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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 9, 1999
Park Place Entertainment Corporation
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(Exact Name of Registrant as
Specified in Charter)
Delaware 0-14573 88-0400631
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(State or Other (Commission (IRS Employer
Jurisdiction of File Identification
Incorporation) Number) No.)
3930 Howard Hughes Parkway
Las Vegas, Nevada 89109
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(Address of Principal
Executive Offices)
(702) 699-5000
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(Registrant's telephone
number, including area code)
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ITEM 5. OTHER EVENTS.
(a) Registrant has entered into a Purchase Agreement with Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Banc of America Securities LLC,
Deutsche Bank Securities Inc., SG Cowen Securities Corporation, Scotia
Capital (USA) Inc., BNY Capital Markets, Inc., First Union Securities, Inc.,
PNC Capital Markets, Inc., Bear, Stearns & Co. Inc. and Norwest Investment
Services, Inc., attached hereto as Exhibit 1.01.
The terms of the Registrant's $400,000,000 aggregate principal
amount 8 1/2% Senior Notes due 2006 have been established as set forth in the
Officers' Certificate, attached hereto as Exhibit 99.01. The Prospectus
Supplement dated November 9, 1999 with respect to such notes is attached
hereto as Exhibit 99.02.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
7(c) EXHIBITS
1.01 Purchase Agreement.
99.01 Officers' Certificate.
99.02 Prospectus Supplement.
2
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Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
PARK PLACE ENTERTAINMENT CORPORATION
By: /s/ Scott A. LaPorta
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Name: Scott A. LaPorta
Dated: November 12, 1999 Title: Executive Vice President and
Chief Financial Officer
3
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EXHIBIT 1.01
PARK PLACE ENTERTAINMENT CORPORATION
(a Delaware corporation)
$400,000,000
8 1/2% Notes due 2006
PURCHASE AGREEMENT
November 9, 1999
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANC OF AMERICA SECURITIES LLC
DEUTSCHE BANK SECURITIES INC.
S.G. COWEN SECURITIES CORPORATION
SCOTIA CAPITAL MARKETS (USA) INC.
BNY CAPITAL MARKETS, INC.
FIRST UNION SECURITIES, INC.
PNC CAPITAL MARKETS, INC.
BEAR, STEARNS & CO. INC.
NORWEST INVESTMENT SERVICES, INC.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Park Place Entertainment Corporation, a Delaware corporation
(the "Company"), confirms its agreement with Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and each of the
other Underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), with respect to the issue and
sale by the Company and the purchase by the Underwriters, acting severally
and not
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jointly, of the respective principal amounts set forth in said Schedule A of
the Company's 8 1/2% Notes due 2006 (the "Securities") pursuant to this
Purchase Agreement (the "Agreement"). The Securities are to be issued
pursuant to an indenture dated as of November 15, 1999 (the "Indenture")
between the Company and Norwest Bank Minnesota, N.A., as trustee (the
"Trustee").
The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 (No.
333-70853) relating to the Securities and the offering thereof from time to
time in accordance with Rule 415 under the Securities Act of 1933 (the "1933
Act") and has filed such amendments thereto as may have been required to the
date hereof. Such registration statement as amended has been declared
effective by the Commission, and the Indenture has been qualified under the
Trust Indenture Act of 1939, as amended (the "1939 Act"). Such registration
statement as amended and the prospectus relating to the sale of Securities by
the Company constituting a part thereof, including all documents incorporated
therein by reference, as from time to time amended or supplemented pursuant
to the Securities Exchange Act of 1934 (the "1934 Act"), the 1933 Act or
otherwise, are referred to herein as the "Registration Statement" and the
"Prospectus", respectively; provided, however, that a supplement to the
Prospectus prepared pursuant to Section 3(a) hereof (a "Prospectus
Supplement") shall be deemed to have supplemented the Prospectus with respect
to the offering of Securities.
The Securities are being issued and sold in connection with the
acquisition of Caesars (as defined in the Prospectus) (all as described in
the Prospectus Supplement under the captions "The Acquisition" and "Use of
Proceeds"). The Caesars acquisition is being effected pursuant to a stock
purchase agreement (the "Acquisition Agreement") entered into on April 27,
1999 between Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") and
several of its subsidiaries to acquire all of the outstanding stock of
Caesars World, Inc., a wholly owned subsidiary of Starwood, and all of their
interests in several other gaming entities.
All references in this Agreement to financial statements and
schedules and other information which is "contained," "included" or "stated"
in the Registration Statement, the Prospectus or the Prospectus Supplement
(or other references of like import) shall be deemed to mean and include all
such financial statements and schedules and other information which is
incorporated by reference in the Registration Statement, the Prospectus or
the Prospectus Supplement, as the case may be; and all references in this
Agreement to amendments or supplements to the Registration Statement or the
Prospectus shall be deemed to mean and include the filing of any document
under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference therein.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
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(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to each Underwriter as of the date hereof and
as of the Closing Time referred to in Section 2(b) hereof, and agrees with
each Underwriter, as follows:
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The
Registration Statement and the Prospectus, at the time the Registration
Statement became effective complied in all material respects with the
requirements of the 1933 Act, the rules and regulations thereunder (the
"1933 Act Regulations") and the 1939 Act. The Registration Statement, at
the time the Registration Statement became effective, did not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading. The Prospectus, at the time the Registration Statement
became effective and, together with the Prospectus Supplement, as of the
date hereof, did not contain an untrue statement of a material fact or
omit 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; provided, however, that the representations and
warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement, Prospectus or Prospectus
Supplement made in reliance upon and in conformity with information
furnished to the Company in writing by any Underwriter through Merrill
Lynch expressly for use in the Registration Statement, Prospectus or
Prospectus Supplement or to that part of the Registration Statement which
shall constitute the Statement of Eligibility and Qualification under the
1939 Act (Form T-1), of the Trustee under the Indenture. The parties
hereto acknowledge that for purposes of this Agreement, including Section
6 hereof, the only information furnished to the Company in writing by the
Underwriters expressly for use in the Registration Statement, Prospectus
and Prospectus Supplement is the information set forth (i) on the cover
page of the Prospectus Supplement with respect to price and commissions
of the offering and (ii) under the caption "Underwriting" in the
Prospectus Supplement in the table, paragraph four, paragraph five, the
second sentence of paragraph six and paragraph seven. No stop order
preventing the use of the Registration Statement, Prospectus or
Prospectus Supplement has been issued.
(ii) INCORPORATED DOCUMENTS. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement and
the Prospectus, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read
together with the other information in the Prospectus, at the time the
Registration Statement became effective, and, together with the
Prospectus Supplement, at the time the Prospectus was issued and at the
Closing Time, did not and will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the
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statements therein, in light of the circumstances under which they were
made, not misleading.
(iii) INDEPENDENT ACCOUNTANTS. The accountants who certified the
financial statements and supporting schedules, if any, included in the
Registration Statement are independent public accountants as required by
the 1933 Act and the 1933 Act Regulations.
(iv) FINANCIAL STATEMENTS. The financial statements of the
Company included in the Registration Statement and the Prospectus,
together with the related schedules and notes, present fairly the
financial position of the Company at the dates indicated and the
statement of operations, stockholders' equity and cash flows of the
Company for the periods specified; said financial statements have been
prepared in conformity with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto). The pro forma
financial statements and the related notes thereto included in the
Registration Statement and the Prospectus, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro
forma financial statements and have been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein.
(v) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the
respective dates as of which information is given in the Registration
Statement, the Prospectus and the Prospectus Supplement neither the
Company nor any of its subsidiaries has incurred any liabilities or
obligations, direct or contingent, which are material to the Company and
its subsidiaries, taken as a whole, nor entered into any transaction not
in the ordinary course of business and there has not been, singly or in
the aggregate, any material adverse change or any development which would
involve a material adverse change, in the business, results of
operations, condition (financial or otherwise), or prospects of the
Company and its subsidiaries, taken as a whole (a "Material Adverse
Change").
(vi) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority
to own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason
of the
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ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not
result in a material adverse effect on the business results of
operations, condition (financial or otherwise) or prospects of the
Company and its subsidiaries, taken as a whole ("Material Adverse
Effect").
(vii) GOOD STANDING OF SUBSIDIARIES. Each "significant
subsidiary" of the Company (as such term is defined in Rule 1-02 of
Regulation S-X) (each a "Subsidiary" and, collectively, the
"Subsidiaries") has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing
of property or the conduct of business, except where the failure so to
qualify or to be in good standing would not result in a Material Adverse
Effect; except as otherwise disclosed in the Registration Statement or
the Prospectus, all of the issued and outstanding capital stock of each
such Subsidiary has been duly authorized and validly issued, is fully
paid and non-assessable and is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock of any Subsidiary was issued in violation of the preemptive
or similar rights of any securityholder of such Subsidiary.
(viii) AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by the Company.
(ix) AUTHORIZATION OF THE INDENTURE. The Indenture has been
duly authorized by the Company and duly qualified under the 1939 Act and,
when duly executed and delivered by the Company and the Trustee, will
constitute a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or similar laws affecting enforcement of
creditors' rights generally and except (a) as enforcement thereof is
subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law) and (b)
the enforceability of any provision requiring the payment of attorney's
fees, except to the extent that a court determines such fees to be
reasonable.
(x) AUTHORIZATION OF THE SECURITIES. The Securities have been
duly authorized and, at the Closing Time, will have been duly executed by
the Company and, when authenticated, executed, issued and delivered in
the manner provided for in
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the Indenture and delivered against payment of the purchase price
therefor as provided in this Agreement, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or
similar laws affecting enforcement of creditors' rights generally and
except as enforcement thereof is subject to general principles of
equity (regardless of whether enforcement is considered in a
proceeding in equity or at law), and will be in the form contemplated
by, and entitled to the benefits of, the Indenture.
(xi) DESCRIPTION OF THE SECURITIES AND THE INDENTURE. The
Securities and the Indenture will conform in all material respects to the
respective statements relating thereto contained in the Prospectus and
the Prospectus Supplement and will be in substantially the respective
forms previously delivered to the initial purchasers.
(xii) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company nor
any of its Subsidiaries is in violation of its charter or by-laws or in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage,
deed of trust, loan or credit agreement, note, lease or other agreement
or instrument to which the Company or any of its Subsidiaries is a party
or by which it or any of them may be bound, or to which any of the
property or assets of the Company or any Subsidiary is subject
(collectively, "Agreements and Instruments") except for such defaults
that would not result in a Material Adverse Effect; and the execution,
delivery and performance of this Agreement, the Indenture and the
Securities and the consummation of the transactions contemplated herein
and in the Prospectus Supplement and compliance by the Company with its
obligations hereunder and under the Indenture and the Securities have
been duly authorized by all necessary corporate action and do not and
will not, whether with or without the giving of notice or passage of time
or both, conflict with or constitute a breach of, or default or Repayment
Event (as defined below) under, or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company or any Subsidiary pursuant to, the Agreements and Instruments
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not result in a Material Adverse Effect), nor
will such action result in any violation of the provisions of the charter
or by-laws of the Company or any Subsidiary or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or any Subsidiary or any of their
assets, properties or operations. As used herein, a "Repayment Event"
means any event or condition which gives the holder of any note,
debenture or other evidence of indebtedness (or any person acting on such
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a
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portion of such indebtedness by the Company or any Subsidiary.
(xiii) ABSENCE OF PROCEEDINGS. There is no action, suit or
proceeding before or by any court or governmental agency or body,
domestic or foreign, pending against or affecting any of the Company or
its subsidiaries, or any of their respective assets or properties, which
is required to be disclosed in the Registration Statement, Prospectus and
Prospectus Supplement and is not so disclosed, or which has, or which
would result in, singly or in the aggregate, a Material Adverse Effect,
or which could reasonably be expected to materially and adversely affect
the Company's performance of its obligations pursuant to this Agreement
or the transactions contemplated hereby, and to the best of the Company's
knowledge, no such action, suit, or proceeding is contemplated or
threatened.
(xiv) POSSESSION OF INTELLECTUAL PROPERTY. The Company and its
subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures),
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the
businesses now operated by them or to carry on the businesses
contemplated to be carried on by them upon completion of the
Transactions, other than those which would not, singly or in the
aggregate, have a Material Adverse Effect, and neither the Company nor
any of its subsidiaries has received any notice or is otherwise aware of
any infringement of or conflict with asserted rights of others with
respect to any Intellectual Property or of any facts or circumstances
which would render any Intellectual Property invalid or inadequate to
protect the interest of the Company or any of its subsidiaries therein,
and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, singly or in
the aggregate, would result in a Material Adverse Effect.
