or interruption
in any such message, not caused by the Issuing Lender;
(xi) any error, neglect or default of any
correspondent of the Issuing Lender in connection with a
Letter of Credit (but without prejudice to any claim by
Borrower against such correspondent);
(xii) any consequence arising from acts of God,
war, insurrection, civil unrest, disturbances, labor
disputes, emergency conditions or other causes beyond the
control of the Issuing Lender;
(xiii) so long as the Issuing Lender in good faith
determines that the contract or document appears to comply
with the terms of the Letter of Credit, the form, accuracy,
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genuineness or legal effect of any contract or document
referred to in any document submitted to the Issuing Lender
in connection with a Letter of Credit; and
(xiv) where the Issuing Lender has acted in good
faith and observed general banking usage, any other
circumstances whatsoever.
(i) The Issuing Lender shall be entitled to the
protection accorded to the Administrative Agent pursuant to
Article 10, mutatis mutandis.
(j) The Uniform Customs and Practice for Documentary
Credits, as published in its most current version by the
International Chamber of Commerce, shall be deemed a part of
this Section and shall apply to all Letters of Credit to the
extent not inconsistent with applicable Law.
2.5 VOLUNTARY REDUCTION OF COMMITMENT. Borrower shall
have the right, at any time and from time to time, without penalty or
charge, upon at least three Banking Days' prior written notice by
Borrower to the Administrative Agent, to voluntarily reduce,
permanently and irrevocably, in amounts which are integral multiples
of $500,000, or to terminate, all or a portion of the then undisbursed
portion of the Commitment, PROVIDED that any such reduction or
termination shall be accompanied by payment of all accrued and unpaid
commitment fees with respect to the portion of the Commitment being
reduced or terminated. Concurrently with the making of any such
reduction in the Commitment, Borrower may specify that the Reduction
Amounts for one or more Reduction Dates will be reduced in an
aggregate amount which is the same as the amount of the reduction of
the Commitment, PROVIDED that in the absence of a timely specification
to this effect by Borrower, each such reduction shall be applied to
Reduction Amounts in the inverse order of their occurrence. The
Administrative Agent shall promptly notify the Lenders of any
reduction or termination of the Commitment under this Section, and of
any changes to the Reduction Amounts.
2.6 SCHEDULED MANDATORY REDUCTIONS OF COMMITMENT. The
Commitment shall automatically and permanently reduce on each
Reduction Date by the related Reduction Amount.
2.7 OTHER MANDATORY REDUCTIONS OF COMMITMENT. The
Commitment shall automatically and permanently reduce (a) on April 1,
2000 by an amount equal to 80% of Excess Cash Flow for the Fiscal Year
ending November 30, 1999, and thereafter on each April 1 by an amount
equal to 80% of Excess Cash Flow for the then most recently ended
Fiscal Year, and (b) upon receipt by Borrower or any of its
Subsidiaries thereof, by an amount equal to 100% of the Net Cash
Proceeds from offerings of Indebtedness or equity securities of
Borrower or its Subsidiaries; PROVIDED, however, that the requirements
of this Section shall terminate on the Trigger Date. The Commitment
shall also automatically and permanently reduce on the date of any
payment by Peter Morton under the Make Well Agreement in the amount of
such payment. Each reduction of the Commitment pursuant to this
Section 2.7 shall be applied to Reduction Amounts in the inverse order
of their occurrence.
2.8 ADMINISTRATIVE AGENT'S RIGHT TO ASSUME FUNDS
AVAILABLE FOR ADVANCES. Unless the Administrative Agent shall have
been notified by a Lender no later than the Banking Day prior to the
funding by the
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Administrative Agent of any Loan that such Lender does not intend to make
available to the Administrative Agent such Lender's Pro Rata Share of that
Loan, the Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent on the date of the Loan and the
Administrative Agent may, in reliance upon such assumption, make available to
Borrower a corresponding amount. If the Administrative Agent has made funds
available to Borrower based on such assumption and such corresponding amount
is not in fact made available to the Administrative Agent by such Lender, the
Administrative Agent shall be entitled to recover such corresponding amount
on demand from such Lender. If such Lender does not pay such corresponding
amount forthwith upon the Administrative Agent's demand therefor, the
Administrative Agent promptly shall notify Borrower and Borrower shall pay
such corresponding amount to the Administrative Agent. The Administrative
Agent also shall be entitled to recover from such Lender interest on such
corresponding amount in respect of each day from the date such corresponding
amount was made available by the Administrative Agent to Borrower to the date
such corresponding amount is recovered by the Administrative Agent, at a rate
per annum equal to (a) the Federal Funds Rate for the first two days
following a demand by the Administrative Agent and (b) thereafter, the rate
of interest then payable by Borrower with respect to Base Rate Advances.
Nothing herein shall be deemed to relieve any Lender from its obligation to
fulfill its share of the Commitment or to prejudice any rights which the
Administrative Agent or Borrower may have against any Lender as a result of
any default by such Lender hereunder.
2.9 SWING LINE. Subject to the terms and conditions set
forth herein, from time to time through the day prior to the Maturity
Date the Swing Line Lender shall make Swing Line Advances to Borrower
in such amounts as Borrower may request that do not result in the
Outstanding Obligations being in excess of the then applicable
Commitment, PROVIDED that (i) giving effect to such Swing Line
Advance, the Swing Line Outstandings shall not exceed $2,000,000 and
(ii) without the consent of all of the Lenders, no Swing Line Advance
may be made during the continuation of a Default or an Event of
Default. Borrower may borrow, repay and reborrow under this Section.
Unless the Swing Line Lender otherwise agrees, each Swing Line Advance
shall be in an amount which is an integral multiple of $100,000 and
shall be made pursuant to a telephonic request by a Responsible
Official of Borrower made to the Swing Line Lender not later than
3:00 p.m., Las Vegas time, on the Banking Day of the requested
borrowing (which telephonic request shall be promptly confirmed in
writing by telecopier with a copy submitted by telecopier to the
Administrative Agent). Promptly after receipt of such a request for
borrowing, the Swing Line Lender shall obtain telephonic verification
from the Administrative Agent that, giving effect to such request,
availability for Loans will exist under Section 2.1 (and such
verification shall be promptly confirmed in writing by telecopier).
Unless the Swing Line Lender otherwise agrees, each repayment of a
Swing Line Advance shall be in an amount which is an integral multiple
of $100,000. If Borrower instructs the Swing Line Lender to debit its
demand deposit account at the Swing Line Lender in the amount of any
payment with respect to a Swing Line Advance, or the Swing Line Lender
otherwise receives repayment, after 3:00 p.m., Las Vegas time, on a
Banking Day, such payment shall be deemed received on the next Banking
Day. The Swing Line Lender shall promptly notify the Administrative
Agent of the Swing Line Outstandings each time there is a change
therein.
Swing Line Advances shall bear interest at a fluctuating
rate per annum equal to the Base Rate PLUS the Base Rate Margin,
payable upon
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demand or at such intervals as may be specified by the
Swing Line Lender and in any event on the Maturity Date. The Swing
Line Lender shall be responsible for invoicing Borrower for such
interest. The interest payable on Swing Line Advances shall be solely
for the account of the Swing Line Lender, except to the extent that
any Lender has funded the participation purchased by that Lender in
accordance with this Section.
The Swing Line Advances shall be payable on demand made by
the Swing Line Lender and in any event on the Maturity Date.
Upon the making of a Swing Line Advance, each Lender shall
be deemed to have purchased from the Swing Line Lender a participation
therein in an amount equal to that Lender's Pro Rata Share TIMES the
amount of the Swing Line Advance. Upon demand made by the Swing Line
Lender through the Administrative Agent, each Lender shall, according
to its Pro Rata Share, promptly provide to the Administrative Agent
for the account of the Swing Line Lender its purchase price therefor
in an amount equal to its participation therein. The obligation of
each Lender to so provide its purchase price to the Swing Line Lender
with respect to any Swing Line Advance made in accordance with the
terms hereof shall be absolute and unconditional and shall not be
affected by the occurrence of a Default or Event of Default or any
other occurrence or event.
In the event that there are Swing Line Outstandings on
three consecutive Banking Days, then on the next Banking Day (unless
Borrower has made other arrangements acceptable to the Swing Line
Lender to repay the Swing Line Outstandings in full), Borrower shall
request a Loan pursuant to Section 2.1(a) in an amount complying with
Section 2.1(d) and sufficient to repay the Swing Line Outstandings in
full. The Administrative Agent shall automatically provide such
amount to the Swing Line Lender (which the Swing Line Lender shall
then apply to the Swing Line Outstandings) and credit any balance of
the Loan in immediately available funds to the Disbursement Account.
In the event that Borrower fails to request a Loan within the time
specified by Section 2.2 on any such date, the Administrative Agent
may, but is not required to, without notice to or the consent of
Borrower, cause Advances to be made by the Lenders under the
Commitment in the amount necessary to comply with Section 2.1(d) and
sufficient to repay all Swing Line Outstandings and, for this purpose,
the conditions precedent set forth in Article 8 shall not apply. The
proceeds of such Advances shall be paid to the Swing Line Lender for
application to the Swing Line Outstandings.
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Article 3
PAYMENTS AND FEES
3.1 PRINCIPAL AND INTEREST.
(a) Interest shall be payable on the outstanding
daily unpaid principal amount of each Advance from the date
thereof until payment in full is made and shall accrue and be
payable at the rates set forth or provided for herein before
and after default, before and after maturity, before and after
judgment, and before and after the commencement of any
proceeding under any Debtor Relief Law, with interest on
overdue interest at the Default Rate to the fullest extent
permitted by applicable Laws.
(b) Interest accrued on each Base Rate Loan on the
last Banking Day of each calendar month, and on the date of any
prepayment of the Notes pursuant to Section 3.1(f), shall be
due and payable on that day. EXCEPT as otherwise provided in
Section 3.9, the unpaid principal amount of each Base Rate Loan
shall bear interest at a fluctuating rate per annum equal to
the Base Rate PLUS the Base Rate Margin. Each change in the
interest rate under this Section 3.1(b) due to a change in the
Base Rate shall take effect simultaneously with the
corresponding change in the Base Rate.
(c) Interest accrued on each LIBOR Loan which is for
a term of three months or less shall be due and payable on the
last day of the related Interest Period. Interest accrued on
each other LIBOR Loan shall be due and payable on the date
which is three months after the date such LIBOR Loan was made
and on the last day of the related Interest Period. EXCEPT as
otherwise provided in Sections 3.1(d) and 3.9, the unpaid
principal amount of any LIBOR Loan shall bear interest at a
rate per annum equal to the LIBOR for that LIBOR Loan PLUS the
LIBOR Margin.
(d) During the existence of a Default or Event of
Default, the Requisite Lenders may determine that any or all
then outstanding LIBOR Loans shall be converted to Base Rate
Loans. Such conversion shall be effective upon notice to
Borrower from the Requisite Lenders (or from the Administrative
Agent on behalf of the Requisite Lenders) and shall continue so
long as such Default or Event of Default continues to exist.
(e) If not sooner paid, the principal Indebtedness
evidenced by the Notes shall be payable as follows:
(i) the principal amount of each LIBOR Loan shall
be payable on the last day of the Interest Period for such
Loan (PROVIDED that such principal amount may be paid using
the proceeds of a Base Rate Loan made pursuant to Section
2.1(g));
(ii) the amount, if any, by which the Outstanding
Obligations at any time exceed the Commitment shall be
payable immediately;
(iii) the principal Indebtedness evidenced by the
Notes shall be immediately payable in the amount of any
payment made by Peter Morton pursuant to the Make Well
Agreement; and
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(iv) the principal Indebtedness evidenced by the
Notes and the Swing Line Documents shall in any event be
payable on the Maturity Date.
(f) The Notes may, at any time and from time to
time, voluntarily be paid or prepaid in whole or in part
without premium or penalty, EXCEPT that with respect to any
voluntary prepayment under this Section (i) any partial
prepayment shall be not less than $500,000, (ii) the
Administrative Agent shall have received written notice of any
prepayment by 10:00 a.m. on the Banking Day prior to such
prepayment (which must be a Banking Day) in the case of a Base
Rate Loan, and, in the case of a LIBOR Loan, three Market Days
before the date of prepayment, which notice shall identify the
date and amount of the prepayment and the Loans being prepaid,
(iii) each prepayment of principal shall be accompanied by
payment of interest accrued to the date of payment on the
amount of principal paid and (iv) any payment or prepayment of
all or any part of any LIBOR Loan on a day other than the last
day of the applicable Interest Period shall be subject to
Section 3.8(d).
3.2 UPFRONT FEES. On the Closing Date, Borrower shall
pay to the Arranger upfront fees in the respective amounts heretofore
agreed upon by a letter agreement among Borrower and the
Administrative Agent. The fees are for the account of the Lenders in
accordance with their separate agreements with the Arranger. The
upfront fees are for the credit facilities provided to Borrower under
this Agreement, are fully earned as of the Closing Date and are
nonrefundable.
3.3 COMMITMENT FEES. From the Closing Date, Borrower
shall pay to the Administrative Agent, for the ratable accounts of the
Lenders according to their Pro Rata Shares, a commitment fee equal to
the then applicable Commitment Fee Rate per annum TIMES the average
daily amount by which (a) the Commitment exceeds (b) the SUM OF (i)
the aggregate principal Indebtedness outstanding under the Notes
(exclusive of the Swing Line Outstandings) PLUS (ii) the Aggregate
Effective Amount. Commitment fees shall be payable quarterly in
arrears on each Quarterly Payment Date, on the date of any reduction
or termination of the Commitment pursuant to Sections 2.5, 2.6, 2.7 or
2.8, and on the Maturity Date.
3.4 LETTER OF CREDIT FEES. With respect to each Letter
of Credit, Borrower shall pay the following fees:
(a) to the Issuing Lender for its sole account, a
fronting fee payable in an amount and at such times as set
forth in a letter agreement between Borrower and the Issuing
Lender;
(b) on the issuance date of each Letter of Credit, a
risk participation fee in an amount equal to the face amount of
the Letter of Credit TIMES the then applicable LIBOR Margin,
which the Administrative Agent shall promptly pay to the
Lenders; and
(c) concurrently with each issuance, negotiation,
drawing or amendment of each Letter of Credit, to the Issuing
Lender for the sole account of the Issuing Lender, issuance,
negotiation, drawing and amendment fees in the amounts set
forth from time to time as the Issuing Lender's published
scheduled fees for such services.
Each of the fees payable with respect to Letters of Credit under this
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Section is earned when due and is nonrefundable.
3.5 AGENCY MANAGEMENT FEES. Borrower shall pay to the
Administrative Agent an agency management fee in such amounts and at
such times as heretofore agreed upon by letter agreement between
Borrower and the Administrative Agent. This fee is for the services
to be performed by the Administrative Agent in acting as
Administrative Agent and is fully earned on the date paid. The agency
fee paid to the Administrative Agent is solely for its own account and
is nonrefundable.
3.6 CONSTRUCTION SERVICES FEES. Borrower shall pay to
Bank of America a construction services fee in such amounts and at
such times as heretofore agreed upon by letter agreement between
Borrower and CSG. The construction services fees are for the services
to be performed by CSG and each installment is fully earned on the
date paid. The construction services fees are solely for the account
of CSG and are nonrefundable.
3.7 INCREASED COMMITMENT COSTS. If any Lender shall
determine in good faith that the introduction after the Closing Date
of any applicable law, rule, regulation or guideline regarding capital
adequacy, or any change therein or any change in the interpretation or
administration thereof by any central bank or other Governmental
Agency charged with the interpretation or administration thereof, or
compliance by such Lender (or its LIBOR Office) or any corporation
controlling the Lender, with any request, guideline or directive
regarding capital adequacy (whether or not having the force of law) of
any such central bank or other authority, affects or would affect the
amount of capital required or expected to be maintained by such Lender
or any corporation controlling such Lender and (taking into
consideration such Lender's or such corporation's policies with
respect to capital adequacy and such Lender's desired return on
capital) determines in good faith that the amount of such capital is
increased, or the rate of return on capital is reduced, as a
consequence of its obligations under this Agreement, then, within
ten Banking Days after demand of such Lender, Borrower shall pay to
such Lender, from time to time as specified in good faith by such
Lender, additional amounts sufficient to compensate such Lender in
light of such circumstances, to the extent reasonably allocable to
such obligations under this Agreement. Each Lender's determination of
such amounts shall be conclusive in the absence of manifest error.
3.8 LIBOR COSTS AND RELATED MATTERS.
(a) If, after the date hereof, the existence or
occurrence of any Special LIBOR Circumstance:
(1) shall subject any Lender or its LIBOR
Office to any tax, duty or other charge or cost with
respect to any LIBOR Advance, any of its Notes evidencing
LIBOR Loans or its obligation to make LIBOR Advances, or
shall change the basis of taxation of payments to any
Lender attributable to the principal of or interest on any
LIBOR Advance or any other amounts due under this
Agreement in respect of any LIBOR Advance, any of its
Notes evidencing LIBOR Loans or its obligation to make
LIBOR Advances, EXCLUDING, in the case of each Lender, the
Administrative Agent and each Eligible Assignee, and any
Affiliate or LIBOR Office thereof, (i) taxes imposed on or
measured in whole or in part by its overall net income,
gross income or gross receipts or capital and franchise
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taxes imposed on it, by (A) any jurisdiction (or political
subdivision thereof) in which it is organized or maintains
its principal office or LIBOR Office or (B) any
jurisdiction (or political subdivision thereof) in which
it is "doing business" (unless it would not be doing
business in such jurisdiction (or political subdivision
thereof) absent the transactions contemplated hereby),
(ii) any withholding taxes or other taxes based on gross
income imposed by the United States of America (other than
withholding taxes and taxes based on gross income
resulting from or attributable to any change in any law,
rule or regulation or any change in the interpretation or
administration of any law, rule or regulation by any
Governmental Agency) or (iii) any withholding taxes or
other taxes based on gross income imposed by the United
States of America for any period with respect to which it
has failed to provide Borrower with the appropriate form
or forms required by Section 11.21, to the extent such
forms are then required by applicable Laws;
(2) shall impose, modify or deem applicable any
reserve not applicable or deemed applicable on the date
hereof (INCLUDING, without limitation, any reserve imposed
by the Board of Governors of the Federal Reserve System,
BUT EXCLUDING the Reserve Percentage taken into account in
calculating the LIBOR), special deposit, capital or
similar requirements against assets of, deposits with or
for the account of, or credit extended by, any Lender or
its LIBOR Office; or
(3) shall impose on any Lender or its LIBOR
Office or the Designated LIBOR Market any other condition
affecting any LIBOR Advance, any of its Notes evidencing
LIBOR Loans, its obligation to make LIBOR Advances or this
Agreement, or shall otherwise affect any of the same;
and the result of any of the foregoing, as determined in good
faith by such Lender, increases the cost to such Lender or its
LIBOR Office of making or maintaining any LIBOR Advance or in
respect of any LIBOR Advance, any of its Notes evidencing LIBOR
Loans or its obligation to make LIBOR Advances or reduces the
amount of any sum received or receivable by such Lender or its
LIBOR Office with respect to any LIBOR Advance, any of its
Notes evidencing LIBOR Loans or its obligation to make LIBOR
Advances (assuming such Lender's LIBOR Office had funded 100%
of its LIBOR Advance in the Designated LIBOR Market), then,
within five (5) Banking Days after demand by such Lender (with
a copy to the Administrative Agent), Borrower shall pay to such
Lender such additional amount or amounts as will compensate
such Lender for such increased cost or reduction (determined as
though such Lender's LIBOR Office had funded 100% of its LIBOR
Advance in the Designated LIBOR Market). Borrower hereby
indemnifies each Lender against, and agrees to hold each Lender
harmless from and reimburse such Lender within ten Banking Days
after demand for (without duplication) all costs, expenses,
claims, penalties, liabilities, losses, reasonable legal fees
and damages incurred or sustained by each Lender in connection
with this Agreement, or any of the rights, obligations or
transactions provided for or contemplated herein, as a direct
result of the existence or occurrence of any Special LIBOR
Circumstance. A statement of any Lender claiming compensation
under this subsection and setting forth in reasonable
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detail the additional amount or amounts to be paid to it hereunder
shall be conclusive in the absence of manifest error. Each Lender
agrees to endeavor promptly to notify Borrower of any event of which
it has actual knowledge, occurring after the Closing Date, which will
entitle such Lender to compensation pursuant to this Section, and
agrees to designate a different LIBOR Office if such designation will
avoid the need for or reduce the amount of such compensation and will
not, in the good faith judgment of such Lender, otherwise be materially
disadvantageous to such Lender. If any Lender claims compensation
under this Section, Borrower may at any time, upon at least four Market
Days' prior notice to the Administrative Agent and such Lender and
upon payment in full of the amounts provided for in this Section through
the date of such payment plus any prepayment fee required by Section
3.8(d), pay in full the affected LIBOR Advances of such Lender or
request that such LIBOR Advances be converted to Base Rate Advances.
(b) If, after the date hereof, the existence or occurrence
of any Special LIBOR Circumstance shall, in the good faith opinion of
any Lender, make it unlawful or impossible for such Lender or its LIBOR
Office to make, maintain or fund its portion of any LIBOR Loan, or
materially restrict the authority of such Lender to purchase or sell,
or to take deposits of, Dollars in the Designated LIBOR Market, or to
determine or charge interest rates based upon the LIBOR, and such Lender
shall so notify the Administrative Agent, then such Lender's obligation
to make LIBOR Advances shall be suspended for the duration of such
illegality or impossibility and the Administrative Agent forthwith shall
give notice thereof to the other Lenders and Borrower. Upon receipt of
such notice, the outstanding principal amount of such Lender's LIBOR
Advances, together with accrued interest thereon, automatically shall be
converted to Base Rate Advances with Interest Periods corresponding to
the LIBOR Loans of which such LIBOR Advances were a part on either
(1) the last day of the Interest Period(s) applicable to such LIBOR
Advances if such Lender may lawfully continue to maintain and fund such
LIBOR Advances to such day(s) or (2) immediately if such Lender may not
lawfully continue to fund and maintain such LIBOR Advances to such day(s),
provided that in such event the conversion shall not be subject to
payment of a prepayment fee under Section 3.8(d). Each Lender agrees to
endeavor promptly to notify Borrower of any event of which it has actual
knowledge, occurring after the Closing Date, which will cause that Lender
to notify the Administrative Agent under this Section 3.8(b), and agrees
to designate a different LIBOR Office if such designation will avoid the
need for such notice and will not, in the good faith judgment of such
Lender, otherwise be materially disadvantageous to such Lender. In the
event that any Lender is unable, for the reasons set forth above, to
make, maintain or fund its portion of any LIBOR Loan, such Lender shall
fund such amount as a Base Rate Advance for the same period of time, and
such amount shall be treated in all respects as a Base Rate Advance.
Any Lender whose obligation to make LIBOR Advances has been suspended
under this Section 3.8(b) shall promptly notify the Administrative Agent
and Borrower of the cessation of the Special LIBOR Circumstance which
gave rise to such suspension.
(c) If, with respect to any proposed LIBOR Loan:
(1) the Administrative Agent reasonably
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determines that, by reason of circumstances affecting the Designated
LIBOR Market generally that are beyond the reasonable control of
the Lenders, deposits in Dollars (in the applicable amounts) are
not being offered to any Lender in the Designated LIBOR Market for
the applicable Interest Period; or
(2) the Requisite Lenders advise the Administrative
Agent that the LIBOR as determined by the Administrative Agent
(i) does not represent the effective pricing to such Lenders for
deposits in Dollars in the Designated LIBOR Market in the relevant
amount for the applicable Interest Period, or (ii) will not
adequately and fairly reflect the cost to such Lenders of making the
applicable LIBOR Advances;
then the Administrative Agent forthwith shall give notice thereof to
Borrower and the Lenders, whereupon until the Administrative Agent
notifies Borrower that the circumstances giving rise to such suspension
no longer exist, the obligation of the Lenders to make any future LIBOR
Advances shall be suspended. If at the time of such notice there is
then pending a Request for Loan that specifies a LIBOR Loan, such Request
for Loan shall be deemed to specify a Base Rate Loan.
(d) Upon payment or prepayment of any LIBOR Advance (other
than as the result of a conversion required under Section 3.1(e)
or 3.8(b)), on a day other than the last day in the applicable
Interest Period (whether voluntarily,involuntarily, by reason of
acceleration, or otherwise), or upon the failure of Borrower (for a
reason other than the failure of a Lender to make an Advance) to borrow
on the date or in the amount specified for a LIBOR Loan in any Request for
Loan, Borrower shall pay to the appropriate Lender within ten Banking
Days after demand a prepayment fee or failure to borrow fee, as the case
may be (determined as though 100% of the LIBOR Advance had been funded in
the Designated LIBOR Market) equal to the sum of:
(1) the principal amount of the LIBOR Advance prepaid or
not borrowed, as the case may be, times the number of days between
the date of prepayment or failure to borrow, as applicable, and the
last day in the applicable Interest Period, divided by 360, times the
applicable Interest Differential (provided that the product of the
foregoing formula must be a positive number); plus
(2) all out-of-pocket expenses incurred by the Lender
reasonably attributable to such payment, prepayment or failure to
borrow.
Each Lender's determination of the amount of any prepayment fee payable
under this Section 3.8(d) shall be conclusive in the absence of manifest
error.
3.9 LATE PAYMENTS. If any installment of principal or interest
or any fee or cost or other amount payable under any Loan Document to the
Administrative Agent or any Lender is not paid when due, it shall thereafter
bear interest at a fluctuating interest rate per annum at all times equal to
the sum of the Base Rate plus the Base Rate Margin plus 2%,
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to the fullest extent permitted by applicable Laws. Accrued and unpaid
interest on past due amounts (INCLUDING, without limitation, interest on past
due interest) shall be compounded monthly, on the last day of each calendar
month, to the fullest extent permitted by applicable Laws.
3.10 COMPUTATION OF INTEREST AND FEES. Computation of interest on
Base Rate Loans shall be calculated on the basis of a year of 365 or 366
days, as the case may be, and the actual number of days elapsed; computation
of interest on LIBOR Loans and all fees under this Agreement shall be
calculated on the basis of a year of 360 days and the actual number of days
elapsed. Borrower acknowledges that such latter calculation method will
result in a higher yield to the Lenders than a method based on a year of 365
or 366 days. Interest shall accrue on each Loan for the day on which the
Loan is made; interest shall not accrue on a Loan, or any portion thereof,
for the day on which the Loan or such portion is paid. Any Loan that is
repaid on the same day on which it is made shall bear interest for one day.
3.11 NON-BANKING DAYS. If any payment to be made by Borrower or
any other Obligor under any Loan Document shall come due on a day other than
a Banking Day, payment shall instead be considered due on the next succeeding
Banking Day and the extension of time shall be reflected in computing
interest and fees.
3.12 MANNER AND TREATMENT OF PAYMENTS.
(a) Each payment hereunder (except payments pursuant to
Sections 3.7, 3.8, 11.3, 11.11 and 11.22) or on the Notes, on the Swing
Line Documents or under any other Loan Document shall be made to the
Administrative Agent, at the Administrative Agent's Office, for the
account of each of the Lenders or the Administrative Agent, as the case
may be, in immediately available funds not later than 11:00 a.m. on the
day of payment (which must be a Banking Day). All payments received
after 11:00 a.m. on any Banking Day, shall be deemed received on the
next succeeding Banking Day. The amount of all payments received by
the Administrative Agent for the account of each Lender shall be
immediately paid by the Administrative Agent to the applicable Lender
in immediately available funds and, if such payment was received by
the Administrative Agent by 11:00 a.m. on a Banking Day and not so made
available to the account of a Lender on that Banking Day, the
Administrative Agent shall reimburse that Lender for the cost to such
Lender of funding the amount of such payment at the Federal Funds Rate.
All payments shall be made in lawful money of the United States of
America.
(b) Each payment or prepayment on account of any Loan (other
than Swing Line Advances) shall be applied pro rata according to the
outstanding Advances made by each Lender comprising such Loan.
(c) Each Lender shall use its best efforts to keep a record
of Advances made by it and payments received by it with respect to each
of its Notes and, subject to Section 10.6(g), such record shall, as
against Borrower, be presumptive evidence of the amounts owing.
Notwithstanding the foregoing sentence, no Lender shall be liable to
any Obligor for any failure to keep such a record.
(d) Each payment of any amount payable by Borrower or
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any other Obligor under this Agreement or any other Loan Document shall
be made free and clear of, and without reduction by reason of, any taxes,
assessments or other charges imposed by any Governmental Agency, central
bank or comparable authority, EXCLUDING, in the case of each Lender, the
Administrative Agent and each Eligible Assignee, and any Affiliate or
LIBOR Office thereof, (i) taxes imposed on or measured in whole or in
part by its overall net income, gross income or gross receipts or capital
and franchise taxes imposed on it, (ii) any withholding taxes or other
taxes based on gross income imposed by the United States of America
(other than withholding taxes and taxes based on gross income resulting
from or attributable to any change in any law, rule or regulation or
any change in the interpretation or administration of any law, rule or
regulation by any Governmental Agency) or (iii) any withholding taxes
or other taxes based on gross income imposed by the United States of
America for any period with respect to which it has failed to provide
Borrower with the appropriate form or forms required by Section 11.21,
to the extent such forms are then required by applicable Laws (all such
non-excluded taxes, assessments or other charges being hereinafter
referred to as "Taxes"). To the extent that Borrower is obligated by
applicable Laws to make any deduction or withholding on account of Taxes
from any amount payable to any Lender under this Agreement, Borrower
shall (i) make such deduction or withholding and pay the same to the
relevant Governmental Agency and (ii) pay such additional amount to that
Lender as is necessary to result in that Lender's receiving a net
after-Tax amount equal to the amount to which that Lender would have
been entitled under this Agreement absent such deduction or withholding.
If and when receipt of such payment results in an excess payment or
credit to that Lender on account of such Taxes, that Lender shall
promptly refund such excess to Borrower.
3.13 FUNDING SOURCES. Nothing in this Agreement shall be deemed
to obligate any Lender to obtain the funds for any Loan or Advance in any
particular place or manner or to constitute a representation by any Lender
that it has obtained or will obtain the funds for any Loan or Advance in any
particular place or manner.
3.14 FAILURE TO CHARGE NOT SUBSEQUENT WAIVER. Any decision by the
Administrative Agent or any Lender not to require payment of any interest
(INCLUDING interest arising under Section 3.8), fee, cost or other amount
payable under any Loan Document, or to calculate any amount payable by a
particular method, on any occasion shall in no way limit or be deemed a
waiver of the Administrative Agent's or such Lender's right to require full
payment of any interest (INCLUDING interest arising under Section 3.8), fee,
cost or other amount payable under any Loan Document, or to calculate an
amount payable by another method that is not inconsistent with this
Agreement, on any other or subsequent occasion.
3.15 ADMINISTRATIVE AGENT'S RIGHT TO ASSUME PAYMENTS WILL BE MADE
BY BORROWER. Unless the Administrative Agent shall have been notified by
Borrower prior to the date on which any payment to be made by Borrower
hereunder is due that Borrower does not intend to remit such payment, the
Administrative Agent may, in its discretion, assume that Borrower has
remitted such payment when so due and the Administrative Agent may, in its
discretion and in reliance upon such assumption, make available to each
Lender on such payment date an amount equal to such Lender's share of such
assumed payment. If Borrower has not in fact remitted such payment to the
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Administrative Agent, each Lender shall forthwith on demand repay to the
Administrative Agent the amount of such assumed payment made available to
such Lender, together with interest thereon in respect of each day from and
including the date such amount was made available by the Administrative Agent
to such Lender to the date such amount is repaid to the Administrative Agent
at the Federal Funds Rate.
3.16 FEE DETERMINATION DETAIL. The Administrative Agent, and any
Lender, shall provide reasonable detail to Borrower regarding the manner in
which the amount of any payment to the Administrative Agent and the Lenders,
or that Lender, under Article 3 has been determined, concurrently with demand
for such payment.
3.17 SURVIVAL. All of Borrower's obligations under
Sections 3.7, 3.8 and 11.22 shall survive for ninety days following
the date on which the Commitment is terminated, and all Loans
hereunder are fully paid.
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Article 4
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to the Creditors that:
4.1 EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS.
Borrower is a corporation duly formed, validly existing and in good standing
under the Laws of Nevada. Borrower is duly qualified or registered to
transact business and is in good standing in each other jurisdiction in which
the conduct of its business or the ownership or leasing of its Properties
makes such qualification or registration necessary, EXCEPT where the failure
so to qualify or register and to be in good standing would not constitute a
Material Adverse Effect. Borrower has all requisite corporate or other
organizational power and authority to conduct its business, to own and lease
its Properties and to execute and deliver each Loan Document to which it is a
party and to perform its Obligations. All outstanding shares of the capital
stock of Borrower are duly authorized and validly issued, fully paid and
non-assessable, and no holder thereof has any enforceable right of rescission
under any applicable state or federal securities Laws. Borrower is in
compliance with all Laws and other legal requirements applicable to its
business, has obtained all authorizations, consents, approvals, orders,
licenses and permits from, and has accomplished all filings, registrations
and qualifications with, or obtained exemptions from any of the foregoing
from, any Governmental Agency that are necessary for the transaction of its
business, EXCEPT where the failure so to comply, file, register, qualify or
obtain exemptions does not constitute a Material Adverse Effect.
4.2 AUTHORITY; COMPLIANCE WITH OTHER AGREEMENTS AND INSTRUMENTS
AND GOVERNMENT REGULATIONS. The execution, delivery and performance by
Borrower, Peter A. Morton and each other Obligor of the Loan Documents to
which they are a party have been duly authorized by all necessary corporate
action, and do not and will not:
(a) Require any consent or approval not heretofore obtained
of any director, stockholder, security holder or creditor of such Obligor;
(b) Violate or conflict with any provision of such Obligor's
articles of incorporation or bylaws;
(c) Except to the extent contemplated by the Loan Documents,
result in or require the creation or imposition of any Lien or Right of
Others upon or with respect to any Property now owned or leased or
hereafter acquired by such Obligor;
(d) Violate any Requirement of Law applicable to such Obligor;
(e) Result in a breach of or constitute a default under, or
cause or permit the acceleration of any obligation owed under, any
indenture or loan or credit agreement or any other Contractual Obligation
to which such Obligor is a party or by which such Obligor or any of its
Property is bound or affected;
and neither Borrower, Peter A. Morton nor any other Obligor is in violation
of, or default under, any Requirement of Law or Contractual Obligation, or
any indenture, loan or credit agreement described in Section 4.2(e), in any
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respect that constitutes a Material Adverse Effect.
4.3 NO GOVERNMENTAL APPROVALS REQUIRED. Except as set forth in
Schedule 4.3 or previously obtained or made, no authorization, consent,
approval, order, license or permit from, or filing, registration or
qualification with, any Governmental Agency is or will be required to
authorize or permit under applicable Laws the execution, delivery and
performance by Borrower and Peter A. Morton of the Loan Documents to which it
is a Obligor. All authorizations from, or filings with, any Governmental
Agency described in Schedule 4.3 will be accomplished as of the Closing Date
or such other date as is specified in Schedule 4.3.
4.4 SUBSIDIARIES. Borrower does not have any Subsidiaries and
Borrower does not own any capital stock, equity interest or debt security
which is convertible, or exchangeable, for capital stock or equity interests
in any Person.
4.5 Financial Statements. Borrower has furnished (a) the audited
financial statements of Borrower for the Fiscal Year ended November 30, 1996,
and (b) the unaudited financial statement of Borrower for the Fiscal Quarter
ended August 31, 1997, to the Administrative Agent and the Lenders, which
financial statements fairly present the financial condition, results of
operations and changes in financial position of Borrower as of such dates and
for such periods in conformity with Generally Accepted Accounting Principles,
consistently applied. Peter A. Morton has furnished his personal financial
report and a Liquidity Report as of December 31, 1997 to the Administrative
Agent, which accurately reflects the matters therein stated as of such date.
4.6 NO MATERIAL ADVERSE CHANGES. As of the Closing Date, no
circumstance or event has occurred that constitutes a Material Adverse Effect
since November 30, 1997, or, as of any date subsequent to the Closing Date,
since the Closing Date.
4.7 TITLE TO PROPERTY. On the Closing Date and on each
subsequent date, Borrower has valid title in fee simple to the Project Site
and all improvements (if any) located thereon, free and clear of all Liens
and Rights of Others, other than Liens or Rights of Others permitted by
Section 6.9.