(xv) ABSENCE OF FURTHER REQUIREMENTS. Except as disclosed in
the Prospectus or the Prospectus Supplement, no authorization,
approval or consent or order of, or filing with, any court or
governmental body, agency or official, including, without limitation,
the Nevada Gaming Commission (the "NGC"), the Nevada State Gaming
Control Board ("NGCB"), the Clark County Liquor and Gaming Licensing
Board ("CCLB"), the City of Reno ("Reno"), the New Jersey Casino
Control Commission (the "NJC"), the Casino Reinvestment Development
Authority (the "CRDA"), the Mississippi Gaming Commission (the "MGC"),
the Mississippi State
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Tax Commission (the "MTC"), the Louisiana Gaming Control Board
("LGCB"), the Delaware State Lottery Office, the Indiana Gaming
Commission, the authorities governing casino gaming in Queensland,
Australia (the "Queensland Authorities"), the Internal Auditors Bureau
of Uruguay (the "IABU"), the Executive Power of the Oriental Republic
of Uruguay, the Ontario Alcohol and Gaming Commission, the Ontario
Casino Corporation, the Nova Scotia Gaming Control Commission, the
Philippine Amusement and Gaming Corporation and the Gauteng Gambling
Board (hereinafter collectively referred to as the "Gaming
Authorities"), is necessary or required for the performance by the
Company of its obligations hereunder, in connection with the offering,
issuance or sale of the Securities hereunder or for the due execution,
delivery or performance of the Indenture by the Company, except (i)
such as may be required by the National Association of Securities
Dealers, Inc. (the "NASD") or have been obtained and made under any
state securities or Blue Sky laws or regulations; (ii) such as have
been already obtained or as may be required under the 1933 Act or the
1933 Act Regulations or state securities laws and except for the
qualification of the Trustee under the 1939 Act, (iii) such as may
have been obtained under the Nevada Gaming Control Act, the New Jersey
Casino Control Act, the Mississippi Gaming Control Act and the
respective regulations promulgated thereunder, the Louisiana Riverboat
Economic Development and Gaming Control Act, Title 29 of the Delaware
code, the Indiana Riverboat Gambling Act and the applicable laws
governing casino gaming in Ontario, Nova Scotia and South Africa; and
(iv) where the failure to obtain the authorization, approval, consent
or order of, or filing with any court or governmental body, agency or
official, does not result in a Material Adverse Effect.
(xvi) POSSESSION OF LICENSES AND PERMITS. Except as disclosed in
the Registration Statement, the Prospectus and the Prospectus Supplement,
(i) the Company, its subsidiaries and each of the Company's directors and
executive officers has all certificates, consents, exemptions, orders,
permits, licenses, authorizations, or other approvals or rights (each, an
"Authorization") of and from, and has made all declarations and filings
with, all Federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals,
including, without limitation, all such Authorizations with respect to
engaging in gaming operations in the States of Nevada, Louisiana, New
Jersey, Mississippi, Delaware or Indiana or in Queensland, Australia,
Uruguay, Ontario, Nova Scotia, the Philippines or South Africa, if such
person is required to be licensed in such jurisdictions, necessary or
required to own, lease, license and use its properties and assets and to
conduct its business in the manner described in the Registration
Statement, except as would not have, singly or in the aggregate, a
Material Adverse Effect, (ii) all such Authorizations are valid and in
full force and effect, except as would not have, singly or in the
aggregate, a Material Adverse Effect, (iii) each of the
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Company and its subsidiaries and each member of the Company's
Management 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 and governing bodies having
jurisdiction with respect thereto, except as would not have, singly or
in the aggregate, a Material Adverse Effect, and (iv) except as
disclosed in the Registration Statement, Prospectus or Prospectus
Supplement, none of the Company or its subsidiaries and no member of
the Company Management has received any notice of proceedings relating
to the revocation or modification of any such Authorization and no
such Authorization contains any restrictions that are materially
burdensome to any of them. Except as disclosed in the Registration
Statement, Prospectus or Prospectus Supplement, none of the Company or
its subsidiaries has any reason to believe that any Gaming Authorities
are considering modifying, limiting, conditioning, suspending,
revoking or not renewing any such Authorizations of any of the Company
or its subsidiaries or any member of the Company Management or that
either the Gaming Authorities or any other governmental agencies are
investigating any of the Company or its subsidiaries or related parties
(other than normal overseeing reviews of the Gaming Authorities
incident to the gaming, riverboat or casino activities, as the case
may be, of any of the Company and its subsidiaries). Except with
respect to facts disclosed in the Registration Statement, Prospectus
or Prospectus Supplement, none of the Company or its subsidiaries has
any reason to believe that there exists a reasonable basis for the
Gaming Authorities to deny the renewal of the current casino and
gaming licenses held by any of the Company or its subsidiaries.
(xvii) TITLE TO PROPERTY. Except as would result in a Material
Adverse Effect, the Company and its subsidiaries have good and marketable
title to all real property owned by the Company and its subsidiaries and
good title to all other properties owned by them, in each case, free and
clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (a) are described
in the Prospectus or the Prospectus Supplement or (b) do not, singly or
in the aggregate, materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by
the Company or any of its subsidiaries; and all of the leases and
subleases material to the business of the Company and its subsidiaries,
considered as one enterprise, and under which the Company or any of its
subsidiaries holds properties described in the Prospectus, are in full
force and effect, and neither the Company nor any subsidiary has any
notice of any material claim of any sort that has been asserted by anyone
adverse to the rights of the Company or any subsidiary under any of the
leases or subleases mentioned above, or affecting or questioning the
rights of the Company or such subsidiary to the continued possession of
the leased or subleased premises under any such lease or
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sublease.
(xviii) INVESTMENT COMPANY ACT. The Company is not, and
upon the issuance and sale of the Securities as herein contemplated and
the application of the net proceeds therefrom as described in the
Prospectus Supplement will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
(xix) ENVIRONMENTAL LAWS. Except as described in the
Registration Statement, Prospectus or Prospectus Supplement and except as
would not, singly or in the aggregate, result in a Material Adverse
Effect, (A) none of the Company or its subsidiaries is in violation of
any federal, state, local or foreign statute, law, rule, regulation,
ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent, decree or judgment, relating to pollution
or protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials") or
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) each of the Company and its subsidiaries have
all permits, authorizations and approvals required under any applicable
Environmental Laws and are each in compliance with their requirements,
(C) there is no investigation known to us and there are no pending or
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation or proceedings relating to any Environmental Law against any of
the Company or its subsidiaries and (D) there are no events or
circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by
any private party or governmental body or agency, against or affecting
any of the Company or its subsidiaries relating to Hazardous Materials or
Environmental Laws.
(xx) TAXES. All United States federal income tax returns of
each of the Company and its subsidiaries required by law to be filed have
been filed and all taxes shown by such returns or otherwise assessed,
which are due and payable, have been paid, except assessments against
which appeals have been or will be promptly taken and as to which
adequate reserves have been provided. The United States federal income
tax returns of each of the Company and its subsidiaries through the
fiscal year ended 1990 have been settled and no assessment in connection
therewith has been
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against any of them. Each of the Company and its subsidiaries has
filed all other tax returns that are required to have been filed by it
pursuant to applicable foreign, state, local or other law except
insofar as the failure to file such returns would not result in a
Material Adverse Effect, and has paid all taxes due pursuant to such
returns or pursuant to any assessment received by it, except for such
taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. The charges, accruals and
reserves on the books of the Company in respect of any income and
corporation tax liability for any years not finally determined are
adequate to meet any assessments or re-assessments for additional
income tax for any years not finally determined, except to the extent
of any inadequacy that would not result in a Material Adverse Effect.
(xxi) ACCOUNTING CONTROLS. The Company and its subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (A) transactions are executed in accordance
with management's general or specific authorization, (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets, (C) access to assets is permitted only in
accordance with management's general or specific authorization and (D)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxii) MISCELLANEOUS. None of the Company or any agent acting on
behalf of the Company has taken, and none of them will take, any action
that might cause this Agreement or the issuance or sale of the Securities
to violate Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R.
Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors
of the Federal Reserve System.
(b) OFFICER'S CERTIFICATES. Any certificate signed by any
officer of the Company or any of its subsidiaries delivered to the Underwriters
or to counsel for the Underwriters shall be deemed a representation and warranty
by the Company to each Underwriter as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS; CLOSING.
(a) SECURITIES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company at the price set forth in Schedule B, the aggregate principal
amount of Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional principal amount of Securities which such
Underwriter may become
<PAGE>
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obligated to purchase pursuant to the provisions of Section 11 hereof.
(b) PAYMENT. Payment of the purchase price for, and delivery
of certificates for, the Securities shall be made at the office of Cahill Gordon
& Reindel, 80 Pine Street, New York, New York 10005, or at such other place as
shall be agreed upon by the Underwriters and the Company, at 9:00 A.M. (New York
time) on the third business day after the date hereof (unless postponed in
accordance with the provisions of Section 11), or such other time not later than
ten business days after such date as shall be agreed upon by the Underwriters
and the Company (such time and date of payment and delivery being herein called
the "Closing Time").
Payment shall be made to the Company by wire transfer of
immediately available funds to a bank account designated by the Company, against
delivery to the Underwriters for the respective accounts of the Underwriters of
certificates for the Securities to be purchased by them. It is understood that
each Underwriter has authorized the Underwriters, for its account, to accept
delivery of, receipt for, and make payment of the purchase price for, the
Securities which it has agreed to purchase. Merrill Lynch may (but shall not be
obligated to) make payment of the purchase price for the Securities to be
purchased by any Underwriter whose funds have not been received by the Closing
Time, but such payment shall not relieve such Underwriter from its obligations
hereunder.
(c) DENOMINATIONS; REGISTRATION. Certificates for the
Securities shall be in such denominations and registered in such names as the
Underwriters may request in writing at least one full business day before the
Closing Time. The Securities will be made available for examination and
packaging by the Underwriters in The City of New York not later than 10:00 A.M.
(Eastern time) on the last business day prior to the Closing Time.
SECTION 3. COVENANTS OF THE COMPANY.
The Company covenants with each Underwriter as follows:
(a) PROSPECTUS SUPPLEMENT. Immediately following the execution
of this Agreement, the Company will prepare a Prospectus Supplement setting
forth the principal amount of Securities covered thereby and their terms not
otherwise specified in the Indenture, the names of the Underwriters
participating in the offering and the principal amount of Securities which each
severally has agreed to purchase, the price at which the Securities are to be
purchased by the Underwriters from the Company, the initial public offering
price, the selling concession and reallowance, if any, any delayed delivery
arrangements, and such other information as the Underwriters and the Company
deem appropriate in connection with the offering of the Securities. The Company
will promptly transmit copies of the Prospectus Supplement to the Commission for
filing pursuant to Rule 424 of the Regulations and will use
<PAGE>
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its best efforts to furnish to the Underwriters named therein as many copies
of the Prospectus and such Prospectus Supplement as the Underwriters shall
reasonably request, prior to 10:00 a.m. New York City time on the business
day next succeeding the date of this Agreement. Thereafter, the Company will
furnish to the Underwriters as many copies of the Prospectus and the
Prospectus Supplement as the Underwriters may from time to time reasonably
request.
(b) FILING OF AMENDMENTS. If at any time when the Prospectus
is required by the 1933 Act to be delivered in connection with sales of the
Securities any event shall occur or condition exist as a result of which it is
necessary, in the reasonable opinion of counsel for the Underwriters or counsel
for the Company, to further amend or supplement the Prospectus in order that the
Prospectus, together with the Prospectus Supplement, will not include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in the light of circumstances
existing at the time it is delivered to a purchaser or if it shall be necessary,
in the opinion of either such counsel, at any such time to amend or supplement
the Registration Statement or the Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company will
promptly prepare and file with the Commission such amendment or supplement,
whether by filing documents pursuant to the 1934 Act or otherwise, as may be
necessary to correct such untrue statement or omission or to make the
Registration Statement comply with such requirements. The Company will give the
Underwriters notice of its intention to file any amendment to the Registration
Statement or any amendment or supplement to the Prospectus, whether pursuant to
the 1934 Act, the 1933 Act, or otherwise, will furnish the Underwriters with
copies of any such amendment or supplement or other documents proposed to be
filed a reasonable time in advance of filing, and will not file any such
amendment or supplement or other documents in a form in which the Underwriters
or counsel for the Underwriters shall reasonably object.
(c) EFFECTIVENESS AND STOP ORDERS. The Company will notify each
of the Underwriters immediately, and confirm the notice in writing, (i) of the
effectiveness of any amendment to the Registration Statement, (ii) of the
mailing or the delivery to the Commission for filing of any supplement to the
Prospectus or any document to be filed pursuant to the 1934 Act, (iii) of the
receipt of any comments from the Commission with respect to the Registration
Statement, the Prospectus or any Prospectus Supplement, (iv) of any request by
the Commission for any amendment to the Registration Statement or any amendment
or supplement to the Prospectus or for additional information, and (v) of the
issuance by the Commission of any order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose.
The Company will make every reasonable effort to prevent the issuance of any
stop order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible moment.