4.8 INTANGIBLE ASSETS. Borrower and its Subsidiaries own, or
possess the right to use to the extent necessary in their respective
businesses, all material trademarks, trade names, copyrights, patents, patent
rights, computer software, licenses and other Intangible Assets that are
necessary to complete and operate the Proposed Expansion or which are used or
contemplated to be used in the conduct of their businesses as now operated
and as contemplated to be operated, and no such Intangible Asset, to the best
knowledge of Borrower, conflicts with the valid trademark, trade name,
copyright, patent, patent right or Intangible Asset of any other Person to
the extent that such conflict constitutes a Material Adverse Effect. Without
limitation on the foregoing, Borrower holds a valid license to use the name
and mark "Hard Rock Hotel" in Las Vegas Nevada in connection with its
operation of the existing Hard Rock Hotel and the Proposed Expansion. Each
registered patent, trademark or copyright owned by Borrower, or as to which
Borrower is a licensee, is described on Schedule 4.8 or, after the Closing
Date, on a supplement to the Trademark Assignment.
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4.9 PUBLIC UTILITY HOLDING COMPANY ACT. Neither Borrower nor any
of its Subsidiaries is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
4.10 LITIGATION. Other than Borrower's intellectual property
litigation with Rank described in the Prospectus for the senior subordinated
notes issued pursuant to the Indenture, there are no actions, suits,
proceedings or investigations pending as to which Borrower or any of its
Subsidiaries have been served or have received notice or, to the best
knowledge of Borrower, threatened against or affecting Borrower or any of its
Subsidiaries or any Property of any of them (including the Real Property)
before any Governmental Agency, which may reasonably be expected to have a
monetary impact which is in excess of $500,000, and neither the Rank
Litigation nor any other such action, suit proceeding or investigation
described in this Section may reasonably be expected to have a Material
Adverse Effect.
4.11 BINDING OBLIGATIONS. Each of the Loan Documents to which
Peter A. Morton, Borrower or any of its Subsidiaries is a party will, when
executed and delivered by such Obligor, constitute the legal, valid and
binding obligation of such Obligor, enforceable against such Obligor in
accordance with its terms, except as enforcement may be limited by Debtor
Relief Laws, Gaming Laws or equitable principles relating to the granting of
specific performance and other equitable remedies as a matter of judicial
discretion.
4.12 NO DEFAULT. No event has occurred and is continuing that is
a Default or Event of Default.
4.13 ERISA.
(a) With respect to each Pension Plan:
(i) such Pension Plan complies in all material
respects with ERISA and any other applicable Laws to the extent
that noncompliance could reasonably be expected to have a Material
Adverse Effect;
(ii) such Pension Plan has not incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA) that could
reasonably be expected to have a Material Adverse Effect;
(iii) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred that could reasonably be expected to have a
Material Adverse Effect; and
(iv) neither Borrower nor any of its Subsidiaries has
engaged in any non-exempt "prohibited transaction" (as defined in
Section 4975 of the Code) that could reasonably be expected to
have a Material Adverse Effect.
(b) Neither Borrower nor any of its Subsidiaries has incurred
or expects to incur any withdrawal liability to any Multiemployer Plan
that could reasonably be expected to have a Material Adverse Effect.
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4.14 REGULATIONS G, T, U AND X; INVESTMENT COMPANY ACT. No part of
the proceeds of any Loan hereunder will be used to purchase or carry, or to
extend credit to others for the purpose of purchasing or carrying, any Margin
Stock in violation of Regulations G, T, U and X. Neither Borrower nor any of
its Subsidiaries is or is required to be registered as an "investment
company" under the Investment Company Act of 1940.
4.15 DISCLOSURE. No statement made by Borrower or any of its
Affiliates to the Administrative Agent or any Lender in connection with this
Agreement, or in connection with any Loan, as of the date thereof contained
any untrue statement of a material fact or omitted a material fact necessary
to make the statement made not misleading in light of all the circumstances
existing at the date the statement was made.
4.16 TAX LIABILITY. Borrower and its Subsidiaries have filed all
tax returns which are required to be filed, and have paid, or made provision
for the payment of, all taxes with respect to the periods, Property or
transactions covered by said returns, or pursuant to any assessment received
by Borrower or any of its Subsidiaries, except (a) such taxes, if any, as are
being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established and maintained and (b) immaterial
taxes so long as no material item or portion of Property of Borrower or any
of its Subsidiaries is in jeopardy of being seized, levied upon or forfeited.
4.17 PROJECTIONS. As of the Closing Date, to the best knowledge
of Borrower, the assumptions set forth in the Projections are reasonable and
consistent with each other and with all facts known to Borrower, and the
Projections are reasonably based on such assumptions. Nothing in this
Section shall be construed as a representation or covenant that the
Projections in fact will be achieved.
4.18 HAZARDOUS MATERIALS. Except as described in Schedule 4.18 or
except as would not individually or in the aggregate have a Material Adverse
Effect, (a) none of Borrower nor any of its Subsidiaries at any time has
disposed of, discharged, released or threatened the release of any Hazardous
Materials on, from or under the Project Site (or, to the best of Borrower or
any of its Subsidiaries knowledge, any other Real Property) in violation of
any Hazardous Materials Law, (b) to the best knowledge of Borrower, no
condition exists that violates any Hazardous Material Law affecting any Real
Property, (c) neither the Project Site nor any portion thereof (nor, to the
best knowledge of Borrower and its Subsidiaries, any other Real Property) is
or has been utilized by Borrower or any of its Subsidiaries as a site for the
manufacture of any Hazardous Materials and (d) to the extent that any
Hazardous Materials are used, generated or stored by Borrower or any of its
Subsidiaries on the Project Site, or transported to or from the Project Site,
such use, generation, storage and transportation are in compliance in all
material respects with all Hazardous Materials Laws.
4.19 GAMING LAWS. Borrower and its Subsidiaries are in compliance
in all material respects with all Gaming Laws that are applicable to them.
4.20 SECURITY INTERESTS. Upon the execution and delivery of the
Security Agreement and the Trademark Assignment, the Security Agreement
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and the Trademark Assignment will create a valid first priority security
interests in the Collateral described therein securing the Obligations, and
all action necessary to perfect the security interests so created (including
without limitation Borrower's license to use the name and mark "Hard Rock
Hotel"), other than filing of the UCC-1 financing statements delivered to the
Administrative Agent pursuant to Section 8.1 with the appropriate
Governmental Agency and the filing of the Trademark Assignment with the
United States Patent and Trademark Office, shall have been taken and
completed. Upon the execution and delivery of the Deed of Trust, the Deed of
Trust will create a valid Lien in the Collateral described therein securing
the Obligations, other than those arising under Sections 4.18, 5.10 and 11.22
(subject only to Permitted Encumbrances and Permitted Rights of Others), and
all action necessary to perfect the Lien so created, other than recordation
or filing thereof with the appropriate Governmental Agencies, will have been
taken and completed.
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Article 5
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND
REPORTING REQUIREMENTS)
So long as any Advance remains unpaid, or any Letter of Credit
remains outstanding, or any other Obligation remains unpaid or unperformed,
or any portion of the Commitment remains in force, Borrower shall, and shall
cause each of its Subsidiaries to, unless the Administrative Agent (with the
written approval of the Requisite Lenders) otherwise consents:
5.1 PAYMENT OF TAXES AND OTHER POTENTIAL LIENS. Pay and
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon any of them, upon their respective Property or any part thereof
and upon their respective income or profits or any part thereof, EXCEPT that
Borrower and its Subsidiaries shall not be required to pay or cause to be
paid (a) any tax, assessment, charge or levy that is not yet past due, or is
being contested in good faith by appropriate proceedings so long as the
relevant entity has established and maintains adequate reserves for the
payment of the same or (b) any immaterial tax so long as no material item or
portion of Property of Borrower or any of its Subsidiaries is in jeopardy of
being seized, levied upon or forfeited.
5.2 PRESERVATION OF EXISTENCE. Preserve and maintain their
respective existences in the jurisdiction of their formation and all material
authorizations, rights, franchises, privileges, consents, approvals, orders,
licenses, permits, or registrations from any Governmental Agency that are
necessary for the transaction of their respective business, EXCEPT where the
failure to so preserve and maintain the existence of any Subsidiary or such
authorizations would not constitute a Material Adverse Effect; and qualify
and remain qualified to transact business in each jurisdiction in which such
qualification is necessary in view of their respective business or the
ownership or leasing of their respective Properties EXCEPT where the failure
to so qualify or remain qualified would not constitute a Material Adverse
Effect.
5.3 MAINTENANCE OF PROPERTIES. Maintain, preserve and protect
all of their respective depreciable Properties in good order and condition,
subject to wear and tear in the ordinary course of business, and not permit
any waste of their respective Properties, EXCEPT that the failure to
maintain, preserve and protect a particular item of depreciable Property that
is not of significant value, either intrinsically or to the operations of
Borrower and its Subsidiaries, taken as a whole, shall not constitute a
violation of this covenant.
5.4 MAINTENANCE OF INSURANCE. Maintain liability, casualty and
other insurance (subject to customary deductibles and retentions) with
responsible insurance companies in such amounts and against such risks as is
carried by responsible companies engaged in similar businesses and owning
similar assets in the general areas in which Borrower and its Subsidiaries
operate and, in any event, such insurance as may be required under the Deed
of Trust.
5.5 COMPLIANCE WITH LAWS. Comply, within the time period, if
any, given for such compliance by the relevant Governmental Agency or
Agencies with enforcement authority, with all Requirements of Law
noncompliance with which constitutes a Material Adverse Effect, EXCEPT that
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Borrower and its Subsidiaries need not comply with a Requirement of Law then
being contested by any of them in good faith by appropriate proceedings.
5.6 INSPECTION RIGHTS - COMPLETION OF CONSTRUCTION. Borrower
hereby engages CSG to monitor the construction of the Proposed Expansion and
to prepare Construction Progress Reports for submission to the Administrative
Agent. The fees for such services shall be as set forth in Section 3.6.
From the Closing Date through the Completion Date, Borrower shall provide CSG
with such information and access to the Project Site and the Proposed
Expansion and individuals employed by Borrower, the project architect and the
project contractor as it may reasonably request upon reasonable advance
notice for that purpose and at any time during regular business hours and as
often as reasonably requested (but not so as to materially interfere with the
business of Borrower or any of its Subsidiaries), and shall permit CSG, at
its own cost, the Administrative Agent or any Lender, or any authorized
employee, agent or representative thereof, to examine, audit and make copies
and abstracts from the records and books of account of, and to visit and
inspect the Properties of, Borrower and its Subsidiaries and to discuss the
affairs, finances and accounts of Borrower and its Subsidiaries with any of
their officers, key employees or accountants and, upon request, furnish
promptly to CSG, the Administrative Agent or any Lender true copies of all
financial information made available to senior management of or shareholders
in Borrower.
5.7 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep adequate
records and books of account reflecting all financial transactions in
conformity with Generally Accepted Accounting Principles, consistently
applied, and in material conformity with all applicable requirements of any
Governmental Agency having regulatory jurisdiction over Borrower or any of
its Subsidiaries.
5.8 COMPLIANCE WITH AGREEMENTS. Promptly and fully comply with
all Contractual Obligations under all material agreements, indentures, leases
and/or instruments to which any one or more of them is a party, whether such
material agreements, indentures, leases or instruments are with a Lender or
another Person, EXCEPT for any such Contractual Obligations (a) the
performance of which would cause a Default or (b) then being contested by any
of them in good faith by appropriate proceedings or if the failure to comply
with such agreements, indentures, leases or instruments does not constitute a
Material Adverse Effect.
5.9 USE OF PROCEEDS. Use the proceeds of the Loans to refinance
the outstanding Indebtedness under the Existing Credit Facility and,
subsequent thereto, for other proper corporate purposes of Borrower,
INCLUDING construction of the Proposed Expansion.
5.10 HAZARDOUS MATERIALS LAWS. Keep and maintain all Real
Property and each portion thereof in compliance in all material respects with
all applicable Hazardous Materials Laws and promptly notify the
Administrative Agent in writing (attaching a copy of any pertinent written
material) of (a) any and all material enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened in
writing by a Governmental Agency pursuant to any applicable Hazardous
Materials Laws with regard to the Real Property, (b) any and all material
claims made or threatened in writing by any Person against Borrower relating
to damage, contribution, cost recovery, compensation, loss or injury
resulting from any Hazardous Materials with regard to the
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Real Property, and (c) discovery by any Senior Officer of Borrower of any
material occurrence or condition on any real Property adjoining or in the
vicinity of such Real Property and affecting the Real Property that could
reasonably be expected to cause such Real Property or any part thereof to be
subject to any restrictions on the ownership, occupancy, transferability or
use of such Real Property under any applicable Hazardous Materials Laws.
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Article 6
NEGATIVE COVENANTS
So long as any Advance remains unpaid, or any Letter of Credit
remains outstanding or any other Obligation remains unpaid or unperformed, or
any portion of the Commitment remains in force, Borrower shall not, and shall
not permit any of its Subsidiaries to, unless the Administrative Agent (with
the written approval of the Requisite Lenders or, if required by Section
11.2, of all of the Lenders) otherwise consents:
6.1 PREPAYMENT OF INDEBTEDNESS. Pay any principal or interest on
any Indebtedness of Borrower or any of its Subsidiaries prior to the date
when due, or make any payment or deposit with any Person that has the effect
of providing for the satisfaction of any Indebtedness of Borrower or any of
its Subsidiaries prior to the date when due, in each case IF a Default or
Event of Default then exists or would result therefrom.
6.2 PAYMENT OF SUBORDINATED OBLIGATIONS. Pay any principal
(INCLUDING sinking fund payments) or any other amount with respect to any
Subordinated Obligation, or purchase or redeem any Subordinated Obligation,
or make any payment of any Supervisory Fees EXCEPT for (a) regularly
scheduled payments of interest with respect to Subordinated Obligations, and
(b) regularly scheduled payments of Supervisory Fees, in each case made when
no Default or Event of Default exists or would result from the making of such
payment and consistently with the Indenture and the Subordination Agreement.
6.3 DISPOSITION OF PROPERTY. Make any Disposition of its
Property, whether now owned or hereafter acquired, except for:
(a) Dispositions of obsolete equipment or other personal
property no longer necessary to the business of Borrower and
its Subsidiaries having a value (in each transaction or series
of related transactions) of less than $250,000); and
(b) Dispositions of easements or minor strips and gores
of property in connection with the construction of the Proposed
Expansion or other improvements to the Project Site and which
are approved in advance by the Administrative Agent as
reasonably necessary to the construction or maintenance
thereof, PROVIDED that the Administrative Agent shall
concurrently receive any endorsements to its policy of title
insurance as it may reasonably request in connection therewith;
PROVIDED, HOWEVER, that this Section shall not apply to prohibit a
Disposition to the extent necessary to prevent a License Revocation if (i) no
Default or Event of Default then exists which is not curable by such
Disposition, (ii) Borrower has notified the Administrative Agent in writing
of the necessity to invoke this proviso at least ten Banking Days (or such
shorter period as may be necessary in order to comply with a regulation or
order of the relevant Gaming Board) in advance and (iii) the Net Cash
Proceeds from such Disposition are paid to the Administrative Agent promptly
after receipt and applied to reduce the principal outstanding under the Notes
(first, to Base Rate Loans and thereafter to LIBOR Loans, shortest Interest
Periods first), and PROVIDED FURTHER that nothing in this Section shall apply
to restrict the Disposition of any of the equity
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securities of any Person that holds, directly or indirectly through a holding
company or otherwise, a license under any Gaming Law to the extent such
restriction is unlawful under that Gaming Law.
6.4 HOSTILE TENDER OFFERS. Make any offer to purchase or
acquire, or consummate a purchase or acquisition of, 5% or more of the
capital stock of any corporation or other business entity if the board of
directors or management of such corporation or business entity has notified
Borrower that it opposes such offer or purchase and such notice has not been
withdrawn or superseded.
6.5 MERGERS. Merge or consolidate with or into any Person,
EXCEPT:
(a) mergers and consolidations of a Subsidiary of
Borrower into Borrower or another Subsidiary of Borrower (in
the case of any such merger or consolidation to which Borrower
is a party, with Borrower as the surviving entity), PROVIDED
that Borrower and each of such Subsidiaries have executed such
amendments to the Loan Documents as the Administrative Agent
may reasonably determine are appropriate as a result of such
merger; and
(b) mergers or consolidations of Borrower or any of
its Subsidiaries with any other Person, PROVIDED that
(i) either (A) Borrower or such Subsidiary is the surviving
entity, or (B) the surviving entity is a corporation organized
under the Laws of a State of the United States of America or
the District of Columbia and, as of the date of such merger or
consolidation, expressly assumes, by an appropriate instrument,
the Obligations of Borrower or such Subsidiary, as the case may
be, (ii) giving effect thereto on a pro-forma basis, no Default
or Event of Default exists or would result therefrom, and
(iii) as a result thereof, no Change of Control has occurred.
6.6 DISTRIBUTIONS. Make any Distribution, whether from
capital, income or otherwise, and whether in Cash or other Property,
OTHER THAN:
(a) Distributions from any Subsidiary of Borrower to
Borrower;
(b) Provided that no Default or Event of Default shall
have occurred or be continuing or would result therefrom, and
that the Opening has occurred, following the date upon which
Borrower has delivered a Compliance Certificate demonstrating a
Total Leverage Ratio which is less than 4.25:1.00 Borrower may
make Distributions (including without limitation Distributions
made to repurchase shares of the capital stock of Borrower
owned by employees in connection with the termination of their
employment) in an aggregate amount to exceed $7,500,000; and
(c) Provided that no Default or Event of Default
shall have occurred or be continuing or would result therefrom,
Borrower may make Distributions in an aggregate amount not to
exceed $1,500,000 to Gary Selesner to repurchase common stock
of Borrower held by him in connection with any termination of
his employment with Borrower.
6.7 ERISA. At any time, permit any Pension Plan to:
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(i) engage in any non-exempt "prohibited transaction" (as defined in Section
4975 of the Code); (ii) fail to comply with ERISA or any other applicable
Laws; (iii) incur any material "accumulated funding deficiency" (as defined
in Section 302 of ERISA); or (iv) terminate in any manner, which, with
respect to each event listed above, could reasonably be expected to result in
a Material Adverse Effect, or (b) withdraw, completely or partially, from any
Multiemployer Plan if to do so could reasonably be expected to result in a
Material Adverse Effect.
6.8 CHANGE IN NATURE OF BUSINESS. Make any material change in
the nature of the business of Borrower and the its Subsidiaries, taken as a
whole.
6.9 LIENS, NEGATIVE PLEDGES AND RIGHTS OF OTHERS. Create, incur,
assume or suffer to exist any Lien, Negative Pledge prohibiting the granting
of Liens to the Banks or any Right of Others of any nature upon or with
respect to any of their respective Properties, or engage in any sale and
leaseback transaction with respect to any of their respective Properties,
whether now owned or hereafter acquired, EXCEPT:
(a) Liens and Negative Pledges described on Schedule 6.9;
(b) Permitted Encumbrances and Permitted Rights of Others;
(c) Liens and Negative Pledges under the Loan Documents;
(d) To the extent that the same constitute Liens, the
exceptions reflected on Schedule B to the ALTA Lender's policy of title
insurance described in Section 8.1;
(e) purchase money Liens securing Indebtedness permitted by
Section 6.9(c) on and limited to the Property acquired, constructed or
financed with the proceeds of such Indebtedness and Negative Pledges in
favor of the holders of such Indebtedness with respect to such Property;
and
(f) Liens on Property acquired by Borrower and its Subsidiaries
following the Closing Date securing Indebtedness permitted by Section
6.10, which are in existence at the time of such acquisition and not
created in contemplation thereof.
6.10 INDEBTEDNESS AND CONTINGENT OBLIGATIONS. Create, incur or
assume any Indebtedness or Contingent Obligation EXCEPT:
(a) Indebtedness and Contingent Obligations existing on the
Closing Date and disclosed in Schedule 6.10, and renewals, extensions or
amendments that do not increase the amount thereof;
(b) Indebtedness and Contingent Obligations under the Loan
Documents;
(c) purchase money Indebtedness and Capital Lease Obligations
incurred when no Default or Event of Default has occurred and remains
continuing, PROVIDED that the aggregate principal amount of such
Indebtedness and Capital Lease Obligations outstanding at any time
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does not exceed $3,000,000;
(d) Indebtedness consisting of one or more Swap Agreements
entered into with respect to the Obligations;
(e) refinancings of any of the Indebtedness and Capital Lease
Obligations described in the foregoing clauses of this Section, PROVIDED
that the amount thereof is not increased;
(f) Indebtedness incurred pursuant to the Indenture in an
aggregate principal amount not to exceed $120,000,000 and refinancings
thereof which are subordinated in the same manner and which do not
increase the amount thereof;
(g) subordinated Indebtedness of Borrower incurred to
Peter A. Morton in connection with a contribution made pursuant to the
Completion Guaranty or the Make Well Agreement in the amounts required
thereby, PROVIDED that (i) such Indebtedness has a stated maturity not
less than 91 days following that of the Indebtedness under the Indenture
and accrues interest at a rate which is not greater than 9.25%, and (ii)
such Indebtedness may be incurred by Borrower only if Borrower is unable
to obtain approval from the appropriate Gaming Authorities for the
issuance of the preferred stock contemplated by the Completion Guaranty
and the Make Well Agreement;
(h) Contingent Obligations under mechanics lien indemnity
agreements executed in favor of Commonwealth Land Title Insurance Company
as of the Closing Date;
(i) Provided that the Opening has then occurred and that no
Default or Event of Default has occurred and remains continuing or would
result from such incurrence or assumption, following the date upon which
Borrower has delivered a Compliance Certificate demonstrating a the Total
Leverage Ratio of Borrower which is less than 4.25:1.00, Borrower may
incur or assume, in addition to the Indebtedness and Contingent
Obligations heretofore described in this Section, unsecured Indebtedness
in an aggregate outstanding principal amount which does not exceed
$10,000,000 at any time; and
(j) Contingent Obligations of Borrower with respect to
Indebtedness of Subsidiaries of Borrower incurred pursuant to the
foregoing clauses of this Section.
6.11 TRANSACTIONS WITH AFFILIATES. Enter into any transaction of
any kind with any Affiliate of Borrower OTHER THAN (a) salary, bonus and
other compensation arrangements with directors, officers, partners or
employees in the ordinary course of business and those no more favorable than
those in existence as of the Closing Date, (b) transactions between or among
Borrower and its Subsidiaries, (c) transactions on overall terms at least as
favorable to Borrower or its Subsidiaries as would be the case in an
arm's-length transaction between unrelated parties of equal bargaining power,
(d) reimbursement of expenses incurred by Persons controlled by Peter A.
Morton in providing support and travel services to Borrower and its
Subsidiaries in the ordinary course of their business and consistent with
past practices, and (e) loans to employees of Borrower and its Subsidiaries
in the ordinary course of their business, PROVIDED that any loan in excess of
$200,000 shall have been approved by the disinterested
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members of the Board of Directors of Borrower.
6.12 SENIOR LEVERAGE RATIO. Permit the Senior Leverage Ratio as
of the last day of any Fiscal Quarter set forth below to exceed the ratio set
forth opposite that Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Maximum Ratio
--------------------- -------------
<S> <C>
11/30/98 2.25:1.00
2/28/99 3.75:1.00
5/31/99 3.85:1.00
8/31/99 3.00:1.00
11/30/99 2.35:1.00
Thereafter 2.00:1.00
</TABLE>
6.13 FIXED CHARGE COVERAGE RATIO. Permit the Fixed Charge
Coverage Ratio as of the last day of any Fiscal Quarter set forth below to be
less than the ratio set forth opposite that Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Minimum Ratio
--------------------- -------------
<S> <C>
Closing Date through 1.15:1.00
February 1999
May 31, 1999 1.05:1.00
August 1999 and
November 30, 1999 1.15:1.00
Thereafter 1.20:1.00.
</TABLE>
6.14 CAPITAL EXPENDITURES. Make or commit to make any
Capital Expenditure other than:
(a) Capital Expenditures made in connection with the
construction of the Proposed Expansion in an aggregate amount
which does not exceed $87,000,000; and
(b) Maintenance Capital Expenditures in an aggregate
amount not to exceed $5,000,000 during any Fiscal Year.
6.15 ACQUISITIONS AND INVESTMENTS. Make or suffer to
exist any Investment, OTHER THAN:
(a) Investments consisting of Cash and Cash
Equivalents;
(b) Investments consisting of advances to officers,
directors, partners and employees of Borrower and its
Subsidiaries for travel, entertainment, relocation and
analogous ordinary business purposes;
(c) Investments in Subsidiaries engaged solely in
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businesses reasonably related to the conduct of the business of
the Hard Rock Hotel and which are made in compliance with
Section 6.16; and
(d) Investments consisting of credit extended to
gaming patrons in the ordinary course of business and in
accordance with past practices.
6.16 NEW SUBSIDIARIES. Make or suffer to exist any
Investment in any Subsidiary, or form or acquire any Subsidiary,
unless:
(a) the Requisite Lenders have approved the same,
with such approval not to be unreasonably withheld; and
(b) concurrently with such Investment, acquisition
or formation, (i) Borrower has pledged its interest in the
capital stock and debt securities of such Subsidiary to the
Administrative Agent and the Lenders, (ii) such Subsidiary has
issued a guaranty of the Obligations and has granted perfected
first priority Liens in substantially all of its Property, in
each case pursuant to agreements which are in form and
substance acceptable to the Administrative Agent, and (iii)
Borrower and such Subsidiary have provided to the
Administrative Agent such other opinions, assurances and the
like as the Administrative Agent or the Requisite Lenders have
reasonably requested.
6.17 CONSTRUCTION OF THE PROPOSED EXPANSION.
(a) Fail to proceed diligently and without
interruption (EXCEPT as may be caused by Force Majeure Events)
to construct and furnish the Proposed Expansion in accordance
in all material respects with the Plans, the Budget and the
Timetable, and in any event on or before the Completion Date.
(b) Make any change to the Plans or Budget which
would (i) allocate or require the allocation of more than
$1,000,000 (in the aggregate of all such allocations) of the
$7,200,000 "contingency" line item in the Budget to any line
item not included in the Budget as of the Closing Date without
the prior written consent of the Requisite Lenders (not to be
unreasonably withheld or delayed), or (ii) increase the Budget
to more than $87,000,000.
(c) Make any change to the Plans, the Budget or
the Timetable which would cause the Completion Date to occur
after August 1, 1999.
(d) Fail to construct the Proposed Expansion in
a good and workmanlike manner in accordance with sound building
practices and the Plans, and comply in all material respects
with all existing Laws and requirements of all Governmental
Agencies having jurisdiction over the Project Site or the
Proposed Expansion and with all future Laws and requirements
that become applicable to the Project Site or the Proposed
Expansion prior to the Completion Date.
(e) Purchase or contract for any materials,
equipment, furnishings, fixtures or articles of personal
property to be placed or installed on the Project Site under
any security agreement or other agreement where the seller
reserves or purports to reserve
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title or the right of removal or repossession (EXCEPT for such
reservations as may arise solely by operation of Law), or the
right to consider such materials personal property after their
incorporation in the work of construction (except to the extent
permitted by Section 6.9 hereof), unless the Administrative Agent
in each instance has authorized Borrower to do so in writing.
(f) Fail to promptly pay when due (subject to
applicable retentions) or otherwise discharge all claims and
Liens for labor done and materials and services furnished in
connection with the construction of the Proposed Expansion,
EXCEPT for claims contested in good faith by appropriate
proceedings and without prejudice to the Timetable, PROVIDED
that any such claims are covered by such payment bonds or title
insurance policy endorsements as may be requested by the
Administrative Agent.
(g) Fail to promptly provide to the Administrative
Agent and CSG such information and documents respecting the
Proposed Expansion as either may reasonably request from time
to time, INCLUDING detailed identification of each significant
subcontractor or supplier to the Proposed Expansion and the
nature and dollar amount of the related subcontract or supply
contract.
(h) Fail to properly obtain, comply with and keep in
effect all permits, licenses and approvals which are
customarily required to be obtained from Governmental Agencies
in order to construct and occupy the Project Site and the
Proposed Expansion as of the then current stage of
construction, and deliver copies of all such permits, licenses
and approvals to the Administrative Agent promptly following a
request therefor.
(i) Make any material change to the Plans or Budget,
or in any event make any change to the Plan or Budget which
results in (A) any increase in the overall amount of the
Budget, or (B) any change in the scope of the Proposed
Expansion so that the square footage of the casino area would
be decreased, or (C) delete or amend any of the amenities
described on Schedule 1.1A.
(j) Fail to provide any and all information, which
is reasonably required for the preparation of a monthly
Construction Progress Report, to cooperate in the preparation
of each Construction Progress Report and, if requested by the
Administrative Agent, cause the Proposed Expansion architect
and general contractor to certify that the improvements
constructed as of the date of any Construction Progress Report
conform to the Plans in all material respects;
(k) Fail to maintain a full set of working drawings
at the Project Site for review by CSG;
(l) Fail, within 15 days following any request by
the Administrative Agent, to deliver (i) then current
construction plans for the Proposed Expansion certified as true
and correct by the Proposed Expansion architect and the project
engineer, (ii) a then current list of the names, addresses and
telephone numbers of each contractor, subcontractor and
material supplier with respect to the Proposed Expansion and
the dollar value and amounts paid with respect to the related
contracts, and (iii) then current versions of the construction
schedule for all uncompleted work on the Proposed
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Expansion and all executed contracts and subcontracts for such
work;
(m) Fail to promptly notify the Administrative
Agent if it purchases any construction materials for the
Proposed Expansion having a value in excess of $1,000,000 that
are not located on the Project Site, or will not be delivered
to the Project Site within fifteen days after purchase
(describing such construction materials, the purchase price
therefor and the location thereof) and, if requested by the
Administrative Agent, provide to the Administrative Agent the
written acknowledgment of the Person having custody of such
construction materials of the existence of the Administrative
Agent's Lien on such construction materials and the right of
the Administrative Agent to have access to and to remove such
construction materials when an Event of Default has occurred
and remains continuing.
(n) On or before the Opening, fail to provide the
Administrative Agent with a written certificate executed by the
project architect and contractor certifying that the Proposed
Expansion has been completed in all material respects in
accordance with the Plans and complies in all material respects
with all applicable zoning, building and land use Laws and that
the Proposed Expansion is ready to be opened for business
together with a Certificate executed by a Senior Officer to
that effect.
(o) Fail, as soon as practicable after
completion of the Proposed Expansion, provide the
Administrative Agent with an ALTA survey of the Project Site
that (i) demonstrates compliance of the Proposed Expansion in
all material respects with all applicable Laws and requirements
of Governmental Agencies, (ii) sets forth all easements and
licenses burdening the Project Site, (iii) reflects no
encroachments onto the Project Site and no encroachments by the
Proposed Expansion onto adjoining real property (other than as
reflected on the ALTA Survey described in the definition of
Project Site) and (iv) certifies the legal description of the
Project Site to be the same as that set forth in the title
insurance policies referred to in Section 8.1(a).
6.18 CHANGES TO THE SUBORDINATED OBLIGATIONS OR CODES, COVENANTS
AND RESTRICTIONS. Make any changes, amendments or modifications to the
terms of the Supervisory Agreement, the Indenture or any other Subordinated
Obligations which are materially adverse to the interests of the Creditors,
or amend, modify or fail to enforce (in any manner which is materially
adverse to the interests of the Lenders or which is directed by the
Administrative Agent) the Declaration of Codes, Covenants and Restrictions
dated made by Hotel Nicole Limited Partnership dated July 27, 1989 and of
record as of the Closing Date.
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Article 7
INFORMATION AND REPORTING REQUIREMENTS
7.1 FINANCIAL AND BUSINESS INFORMATION. So long as any
Advance remains unpaid, or any Letter of Credit remains outstanding,
or any other Obligation remains unpaid or unperformed, or any portion
of the Commitment remains in force, Borrower shall, unless the
Administrative Agent (with the written approval of the Requisite
Lenders) otherwise consents, at Borrower's sole expense, deliver to
the Administrative Agent, a sufficient number of copies for all of the
Lenders, of the following:
(a) As soon as practicable, and in any event within
45 days after the end of each Fiscal Quarter, (i) the
consolidated and consolidating balance sheet, statement of
income and cash flows for the portion of the Fiscal Year ended
with such Fiscal Quarter, all in reasonable detail, and (ii) a
quarterly operating report with a narrative description in a
format which is mutually acceptable to Borrower and the
Administrative Agent. Such financial statements shall be
certified by the Chief Financial Officer or Treasurer of
Borrower as fairly presenting the financial condition, results
of operations and cash flows of Borrower and its Subsidiaries
in accordance with Generally Accepted Accounting Principles
(other than footnote disclosures), consistently applied, as at
such date and for such periods, subject only to normal year-end
accruals and audit adjustments;
(b) As soon as practicable, and in any event within
90 days after the end of each Fiscal Year, the consolidated and
consolidating balance sheet, statements of operations and cash
flows, in each case of Borrower and its Subsidiaries for such
Fiscal Year, in each case as at the end of and for the Fiscal
Year, all in reasonable detail. Such financial statements
shall be prepared in accordance with Generally Accepted
Accounting Principles, consistently applied, and such
consolidated balance sheet and consolidated statements shall be
accompanied by a report and opinion of independent public
accountants of recognized standing selected by Borrower and
reasonably satisfactory to the Requisite Lenders, which report
and opinion shall be prepared in accordance with generally
accepted auditing standards as at such date, and shall not be
subject to any qualifications or exceptions which are not
acceptable to the Requisite Lenders. Such accountants' report
shall be accompanied by a certificate stating that, in making
the examination pursuant to generally accepted auditing
standards necessary for the certification of such financial
statements and such report, such accountants have obtained no
knowledge of any Default or, if, in the opinion of such
accountants, any such Default shall exist, stating the nature
and status of such Default, and stating that such accountants
have reviewed Borrower's financial calculations as at the end
of such Fiscal Year (which shall accompany such certificate)
under Sections 6.12, 6.13 and 6.14, have read such Sections
(including the definitions of all defined terms used therein)
and that nothing has come to the attention of such accountants
in the course of such examination that would cause them to
believe that the same were not calculated by Borrower in the
manner prescribed by this Agreement;
(c) As soon as practicable, and in any event within
90 days after the commencement of each Fiscal Year, a budget
and
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projection by Fiscal Quarter for that Fiscal Year and by
Fiscal Year for the four succeeding Fiscal Years, INCLUDING
projected consolidated balance sheets, statements of operations
and statements of cash flow of Borrower and its Subsidiaries,
all in reasonable detail;
(d) Promptly after the same are available, copies of
each material change to the Plans (whether such changes require
the consent of the Lenders or not). Without limitation on the
foregoing, Borrower shall promptly provide CSG with (i) copies
of all change orders with respect to the Plans including plans
and specifications indicating the proposed change, a written
description of the proposed change and related work drawings
and a written estimate of the cost of the proposed change and
the time necessary to complete it, and (ii) any and all other
information and documents with respect thereto reasonably
requested by CSG;
(e) Promptly after request by the Administrative
Agent or any Lender, copies of any detailed audit reports,
management letters or recommendations submitted to Borrower by
independent accountants in connection with the accounts or
books of Borrower or any of its Subsidiaries, or any audit of
any of them;
(f) Promptly after the same are available, copies of
each annual report, proxy or financial statement or other
report or communication sent to the stockholders of Borrower,
and copies of all annual, regular, periodic and special reports
and registration statements which Borrower may file or be
required to file with the Securities and Exchange Commission
under Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, and not otherwise required to be delivered to
the Lenders pursuant to other provisions of this Section 7.1;
(g) Promptly after the same are available, copies of
the Nevada "Regulation 6.090 Report" and "6-A Report" and
copies of any written communication to Borrower or any of its
Subsidiaries from any Gaming Board advising it of a violation
of or non-compliance with any Gaming Law by Borrower or any of
its Subsidiaries;
(h) Promptly after request by the Administrative
Agent or any Lender, copies of any other material report or
other document that was filed by Borrower or any of its
Subsidiaries with any Governmental Agency;
(i) Promptly, and in any event within ten Banking
Days upon a Senior Officer becoming aware, of the occurrence of
any (i) "reportable event" (as such term is defined in
Section 4043 of ERISA) or (ii) "prohibited transaction" (as
such term is defined in Section 406 of ERISA or Section 4975 of
the Code) in connection with any Pension Plan or any trust
created thereunder, telephonic notice specifying the nature
thereof, and, no more than five Banking Days after such
telephonic notice, written notice again specifying the nature
thereof and specifying what action Borrower or any of its
Subsidiaries is taking or proposes to take with respect
thereto, and, when known, any action taken by the Internal
Revenue Service with respect thereto;
(j) As soon as practicable, and in any event within
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three Banking Days after a Senior Officer becomes aware of the
existence of any condition or event which constitutes a
Default, telephonic notice specifying the nature and period of
existence thereof, and, no more than two Banking Days after
such telephonic notice, written notice again specifying the
nature and period of existence thereof and specifying what
action Borrower is taking or proposes to take with respect
thereto;
(k) Promptly upon a Senior Officer becoming aware
that (i) any Person has commenced a legal proceeding with
respect to a claim against Borrower or any of its Subsidiaries
that is $500,000 or more in excess of the amount thereof that
is fully covered by insurance, (ii) any creditor or lessor
under a written credit agreement or material lease has asserted
a default thereunder on the part of Borrower or any of its
Subsidiaries, (iii) any Person has commenced a legal proceeding
with respect to a claim against Borrower or any of its
Subsidiaries under a contract that is not a credit agreement or
material lease in excess of $500,000 or which otherwise may
reasonably be expected to result in a Material Adverse Effect,
(iv) any labor union has notified Borrower of its intent to
strike Borrower or any of its Subsidiaries on a date certain
and such strike would involve more than 100 employees of
Borrower and its Subsidiaries, or (v) any Gaming Board has
indicated its intent to consider or act upon a License
Revocation or a fine or penalty of $1,000,000 or more with
respect to Borrower or any of its Subsidiaries, a written
notice describing the pertinent facts relating thereto and what
action Borrower or its Subsidiaries are taking or propose to
take with respect thereto;
(l) As soon as practicable, and in any event prior
to April 1 of any calendar year, (a) a Liquidity Report, and
(b) the annual personal financial report of Peter A. Morton
with respect to the preceding calendar year; PROVIDED THAT it
is agreed that Peter A. Morton's personal financial report and
the Liquidity Report are subject to the provisions of Section
11.14; and
(m) Such other data and information as from time to
time may be reasonably requested by the Administrative Agent,
any Lender (through the Administrative Agent) or the Requisite
Lenders.
7.2 COMPLIANCE CERTIFICATES. For so long as any Advance remains
unpaid, any Letter of Credit remains outstanding, any other Obligation
remains unpaid or unperformed, or any portion of the Commitment remains
outstanding, Borrower shall deliver to the Administrative Agent for
distribution by it to the Lenders concurrently with the financial statements
required pursuant to Sections 7.1(a) a properly completed Compliance
Certificate signed by a Senior Officer.
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Article 8
CONDITIONS
8.1 INITIAL ADVANCES ON THE CLOSING DATE. The obligation of each
Lender to make the initial Advance to be made by it on the Closing Date, is
subject to the following conditions precedent, each of which shall be
satisfied prior to the making of the initial advances (unless all of the
Lenders, in their sole and absolute discretion, shall agree otherwise):
(a) The Administrative Agent shall have received all
of the following, each of which shall be originals unless
otherwise specified, each properly executed by a Responsible
Official of each party thereto, each dated as of the Closing
Date and each in form and substance satisfactory to the
Administrative Agent and its legal counsel (unless otherwise
specified or, in the case of the date of any of the following,
unless the Administrative Agent otherwise agrees or directs):
(1) executed counterparts of this Agreement,
sufficient in number for distribution to the Lenders and
Borrower;
(2) Notes executed by Borrower in favor of each
Lender, each in a principal amount equal to that Lender's
Pro Rata Share;
(3) the Swing Line Documents executed by
Borrower in favor of the Swing Line Lender;
(4) the Deed of Trust, executed and
acknowledged by Borrower;
(5) a fixture filing on form UCC-1 with respect
to the Project Site;
(6) the Security Agreement executed by
Borrower;
(7) such financing statements on Form UCC-1
executed by Borrower with respect to the Security
Agreement as the Administrative Agent may request;
(8) the Trademark Assignment, executed by
Borrower;
(9) a Certificate, signed by a Senior Officer
of Borrower certifying that attached thereto are true,
correct and complete copies of the Trademark Sublicense
Agreement, dated October 24, 1997 between Peter A. Morton
and Borrower, as amended (which amendment shall be in form
and substance acceptable to the Lenders);
(10) the Completion Guaranty, executed by Peter
A. Morton;
(11) the Make Well Agreement, executed by Peter
A. Morton;
(12) the Subordination Agreement (regarding
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Supervisory Fees) executed by Peter A. Morton;
(13) a certified execution copy of the
Indenture;
(14) the fee letter with respect to certain fees
due and owing to the Administrative Agent and the
Arranger, executed by Borrower;
(15) such documentation with respect to Borrower
as the Administrative Agent may require to establish its
due organization, valid existence and good standing, its
qualification to engage in business in each material
jurisdiction in which it is engaged in business or
required to be so qualified, its authority to execute,
deliver and perform the Loan Documents, the identity,
authority and capacity of each Responsible Official
thereof authorized to act on its behalf, INCLUDING
certified copies of articles of incorporation and
amendments thereto, bylaws and amendments thereto,
certificates of good standing and/or qualification to
engage in business, tax clearance certificates,
certificates of corporate resolutions, and incumbency
certificates;
(16) a Certificate of a Responsible Official
signed by a Senior Officer of Borrower attaching true,
correct and complete copies of the Plans and the Budget;
(17) the "Phase I" environmental report dated
September 27, 1989 prepared with respect to the Project
Site by Western Technologies, Inc.;
(18) a written appraisal by a qualified
independent appraiser acceptable to the Administrative
Agent and complying in all respects with FIRREA of
the Project Site that reflects (i) the fair market value
of the Project Site and the existing Hard Rock Hotel
improvements as of the Closing Date of not less than
$100,000,000 and (ii) a projected "as-built" value of the
Project Site and related improvements upon Completion of
the Expansion Project of not less than $150,000,000;
(19) a certificate of insurance issued by
Borrower's insurance carrier or agent with respect to the
insurance required to be maintained pursuant to the Deed
of Trust, including without limitation flood insurance and
a policy or policies of bailer's "all risk" insurance in
non-reporting form and in an amount not less than the then
current value of the improvements located on the Real
Property, to be increased on the Completion Date to the
full insurable completed value of Hard Rock Hotel and the
Proposed Expansion on a replacement cost basis, together
with lenders' loss payable endorsements thereof on
Form 438BFU or other form acceptable to the Administrative
Agent;
(20) assurances acceptable to the Administrative
Agent that the Commonwealth Land Title Insurance Company
is prepared to issue its ALTA lenders policy (with an
LP-10 pricing package), insuring that Borrower is the
owner of the Project Site in fee simple absolute and
insuring the Lien of
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the Deed of Trust in an amount not less than the amount
of the Commitment, subject only to the exceptions to title
described on Schedule 6.9 and with endorsements to coverage as
are reasonably acceptable to the Administrative Agent or as are
reasonably requested by the Requisite Lenders (including any
endorsements providing coverage as to exceptions to title
described on Schedule 6.9 as may be reasonably requested by the
Administrative Agent with respect thereto), with such
assurances as the Administrative Agent may reasonably require
from title re-insurers acceptable to the Administrative Agent;
(21) the Opinions of Counsel;
(22) a Certificate of a Responsible Official of
Borrower stating that attached thereto and incorporated
therein by reference are true, correct and complete copies
of the architect contract for the Proposed Expansion;
(23) The Timetable shall have been approved by
the Administrative Agent and the Lenders;
(24) a geotechnical report by a qualified
licensed soils engineer satisfactory to the Lenders and
certified as applicable to the improvements of the Project
Site contemplated by the Proposed Expansion;
(25) evidence satisfactory to the Requisite
Lenders of such zoning (including variances and use
permits) and other land use entitlements as may be
necessary to permit the use of the Project Site and the
Proposed Expansion as a hotel, casino and resort property;
(26) such assurances as the Administrative Agent
deems appropriate that the relevant Gaming Boards have
approved the transactions contemplated by the Loan
Documents (other than the Negative Pledge contemplated by
the Make Well Agreement) to the extent that such approval
is required by applicable Gaming Laws;
(27) a Certificate of a Responsible Official
signed by a Senior Officer of Borrower certifying that the
conditions specified in Sections 8.1(e) and 8.1(f) have
been satisfied;
(28) such other assurances, certificates,
documents, consents or opinions as the Administrative
Agent reasonably may require.
(b) Borrower shall have concurrently terminated the
Existing Credit Agreement pursuant to agreements acceptable to
the Administrative Agent, and shall have made arrangements
satisfactory to the Administrative Agent for the termination of
the deed of trust, financing statements and other security held
by the lenders under the Existing Credit Agreement.
(c) Evidence that the security interests of the
Administrative Agent in the personal property of Borrower are
of first priority, except as otherwise contemplated by the Loan
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Documents.
(d) The reasonable costs and expenses of the
Administrative Agent in connection with the preparation of the
Loan Documents payable pursuant to Section 11.3, and invoiced
to Borrower prior to the Closing Date, shall have been paid.
(e) The representations and warranties of Borrower
contained in Article 4 shall be true and correct.
(f) Borrower and any other Obligors shall be in
compliance with all the terms and provisions of the Loan
Documents, and after giving effect to the initial Advance, no
Default or Event of Default shall have occurred and be
continuing.
(g) The fees due and payable on the Closing Date
pursuant to Article 3 shall have been paid.
(h) Borrower shall have received, or shall
concurrently receive, the net proceeds of the issuance of its
$120,000,000 Senior Subordinated Notes due 2005 issued pursuant
to the Indenture, and the terms of the Indenture shall be
acceptable to the Administrative Agent.
(i) All legal matters relating to the Loan Documents
shall be satisfactory to Sheppard, Mullin, Richter & Hampton,
LLP special counsel to the Administrative Agent.
8.2 ANY ADVANCE. The obligation of each Lender to make any
Advance, the obligation of the Issuing Lender to issue any Letter of Credit,
and the obligation of the Swing Line Lender to make any Swing Line Advance,
are each subject to the conditions precedent that:
(a) EXCEPT as disclosed by Borrower and approved in
writing by the Requisite Lenders, the representations and
warranties contained in Article 4 (OTHER THAN the
representations set forth in Sections 4.4, 4.10 and 4.17) shall
be true and correct on the date of such Advance as though made
on that date, (PROVIDED that after the release of the Make Well
Agreement, no such representations or warranties made with
respect to Peter A. Morton shall be conditions to the making of
Loans, Letters of Credit or Swing Line Advances hereunder);
(b) There shall not be any pending or threatened
action, suit, proceeding or investigation affecting Borrower or
any of its Subsidiaries before any Governmental Agency that
constitutes a Material Adverse Effect;
(c) EXCEPT as provided for in Section 2.1(g), the
Administrative Agent shall have timely received a Request for
Loan in compliance with Article 2 (or telephonic or other
request for Loan referred to in the second sentence of
Section 2.1(b), if applicable) or the Issuing Lender shall have
received a Request for Letter of Credit, as the case may be, in
compliance with Article 2;
(d) no Default or Event of Default shall have
occurred and remain continuing or will result from such Advance
or Swing Line Advance or the issuance of such Letter of Credit;
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(e) the Administrative Agent shall have received, in
form and substance satisfactory to the Administrative Agent,
such other assurances, certificates, documents or consents
related to the foregoing as the Administrative Agent or the
Requisite Lenders reasonably may require.
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Article 9
EVENTS OF DEFAULT AND REMEDIES UPON EVENT OF DEFAULT
9.1 EVENTS OF DEFAULT. The existence or occurrence of any one or
more of the following events, whatever the reason therefor and under any
circumstances whatsoever, shall constitute an Event of Default:
(a) Borrower (i) fails to pay any principal on any
of the Notes, or any portion thereof, on the date when due,
(ii) fails to make any payment with respect to any Letter of
Credit when due, or (iii) fails to make any payment of
principal with respect to any Swing Line Advance when due; or
(b) Borrower fails to pay any interest on any of the
Notes, or any fees under Sections 3.4, 3.5, 3.6 or 3.7 or any
portion thereof, within two Banking Days after the date when
due; or fails to pay any other fee or amount payable to the
Lenders under any Loan Document, or any portion thereof, within
two Banking Days after demand therefor; or
(c) Borrower fails to comply with any of the
covenants contained in Article 6, PROVIDED that (i) at such
times as the Make Well Agreement is in effect, no Event of
Default shall exist solely by reason of a Default under
Sections 6.12 or 6.13 if, within ten Banking Days following the
first date upon which Borrower becomes aware of such a Default,
Peter A. Morton makes all of the Additional Contributions
contemplated by the Make Well Agreement and cures all such
Defaults, and (ii) at such times as the Completion Guaranty is
in effect, no Event of Default shall exist under Section 6.17
solely by reason of the completion of the Proposed Expansion
and the related amenities described in Schedule 1.1A for an
amount which is in excess of the Budget, to the extent that
Peter A. Morton has made Additional Contributions under the
Completion Guaranty in an amount which is not less than such
excess amount within the time periods provided for in the
Completion Guaranty;
(d) Borrower fails to comply with Sections 5.6 or
7.1(j) in any respect that is materially adverse to the
interests of the Lenders; or
(e) Borrower or any other Obligor fails to perform
or observe any other covenant or Agreement (not specified in
clauses (a), (b), (c) or (d) above) contained in any Loan
Document on its part to be performed or observed within
fifteen Banking Days after the giving of notice by the
Administrative Agent on behalf of the Requisite Lenders of such
Default; or
(f) Any representation or warranty of Borrower or
any other Obligor made in any Loan Document, or in any
certificate or other writing delivered by Borrower pursuant to
any Loan Document, proves to have been incorrect when made or
reaffirmed in any respect that is materially adverse to the
interests of the Lenders; or
(g) Borrower or any of its Subsidiaries (i) fails to
pay the principal, or any principal installment, of any present
or future Indebtedness for borrowed money of $1,000,000 or
more, or any guaranty of present or future Indebtedness for
borrowed money of
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$1,000,000 or more, on its part to be paid,
when due (or within any stated grace period), whether at the
stated maturity, upon acceleration, by reason of required
prepayment, the exercise of any "put" exercised by the holder
of such Indebtedness or otherwise or (ii) fails to perform or
observe any other term, covenant or Agreement on its part to be
performed or observed, or suffers any event to occur, in
connection with any present or future Indebtedness for borrowed
money of $1,000,000 or more, or of any guaranty of present or
future indebtedness for borrowed money of $1,000,000 or more,
if as a result of such failure or sufferance any holder or
holders thereof (or an agent or trustee on its or their behalf)
has the right to declare such indebtedness due before the date
on which it otherwise would become due; or
(h) Any event occurs which gives the holder or
holders of any Subordinated Obligation (or an agent or trustee
on its or their behalf) the right to declare such Subordinated
Obligation due before the date on which it otherwise would
become due, or the right to require the issuer thereof to
redeem or purchase, or offer to redeem or purchase, all or any
portion of any Subordinated Obligation; or
(i) Any Loan Document, at any time after its
execution and delivery and for any reason other than the
agreement of the Lenders or satisfaction in full of all the
Obligations ceases to be in full force and effect or is
declared by a court of competent jurisdiction to be null and
void, invalid or unenforceable in any respect which, in any
such event in the reasonable opinion of the Requisite Lenders,
is materially adverse to the interests of the Lenders; or any
Obligor thereto denies in writing that it has any or further
liability or obligation under any Loan Document, or purports to
revoke, terminate or rescind same; or
(j) A final judgment against Borrower or any of its
Subsidiaries is entered for the payment of money in excess of
$1,000,000 and, absent procurement of a stay of execution, such
judgment remains unsatisfied for thirty calendar days after the
date of entry of judgment, or in any event later than five days
prior to the date of any proposed sale thereunder; or any writ
or warrant of attachment or execution or similar process is
issued or levied against all or any part of the Property of any
such Person and is not released, vacated or fully bonded within
thirty calendar days after its issue or levy; or
(k) Borrower or any of its Subsidiaries institutes
or consents to the institution of any proceeding under a Debtor
Relief Law relating to it or to all or any part of its
Property, or is unable or admits in writing its inability to
pay its debts as they mature, or makes an assignment for the
benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator or similar officer for it or for all
or any part of its Property; or any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar
officer is appointed without the application or consent of that
Person and the appointment continues undischarged or unstayed
for sixty calendar days; or any proceeding under a Debtor
Relief Law relating to any such Person or to all or any part of
its Property is instituted without the consent of that Person
and continues
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undismissed or unstayed for sixty calendar days; or
(l) The occurrence of an Event of Default (as such
term is or may hereafter be specifically defined in any other
Loan Document) under any other Loan Document; or
(m) Any determination is made by a court of
competent jurisdiction that any Subordinated Obligation is not
subordinated in accordance with its terms to the Obligations;
or
(n) Any Pension Plan maintained by Borrower or any
of its Subsidiaries is determined to have an "accumulated
funding deficiency" as that term is defined in Section 302 of
ERISA and the result is a Material Adverse Effect; or
(o) The occurrence of any License Revocation that
continues for five consecutive calendar days with respect to
any material gaming operations at the Hard Rock Hotel; or
(p) The occurrence of any Change of Control;
(q) At any time when the Completion Guaranty or the
Make Well Agreement is in effect, any event or circumstance of
the types described in Section 9.1(g), (j) or (k) occurs with
respect to Peter A. Morton; or
(r) Any amendment is made to the terms of the
Indenture or any instrument, document or Agreement governing
Subordinated Obligations in violation of Section 6.18, or any
payment is made in violation of the terms of the Indenture or
the Subordination Agreement, or Peter A. Morton or any of the
holders of the senior subordinated notes issued pursuant to the
Indenture asserts in writing that the obligations evidenced
thereby are not subordinated in accordance with their terms to
the Obligations.
9.2 Remedies Upon Event of Default. Without limiting any
other rights or remedies of the Administrative Agent or the Lenders
provided for elsewhere in this Agreement, or the other Loan Documents,
or by applicable Law, or in equity, or otherwise:
(a) Upon the occurrence, and during the continuance,
of any Event of Default other than an Event of Default
described in Section 9.1(k):
(1) the Commitment to make Advances, the
obligation of the Issuing Lender to issue Letters of
Credit, the obligation of the Swing Line Lender to make
Swing Line Advances and all other obligations of the
Creditors to the Obligors and all rights of Borrower and
the other Obligors under the Loan Documents shall be
suspended without notice to or demand upon Borrower, which
are expressly waived by Borrower, except that all of the
Lenders or the Requisite Lenders (as the case may be, in
accordance with Section 11.2) may waive an Event of
Default or, without waiving, determine, upon terms and
conditions satisfactory to the Lenders or Requisite
Lenders, as the case may be, to reinstate the Commitment
and make further Advances, and cause the Issuing Lender to
issue further Letters of Credit, which waiver or
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determination shall apply equally to, and shall be binding
upon, all the Lenders;
(2) the Issuing Lender may, with the approval
of the Administrative Agent on behalf of the Requisite
Lenders, demand immediate payment by Borrower of an amount
equal to the aggregate amount of all outstanding Letters
of Credit to be held by the Issuing Lender as cash
collateral hereunder; and
(3) the Requisite Lenders may request the
Administrative Agent to, and the Administrative Agent
thereupon shall, terminate the Commitment and may declare
all or any part of the unpaid principal of the Notes, all
interest accrued and unpaid thereon and all other amounts
payable under the Loan Documents to be forthwith due and
payable, whereupon the same shall become and be forthwith
due and payable, without protest, presentment, notice of
dishonor, demand or further notice of any kind, all of
which are expressly waived by Borrower.
(b) Upon the occurrence of any Event of Default
described in Section 9.1(k):
(1) the Commitment to make Advances, the
obligation of the Issuing Lender to issue Letters of
Credit, the obligation of the Swing Line Lender to make
Swing Line Advances and all other obligations of the
Creditors to the Obligors and all rights of Borrower and
any other Obligors under the Loan Documents shall
terminate without notice to or demand upon Borrower, which
are expressly waived by Borrower, except that all the
Lenders may waive the Event of Default or, without
waiving, determine, upon terms and conditions satisfactory
to all the Lenders, to reinstate the Commitment and make
further Advances and to cause the Issuing Lender to issue
further Letters of Credit,, which determination shall
apply equally to, and shall be binding upon, all the
Lenders;
(2) an amount equal to the aggregate amount of
all outstanding Letters of Credit shall be immediately due
and payable to the Issuing Lender without notice to or
demand upon Borrower, which are expressly waived by
Borrower, to be held by the Issuing Lender in an interest-
bearing account as collateral hereunder; and
(3) the unpaid principal of all Notes, all
interest accrued and unpaid thereon and all other amounts
payable under the Loan Documents shall be forthwith due
and payable, without protest, presentment, notice of
dishonor, demand or further notice of any kind, all of
which are expressly waived by Borrower.
(c) Upon the occurrence and during the continuance
of any Event of Default, the Lenders and the Administrative
Agent, or any of them, without notice to (except as expressly
provided for in any Loan Document) or demand upon Borrower,
which are expressly waived by Borrower (except as to notices
expressly provided for in any Loan Document), may proceed (but
only with the consent of the Requisite Lenders) to protect,
exercise and enforce their rights and remedies under the Loan
Documents against Borrower and any other
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Obligor and such other rights and remedies as are provided by Law
or equity. Without limitation upon the foregoing, if any Event of
Default occurs before the Opening, the Administrative Agent shall
have the right (to the extent not prohibited by applicable Laws)
in the sole discretion of the Requisite Lenders to enter and take
possession of the Proposed Expansion, whether in person, by
agent or by court-appointed receiver, and to take any and all
actions which the Administrative Agent in its sole discretion
after consultation with the Lenders may consider necessary to
complete construction of the Proposed Expansion, including
making changes in the Plans, work or materials and entering
into, modifying or terminating any contractual arrangements,
all subject to the Administrative Agent's and the Lenders'
right at any time to discontinue any work without liability,
PROVIDED that the Administrative Agent shall discontinue the
exercise of the rights provided by this sentence if the Event
of Default is cured to the satisfaction of the Requisite
Lenders. If the Administrative Agent and the Requisite Lenders
choose to complete the Proposed Expansion, neither the
Administrative Agent nor the Lenders shall assume any liability
to Borrower or any other Person for completing the Proposed
Expansion, or for the manner or quality of construction of the
Proposed Expansion, and Borrower expressly waives any such
liability not associated with the gross negligence and willful
misconduct of the Administrative Agent or the Lenders. If the
Administrative Agent exercises any of the rights or remedies
provided in this paragraph on behalf of the Lenders, that
exercise shall not make the Administrative Agent or the
Lenders, or cause the Administrative Agent or the Lenders to be
deemed to be, a partner or joint venturer of Borrower. The
Administrative Agent in its sole discretion may choose to
complete construction in its own name. All sums which are
expended by the Administrative Agent and/or the Lenders in
completing construction shall be considered to have been
disbursed to Borrower and shall be secured by the Collateral;
any sums of principal shall be considered to be additional
Loans to Borrower bearing interest at the Default Rate, and
shall be secured by the Collateral. For these purposes the
Administrative Agent, in its sole discretion, may reallocate
any line item or cost category of the Budget.
(d) The order and manner in which the Lenders'
rights and remedies are to be exercised shall be determined by
the Requisite Lenders in their sole discretion, and all
payments received by the Administrative Agent and the Lenders,
or any of them, shall be applied first to the costs and
expenses (including reasonable attorneys' fees and
disbursements and the reasonably allocated costs of attorneys
employed by the Administrative Agent or by any Lender) of the
Administrative Agent and of the Lenders, and thereafter paid
pro rata to the Lenders in the same proportions that the
aggregate Obligations owed to each Lender under the Loan
Documents bear to the aggregate Obligations owed under the Loan
Documents to all the Lenders, without priority or preference
among the Lenders. Regardless of how each Lender may treat
payments for the purpose of its own accounting, for the purpose
of computing Borrower's Obligations hereunder and under the
Notes, payments shall be applied FIRST, to the costs and
expenses of the Administrative Agent and the Lenders, as set
forth above, SECOND, to the payment of accrued and unpaid
interest due under any Loan Documents to and including the date
of such application (ratably, and without duplication,
according to the accrued and unpaid interest due under each of
the Loan
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Documents), and THIRD, to the payment of all other amounts (including
principal and fees) then owing to the Administrative Agent or the
Lenders under the Loan Documents. No application of payments will cure
any Event of Default, or prevent acceleration, or continued
acceleration, of amounts payable under the Loan Documents, or prevent
the exercise, or continued exercise, of rights or remedies of the
Lenders hereunder or thereunder or at Law or in equity.
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Article 10
THE ADMINISTRATIVE AGENT
10.1 APPOINTMENT AND AUTHORIZATION. Subject to Section 10.8, each
Creditor hereby irrevocably appoints and authorizes the Administrative Agent
to take such action as administrative agent on its behalf and to exercise
such powers under the Loan Documents as are delegated to the Administrative
Agent by the terms thereof or are reasonably incidental, as determined by the
Administrative Agent, thereto. This appointment and authorization is
intended solely for the purpose of facilitating the servicing of the Loans
and does not constitute appointment of the Administrative Agent as a trustee
or agent for any Lender or as representative of any Lender for any other
purpose and, EXCEPT as specifically set forth in the Loan Documents to the
contrary, the Administrative Agent shall take such action and exercise such
powers only in an administrative and ministerial capacity.
10.2 ADMINISTRATIVE AGENT AND AFFILIATES. Bank of America (and
each successor Administrative Agent) has the same rights and powers under the
Loan Documents as any other Lender and may exercise the same as though it
were not the Administrative Agent, and the term "Lender" or "Lenders"
includes Bank of America in its individual capacity. Bank of America (and
each successor Administrative Agent) and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust or
other business with Borrower, any Subsidiary thereof, or any Affiliate of
Borrower or any Subsidiary thereof, as if it were not the Administrative
Agent and without any duty to account therefor to the other Creditors. Bank
of America (and each successor Administrative Agent) need not account to any
other Creditor for any monies received by it for reimbursement of its costs
and expenses as Administrative Agent hereunder, or for any monies received by
it in its capacity as a Lender hereunder. The Administrative Agent shall not
be deemed to hold a fiduciary trust or other special relationship or any
other special relationship with any other Creditor and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or otherwise exist against the Administrative Agent.
10.3 PROPORTIONATE INTEREST IN ANY COLLATERAL. The Administrative
Agent, on behalf of all the Creditors, shall hold in accordance with the Loan
Documents all items of any collateral or interests therein received or held
by the Administrative Agent. Subject to the Administrative Agent's right to
reimbursement for its costs and expenses hereunder (INCLUDING reasonable
attorneys' fees and disbursements and other professional services and the
reasonably allocated costs of attorneys employed by the Administrative Agent)
and subject to the application of payments in accordance with Section 9.2(d),
each Lender shall have an interest in the Collateral or interests therein in
the same proportions that the aggregate Obligations owed such Lender under
the Loan Documents bear to the aggregate Obligations owed under the Loan
Documents to all the Lenders, without priority or preference among the
Lenders, EXCEPT that Obligations owed to any Lender under a Secured Swap
Agreement shall be secured on a PARI PASSU basis with all other Obligations
up to an amount equal to the Administrative Agent's then customary credit
risk factor for Swap Agreements times the notional amount of Indebtedness
covered by such Secured Swap Agreement and shall be secured on a subordinate
basis as to amounts in excess of such amount.
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10.4 LENDERS' CREDIT DECISIONS. Each Creditor agrees that it has,
independently and without reliance any other Creditor or the directors,
officers, agents, employees or attorneys thereof, and instead in reliance
upon information supplied to it by or on behalf of Borrower and upon such
other information as it has deemed appropriate, made its own independent
credit analysis and decision to enter into this Agreement. Each Lender
agrees that it shall, independently and without reliance upon any other
Creditor or the directors, officers, agents, employees or attorneys thereof,
continue to make its own independent credit analyses and decisions in acting
or not acting under the Loan Documents.
10.5 ACTION BY ADMINISTRATIVE AGENT.
(a) Absent actual knowledge of the Administrative Agent of
the existence of a Default or Event of Default, the Administrative
Agent may assume that no Default or Event of Default has occurred and
is continuing, unless the Administrative Agent has received notice from
Borrower stating the nature of the Default or has received notice from
a Lender stating the nature of the Default and that such Lender
considers the Default to have occurred and to be continuing.
(b) The Administrative Agent has only those obligations
under the Loan Documents as are expressly set forth therein.
(c) EXCEPT for any obligation expressly set forth in the
Loan Documents and as long as the Administrative Agent may assume that
no Event of Default has occurred and is continuing, the Administrative
Agent may, but shall not be required to, exercise its discretion to act
or not act, PROVIDED that (i) the Administrative Agent shall be
required to act or not act upon the instructions of the Requisite
Lenders (or of all the Lenders, to the extent required by Section 11.2)
and those instructions shall be binding upon the Administrative Agent
and all of the other Creditors, and (ii) the Administrative Agent shall
not be required to act or not act if to do so would be contrary to any
Loan Document or to applicable Law or would result, in the reasonable
judgment of the Administrative Agent, in substantial risk of liability
to the Administrative Agent.
(d) If the Administrative Agent has received a notice
specified in clause (a), the Administrative Agent shall immediately
give notice thereof to the Lenders and shall act or not act upon the
instructions of the Requisite Lenders (or of all the Lenders, to the
extent required by Section 11.2), PROVIDED that (i) the Administrative
Agent shall not be required to act or not act if to do so would be
contrary to any Loan Document or to applicable Law or would result, in
the reasonable judgment of the Administrative Agent, in substantial
risk of liability to the Administrative Agent, and (ii) if the
Requisite Lenders (or all the Lenders, if required under Section 11.2)
fail, for five Banking Days after the receipt of notice from the
Administrative Agent, to instruct the Administrative Agent, then the
Administrative Agent, in its sole discretion, may act or not act as it
deems advisable for the protection of the interests of the Lenders.
(e) The Administrative Agent shall have no liability to any
Creditor for acting, or not acting, as instructed by the Requisite
Lenders (or all the Lenders, if required under Section 11.2),
notwithstanding any other provision hereof.
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10.6 LIABILITY OF ADMINISTRATIVE AGENT. Neither the
Administrative Agent nor any of its directors, officers, agents, employees or
attorneys shall be liable for any action taken or not taken by them under or
in connection with the Loan Documents, EXCEPT for their own gross negligence
or willful misconduct. Without limitation on the foregoing, the
Administrative Agent and its directors, officers, agents, employees and
attorneys:
(a) May treat the payee of any Note as the holder thereof
until the Administrative Agent receives notice of the assignment or
transfer thereof, in form satisfactory to the Administrative Agent,
signed by the payee, and may treat each Lender as the owner of that
Lender's interest in the Obligations for all purposes of this Agreement
until the Administrative Agent receives notice of the assignment or
transfer thereof, in form satisfactory to the Administrative Agent,
signed by that Lender.
(b) May consult with legal counsel (INCLUDING in-house legal
counsel), accountants (INCLUDING in-house accountants) and other
professionals or experts selected by it, or with legal counsel,
accountants or other professionals or experts for Borrower or its
Subsidiaries or the Lenders, and shall not be liable for any action
taken or not taken by it in good faith in accordance with any advice of
such legal counsel, accountants or other professionals or experts.
(c) Shall not be responsible to any Creditor for any
statement, warranty or representation made in any of the Loan Documents
or in any notice, certificate, report, request or other statement
(written or oral) given or made in connection with any of the Loan
Documents.
(d) EXCEPT to the extent expressly set forth in the Loan
Documents, shall have no duty to ask or inquire as to the performance
or observance by any Obligor of any of the terms, conditions or
covenants of any of the Loan Documents or to inspect any Collateral or
the Property, books or records of Obligor.
(e) Will not be responsible to any Creditor for the due
execution, legality, validity, enforceability, genuineness,
effectiveness, sufficiency or value of any Loan Document, any other
instrument or writing furnished pursuant thereto or in connection
therewith, or any Collateral.
(f) Will not incur any liability by acting or not acting in
reliance upon any Loan Document, notice, consent, certificate,
statement, request or other instrument or writing believed by it to be
genuine and signed or sent by the proper party or parties.
(g) Will not incur any liability for any arithmetical error
in computing any amount paid or payable by any Obligor or paid or
payable to or received or receivable from any Lender under any Loan
Document, INCLUDING, without limitation, principal, interest,
commitment fees, Advances and other amounts; PROVIDED that, promptly
upon discovery of such an error in computation, the Administrative
Agent, the Lenders and (to the extent applicable) Borrower and/or its
Subsidiaries or Affiliates shall make such adjustments as are neces-
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sary to correct such error and to restore the parties to the position
that they would have occupied had the error not occurred.
10.7 INDEMNIFICATION. Each Lender shall, ratably in accordance
with its Pro Rata Share (if the Commitment is then in effect) or in
accordance with its proportion of the aggregate Indebtedness then evidenced
by the Notes (if the Commitment has then been terminated), indemnify and hold
the Administrative Agent, the Arranger and the Co-Agent and each of their
respective directors, officers, agents, employees and attorneys harmless
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (INCLUDING, without limitation, attorneys' fees and
disbursements and reasonably allocated costs of attorneys employed by the
Administrative Agent, the Arranger or the Co-Agent) that may be imposed on,
incurred by or asserted against it or them in any way relating to or arising
out of the Loan Documents (other than losses incurred by reason of the
failure of Borrower to pay the Indebtedness represented by the Notes) or any
action taken or not taken by such indemnitee thereunder, except such as
result from its own gross negligence or willful misconduct. Without
limitation on the foregoing, each Lender shall reimburse the Administrative
Agent upon demand for that Lender's Pro Rata Share of any out-of-pocket cost
or expense incurred by the Administrative Agent in connection with the
negotiation, preparation, execution, delivery, amendment, waiver,
restructuring, reorganization (INCLUDING a bankruptcy reorganization),
enforcement or attempted enforcement of the Loan Documents, to the extent
that Borrower or any other Obligor is required by Section 11.3 to pay that
cost or expense but fails to do so upon demand. Nothing in this Section 10.7
shall entitle the Administrative Agent, the Arranger or the Co-Agent to
recover any amount from the Lenders if and to the extent that such amount has
theretofore been recovered from Borrower or any of its Subsidiaries. To the
extent that the Administrative Agent, the Arranger or the Co-Agent are later
reimbursed such cost or expense by Borrower or any of its Subsidiaries, they
shall return the amounts paid to it by the Lenders in respect of such cost or
expense.
10.8 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent
may, and at the request of the Requisite Lenders shall, resign as
Administrative Agent upon thirty days' notice to the Lenders and Borrower.
If the Administrative Agent resigns as Administrative Agent under this
Agreement, the Requisite Lenders shall appoint from among the Lenders a
successor administrative agent for the Lenders, which successor
administrative agent shall be approved by Borrower (and such approval shall
not be unreasonably withheld or delayed or, if any Event of Default exists,
required). If no successor administrative agent is appointed prior to the
effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and
Borrower, a successor administrative agent from among the Lenders. Upon the
acceptance of its appointment as successor administrative agent hereunder,
such successor administrative agent shall succeed to all the rights, powers
and duties of the retiring Administrative Agent and the term "Administrative
Agent" shall mean such successor administrative agent and the retiring
Administrative Agent's appointment, powers and duties as Administrative Agent
shall be terminated. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Article 10, and
Sections 11.3, 11.11 and 11.22, shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent. If (a)
the Administrative Agent has not been paid its agency fees under Section 3.6
or has not been reimbursed for
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any expense reimbursable to it under Section 11.3, in either case for a
period of at least one year and (b) no successor administrative agent has
accepted appointment as Administrative Agent by the date which is thirty days
following a retiring Administrative Agent's notice of resignation, the
retiring Administrative Agent's resignation shall nevertheless thereupon
become effective and the Lenders shall perform all of the duties of the
Administrative Agent hereunder until such time, if any, as the Requisite
Lenders appoint a successor administrative agent as provided for above.
10.9 FORECLOSURE ON COLLATERAL. In the event of foreclosure or
enforcement of the Lien created by any of the Collateral Documents, title to
the Collateral covered thereby shall be taken and held by the Administrative
Agent (or any designee thereof) pro rata for the benefit of the Lenders in
accordance with their Pro Rata Share of the Commitment and shall be
administered in accordance with the standard form of collateral holding
participation agreement used by the Administrative Agent in comparable
syndicated credit facilities.
10.10 NO OBLIGATIONS OF BORROWER. Nothing contained in this
Article 10 shall be deemed to impose upon Borrower any obligation in respect
of the due and punctual performance by the Administrative Agent of its
obligations to the Lenders under any provision of this Agreement, and
Borrower shall have no liability to the Administrative Agent or any of the
Lenders in respect of any failure by the Administrative Agent or any Lender
to perform any of its obligations to the Administrative Agent or the Lenders
under this Agreement. Without limiting the generality of the foregoing,
where any provision of this Agreement relating to the payment of any amounts
due and owing under the Loan Documents provides that such payments shall be
made by Borrower to the Administrative Agent for the account of the Lenders,
Borrower's obligations to the Lenders in respect of such payments shall be
deemed to be satisfied upon the making of such payments to the Administrative
Agent in the manner provided by this Agreement.