(d) DELIVERY OF REGISTRATION STATEMENTS. The Company has
furnished or
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will deliver to the Underwriters, without charge, signed copies of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein and
documents incorporated or deemed to be incorporated by reference therein) and
signed copies of all consents and certificates of experts, and will also
deliver to the Underwriters, without charge, a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(without exhibits) for each of the Underwriters. The copies of the
Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(e) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company
will comply with the 1933 Act and the 1933 Act Regulations, the 1934 Act and the
1934 Act Regulations and the 1939 Act and the 1939 Act Regulations so as to
permit the completion of the distribution of the Securities as contemplated in
this Agreement and in the Prospectus Supplement.
(f) BLUE SKY QUALIFICATIONS. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions as the Underwriters may designate and to maintain such
qualifications in effect for a period of not less than one year from the date
hereof; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation or
as a dealer in securities in any jurisdiction in which it is not so qualified or
to subject itself to taxation in respect of doing business in any jurisdiction
in which it is not otherwise so subject. In each jurisdiction in which the
Securities have been so qualified, the Company will file such statements and
reports as may be required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one year from the date
hereof. The Company will also supply the Underwriters with such information as
is necessary for the determination of the legality of the Securities for
investment under the laws of such jurisdictions as the Underwriters may request.
(g) RULE 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally available
to its securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last paragraph of
Section 11(a) of the 1933 Act.
(h) USE OF PROCEEDS. The Company will use the net proceeds
received by it from the sale of the Securities in the manner specified in the
Prospectus Supplement under "Use of Proceeds".
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(i) REPORTING REQUIREMENTS. The Company, during the period
when the Prospectus is required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission pursuant
to the 1934 Act within the time periods required by the 1934 Act and the 1934
Act Regulations.
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Company will pay all expenses incident to
the performance of its obligations under this Agreement, including (i) the
preparation, printing and filing of the Registration Statement (including
financial statements and exhibits) as originally filed and of each amendment
thereto, (ii) the preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters, the Indenture and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, (iv) the
fees and disbursements of the Company's counsel, accountants and other advisors,
(v) the qualification of the Securities under securities laws in accordance with
the provisions of Section 3(f) hereof, including filing fees and the reasonable
fees and disbursements of counsel for the Underwriters in connection therewith
and in connection with the preparation of the Blue Sky Survey, any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of the
Prospectus and Prospectus Supplement and any amendments or supplements thereto,
(vii) the preparation, printing and delivery to the Underwriters of copies of
the Blue Sky Survey and any supplement thereto, and any Legal Investment Survey,
(viii) the fees and expenses of the Trustee, including the fees and
disbursements of counsel for the Trustee in connection with the Indenture and
the Securities, and (ix) any fees payable in connection with the rating of the
Securities.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated
by the Underwriters in accordance with the provisions of Section 5 or
Section 9(a)(i) hereof, the Company shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
The obligations of the several Underwriters hereunder are subject
to the accuracy of the representations and warranties of the Company contained
in Section 1 hereof or in certificates of any officer of the Company or any of
its subsidiaries delivered pursuant to the provisions hereof, to the performance
by the Company of the covenants and other obligations hereunder, and to the
following further conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. At Closing Time
no stop order
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suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters. The
Prospectus Supplement shall have been filed with the Commission in
accordance with Rule 424(b).
(b) OPINIONS OF COUNSEL FOR THE COMPANY. At the Closing
Time, the Underwriters shall have received the favorable opinion,
dated as of the Closing Time, of (i) Latham & Watkins, counsel to the
Company, (ii) Clive Cummis, General Counsel to the Company, (iii)
Phelps Dunbar, special Louisiana gaming counsel to the Company, (iv)
Schreck Morris, special Nevada gaming counsel to the Company, (v)
Sills Cummis Radin Tischman Epstein & Gross, P.A., special New Jersey
counsel to the Company, (vi) Watkins Ludlam Winter & Stennis, P.A.,
special Mississippi counsel to the Company, and (vii) Susan L.
Johnson, Corporate Counsel to the Company, each in form and substance
satisfactory to counsel for the Underwriters, together with signed or
reproduced copies of such letter for each of the other Underwriters to
the effect set forth in Exhibits A-1, A-2, A-3, A-4, A-5, A-6 and A-7
hereto, respectively, and to such further effect as counsel to the
Underwriters may reasonably request.
(c) OPINION OF COUNSEL FOR UNDERWRITERS. (i) At the Closing
Time, the Underwriters shall have received the favorable opinions, dated
as of the Closing Time, of Cahill Gordon & Reindel, counsel for the
Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters, with respect to the matters set forth
in paragraphs (1), (2), (3), (4), (5), (12) and (13) and the penultimate
paragraph of Exhibit A-1 hereto together with signed or reproduced copies
of such letter for each of the other Underwriters, with respect to the
penultimate paragraph of Exhibit A-1 hereto. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions
other than the law of the State of New York, the federal law of the
United States and the General Corporation Law of the State of Delaware,
upon the opinions of counsel satisfactory to the Underwriters. Such
counsel may also state that, insofar as such opinion involves factual
matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries, as
appropriate, and certificates of public officials.
(d) OFFICERS' CERTIFICATE. At the Closing Time, there shall
not have been, since the date hereof or since the respective dates as of
which information is given in the Prospectus and Prospectus Supplement
(excluding any amendment or supplement thereto after the date hereof),
any Material Adverse Change, whether or not arising in the ordinary
course of business, and the Underwriters shall have received a
certificate
<PAGE>
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of the President or a Vice President of the Company, and of the chief
financial or chief accounting officer of the Company, each dated as of
the Closing Time, to the effect that (i) there has been no such
Material Adverse Change, (ii) the representations and warranties in
Section 1 hereof were true and correct as of the date hereof and are
true and correct with the same force and effect as though expressly
made at and as of the Closing Time, and (iii) the Company has complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied under this Agreement at or prior to the Closing
Time and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
(e) ACCOUNTANTS' COMFORT LETTER. At the Closing Time, the
Underwriters shall have received from Arthur Andersen LLP a letter or
letters dated such date, in form and substance satisfactory to the
Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters containing statements and information
of the type ordinarily included in accountants' "comfort letters" to
Underwriters with respect to the financial statements and certain
financial information contained in the Registration Statement and the
Prospectus.
(f) MAINTENANCE OF RATING. At the Closing Time, the Securities
shall be rated at least Baa3 by Moody's and BBB- by S&P, and the Company
shall have delivered to the Underwriters a letter dated the Closing Time,
from each such rating agency, or other evidence satisfactory to the
Underwriters (which evidence may include oral representations),
confirming that the Securities have such ratings; and since the date of
this Agreement, there shall not have occurred a downgrading in the rating
assigned to the Securities or any of the Company's other debt securities
by any "nationally recognized statistical rating agency", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the 1933
Act, and no such securities rating agency shall have publicly announced
that it has under surveillance or review, with possible negative
implications, its rating of the Securities or any of the Company's other
debt securities.
(g) ADDITIONAL DOCUMENTS. At the Closing Time, counsel for the
Underwriters shall have been furnished with such documents and opinions
as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order
to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all
proceedings taken by the Company in connection with the issuance and sale
of the Securities as herein contemplated shall be satisfactory in form
and substance to the Underwriters and counsel for the Underwriters.
<PAGE>
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(h) TERMINATION OF AGREEMENT. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement may be terminated by the Underwriters by notice
to the Company at any time at or prior to the Closing Time, and such
termination shall be without liability of any party to any other party
except as provided in Section 4 and except that Sections 1, 4, 6, 7, 8,
9(b) and this Section 5(h) shall survive any such termination and remain
in full force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF UNDERWRITERS. The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Prospectus, or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission; provided that (subject to
Section 6(d) below) any such settlement is effected with the written
consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under (i) or (ii) above;
(iv) against any untrue statement or alleged untrue statement of
any material
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fact contained in any audio or visual materials based upon information
provided by the Company used in connection with the marketing of the
Securities, including without limitation, slides, videos, films and tape
recordings;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement or the Prospectus.
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement or the Prospectus in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Merrill Lynch
expressly for use in the Registration Statement or the Prospectus.
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified
party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) above, counsel to the indemnified parties shall be
selected by Merrill Lynch, and, in the case of parties indemnified pursuant to
Section 6(b) above, counsel to the indemnified parties shall be selected by the
Company. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this
<PAGE>
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Section 6 or Section 7 hereof (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from
all liability arising out of such litigation, investigation, proceeding or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
SECTION 7. CONTRIBUTION. If the indemnification provided for
in Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Securities pursuant to this Agreement or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and of the
Underwriters on the other hand in connection with the statements or omissions
which resulted in such losses, liabilities, claims, damages or expenses, as well
as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and
the Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters, in
each case as set forth on the cover of the Prospectus, or, if Rule 434 is used,
the corresponding location on the Term Sheet, bear to the aggregate initial
public offering price of the Securities as set forth on such cover.
The relative fault of the Company on the one hand and the
Underwriters on the other hand shall be determined by reference to, among other
things, whether any such untrue
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or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of any such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 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
an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the principal amount of Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO
SURVIVE DELIVERY. All representations, warranties and agreements contained in
this Agreement or in certificates of officers of the Company or any of its
subsidiaries submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Company, and
<PAGE>
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shall survive delivery of the Securities to the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT
(a) TERMINATION; GENERAL. The Underwriters may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Prospectus, any
Material Adverse Change, or (ii) if there has occurred any material adverse
change in the financial markets in the United States, any outbreak of
hostilities or escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or international
political, financial or economic conditions, in each case the effect of which is
such as to make it, in the judgment of the Underwriters, impracticable to market
the Securities or to enforce contracts for the sale of the Securities, or
(iii) if trading in any securities of the Company has been suspended or
materially limited by the Commission, or if trading generally on the American
Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market
has been suspended or materially limited, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices have been required, by any
of said exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority, or
(iv) if a banking moratorium has been declared by either Federal or New York
authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof, and provided further that
Sections 1, 6, 7 and 8 shall survive such termination and remain in full force
and effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one
or more of the Underwriters shall fail at Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the Underwriters shall have the right, within 24 hours
thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, the Underwriters shall not have completed
such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10%
of the aggregate principal amount of the Securities to be purchased
hereunder, each of the non-defaulting Underwriters shall be obligated,
severally and not jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear
to the underwriting obligations of all non-defaulting Underwriters, or
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(b) if the number of Defaulted Securities exceeds 10% of the
aggregate principal amount of the Securities to be purchased hereunder,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Underwriters or the Company shall have
the right to postpone Closing Time for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.
SECTION 11. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Underwriters at Merrill Lynch & Co., North
Tower, World Financial Center, New York, New York 10281-1201, to the attention
of Brian K. Maier; notices to the Company shall be directed to it at 3930 Howard
Hughes Parkway, Las Vegas, Nevada 89109, to the attention of Clive Cummis, Esq.
SECTION 12. PARTIES. This Agreement shall each inure to the
benefit of and be binding upon the Underwriters and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Underwriters and the Company and
their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 14. EFFECT OF HEADINGS. The Article and Section
headings herein are for convenience only and shall not affect the construction
hereof.
<PAGE>
-24-
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
between the Underwriters and the Company in accordance with its terms.
Very truly yours,
PARK PLACE ENTERTAINMENT
CORPORATION
By:
Name:
Title:
<PAGE>
-25-
CONFIRMED AND ACCEPTED,
as of the date first above written
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BANC OF AMERICA SECURITIES LLC
DEUTSCHE BANK SECURITIES INC.
S.G. COWEN SECURITIES CORPORATION
SCOTIA CAPITAL MARKETS (USA) INC.
BNY CAPITAL MARKETS, INC.
FIRST UNION SECURITIES, INC.
PNC CAPITAL MARKETS, INC.
BEAR, STEARNS & CO. INC.
NORWEST INVESTMENT SERVICES, INC.
By:
--------------------------------
Authorized Signatory
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
LIST OF UNDERWRITERS
--------------------
Principal Amount
Name of Underwriter of Securities
<S> <C>
Merrill Lynch, Pierce Fenner & Smith Incorporated..... $120,000,000
Banc of America Securities LLC........................ 100,000,000
Deutsche Bank Securities Inc.......................... 60,000,000
SG Cowen Securities Corporation....................... 22,000,000
Scotia Capital (USA) Inc.............................. 22,000,000
BNY Capital Markets, Inc.............................. 18,000,000
First Union Securities, Inc........................... 18,000,000
PNC Capital Markets, Inc.............................. 18,000,000
Bear, Stearns & Co. Inc............................... 12,000,000
Norwest Investment Services, Inc...................... 10,000,000
Total........................................ $400,000,000
============
</TABLE>
SCH A-26
<PAGE>
SCHEDULE B
PRICING INFORMATION
--------------------
PARK PLACE ENTERTAINMENT CORPORATION
8 1/2% Notes due 2006
<TABLE>
<CAPTION>
Initial Public Underwriters'
Offering Price1 Purchase Price*
---------------- ---------------
<S> <C> <C>
8 1/2% Notes 99.019% 98.394%
</TABLE>
- -------------------------------
1 Expressed as a percentage of the face amount.
SCH B-27
<PAGE>
Exhibit A-1
FORM OF OPINION OF LATHAM & WATKINS
(1) The Company is a corporation duly incorporated and validly
existing in good standing as a corporation under the laws of the State of
Delaware and has the corporate power and authority to own, lease and operate
its properties and to conduct its business as described in the Prospectus and
to enter into and perform its obligations under the Agreement and the
Indenture.