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Article 11
MISCELLANEOUS
11.1 CUMULATIVE REMEDIES; NO WAIVER. The rights, powers,
privileges and remedies of the Creditors provided herein, in the Notes and in
the other Loan Documents are cumulative and not exclusive of any right,
power, privilege or remedy provided by Law or equity. No failure or delay on
the part of any Creditor in exercising any right, power, privilege or remedy
may be, or may be deemed to be, a waiver thereof; nor may any single or
partial exercise of any right, power, privilege or remedy preclude any other
or further exercise of the same or any other right, power, privilege or
remedy. The terms and conditions of Article 8 are inserted for the sole
benefit of the Creditors; the same may be waived in whole or in part, with or
without terms or conditions, in respect of any Loan or Letter of Credit
without prejudicing the Creditors' rights to assert them in whole or in part
in respect of any other Loan.
11.2 AMENDMENTS; CONSENTS. No amendment, modification,
supplement, extension, termination or waiver of any provision of this
Agreement or any other Loan Document, no approval or consent thereunder, and
no consent to any departure by Borrower or any other Obligor therefrom, may
in any event be effective unless in writing signed or approved in writing by
the Requisite Lenders ( and, in the case of any amendment, modification or
supplement to Article 10, signed by the Administrative Agent), and then only
in the specific instance and for the specific purpose given; and, without the
approval in writing of all the Lenders, no amendment, modification,
supplement, termination, waiver or consent may be effective:
(a) To amend or modify the principal of, or the amount of
principal, principal prepayments or the rate of interest payable on,
any Note, or the amount of the Commitment or the Pro Rata Share of any
Lender (except in connection with any assignments made in accordance
with Section 11.8 with the consent of all necessary parties) or to
decrease the amount of any commitment fee payable to any Lender, or to
decrease any other fee or amount payable to any Lender under the Loan
Documents;
(b) To postpone any date fixed for any payment of principal
of, prepayment of principal of or any installment of interest on, any
Note or any installment of any commitment fee or letter of credit fee,
or to extend the term of the Commitment, or to release the Completion
Guaranty or any collateral for the Completion Guaranty (except as
otherwise provided in any Loan Document), or the Make Well Agreement;
(c) To permit the term of any Letter of Credit to exceed one
year or extend beyond the Maturity Date;
(d) to release any portion of the Collateral having an
aggregate value in excess of $500,000 (EXCEPT as provided in Section
11.24 or as otherwise expressly provided in any Loan Document);
(e) To amend the provisions of the definition of "REQUISITE
LENDERS", Articles 8 or 9 or this Section 11.2; or
(f) To amend any provision of this Agreement that
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expressly requires the consent or approval of all the Lenders.
Any amendment, modification, supplement, termination, waiver or
consent pursuant to this Section 11.2 shall apply equally to, and
shall be binding upon, all of the Creditors.
11.3 COSTS, EXPENSES AND TAXES. Borrower shall pay within two
Banking Days after demand, accompanied by an invoice therefor:
(a) the reasonable costs and expenses of the Administrative
Agent and the Arranger in connection with the negotiation, preparation,
syndication, administration, execution and delivery of the Loan
Documents;
(b) the reasonable costs and expenses of the Administrative
Agent in connection with any amendment to the Loan Documents or any
waiver of the terms thereof; and
(c) the reasonable costs and expenses of the Administrative
Agent and the Lenders in connection with the refinancing,
restructuring, reorganization (INCLUDING a bankruptcy reorganization)
and enforcement or attempted enforcement of the Loan Documents, and any
matter related thereto.
The foregoing costs and expenses shall include the actual environmental
review fees, filing fees, recording fees, title insurance premiums and fees,
appraisal fees, search fees, and other out-of-pocket expenses and the
reasonable fees and out-of-pocket expenses of any legal counsel (INCLUDING
reasonably allocated costs of legal counsel employed by the Administrative
Agent or any Lender), independent public accountants and other outside
experts retained by the Administrative Agent or any Lender, whether or not
such costs and expenses are incurred or suffered by the Administrative Agent
or any Lender in connection with or during the course of any bankruptcy or
insolvency proceedings of any Obligor. Such costs and expenses shall also
include, in the case of any amendment or waiver of any Loan Document
requested by Borrower, the administrative costs of the Administrative Agent
reasonably attributable thereto. Borrower shall pay any and all documentary
and other taxes, EXCLUDING, in the case of each Creditor, (i) taxes imposed
on or measured in whole or in part by its overall net income, gross income or
gross receipts or capital and franchise taxes imposed on it, (ii) any
withholding taxes or other taxes based on gross income imposed by the United
States of America (other than withholding taxes and taxes based on gross
income resulting from or attributable to any change in any law, rule or
regulation or any change in the interpretation or administration of any law,
rule or regulation by any Governmental Agency) or (iii) any withholding taxes
or other taxes based on gross income imposed by the United States of America
for any period with respect to which it has failed to provide Borrower with
the appropriate form or forms required by Section 11.21, to the extent such
forms are then required by applicable Laws, and all costs, expenses, fees and
charges payable or determined to be payable in connection with the filing or
recording of this Agreement, any other Loan Document or any other instrument
or writing to be delivered hereunder or thereunder, or in connection with any
transaction pursuant hereto or thereto, and shall reimburse, hold harmless
and indemnify the Administrative Agent and the Lenders from and against any
and all loss, liability or legal or other expense with respect to or
resulting from any delay in paying or failure to pay any such tax, cost,
expense, fee or charge or that any of them may
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suffer or incur by reason of the failure of any Obligor to perform any
of its Obligations. Any amount payable to the Administrative Agent or
any Lender under this Section 11.3 shall bear interest from the second
Banking Day following the date of demand for payment at the Default Rate.
11.4 NATURE OF LENDERS' OBLIGATIONS. The obligations of the
Lenders hereunder are several and not joint or joint and several. Nothing
contained in this Agreement or any other Loan Document and no action taken by
any Creditor pursuant hereto or thereto may, or may be deemed to, make any of
the Creditors a partnership, an association, a joint venture or other entity,
either among themselves or with Borrower or any Affiliate of Borrower. Each
Lender's obligation to make any Advance pursuant hereto is several and not
joint or joint and several, and in the case of the initial Advance only, is
conditioned upon the performance by all other Lenders of their obligations to
make initial Advances. A default by any Lender will not increase the Pro
Rata Share of the Commitment attributable to any other Lender. Any Lender not
in default may, if it desires, assume in such proportion as the nondefaulting
Lenders agree the obligations of any Lender in default, but is not obligated
to do so.
11.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties contained herein or in any other Loan
Document, or in any certificate or other writing delivered by or on behalf of
any one or more of the Obligors, will survive the making of the Loans
hereunder and the execution and delivery of the Notes, and have been or will
be relied upon by each Creditor, notwithstanding any investigation made by
the Creditors or on their behalf.
11.6 NOTICES. EXCEPT as otherwise expressly provided in the Loan
Documents, all notices, requests, demands, directions and other
communications provided for hereunder or under any other Loan Document must
be in writing and must be mailed, telecopied, dispatched by commercial
courier or delivered to the appropriate party at the address set forth on the
signature pages of this Agreement or other applicable Loan Document or, as to
any party to any Loan Document, at any other address as may be designated by
it in a written notice sent to all other parties to such Loan Document in
accordance with this Section. EXCEPT as otherwise expressly provided in any
Loan Document, if any notice, request, demand, direction or other
communication required or permitted by any Loan Document is given by mail it
will be effective on the earlier of receipt or the third calendar day after
deposit in the United States mail with first class or airmail postage
prepaid; if given by telecopier, when sent; if dispatched by commercial
courier, on the scheduled delivery date; or if given by personal delivery,
when delivered.
11.7 EXECUTION OF LOAN DOCUMENTS. Unless the Administrative Agent
otherwise specifies with respect to any Loan Document, (a) this Agreement and
any other Loan Document may be executed in any number of counterparts and any
party hereto or thereto may execute any counterpart, each of which when
executed and delivered will be deemed to be an original and all of which
counterparts of this Agreement or any other Loan Document, as the case may
be, when taken together will be deemed to be but one and the same instrument
and (b) execution of any such counterpart may be evidenced by a telecopier
transmission of the signature of such party. The execution of this Agreement
or any other Loan Document by any party hereto or thereto will not become
effective until counterparts hereof or thereof, as the case may be, have been
executed by all the parties hereto or thereto.
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11.8 BINDING EFFECT; ASSIGNMENT.
(a) This Agreement and the other Loan Documents to which
Borrower is a party will be binding upon and inure to the benefit of
Borrower and the Creditors, and their respective successors and
assigns, EXCEPT that Borrower may not assign its rights hereunder or
thereunder or any interest herein or therein without the prior written
consent of all the Lenders. Each Lender represents that it is not
acquiring its Note with a view to the distribution thereof within the
meaning of the Securities Act of 1933, as amended (subject to any
requirement that disposition of such Note must be within the control of
such Lender). Any Lender may at any time pledge its Note or any other
instrument evidencing its rights as a Lender under this Agreement to a
Federal Reserve Bank, but no such pledge shall release that Lender from
its obligations hereunder or grant to such Federal Reserve Bank the
rights of a Lender hereunder absent foreclosure of such pledge.
(b) From time to time following the Closing Date, each
Lender may assign to one or more Eligible Assignees all or any portion
of its Pro Rata Share; PROVIDED that (i) such Eligible Assignee, if not
then a Lender or an Affiliate of the assigning Lender, shall be
approved by the Administrative Agent and Borrower (neither of which
approvals shall be unreasonably withheld or delayed), PROVIDED that the
consent of Borrower to assignments shall not be required when any
Default or Event of Default has occurred and remains continuing, (ii)
such assignment shall be evidenced by an Assignment Agreement, a copy
of which shall be furnished to the Administrative Agent as provided
below, (iii) EXCEPT in the case of an assignment to an Affiliate of the
assigning Lender, to another Lender or of the entire remaining
Commitment of the assigning Lender, the assignment shall not assign a
Pro Rata Share of the Commitment equivalent to less than $5,000,000,
and (iv) the effective date of any such assignment shall be as
specified in the Assignment Agreement, but not earlier than the date
which is five Banking Days after the date the Administrative Agent has
received the Assignment Agreement. Upon the effective date of such
Assignment Agreement, the Eligible Assignee named therein shall be a
Lender for all purposes of this Agreement, with the Pro Rata Share
therein set forth and, to the extent of such Pro Rata Share, the
assigning Lender shall be released from its further obligations under
the Loan Documents. Borrower agrees that it shall execute and deliver
(against delivery by the assigning Lender to Borrower of its Note) to
such assignee Lender, a Note evidencing that assignee Lender's Pro Rata
Share, and to the assigning Lender, a Note evidencing the remaining
balance Pro Rata Share retained by the assigning Lender.
(c) By executing and delivering an Assignment Agreement, the
Eligible Assignee thereunder acknowledges and agrees that: (i) other
than the representation and warranty that it is the legal and
beneficial owner of the Pro Rata Share being assigned thereby free and
clear of any adverse claim, the assigning Lender has made no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness or sufficiency of this Agreement or any
other Loan Document; (ii) the assigning Lender has
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made no representation or warranty and assumes no responsibility with
respect to the financial condition of Borrower or the performance by
Borrower of the Obligations; (iii) it has received a copy of this
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 7.1 and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment Agreement; (iv) it
will, independently and without reliance upon the Administrative Agent
or any Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement; (v) it appoints
and authorizes the Administrative Agent to take such action and to
exercise such powers under this Agreement and the other Loan Documents
as are delegated to the Administrative Agent by this Agreement; and
(vi) it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) The Administrative Agent shall maintain at the
Administrative Agent's Office a copy of each Assignment Agreement
delivered to it. After receipt of a completed Assignment Agreement
executed by any Lender and an Eligible Assignee, and receipt of an
assignment fee of $3,500 from such Eligible Assignee, the
Administrative Agent shall, promptly following the effective date
thereof, provide to Borrower and the Lenders a revised list of the Pro
Rata Shares of the Lenders giving effect thereto.
(e) Each Lender may from time to time grant participations
to one or more banks or other financial institutions (INCLUDING another
Lender) in a portion of its Pro Rata Share; PROVIDED, HOWEVER, that (i)
such Lender's obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the participating
banks or other financial institutions shall not be a Lender hereunder
for any purpose except, if the participation Agreement so provides, for
the purposes of Sections 3.7, 3.8, 11.11 and 11.22 but only to the
extent that the cost of such benefits to Borrower does not exceed the
cost which Borrower would have incurred in respect of such Lender
absent the participation, (iv) Borrower, the Administrative Agent and
the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under
this Agreement, (v) the participation interest shall be expressed as a
percentage of the granting Lender's Pro Rata Share as it then exists
and shall not restrict an increase in the Commitment, or in the
granting Lender's Pro Rata Share, so long as the amount of the
participation interest is not affected thereby and (vi) the consent of
the holder of such participation interest shall not be required for
amendments or waivers of provisions of the Loan Documents OTHER THAN
those which (A) extend the Maturity Date or any other date upon which
any payment of money is due to the Lenders, (B) reduce the rate of
interest on the Notes, any fee or any other monetary amount payable to
the Lenders, (C) reduce the amount of any installment of principal due
under the Notes, (D) change the definition of "Requisite Lenders" or
(E) release any material portion of the Collateral.
(f) Notwithstanding anything in this Section 11.8 to
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the contrary, the rights of the Lenders to make assignments of, and
grant participations in, their Pro Rata Shares of the Commitment shall
be subject to the approval of any Gaming Board (including the approval
of the identity of any proposed assignee or participant), to the extent
required by applicable Gaming Laws.
11.9 RIGHT OF SETOFF. If an Event of Default has occurred and is
continuing, each Creditor may (but only with the consent of the Requisite
Lenders) exercise its rights under Article 9 of the Uniform Commercial Code
and other applicable Laws and, to the extent permitted by applicable Laws,
apply any funds in any deposit account maintained with it by Borrower or any
Property of Borrower in its possession against the Obligations.
11.10 SHARING OF SETOFFS. Each Lender severally agrees that if
it, through the exercise of any right of setoff, banker's lien or
counterclaim against Borrower, or otherwise, receives payment of the
Obligations held by it that is ratably more than any other Lender, through
any means, receives in payment of the Obligations held by that Lender, then,
subject to applicable Laws (a) the Lender exercising the right of setoff,
banker's lien or counterclaim or otherwise receiving such payment shall
purchase, and shall be deemed to have simultaneously purchased, from the
other Lender a participation in the Obligations held by the other Lender and
shall pay to the other Lender a purchase price in an amount so that the share
of the Obligations held by each Lender after the exercise of the right of
setoff, banker's lien or counterclaim or receipt of payment shall be in the
same proportion that existed prior to the exercise of the right of setoff,
banker's lien or counterclaim or receipt of payment; and (b) such other
adjustments and purchases of participations shall be made from time to time
as shall be equitable to ensure that all of the Lenders share any payment
obtained in respect of the Obligations ratably in accordance with each
Lender's share of the Obligations immediately prior to, and without taking
into account, the payment; PROVIDED that, if all or any portion of a
disproportionate payment obtained as a result of the exercise of the right of
setoff, banker's lien, counterclaim or otherwise is thereafter recovered from
the purchasing Lender by Borrower or any Person claiming through or
succeeding to the rights of Borrower, the purchase of a participation shall
be rescinded and the purchase price thereof shall be restored to the extent
of the recovery, but without interest. Each Lender that purchases a
participation in the Obligations pursuant to this Section 11.10 shall from
and after the purchase have the right to give all notices, requests, demands,
directions and other communications under this Agreement with respect to the
portion of the Obligations purchased to the same extent as though the
purchasing Lender were the original owner of the Obligations purchased.
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in an Obligation so purchased may exercise any
and all rights of setoff, banker's lien or counterclaim with respect to the
participation as fully as if the Lender were the original owner of the
Obligation purchased.
11.11 INDEMNITY BY BORROWER. Borrower agrees to indemnify, save
and hold harmless the Creditors and their directors, officers, agents,
attorneys and employees (collectively the "INDEMNITEES") from and against:
(a) any and all claims, demands, actions or causes of action, if the claim,
demand, action or cause of action arises out of or relates to any act or
omission (or alleged act or omission) of Borrower, any other Obligor, their
respective Affiliates or any of their respective partners,
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officers, directors or stockholders relating to the Commitment, the use or
contemplated use of proceeds of any Loan, Letter of Credit or Swing Line
Advance, or the relationship between any such Person and the Creditors under
this Agreement; (b) any administrative or investigative proceeding by any
Governmental Agency arising out of or related to a claim, demand, action or
cause of action described in clause (a) above; and (c) any and all
liabilities, losses, costs or expenses (INCLUDING reasonable attorneys' fees
and the reasonably allocated costs of attorneys employed by any Indemnitee
and disbursements of such attorneys and other professional services) that any
Indemnitee suffers or incurs as a result of the assertion of any foregoing
claim, demand, action or cause of action; PROVIDED that no Indemnitee shall
be entitled to indemnification for any loss caused by its own gross
negligence or willful misconduct. If any claim, demand, action or cause of
action is asserted against any Indemnitee, such Indemnitee shall promptly
notify Borrower, but the failure to so promptly notify Borrower shall not
affect Borrower's obligations under this Section unless such failure
materially prejudices Borrower's right to participate in the contest of such
claim, demand, action or cause of action, as hereinafter provided. Each
Indemnitee may contest the validity, applicability and amount of such claim,
demand, action or cause of action with counsel of its own chosing and shall
permit Borrower to participate in such contest. Any Indemnitee that proposes
to settle or compromise any claim or proceeding for which Borrower may be
liable for payment of indemnity hereunder shall give Borrower written notice
of the terms of such proposed settlement or compromise reasonably in advance
of settling or compromising such claim or proceeding. In connection with any
claim, demand, action or cause of action covered by this Section 11.11
against more than one Indemnitee, all such Indemnitees shall be represented
by the same legal counsel (which may be a law firm engaged by the Indemnitees
or attorneys employed by an Indemnitee or a combination of the foregoing)
selected by the Indemnitees and reasonably acceptable to Borrower; PROVIDED,
that if such legal counsel determines in good faith that representing all
such Indemnitees would or could result in a conflict of interest under Laws
or ethical principles applicable to such legal counsel or that a defense or
counterclaim is available to an Indemnitee that is not available to all such
Indemnitees, then to the extent reasonably necessary to avoid such a conflict
of interest or to permit unqualified assertion of such a defense or
counterclaim, each Indemnitee shall be entitled to separate representation by
legal counsel selected by that Indemnitee and reasonably acceptable to
Borrower, with all such legal counsel using reasonable efforts to avoid
unnecessary duplication of effort by counsel for all Indemnitees; and FURTHER
PROVIDED that the Administrative Agent and the Arranger (as Indemnitees)
shall at all times be entitled to representation by separate legal counsel
(which may be a law firm or attorneys employed by the Administrative Agent or
the Arranger or a combination of the foregoing). Any obligation or liability
of Borrower to any Indemnitee under this Section 11.11 shall survive the
expiration or termination of this Agreement, the repayment of all Loans, the
expiration or termination of all Letters of Credit and the payment and
performance of all other Obligations owed to the Lenders.
11.12 NONLIABILITY OF THE LENDERS. Borrower acknowledges and
agrees that:
(a) Any inspections of any Property of Borrower made by or
through the Creditors are for purposes of administration of the Loans
and Letters of Credit only and Borrower is not entitled to rely upon
the same (whether or not such inspections are at the expense of
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Borrower);
(b) By accepting or approving anything required to
be observed, performed, fulfilled or given to the Creditors
pursuant to the Loan Documents, no Creditor shall be deemed to
have warranted or represented the sufficiency, legality,
effectiveness or legal effect of the same, or of any term,
provision or condition thereof, and such acceptance or approval
thereof shall not constitute a warranty or representation to
anyone with respect thereto by any Creditor;
(c) The relationship between Borrower and Creditors
is, and shall at all times remain, solely that of borrower and
lenders; no Creditor shall under any circumstance be construed
to be a partner or joint venturer with of Borrower or its
Affiliates; no creditor shall under any circumstance be deemed
to be in a relationship of confidence or trust or a fiduciary
or other special relationship with Borrower or its Affiliates,
or to owe any fiduciary duty or other special duty to Borrower
or its Affiliates; no Creditor undertakes or assumes any
responsibility or duty to Borrower or its Affiliates to select,
review, inspect, supervise, pass judgment upon or inform
Borrower or its Affiliates of any matter in connection with
their Property or the operations of Borrower or its Affiliates;
Borrower and its Affiliates shall rely entirely upon their own
judgment with respect to such matters; and any review,
inspection, supervision, exercise of judgment or supply of
information undertaken or assumed by the Creditors in
connection with such matters is solely for the protection of
the Creditors and neither Borrower nor any other Person is
entitled to rely thereon; and
(d) The Creditors shall not be responsible or liable
to any Person for any loss, damage, liability or claim of any
kind relating to injury or death to Persons or damage to
Property caused by the actions, inaction or negligence of
Borrower or its Affiliates and Borrower hereby indemnifies and
holds each Creditor harmless from any such loss, damage,
liability or claim.
11.13 NO THIRD PARTIES BENEFITED. This Agreement is
made for the purpose of defining and setting forth certain obligations,
rights and duties of Borrower and the Creditors in connection with
the Loans, Letters of Credit and Swing Line Advances and is made
for the sole benefit of Borrower, the Creditors and the Creditors'
successors and assigns. EXCEPT as provided in Sections 11.8,
11.11 and 11.14, no other Person shall have any rights of any
nature hereunder or by reason hereof.
11.14 CONFIDENTIALITY. Each Lender agrees to hold any
confidential information that it may receive from Peter A. Morton or
Borrower pursuant to this Agreement in confidence, EXCEPT for
disclosure: (a) to other Lenders; (b) to legal counsel and
accountants for Borrower or any Lender; (c) to other professional
advisors to Borrower or any Lender, provided that the recipient has
accepted such information subject to a confidentiality Agreement
substantially similar to this Section 11.14; (d) to regulatory
officials having jurisdiction over that Lender; (e) to any Gaming
Board having regulatory jurisdiction over Borrower or its
Subsidiaries; (f) as required by Law or legal process or in connection
with any legal proceeding to which that Lender and Borrower are
adverse parties; and (g) to another financial institution in
connection with a disposition or proposed disposition to that
financial institution of all or part of that Lender's interests
hereunder or a participation interest in its Note,
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<PAGE>
provided that the recipient has accepted such information subject to a
written confidentiality Agreement. For purposes of the foregoing,
"confidential information" shall mean (x) any information respecting Borrower
reasonably considered by Borrower to be confidential, OTHER THAN (i)
information previously filed with any Governmental Agency and available to
the public, (ii) information previously published in any public medium from a
source other than, directly or indirectly, that Lender, and (iii) information
previously disclosed by Borrower to any Person not associated with themselves
without a confidentiality Agreement or obligation substantially similar to
this Section 11.14, and (y) the personal financial reports of Peter A. Morton
and the Liquidity Reports delivered hereunder, and any other information
concerning Peter A. Morton delivered to the Creditors marked confidential or
otherwise delivered in a confidential manner. Notwithstanding the foregoing
provisions of this Section, the Administrative Agent shall not disclose the
contents of any personal financial report to any of the other Creditors or
any other Person except to the extent required by Law or legal process.
Nothing in this Section shall be construed to create or give rise to any
fiduciary duty or other special duty on the part of any Creditor to Peter A.
Morton or to Borrower. Peter A. Morton is an intended third party
beneficiary of this Section.
11.15 FURTHER ASSURANCES. Borrower and its Subsidiaries
shall, at their expense and without expense to the Creditors, do, execute and
deliver such further acts and documents as any Creditor from time to time
reasonably requires for the assuring and confirming unto the Creditors of the
rights hereby created or intended now or hereafter so to be, or for carrying
out the intention or facilitating the performance of the terms of any Loan
Document.
11.16 INTEGRATION. This Agreement, together with the other
Loan Documents and the letter agreements referred to in Sections 3.2, 3.3,
3.5, 3.6, 3.7 and 11.3, comprises the complete and integrated Agreement of
the parties on the subject matter hereof and supersedes all prior agreements,
written or oral, on the subject matter hereof. In the event of any conflict
between the provisions of this Agreement and those of any other Loan
Document, the provisions of this Agreement shall control and govern; PROVIDED
that the inclusion of supplemental rights or remedies in favor of the
Creditors in any other Loan Document shall not be deemed a conflict with this
Agreement. Each Loan Document was drafted with the joint participation of
the respective parties thereto and shall be construed neither against nor in
favor of any party, but rather in accordance with the fair meaning thereof.
11.17 GOVERNING LAW. EXCEPT to the extent otherwise provided
therein, each Loan Document shall be governed by, and construed and enforced
in accordance with, the local Laws of Nevada, without reference to the choice
of law or conflicts of laws provisions thereof.
11.18 SEVERABILITY OF PROVISIONS. Any provision in any Loan
Document that is held to be inoperative, unenforceable or invalid as to any
party or in any jurisdiction shall, as to that party or jurisdiction, be
inoperative, unenforceable or invalid without affecting the remaining
provisions or the operation, enforceability or validity of that provision as
to any other party or in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.
11.19 HEADINGS. Article and Section headings in this
Agreement
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and the other Loan Documents are included for convenience of
reference only and are not part of this Agreement or the other Loan
Documents for any other purpose.
11.20 TIME OF THE ESSENCE. Time is of the essence of
the Loan Documents.
11.21 FOREIGN LENDERS AND PARTICIPANTS. Each Lender, and each
holder of a participation interest herein, that is incorporated or otherwise
organized under the Laws of a jurisdiction other than the United States of
America or any State thereof or the District of Columbia shall deliver to
Borrower (with a copy to the Administrative Agent) within twenty days after
the Closing Date (or after accepting an assignment or receiving a
participation interest herein pursuant to Section 11.8, if applicable) two
duly completed copies, signed by a Responsible Official, of either Form 1001
(relating to such Person and entitling it to a complete exemption from
withholding on all payments to be made to such Person by Borrower pursuant to
this Agreement) or Form 4224 (relating to all payments to be made to such
Person by Borrower pursuant to this Agreement) of the United States Internal
Revenue Service or such other evidence (INCLUDING, if reasonably necessary,
Form W-9) satisfactory to Borrower and the Administrative Agent that no
withholding under the federal income tax laws is required with respect to
such Person. Thereafter and from time to time, each such Person shall (a)
promptly submit to Borrower (with a copy to the Administrative Agent) such
additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to
Borrower and the Administrative Agent of any available exemption from, United
States withholding taxes in respect of all payments to be made to such Person
by Borrower pursuant to this Agreement and (b) take such steps as shall not
be materially disadvantageous to it, in the reasonable judgment of such
Lender, and as may be reasonably necessary (including the re-designation of
its LIBOR Office, if any) to avoid any requirement of applicable Laws that
Borrower make any deduction or withholding for taxes from amounts payable to
such Person.
11.22 HAZARDOUS MATERIAL INDEMNITY. Borrower hereby
agrees to indemnify, hold harmless and defend (by counsel reasonably
satisfactory to the Administrative Agent) the Creditors and their
respective directors, officers, employees, agents, successors and
assigns from and against any and all claims, losses, damages,
liabilities, fines, penalties, charges, administrative and judicial
proceedings and orders, judgments, remedial action requirements,
enforcement actions of any kind, and all reasonable costs and expenses
incurred in connection therewith (including but not limited to
reasonable attorneys' fees and the reasonably allocated costs of
attorneys employed by any of the Creditors, and expenses to the extent
that the defense of any such action has not been assumed by Borrower),
arising directly or indirectly out of:
(a) the presence on, in, under or attributable to any Real
Property of any Hazardous Materials, or any releases or
discharges of any Hazardous Materials on, under or from any
Real Property; and
(b) any activity carried on or undertaken on any Real Property
by Borrower, any of its Subsidiaries, or any of their
respective predecessors in title, whether prior to or during
the term of this Agreement (but not after the Obligations are
paid in full and the
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Commitment terminated), and whether by Borrower, its Subsidiaries or
any predecessor in title or any employees, agents, contractors or
subcontractors of Borrower, its Subsidiaries or any predecessor in
title, or any third persons at any time prior to the payment in full of
the Obligations and the termination of the Commitment occupying or
present on any Real Property, in connection with the handling,
treatment, removal, storage, decontamination, clean-up, transport or
disposal of any Hazardous Materials at any time located or present on,
in, under or affecting any Real Property.
The foregoing indemnity shall further apply to any residual contamination on,
in, under or affecting any Real Property, or affecting any natural resources,
and to any contamination of any Real Property or related natural resources
arising from the generation, use, handling, storage, transport or disposal of
any such Hazardous Materials, and irrespective of whether any of such
activities were or will be undertaken in accordance with applicable Hazardous
Materials Laws, but the foregoing indemnity shall not apply to Hazardous
Materials on any Real Property, the presence of which is caused by the
relevant Creditor. Borrower hereby acknowledges and agrees that,
notwithstanding any other provision of this Agreement or any of the other
Loan Documents to the contrary, the obligations of Borrower under this
Section (and under Sections 4.18 and 5.10) shall be unlimited obligations of
Borrower and shall not be secured by any mortgage or deed of trust on any
Real Property. Any obligation or liability of Borrower to any Indemnitee
under this Section shall survive the expiration or termination of this
Agreement and the repayment of all of the Obligations until (but not beyond)
the date upon which the applicable statute of limitations for the related
cause of action shall have expired.
11.23 GAMING BOARDS. The Administrative Agent and each of the
Lenders agree to cooperate with all Gaming Boards in connection with the
administration of their regulatory jurisdiction over Borrower and its
Subsidiaries, INCLUDING the provision of such documents or other information
as may be requested by any such Gaming Board relating to Borrower or any of
its Subsidiaries or to the Loan Documents.
11.24 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS
AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS
RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
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11.25 PURPORTED ORAL AMENDMENTS. BORROWER EXPRESSLY
ACKNOWLEDGES THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE
AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR
SUPPLEMENTED, BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 11.2.
BORROWER AGREES THAT IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF
PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY ANY CREDITOR OR ITS
REPRESENTATIVES THAT DOES NOT COMPLY WITH SECTION 11.2 TO EFFECT AN
AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
HARD ROCK HOTEL, INC., a Nevada corporation
By: /s/ Peter A. Morton
----------------------------
Title: CEO
-------------------------
Address for notices:
Hard Rock Hotel and Casino
510 North Robertson Boulevard
Los Angeles, California 90048
Attention: Brian Ogaz
Telephone: 310 358-1710
Telecopier: 310 652-8747
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent and
Issuing Lender
By: /s/ Scott Faber
----------------------------
Title: Vice President
-------------------------
Address:
Bank of America National Trust and Savings
Association
555 South Flower Street
Los Angeles, California 90071
Attn: Janice Hammond, Vice President
Telecopier: (213) 228-2299
Telephone: (213) 222-9861
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BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Lender
By: /s/ Scott Faber
----------------------------
Title: Vice President
-------------------------
Address:
Bank of America National Trust and Savings
Association
555 South Flower Street, #3283
Los Angeles, California 90071
Attn: Scott Faber, Vice President
Telecopier: (213) 228-2641
Telephone: (213) 228-2768
With a copy to:
Bank of America National Trust and
Savings Association
555 South Flower Street (LA-5777)
Los Angeles, California 90071
Attn: William Newby, Managing Director
Telecopier: (213) 228-3145
Telephone: (213) 228-2438
IMPERIAL BANK, as a Lender
By: /s/ Steven K. Johnson
----------------------------------
Steven K. Johnson, Vice President
Address for Notices:
Imperial Bank
9920 South La Cienega
14th Floor
Inglewood, CA 90301
Attention: Steven K. Johnson
Telephone: 310/417-5657
Telecopier: 310/417-5997
WELLS FARGO BANK, N.A., as a Lender
By: /s/ Robert Medeiros
---------------------------
Robert Medeiros, V.P.
-------------------------
Address for Notices:
Wells Fargo Bank, N.A.
1 East 1st Street, Suite 300
Reno, Nevada 89501
Telephone: 702/334-5747
Telecopier: 702/334-5637
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Schedule 1.1C
<TABLE>
<CAPTION>
LENDER AMOUNT PRO RATA SHARE
- ----- ------ --------------
<S> <C> <C>
Bank of America National Trust
and Savings Association $37,000,000 55.2238805%
Imperial Bank $15,000,000 22.3880597%
Wells Fargo Bank, N.A. $15,000,000 22.3880597%
- -------------------------------------------------------------------
Total $67,000,000 100%
</TABLE>
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MAKE WELL AGREEMENT
This Make Well Agreement (this "Agreement") dated as of March 23, 1998, is
entered into by Peter A. Morton ("Morton") in favor of Bank of America National
Trust and Savings Association, as Administrative Agent under the Loan Agreement
described below, and for the benefit of the Lenders party to the Loan Agreement
from time to time. The parties hereto agree with reference to the following
facts:
RECITALS
A. Concurrently herewith, the Administrative Agent is entering into a
Loan Agreement of even date herewith (the "Loan Agreement") with Hard Rock
Hotel, Inc., a Nevada corporation ("Borrower"), pursuant to which Bank of
America National Trust and Savings Association and each Lender which may
hereafter become a party to such Loan Agreement will make Loans to
Borrower. The initial amount of the lending commitment under the loan
agreement is $67,000,000.
B. Borrower has agreed to use the Loans under the Loan Agreement for the
purposes described in Section 5.9 thereof, including financing for the
construction of the Proposed Expansion described below.
C. Morton is executing this Agreement to induce the Lenders to make Loans
to Borrower under the Loan Agreement.
NOW THEREFORE, Morton hereby agrees as follows:
1. DEFINITIONS. This is the Make Well Agreement referred to in the Loan
Agreement and is one of the Loan Documents referred to therein. Capitalized
terms used but not defined in this Agreement are used with the meanings set
forth for those terms in the Loan Agreement as in effect on the date hereof, and
as amended by any amendments consented to by Morton in writing. In addition,
the following terms are used with the meanings set forth after each:
"ADDITIONAL CONTRIBUTIONS" means amounts paid to Borrower by Morton in cash
in the form (at Morton's discretion) of either (a) preferred stock of
Borrower having the characteristics described on Exhibit A hereto, or (ii)
junior subordinated Indebtedness of Borrower of the type described in
Section 6.10(g) of the Loan Agreement, PROVIDED that such Indebtedness may
be incurred by Borrower only if Borrower is unable to obtain approval from
the appropriate Gaming Authorities for the issuance of the preferred stock
contemplated by clause (a), or (c) both of the foregoing (without
duplication).
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<PAGE>
"BENEFICIARIES" means the Administrative Agent and the other Creditors
under the Loan Agreement.
"COMPLETION GUARANTY" means the Completion Guaranty of even date herewith
executed by Morton in favor of the Administrative Agent, for the benefit of
the Lenders and Trustee, for the benefit of the holders of the notes under
the Indenture referred to in the Loan Agreement.
"INSOLVENCY PROCEEDING" means a proceeding under any Debtor Relief Law,
including without limitation any bankruptcy or other voluntary or
involuntary proceeding, in or out of court, for the adjustment of debtor-
creditor relationships.
"LOANS" means, collectively, any cash loans made to Borrower pursuant to
the Loan Agreement, together with any letters of credit and other credit
accommodations granted to Borrower by the Administrative Agent or any
Lender pursuant to the terms of the Loan Documents.
"MAKE WELL PERIOD" means the period from (a) the earlier of August 1, 1999
as such date may be extended with the written approval of the Lenders or
the termination of the Completion Guaranty in accordance with its terms,
through (b) the Release Date.
"OBLIGATIONS" means, collectively, the obligations and indebtedness of
Borrower to the Beneficiaries under the Loan Agreement and the Loan
Documents referred to therein.
"PRO FORMA EFFECT" means, in relation to any Default or Event of Default as
of a particular date of determination under:
(a) the Senior Leverage Ratio covenant contained in Section 6.12 of
the Loan Agreement, that the Additional Contributions made hereunder
are in an amount which is adequate, when subtracted from the numerator
of the Senior Leverage Ratio, to cause Borrower to be in pro forma
compliance with the Senior Leverage Ratio as of such date; and
(b) the Fixed Charge Coverage Ratio covenant contained in Section
6.13 of the Loan Agreement, that the Additional Contributions made
hereunder are in an amount which is adequate, when added to the
numerator of the Fixed Charge Coverage Ratio, to cause Borrower to be
in pro forma compliance with the Fixed Charge Coverage Ratio as of
such date.
"PROPOSED EXPANSION" has the meaning set forth in the Loan Agreement as of
the date hereof, together with any changes consented to by Morton.