(2) The Agreement has been duly authorized, executed and
delivered by the Company.
(3) The Securities have been duly authorized by the Company
for issuance and sale to the Underwriters pursuant to the Agreement. The
Securities, when executed by the Company and authenticated by the Trustee in
the manner provided for in the Indenture and delivered to the Underwriters
against payment of the purchase price therefor specified in the Agreement,
will constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as the
enforcement thereof may be limited by (a) the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to or affecting the rights or remedies of creditors; (b)
the effect of general principles of equity, whether enforcement is considered
in a proceeding in equity or at law, and the discretion of the court before
which any proceeding therefor may be brought; (c) the unenforceability under
certain circumstances under law or court decisions of provisions providing
for the indemnification of or contribution to a party with respect to a
liability where such indemnification or contribution is contrary to public
policy; and (d) the unenforceability of any provision requiring the payment
of attorney's fees, except to the extent that a court determines such fees to
be reasonable. The Securities are in the form contemplated by the Indenture.
(4) The Indenture has been authorized, executed and delivered
by the Company and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except to the
extent the enforcement thereof may be limited by (a) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to or affecting the rights or remedies of
creditors; (b) the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be brought;
(c) the unenforceability under certain circumstances under law or court
decisions of provisions providing for the indemnification of or contribution
to a party with respect to a liability where such indemnification or
contribution is contrary to public
A-1-28
<PAGE>
policy; (d) the unenforceability of any provision requiring the payment of
attorney's fees, except to the extent that a court determines such fees to be
reasonable; and (e) we express no opinion regarding the enforceability of the
waiver of rights or defenses contained in Section 5.15 of the Indenture. The
Indenture is qualified under the 1939 Act.
(5) The Securities and the Indenture conform in all material
respects to the descriptions thereof contained in the Registration Statement and
Prospectus.
(6) The Company is not an "investment company" within the meaning
of the 1940 Act.
(7) The execution, delivery and performance of the Agreement and
the Indenture by the Company and the offering, issuance or sale of the
Securities under the Agreement and the use of the proceeds therefrom as
described in the Prospectus Supplement will not, to our knowledge, require any
consent, approval, authorization or other order of, or qualification with, any
court or governmental body or agency (except such as may be required under the
securities or Blue Sky laws of various states).
(8) The Indenture complies as to form in all material respects
with the requirements of the 1939 Act, and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder.
(9) The execution and delivery by the Company of the Agreement,
the Indenture and the Securities and the offering, issuance or sale of the
Securities under the Agreement and the use of the proceeds therefrom as
described in Prospectus Supplement do not and will not, whether with or without
the giving of notice or passage of time or both, conflict with or constitute a
breach of, or default or Company Repayment Event under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any of its subsidiaries pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any
other agreement or instrument to which the Company, or any of its subsidiaries
is a party or by which it is or any of them may be bound, or to which any of the
assets, properties or operations of the Company or any of its subsidiaries is
subject that is identified by an officer of the Company as being material to the
Company and its subsidiaries, taken as a whole, and that is listed as an
attachment to such counsel's opinion ("Applicable Contracts"), except for such
conflicts, breaches, defaults or Company Repayment Events or liens, charges or
encumbrances that would not result in a Material Adverse Effect, nor will such
action result in any violation of the provisions of the charter or by-laws of
the Company or, to such counsel's knowledge, any Applicable Law (as defined
below) or any Applicable Order (as defined below). No opinion is expressed in
the foregoing opinion, however, as to the application of any antifraud or
antitrust laws, or as to the perfection or priority of any security interest.
For purposes of the foregoing, (a) the term "Applicable Law" shall mean only the
Delaware General Corporation Law and those laws,
A-1-29
<PAGE>
rules and regulations of the State of New York and of the United States of
America, in each case, that, in such counsel's experience, are normally
applicable to the transactions of the type provided for by the Agreement, but
without such counsel having made any special investigation with respect to
any other laws, rules or regulations, (b) the term "Applicable Order" shall
mean those court orders and orders of governmental authorities or
governmental bodies (if any) disclosed to such counsel and set forth in an
officer's certificate attached to such opinion.
(10) The documents of the Company incorporated by reference in
the Registration Statement and Prospectus (other than the financial statements
and notes thereto, schedules and other financial data included in, incorporated
by reference in or omitted therefrom, as to which such counsel expresses no
opinion), when they became effective or were filed with the Commission, as the
case may be, complied as to form in all material respects with the requirements
of the 1934 Act and the rules and regulations of the Commission thereunder.
(11) Based solely on certificates from public officials, such
counsel confirms that the Company is qualified to do business and is in good
standing in Florida, Louisiana, Maryland, Mississippi, Nevada and New Jersey.
(12) The Registration Statement is effective under the 1933 Act,
and to the best of our knowledge and information, no proceedings for a stop
order have been instituted or threatened under Section 8(d) of the 1933 Act.
(13) At the time the Registration Statement became effective, the
Registration Statement (other than the financial statements included or
incorporated by reference therein, as to which such counsel need express no
opinion) appeared on its face to be appropriately responsive in all material
respects to the 1933 Act, the rules and regulations of the Commission under the
1933 Act, and the 1939 Act.
In addition, we have participated in conferences with officers
and other representatives of the Company, counsel to the Underwriters,
representatives of the independent public accountants of the Company and
representatives of the Underwriters at which the contents of the Registration
Statement, the Prospectus, the Prospectus Supplement and related matters were
discussed. Although we have not verified, are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement, the Prospectus or the
Prospectus Supplement, and have not made any independent verification
thereof, in the course our participation, nothing has come to our attention
that caused us to believe that the Registration Statement, at the time it
became effective, contained an untrue
A-1-30
<PAGE>
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein not misleading
or that the Prospectus as supplemented by the Prospectus Supplement, as of
its date or at the date hereof, contained or contains 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 light of the
circumstances under which they were made, not misleading (it being understood
that we have not been requested to, and do not, express any belief with
respect to the financial statements and schedules and other financial data
included in or incorporated by reference in the Registration Statement,
Prospectus or Prospectus Supplement).
Such opinion may be limited to the federal laws of the United
States, the internal laws of the State of New York, and the General Corporation
Law of the State of Delaware.
A-1-31
<PAGE>
Exhibit A-2
FORM OF OPINION OF CLIVE CUMMIS
(1) Based solely on my review of and in reliance upon
certifications of relevant corporate officers of the Company, GNOC, Corp.,
Bally's Park Place, Inc. and Bally's Olympia Limited Partnership, of which
Bally's Operator, Inc., a Delaware corporation, is the general partner
(hereinafter referred to collectively as the "Relevant Gaming Subsidiaries"),
each of the Relevant Gaming Subsidiaries is validly existing as a corporation or
limited partnership, as the case may be, in good standing under the laws of the
jurisdiction of its incorporation or formation, has corporate or partnership
power and authority to own, lease and operate its properties and to conduct its
business to the extent described in the Prospectus or the Prospectus Supplement.
(2) Based solely on my review of and in reliance upon
certifications of relevant corporate officers of the Company, each Relevant
Gaming Subsidiary is in good standing in each foreign jurisdiction (to the
extent such foreign jurisdiction is the State of New Jersey or the State of
Delaware) in which such qualification is required, whether by reason of the
ownership, operation or leasing of property or the conduct of business, except
where the failure to so qualify or to be in good standing would not result in a
Material Adverse Effect on the Company and its subsidiaries and affiliates,
taken as a whole.
(3) Based solely on my review and in reliance upon the
certifications of relevant corporate officers of the Company, all of the issued
and outstanding capital stock of each Relevant Gaming Subsidiary (other than
Bally's Olympia Limited Partnership) has been duly authorized and is validly
issued, fully paid and non-assessable. Based solely on my review and in
reliance upon the certifications of relevant corporate officers of the Company,
all of the issued and outstanding limited partnership interests of Bally's
Olympia Limited Partnership, to the extent applicable under the Delaware Revised
Limited Uniform Partnership Act, has been duly authorized, validly issued, fully
paid and non-assessable.
(4) To my knowledge, and in reliance upon certifications of
relevant corporate officers of the Company, all of the issued and outstanding
capital stock or limited partnership interests of each Relevant Gaming
Subsidiary is owned by the Company directly or through subsidiaries free and
clear of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity.
Such opinion shall be limited to the Delaware General Corporation
Law, the Delaware Revised Limited Uniform Partnership Act and the internal laws
of the State of New Jersey.
A-2-32
<PAGE>
Exhibit A-3
FORM OF OPINION OF PHELPS DUNBAR
(1) The statements in the Prospectus or the Prospectus
Supplement under the caption "Regulation and Licensing-Louisiana Gaming Laws"
insofar as such statements, at the time they were made, constitute a summary
of certain provisions of the laws and regulations governing riverboat gaming
in Louisiana, have been reviewed by us and are accurate in all material
respects (except for financial data included therein or omitted therefrom, as
to which counsel express no opinion) and we do not know of any legal or
governmental proceedings in the State of Louisiana where the Company
conducts, or proposes to conduct, gaming operations required to be described
in the Prospectus or the Prospectus Supplement which are not described as
required.
(2) No facts have come to our attention that would lead us to
believe that the statements referred to in paragraphs (1) above contained, on
the date of the Prospectus or the Prospectus Supplement, any untrue statement
of a material fact or omitted to state any material fact required to be
stated therein or necessary to make such statements, in light of the
circumstances under which they are made, not misleading.
(3) (a) No consent, approval, authorization or other order, or
filing with, any state executive, legislative, judicial, administrative or
regulatory body (including any gaming regulatory body) or under the laws,
rules and regulations of the State of Louisiana is legally required in
connection with the commencement or consummation of the transactions
contemplated by the Agreement, and (b) the execution, delivery and
performance of the Agreement and the Indenture and the execution and delivery
of the Securities by the Company and the consummation of the transactions
contemplated thereby will not conflict with or violate any of the gaming
laws, rules and regulations of the State of Louisiana or orders or decrees
known to us of any State of Louisiana legislative, judicial, administrative
or regulatory body as to which the Company is bound. Further, the recipients
of this opinion understand and acknowledge that the transactions contemplated
by the Agreement, the Indenture and the Securities, and each of these
documents themselves, are subject to review by the Louisiana Gaming Control
Board and are subject to the continuing review of the Board in connection
with any gaming licenses issued to the Company.
(4) Based solely upon our review of the records of the
Louisiana Secretary of State and the truth and veracity of an Officer's
Certificate in the form attached hereto as Exhibit A, Belle of Orleans,
L.L.C. is a duly organized and validly existing limited liability company in
good standing under the laws of the jurisdiction of its organization, has the
limited liability company power and authority to own, lease and operate its
properties and to
A-3-33
<PAGE>
conduct its business as described in the Prospectus or the Prospectus
Supplement and is duly qualified as a foreign limited liability company to
transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership, operation or
leasing of property or the conduct of business.
(5) Except as described in the Prospectus or the Prospectus
Supplement, Belle of Orleans, L.L.C. has such gaming Authorizations from the
Louisiana Gaming Control Board as are necessary to own, lease and operate its
respective properties and to conduct its business in the manner described in
the Prospectus or the Prospectus Supplement, except where the failure to
obtain such gaming Authorizations would not have, singly or in the aggregate,
a Material Adverse Effect. Notwithstanding the foregoing, you recognize that
the suitability of Belle of Orleans, L.L.C. and its members to conduct gaming
operations is subject to continuous review, and Belle of Orleans, L.L.C. and
its members are subject, from time to time, to administrative proceedings or
investigations. The foregoing opinion relates only to the authorization to
conduct gaming operations on the date hereof, and we do not express or imply
that such suitability or authorization will continue, or that such matters
will not be affected by facts and circumstances known to us on the date
hereof.
A-3-34
<PAGE>
Exhibit A-4
FORM OF OPINION OF SCHRECK MORRIS
(1) The statements in the Prospectus or the Prospectus
Supplement under the heading "Regulation and Licensing-Nevada Gaming Laws"
(except for financial data included therein or omitted therefrom, as to which
we express no opinion), have been reviewed by us and insofar as such
statements constitute summaries of the statutes, laws and applicable
regulations of the State of Nevada regarding gaming (the "Nevada Gaming
Laws"), they are accurate and correct in all material respects and fairly
summarize the information called for.
(2) Insofar as the following relate to the Nevada Gaming Laws,
no authorization, approval, consent or license issued by any Nevada Gaming
Authority or any other governmental body, agency or official of the State of
Nevada is necessary in connection with the issuance of the Securities and the
due authorization, execution, delivery and performance by the Companies of
the Agreement, the Indenture, the Securities and the Acquisition Agreement,
except (a) such as have been obtained and are in full force and effect, (b)
such as may be required under Nevada state securities laws (as to which we
express no opinion) and (c) such as are required under the Nevada Gaming
Laws, as set forth in the Prospectus or the Prospectus Supplement.
(3) The execution, delivery and performance of the Agreement,
the Indenture, the Securities and the Acquisition Agreement by the Companies
that are parties thereto and the consummation of the transactions
contemplated thereby will not violate any of the Nevada Gaming Laws or any
orders or decrees of any executive, legislative, judicial, administrative or
regulatory body of the State of Nevada known to us to be binding upon the
Company and any of the Gaming Subsidiaries.
(4) Each of Flamingo Hilton-Laughlin, Inc., Parball
Corporation, BI Gaming Corporation, FHR Corporation and LVH Corporation (the
"Nevada Subsidiaries") has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the State of Nevada and has
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus or the Prospectus
Supplement.
(5) All of the issued and outstanding capital stock of each of
the Nevada Subsidiaries has been duly authorized and is validly issued, fully
paid and non-assessable and is owned by the Company directly or through
subsidiaries. None of the outstanding shares of capital stock of any of the
Nevada Subsidiaries was issued in violation of statutory preemptive
A-4-35
<PAGE>
or, to our knowledge, non-statutory preemptive or other similar rights of any
security holder.
A-4-36
<PAGE>
Exhibit A-5
FORM OF OPINION OF
SILLS CUMMIS RADIN TISCHMAN EPSTEIN & GROSS, P.A.
(1) As at the time such statements were made, the statements
in the Prospectus or the Prospectus Supplement under the caption "New Jersey
Gaming Laws" found under the heading "Regulation and Licensing" (except for
financial data included therein or omitted therefrom, as to which we express
no opinion), to the extent the same pertain solely to N.J.S.A. 5:12-1 et seq.
and the regulations promulgated pursuant thereto (collectively, the "New
Jersey Gaming Laws"), contain no untrue statement of a material fact or
omitted or omit to state any material fact required to be stated therein or
necessary to make such statements, in light of the circumstances under which
they were or are made, not misleading; and except as may be described in the
Prospectus or the Prospectus Supplement, we have no knowledge of any material
legal or governmental proceedings in the State of New Jersey to which the
Company or any affiliate that has licensed gaming operations in the State of
New Jersey (a "New Jersey Gaming Affiliate") is a named party wherein a claim
of a violation of the New Jersey Gaming Laws is asserted. The New Jersey
Gaming Affiliates include GNOC, Corp. and Bally's Park Place, Inc.
(2) Solely with respect to the New Jersey Gaming Laws, no
authorization, approval, consent or license issued by the "Casino Control
Commission" or the "Division of Gaming Enforcement" (as such governmental
authorities are referenced in the New Jersey Gaming Laws, hereinafter
referred to as the "New Jersey Regulators") is necessary in connection with
the issuance of the Securities or for the due authorization, execution and
delivery by the Company and/or any New Jersey Gaming Affiliate of the
Agreement and the consummation of the transactions contemplated thereby,
except such as have been obtained and are in full force in effect, and
subject to the additional limitations, qualifications and exceptions set
forth on Schedule 1 attached hereto and made a part hereof.
(3) Subject to the limitations, qualification and exceptions set
forth on Schedule 1 attached hereto and made a part hereof, the execution and
delivery of the Agreement, the Indenture and the Securities by the Company and
by any New Jersey Gaming Affiliate and the consummation of the transactions
contemplated thereby will not conflict with or violate (a) any New Jersey Gaming
Laws or (b) any order or decree of the New Jersey Regulators of which we have
knowledge as to which the Company or any New Jersey Gaming Affiliate is bound.
(4) Except as described in the Prospectus or the Prospectus
Supplement, solely with respect to New Jersey Gaming Laws, and in reliance upon
the certifications of relevant
A-5-37
<PAGE>
corporate officers of the Company, to our knowledge, each of the Company and
any New Jersey Gaming Affiliate has such authorizations from the New Jersey
Regulators as are necessary to own, lease and operate its respective
properties and to conduct its business in the manner described in the
Prospectus or the Prospectus Supplement, subject to the additional
limitations, qualifications and exceptions set forth on Schedule 1 attached
hereto and made a part hereof, and except where the failure to obtain such
authorizations would not have, singly or in the aggregate, a Material Adverse
Effect.
Such opinion shall be limited to the New Jersey Gaming Laws.
A-5-38
<PAGE>
Exhibit A-6
FORM OF OPINION OF
WATKINS LUDLAM WINTER & STENNIS, P.A.
(1) Except (a) as disclosed in the Prospectus or the
Prospectus Supplement, (b) for consents, approvals, authorizations, orders
and filings that have been obtained prior to the date of the opinion or for
those required under state securities or Blue Sky laws or regulations (as to
which such state securities or Blue Sky laws or regulations such counsel need
express no opinion), and (c) for the periodic and other filings and reporting
requirements to which any of the Company and the Mississippi Gaming
Subsidiaries (as defined in this opinion) are subject generally, to the best
knowledge of such counsel, no action has been taken and no statute, rule or
regulation (including, without limitation, any gaming statutes and
regulations) or order has been enacted, adopted or issued by any Mississippi
governmental agency (including, without limitation, the Mississippi Gaming
Commission) or body which prevents the issuance of the Securities, prevents
or suspends the use of any Prospectus or the Prospectus Supplement or
suspends the sale of Securities; to the best knowledge of such counsel, no
action, suit or proceeding is pending against or threatened against or
affecting the Company or any of the Mississippi Gaming Subsidiaries before
any Mississippi court or arbitrator or any Mississippi governmental body,
agency (including, without limitation, the Mississippi Gaming Commission) or
official, that, if adversely determined, would draw into question the
validity of the Agreement.
(2) Subject to the qualifications as set forth in paragraph (1)
above, the execution and delivery of the Agreement, the performance of the
Agreement, compliance by the Companies with provisions hereof and thereof and
the consummation of the transactions contemplated hereby and thereby, including
those included in the Prospectus or the Prospectus Supplement (including the
Transactions), in each case, as applicable, will not contravene any order of any
Mississippi court or governmental agency (including, without limitation, the
Mississippi Gaming Commission).
(3) The statements in the Prospectus or the Prospectus
Supplement under the captions "Risk Factors--Gaming referenda have been voted
on or are being proposed in Mississippi and California and adoption of these
referenda could have a material adverse effect on our business" and
"Regulation and Licensing--Mississippi Gaming Laws" have been reviewed by
such counsel and to the extent such statements constitute summaries of the
statutes, laws and applicable regulations of the State of Mississippi
regarding the casino industry and gaming, fairly summarize the information
called for with respect to such Mississippi legal matters and are correct and
accurate in all material respects.
A-6-39
<PAGE>
(4) None of the Underwriters, the Trustee or the holders of
the Securities (collectively referred to as "Participants") is required,
solely by reason of the transactions contemplated by the Agreement, to be
found suitable or to be licensed by the Mississippi Gaming Commission;
provided, however, the Mississippi Gaming Commission retains discretion to
require any Participant to file an application for a finding of suitability
and be found suitable in order to remain a Participant.
(5) Insofar as the following relate to the statutes, laws and
applicable regulations of the State of Mississippi regarding the casino
industry and gaming and subject to the qualifications set forth in paragraph
(1) above, no consent, approval, authorization or other order, or filing
with, any state executive, legislative, judicial, administrative or
regulatory body (including any gaming regulatory body) or under the laws,
rules and regulations of the State of Mississippi is legally required in
connection with the commencement or consummation of the transactions
contemplated by the Agreement.
(6) Subject to the qualifications as set forth in paragraph
(1) above, the execution, delivery and performance of the Agreement, the
Indenture, the Securities and the Acquisition Agreement by the Company and
the consummation of the transactions contemplated thereby will not conflict
with or violate any of the gaming laws, rules and regulations of the State of
Mississippi or orders or decrees of any State of Mississippi executive,
legislative, judicial, administrative or regulatory body known to us to be
binding upon the Company or any of the Mississippi Gaming Subsidiaries.
(7) Each of Grand Casinos of Mississippi, LLC-Gulfport, Grand
Casinos of Mississippi, Inc.- Biloxi, BL Development Corp. and Bally's
Olympia Limited Partnership, of which Bally's Operator, Inc., a Delaware
corporation, is the general partner (the "Mississippi Gaming Subsidiaries"),
has received a gaming operator's license from the Mississippi Gaming
Commission, subject to the terms and conditions under which each such license
was issued, which is necessary to own lease and operate each of their
respective properties and to conduct each of their respective businesses in
the manner described in the Prospectus or the Prospectus Supplement, and to
the knowledge of such counsel, there are no proceedings pending before the
Mississippi Gaming Commission to suspend or terminate any of such licenses.
The opinion of Watkins Ludlam Winter & Stennis, P.A. shall be
rendered to the Underwriters at the request of the Company and shall so state
therein. Such opinion shall be subject to standard exceptions,
qualifications and assumptions, including the retained discretion of the
Mississippi Gaming Commission to require a finding of suitability with
respect to any Participant, the authority of the Mississippi Gaming
Commission to require rescission of any loan transaction which is inimical to
the public health, safety, morals, good order or general welfare of the
people of the State of Mississippi or would reflect, or tend to reflect,
discredit upon the State of Mississippi or the gaming industry and required
filings with
A-6-40
<PAGE>
and approvals of the Mississippi Gaming Commission with respect
to the Securities and the approval of the Mississippi Gaming Commission to
any restrictions on the transfer of, and agreements not to encumber, the
stock or other equity securities of the Mississippi Gaming Subsidiaries that
are licensed or that are registered in the State of Mississippi (without
which such restrictions and agreements will not be effective pursuant to
Mississippi Gaming Commission Regulations II.E. Section 5 and II.G. section
5). While the Company has received a waiver from the prior approval
requirements under the Mississippi Gaming Control Act and Mississippi Gaming
Commission regulations with respect to private placements and public
offerings of its securities, the Mississippi Gaming Commission staff retains
the ability to issue a "stop order" with respect to such offerings.
A-6-41
<PAGE>
Exhibit A-7
FORM OF OPINION OF SUSAN L. JOHNSON
(1) The execution and delivery by the Company of the
Agreement, the Indenture and the Securities and the offering, issuance or
sale of the Securities under the Agreement and the use of the proceeds
therefrom as described in the Prospectus or the Prospectus Supplement do not
and will not, whether with or without the giving of notice or passage of time
or both, conflict with or constitute a breach of, or default or Company
Repayment Event under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to any Applicable Contracts (as defined below),
except for such conflicts, breaches, defaults or Company Repayment Events or
liens, charges or encumbrances that would not result in a Material Adverse
Effect. No opinion is expressed in the foregoing opinion, however, as to the
application of any antifraud or antitrust laws, or as to the perfection or
priority of any security interest.
For purposes of the foregoing, the term "Applicable Contracts"
shall mean each contract that the Company filed as an Exhibit 10 to its
Annual Report on Form 10-K for the year ended December 31, 1998 and its
Quarterly Reports on Form 10-Q for the three months ended March 31, 1999 and
the three months ended June 30, 1999.
(2) To the best of my knowledge, except as disclosed in the
Registration Statement and Prospectus, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation to which the Company or
any of its subsidiaries thereof is a party or to which the assets, properties
or operations of the Company or any of its subsidiaries thereof is subject,
before or by any court or governmental agency or body, domestic or foreign,
which might reasonably be expected to result in a Material Adverse Effect or
which would reasonably be expected to materially and adversely affect the
consummation of the transactions contemplated by this Agreement and the
Indenture or the performance by the Company of its material obligations
thereunder.
A-7-42
<PAGE>
EXHIBIT 99.01
OFFICERS' CERTIFICATE
The undersigned, Scott A. LaPorta and Janet E. Sockwell, do hereby
certify that they are duly appointed and the Executive Vice President and Chief
Financial Officer, and Vice President and Assistant Treasurer, respectively, of
PARK PLACE ENTERTAINMENT CORPORATION, a Delaware corporation (the "Company").
Each of the undersigned also hereby certifies, pursuant to the Indenture, dated
as of November 9, 1999, between the Company and Norwest Bank Minnesota, N.A., as
Trustee (the "Indenture"), that:
A. Pursuant to resolutions duly adopted by the Note Committee of the
Company on November 9, 1999, a series of Debt Securities (as defined in the
Indenture) to be issued under the Indenture has been established (the
"Notes"), with the following terms (defined terms used herein and not
otherwise defined herein have the meanings set forth in the Indenture):
(1) The Notes shall constitute a series of Debt Securities having the
title "8 1/2% Senior Notes due 2006."