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"RELEASE DATE" means the date (which must be a date which is not less than
one full Fiscal Quarter following the Opening of the Proposed Expansion)
upon which each of the following has occurred:
(a) Borrower has delivered a Compliance Certificate under the
Loan Agreement demonstrating to the reasonable satisfaction of the
Administrative Agent that it has achieved, as a Total Leverage Ratio
not greater than 5.55:1.00 as of the last day of such a Fiscal
Quarter;
(b) Borrower has delivered to the Administrative Agent
projections in form, detail and substance reasonably acceptable to the
Administrative Agent demonstrating that the Total Leverage Ratio for
each fiscal quarter in the one year period following the proposed
release date will not exceed 5.55:1.00 (it being understood that such
projections shall not constitute a representation or warranty of the
future financial performance of Borrower, but rather the best estimate
of the senior management of Borrower of probable performance, and
subject to the uncertainty inherent in all financial forecasts);
(c) Concurrently with the delivery of such Compliance
Certificate and projections, Morton (or Borrower on his behalf) has
requested the release of this Agreement in writing;
(d) The Administrative Agent has delivered such Compliance
Certificate, projections and written release request to the Lenders,
and the Requisite Lenders have not objected thereto (on the basis that
they are in some manner not in conformity with the requirements of
this Section) within five Banking Days of their receipt of such
materials;
(e) As of the date of the delivery of such Compliance
Certificate and projections to the Administrative Agent, and as of the
Release Date, no Default or Event of Default has occurred and remains
continuing; and
(f) The Administrative Agent has notified Morton and the Lenders
of the date which is the Release Date (which the Administrative Agent
hereby agrees to do if the foregoing conditions are completed in
accordance with this Section).
The determination by the Administrative Agent of the Release Date shall be
presumed correct in the absence of manifest error.
"SUBJECT PROPERTY" means the Property subject to the Deed of Trust
described in the Loan Agreement.
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2. MAKE WELL AGREEMENT. Subject to the terms and conditions hereof,
Morton hereby absolutely, irrevocably and unconditionally agrees in favor of the
Beneficiaries that:
(a) If at any time and from time to time during the Make Well Period,
Borrower fails to comply with the covenants contained in Sections 6.12 or
6.13 of the Loan Agreement, Morton shall make Additional Contributions to
Borrower in Cash in the amount which are required, after giving PRO Forma
EFFECT to the making of such Additional Contributions, to cause Borrower to
be in compliance with the covenants contained in those Sections. Borrower
is an intended third party beneficiary of this Agreement, but this
Agreement may be amended or waived by the Administrative Agent (acting with
the consent of the Lenders pursuant to Section 11.2 of the Loan Agreement)
without the approval of Borrower.
(b) Morton shall make such Additional Contributions no later than
10 Banking Days after (i) the date on which Borrower delivers a Compliance
Certificate pursuant to Section 7.2 of the Loan Agreement demonstrating
Borrower's failure to comply with such Sections or, (ii) if Borrower fails
to deliver a Compliance Certificate by the date required pursuant to
Section 7.2 of the Loan Agreement (or delivers a Compliance Certificate
which is incorrect), on the date upon which Administrative Agent or the
Requisite Lenders determine that the covenants contained in Section 6.12 or
6.13 have not been complied with (which determination shall be presumed
correct unless and until Morton demonstrates the inaccuracy thereof) and
notify Morton of the same. If Morton fails to make Additional
Contributions on the date required, interest shall accrue on the amount of
Additional Contributions at a rate per annum equal to the interest rate set
forth in the Loan Agreement for Base Rate Loans until such Additional
Contributions are made to Borrower; provided that all such interest accrued
to the date such Additional Contributions are made shall be paid to
Borrower together therewith and shall be treated as a cash contribution to
Borrower in exchange for equity of Borrower or subordinated indebtedness
or, without duplication, both.
(c) Borrower agrees to accept Additional Contributions made by Morton
in the form of preferred stock as described on Exhibit A or (if investments
by means of preferred stock are then prohibited in the manner set forth in
the definition of Additional Contributions), in the form of junior
subordinated indebtedness, and to do all acts and things necessary to
accomplish the purposes of this clause (c).
(d) This is a continuing agreement, and no Additional Contributions
made in respect of any particular Default or Event of Default under
Sections 6.12 or 6.13 of the Loan Agreement shall be construed to have
applicability to any subsequent Default or Event of Default under those
Sections, PROVIDED that in the event that Borrower is in default of its
obligations under both such Sections as of any date of determination, the
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<PAGE>
Additional Contributions made by Morton in relation to either such default
shall (to the extent that they are adequate to cause PRO FORMA EFFECT
compliance), be construed to be applicable to both such defaults to the
extent that both such defaults are thereby cured.
3. NEGATIVE PLEDGE. Morton hereby represents and warrants that he has
caused applications to be submitted to the Nevada Gaming Commission seeking all
required governmental approvals to grant a Negative Pledge to the Banks with
respect to his direct and indirect interest in the equity capital of Borrower
and Lily Pond Investments, Inc. (the "Securities") which constitute not less
than 90% of the equity capital thereof), and that until the Release Date, he
shall diligently pursue such approvals by appropriate proceedings. Within five
Banking Days following the granting of all required approvals by the Nevada
Gaming Commission, Morton agrees that he shall execute and deliver to the
Administrative Agent (and shall cause any Person then owning any of the
Securities to so execute and deliver) a written agreement in the form of Exhibit
B hereto to the Administrative Agent, granting a Negative Pledge to the
Administrative Agent in the Securities, PROVIDED that such agreement will
provide for the termination of the Negative Pledge upon the Release Date.
4. RIGHTS OF THE BENEFICIARIES. Morton authorizes the Beneficiaries to
perform any or all of the following acts at any time in their sole discretion,
all without notice to Morton and without affecting Morton's obligations under
this Agreement:
(a) The Beneficiaries may alter any terms of any of the Loan
Documents to which Morton is not a party, including renewing, compromising,
extending or accelerating, or otherwise changing the time for payment of,
or increasing or decreasing the rate of interest on, the Obligations or any
part of them PROVIDED that no alteration of the terms of Section 6.12
or 6.13 of the Loan Agreement, or their constituent definitions, which is
not consented to by Morton shall result in an increase in the obligations
of Morton hereunder.
(b) The Beneficiaries may take and hold security for the Obligations
or this Agreement, accept additional or substituted security for either,
and subordinate, exchange, enforce, waive, release, compromise, fail to
perfect and sell or otherwise dispose of any such security.
(c) The Beneficiaries may direct the order and manner of any sale of
all or any part of any security now or later to be held for the Obligations
or this Agreement, and may also bid at any such sale.
(d) The Beneficiaries may apply any payments or recoveries from
Borrower, Morton or any other source, and any proceeds of any security, to
the Obligations in such manner, order and priority as they may elect,
whether or not those obligations are guarantied by this Agreement or
secured at the time of the application.
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(e) The Beneficiaries may release Borrower or any other Person from
the portion of the Obligations held by them or any portion of them or any
guaranty thereof.
(f) The Beneficiaries may substitute, add or release any one or more
guarantors or endorsers.
(g) The Beneficiaries may extend other credit to Borrower in addition
to the Obligations, and may take and hold security for the credit so
extended, all without affecting Morton's liability under this Agreement.
(h) The Administrative Agent and the Lenders may change the terms or
conditions of disbursement of the Loans in accordance with the terms of the
Loan Agreement.
5. AGREEMENT ABSOLUTE. Morton agrees that until the Release Date, Morton
shall not be released by or because of:
(a) Any act or event which might otherwise discharge, reduce, limit
or modify Morton's obligations under this Agreement;
(b) Any waiver, extension, modification, forbearance, delay or other
act or omission of the Beneficiaries, or any failure to proceed promptly or
otherwise as against Borrower, Morton or any security or guarantor;
(c) Any action, omission or circumstance which might increase the
likelihood that Morton may be called upon to perform under this Agreement
or which might affect the rights or remedies of Morton as against Borrower;
or
(d) Any dealings occurring at any time between Borrower and the
Beneficiaries, whether relating to the Obligations or otherwise.
Morton hereby expressly waives and surrenders any defense to his liability
under this Agreement based upon any of the foregoing acts, omissions,
agreements, waivers or matters. It is the purpose and intent of this Agreement
that the obligations of Morton under it shall be absolute and unconditional
under any and all circumstances.
6. MORTON'S WAIVERS. Morton waives:
(a) All statutes of limitations as a defense to any action or
proceeding brought against Morton by the Beneficiaries, or either of them,
to the fullest extent permitted by Law;
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(b) Any right he may have to require the Beneficiaries to proceed
against Borrower, proceed against or exhaust any security held from
Borrower, or pursue any other remedy in their power to pursue;
(c) Any defense based on any claim that Morton's obligations exceed
or are more burdensome than those of Borrower;
(d) Any defense based on: (i) any legal disability of Borrower, (ii)
any release, discharge, modification, impairment or limitation of the
liability of Borrower under the Loan Documents from any cause, whether
consented to by the Beneficiaries or arising by operation of Law or from an
Insolvency Proceeding, (iii) any rejection or disaffirmance of the
Obligations or any security held for the Obligations, in any such
Insolvency Proceeding and (iv) Morton's rights under Nevada Revised
Statutes ("NRS") 104.3605, Morton specifically agreeing that this clause
(iv) shall constitute a waiver of discharge under NRS 104.3605;
(e) Any defense based on any action taken or omitted by the
Beneficiaries in any Insolvency Proceeding involving Borrower, including
any election to have a claim allowed as being secured, partially secured or
unsecured, any extension of credit by the Beneficiaries, or any of them, to
Borrower in any Insolvency Proceeding, and the taking and holding by the
Beneficiaries of any security for any such extension of credit;
(f) All presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, notices
of acceptance of this Agreement and of the existence, creation, or
incurring of new or additional indebtedness, and demands and notices of
every kind except for any demand or notice expressly provided for in this
Agreement;
(g) Any defense based on or arising out of any defense that Borrower
may have to the payment or performance of the Obligations or any portion of
the Obligations; and
(h) Any defense or benefit based on NRS 40.430 and judicial decisions
relating thereto and NRS 40.451 ET SEQ. and judicial decisions relating
thereto (to the fullest extent that the same may be waived under the NRS),
Morton agreeing that the waiver in this paragraph (h) is intended to take
advantage of the two waivers permitted by NRS 40.495 to the maximum extent
permitted.
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7. SUBROGATION AND OTHER RIGHTS.
(a) Upon the occurrence of any Event of Default, the Beneficiaries
may, in their sole discretion, without prior notice to or consent of
Morton: (i) foreclose either judicially or nonjudicially against any real
or personal property security for the Obligations, (ii) accept a transfer
of any such security in lieu of foreclosure, (iii) compromise or adjust the
Obligations or any part thereof or make any other accommodation with
Borrower or Morton, or (iv) exercise any other remedy against Borrower or
any security. No such action by the Beneficiaries shall release or limit
the liability of Morton, who shall remain liable under this Agreement after
the action, even if the effect of the action is to deprive Morton of any
subrogation rights, rights of indemnity, or other rights to collect
reimbursement from Borrower for any sums paid to the Beneficiaries, whether
contractual or arising by operation of Law or otherwise. Morton expressly
agrees that under no circumstances shall it be deemed to have any right,
title, interest or claim in or to any real or personal property to be held
by the Beneficiaries or any third party after any foreclosure or transfer
in lieu of foreclosure of any security for the Obligations.
(b) Regardless of whether Morton may have made any payments to the
Beneficiaries, Morton hereby defers and subordinates, until all obligations
and indebtedness of Borrower to the Beneficiaries are paid in full and in
cash: (i) all rights of subrogation, all rights of indemnity, and any other
rights to collect reimbursement from Borrower for any sums paid to the
Beneficiaries, whether contractual or arising by operation of Law
(including the United States Bankruptcy Code or any successor or similar
statute) or otherwise, (ii) all rights to enforce any remedy that the
Beneficiaries may have against Borrower, and (iii) all rights to
participate in any security now or later to be held by the Beneficiaries.
(c) Morton understands and acknowledges that if the Beneficiaries
foreclose judicially or nonjudicially against any real property security
for the Obligations, that foreclosure could impair or destroy any ability
that Morton may have to seek reimbursement, contribution or indemnification
from Borrower or others based on any right Morton may have of subrogation,
reimbursement, contribution or indemnification for any amounts paid by
Morton under this Agreement. Morton further understands and acknowledges
that in the absence of this Section 7, such potential impairment or
destruction of Morton's rights, if any, may entitle Morton to assert a
defense to this Agreement. By executing this Agreement, Morton freely,
irrevocably and unconditionally: (i) waives and relinquishes that defense
and agrees that Morton will be fully liable under this Agreement even
though the Beneficiaries may foreclose judicially or nonjudicially against
any real property security for the Obligations; (ii) agrees that Morton
will not assert that defense in any action or proceeding which the
Beneficiaries
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may commence to enforce this Agreement; and (iii) acknowledges and
agrees that the Beneficiaries are relying on this waiver in making
the Obligations, and that this waiver is a material part of the
consideration which they are receiving for making the Obligations.
8. REVIVAL AND REINSTATEMENT. If the Lenders are required to pay, return
or restore to Borrower or any other person any amounts previously paid on the
Obligations because of any Insolvency Proceeding of Borrower, any stop notice or
any other reason, the obligations of Morton shall be reinstated and revived and
the rights of the Beneficiaries shall continue with regard to such amounts, all
as though they had never been paid.
9. INFORMATION REGARDING BORROWER AND THE SUBJECT PROPERTY. Before
signing this Agreement, Morton investigated the financial condition and business
operations of Borrower, the present and former condition, uses and ownership of
the Subject Property, and such other matters as Morton deemed appropriate to
assure himself of Borrower's ability to discharge its obligations under the Loan
Documents. Morton assumes full responsibility for that due diligence, as well
as for keeping informed of all matters which may affect Borrower's ability to
pay and perform its obligations to the Beneficiaries. The Beneficiaries have no
duty to disclose to Morton any information which they may have or receive about
Borrower's financial condition or business operations, the condition or uses of
the Subject Property, or any other circumstances bearing on Borrower's ability
to perform its obligations to the Beneficiaries.
10. SUBORDINATION. All rights of Morton, whether now existing or later
arising, to receive payment on account of any Additional Contributions made
hereunder, and any dividends, interest or other amounts payable by reason
thereof, shall at all times be subordinate as to lien and right of payment and
in all other respects to the full and prior repayment of the Obligations.
Morton shall not be entitled to enforce or receive payment of any sums hereby
subordinated until the Obligations have been paid and performed in full and any
such sums received in violation of this Agreement shall be received by Morton in
trust for the Lenders.
11. FINANCIAL INFORMATION. Within ninety days after the end of each
calendar year, Morton shall deliver to the Administrative Agent a personal
financial statement, including a balance sheet and statement of cash flows as of
the last day of such calendar year and for the year then ended and a Liquidity
Report in the form described in the Loan Agreement as of the date hereof. The
Administrative Agent is authorized to distribute the Liquidity Reports to the
Lenders but shall retain the confidentiality of the annual financial report in
accordance with Section 11.14 of the Loan Agreement (but is authorized to
describe any discrepancies between the Liquidity Report and such financial
statements to the Lenders, without any liability for any failure to do so).
Morton shall promptly provide the Administrative Agent with such other
information concerning his affairs and properties as the Administrative Agent
may reasonably request.
12. MORTON'S REPRESENTATIONS AND WARRANTIES. Morton represents and
warrants that:
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(a) This agreement is the valid and binding obligation of Morton,
enforceable in accordance with its terms.
(b) All financial statements and other financial information
furnished or to be furnished to the Administrative Agent or the Lenders by
Morton are true and correct in all material respects and fairly represent
the financial condition of Morton (including all contingent liabilities);
(c) There has been no material adverse change in Morton's financial
condition since the dates of the statements most recently furnished to the
Administrative Agent;
(d) The execution, delivery and performance of this Agreement do not
and will not (i) constitute a default or cause an acceleration of any
obligation under, or result in the imposition or creation of (or the
obligation to create or impose) any Lien with respect to, any material
bond, note, debenture or other evidence of Indebtedness or any indenture,
mortgage, deed of trust or other agreement or instrument to which Morton is
a party or bound, or to which any properties of Morton may be subject,
(ii) contravene any order of any court or governmental agency (including,
without limitation, any gaming authority in any state of the United States
or foreign country or body having jurisdiction over Morton or any of his
properties), or (iii) violate or conflict with any statute, rule or
regulation or administrative or court decree applicable to Morton or any of
his properties may be subject.
13. EVENTS OF DEFAULT. The Beneficiaries may declare Morton to be in
default under this Agreement upon the occurrence of any of the following events
("Events of Default"):
(a) Morton fails to perform any of his obligations under this
Agreement; or
(b) Morton purports to revoke or rescind this Agreement, denies his
continuing liability hereunder, or fails to reaffirm his obligations
hereunder in writing within five days following a written request to do so
by either Beneficiary; or
(c) Any representation or warranty made or given by Morton to the
Beneficiaries proves to be false or misleading in any material respect as
of the date when made or reaffirmed; or
(d) Morton becomes insolvent or the subject of any Insolvency
Proceeding; or
(e) Morton dies or is declared incompetent by a court of competent
jurisdiction;
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and, in any such case, the Administrative Agent shall be entitled to exercise
all remedies provided hereby.
14. REFERENCE AND ARBITRATION.
(a) JUDICIAL REFERENCE. In any judicial action between or among the
parties, including any action or cause of action arising out of or relating
to this Agreement (including without limitation those based on or arising
from an alleged tort), all decisions of fact and Law shall at the request
of any party be referred to a referee. The parties shall designate to the
court a referee or referee selected under the auspices of the American
Arbitration Association ("AAA") in the same manner as arbitrators are
selected in AAA-sponsored proceedings. The presiding referee of the panel,
or the referee if there is a single referee, shall be an active attorney or
retired judge. Judgment upon the award rendered by such referee or
referees shall be entered in the court in which such proceeding was
commenced.
(b) MANDATORY ARBITRATION. Any controversy or claim between or among
the parties, including those arising out of or relating to this Agreement
and any claim based on or arising from an alleged tort, shall at the
request of any party be determined by arbitration, PROVIDED THAT this
Section shall not limit the right of the Beneficiaries to proceed
judicially to foreclosure under any document providing collateral security
to them. The arbitration shall be conducted in accordance with the United
States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of
Law provision in this Agreement, and under the Commercial Rules of the AAA.
The arbitrators shall give effect to statutes of limitation in determining
any claim. Any controversy concerning whether an issue is arbitrable shall
be determined by the arbitrators. Judgment upon the arbitration award may
be entered in any court having jurisdiction. The institution and
maintenance of an action for judicial relief or pursuit of a provisional
or-ancillary remedy shall not constitute a waiver of the right of any
party, including the plaintiffs, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief.
(c) REAL PROPERTY COLLATERAL. Notwithstanding the provisions of
Section 14(b), no controversy or claim shall be submitted to arbitration
without the consent of all parties if, at the time of the proposed
submission, such controversy or claim arises from or relates to an
obligation of Morton or Borrower to the Beneficiaries which is secured by
real property collateral. If all parties do not consent to submission of
such a controversy or claim to arbitration, the controversy or claim shall
be determined by reference as provided in Section 14(a).
(d) PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No provision of
this Section 14 shall limit the right of any party to exercise self-help
remedies such as setoff,
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foreclosure against or sale of any real or personal property collateral
or security, or to obtain provisional or ancillary remedies from a court
of competent jurisdiction before, after, or during the pendency of any
arbitration or other proceeding. The exercise of a remedy does not waive
the right of either party to resort to arbitration or reference. At the
relevant Beneficiary's option, foreclosure under a deed of trust or
mortgage may be accomplished either by exercise of power of sale under
the deed of trust or mortgage or by judicial foreclosure.
15. ADDITIONAL AND INDEPENDENT OBLIGATION. Morton's obligations under
this Agreement are in addition to his obligations under the Completion Guaranty
and any future agreements which may be entered into among Morton and either
Beneficiary. Morton's obligations under this Agreement are independent of those
of Borrower under the Loan Agreement, the other Loan Documents. The
Beneficiaries may bring a separate action, or commence a separate reference or
arbitration proceeding against Morton without first proceeding against Borrower,
any other person or any security that the Beneficiaries may hold, and without
pursuing any other remedy. The rights under this Agreement shall not be
exhausted by any action by the Beneficiaries until the Obligations have been
paid and performed in full or this Agreement is terminated in accordance with
its terms.
16. NO WAIVER; CONSENTS; CUMULATIVE REMEDIES. Each waiver by the
Beneficiaries must be in writing, and no waiver shall be construed as a
continuing waiver. No waiver shall be implied from any delay by the
Beneficiaries in exercising or failure to exercise any right or remedy against
Borrower, Morton or any security. Consent by the Beneficiaries to any act or
omission by Borrower or Morton shall not be construed as a consent to any other
or subsequent act or omission, or as a waiver of the requirement for their
consent to be obtained in any future or other instance. All remedies of the
Beneficiaries against Borrower and Morton are cumulative.
17. SUCCESSORS AND ASSIGNS; PARTICIPATIONS. The terms of this Agreement
shall bind and benefit the legal representatives, successors and assigns of the
Beneficiaries and Morton; provided, however, that Morton may not assign this
Agreement, or assign or delegate any of his rights or obligations under this
Agreement, without the prior written consent of the Beneficiaries in each
instance. The Beneficiaries may sell or assign participations or other
interests in the Obligations and their respective rights under this Agreement,
in whole or in part, all without notice to or the consent of Morton and without
affecting Morton's obligations under this Agreement. Without notice to or the
consent of Morton, the Beneficiaries may disclose any and all information in
their possession concerning Morton, this Agreement and any security for this
Agreement to any actual or prospective purchaser of the Obligations or their
rights hereunder or to any participant therein (provided in each case that such
disclosure is subject to a written confidentiality agreement).
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18. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the local Laws of the State of Nevada without reference to the
conflicts of laws or choice of laws provisions thereof.
19. COSTS AND EXPENSES. If any lawsuit, reference or arbitration is
commenced which arises out of, or which relates to this Agreement, the
prevailing party shall be entitled to recover from each other party such sums as
the court, referee or arbitrator may adjudge to be reasonable attorneys' fees
(including reasonably allocated costs for services of in-house counsel of the
Administrative Agent) in the action or proceeding, in addition to costs and
expenses otherwise allowed by Law. In all other situations, including any
Insolvency Proceeding, Morton agrees to pay all of the Beneficiaries' reasonable
costs and expenses, including reasonable attorneys' fees (including reasonably
allocated costs for services of their respective in-house counsel of the
Administrative Agent) which may be incurred in any effort to collect or enforce
the terms of this Agreement. From the time incurred until paid in full, all
sums shall bear interest at the Default Rate.
20. CONSIDERATION. Morton acknowledges that it expects to benefit from
the extension of the Obligations to Borrower because of his relationship to
Borrower, and that it is executing this Agreement in consideration of that
anticipated benefit.
21. INTEGRATION; MODIFICATIONS. This Agreement (a) integrates all the
terms and conditions mentioned in or incidental to this Agreement, (b)
supersedes all oral negotiations and prior writings with respect to its subject
matter, and (c) is intended by Morton and the Beneficiaries as the final
expression of the agreement with respect to the terms and conditions set forth
in this Agreement and as the complete and exclusive statement of the terms
agreed to by Morton and the Beneficiaries with respect to the subject matter of
this Agreement. No representation, understanding, promise or condition shall be
enforceable against any party unless it is contained in this Agreement.
22. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH
RESPECT TO THE THIS AGREEMENT, THE LOAN AGREEMENT AND ANY OTHER LOAN DOCUMENT,
OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY
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COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
23. NOTICES. Notices hereunder shall be in writing and shall be delivered
in the manner prescribed for notices in the Loan Agreement to the address for
each party set forth in the signature pages to this Agreement.
24. MISCELLANEOUS. The illegality or unenforceability of one or more
provisions of this Agreement shall not affect any other provision.
25. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
IN WITNESS WHEREOF, Morton has executed this Agreement as of the date first
written above.
/s/ Peter A. Morton
------------------------------------
Peter A. Morton, an individual
Address for Notices
Hard Rock Hotel and Casino
--------------------------------------------------
510 N. Robertson Blvd.
--------------------------------------------------
Los Angeles, CA 90048
--------------------------------------------------
Telephone (310) 358-1710
----------------------------------------
Telecopier (310) 652-8747
----------------------------------------
Accepted:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By: /s/ Scott Faber
-------------------------------
Title: Vice President
----------------------------
Address for Notices:
555 S. Flower St.
- --------------------------------------
Los Angeles, CA 90071
- --------------------------------------
- --------------------------------------
Telephone (213) 228-2299
---------------------------
Telecopier (213) 222-9861
---------------------------
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By executing this Agreement in the space
provided below, the Borrower consents to the
terms hereof, and agrees that it shall not take any
action which is in contravention of the terms of
this Agreement.
HARD ROCK HOTEL, INC.
By: /s/ Peter A. Morton
-------------------------------
Title: President
----------------------------
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EXHIBIT A - DESCRIPTION OF PREFERRED STOCK
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<PAGE>
EXHIBIT B - NEGATIVE PLEDGE AGREEMENT
_________, ______
Ms. Janice Hammond
Vice President - Agency Specialist
USCG - Agency Management Los Angeles 20529
Bank of America National Trust and Savings Association
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Re: NEGATIVE PLEDGE
Dear Ms. Hammond:
This letter is delivered to you in connection with the Make Well
Agreement dated as of March 23, 1998 made by Peter A. Morton in favor of Bank of
America National Trust and Savings Association. Capitalized terms used in this
are used with the meanings set forth in the Loan Agreement referred to in the
Make Well Agreement.
The undersigned hereby certifies to each of the Creditors under the
Loan Agreement that it has received all necessary consents and approvals of the
Nevada Gaming Commission and all other relevant governmental agencies to the
execution, delivery and performance of this letter. By this letter the
undersigned hereby agrees that he shall not create, incur, assume, or suffer to
exist any Lien or Right of Others with respect to his direct or indirect
interest in Hard Rock Hotel, Inc., a Nevada corporation and Lily Pond
Investments, Inc. a ________ corporation (collectively, the "Stock") nor grant
any Negative Pledge to any other creditor which prohibits the granting of Liens
or Negative Pledges to the Creditors under the Loan Agreement with respect to
any of the Stock.
The Stock constitutes not less than 90% of the equity capital of each
of Hard Rock Hotel, Inc and Lily Pond Investments, Inc.
It is understood and agreed that (i) the provisions of this letter
shall not apply to any Stock which is sold by the undersigned to a person which
is not an affiliate of the undersigned in a BONA FIDE transaction for arm's
length value which does not constitute a Change
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in Control under the Loan Agreement and (ii) that, concurrently with the
transfer of any Stock to an Affiliate, the undersigned will cause that
Affiliate to execute a letter providing the same benefits as this letter to
the Administrative Agent with respect to the Stock so transferred.
This letter supplements the Make Well Agreement, and the provisions of
the Make Well Agreement (including each of the suretyship waivers and consents
set forth therein) are hereby incorporated by this reference. This letter shall
terminate concurrently with the Make Well Agreement.
-------------------------------
Peter A. Morton
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AMENDED AND RESTATED
SUPERVISORY AGREEMENT
This AMENDED AND RESTATED SUPERVISORY AGREEMENT is made and entered into as
of the 21st day of October, 1997, by and between HARD ROCK HOTEL, INC., a
Nevada corporation, with its principal place of business located at the Hard
Rock Hotel, Las Vegas, Nevada ("Company"); and PETER A. MORTON of Los
Angeles, California ("Morton");
RECITALS
WHEREAS, Company has the rights and expertise in the development,
financing and management of the Hard Rock Hotel in Las Vegas, Nevada
("Project"); and
WHEREAS, Company and Morton entered into a Supervisory Agreement
dated as of August 30, 1993; and
WHEREAS, Company and Morton desire to amend and restate the
Supervisory Agreement in order to provide for the supervision, operation and
maintenance of the Project in conformance with the terms and conditions of
this Agreement in accordance with local, state and federal law.
NOW, THEREFORE, the parties agree that the Supervisory Agreement is
amended and restated in its entirety as follows:
ARTICLE 1
DEFINITIONS
1.01 "Gross Revenues" shall mean all revenues and income of any
kind derived directly or indirectly from the use or operation of the Project
determined substantially in accordance with generally accepted accounting
principles including, without limitation, total room sales; gaming 'Gross
Revenues', as that term is defined in the Nevada Revised Statutes; food and
beverage sales; gross receipts from all entertainment programs and
merchandise sale; telephone, telegraph and telex revenues; rental or other
payments from lessees; lessees, sublessees and concessionaries and others
occupying space or rendering services at the Project (but not the gross
receipts of such lessees, sublessees or concessionaires unless the same is
part of such lessees', sublessees' or concessionaires' rental payments); and
the actual cash proceeds of business interruption or similar insurance and of
temporary condemnation awards after deducting necessary expenses in
connection with the adjustment or collection of such proceeds; excluding,
however, any proceeds from the sale, financing or refinancing or other
disposition of the Project; any proceeds from the sale, financing or
refinancing or other disposition of the furniture, fixtures and equipment or
other capital assets; proceeds of any fire, extended coverage or other
insurance policies (excluding any proceeds of business
<PAGE>
2
interruption or similar insurance, as provided above); condemnation (other
than temporary) awards and other amounts received by Company in lieu of or
threat of condemnation; credits or refunds to guests, gratuities or service
charges or other similar receipts which the Company pays to employees,
lessees or concessionaires; excise, sales, gross receipts, admission,
entertainment, tourist, taxes or similar charges collected from patrons or
guests or as part of the sale price for goods, services or entertainment; any
sum and credits received for lost or damaged merchandise; any interest paid
with respect to any Reserve Fund or Bank Account; and the cost or value of
any complimentary goods or services (including, but not limited to, rooms,
food and beverages) given or awarded to employees, patrons or guests of the
Project.
ARTICLE 2
TERM
2.1 TERM. The initial term of this Agreement shall commence as of
the date hereof and expire on December 31, 2022, subject to sooner
termination or extensions as provided herein.
2.2 RENEWAL TERMS. Morton shall have an option to renew and
continue this Agreement for a period of fifteen (15) years ("Second Term").
Morton shall also have an option to renew and continue this Agreement for a
second fifteen (15) year period at the conclusion of the Second Term ("Third
Term"). Morton shall notify Company, in writing, of his intent to exercise
his option to perform under each renewal term not less than one year prior to
the date on which each respective renewal term is to commence. Notwithstanding
the foregoing, Morton's right to exercise the options is subject to the terms
and conditions of this Agreement regarding defaults by Morton or any event
which would constitute an event of default pursuant to Article 5. If, at the
time of exercise of the option by Morton, Morton has an uncured default and
is not diligently pursuing cure of the default, then the option for renewal
shall be deemed null and void.
ARTICLE 3
SCOPE OF RIGHTS AND RESPONSIBILITIES
Morton's rights and responsibilities shall be as follows:
1. Oversee and supervise design and theme of the Project,
including rooms, stores, bars, pool, restaurants, front desk, Project
structure, beach club, casino, slot machines, cashier areas, public
restrooms, outdoor theatre and landscaping.
2. Oversee and supervise the design of all interiors,
<PAGE>
3
3. Oversee and supervise development and monitoring of all
restaurant concepts, menus, food, pricing, service and activities related to
food and beverages.
4. Oversee and supervise the development of all bar concepts and
pricing structure.
5. Oversee and supervise the selection and purchase of memorabilia
on an on-going basis.
6. Oversee and supervise design of all uniforms for door
personnel, cashiers, servers, bus help, dealers, bartenders, front desk
staff, housekeepers, et al.
7. Assist in development of the annual plan and annual operating
budget.
8. Oversee and supervise development of all media events for the
Project; i.e., television, radio and print; coordination of public relations
activities for the Project.
9. Supervise and oversee selection of music.
10. Oversee and supervise the overall monitoring of all areas of
the Project and service including quality of food and drink, coffee shop,
casino bar, beach club, room service, front desk service, et al.
ARTICLE 4
SUPERVISORY FEE
4.1 SUPERVISORY FEE. In consideration of the services to be
provided by Morton herein, Company agree to pay Morton a Supervisory Fee.
The Supervisory Fee shall be equal to two percent (2%) of the estimated
annual Gross Revenues, to be calculated computing estimated Gross Revenues on
a monthly basis of the Project. The fee shall be due and payable the twentieth
day of each month, representing compensation for the preceding month. Should
the actual aggregate installments of the Supervisory Fee paid in any fiscal
year be more or less than the total annual Supervisory Fee due for the entire
fiscal year, Morton or Company, as the case may be, shall pay to the other
the amount of such overpayment or underpayment within ninety (90) days after
the end of such fiscal year.
4.2 REIMBURSEMENT OF COSTS. Company shall reimburse Morton for
all costs and expenses incurred by him in connection with the rendition of his
services hereunder. Monthly statements covering such costs and expenses
shall be submitted by Morton to and shall be paid by the Company within
thirty (30) days thereafter.
<PAGE>
4
ARTICLE 5
DEFAULT
5.1 DEFAULT. Upon the occurrence of any event of default, this
Agreement may be terminated at the option of the non-defaulting party, which
shall be effective within thirty (30) days after written notice of same and
subject to the provisions of Section 5.4. Default shall include the events
set forth in Sections 5.2 and 5.3.
5.2 DEFAULT BY MORTON.
a. Morton shall fail to keep, observe, or perform any
material covenant, agreement, term or provision of this Agreement to be kept,
observed, or performed by Morton, and such default shall continue for a
period of thirty (30) days after notice thereof by Company to Morton; or
b. Morton shall apply for or consent to the appointment of a
receiver, trustee or liquidator; or
c. Morton files a voluntary petition for bankruptcy, or makes
a general assignment for benefit of creditors; or
d. Involuntary bankruptcy proceedings or any order, judgment
or decree shall be entered by a Court of competent jurisdiction or the
application of a creditor, adjudicating Morton bankrupt or insolvent and such
Order, Judgment or Decree shall continue unstayed and in effect for a period
of ninety (90) days; or
e. The Nevada Gaming Commission or Nevada Gaming Control
Board revokes Morton's operating license.
5.3 DEFAULT BY COMPANY.
a. Company shall fail to keep, observe, or perform any
material covenant, agreement, term or provision of this Agreement to be kept,
observed, or performed by Company, and such default shall continue for a
period of thirty (30) days after notice thereof by Morton to Company; or
b. Company shall apply for or consent to the appointment of a
receiver, trustee or liquidator of Company, or a substantial part of
Company's assets; or
c. Company files a voluntary petition for bankruptcy or makes
a general assignment for the benefit of creditors; or
d. Company shall apply for a voluntary petition for
bankruptcy or an order, judgment or decree is entered by any
<PAGE>
5
court or competent jurisdiction, or the application of a creditor
adjudicating the Company bankrupt or insolvent, or approving a petition of
reorganization of the Company or appointing a receiver, trustee, or
liquidator of the Company or all or a substantial part of the assets of the
Company, and such order, judgment or decree shall continue unstayed and in
effect for a period of thirty (30) days; or
e. The Nevada Gaming Commission, or Nevada Gaming Control
Board issues any notification that Company or any of its members, officers
and directors are in violation or unsuitable under any Nevada Gaming statutes
and regulations; or
f. If Company fails to timely pay Morton the fees set forth
in this Agreement within five (5) days after written notice thereof by Morton
to Company, and such failure was not caused by the acts of Morton; or
5.4 CURING DEFAULT. Upon receipt of any notice of default, the
defaulting party shall immediately undertake to cure within the period as
identified in Article 5. If such default is not susceptible to being cured
with all due diligence within the stated cure period, the defaulting party
shall proceed promptly with all due diligence to cure the same and thereafter
to prosecute the curing of such default with all due diligence. The time for
the defaulting party to cure the same shall be extended for such periods as
may be necessary to cure the same with due diligence. However, the
cumulative total of such extension shall not exceed ninety (90) days without
the written consent of the non-defaulting party. After cured, the default
shall be of no force or effect, and the after cure rights and obligations of
the parties shall be the same as existed prior to the giving of notice of the
default.
ARTICLE 6
TERMINATION
6.1 TERMINATING UNDER DEFAULT. Any party may terminate this
Agreement in the event of a default, as set forth in Article 5 above, at the
option of the non-defaulting party, subject to all applicable notice and cure
requirements.
6.2 TERMINATION NOTICE. Any termination given pursuant to this
Article shall be effective as of the date specified in the notice of
termination which will not be less than thirty (30) nor more than one hundred
eighty (180) days after the date of such notice.