(2) The aggregate principal amount of Notes that may be authenticated
and delivered under the Indenture (except for Notes authenticated and
delivered upon transfer of, or in exchange for, or in lieu of, other Notes
pursuant to Sections 3.04, 3.05, 3.06, 11.06 or 13.07 of the Indenture)
shall be $400,000,000.
(3) The entire outstanding principal of the Notes shall be payable on
November 15, 2006 (the "Maturity Date").
(4) The date from which such interest shall accrue shall be November
15, 1999; the Interest Payment Dates on which such interest will be payable
shall be May 15 and November 15 of each year, beginning May 15, 2000; the
Regular Record Dates for the interest payable on the Notes on any Interest
Payment Date shall be the preceding May 1 (in the case of interest payable
on any May 15) and November 1 (in the case of interest payable on any
November 15); and the basis upon which interest shall be calculated shall
be that of a 360-day year consisting of twelve 30-day months.
(5) Payments in respect of the Notes represented by Global Notes
(including principal, premium, if any, and interest) will be made in
immediately available funds to the accounts specified by the U.S.
Depositary.
(6) Upon not less than 30 nor more than 60 days' notice the Company
may redeem the Notes in whole but not in part at any time at a redemption
price equal to 100% of the principal amount thereof plus the Make-Whole
Premium, together with accrued and unpaid interest thereon, if any, to the
applicable redemption date. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date
to each holder of Notes to be redeemed at its registered address. Notes
called for redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on Notes called for
redemption.
(7) The Notes will not have the benefit of any sinking fund.
(8) The Notes shall be issued in denominations of $1,000 and any
integral multiple thereof.
(9) The Trustee shall be the Security Registrar and Paying Agent.
(10) The entire outstanding principal amount of the Notes shall be
payable upon declaration of acceleration of the maturity of such series
pursuant to Section 5.02 of the Indenture.
<PAGE>
(11) Payments of the principal and interest on the Notes shall be made
in Dollars, and the Notes shall be denominated in Dollars.
(12) The Notes will be payable at Maturity in an amount equal to the
principal amount thereof plus unpaid interest accrued to such Maturity.
(13) The Holders of the Notes shall have no special rights in addition
to those provided in the Indenture upon the occurrence of any particular
events.
(14) (A) There shall be the following additions and changes to the
Events of Default set forth in the Indenture with respect to the Notes:
The following additional remedy will apply to the Notes: In the case of
an Event of Default arising from certain events of bankruptcy or insolvency of
Park Place, all outstanding Notes will become due and payable immediately
without further action or notice by the holders of Notes or the trustee.
The following event of default replaces the fifth Event of Default
identified in Section 5.01 of the Indenture under "Events of Default" with
respect to the Notes:
(5) the acceleration of the maturity of indebtedness
of the Company (other than Non-recourse Indebtedness), at any one time,
in an aggregate amount in excess of the greater of (i) $25 million and
(ii) 5% of Consolidated Net Tangible Assets, if such acceleration is
not annulled within 30 days after written notice to the Company by the
trustee and the holders of at least 25% in principal amount of the
outstanding Notes.
(B) There shall be the following additions to the covenants set forth
in the Indenture with respect to the Notes:
LIMITATION ON LIENS. Other than as set forth below under
"Exempted Liens and Sale and Lease-Back Transactions," neither the Company
nor any of its Subsidiaries may create, assume or suffer to exist any Lien:
(1) upon any Principal Property;
(2) upon any shares of capital stock of any Restricted Subsidiary
owned by the Company or any Restricted Subsidiary; or
(3) securing Debt of any Restricted Subsidiary,
without equally and ratably securing the Notes with, or prior to, the Debt
secured by such Lien, for so long as such Debt shall be so secured,
PROVIDED, HOWEVER, that this limitation will not apply to:
(a) Liens existing on the date of issuance of the Notes;
2
<PAGE>
(b) Liens existing:
- on property at the time of acquisition through a merger, a
consolidation or otherwise by the Company or a Restricted
Subsidiary; or
- Liens existing on property or securing Debt of, or Capital
Stock of any corporation, partnership or other entity at the
time such corporation, partnership or other entity becomes a
Restricted Subsidiary;
(c) Liens to secure Debt with respect to all or any part of the
acquisition cost or the cost of construction or improvement of property,
provided, such Debt is incurred and related Liens are created within 24
months of the acquisition, completion of construction or improvement or
commencement of full operation, whichever is later, and such Debt does not
exceed the aggregate amount of the acquisition cost and/or the construction
cost thereof;
(d) Liens on shares of capital stock or property of a Restricted
Subsidiary to secure Debt with respect to all or part of the acquisition
cost of such Restricted Subsidiary, provided that such Debt is incurred and
related Liens are created within 24 months of the acquisition of such
Restricted Subsidiary and such Debt does not exceed the acquisition cost of
such Restricted Subsidiary;
(e) Liens to secure Debt incurred to construct additions to, or to
make Capital Improvements to, properties of the Company or any Restricted
Subsidiary, provided such Debt is incurred and related Liens are created
within 24 months of completion of construction or Capital Improvements and
such indebtedness does not exceed the cost of such construction or Capital
Improvements;
(f) Liens in favor of the Company or another Restricted Subsidiary;
(g) Liens to secure Debt on which interest payments are exempt from
Federal income tax under Section 103 of the Internal Revenue Code of 1986,
as amended;
(h) Liens on the equity interest of the Company or any Restricted
Subsidiary in any Joint Venture or any Restricted Subsidiary which owns an
equity interest in such Joint Venture to secure Debt, provided the amount
of such Debt is contributed and/or advanced solely to such Joint Venture;
(i) any extension, renewal or replacement, in whole or in part, of any
Liens referred to in the foregoing clauses (a) through (h) or of any Debt
secured thereby, including premium, if any, provided that the aggregate
principal amount secured does not exceed:
3
<PAGE>
- the greater of (1) the principal amount secured thereby at
the time of such extension, renewal or replacement, or, as
the case may be, repayment or extinguishment, and (2) 80% of
the fair market value (in the opinion of the Company's
board of directors) of the properties subject to such
extension, renewal or replacement, plus
- any reasonable fees and expenses associated with such
extension, renewal or replacement,
and provided, further, that in the case of a replacement thereof, such Debt
is incurred and related Liens are created within 24 months of the repayment
or extinguishment of the Debt or Liens referred to in the foregoing clauses
(a) through (h);
(j) purchase money liens on personal property;
(k) Liens to secure payment of workers' compensation or insurance
premiums, or relating to tenders, bids or contracts (except contracts for
the payment of money);
(l) Liens in connection with tax assessments or other governmental
charges, or as security required by law or governmental regulation as a
condition to the transaction of any business or the exercise of any
privilege or right;
(m) mechanic's, materialman's, carrier's or other like Liens, arising
in the ordinary course of business; and
(n) Liens in favor of any domestic or foreign government or
governmental body in connection with contractual or statutory obligations.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. Other than as provided
below under "--Exempted Liens and Sale and Lease-Back Transactions,"
neither the Company nor any Restricted Subsidiary will enter into any
arrangement with any lessor (other than the Company or a Restricted
Subsidiary), providing for the lease to the Company or a Restricted
Subsidiary for a period of more than three years (including renewals at the
option of the lessee) of any Principal Property that has been or is to be
sold or transferred by the Company or such Restricted Subsidiary to such
lessor or to any other Person, and for which funds have been or are to be
advanced by such lessor or other Person on the security of the leased
property ("Sale and Lease-Back Transaction"), unless either:
(a) Park Place or such Restricted Subsidiary would be entitled,
pursuant to the provisions described in clauses (a) through (n) under
"--Limitation on Liens" above, to create, assume or suffer to exist a Lien
on the property to be leased without equally and ratably securing the
Notes; or
4
<PAGE>
(b) an amount equal to:
- the greater of the net cash proceeds of such sale or the
fair market value of such property (in the opinion of the
Company's board of directors), less
- the fair market value (in the opinion of the Company's board
of directors) of any noncash proceeds of the sale of such
property (provided such noncash proceeds constitute
"Principal Property," acquired on the date the property sold
in the Sale and Lease-Back Transaction was acquired by the
Company or any of its Restricted Subsidiaries),
is applied within 180 days to the retirement or other discharge of the
Notes or Debt ranking on a parity with the Notes.
EXEMPTED LIENS AND SALE AND LEASE-BACK TRANSACTIONS. Notwithstanding
the restrictions set forth in "--Limitation on Liens" and "--Limitation on
Sale and Lease-Back Transactions," the Company or any Restricted
Subsidiary may create, assume or suffer to exist Liens or enter into Sale
and Lease-Back Transactions not otherwise permitted as described above,
provided that at the time of such event, and after giving effect thereto,
the sum of outstanding Debt secured by such Liens (not including Liens
permitted under "--Limitation on Liens" above) plus all Attributable Debt
in respect of such Sale and Lease-Back Transactions entered into (not
including Sale and Lease-Back Transactions permitted under "--Limitation on
Sale and Lease-Back Transactions"), measured, in each case, at the time any
such Lien is incurred or any such Sale and Lease-Back Transaction is
entered into, by the Company and Restricted Subsidiaries does not exceed
15% of Consolidated Net Tangible Assets.
REPORTS. Whether or not required by the Commission, so long as any
Notes are outstanding, the Company will file with the applicable trustee
such of the supplementary and periodic information, documents and reports
which may be required pursuant to Section 13 or Section 15(d) of the
Exchange Act in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such rules
and regulations.
5
<PAGE>
(C) As used in paragraphs 14(A) and 14(B) above, the following terms
have the meanings set forth below:
"Attributable Debt" with respect to any Sale and Lease-Back
Transaction that is subject to the restrictions described under
"--Limitation on Sale and Lease-Back Transactions" means the present value
of the minimum rental payments called for during the term of the lease
(including any period for which such lease has been extended), determined
in accordance with generally accepted accounting principles, discounted at
a rate that, at the inception of the lease, the lessee would have incurred
to borrow over a similar term the funds necessary to purchase the leased
assets.
"Capital Improvements" means additions to properties or renovations or
refurbishing of properties which are designed to substantially upgrade such
properties or significantly modernize the operation thereof.
"Capital Stock" means with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however
designated) of such Person's capital stock, and any rights (other than debt
securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock.
"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of the Company and its
Subsidiaries (less applicable depreciation, amortization and other
valuation reserves) after deducting therefrom (a) all current liabilities
of the Company and its Subsidiaries (excluding (i) the current portion of
long-term indebtedness, (ii) intercompany liabilities and (iii) any
liabilities which are by their terms renewable or extendible at the option
of the obligor thereon to a time more than 12 months from the time as of
which the amount thereof is being computed) and (b) all goodwill, trade
names, trademarks, patents, unamortized debt discount and any other like
intangibles, all as set forth on the most recent consolidated balance sheet
of the Company and computed in accordance with generally accepted
accounting principles.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities or commercial paper facilities, in each case with banks or
other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such
lenders against such receivables) or letters of credit, in each case, as
amended, restated, modified, renewed, refunded, replaced or refinanced in
whole or in part from time to time.
"Debt" means notes, bonds, debentures or other similar evidences of
Debt for borrowed money or any guarantee of any of the foregoing.
"Default" means any event that after notice or lapse of time, or both,
would become an Event of Default.
6
<PAGE>
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect from time to
time.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates.
"Joint Venture" means any partnership, corporation or other entity, in
which up to and including 50% of the partnership interests, outstanding
voting stock or other equity interest is owned, directly or indirectly, by
the Company and/or one or more Subsidiaries.
"Lien" means any mortgage, pledge, lien, encumbrance or other security
interest to secure payment of Debt.
"Make-Whole Premium" means, with respect to any Note at any redemption
date, the excess, if any, of (a) the present value of the sum of the
principal amount and premium, if any, that would be payable on such Note on
its maturity date and all remaining interest payments (not including any
portion of such payments of interest accrued as of the redemption date) to
and including such maturity date, discounted on a semi-annual bond
equivalent basis from such maturity date to the redemption date at a per
annum interest rate equal to the sum of the Treasury Yield (determined on
the Business Day immediately preceding the date of such redemption), plus
50 basis points, over (b) the principal amount of the Note being redeemed.
"Non-recourse Indebtedness" means indebtedness the terms of which
provide that the lender's claim for repayment of such indebtedness is
limited solely to a claim against the property which secures such
indebtedness.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any Debt.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
estate, unincorporated organization or government or any agency or
political subdivision thereof or any other entity.
7
<PAGE>
"Principal Property" means any real estate or other physical facility
or depreciable asset, the net book value of which on the date of
determination exceeds the greater of $25 million or 2% of Consolidated Net
Tangible Assets of the Company.
"Redeemable Capital Stock" means any class or series of Capital Stock
that, either by its terms, by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise, is or upon the
happening of an event or passage of time would be, required to be redeemed
prior to the stated maturity of the Notes or is redeemable at the option of
the holder thereof at any time prior to the stated maturity of the Notes,
or is convertible into or exchangeable for debt securities at any time
prior to the stated maturity of the Notes.
"Restricted Subsidiary" means any Subsidiary of the Company organized
and existing under the laws of the United States of America and the
principal business of which is carried on within the United States of
America (x) which owns, or is a lessee pursuant to a capital lease of, any
Principal Property or (y) in which the investment of the Company and all
its Subsidiaries exceeds 5% of Consolidated Net Tangible Assets as of the
date of such determination other than, in the case of either clause (x) or
(y), (i) each Subsidiary whose business primarily consists of finance,
banking, credit, leasing, insurance, financial services or other similar
operations, or any combination thereof, and (ii) each Subsidiary formed or
acquired after the date hereof for the purpose of developing new assets or
acquiring the business or assets of another Person and which does not
acquire any part of the business or assets of the Company or any Restricted
Subsidiary.
"Significant Subsidiary" of the Company means any Restricted
Subsidiary of the Company that is a "significant subsidiary" as defined
in Rule 1.02(v) of Regulation S-X under the Securities Act.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to
elect a majority of the directors of such corporation is, at the time,
directly or indirectly, owned by the Company or by one or more Subsidiaries
thereof, or by the Company and one or more Subsidiaries.
"Treasury Securities" mean any investment in obligations issued or
guaranteed by the United States government or any agency thereof.
"Treasury Yield" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity
(as compiled by and published in the most recent Federal Reserve
Statistical Release H.15 (519) which has become publicly available at least
two business days prior to the date fixed for redemption (or, if such
Statistical Release is no longer published, any publicly available source
of similar data)) most nearly equal to the then remaining average life of
the Notes, provided that if the average life of the Notes is not equal to
the constant maturity of a United States Treasury security for which a
weekly average yield is given, the Treasury yield shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from
the weekly
8
<PAGE>
average yields of United States Treasury securities for which such yields
are given, except that if the average life of the Notes is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"wholly owned" with respect to any Subsidiary, means any Subsidiary of
any Person of which at least 99% of the outstanding Capital Stock is owned
by such Person or another wholly-owned Subsidiary of such Person. For
purposes of this definition, any directors' qualifying shares or
investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
(15) The Notes shall be issuable only as Registered Securities in
permanent global forms (without coupons). Beneficial owners of interests in
the Global Notes may exchange such interests for Notes of like tenor or any
authorized form and denomination only in the manner provided in Section
3.04(c) of the Indenture. The Depository Trust Company shall be the U.S.
Depositary with respect to each Global Note. The form of such Global Notes
attached hereto as Exhibit A is hereby approved.
(16) The Notes shall not be issuable as Bearer Securities.
(17) Interest on any Note shall be payable only to the Person in whose
name that Note (or one or more predecessor Notes thereof) is registered at
the close of business on the Regular Record Date for such interest.
(18) Article 15 of the Indenture shall be applicable to the Notes.
(19) The Notes shall not be issuable in definitive form except under
the circumstances described in Section 3.04 of the Indenture.
(20) The Notes will be authenticated and delivered as provided in
Section 3.03 of the Indenture.
(21) The Notes shall not be convertible into Common Stock or other
securities or property of the Company.
(22) The Notes shall not be subordinated to any other Debt of the
Company, and shall constitute senior unsecured obligations of the Company.
(23) Compliance with the covenants set forth in paragraph 14(B) above
may not be waived by the Trustee unless the holders of at least a majority
in principal amount of all outstanding Notes consent to such waiver as set
forth in the Indenture; PROVIDED, HOWEVER, that the Company need not comply
with such covenants in the event it elects to comply with the provisions of
Article 15 set forth in the Indenture. The Trustee may amend the terms of
such covenants with the written consent of the holders of not less than a
majority in principal amount of outstanding Notes as set forth in the
Indenture.
(24) Each holder of a Note, by accepting any Note, shall be deemed to
have agreed to be bound by the requirements imposed on holders of Debt
Securities of the
9
<PAGE>
Company by the gaming authority of any jurisdiction of which the Company or
any of its subsidiaries conducts or proposes to conduct gaming activities.
B. The form of the Notes attached hereto as Exhibit A is approved.
C. The foregoing form and terms of the Notes have been established in
conformity with the provisions of the Indenture.
D. Each of the undersigned has read the Indenture and the definitions
relating thereto and has examined the resolutions referred to in paragraph
A above and the Notes and has made such examination or investigation as is
necessary to enable the undersigned to represent as to whether or not all
conditions precedent provided in the Indenture relating to the
establishment, authentication and delivery of the Notes have been complied
with. On the basis of the foregoing, all such conditions precedent have
been complied with.
10
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto executed this
Officers' Certificate as of the 9th day of November, 1999.
---
PARK PLACE ENTERTAINMENT,
a Delaware corporation
By: --------------------------------
Name: Scott A. LaPorta
Title: Executive Vice President and Chief Financial
Officer
By: --------------------------------
Name: Janet E. Sockwell, CFA
Title: Vice President and Assistant Treasurer
11
<PAGE>
PROSPECTUS SUPPLEMENT
(To prospectus dated February 8, 1999)
$400,000,000
[LOGO]
8 1/2% SENIOR NOTES DUE 2006
----------------
The notes will bear interest at 8 1/2% per year and will mature on
November 15, 2006. We will pay interest on the notes on May 15 and November 15
of each year, beginning on May 15, 2000.
We may redeem the notes at any time prior to their maturity at the
redemption prices and on the conditions specified in this prospectus supplement
under "Description of Notes--Optional Redemption."
The notes will be unsecured and will rank equally with all of our other
senior unsecured indebtedness.
INVESTING IN THE NOTES INVOLVES RISKS WHICH ARE DESCRIBED IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE S-11 OF THIS PROSPECTUS SUPPLEMENT.
------------------------
<TABLE>
<CAPTION>
PER NOTE TOTAL
-------- -----
<S> <C> <C>
Price to public(1).......................................... 99.019% $396,076,000
Underwriting discount....................................... .625% $2,500,000
Proceeds to Park Place...................................... 98.394% $393,576,000
</TABLE>
(1) Plus accrued interest from November 15, 1999, if settlement occurs
after that date
Neither the Securities and Exchange Commission nor any other federal or
state securities commission or regulatory authority, including any gaming
regulatory authority, has approved or disapproved of these securities or
determined that this prospectus supplement or the accompanying prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only through The
Depository Trust Company on or about November 15, 1999.
--------------------------
LEAD MANAGER
JOINT BOOK RUNNING MANAGER
MERRILL LYNCH & CO.
CO-LEAD MANAGER
JOINT BOOK RUNNING MANAGER
BANC OF AMERICA SECURITIES LLC
CO-LEAD MANAGER
DEUTSCHE BANC ALEX. BROWN
SG COWEN
------------------
SCOTIA CAPITAL
BNY CAPITAL MARKETS, INC.
FIRST UNION SECURITIES, INC.
PNC CAPITAL MARKETS, INC.
BEAR, STEARNS & CO. INC.
------------------------
The date of this prospectus supplement is November 9, 1999.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Market Data................................................. S-3
Summary..................................................... S-4
Risk Factors................................................ S-11
Forward-Looking Statements.................................. S-16
The Acquisition............................................. S-17
Use of Proceeds............................................. S-20
Capitalization.............................................. S-21
Unaudited Pro Forma Condensed Financial Statements.......... S-22
Selected Financial Data..................................... S-29
Properties of Caesars....................................... S-31
Regulation and Licensing.................................... S-34
Description of Other Indebtedness........................... S-42
Description of Notes........................................ S-43
Underwriting................................................ S-51
Legal Matters............................................... S-52
Independent Public Accountants.............................. S-52
Index to Financial Statements............................... F-1
PROSPECTUS
About This Prospectus....................................... 1
Where You Can Find More Information......................... 1
Incorporation of Certain Documents By Reference............. 1
Disclosure Regarding Forward-Looking Statements............. 2
The Company................................................. 2
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Description of Debt Securities.............................. 3
Description of Capital Stock................................ 12
Common Stock................................................ 12
Preferred Stock............................................. 13
Description of Depositary Shares............................ 15
Description of Warrants..................................... 18
Plan of Distribution........................................ 20
Legal Matters............................................... 21
Experts..................................................... 21
</TABLE>
------------------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and the underwriters have not, authorized any person to provide you with
different information or to make any representation not contained in this
prospectus supplement or the accompanying prospectus. If anyone provides you
with different or inconsistent information, you should not rely on it. You
should not assume the information contained in this prospectus supplement or the
accompanying prospectus and documents incorporated by reference is accurate
after the dates on the front covers of each of the prospectus supplement and the
accompanying prospectus and after the date of filing of the incorporated
documents. Our business, financial condition, results of operations and
prospects may have changed since those dates.
S-2
<PAGE>
MARKET DATA
Market data used in this prospectus supplement and the accompanying
prospectus, including information relating to our relative position in the
casino and gaming industry, is based on our good faith estimates, which we based
upon our review of internal surveys, independent industry publications and other
publicly available information. Although we believe these sources are reliable,
we have not independently verified the information and cannot guarantee its
accuracy and completeness.
S-3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND
MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU. YOU SHOULD
READ THIS ENTIRE PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS,
INCLUDING THE FINANCIAL DATA AND RELATED NOTES AND THE DOCUMENTS INCORPORATED BY
REFERENCE HEREIN AND IN THE ACCOMPANYING PROSPECTUS, BEFORE MAKING AN INVESTMENT
DECISION. THE TERMS "PARK PLACE," "WE," "OUR," AND "US," AS USED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS REFER TO PARK PLACE
ENTERTAINMENT CORPORATION AND ITS SUBSIDIARIES AS A COMBINED ENTITY EXCEPT WHERE
IT IS CLEAR THAT THE TERMS MEAN ONLY PARK PLACE ENTERTAINMENT CORPORATION.
PARK PLACE ENTERTAINMENT CORPORATION
We are the largest gaming company in the world, as measured by casino square
footage and revenues. We are currently the only gaming company with a
significant presence in Nevada, New Jersey and Mississippi, the three largest
U.S. gaming markets. We have approximately 1.4 million square feet of gaming
space and approximately 23,000 rooms. We operate our properties as a collection
of premier brand names that includes Bally's, Flamingo, Grand, Hilton and
Conrad. We believe our casino hotels are leading establishments with respect to
location, size, facilities, physical condition, quality and variety of services
offered in the areas in which they are located. We currently own or operate:
- nine U.S. land-based casinos;
- four U.S. dockside casinos;
- one U.S. riverboat casino;
- two land-based casinos in Australia; and
- one land-based casino in Uruguay.
Our properties are listed below.
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
NUMBER OF YEAR CASINO SQUARE
NAME AND LOCATION ROOMS/SUITES ACQUIRED FOOTAGE(1)
- ----------------- ------------ -------- -------------
<S> <C> <C> <C>
DOMESTIC CASINOS
NEW JERSEY
Bally's Park Place Casino Resort....................... 1,240 1996 155,000
The Atlantic City Hilton Casino Resort................. 804 1996 60,000
NEVADA
Flamingo Hilton Las Vegas.............................. 3,638 1971 93,000
Las Vegas Hilton....................................... 2,956 1971 100,000
Paris Casino Resort(2)................................. 2,900 1999 85,000
Bally's Las Vegas...................................... 2,814 1996 68,000
Reno Hilton............................................ 2,003 1992 114,000
Flamingo Hilton Laughlin............................... 1,912 1990 58,000
Flamingo Hilton Reno................................... 604 1981 46,000
MISSISSIPPI
Grand Casino Tunica.................................... 1,356 1998 140,000
Grand Casino Biloxi.................................... 985 1998 110,000
Grand Casino Gulfport.................................. 1,007 1998 110,000
Bally's Saloon-Gambling Hall-Hotel..................... 235 1996 40,000
LOUISIANA
Bally's Casino Lakeshore Resort(3)..................... -- 1996 30,000
(FOOTNOTES ON FOLLOWING PAGE)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
NUMBER OF YEAR CASINO SQUARE
NAME AND LOCATION ROOMS/SUITES ACQUIRED FOOTAGE(1)
- ----------------- ------------ -------- -------------
<S> <C> <C> <C>
INTERNATIONAL CASINOS
AUSTRALIA
Conrad Jupiters, Gold Coast(4)......................... 609 1985 70,000
Conrad International Treasury Casino, Brisbane(4)...... 136 1995 65,000
URUGUAY
Conrad International Punta del Este Resort and
Casino(5)............................................ 302 1997 38,000
------ ---------
Total.............................................. 23,501 1,382,000
====== =========
</TABLE>
- ------------------------
(1) Includes square footage attributable to our race and sports books.