6.3 RIGHTS AND REMEDIES UPON TERMINATION. A party terminating
this Agreement shall retain all other rights and remedies which may be
provided at law or equity in addition to any rights provided in this
Agreement.
<PAGE>
6
ARTICLE 7
MISCELLANEOUS
7.1 NOTICES. All notices or other communications required
pursuant to this Agreement shall be in writing and personally served or
delivered by overnight express mail, or by certified or registered mail to
the representatives of Company or Morton as set forth below. Delivery will
be deemed complete upon mailing or by delivery to overnight courier.
If to Company:
HARD ROCK HOTEL, INC.
4455 Paradise Road
Las Vegas, NV 89109
If to Morton:
Mr. Peter A. Morton
510 North Robertson Boulevard
Los Angeles, California 90048
7.2 GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the State of Nevada.
7.3 SEVERABILITY. Should any court, administrative or legislative
body uphold or declare any of the terms or provisions hereof to be invalid or
unenforceable for any reason, the validity or unenforceability of said
provisions shall not affect the remaining terms or provisions of this
Agreement.
7.4 SUCCESSORS. This Agreement shall inure to the benefit of, and
be binding upon the parties hereto, and their respective heirs, legal
representatives, successors, and assigns.
<PAGE>
7
The parties have duly executed and delivered this Agreement
effective the day and year first above written.
Company:
HARD ROCK HOTEL, INC.
A Nevada Corporation
By: /s/ Peter A. Morton
-------------------------
Peter A. Morton
Its: President
------------------------
Morton:
/S/ Peter A. Morton
-----------------------------
PETER A. MORTON
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into this
8th day of October, 1997 by and between Hard Rock Hotel, Inc., a Nevada
corporation, (the "Company") and Gary R. Selesner, a resident of the State of
Nevada ("Executive").
WITNESSETH
WHEREAS, Executive is Senior Vice President of Harveys Casino Resorts, a
Nevada corporation ("Harveys") and acts as General Manager of the Hard Rock
Hotel and Casino located in Las Vegas, Nevada (the "Hard Rock"); and
WHEREAS, pursuant to the terms of a management agreement (the
"Management Agreement") Harveys manages the Hard Rock and the parties hereto
are entering into this Agreement in anticipation of and in connection with
the termination of the Management Agreement; and
WHEREAS, the Company has determined that the future services of
Executive will be of value to the Company and desires that Executive remain
at the Hard Rock as an employee of the Company in accordance with the terms
hereof, and
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, together with good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby employs Executive and
Executive hereby accepts such employment commencing on the date of, and
immediately following, the final closing of the sale of Harvey's equity
interest in the Company to Peter Morton or his designee and the termination
of the Management Agreement and any employment agreement between Harveys and
Executive (the "Commencement Date") and shall continue thereafter until the
fourth anniversary of the Commencement Date (the "Termination Date"), unless
sooner terminated in accordance with the terms hereof.
2. DUTIES OF EXECUTIVE. Executive shall be employed to serve in the
capacity of Senior Vice President of the Company and General Manager of the
Hard Rock. Executive shall be responsible for the overall supervision,
direction, and control of the operations of the Hard Rock facility and shall
direct the operating departments with a view to the successful implementation
of business policies and plans for the Hard Rock. Executive shall provide
support in the conceptual, strategic and policy formulation functions of the
Company and shall direct and coordinate the activities of the Hard Rock to
attempt to obtain optimum efficiency and economy of operations in order to
attempt to maximize profits. Executive shall devote his full business time,
attention and ability to the affairs of the Company during the term of this
Agreement; PROVIDED, HOWEVER, that Employee shall not be precluded from
involvement in charitable or civic activities or his
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personal financial investments provided that the same do not interfere with
his time and attention to the affairs of the Company. Executive will report
directly to Peter Morton or such other person designated by the Board (as
defined below) who is reasonably acceptable to Executive.
3. BASE SALARY, BONUS AND REIMBURSEMENT FOR EXPENSES.
3.1 BASE SALARY. The Company shall pay to Executive a base
salary (the "Base Salary") of $250,000 per annum. The Base Salary shall be
payable in equal bi-weekly installments in arrears. For purposes of this
Agreement, the Base Salary and the Minimum Bonus (as hereinafter defined) are
collectively referred to as "Annual Compensation." Executive's job
performance will be evaluated at least annually for consideration of merit
increases in the Base Salary and any other form of supplemental income or
benefits that the Company may award to its senior officers.
3.2 BONUS. Executive shall be eligible to receive an annual
bonus to be determined by the Company's Board of Directors (the "Board")
based upon the financial performance of the Company and Executive's
contribution to such performance, which bonus shall not in any event be less
than $75,000 per annum (payable initially within 30 days after the end of
Company's fiscal year ended November 30, 1997 and thereafter within 30 days
after the end of the Company's calendar and/or fiscal year as the case may
be) commencing as of the date hereof and each anniversary of the date hereof,
and pro rated for any short year of the employment term.
3.3 REIMBURSEMENT OF EXPENSES. The Company will promptly
reimburse Executive for all reasonable and necessary expenses incurred by
Executive for travel, entertainment and miscellaneous business expenses,
including brokerage commissions on the sale of Executive's New Jersey home
and, up to a maximum of Six Thousand Dollars ($6,000), accounting and legal
fees incurred by Executive in connection with this Agreement. In addition,
the Company shall not require Executive to reimburse the Company for all or
part of that certain Thirteen Thousand Dollars ($13,000) bonus previously
received by Executive.
4. BENEFITS.
4.1 GENERALLY. Executive shall be entitled to participate in the
Company's group insurance, hospitalization and health and benefit plans as
well as all other benefit plans that the Company provides to its senior
executives to the extent such plans are established by the Company which the
parties hereto anticipate will be similar to those established by Harveys.
4.2 AUTOMOBILE. The Company shall provide Executive during the
term of this Agreement with the use of an automobile equal to or better than
that currently utilized by Executive and shall reimburse Executive for all
registration and title expenses, insurance premiums, maintenance and fuel
costs, in connection with the ownership and operation thereof. Executive
represents and warrants to the Company that Executive is
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currently receiving from Harveys the use of an automobile along with the
reimbursement of registration and title expenses, insurance premiums,
maintenance and fuel costs in connection with the ownership and operation of
such automobile.
4.3 RELOCATION LOAN. The Company shall loan Executive an amount
of money equal to, and on the same terms, as the current loan to Executive
from Harveys with respect to Executive's relocation from New Jersey to Nevada.
5. FACILITIES. Executive shall be furnished with office, supplies and
personnel which are necessary or appropriate for the adequate performance by
Executive of his duties be deemed to include, without limitation, a full time
administrative assistant.
6. NON-DISCLOSURE; NON-SOLICITATION. During the term of this
Agreement and thereafter, Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or its affiliates, and their respective
businesses, which shall not be public knowledge (other than information which
becomes public as a result of acts of Executive or his representatives in
violation of this Agreement), including, without limitation, customer/client
lists, matters subject to litigation, and technology or financial information
of the Company or its subsidiaries, without the prior written consent of the
Company. In addition, during the term of this Agreement and for a two (2)
year period thereafter, Executive shall not, directly or indirectly, solicit
or contact any employee of the Company or any affiliate of the Company, with
a view to inducing or encouraging such employee to leave the employ of the
Company or its affiliates, for the purpose of being employed by Executive,
an employer affiliated with Executive or any competitor of the Company or
any affiliate hereof. Executive acknowledges that the provisions of this
Paragraph 6 are reasonable and necessary for the protection of the Company
and that the Company will be irrevocably damaged if such provisions are not
specifically enforced. Accordingly, Executive agree that, in addition to any
other relief to which the Company may be entitled in the form of actual or
punitive damages, the Company shall be entitled to seek and obtain injunctive
relief from a court of competent jurisdiction (without posting a bond
therefor) for the purpose of restraining Executive from any actual or
threatened breach of such provisions.
7. TERMINATION.
7.1 Executive's employment under this Agreement shall terminate
upon the occurence of any of the following:
(a) DEATH OR DISABILITY. If Executive dies or becomes
"Permanently Disabled" (meaning that he becomes mentally or physically
disabled, and if he has for six (6) successive months, or for shorter periods
aggregating nine (9) months in any period of eighteen (18) consecutive
months, been unable to substantially perform his duties hereunder),
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(b) RESIGNATION. The voluntary resignation of Executive
provided that Executive agrees that he will give not less than three (3)
month's advance written notice of such resignation to the Board, which notice
may be waived by the Company in its sole discretion.
(c) CAUSE. For "Cause," which for purposes of this
Agreement, shall only be any of the following:
(i) Executive's breach of any of the covenants contained
in Paragraph 6 of this Agreement;
(ii) willful and material failure or refusal by
Executive to perform or fulfill his obligations and duties
under this Agreement, other than by reason of Permanent
Disability as provided in Paragraph 7.1(a) above, provided
that Executive shall first be given written notice of such
failure, specifying the particulars in detail, and shall have
a period of thirty (30) days thereafter to cure or rebut the
claimed basis of such failures (and notwithstanding the
foregoing, Executive shall not be deemed to have been
terminated pursuant to this subparagraph (ii) unless and
until there shall have been delivered to Executive, together
with such written notice, a copy of a resolution, duly
adopted by the affirmative vote of not less than a majority
of the entire membership of the Board (after reasonable
notice to Executive and an opportunity for him, together with
his counsel, to be heard in person or telephonically before
the Board), finding that in the good faith determination of
the Board, Executive was guilty of such failure; or
(iii) an act of fraud, theft or embezzlement by
Executive, the commission of a felony by Executive, or the
entry by Executive of a plea of guilty or nolo contendere in
a court of competent jurisdiction for any crime (other than
minor traffic violations) or involving moral turpitude; or
(iv) the failure of Executive to obtain any requisite
license, permit or approval based on suitability from any
state, county, or other governmental authority having
jurisdiction over the gaming operations of the Company (the
"Gaming Authorities") which would preclude Executive from
carrying out his duties as set forth in this Agreement; or
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(v) if, after the initial receipt by Executive of any
requisite license, permit or approval from the Gaming
Authorities, the execution of Executive's duties as set forth
in this Agreement will, as evidenced by communications from
any senior official of any of the Gaming Authorities,
materially preclude or unduly delay the issuance of, or
result in the imposition of unduly burdensome terms and
conditions on, or revocation of, any liquor, gaming or other
license, permit or approval, necessary or appropriate to the
proposed, contemplated or actual operations of the Company;
PROVIDED, HOWEVER, that this subparagraph (v) shall not be
applicable if Executive shall, within a reasonable period of
time after receipt of written notice from the Board
specifying the nature of the issues involved hereunder,
remedy the situation to the satisfaction of the applicable
Gaming Authorities; or
(vi) a default of Executive of any other material
provision of this Agreement, provided that the termination of
Executive's employment pursuant to this subparagraph (vi) shall
not constitute valid termination for good cause unless
Executive shall have first received written notice from the
Board stating with specificity the nature of such breach and
affording Executive at least thirty (30) days to correct the
breach.
(d) COMPANY BREACH. In the event of the Company's willful
and material breach of any provision of this Agreement (which shall be deemed
to include, but not be limited to, any failure to timely pay any undisputed
amounts owing to Executive hereunder), Executive shall have the right to
terminate his employment hereunder; provided that Executive shall give
written notice to the Company of his intent to so terminate setting forth the
basis for such termination, and the Company shall then have thirty (30) days
after receipt of such notice to cure fully the subject breach.
7.2 TERMINATION OBLIGATIONS OF EXECUTIVE. In the event
Executive's employment with the Company is terminated, Executive, or his
legal representative in case of termination by death or Executive's physical
or mental incapacity to serve, shall:
(a) by the close of the effective date of termination,
resign from all corporate and board positions held in the Company and any of
its subsidiary and affiliated companies;
(b) promptly return to a representative designated by the
Company all property, including but not limited to, automobiles, keys,
identification
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cards and credit cards of the Company or any of its subsidiaries or
affiliated companies; and
(c) incur no further expenses or obligations on behalf of
the Company, or any of its subsidiaries and affiliated companies.
8. CHANGE OF CONTROL. In the event of a "Change of Control" (as
defined below), all equity granted to Executive in accordance with this
Agreement which has not vested as of the date of the Change of Control shall
immediately vest (and the put shall become exercisable by Executive). For
purposes of this Agreement "Change of Control" shall mean that Peter Morton
and/or his affiliates no longer, directly or indirectly, beneficially own(s)
in the aggregate shares of capital stock of the Company having thirty-three
and one-third percent (33-1/3%) or more of the aggregate voting power of all
shares of capital stock of the Company at the time outstanding and any person
or any group shall, directly or indirectly, beneficially own in the aggregate
shares of capital stock of the Company having thrity-three and one-third
percent (33-1/3%) or more of the aggregate voting power of all shares of
capital stock of the Company at the time outstanding. For the purposes of
this Paragraph 8, the term "person" shall have the same meaning ascribed to
such term pursuant to the Securities Act of 1933, as amended. For the
purposes of this Paragraph 8, the terms "beneficially owned" and "group"
shall have the respective meanings ascribed to them pursuant to Section 13(d)
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
The term "affiliate" as used in this Agreement shall have the same meaning
as ascribed to such term in Section 12b-2 of the Securities Exchange Act of
1934, as amended.
9. TERMINATION COMPENSATION
9.1 SEVERANCE COMPENSATION. If Executive shall terminate his
employment under this Agreement pursuant to Paragraph 7.1(d), or if the
Company shall terminate Executive's employment with the Company for any
reason other than those set forth in Paragraph 7.1(a), (b) or (c), the
Company shall pay Executive (i) his total Annual Compensation through the
date of termination at the rate in effect at the time notice of such
termination is given in lieu of any further salary or other payments to
Executive hereunder for periods subsequent to the date of termination; (ii)
in lieu of any further salary or other payments to Executive hereunder other
than payments relating to Executive's right to sell the Shares to Lily Pond
as set forth in the Letter Agreement of even date herewith (the "Letter
Agreement") for periods subsequent to the date of termination, the Company
shall pay as liquidated damages to Executive on the fifteenth day following
the date of termination, a lump sum amount equal to the product of (A) the
total Annual Compensation in effect as of the date of termination, multiplied
by (B) the number of years (including partial years) remaining in the
employment term hereunder (provided, that such number used as a multiplier
shall not be less than one); (iii) Executive shall vest in any non-vested
equity granted to him by the Company and Lily Pond Investments, Inc., a
Nevada corporation; (iv) the Company shall pay the
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amount of any forfeitures that result from any non-vesting under any of the
Company's employee benefit, welfare, stock option or other plans (qualified
or non-qualified); and (v) the Company shall continue to provide the benefits
and payments due Executive as provided in Paragraph 4 above for the unexpired
portion of the employment term; PROVIDED, HOWEVER, that Executive shall only be
entitled to such payment and benefits as long as he is in compliance with
Paragraph 6 of this Agreement.
10. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. Executive represents
and warrants to the Company that (i) as of the Commencement Date, Executive
shall be under no contractual or other restriction or obligation which is
inconsistent with the execution of this Agreement, the performance of his
duties hereunder, or the other rights of the Company hereunder, and (ii)
Executive is under no physical or mental disability that would hinder the
performance of his duties under this Agreement.
11. GENERAL PROVISIONS.
11.1 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns and
Executive, his assignees, and his estate. Neither Executive, his designees,
nor his estate shall commute, pledge, encumber, sell or otherwise dispose of
the rights to receive the payments provided in this Agreement, which payments
and the rights thereto are expressly declared to be nontransferable and
nonassignable (except by death or otherwise by operation of law).
11.2 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Nevada from time to time in effect.
11.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same Agreement.
11.4 NO WAIVER. Except as otherwise expressly set forth herein,
no failure on the part of either party hereto to exercise and no delay in
exercising any right, power or remedy hereunder shall operate as a waiver
hereof nor shall any single or partial exercise of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of
any other right, power or remedy.
11.5 HEADINGS. The headings of the Paragraphs of this Agreement
have been inserted for convenience of reference only and shall in no way
restrict any of the terms or provisions hereof.
11.6 INDEMNIFICATION. Subject to Nevada Revised Statutes Section
78.751, as may be amended, and to the fullest extent permitted by law, the
Company agrees to defend, indemnify and hold Executive harmless from and
against any liabilities, costs and expenses (including without limitation, in
connection with any actions relating to licensing by any Gaming Authorities)
arising in relation to Executive's services as an officer, director or
employee of the Company or any of its affiliates to the fullest extent
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permitted by applicable law. Subject to the foregoing, the Company shall pay
on a regular basis to the fullest extent permitted by law, any legal and
other professional fees and expenses incurred with respect to a matter which
is the subject of indemnification. The Company will continue to maintain
directors and officers liability insurance.
11.7 NOTICES. Any notice under this Agreement shall be given in
writing and delivered in person or mailed by certified or registered mail,
addressed to the respective party at the address as set out below, or at such
other address as either party may elect to provide in advance in writing to
the other party:
EXECUTIVE:
Gary R. Selesner
8108 Sapphire Bay
Las Vegas, Nevada 89128
COMPANY:
Hard Rock Hotel, Inc.
510 North Robertson Boulevard
Los Angeles, California 90048
Attn: Peter Morton
WITH A COPY TO:
Gordon & Silver, Ltd.
3800 Howard Hughes Parkway
14th Floor
Las Vegas, Nevada 89109
Attn: James S. Mace
11.8 SEVERABILITY. If any provision of this Agreement is held by
a court of competent jurisdiction to be invalid, illegal, or unenforceable by
reason of any rule of law or public policy, all other provisions of this
Agreement shall nevertheless remain in effect. No provision of this Agreement
shall be deemed dependent on any other provision unless so expressed herein.
11.9 GAMING AUTHORITIES APPROVAL. Nothing contained in this
Agreement shall be construed to require the commencement of any act contrary
to law, and when there is any conflict between any provision of this
Agreement and any statute, law, ordinance, or regulation, contrary to which
the parties have no legal right to contract, then the latter shall prevail;
but in such an event, the provisions of this Agreement so affected shall be
curtailed and limited only to the extent necessary to bring it within the
legal requirements. Notwithstanding anything contained in this Agreement to
the contrary, this Agreement and the terms and conditions contained herein
shall be contingent upon all requisite approvals of the applicable Gaming
Authorities.
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11.10 NO WAIVER. The several rights and remedies provided for in
this Agreement shall be construed as being cumulative, and no one of them
shall be deemed to be exclusive of the others or of any right or remedy
allowed by law. No waiver by Company or Executive any failure to Executive or
Company, respectively, to keep or perform any provision of this Agreement
shall be deemed to be a waiver of any preceding or succeeding breach of the
same or other provision.
11.11 MERGER. This Agreement and the Letter Agreement supersede
any and all other agreements, either oral or in writing, between the parties
hereto with respect to the employment of the Executive by the Company.
11.12 NO REPRESENTATIONS. Each party to this Agreement
acknowledges that except as set forth in the Letter Agreement, no
representations, inducements, promises or other agreements, oral or
otherwise, have been made by any party, anyone acting on behalf of any party,
which are not embodied herein and that no other agreement, statement or
promise not contained in this Agreement shall be valid or binding. Any
addendum to or modification of this Agreement shall be effective only if it
is in writing and signed by the parties to be charged.
11.13 DRAFTING AMBIGUITIES. Each party to this Agreement has been
afforded an opportunity to have this Agreement reviewed by his or its
respective counsel. The normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting Party shall not be
employed in the interpretation of this Agreement or of any amendments or
exhibits to this Agreement.
11.14 SURVIVAL. The terms and conditions of Paragraphs 6, 9 and
11.6 shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
Hard Rock Hotel, Inc., a Nevada
corporation
By: /s/ Peter Morton
--------------------------------
Peter Morton, President
/s/ Gary R. Selesner
--------------------------------
Gary R. Selesner
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AMENDED AND RESTATED LETTER AGREEMENT
THIS AMENDED AND RESTATED LETTER AGREEMENT (this "AMENDED AGREEMENT") is
dated as of March ___, 1998, by and among Hard Rock Hotel, Inc., a Nevada
corporation (the "COMPANY"), Gary R. Selesner ("EXECUTIVE") and Lily Pond
Investments, Inc., a Nevada corporation ("LILY POND").
PRELIMINARY STATEMENTS
A. The parties hereto are parties to that certain Letter Agreement
dated as of October 8, 1997 (the "LETTER AGREEMENT"), pursuant to which the
parties agreed to modify that certain Employment Agreement dated as of
October 8, 1997 (the "EMPLOYMENT AGREEMENT") by providing an additional
inducement for Executive to enter into the Employment Agreement in the form
of an equity participation in the Company. Capitalized terms not otherwise
defined herein shall have the same meanings as set forth in the Employment
Agreement.
B. Pursuant to the Letter Agreement, Lily Pond had agreed to cause
Shares (as defined below) to be delivered to Executive on the terms and
conditions set forth therein.
C. The parties hereto desire to amend and restate the Letter Agreement
so that the Shares will be issued directly by the Company to Executive and
not from the shares of common stock of the Company held by Lily Pond.
AGREEMENT
In consideration of the mutual covenants and agreements contained in the
Employment Agreement, and intending to be legally bound, the parties hereto
stipulate and agree as follows:
1. EQUITY PARTICIPATION. As an additional inducement for Executive to
enter into the Employment Agreement, Executive shall receive Seven Hundred
Sixty-eight (768) shares of no par value non-voting common stock of the
Company as may be adjusted as set forth in subparagraph (k) below (the
"SHARES") representing, as of the Commencement Date, one percent (1%) of the
total outstanding common stock of the Company which Shares shall be delivered
to Executive by the Company and shall vest as follows: Twenty percent (20%)
of the Shares shall be issued to Executive and vest on the Commencement Date;
PROVIDED, HOWEVER, that such twenty percent (20%) portion of the Shares shall
be subject to forfeiture if Executive's employment with the Company is
terminated within twelve (12) months of the Commencement Date pursuant to
Paragraph 7.1(b) or (c) of the Employment Agreement. Provided that
Executive's employment with the Company is not terminated pursuant to
Paragraph 7.1(a), (b) or (c) of the Employment Agreement, on each anniversary
of the Commencement Date an additional twenty percent (20%) of the Shares
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shall vest; PROVIDED, HOWEVER, that each such additional twenty percent (20%)
portion of the Shares shall be subject to forfeiture if Executive's
employment with the Company is terminated prior to the fourth anniversary of
this Amended Agreement pursuant to Paragraph 7.1(b) or (c) of the Employment
Agreement within twelve (12) months of the date that such twenty percent
(20%) portion of the Shares has vested and; FURTHER PROVIDED, that in the
event that a Change of Control has occurred, the remainder of the Shares not
vested shall immediately vest. The Company agrees that it will not encumber,
transfer (except for a transfer to an affiliate of the Company, in which
event both the Company and such affiliate shall be bound by the obligations
of the Company set forth in this Amended Agreement) or otherwise alienate the
Shares during the term of the Employment Agreement. The Shares, whether
vested or not, shall (i) be subject to all restrictions necessary to comply
with the terms of applicable law including, without limitation, the Gaming
Authorities (as defined below); (ii) satisfy and be subject to the usual,
customary and reasonable criteria imposed by any underwriter for the Company
in connection with an IPO (as defined below) or such other financing events,
and (iii) be subject to the restrictions below:
a) RESTRICTIONS ON TRANSFER. No transfer or other dispositions of
the Shares on the part of Executive shall be made in contravention of the
terms of this Amended Agreement. Dispositions of the Shares shall include any
transfer, gift, sale, assignment, pledge or hypothecation/or other transfer
of the Shares except as otherwise provided herein. Any disposition of the
Shares on the part of Executive made in contravention of this Amended
Agreement shall be null, void and of no effect. The Company shall not take
any action to effectuate any disposition of the Shares in contravention of
this Amended Agreement and shall not record any such transfer on the books of
the Company.
b) OFFER. Executive shall not dispose of the Shares or any portion
thereof to any person or entity until Executive shall first have offered such
Shares to the Company by notice in writing to the Company (the "OFFER
NOTICE") and shall otherwise have complied with this Paragraph 1. Any Offer
Notice under this Paragraph 1 shall specify (i) the person or entity to which
the Shares are proposed to be transferred (the "THIRD PARTY OFFEROR"), (ii)
the price, other consideration and other material terms and conditions of the
transaction which Executive proposes to undertake with the Third Party
Offeror and (iii) the number of Shares proposed to be included in or affected
by the disposition to the Third Party Offeror. The Company shall have the
right to acquire all (but not less than all) of the Shares offered by
Executive on the terms and conditions set forth in the Offer Notice. Such
right shall be exercisable by the Company within ten (10) business days after
the Offer Notice is given by Executive. Such right shall be deemed to be
exercised when written notice of such exercise is given by the Company within
said ten (10) day period. The Company shall have the ability to assign the
rights granted to it by this Paragraph 1.
c) TRANSFER TO THIRD PARTY. If all of the Shares are not acquired
by the Company or its assignee as provided for in this Paragraph 1 within the
applicable notice
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period provided for therein, then Executive may transfer or otherwise dispose
of such Shares only to the Third Party Offeror for the consideration and only
on the terms and conditions set forth in the Offer Notice that was given to
the Company, provided that the Third Party Offeror agrees in writing to be
bound by all of the terms of this Amended Agreement other than any terms
related to employment with the Company, before the effectuation of any
transfer of the Shares or interests therein to the Third Party Offeror and
provided that a written instrument evidencing such agreement is delivered to
the Company before any such transfer is effected.
d) REVIVAL OF FIRST REFUSAL RIGHT. If a transfer or other
disposition of the Shares or interests therein to a Third Party Offeror is
not consummated within ninety (90) days after receipt by the Company of the
Offer Notice, then any transfer or other disposition proposed to be made to
such Third Party Offeror shall again be subject to the rights and options of
the Company and subject to the notice requirements provided for in this
Paragraph 1.
e) CLOSING. The closing of any disposition of the Shares under
this Paragraph 1 shall take place at the principal offices of the Company or
at the offices of the attorneys of the Company, or at such other place as may
be agreed upon by the parties to such transaction, within thirty (30) days
after the last written notice that is timely hereunder given by the Company.
Such closing shall take place at a time during regular business hours
specified by Executive on fifteen (15) days' prior written notice to the
persons or entities acquiring the Shares. At the closing, the Shares to be
disposed of under this Paragraph 1 shall be delivered by the transferring
party to the party entitled to acquire such Shares, duly endorsed in blank or
accompanied by duly executed stock powers, with transfer stamps attached, if
required by applicable law. The acquirer of any Shares transferred under this
Paragraph 1 shall at the closing of such disposition, pay the acquisition
price for the Shares in accordance with the Offer Notice that was delivered
in connection with the disposition of such Shares.
f) EXEMPTED TRANSFER. The provisions of this Paragraph 1 shall not
apply to any of the following dispositions of Shares by Executive, provided
that the transferee or acquirer of the Shares disposed of under this
Paragraph 1 agrees in writing to be bound by the terms of this Paragraph 1:
(i) any disposition by will or intestacy and any other disposition to an
heir, executor, estate, committee, guardian or other legal representative of
Executive upon the death or legal incapacity of Executive, or (ii) any
disposition to a Family Transferee of Executive (as hereinafter defined). As
used in this Amended Agreement, a "FAMILY TRANSFEREE" shall mean (A) a
spouse, child, parent, grandchild or sibling of Executive or (B) a trust
established by Executive, or a trustee, fiduciary, custodian or foundation
designated by Executive, that will hold the Shares for the benefit of
Executive or for the benefit of any of the persons described in item (A)
above in this sentence.
g) RESTRICTIVE LEGEND. The certificates representing the Shares
shall bear the following legend:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE
ACT, AND IN COMPLIANCE WITH APPLICABLE SECURITIES LAWS
OF ANY STATE WITH RESPECT THERETO, OR IN ACCORDANCE
WITH AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
h) PUT OPTION. In the event that Executive's employment with the
Company is terminated for any reason other than as set forth in Paragraph
7.1(b) or (c) of the Employment Agreement (including, the expiration of the
term of the Employment Agreement or the death of Executive), the Company
shall, upon the written demand of Executive or his personal representative as
the case may be (the "DEMAND"), purchase all, but not less than all, of the
Shares, for a purchase price of the lesser of One Thousand Nine Hundred Fifty
three and 13/100 Dollars ($1,953.13) per Share (which multiplied by seven
hundred sixty-eight (768) Shares would equal One Million Five Hundred
Thousand Seven and 10/100 Dollars ($1,500,007.10)) or, in the event an IPO
(as defined below) has occurred, the IPO Price (the "PURCHASE PRICE") to be
paid in immediately available funds on or before the later of (i) ninety (90)
days of receipt of the Demand or (ii) receipt of all requisite approvals from
the appropriate Gaming Authorities to transfer the Shares, PROVIDED, HOWEVER,
that the Shares shall be good and marketable, free and clear of all liens and
encumbrances and Executive shall warrant and indemnify the Company with
respect to same; and FURTHER, PROVIDED, in the event of a dividend or
distribution made by the Company with respect to the Shares, the Purchase
Price shall be correspondingly adjusted downward to reflect the fair market
value of such dividend or distribution.
i) PARTIAL PUT OPTION. Executive shall have the right (the
"PARTIAL PUT OPTION") for a period of thirty (30) days from the second
anniversary of the Commencement Date to require the Company, upon receipt of
a Demand, to purchase one-half (1/2) of all of the Shares then vested and not
subject to forfeiture pursuant to this Paragraph 1 for a per Share price
equal to the Purchase Price to be paid in immediately available funds on or
before the later of (x) ninety (90) days of receipt of the Demand or (y)
receipt of all requisite approvals from the appropriate Gaming Authorities to
transfer the Shares; PROVIDED, HOWEVER, that the Shares shall be good and
marketable, free and clear of all liens and encumbrances and Executive shall
warrant and indemnify the Company with respect to same; and FURTHER,
PROVIDED, in the event of a dividend or distribution made by the Company with
respect to the Shares, the Purchase Price shall be correspondingly adjusted
downward to reflect the fair market value of such dividend or distribution.
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j) IPO PUT RIGHTS. Notwithstanding anything contained in this
Amended Agreement to the contrary, in the event that the Company (or the
immediate parent of the Company or a wholly-owned subsidiary of the Company,
in which case Executive shall be entitled to participate to the same extent
as if undertaken by the Company) has, prior to the date of receipt of the
Demand, undertaken an equity securities offering in the public market (an
"IPO") and Executive has had a reasonable opportunity to sell the Shares then
vested in the public market at a price equal to or greater than the IPO Price
(as defined below), then the Company shall have no obligation to repurchase
the Shares then vested. For the purposes hereof, the parties shall mutually
determine whether Executive was provided a "reasonable opportunity" to sell
any Shares, and if they cannot mutually agree, then such determination shall
be made by the independent board members of the Company. In all cases, the
obligation of the Company to repurchase the Shares shall be subject to the
receipt of all appropriate governmental approvals, including, without
limitation, the requisite approvals of the Gaming Authorities, which the
Company and Executive covenant to each other that they shall use their
reasonable best efforts to obtain. In the event Executive does not have a
reasonable opportunity to sell the Shares then vested in the IPO and
provided that Executive is employed with the Company, then Executive shall
have the right to put up to fifty percent (50%) of the Shares then vested and
not subject to forfeiture pursuant to Paragraph 1 of this Amended Agreement
to the Company at the initial public offering price less underwriters
discounts and commissions (the "IPO PRICE") per Share multiplied by the
number of Shares then vested and not subject to forefeiture pursuant to
Paragraph 1 of this Amended Agreement so put after taking into consideration
any adjustment to the number of Shares as provided in paragraph 1.k) below. In
order to exercise the put right set forth in the immediately preceding
sentence, Executive shall deliver a Demand to the Company on or before the
date that is thirty (30) days prior to the effective date of the IPO. In the
event of a Change of Control, the Company's obligation to repurchase the
Shares shall expire unless they have received a demand within thirty (30)
days following the date of such Change of Control.
k) DILUTION. If, during the term of the Employment Agreement, the
Company (i) issues a stock dividend, (ii) subdivides its outstanding shares
of common stock, (iii) combines its outstanding shares of common stock into a
smaller number of shares of common stock or (iv) issues any shares of capital
stock in a reclassification of the Company's common stock or (v) such other
similar event (each, a "DILUTION EVENT"), then the remaining number of Shares
which the Company will thereafter be obligated to deliver to Executive
(determined immediately prior to the record date for such Dilution Event)
shall be adjusted so that Executive shall be entitled to receive from the
Company the number of shares of common stock of the Company (or such other
securities of the Company which thereafter enjoy the rights which the Shares
enjoyed as of the date of this Amended Agreement) that Executive would have
received after the Dilution Event, had all of the Shares been delivered to
Executive immediately prior to the record date of such Dilution Event.
Whenever the number of Shares which the Company is obligated to deliver to
Executive is adjusted pursuant to the preceding sentence, the Purchase Price
shall be adjusted by multiplying such Purchase Price, immediately prior to
such adjustment by a fraction, the numerator of which shall be the total
number of Shares immediately prior to
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such adjustment, and the denominator of which shall be the total number of
Shares immediately after such adjustment.
1) LOAN FOR TAX LIABILITY. The Company shall loan Executive an
amount equal to Executive's federal income tax liability (including Medicare,
if applicable) due to the vesting of the Shares (the "LOAN"). The Loan
proceeds shall be made available to Executive on or before the date that
payment for such tax liability is due and payable. The Loan shall be
evidenced by promissory notes bearing interest at seven and one-half percent
(7-1/2%) per annum and shall be due and payable on the earlier of (i) the
date that the Employment Agreement is terminated pursuant to Paragraph 7.1(b)
or (c) thereof, (ii) the date that is ninety (90) days subsequent to the
effective date of termination in the event the Employment Agreement is
terminated pursuant to Paragraph 7.1(a) thereof, or (iii) ninety (90) days
after the Termination Date; PROVIDED, HOWEVER, that if Executive or his
personal representative validly exercises the put option set forth in
Paragraph 1.b) above, the Loan shall not be due until the closing of the put
option as provided in such Paragraph 1.b). At Executive's option, interest
shall accrue through maturity. The Loan shall be fully non-recourse to
Executive but shall be secured by the Shares and Executive agrees to pledge
the Shares to the Company and pursuant thereto, execute and deliver to the
Company a Pledge Agreement in form and substance acceptable to the Company
and its legal counsel. Notwithstanding the foregoing to the contrary, in the
event the Employment Agreement is terminated pursuant to Paragraph 7.1(a)
thereof and the personal representative of Executive makes a Demand, the Loan
shall not be due and payable until the date that the Purchase Price has been
paid.
2. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. Executive represents
and warrants to the Company that (i) Executive is an "accredited investor"
within the meaning of Regulation D promulgated under the Securities Act of
1933, as amended and (ii) Executive has had the opportunity to obtain all
such information pertaining to the Company as Executive has requested.
3. GAMING AUTHORITY'S APPROVAL. Notwithstanding anything contained in
this Amended Agreement to the contrary, the transfer of the Shares and each
and every other term and condition of this Amended Agreement shall be
contingent upon (i) the receipt of the requisite approvals of all applicable
state, county or other governmental authorities having jurisdiction over the
gaming operations of the Company and (ii) the final closing of the sale of
Harveys' equity interest in the Company to the Company or its designee and
the termination of the Management Agreement and any Employment Agreement
between Harveys and Executive.
4. APPLICABLE LAW. This Amended Agreement shall be construed in
accordance with and governed for all purposes by the laws of the State of
Nevada without giving effect to the principles of conflicts of laws.
5. EFFECT ON EMPLOYMENT AGREEMENT AND LETTER AGREEMENT. This Amended
Agreement shall amend and supplement the Employment Agreement to the extent
of the
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terms hereof. The Employment Agreement, except as amended and superseded
hereby, is and shall remain in full force and effect. This Amended
Agreement shall amend and supersede the Letter Agreement in its entirety.
6. SURVIVAL. Except as otherwise stated herein, the terms and
conditions of this Amended Agreement shall survive the termination of the
Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amended
Agreement as of the date first above written.
Hard Rock Hotel, Inc., a Nevada
corporation
By: /s/ Peter A. Morton
------------------------------------
Peter A. Morton, President
/s/ Gary R. Selesner
-----------------------------------
Gary R. Selesner 2/3/98
Lily Pond Investment, Inc., a Nevada
corporation
By: /s/ Peter A. Morton
------------------------------------
Peter A. Morton, President
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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of
December 1, 1997, between Hard Rock Hotel, Inc., a Nevada corporation
(the "Company"), and William Stephens, an individual ("Executive").
PRELIMINARY STATEMENTS
A. The Company currently operates that certain hotel/casino resort
known as the "Hard Rock Hotel" located at 4455 Paradise Road, Las Vegas,
Nevada.
B. The Company desires to employ Executive, and Executive desires to be
so employed, on the terms and conditions herein contained.
AGREEMENT
NOW, THEREFORE, in consideration of the various covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby employs Executive and
Executive accepts such employment commencing on the date of this Agreement
(the "Commencement Date") and terminating on the second anniversary of the
Commencement Date, unless sooner terminated as hereinafter provided;
PROVIDED, HOWEVER, that this Agreement may be extended for successive one (1)
year terms upon the mutual agreement of the parties hereto.
2. SERVICES TO BE RENDERED.
2.1. DUTIES OF EXECUTIVE. Executive shall be employed to serve in
the capacity of Vice President of Gaming Operations of the Company.
Executive shall be responsible for the overall supervision, direction, and
control of the casino operations of the Hard Rock Hotel facility, including
table games, slots, race and sports books, casino marketing, player
development, data base and direct mail marketing, and special events.
Executive shall direct those operating departments with a view toward revenue
growth, profitability and high standards of customer service. Executive
shall devote his full business time, attention and ability to the affairs of
the Company during the term of this Agreement; PROVIDED, HOWEVER, that
Employee shall not be precluded from involvement in charitable or civic
activities or his personal financial investments provided that the same do
not interfere with his time and attention to the affairs of the Company.
Executive will report directly to the Senior Vice President and General
Manager or such other person designated by the Board of Directors of the
Company (the "Board").
3. COMPENSATION AND BENEFITS. The Company shall pay the following
compensation and benefits to Executive during the term hereof; and Executive
shall accept the same as payment in full for all services rendered by
Executive to or for the benefit of the Company:
3.1. BASE SALARY. Commencing on the Commencement Date, a base
salary (the "Base Salary") of $125,000 per annum. The Base Salary shall
accrue in equal bi-weekly
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installments in arrears and shall be payable in accordance with the payroll
practices of the Company in effect from time to time.
3.2. ANNUAL BONUS. Executive shall be eligible to receive an
annual bonus (the "Annual Bonus") to be determined by the Board based upon
the achievement of the financial performance and other objectives of the
Company and Executive's contribution to such performance.
3.3. STOCK. Executive shall be entitled to participate in stock
option plans that the Company provides to its comparable senior executive
officers to the extent such plans are established by the Company.
3.4. EXPENSES. The Company shall reimburse Executive for
reasonable out-of-pocket expenses incurred in connection with the performance
of his duties hereunder, subject to (i) such policies as the Board may from
time to time establish and (ii) Executive furnishing the Company with
evidence in the form of receipts satisfactory to the Company substantiating
the claimed expenditures.
3.5. VACATION. Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Company from time to
time for its comparable senior executive officers. Executive shall also be
entitled to all paid holidays given to the Company's comparable senior
executive officers.
3.6. BENEFITS. Executive shall be entitled to participate in the
Company's group insurance, hospitalization, and group health and benefit
plans and all other benefits and plans as the Company provides to its
comparable senior executive officers to the extent such plans are established
by the Company and to the extent that Executive is eligible to participate in
such plans.
3.7. WITHHOLDING AND OTHER DEDUCTIONS. All compensation payable to
Executive hereunder shall be subject to such deductions as the Company is
from time to time required to make pursuant to law, governmental regulation
or order.
4. FACILITIES. Executive shall be furnished with an office, supplies
and personnel which are necessary or appropriate for the adequate performance
by Executive of his duties as set forth in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF EXECUTIVE. Executive represents
and warrants to the Company that (i) Executive is under no contractual or
other restriction or obligation which is inconsistent with the execution of
this Agreement, the performance of his duties hereunder, or the other rights
of the Company hereunder and (ii) Executive is under no physical or mental
disability that would hinder the performance of his duties under this
Agreement.
6. NON-DISCLOSURE; NON-SOLICITATION. During the term of this Agreement
and thereafter, Executive shall hold in a fiduciary capacity for the benefit
of the Company all secret or confidential information, knowledge or data
relating to the Company or its affiliates, and their respective businesses,
which shall not be public knowledge (other than information which
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becomes public as a result of acts of Executive or his representatives in
violation of this Agreement), including, without limitation, customer/ client
lists, matters subject to litigation, and technology or financial information
of the Company or its subsidiaries, without the prior written consent of the
Company. In addition, during the term of this Agreement and for a two (2)
year period thereafter, Executive shall not, directly or indirectly, solicit
or contact any employee of the Company or any affiliate of the Company, with
a view to inducing or encouraging such employee to leave the employ of the
Company or its affiliates, for the purpose of being employed by Executive, an
employer affiliated with Executive or any competitor of the Company or any
affiliate thereof. Executive acknowledges that the provisions of this
Article 6 are reasonable and necessary for the protection of the Company and
that the Company will be irrevocably damaged if such provisions are not
specifically enforced. Accordingly, Executive agrees that, in addition to
any other relief to which the Company may be entitled in the form of actual
or punitive damages, the Company shall be entitled to seek and obtain
injunctive relief from a court of competent jurisdiction (without posting a
bond therefor) for the purpose of restraining Executive from any actual or
threatened breach of such provisions.
7. TERMINATION.
7.1. DEATH OR TOTAL DISABILITY OF EXECUTIVE. If Executive dies or
becomes totally disabled during the term of this Agreement, Executive's
employment hereunder shall automatically terminate. For these purposes
Executive shall be deemed totally disabled if Executive shall become
physically or mentally incapacitated or disabled or otherwise unable fully to
discharge Executive's essential duties hereunder for a period of ninety (90)
consecutive calendar days or for one hundred twenty (120) calendar days in
any one hundred eighty (180) calendar-day period.
7.2. TERMINATION FOR GOOD CAUSE. Executive's employment hereunder
may be terminated by the Company for "good cause." The term "good cause is
defined as any one or more of the following occurrences:
(a) Executive's breach of any of the covenants contained in
Article 6 of this Agreement;
(b) Executive's conviction by, or entry of a plea of guilty
or nolo contendere in, a court of competent and final jurisdiction for any
crime involving moral turpitude or punishable by imprisonment in the
jurisdiction involved;
(c) Executive's commission of an act of fraud, whether prior
to or subsequent to the date hereof upon the Company;
(d) Executive's continuing repeated willful failure or
refusal to perform Executive's duties as required by this Agreement
(including, without limitation, Executive's inability to perform Executive's
duties hereunder as a result of drug or alcohol related misconduct and/or as
a result of any failure to comply with any laws, rules or regulations of any
governmental entity with respect to Executive's employment by the Company);
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(e) Executive's gross negligence, insubordination or material
violation of any duty of loyalty to the Company or any other material
misconduct on the part of Executive;
(f) Executive's commission of any act which is detrimental to
the Company's business or goodwill;
(g) the failure of Executive to obtain any requisite license,
permit or approval based on suitability from any state, county, or other
governmental authority having jurisdiction over the gaming operations of the
Company (the "Gaming Authorities") which would preclude Executive from
carrying out his duties as set forth in this Agreement;
(h) if, after the initial receipt by Executive of any
requisite license, permit or approval from the Gaming Authorities, the
execution of Executive's duties as set forth in this Agreement will, as
evidenced by communications from any senior official of any of the Gaming
Authorities, materially preclude or unduly delay the issuance of, or result
in the imposition of unduly burdensome terms and conditions on, or revocation
of, any liquor, gaming or other license, permit or approval, necessary or
appropriate to the proposed, contemplated or actual operations of the
Company; PROVIDED, HOWEVER, that this Section 7.2(h) shall not be applicable
if Executive shall, within a reasonable period of time after receipt of
written notice from the Board specifying the nature of the issues involved
hereunder, remedy the situation to the satisfaction of the applicable Gaming
Authorities; or
(i) Executive's breach of any other provision of this
Agreement, provided that termination of Executive's employment pursuant to
this subsection (i) shall not constitute valid termination for good cause
unless Executive shall have first received written notice from the Board
stating with specificity the nature of such breach and affording Executive at
least fifteen (15) days to correct the breach alleged.
7.3. RESIGNATION OF EXECUTIVE. The Company shall have the right to
terminate this Agreement and Executive's employment hereunder due to the
voluntary resignation of Executive, provided that Executive shall deliver no
less than sixty (60) days prior written notice of such resignation to the
Board, which notice may be waived by the Company in its sole discretion.
7.4. SEVERANCE COMPENSATION. Notwithstanding anything contained in
this Agreement, upon a termination of this Agreement and Executive's
employment hereunder due to the occurrence of any of the events referred to
in Section 7.1, 7.2 or 7.3 of this Agreement, Executive (or Executive's heirs
or representatives) shall be entitled to receive only such portion (if any)
of the Base Salary as may theretofore have accrued but be unpaid on the date
on which the termination shall take effect.
7.5. TERMINATION FOR NO CAUSE. In addition to the right to
terminate this Agreement pursuant to Sections 7.1, 7.2 and 7.3 of this
Agreement, the Company shall have the right to terminate this Agreement and
Executive's employment hereunder for any other reason or for no reason prior
to the expiration of the term of this Agreement. In the event that the
Company terminates this Agreement and Executive's employment hereunder
pursuant to this
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Section 7.5, the Company shall give ten (10) days prior written notice to
Executive and pay a termination fee to Executive in an amount equal to the
lesser of (i) Sixty-two Thousand Five Hundred Dollars ($62,500) or (ii) the
remainder of the Base Salary which would otherwise be due Executive pursuant
to this Agreement but for such termination, to be paid in the manner and at
the rate Executive had received immediately prior to such termination
pursuant to Section 3.1 of this Agreement and the Company shall have no
further obligation to Executive under this Agreement.
7.6. TERMINATION OBLIGATIONS OF EXECUTIVE. In the event that this
Agreement and Executive's employment hereunder is terminated, Executive, or
his legal representative in case of termination by death or Executive's
physical or mental incapacity to serve, shall:
(a) by the close of the effective date of termination, resign
from all corporate positions held in the Company and any of its subsidiary
and affiliated companies;
(b) promptly return to a representative designated by the
Company all property, including but not limited to, keys, identification
cards and credit cards of the Company or any of its subsidiaries or
affiliated companies; and
(c) incur no further expenses or obligations on behalf of the
Company, or any of its subsidiaries and affiliated companies.
8. ARBITRATION. Any claim or controversy arising out of or relating to
this Agreement shall be settled by arbitration in Las Vegas. Nevada, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment on the award rendered by the arbitrators may be
entered in any court having jurisdiction. There shall be three arbitrators,
one to be chosen directly by each party at will, and the third arbitrator to
be selected by the two arbitrators so chosen. Each party shall pay the fees
of the arbitrator it selects and of its own attorneys, the expenses of its
witnesses and all other expenses connected with presenting its case. Other
costs of the arbitration, including the cost of any record or transcripts of
the arbitration, administrative fees, the fee of the third arbitrator, and
all other fees and costs, shall be borne equally by the parties hereto.
9. GENERAL RELATIONSHIP. Executive shall be considered an employee of
the Company within the meaning of all federal, state and local laws and
regulations including, but not limited to, laws and regulations governing
unemployment insurance, workers' compensation, industrial accident, labor and
taxes.
10. GENERAL PROVISIONS.
10.1. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns and
Executive, his assignees, and his estate. Neither Executive, his designees,
nor his estate shall commute, pledge, encumber, sell or otherwise dispose of
the rights to receive the payments provided in this Agreement, which payments
and the rights thereto are expressly declared to be nontransferable and
nonassignable (except by death or otherwise by operation of law).
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10.2. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Nevada from time to time in effect.
10.3. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same Agreement.
10.4. NO WAIVER. Except as otherwise expressly set forth herein,
no failure on the part of either party hereto to exercise and no delay in
exercising any right, power or remedy hereunder shall operate as a waiver
hereof nor shall any single or partial exercise of any right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of
any other right, power or remedy.
10.5. HEADINGS. The headings of the Articles and Sections of this
Agreement have been inserted for convenience of reference only and shall in
no way restrict any of the terms or provisions hereof.
10.6. NOTICES. Any notice under this Agreement shall be given in
writing and delivered in person or mailed by certified or registered mail,
addressed to the respective party at the address as set out below, or at such
other address as either party may elect to provide in advance in writing, to
the other party:
EXECUTIVE:
William Stephens
2504 Hacker Drive
Henderson, Nevada 89014
COMPANY:
Hard Rock Hotel, Inc.
510 North Robertson Boulevard
Los Angeles, California 90048
Attn: Peter Morton
WITH A COPY TO:
Gordon & Silver, Ltd.
3800 Howard Hughes Parkway
14th Floor
Las Vegas, Nevada 89109
Attn: Jeffrey A. Silver
10.7. SEVERABILITY. If any provision of this Agreement is held by
a court of competent jurisdiction to be invalid, illegal, or unenforceable by
reason of any rule of law or public policy, all other provisions of this
Agreement shall nevertheless remain in effect. No
6
<PAGE>
provision of this Agreement shall be deemed dependent on any other provision
unless so expressed herein.
10.8. COMPLIANCE WITH LAWS; GAMING AUTHORITIES APPROVAL. Nothing
contained in this Agreement shall be construed to require the commencement of
any act contrary to law, and when there is any conflict between any provision
of this Agreement and any statute, law, ordinance, or regulation, contrary to
which the parties have no legal right to contract, then the latter shall
prevail; but in such an event, the provisions of this Agreement so affected
shall be curtailed and limited only to the extent necessary to bring it
within the legal requirements. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement and the terms and conditions
contained herein shall be contingent upon receipt of all requisite approvals
of the applicable Gaming Authorities.
10.9. NO WAIVER. The several rights and remedies provided for in
this Agreement shall be construed as being cumulative, and no one of them
shall be deemed to be exclusive of the others or of any right or remedy
allowed by law. No waiver by the Company or Executive any failure of
Executive or the Company, respectively, to keep or perform any provision of
this Agreement shall be deemed to be a waiver of any preceding or succeeding
breach of the same or other provision.
10.10. MERGER. This Agreement supersedes any and all other agreements,
either oral or in writing, between the parties hereto with respect to the
employment of Executive by the Company.
10.11. NO REPRESENTATIONS. Each party to this Agreement
acknowledges that no representations, inducements, promises or other
agreements, oral or otherwise, have been made by any party, anyone acting on
behalf of any party, which are not embodied herein and that no other
agreement, statement or promise not contained in this Agreement shall be
valid or binding. Any addendum to or modification of this Agreement shall be
effective only if it is in writing and signed by the parties to be charged.
10.12. DRAFTING AMBIGUITIES. Each party to this Agreement has been
afforded an opportunity to have this Agreement reviewed by his or its
respective counsel. The normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or of any amendments or
exhibits to this Agreement.
10.13. SURVIVAL. The terms and conditions of Article 6 and Section
10.6 of this Agreement shall survive the termination of this Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date hereinabove set forth.
COMPANY: EXECUTIVE:
Hard Rock Hotel, Inc., a Nevada
corporation
By: /s/ Peter Morton /s/ William Stephens
-------------------------------- ----------------------------------
Peter A. Morton, President William Stephens
8
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
AGREEMENT made this 24th day of October, 1997 ("Effective Date"), by
and between Peter A. Morton ("Sublicensor") and Hard Rock Hotel, Inc.
("Sublicensee").
W I T N E S S E T H:
WHEREAS, pursuant to the Trademark License and Cooperation
Agreement dated as of June 7, 1996 by and between Rank Licensing, Inc.
("Licensor") and Sublicensor (the "Trademark Agreement"), Sublicensor is the
exclusive licensee of the Hard Rock Hotel Marks and Hard Rock Casino Marks for
use and exploitation in connection with Hard Rock Hotel/Casinos and Hard Rock
Casinos in the Morton Territories and has the right to sublicense or
franchise any or all of its rights thereunder; and
WHEREAS, Sublicensor wishes to license to Sublicensee, and
Sublicensee wishes to acquire from Sublicensor a license to use such Hard Rock
Hotel Marks and Hard Rock Casino Marks in connection with its operation of
the Hard Rock Hotel/Casino and Hard Rock Casino located in the Las Vegas,
Nevada Metropolitan Statistical Area (the "Las Vegas Hotel");
NOW, THEREFORE, for good and valuable consideration, including the
mutual promises set forth herein, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
Article 1. DEFINITIONS. Defined terms used in this Agreement but
not specified herein shall have the meanings specified in the Trademark
Agreement (including all Exhibits, Schedules and Attachments thereto).
Article 2. GRANTS OF RIGHT.
Section 2.1. Sublicensor hereby grants to Sublicensee an
exclusive, royalty-free license to use the Hard Rock Hotel Marks and Hard Rock
Casino Marks as listed on Exhibits A and B (such Exhibits corresponding to
those of the Trademark Agreement) (collectively, the "Sublicensed Marks"),
solely in connection with the development, operation, ownership, management,
operation of and promotion of the Las Vegas Hotel, including the offering or
sale by Sublicensee of Licensed Products bearing the Sublicensed Marks
("Sublicensed Products") to the extent permitted under the Trademark
Agreement. Sublicensee shall not use or exploit the Sublicensed Marks
elsewhere in the world, except, however, Sublicensee may engage in the
promotion, advertising or marketing of the Las Vegas Hotel anywhere in the
world.
Section 2.2. All rights not expressly granted to Sublicensee in
Section 2.1 are reserved to Sublicensor. Sublicensee shall not otherwise
develop, use or exploit the
<PAGE>
Sublicensed Marks without the express written consent of Sublicensor.
Nothing herein shall prohibit Sublicensee from developing, owning, operating
or managing a Hotel, a Hotel/Casino or a Casino that is NOT operated under
the Sublicensed Marks or any confusingly similar trademarks or trade names
anywhere in the world.
Section 2.3. Sublicensee agrees, as a sublicensee under Section 10
of the Trademark Agreement to assume, observe and perform all of
Sublicensor's obligations, and to be bound by all of Sublicensor's
restrictions and reservations of rights, under the Trademark Agreement.
Exhibits C, D and E hereto correspond to Exhibits C, D and E of such
Trademark Agreement and refer to Sublicensor's obligations under Section
2(b)(vi), (vii) and (viii) therein. Sublicensee acknowledges that
it is familiar with the terms of such obligations, restrictions and
reservations of rights.
Section 2.4. Upon request of Sublicensee, Sublicensor agrees to
exercise its rights under Section 2(b)(iii) of the Trademark Agreement as
necessary to protect and preserve the registrations and/or renewals of the
Sublicensed Marks.
Section 2.5. Sublicensor agrees to take all actions within its
control necessary to establish Licensor's claim of title in the Sublicensed
Marks and to allow Sublicensee or the Lenders under the Credit Agreement (as
defined herein) to document the existence of this Agreement and any security
interest granted to the Lenders with the United States Patent and Trademark
Office.
Article 3. FORM OF USE.
Section 3.1. Sublicensee agrees to use the Sublicensed Marks in
good faith and in a dignified manner, in a manner consistent with
Sublicensor's high standards of, and reputation for quality, in a manner
consistent with Sublicensee's own current standards for quality, and in
accordance with good trademark practice wherever the Sublicensed Marks are
used. Sublicensor and Sublicensee agree to use their best efforts to protect
the Sublicensed Marks and the goodwill associated therewith.
Section 3.2. Except as required by law and/or as expressly
provided in Section 2.3, Sublicensee agrees not to use any word, words, term
or terms to identify its company in conjunction with the Sublicensed Marks
and/or the Licensed Services provided by Sublicensee in connection with or
relating to the operation of the Las Vegas Hotel ("Sublicensed Services")
(other than geographic designations) if such use would in any way dominate,
modify or qualify the Sublicensed Marks. Sublicensee shall at no time use or
authorize the use of any service mark, trademark, trade name or other
designation identical with or confusingly similar to the Sublicensed Marks.
Section 3.3. Sublicensee agrees to include on all uses of the
Sublicensed Marks all notices and legends required by applicable law or
regulations to preserve and protect all of Licensor's and Sublicensor's
right, title and interest in, to and under the Sublicensed Marks, including
without limitation those reasonably requested by Sublicensor. Sublicensee
shall comply in all respects with all applicable laws and regulations and
obtain all
-2-
<PAGE>
appropriate permits and approvals in regard to the Sublicensed Products and
Sublicensed Services.
Section 3.4. Sublicensee shall use the Sublicensed Marks on any
advertising or promotional materials related to Sublicensed Services or
Sublicensed Products wherever the Sublicensed Marks may be used with
reasonable convenience.
Article 4. OWNERSHIP OF SUBLICENSED MARKS.
Section 4.1. Sublicensee acknowledges and agrees that Licensor is
the exclusive owner of all right, title and interest to the Sublicensed
Marks, and that Sublicensee will not gain any ownership interest in the
Sublicensed Marks under any circumstances. Sublicensee further acknowledges
that Sublicensor owns the exclusive rights granted to Sublicensee in Section
2.1 by virtue of a valid license from Licensor.
Section 4.2. Sublicensee recognizes the value of the goodwill
associated with the Sublicensed Marks and acknowledges that the Sublicensed
Marks have acquired secondary meaning. Sublicensee agrees not to directly or
indirectly question, attack, contest or in any other manner impugn the
validity of the Sublicensed Marks or Licensor's and/or Sublicensor's rights
in and to the Sublicensed Marks, or this Agreement, including without
limitation thereto, in any action in which enforcement of a provision of this
Agreement is sought, nor shall Sublicensee willingly become a party adverse
to Sublicensor in litigation in which a third party contests the validity of
the Sublicensed Marks or Licensor's and/or Sublicensor's rights in and to the
Sublicensed Marks. Sublicensee shall not at any time apply for any
registration of any copyright, trademark or other designation nor file any
document requesting any governmental authority to take any action nor take
any action itself which would affect the ownership of or potentially damage,
dilute or modify the Sublicensed Marks.
Section 4.3. Sublicensee shall be considered a "related company"
to Sublicensor, as that term is defined by the U.S. Lanham Act, such that any
and all goodwill arising from Sublicensee's use of the Sublicensed Marks
shall inure solely to the benefit of Sublicensor, and neither during nor
after the expiration or termination of this Agreement and the license granted
hereunder shall Sublicensee assert any claim to the Sublicensed Marks or such
goodwill. Sublicensee shall not take any action that could be detrimental to
the Sublicensed Marks or the goodwill associated with the Sublicensed Marks,
Sublicensor or Licensor.
Section 4.4. Sublicensee shall, during the Term of this Agreement
and after expiration or termination hereof, execute such documents as
Sublicensor may reasonably request from time to time to make any necessary
government recordings for Sublicensor or Licensor.
Section 4.5. The provisions of this Article 4 shall survive any
expiration or termination of this Agreement.
-3-
<PAGE>
Article 5. QUALITY CONTROL.
Section 5.1. Sublicensee covenants that the nature and quality of
the Sublicensed Products and the Sublicensed Services and all promotional,
advertising, and packaging material relating to the Sublicensed Products and
Sublicensed Services, and all representations of the Sublicensed Marks, shall
be of good quality at least as high as the quality of similar goods presently
sold or distributed by Sublicensor or Sublicensee. Sublicensee acknowledges
that it is familiar with the nature and quality of the Licensed Products and
Licensed Services and with the representations of the Sublicensed Marks now
in use. With respect to any additional Sublicensed Services or Sublicensed
Products, Sublicensee agrees that the nature and quality of such products and
services shall be equal to and commensurate with that of existing products
and services offered by Sublicensor and Sublicensee.
Section 5.2. Sublicensor shall have the right to inspect the
quality of the Sublicensed Products and Sublicensed Services, and Sublicensee
shall permit duly authorized representatives of Sublicensor to have
reasonable access to all areas of the Hard Rock Hotel/Casinos or Hard Rock
Casinos for such inspection purposes during regular business hours and on
reasonable notice and in a manner that will cause minimal disruption to
Sublicensee's business.
Section 5.3. Sublicensee shall furnish or render to Sublicensor
during such inspections, upon request for Sublicensor's approval and/or
testing, representative samples on the premises of each Sublicensed Product,
its labels, packaging, advertisements, and all other materials displaying or
using the Sublicensed Marks in relation to the Sublicensed Products and
Sublicensed Services.
Section 5.4. The parties acknowledge that all rights of
Sublicensor to monitor and intervene in Sublicensee's operations, and all
standards of operation set forth herein, are established solely to ensure the
quality of the goods and services associated with the Sublicensed Marks and
to protect the goodwill accrued in them.
Article 6. TERM OF LICENSE. The term of this Agreement ("Term")
commences on the Effective Date and continues for as long as any Commitment,
Loan or Letter of Credit Liability (each as defined in the Credit Agreement)
are outstanding under the Credit Agreement dated as of September 26, 1997
among Hard Rock Hotel, Inc. and Merrill Lynch & Co., and Wells Fargo Bank,
National Association, as agents (the "Credit Agreement").
Article 7. TERMINATION.
Section 7.1. Subject to the provisions of Article 11, Sublicensor
and Sublicensee each have the right to terminate this Agreement if the other
party commits a material breach of its obligations hereof, including without
limitation a breach of Articles 2, 3, 4, or 12, and fails to cure such breach
within thirty (30) days' written notice.
-4-
<PAGE>
Section 7.2. Sublicensor has the right to terminate this Agreement
immediately upon written notice to Sublicensee if (i) Sublicensee makes an
assignment for the benefit of creditors; (ii) Sublicensee admits in writing
its inability to pay debts as they mature; (iii) a trustee or receiver is
appointed for a substantial part of Sublicensee's assets; or (iv) to the
extent termination is enforceable under the U.S. Bankruptcy Code, a
proceeding in bankruptcy is instituted against Sublicensee which is
acquiesced in, is not dismissed within 120 days, or results in an
adjudication of bankruptcy.
Section 7.3. If an event described in Section 7.2 occurs,
Sublicensor shall have the right, in addition to its other rights and
remedies, to suspend Sublicensee's rights regarding the Sublicensed Marks
while Sublicensee attempts to remedy the situation.
Section 7.4. Upon expiration pursuant to Article 6 or termination
pursuant to Article 7, Sublicensor and Sublicensee shall cooperate so as best
to preserve the value of the Sublicensed Marks. Upon expiration or
termination, Sublicensee agrees immediately to discontinue all use of
Sublicensed Marks, and at Sublicensor's request, to destroy or return any
materials related to same.
Article 8. INFRINGEMENT.
Section 8.1. Sublicensee agrees to notify Sublicensor in writing
immediately after it becomes aware of any actual or threatened infringement,
impairment or other unauthorized use or conduct in derogation
("Infringement") of the Sublicensed Marks. Sublicensee shall not file an
action, suit or proceeding ("Action") alleging Infringement of the Sublicensed
Marks without the prior written consent of Sublicensor. Licensor and
Sublicensor, in their absolute discretion, may file an Action alleging
Infringement of the Sublicensed Marks without the consent of Sublicensee.
Sublicensee agrees to cooperate with Licensor and/or Sublicensor, at
Sublicensor's request, in any such Action.
Section 8.2. In any Action alleging Infringement of the
Sublicensed Marks or otherwise Sublicensee shall pay such costs and any
resulting damages, monetary judgment, settlement and/or compensation paid for
such Infringement.
Section 8.3. Absent a later agreement to the contrary, Sublicensor
and Sublicensee agree to divide evenly any costs and expenses of, and any
damages, monetary judgment, settlement and/or liability resulting from, any
Action brought in any of the Morton Territories where Sublicensee is using
the Sublicensed Marks, alleging that the Sublicensed Marks cause the
Infringement of the intellectual property rights of a third party.
Article 9. REPRESENTATIONS AND WARRANTIES.
Section 9.1. Sublicensor and Sublicensee each represents and
warrants to the other party that:
(a) This Agreement is a legal, valid and binding obligation of
the warranting party, enforceable against such party in accordance with
its terms, subject
-5-
<PAGE>
to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights and remedies
generally, and subject, as to enforceability, to the effect of general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity);
(b) The warranting party is not subject to any judgment, order,
injunction, decree or award of any court, administrative agency or
governmental body that would or might interfere with its performance of
any of its material obligations hereunder, and
(c) The warranting party has full power and authority to enter
into and perform its obligations under this Agreement in accordance with
its terms.
Section 9.2. Sublicensor represents and warrants that, by virtue of
the Trademark Agreement, Sublicensor has full right and authority to grant to
Sublicensee the license set forth in Section 2.1.
Section 9.3. NOTWITHSTANDING SECTION 9.2, SUBLICENSEE ACKNOWLEDGES
THAT SUBLICENSOR MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER AS TO
OWNERSHIP OR VALUE OF THE SUBLICENSED MARKS. THE SUBLICENSED MARKS ARE HEREBY
LICENSED TO SUBLICENSEE ON AN "AS IS" BASIS, AND SUBLICENSEE SHALL BEAR THE
ECONOMIC AND LEGAL RISK THAT SUBLICENSOR'S RIGHT TO USE THE SUBLICENSED MARKS
SHALL BE OTHER THAN GOOD AND MARKETABLE AND FREE FROM ENCUMBRANCES AND THAT
THE SUBLICENSED MARKS SHALL BE VALID AND FREE FROM CONFLICT IN THE MORTON
TERRITORIES.
Article 10. INDEMNIFICATION. Sublicensee hereby indemnifies
Sublicensor and undertakes to defend Sublicensor against, and hold
Sublicensor harmless from, any suits, loss and damage arising out of any
service or act rendered or performed by Sublicensee in connection with this
Agreement in relation to the Sublicensed Marks, or out of the sale of any
Sublicensed Products or rendering of any Sublicensed Services by Sublicensee.
Article 11. DISPUTE RESOLUTION.
Section 11.1. In the event that Sublicensor should note any
material failure by Sublicensee to maintain in any respect quality standards
set forth herein, Sublicensor shall advise Sublicensee in writing of the
particular failure or deficiency noted, and Sublicensee shall correct the
same within thirty (30) days of the mailing of such notice. In the event of
any dispute regarding the failure of Sublicensee to conform to any provision
of quality control as set forth herein or to correct any such related
deficiencies, the dispute shall be resolved by binding arbitration, upon the
initiation of either party by a written notice to the other party demanding
arbitration and specifying the controversy or claim to be arbitrated. The
arbitration shall be conducted in California by a single arbitrator or by a
panel of three arbitrators as agreed between the parties. The arbitrator(s)
shall be chosen in the manner prescribed by the American Arbitration
Association and the arbitration shall be conducted
-6-
<PAGE>
under auspices, rules and regulations of the American Arbitration Association
with all fees and costs to be shared equally by the parties to the
arbitration. The arbitrators(s) shall have the power to award any and all
remedies and relief whatsoever that are deemed appropriate under the
circumstances, including equitable relief.
Section 11.2. The written decision of the arbitrator(s) shall be
rendered within thirty (30) business days following the close of the
arbitration hearing. The written decision of the arbitrator(s) shall be
binding and conclusive on the parties thereto and enforceable as provided by
the laws of the State of New York, and judgment on such arbitration decision
may be entered by any court having jurisdiction thereof.
Section 11.3. It is expressly acknowledged and agreed that any claims
or controversies not specifically identified hereinabove, including but not
limited to claims, controversies or disputes relating to the validity of
this Agreement or the validity or enforceability of any trademark rights
hereunder, shall be excluded from arbitration and shall be adjudicated in a
court of competent jurisdiction unless otherwise agreed to by the parties.
Any litigation between the parties arising out of or relating to this
Agreement shall be brought exclusively in the state or federal courts located
in the State of New York.
Section 11.4. Sublicensee acknowledges and agrees that the Sublicensed
Marks constitute the unique and valuable property rights of Sublicensor, and
further acknowledges and agrees that, due to the nature of many of the terms
and provisions of this Agreement, money damages will not compensate
Sublicensor as a result of any breach of this Agreement by Sublicensee.
Accordingly, the parties hereto agree that Sublicensor shall be entitled to
obtain without bond from a court of competent jurisdiction an injunction or
restraining order or a decree for specific performance of the terms of this
Agreement or to maintain the status quo during the arbitration process
described herein.
Article 12. ASSIGNMENTS AND SUBLICENSES. This Agreement, or any
portion thereof, may not be assigned or sublicensed by Sublicensee without the
prior written consent of Sublicensor, except that this Agreement and
Sublicensee's rights hereunder may be pledged as collateral security for any
financing of Sublicensee. Any attempted assignment or sublicense by either
party not in accordance with this Article 12 shall be void and shall
constitute a material breach of this Agreement.
Article 13. NOTICES. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified
mail (return receipt requested) or internationally recognized overnight
courier service or sent by any means of electronic message transmission with
delivery confirmed (by voice or otherwise) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by
like notice) and will be deemed given on the date on which such notice is
received:
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<PAGE>
If to Sublicensor:
Peter A. Morton
510 North Robertson Boulevard
Los Angeles, California 90048
Telephone No.: 310-854-3366
Telecopy No.: 310-652-8747
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gary I. Horowitz
Telephone No.: 212-455-2000
Telecopy No.: 212-455-2502
If to Sublicensee:
Article 14. SURVIVAL. Except as otherwise contemplated by this
Agreement, all representations, warranties and indemnities contained in this
Agreement shall survive any independent investigation made by the benefiting
party and the expiration, suspension or termination of this Agreement.
Article 15. RELATIONSHIP. Sublicensee shall not use the name or
credit of Sublicensor in any manner whatsoever nor incur any obligation in
Sublicensor's name. Nothing herein shall be construed to constitute the
parties as joint venturers, nor shall any relationship other than Sublicensor
and Sublicensee be deemed to exist between them. It is specifically
understood that the rights and powers retained by Sublicensor to supervise or
otherwise intervene in Sublicensee's activities, all as provided in this
Agreement, are retained solely because of the necessity of protecting
Sublicensor's interest in the Sublicensed Marks and the goodwill symbolized
thereby.
Article 16. FURTHER ASSURANCES. Sublicensor and Sublicensee agree to
execute such further documentation and perform such further actions,
including the recordation of such documentation with appropriate authorities,
as may be reasonably requested by the other party to evidence and effectuate
further the purposes and intents set forth in this Agreement.
Article 17. ENTIRE AGREEMENT/CONSTRUCTION. This Agreement, including
the Schedules, shall constitute the entire agreement between the parties with
respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
-8-
<PAGE>
Article 18. AMENDMENTS. This Agreement may not be modified or amended
except by an agreement in writing signed by each of the parties hereto.
Article 19. CUMULATIVE RIGHTS; WAIVER. All rights and remedies which
Sublicensor or Sublicensee may be hereunder or by operation of law are
cumulative, and the pursuit of one right or remedy shall not be deemed an
election to waive or renounce any other right or remedy. The failure of
either Sublicensor or Sublicensee to require strict performance by the other
party of any provision in this Agreement will not waive or diminish that
party's right to demand strict performance thereafter of that or any other
provision hereof.
Article 20. SEVERABILITY. The parties agree that each provision of
this Agreement shall be construed as separable and divisible from every other
provision. The unenforceability of any one provision shall not limit the
enforceability, in whole or in part, of any other provision hereof. If any
term or provision of this Agreement (or the application thereof to any party
or set of circumstances) shall be held invalid or unenforceable in any
jurisdiction to any extent, it shall be ineffective only to the extent of
such invalidity or unenforceability and shall not invalidate or render
unenforceable any other terms or provisions of this Agreement (or such
applicability thereof). In such event, the parties shall negotiate in good
faith a valid, enforceable, applicable substitute provision that imitates as
closely as possible the previous term or provision and has an effect as
comparable as possible on the parties respective positions.
Article 21. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed in the State of New York.
Article 22. LIMITATION OF LIABILITY. IN NO EVENT SHALL ANY PARTY BE
LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES. WHETHER FORESEEABLE OR
NOT. OCCASIONED BY FAILURE TO PERFORM OR BREACH OF ANY OBLIGATION UNDER THIS
AGREEMENT FOR ANY CAUSE WHATSOEVER.
Article 23. TITLES AND SECTION HEADINGS. Titles and headings to
sections herein are inserted for the convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
Article 24. SEPARATE COUNTERPARTS. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other parties.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this agreement,
effective as of the date first above written.
PETER A. MORTON
("Sublicensor")
/s/ Peter Morton
---------------------------------------
Date: 10/21/97
HARD ROCK HOTEL CORPORATION
("Sublicensee")
By: /s/ Peter Morton
---------------------------------------
Name: Peter Morton
Title: President
Date: 10/21/97
see attached
- ---------------------------------
Notary Public
-10-
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California
---------------------
County of Los Angeles
---------------------
On 10-21-97 before me, Lainie Schaffel ,
-------- ---------------------------------------------------
Date Name and Title of Officer (e.g. "Jane Doe, Notary Public")
personally appeared Peter Morton
------------------------------------------------------,
Name(s) of Signer(s)
X personally known to me
---
to be the person whose name is subscribed to the
within instrument and acknowledged to me that he
- --------------- executed the same in his authorized capacity(ies),
NOTARY SEAL and that by his signature(s) on the instrument the
- --------------- person, or the entity upon behalf of which the
person acted, executed the instrument.
WITNESS my hand and official seal.
Lainie Schaffel
--------------------------------------------------
Signature of Notary Public
- ---------------------------------OPTIONAL-----------------------------------
THOUGH THE INFORMATION BELOW IS NOT REQUIRED BY LAW, IT MAY PROVE VALUABLE
TO PERSONS RELYING ON THE DOCUMENT AND COULD PREVENT FRAUDULENT REMOVAL AND
REATTACHMENT OF THIS FORM TO ANOTHER DOCUMENT.
<PAGE>
EXHIBIT A
HARD ROCK HOTEL
HARD ROCK CASINO
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<PAGE>
EXHIBIT B
HARD ROCK CASINO
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<PAGE>
EXHIBIT C
[HARD ROCK CAFE LOGO]
LAS VEGAS **
* Replace with Hotel or Casino
** May be replaced with "Beach Club"
or "Athletic Club" as designations
<PAGE>
EXHIBIT D
[HARD ROCK HOTEL LOGO]
Beach Club*
*Or Athletic Club
<PAGE>
EXHIBIT E
[HARD ROCK BEACH CLUB* LOGO]
*OR "ATHLETIC CLUB"
<PAGE>
AMENDMENT NO 1 TO TRADEMARK SUBLICENSE AGREEMENT
This Amendment No. 1 to the Trademark Sublicense Agreement, entered
into as of March 23, 1998, (this "Amendment") and amends the Trademark
Sublicense Agreement, dated October 24, 1997, (the "Agreement") between Peter
A. Morton ("Sublicensor") and Hard Rock Hotel, Inc., a Nevada corporation
("Sublicensee").
Except as otherwise defined in this Amendment, capitalized terms
used but not defined herein shall have the respective meanings given to such
terms in the Agreement.
W I T N E S S E T H :
WHEREAS, Sublicensor and Sublicensee desire to amend the Agreement
with respect to the Term.
NOW, THEREFORE, for good and valuable consideration, including the
mutual promises set forth herein, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Article 6 of the Agreement is hereby amended and restated in
its entirety so that such Article 6 shall read as follows:
Article 6. TERM OF LICENSE. The term of this Agreement ("Term")
commences on the Effective Date and continues for the later of (i) as
long as any Commitment, Loan or Letter of Credit are outstanding under
the Loan Agreement, dated as of March 23, 1998, among Hard Rock Hotel,
Inc., Bank of America National Trust and Savings Association as
administrative agent, Bear, Stearns & Co. Inc. as co-agent and the
lenders parties thereto, including any related notes, guarantees,
collateral documents, instruments, and agreements executed in
connection therewith, and in each case as amended or modified from
time to time (the "Loan Agreement") or any senior credit facility
which directly refinances the Loan Agreement, or (ii) as long as there
are any Notes outstanding under the Indenture, dated as of March 23,
1998, between Sublicensee and First Trust National Association, as
trustee (the "Indenture") and/or any Exchange Securities (as defined
in the Indenture) outstanding.
<PAGE>
2. Except as modified as set forth in this Amendment, the
Agreement remains in full force and effect and this Amendment shall be
incorporated into and become a part of the Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment, effective as of the date first above written.
Sublicensor:
/s/ Peter A. Morton
--------------------------------------
Peter A. Morton
Sublicensee:
HARD ROCK HOTEL, INC.
By: /s/ Bruce R. Dall
---------------------------------
Name: Bruce R. Dall
---------------------------------
Title: C.F.O.
---------------------------------
2
<PAGE>
EXHIBIT 10.9
AIA DOCUMENT A101-1997
STANDARD FORM OF AGREEMENT BETWEEN OWNER AND CONTRACTOR
WHERE THE BASIS OF PAYMENT IS A STIPULATED SUM
This document has
important legal
AGREEMENT made as of the 17th day of February consequences.
in the year 1998 Consultation with
(IN WORDS, INDICATE DAY, MONTH AND YEAR) an attorney is
encouraged with
respect to its
completion or
modification.
BETWEEN the Owner: HARD ROCK HOTEL, INC.
(Name, address and other 4455 Paradise Road
information) Las Vegas, NV 89109
AIA Document
A201-1997,
General Conditions
of the Contract for
Construction, is
adopted in this
document by
reference. Do not
use with other
general conditions
and the Contractor: unless this
(NAME, ADDRESS AND OTHER INFORMATION) document is
modified.
M.J. DEAN CONSTRUCTION, INC.
5541 South Cameron Avenue
Las Vegas, NV 89118 This document has
been approved and
endorsed by The
Associated General
Contractors of
America.
The Project is: HARD ROCK HOTEL & CASINO
(NAME AND LOCATION) PARKING GARAGE
Parking Garage
4455 Paradise Road
Las Vegas, NV 89109
The Architect is: KLAI::JUBA
(NAME, ADDRESS AND 4444 West Russell Road
OTHER INFORMATION) Suite J
Las Vegas, NV 89118 [LOGO]
The Owner and Contractor agree as follows.
1
<PAGE>
ARTICLE 1 THE CONTRACT DOCUMENTS
The Contract Documents consist of this Agreement, Conditions of the
Contract (General, Supplementary and other Conditions), Drawings,
Specifications, Addenda issued prior to execution of this Agreement,
other documents listed in this Agreement and Modifications issued after
execution of this Agreement; these form the Contract, and are as fully a
part of the Contract as if attached to this Agreement or repeated
herein. The Contract represents the entire and integrated agreement
between the parties hereto and supersedes prior negotiations,
representations or agreements, either written or oral. An enumeration of
the Contract Documents, other than Modifications, appears in Article 8.
ARTICLE 2 THE WORK OF THIS CONTRACT
The Contractor shall fully execute the Work described in the Contract
Documents, except to the extent specifically indicated in the Contract
Documents to be the responsibility of others.
ARTICLE 3 DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
3.1 The date of commencement of the Work shall be the date of this
Agreement unless a different date is stated below or provision is made
for the date to be fixed in a notice to proceed issued by the Owner.
(INSERT THE DATE OF COMMENCEMENT IF IT DIFFERS FROM THE DATE OF THIS
AGREEMENT OR, IF APPLICABLE, STATE THAT THE DATE WILL BE FIXED IN A
NOTICE TO PROCEED.) February 18, 1998
If, prior to the commencement of the Work, the Owner requires time to
file mortgages, mechanic's liens and other security interests, the
Owner's time requirement shall be as follows:
N/A
3.2 The Contract Time shall be measured from the date of commencement.
3.3 The Contractor shall achieve Substantial Completion of the entire
Work not later than 150 calendar days from the date of commencement, or
as follows:
(INSERT NUMBER OF CALENDAR DAYS. ALTERNATIVELY, A CALENDAR DATE MAY BE
USED WHEN COORDINATED WITH THE DATE OF COMMENCEMENT. UNLESS STATED
ELSEWHERE IN THE CONTRACT DOCUMENTS, INSERT ANY REQUIREMENTS FOR EARLIER
SUBSTANTIAL COMPLETION OF CERTAIN PORTIONS OF THE WORK).
, subject to adjustments of this Contract Time as provided in the
Contract Documents.
(INSERT PROVISIONS, IF ANY, FOR LIQUIDATED DAMAGES RELATING TO FAILURE TO
COMPLETE ON TIME OR FOR BONUS PAYMENTS FOR EARLY COMPLETION OF THE WORK.)
In the event that the Contractor shall fail to achieve Substantial
Completion of the entire Work on or before July 17, 1998, Contractor and
Owner agree that it would be impractical and extremely difficult to
estimate the damages suffered by Owner as a result of Contractor's failure
to achieve Substantial Completion of the entire Work on or before such
date, and that under the circumstances existing as of the date of this
Agreement, the liquidated damages provided for in this Paragraph 3.3
will represent a reasonable estimate of the damages which Owner will
incur as a result of such failure; PROVIDED, HOWEVER, that this
provision will not limit Owner's right to receive reimbursement of
attorneys' fees nor waive any indemnity obligations of Contractor
pursuant to this Agreement or any other agreement between Owner and
Contractor. Therefore, Contractor and Owner do hereby agree that a
reasonable estimate of the total net detriment that Owner would suffer
in the event that Contractor fails to achieve Substantial Completion of
the entire Work on or before July 17, 1998 will be Five Thousand Dollars
($5,000) per day for each day subsequent to July 17, 1998 that Contractor
fails to achieve Substantial Completion of the entire Work. Said amount
will be the full, agreed and liquidated damages for such failure.
[LOGO]
2
<PAGE>
ARTICLE 4 CONTRACT SUM
4.1 The Owner shall pay the Contractor the Contract Sum in current
funds for the Contractor's performance of the Contract. The Contract Sum
shall be Seven million two hundred seventy nine thousand nine hundred
sixty seven Dollars ($7,279,967.00) subject to additions and deductions
as provided in the Contract Documents.
4.2 The Contract Sum is based upon the following alternates, if any,
which are described in the Contract Documents and are hereby accepted by
the Owner: (STATE THE NUMBERS OR OTHER IDENTIFICATION OF ACCEPTED
ALTERNATES. IF DECISIONS ON OTHER ALTERNATES ARE TO BE MADE BY THE
OWNER SUBSEQUENT TO THE EXECUTION OF THIS AGREEMENT, ATTACH A SCHEDULE
OF SUCH OTHER ALTERNATES SHOWING THE AMOUNT FOR EACH AND THE DATE WHEN
THAT AMOUNT EXPIRES.)
Alternates 4, 5, 10, 11, 12, 13, & 14.
4.3 Unit prices, if any, are as follows:
Unit cost to deepen footings a) Excavation = $ 15.00 cy
b) Concrete = $150.00 cy
Painting unit prices a) Concrete 415138 of x .32 = $132,844.00
b) CMU, EIFS,
Stairs 87524 of x .42 = $ 36,760.00
-----------
$169,604.00 =
* Included in base bid
ARTICLE 5 PAYMENTS
5.1 PROGRESS PAYMENTS
5.1.1 Based upon Applications for Payment submitted to the Architect by
the Contractor and Certificates for Payment issued by the Architect, the
Owner shall make progress payments on account of the Contract Sum to the
Contractor as provided below and elsewhere in the Contract Documents.
5.1.2 The period covered by each Application for Payment shall be one
calendar month ending on the last day of the month, or as follows:
5.1.3 Provided that an Application for Payment is received by the
Architect not later than the 25th day of a month, the Owner shall make
payment to the Contractor not later than the 30th day of the following
month. If an Application for Payment is received by the Architect after
the application date fixed above, payment shall be made by the Owner not
later than 30 days after the Architect receives the Application for
Payment.
5.1.4 Each Application for Payment shall be based on the most recent
schedule of values submitted by the Contractor in accordance with the
Contract Documents. The schedule of values shall allocate the entire
Contract Sum among the various portions of the Work. The schedule of
values shall be prepared in such form and supported by such data to
substantiate its accuracy as the Architect may require. This schedule,
unless objected to by the Architect, shall be used as a basis for
reviewing the Contractor's Applications for Payment.
[LOGO]
3
<PAGE>
5.1.5 Applications for Payment shall indicate the percentage of
completion of each portion of the Work as of the end of the period
covered by the Application for Payment.
5.1.6 Subject to other provisions of the Contract Documents, the amount
of each progress payment shall be computed as follows:
.1 Take that portion of the Contract Sum properly allocable to
completed Work as determined by multiplying the percentage
completion of each portion of the Work by the share of the
Contract Sum allocated to that portion of the Work in the
schedule of values, less retainage of TEN percent (10%).
Pending final determination of cost to the Owner of changes
in the Work, amounts not in dispute shall be included as
provided in Subparagraph 7.3.8 of AIA Document A201-1997;
.2 Add that portion of the Contract Sum properly allocable to
materials and equipment delivered and suitably stored at the
site for subsequent incorporation in the completed
construction (or, if approved in advance by the Owner,
suitably stored off the site at a location agreed upon in
writing), less retainage of TEN percent (10%);
.3 Subtract the aggregate of previous payments made by the Owner;
and
.4 Subtract amounts, if any, for which the Architect has withheld
or nullified a Certificate for Payment as provided in
Paragraph 9.5 of AIA Document A201-1997.
5.1.7 The progress payment amount determined in accordance with
Subparagraph 5.1.6 shall be further modified under the following
circumstances:
.1 Add, upon Substantial Completion of the Work, a sum sufficient
to increase the total payments to the full amount of the
Contract Sum, less such amounts as the Architect shall
determine for incomplete Work, retainage applicable to such
work and unsettled claims; and (SUBPARAGRAPH 9.8.5 OF AIA
DOCUMENT A201-1997 REQUIRES RELEASE OF APPLICABLE RETAINAGE
UPON SUBSTANTIAL COMPLETION OF WORK WITH CONSENT OF SURETY, IF
ANY.)
.2 Add, if final completion of the Work is thereafter materially
delayed through no fault of the Contractor, any additional
amounts payable in accordance with Subparagraph 9.10.3 of AIA
Document A201-1997.
5.1.8 Reduction or limitation of retainage, if any, shall be as follows:
(IF IT IS INTENDED, PRIOR TO SUBSTANTIAL COMPLETION OF THE ENTIRE WORK,
TO REDUCE OR LIMIT THE RETAINAGE RESULTING FROM THE PERCENTAGES INSERTED
IN CLAUSES 5.1.6.1 AND 5.1.6.2 ABOVE, AND THIS IS NOT EXPLAINED
ELSEWHERE IN THE CONTRACT DOCUMENTS, INSERT HERE PROVISIONS FOR SUCH
REDUCTION OR LIMITATION.)
Retention to be reduced to 5% when the project reaches 50% completion.
5.1.9 Except with the Owner's prior approval, the Contractor shall not
make advance payments to suppliers for materials or equipment which have
not been delivered and stored at the site.
5.2 FINAL PAYMENT
5.2.1 Final payment, constituting the entire unpaid balance of the
Contract Sum, shall be made by the Owner to the Contractor when:
.1 the Contractor has fully performed the Contract except for the
Contractor's responsibility to correct Work as provided in
Subparagraph 12.2.2 of AIA Document A201-1997, and to satisfy
other requirements, if any, which extend beyond final payment;
and
.2 a final Certificate for Payment has been issued by the Architect.
[LOGO]
4
<PAGE>
5.2.2 The Owner's final payment to the Contractor shall be made no
later than 30 days after the issuance of the Architect's final Certificate
for Payment, or as follows:
ARTICLE 6 TERMINATION OR SUSPENSION
6.1 The Contract may be terminated by the Owner or the Contractor as
provided in Article 14 of AIA Document A201-1997.
6.2 The Work may be suspended by the Owner as provided in Article 14 of
AIA Document A201-1997.
ARTICLE 7 MISCELLANEOUS PROVISIONS
7.1 Where reference is made in this Agreement to a provision of AIA
Document A201-1997 or another Contract Document, the reference refers to
that provision as amended or supplemented by other provisions of the
Contract Documents.
7.2 Payments due and unpaid under the Contract shall bear interest from
the date payment is due at the rate stated below, or in the absence
thereof, at the legal rate prevailing from time to time at the place
where the Project is located. (INSERT RATE OF INTEREST AGREED UPON, IF
ANY.)
(USURY LAWS AND REQUIREMENTS UNDER THE FEDERAL TRUTH IN LENDING ACT,
SIMILAR STATE AND LOCAL CONSUMER CREDIT LAWS AND OTHER REGULATIONS AS
THE OWNER'S AND CONTRACTOR'S PRINCIPAL PLACES OF BUSINESS, THE LOCATION
OF THE PROJECT AND ELSEWHERE MAY AFFECT THE VALIDITY OF THIS PROVISION.
LEGAL ADVICE SHOULD BE OBTAINED WITH RESPECT TO DELETIONS OR
MODIFICATIONS, AND ALSO REGARDING REQUIREMENTS SUCH AS WRITTEN
DISCLOSURES OR WAIVERS.)
7.3 The Owner's representative is: Adam Titus, V.P. Construction
(NAME, ADDRESS AND OTHER INFORMATION) Hard Rock Hotel, Inc.
4455 Paradise Road
Las Vegas, NV 89109
7.4 The Contractor's representative is: Charlie Capps
(NAME, ADDRESS AND OTHER INFORMATION) M.J. Dean Construction, Inc.
5541 South Cameron Avenue
Las Vegas, NV 89118
7.5 Neither the Owner's nor the Contractor's representative shall be
changed without ten days' written notice to the other party.
7.6 Other provisions:
[LOGO]
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<PAGE>
ARTICLE 8 ENUMERATION OF CONTRACT DOCUMENTS
8.1 The Contract Documents, except for Modifications issued after
execution of this Agreement, as enumerated as follows:
8.1.1 The Agreement is this executed 1997 edition of the Standard Form of
Agreement Between Owner and Contractor, AIA Document A101-1997.
8.1.2 The General Conditions are the 1997 edition of the General
Conditions of the Contract for Construction, AIA Document A201-1997.
8.1.3 The Supplementary and other Conditions of the Contract are those
contained in the Project Manual dated , and are as
follows:
Document Title Pages
8.1.4 The Specifications are those contained in the Project Manual dated
as in Subparagraph 8.1.3, and are as follows:
(EITHER LIST THE SPECIFICATIONS HERE OR REFER TO AN EXHIBIT ATTACHED TO
THIS AGREEMENT.)
Section Title Pages
8.1.5 The Drawings are as follows, and are dated unless a
different date is shown below:
(EITHER LIST THE DRAWINGS HERE OR REFER TO AN EXHIBIT ATTACHED TO THIS
AGREEMENT.)
Number Title Date
[LOGO]
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<PAGE>
8.1.6 The Addenda, if any, are as follows:
Number Date Pages
1 January 13, 1998 1 (Drawing revision list)
2 January 20, 1998 5 (RFI 4 pages, 1 revised bid form)
3 February 2, 1998 A.0.00.1, A1.01.1, A1.021, A1.03.1,
A1.04.1, A1.05.1, A1.06.1, A3.00.2,
A5.001 and A7.000
Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in
this Article 8.
8.1.7 Other documents, if any, forming part of the Contract Documents are
as follows:
(LIST HERE ANY ADDITIONAL DOCUMENTS THAT ARE INTENDED TO FORM PART OF THE
CONTRACT DOCUMENTS. AIA DOCUMENT A201-1997 PROVIDES THAT BIDDING
REQUIREMENTS SUCH AS ADVERTISEMENT OR INVITATION TO BID, INSTRUCTIONS TO
BIDDERS, SAMPLE FORMS AND THE CONTRACTOR'S BID ARE NOT PART OF THE CONTRACT
DOCUMENTS UNLESS ENUMERATED IN THIS AGREEMENT. THEY SHOULD BE LISTED HERE
ONLY IF INTENDED TO BE PART OF THE CONTRACT DOCUMENTS.)
INSTRUCTION TO BIDDERS DATED JANUARY 05, 1998
This Agreement is entered into as of the day and year first written above
and is executed in at least three original copies, of which one is to be
delivered to the Contractor, one to the Architect for use in the
administration of the Contract, and the remainder to the Owner.
/s/ Peter Morton /s/ Michael J. Dean
----------------------------- -------------------------------
OWNER (SIGNATURE) CONTRACTOR (SIGNATURE)
/s/ Gary R. Selesner /s/ Michael J. Dean/President
----------------------------- -------------------------------
(PRINTED NAME AND TITLE) (PRINTED NAME AND TITLE
CAUTION: YOU SHOULD SIGN AN ORIGINAL AIA DOCUMENT OR A LICENSED
REPRODUCTION. ORIGINALS CONTAINS THE AIA LOGO PRINTED IN RED; LICENSED
REPRODUCTIONS ARE THOSE PRODUCED IN ACCORDANCE WITH THE INSTRUCTIONS TO
THIS DOCUMENT.
/s/ Adam Titus
[LOGO]
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<PAGE>
[LETTERHEAD]
May 8, 1998
Mr. Adam Titus
Director of Construction
Hard Rock Hotel, Inc.
4455 Paradise Road
Las Vegas, NV 89109
RE: Hard Rock Hotel & Casino
Las Vegas, Nevada
Proposed Retail Addition & Remodel; And
Proposed Harmon Street Addition & Remodel
Dear Adam,
This letter will serve as the letter of intent to contract for the
construction of the above referenced project based on contract documents as
prepared by Klai-Juba Architects. The Contract value shall be $9,500,000
based on the bid of $9,951,000 less the owner allowance of $400,000 and the
deletion of the pool service bar area, including all equipment and the
horizontal grease duct at the EDR servery as noted by General Note #2; which
is valued at $51,000. The construction time shall commence upon receipt of
the foundation and structural permit.
This letter will allow the contractor to proceed with mobilization,
permitted demolition and procurement of vendors, materials and equipment. The
contract shall be based on an AIA A201 contract, stipulated sum or other
contract as agreed upon by both parties.
Howa Construction, Inc. Hard Rock Hotel, Inc.
/s/ Richard I. Howa /s/ Adam Titus
- --------------------------- ---------------------------
Richard I. Howa Adam Titus
10 May 98
- --------------------- ---------------------
Dated Dated
<PAGE>
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into on the 19th day of March, 1998, by and between Hard Rock Hotel, Inc, a
Nevada corporation (the "Corporation") and ______________ (the "Indemnitee").
PRELIMINARY STATEMENTS
A. It is in the Corporation's best interest to attract and retain capable
directors.
B. It is the policy of the Corporation to indemnify the members of its
Board of Directors (the "Board") so as to provide them with the maximum
possible protection available in accordance with applicable law.
C. Article VII of the Corporation's Second Amended and Restated Bylaws
expressly recognizes that the right of indemnification provided therein shall
not be exclusive of any other rights to which any indemnified person may
otherwise be entitled.
D. The Corporation's Second Amended and Restated Bylaws, its Second
Amended and Restated Articles of Incorporation and applicable law permit
contracts between the Corporation and the members of its Board of Directors
covering indemnification.
AGREEMENT
Intending to be legally bound, the Corporation and the Indemnitee hereby
covenant and agree as follows:
1. INDEMNIFICATION. In consideration for the Indemnitee's continuing
service on behalf of the Corporation and as the Indemnitee's contract right,
the Corporation agrees to indemnify the Indemnitee to the fullest extent
permitted by Chapter 78 of the Nevada Revised Statutes, as amended ("Nevada
"Law") and the Articles of Incorporation and Bylaws of the Corporation, as
they are in effect on the date hereof or as they may from time to time be
amended (but, in the case of amendment, only to the extent any amendment
permits the Corporation to provide broader indemnification rights than the
Corporation was permitted to provide before the amendment). Notwithstanding
the generality of the foregoing, the Corporation agrees to pay to the
Indemnitee any Expenses (as defined below) which the indemnitee actually or
reasonably incurs as a party to or witness in any Proceeding (as defined
below) by reason of the fact that the Indemnitee is or was a director or
officer of the Corporation or serves or served at the request of the
Corporation as a director of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of anything done or not done by the
indemnitee in that capacity.
"Expenses" shall be broadly construed and shall include, without
limitation, (a) all direct and indirect costs incurred, paid or accrued, of
investigation, defense and appeal of any Proceeding, (b) all attorneys' fees,
retainers, court costs, deposition costs, transcripts, fees of experts,
witness fees, accounting fees, travel expenses, duplicating and printing
costs, telephone
1
<PAGE>
and delivery charges, costs of attachment or similar bonds, (c) all other
disbursements and out-of-pocket expenses and (d) amounts paid in settlement
or for fines or judgments, to the extent permitted by Nevada Law, actually
and reasonably incurred in connection with either the appearance at or
investigation, defense, settlement or appeal of a Proceeding or establishing
or enforcing a right to indemnification under this Agreement or applicable
law or otherwise.
"Proceeding" means any pending, threatened or completed action,
hearing, suit or any other proceeding, whether civil, criminal, arbitrative,
administrative or investigative, or any alternative dispute resolution
mechanism, including, without limitation, any such Proceeding brought by or
in the right of the Corporation (subject to Section 7(c) of this Agreement)
or any Proceeding brought to enforce the Indemnitee's rights under this
Agreement.
2. ADVANCEMENT OF EXPENSES. The Corporation shall advance to the
Indemnitee all Expenses incurred by or on behalf of the Indemnitee within
twenty (20) days after the receipt by the Corporation of a written request
for such advance that reasonably describes the Expenses (unless there has
been a final determination by a court of competent jurisdiction that the
Indemnitee is not entitled to be indemnified for such Expenses). The
Indemnitee hereby agrees to repay the amounts advanced, paid or incurred by
the Corporation on behalf of the Indemnitee in respect of a claim against the
Corporation under this Agreement in the event and only to the extent that it
shall be ultimately determined that the Indemnitee is not entitled to be
indemnified by the Corporation for such expenses under provisions of Nevada
Law, the Corporation's Second Amended and Restated Articles of Incorporation,
the Corporation's Second Amended and Restated Bylaws, this Agreement or
otherwise.
3. NOTIFICATION AND DEFENSE OF CLAIM. Promptly after receipt by the
Indemnitee of notice of the commencement of any Proceeding, the Indemnitee
shall, if a claim in respect thereof is to be made against the Corporation
under this Agreement, notify the Corporation of the commencement thereof; but
an omission to so notify the Corporation will not relieve the Corporation
from any liability which it may have to the Indemnitee otherwise than under
this Agreement, including, without limitation, its liability under the
Corporation's Second Amended and Restated Articles of Incorporation and
Second Amended and Restated Bylaws. Further, failure by the Indemnitee to
provide the Corporation with prompt notification of a Proceeding shall not
relieve the Corporation from any liability pertaining to that Proceeding
under this Agreement unless the Corporation has been adversely affected by
the delay.
4. PROCEDURES FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) The Corporation shall determine whether the Indemnitee is
entitled to indemnification within ninety (90) days after receipt of notice
of a request for indemnification in a forum selected by the Corporation from
the following alternatives:
(i) the shareholders of the Corporation;
(ii) a quorum of the Board consisting of directors who are not
parties to the Proceeding;
2
<PAGE> (iii) the written opinion of independent counsel which has not
represented the Corporation or the Indemnitee in the past
or any party to the Proceeding, as selected by the
Indemnitee and reasonably approved by the Board; or
(iv) a panel of three (3) arbitrators, one (1) of whom is
selected by the Corporation, another of whom is selected
by the Indemnitee and the last of whom is selected by the
first two (2) arbitrators.
(b) It shall be presumed that the Indemnitee is entitled to
indemnification and the Corporation has the burden of proof to overcome that
presumption by a preponderance of evidence.
(c) If the Corporation fails to notify the Indemnitee of the
determination within ninety (90) days after the Indemnification Request, the
Indemnitee shall be absolutely entitled to indemnification, except as
provided in Section 7 of this Agreement.
(d) The termination of any Proceeding by judgment, order,
settlement or arbitration, or upon a plea of nolo contendere or its
equivalent, shall not of itself adversely affect the rights of the Indemnitee
to indemnification, create a presumption that the Indemnitee did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation or, with respect to any
criminal action or proceeding, create a presumption that the Indemnitee had
reasonable cause to believe that the Indemnitee's conduct was unlawful.
5. DEFENSE OF PROCEEDINGS
With respect to any Proceeding as to which the Indemnitee has
notified the Corporation and the Corporation has determined that the
Indemnitee is entitled to indemnification:
(a) the Corporation shall be entitled to participate therein at its
own expense; and
(b) the Corporation, jointly with any other indemnifying party
similarly notified, shall be entitled to assume the defense thereof with
counsel reasonably satisfactory to the Indemnitee; PROVIDED HOWEVER, that the
Corporation shall not be entitled to assume the defense of any Proceeding if
the Indemnitee reasonably concludes that there may be a conflict of interest
between the Corporation and the Indemnitee with respect to such Proceeding.
After notice from the Corporation to the Indemnitee of its election to assume
the defense thereof, the Corporation will not be liable to the Indemnitee
under this Agreement for any Expenses subsequently incurred by the Indemnitee
in connection with the defense thereof, other than reasonable costs of
investigation or as otherwise provided below. The Indemnitee shall have the
right to employ its own counsel in such Proceeding but the fees and expenses
of such counsel incurred after notice from the Corporation of its assumption
of the defense thereof shall be at the expense of the Indemnitee unless:
3
<PAGE>
(i) the Corporation has authorized the employment of counsel
by the Indemnitee;
(ii) the Indemnitee shall have reasonably concluded that
counsel engaged by the Corporation may not adequately
represent the Indemnitee; or
(iii) the Corporation shall not in fact have employed counsel
to assume the defense in such Proceeding or shall not in
fact have assumed such defense and be acting in
connection therewith with reasonable diligence.
The Corporation shall have the right, in its sole discretion, to
settle any Proceeding; PROVIDED, HOWEVER that no settlement may be made
without the Indemnitee's prior consent if it will adversely affect the
Indemnitee. The Indemnitee agrees to give the Corporation such information
and cooperation as it may reasonably require to defend or settle any
Proceeding.
6. REMEDIES OF THE INDEMNITEE IN CASES OF DETERMINATION NOT TO INDEMNIFY
OR TO ADVANCE EXPENSES.
(a) In the event that (i) an initial determination is made that the
Indemnitee is not entitled to indemnification, (ii) advances for Expenses are
not made when and as required by this Agreement, (iii) payment has not been
timely made following a determination of entitlement to indemnification
pursuant to this Agreement, or (iv) the Indemnitee otherwise seeks
enforcement of this Agreement, the Indemnitee shall be entitled to a final
adjudication in an appropriate court. Alternatively, the Indemnitee, at his
option, may seek arbitration pursuant to the commercial arbitration rules of
the American Arbitration Association then in effect, which arbitration shall
be completed within ninety (90) days following the filing of the demand for
arbitration. In any proceeding or arbitration, the Indemnitee shall be
presumed to be entitled to indemnification and the Corporation shall have the
burden of proof to overcome that presumption by a preponderance of evidence.
The Corporation agrees to stipulate in court or arbitration that the
Corporation is bound by all the provisions of this Agreement.
(b) If an initial determination is made or deemed to have been made
pursuant to the terms of this Agreement that the Indemnitee is entitled to
indemnification, the Corporation shall be bound by such determination in the
absence of a misrepresentation of a material fact by the Indemnitee in the
request for indemnification or a specific finding in a final judgment by a
court of competent jurisdiction that all or any part of such indemnification
is expressly prohibited by law.
(c) In the event an initial determination has been made, in whole or
in part, that the Indemnitee is not entitled to indemnification, the decision
in the judicial proceeding or arbitration shall be made de novo and the
Indemnitee shall not be prejudiced by reason of any prior determination that
he is not entitled to indemnification.
4
<PAGE>
7. LIMITATIONS ON INDEMNIFICATION. No indemnification shall be paid nor
shall Expenses be advanced:
(a) to the extent that the Indemnitee has been reimbursed by
insurance coverage. Notwithstanding the availability of insurance, the
Indemnitee may claim indemnification from the Corporation pursuant to this
Agreement by assigning to the Corporation his rights to insurance;
(b) to the extent of any wholly or partially successful claim
against the Indemnitee pursuant to the provisions of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or similar provisions of any
federal, state or local law:
(c) in connection with all or any part of a Proceeding which is
initiated or maintained by or on behalf of the Indemnitee, or any Proceeding
by the Indemnitee against the Corporation or its directors, officers,
employees or other agents, unless (i) such indemnification is expressly
required to be made by Nevada Law or this Agreement, (ii) the Proceeding was
authorized by the Board of Directors of the Corporation or (iii) such
indemnification is provided by the Corporation, in its sole discretion,
pursuant to the powers vested in the Corporation under Nevada Law;
(d) in respect of remuneration paid to, or indemnification of, the
Indemnitee, if it shall be determined by a final judgment or other final
adjudication that such remuneration or indemnification was or is prohibited by
applicable law;
(e) for any transaction from which the Indemnitee derived an
improper personal benefit;
(f) for any breach of the Indemnitee's duty to act in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation; or
(g) in respect of acts or omissions which involve intentional
misconduct or a knowing violation of law by the Indemnitee.
8. DURATION AND SCOPE OF AGREEMENT; BINDING EFFECT. This Agreement
shall continue so long as the Indemnitee is subject to any possible
Proceeding for acts or omissions occurring before or after execution of this
Agreement by reason of the fact that the Indemnitee is or was a director or
officer of the Corporation or serves or served at the request of the
Corporation as a director of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of anything done or not done by the
Indemnitee in that capacity. This Agreement is binding upon the Corporation
and its successors and assigns and is for the benefit of the Indemnitee and
his assigns, heirs, devisees, executors, administrators and other legal
representatives.
9. SEVERABILITY. If any provision, covenant or condition of this
Agreement is held or found to be invalid, illegal or unenforceable for any
reason whatsoever, that provision, covenant or condition shall be deemed
severable and the provisions, covenants and conditions not held or
5
<PAGE>
found to be invalid, void or unenforceable shall continue in full force and
effect and shall in no way be affected, impaired or invalidated thereby. To
the fullest extent possible, the provisions of this Agreement shall be
construed to give effect to the intent of the provision held invalid, illegal
or unenforceable.
10. PARTIAL INDEMNITY. If the Indemnitee is entitled under any provision
of this Agreement to indemnification by the Corporation for only a portion of
any Expenses, the Corporation shall indemnify the Indemnitee for the portion
to which the Indemnitee is entitled.
11. MODIFICATION AND WAIVER. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by the Corporation
and the Indemnitee. No waiver of any provision of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar) nor will such waiver constitute a continuing waiver.
12. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand to the addressee, (ii) received by facsimile
transmission if such transmission is thereafter confirmed or acknowledged in
writing or (iii) mailed by certified or registered mail with postage prepaid,
on the third business day after the date on which it is so mailed:
If to the Indemnitee:
If to the Corporation: Hard Rock Hotel, Inc.
510 N. Robertson Blvd.
Los Angeles, CA 90048
Attn: Peter A. Morton
with a copy to: Gordon & Silver, Ltd.
3800 Howard Hughes Parkway
14th Floor
Las Vegas, Nevada 89109
Attn: James S. Mace
or to such other address as may have been furnished by the parties.
13. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Nevada applicable to contracts made in that state.
14. SUBROGATION. In the event of any payment under this Agreement, the
Corporation will be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who agrees to execute all papers
required and do everything that may be necessary
6
<PAGE>
to secure such rights, including the execution of such documents necessary to
enable the Corporation effectively to bring suit to enforce such rights.
15. COUNTERPARTS. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute but one and the same instrument.
16. PRIOR AGREEMENTS. This Agreement supersedes any prior
indemnification agreement between the Indemnitee and the Corporation, which
shall be of no further force and effect whatsoever.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CORPORATION:
HARD ROCK HOTEL, INC.,
a Nevada corporation
By:
------------------------------------
Gary Selesner, Senior Vice
President of Operations
INDEMNITEE:
------------------------------------
7
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated December 23, 1997, in the Registration Statement
(Form S-4 No. 333- ) of Hard Rock Hotel, Inc. for the registration of
$120,000,000 of 9 1/4% Series B Senior Subordinated Notes Due 2005.
/s/ Ernst & Young LLP
Reno, Nevada
May 18, 1998
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
U.S. BANK TRUST NATIONAL ASSOCIATION
FORMERLY KNOWN AS
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer
Identification No.)
U.S. Bank Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
HARD ROCK HOTEL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 88-0306263
(State of Incorporation) (I.R.S. Employer
Identification No.)
4455 Paradise Road
Las Vegas, NV 89109
(Address of Principal Executive Offices) (Zip Code)
9 1/4% SENIOR SUBORDINATED EXCHANGE NOTES DUE 2005
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. GENERAL INFORMATION Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe
each such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which
the Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this
statement of eligibility and qualification.
1. Copy of Articles of Association.*
2. Copy of Certificate of Authority to Commence Business.*
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).*
4. Copy of existing By-Laws.*
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority is filed in paper format pursuant to Form SE.
* Incorporated by reference to Registration Number 22-27000.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within
three years prior to the date of filing this statement, or what persons are
owners of 10% or more of the voting securities of the obligors, or
affiliates, are based upon information furnished to the Trustee by the
obligors. While the Trustee has no reason to doubt the accuracy of any such
information, it cannot accept any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, U.S. Bank Trust National Association, an Association organized and
existing under the laws of the United States, has duly caused this statement
of eligibility and qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto affixed
and attested, all in the City of Saint Paul and State of Minnesota on the
14th day of May, 1998.
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------------------
Richard H. Prokosch
Assistant Vice President
/s/ S. Christopherson
- ------------------------------------
S. Christopherson
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939,
the undersigned, U.S. BANK TRUST NATIONAL ASSOCIATION hereby consents that
reports of examination of the undersigned by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities
and Exchange Commission upon its request therefor.
Dated: May 14, 1998
U.S. BANK TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------------------
Richard H. Prokosch
Assistant Vice President
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