(2) This property opened on September 1, 1999.
(3) We have a 49.9% ownership interest in this property.
(4) We have a 19.9% ownership interest in this property.
(5) We have a 46.4% ownership interest in this property.
Our principal executive offices are located at 3930 Howard Hughes Parkway,
Las Vegas, Nevada 89109, and our telephone number is (702) 699-5000.
THE ACQUISITION
On April 27, 1999, we entered into a definitive agreement with Starwood
Hotels & Resorts Worldwide, Inc. and several of its subsidiaries to acquire all
of the outstanding stock of Caesars World, Inc., a wholly owned subsidiary of
Starwood, and all of their interests in several other gaming entities for $3.0
billion in cash. We refer in this prospectus supplement to all of the interests
we are acquiring collectively as "Caesars." The closing of the acquisition is
conditioned upon the receipt of regulatory and gaming approvals, as more fully
described in the sections entitled "The Acquisition" and "Regulation and
Licensing."
Caesars owns and/or operates major gaming resorts in Las Vegas, Nevada,
Atlantic City, New Jersey and Harrison County, Indiana, as well as three other
domestic and five international properties. Caesars also owns strategic parcels
of land in Atlantic City and behind Caesars Palace in Las Vegas. We believe the
Caesars brand name is one of the most highly regarded and recognized brand names
in the gaming industry. We believe this acquisition is strategic and provides
built-in opportunities for growth. We also expect the acquisition to be
accretive to earnings and free cash flow in the first full year of operations.
On a pro forma basis following the Caesars acquisition, our combined casino
square footage and number of rooms will be approximately 2 million and 28,000,
respectively.
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<PAGE>
The following table sets forth information available to us at October 1999
about the Caesars properties in which we will have interests upon consummation
of the acquisition:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
NUMBER OF CASINO
NAME LOCATION ROOMS/SUITES SQUARE FOOTAGE
- ------------------------------------ --------------------------------- ------------ --------------
<S> <C> <C> <C>
DOMESTIC CASINOS
Caesars Palace Las Vegas, Nevada 2,454 125,000
Caesars Atlantic City Atlantic City, New Jersey 1,149 120,000
Caesars Indiana(1) Harrison County, Indiana --(2) 90,000
Caesars Tahoe(3) Stateline, Nevada 440 40,000
Sheraton Casino & Hotel Robinsonville, Mississippi 134 33,000
Dover Downs(4) Dover, Delaware -- 25,000
INTERNATIONAL CASINOS
Windsor Casino(5) Windsor, Canada 389 100,000
Caesars Gauteng(6) Kempton Park, South Africa -- 65,000
Sheraton Casino Sydney(10) Cape Breton, Nova Scotia, Canada -- 15,000
Sheraton Halifax Hotel & Casino(10) Halifax, Nova Scotia, Canada 350 20,000(7)
Caesars Manila(8) Manila, Philippines -- 4,000
Caesars Palace at Sea S.S. Crystal Harmony -- 3,850(9)
S.S. Crystal Symphony -- 5,000(9)
----- -------
Total 4,916 645,850
===== =======
</TABLE>
- ------------------------
(1) Caesars Indiana is managed by Caesars and owned by a joint venture in which
Caesars owns in excess of 90% of the economic interests.
(2) A 500-room hotel tower is currently planned to be under construction in
2000.
(3) Caesars leases the building that houses the hotel and casino and leases the
underlying land under a long-term ground and structure lease.
(4) Caesars provides management services to the casino at the Dover Downs
racetrack in Delaware.
(5) Caesars has a 50% interest in Windsor Casino Limited, which operates this
hotel/casino complex. The Province of Ontario owns the complex.
(6) Caesars has an approximately 25% interest in a joint venture that owns
Caesars Gauteng and has an approximately 50% interest in a joint venture
that manages Caesars Gauteng.
(7) A permanent casino featuring approximately 33,000 square feet is currently
under construction.
(8) Caesars has a 50% interest in a joint venture which owns Caesars Manila and
receives a marketing services fee.
(9) Caesars operates the Caesars Palace at Sea casinos only while the cruise
ships on which they are located are in international waters.
(10) Caesars has a 95% interest in Metropolitan Entertainment Group, which owns
and operates the two Canadian properties.
For a more detailed description of the above properties, see "Properties of
Caesars."
S-6
<PAGE>
OTHER RECENT DEVELOPMENTS
HILTON SPINOFF AND GRAND MERGER
We were incorporated in June 1998, and on December 31, 1998, Hilton Hotels
Corporation completed the transfer of the operations, assets and liabilities of
substantially all of its gaming business to us. Hilton distributed our common
stock to Hilton's shareholders tax-free on a one-for-one basis. Also on
December 31, 1998, immediately following our spin-off from Hilton, we acquired,
by means of a merger, the Mississippi gaming business of Grand Casinos, Inc.,
which includes the Grand Casino Biloxi, Grand Casino Gulfport and Grand Casino
Tunica properties, in exchange for the assumption of debt and the issuance of
our common stock to Grand shareholders on a one-for-one basis. Immediately prior
to the Grand merger, Grand completed the transfer of the operations, assets and
liabilities of its non-Mississippi business to Lakes Gaming, Inc. and then
distributed Lakes' common stock to Grand shareholders. The non-Mississippi
business consisted of the management of two Indian-owned casinos and other
assets and liabilities.
NEW CREDIT FACILITIES
In order to finance the Caesars acquisition, we entered into a new
$2.0 billion 364-day revolving credit facility on August 31, 1999. Up to
$650 million of this facility can be drawn before the closing of the
acquisition, at which point the entire $2.0 billion will be available subject to
various closing conditions. In addition to the new $2.0 billion 364-day
facility, we also entered into a $1.0 billion 364-day facility which may only be
used to provide funding for the Caesars acquisition. Availability under the
$1.0 billion facility will be reduced by the proceeds of any public notes we may
issue, including notes in this offering.
PARIS CASINO RESORT
On September 1, 1999 we opened the 2,900 room Paris Casino Resort in Las
Vegas, Nevada. This resort, which is located adjacent to Bally's Las Vegas on
the Las Vegas Strip, features an 85,000 square foot casino, eight restaurants,
130,000 square feet of convention space and a retail shopping complex with a
French influence. In addition to a 50 story replica of the Eiffel Tower, the
resort also features replications of some of Paris' most recognized landmarks,
including the Arc de Triomphe, the Paris Opera House, The Louvre and Rue de la
Paix.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
On October 25, 1999, we announced our results for the third quarter and nine
months ended September 30, 1999. Net income for the three months ended
September 30, 1999 before pre-opening expenses net of taxes, was $58 million or
$0.19 per diluted share compared with net income of $44 million or $0.14 per
diluted share on a pro forma basis including Grand in the prior year. Including
pre-opening expenses net income was $34 million or $0.11 per diluted share for
the three months ended September 30, 1999 compared to net income of $44 million
or $0.14 per diluted share on a pro forma basis including Grand in the prior
year.
For the nine months ended September 30, 1999, net income before pre-opening
expenses net of taxes, was $152 million or $0.49 per diluted share compared to
net income of $133 million or $0.43 per share on a pro forma basis including
Grand. For the nine months ended September 30, 1999, net income including
pre-opening expenses was $119 million or $0.39 per diluted share compared to
$133 million or $0.43 per diluted share on a pro forma basis including Grand in
the prior year.
We also reported that EBITDA (as defined) was $213 million for the three
months ended September 30, 1999 compared to $184 million on a pro forma basis
including Grand in the prior year. For the nine months ended September 30, 1999,
EBITDA was $585 million compared to $544 million in the prior year.
S-7
<PAGE>
OVERVIEW OF OUR CORPORATE STRUCTURE FOLLOWING THE ACQUISITION
The following chart shows a simplified version of our corporate structure
immediately following the proposed acquisition:
[LOGO]
S-8
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Issuer............................................... Park Place Entertainment Corporation.
Total Amount of Notes Offered........................ $400 million in principal amount of 8 1/2%
senior notes due 2006.
Maturity............................................. November 15, 2006.
Interest Payment Dates............................... May 15 and November 15, beginning May 15,
2000. Interest will accrue from the issue date
of the notes.
Optional Redemption.................................. We may redeem the notes at any time at the
redemption prices described in the
"Description of Notes" section under the
heading "Optional Redemption," plus accrued
and unpaid interest to the date of redemption.
Ranking.............................................. The notes are our unsecured obligations. The
notes will rank senior to our subordinated
indebtedness and equally with our other senior
indebtedness. The notes will effectively rank
junior to all liabilities of our subsidiaries.
Certain Covenants.................................... The indenture will, among other things, limit
our and our subsidiaries' ability to:
- enter into sale and lease-back transactions;
- incur liens on our assets to secure debt;
- merge or consolidate with another company;
and
- transfer our assets substantially as an
entirety.
These covenants are subject to a number of
important qualifications and exceptions which
are described in the "Description of Notes"
section under the heading "Additional
Covenants of Park Place" in this prospectus
supplement, and in the "Description of Debt
Securities" section under the heading
"Consolidation, Merger or Sale of Assets" in
the accompanying prospectus.
Use of Proceeds...................................... We estimate that the net proceeds from this
offering will be approximately $393 million.
We will use the net proceeds of the offering
to repay a portion of the outstanding debt
under our five-year revolving credit facility.
For additional details, see "Use of Proceeds."
</TABLE>
S-9
<PAGE>
RISK FACTORS
See "Risk Factors" for a discussion of the factors you should carefully
consider before deciding to invest in the notes, including factors affecting
forward-looking statements.
S-10
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN ADDITION TO THE OTHER
INFORMATION SET FORTH IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS AND THE INFORMATION INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS BEFORE MAKING AN INVESTMENT IN THESE
NOTES.
OUR SUBSTANTIAL INDEBTEDNESS FOLLOWING THE ACQUISITION COULD ADVERSELY AFFECT
OUR FINANCIAL RESULTS AND PREVENT US FROM FULFILLING OUR OBLIGATIONS UNDER THE
NOTES.
Following the acquisition, we will have a significant amount of
indebtedness. At June 30, 1999, pro forma for the acquisition and the incurrence
of indebtedness to fund the purchase price of Caesars, we would have had total
consolidated indebtedness of approximately $5.5 billion and stockholders' equity
of approximately $3.7 billion.
The notes will not restrict our ability to borrow substantial additional
funds in the future nor do they provide holders any protection should we be
involved in a highly leveraged transaction. If we add new indebtedness to our
anticipated debt levels following or prior to the acquisition, it could increase
the related risks that we face.
Our substantial indebtedness could have important consequences to you. For
example, it could:
- limit our ability to satisfy our obligations with respect to the notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate activities;
- limit our flexibility in planning for, or reacting to, changes in our
business and industry;
- place us at a competitive disadvantage compared to other less leveraged
competitors; and
- limit our ability to borrow additional funds.
SERVICING OUR INDEBTEDNESS WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH AND OUR
ABILITY TO GENERATE SUFFICIENT CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness, including
the notes, and to fund planned capital expenditures depends on our ability to
generate cash flow in the future. This, to some extent, is subject to general
economic, financial, competitive, legislative and regulatory factors and other
factors that are beyond our control. In addition, our ability to borrow funds
under our revolving credit facilities in the future will depend on our meeting
the financial covenants in the agreements, including an interest coverage test
and a leverage ratio test. We cannot assure you that our business will generate
cash flow from operations or that future borrowings will be available to us
under our revolving credit facilities in an amount sufficient to enable us to
pay our indebtedness, including the notes, or to fund our other liquidity needs.
As a result, we may need to refinance all or a portion of our indebtedness,
including the notes, on or before maturity. We cannot assure you that we will be
able to refinance any of our indebtedness on commercially reasonable terms or at
all. Our inability to generate sufficient cash flow or refinance our
indebtedness on commercially reasonable terms would have a material adverse
effect on our financial condition, results of operations and ability to satisfy
our obligations under the notes.
OUR ABILITY TO CONSUMMATE THE ACQUISITION DEPENDS ON, AMONG OTHER THINGS,
RECEIPT OF REGULATORY APPROVAL, INCLUDING GAMING APPROVALS IN VARIOUS
JURISDICTIONS.
Consummation of the acquisition is subject to the receipt of regulatory
approval, including gaming approvals in various jurisdictions. If all of the
required regulatory approvals have not been obtained by
S-11
<PAGE>
November 1, 1999, then the condition will be deemed satisfied when we have
obtained regulatory approvals from gaming authorities in Nevada, New Jersey,
Indiana and Windsor, Ontario. After these four regulatory approvals are
obtained, we will be obligated to purchase, at the full $3.0 billion purchase
price, those properties for which approvals have been obtained and any other
properties the acquisition of which would not result in a material liability or
impairment of a material contract. As of November 3, 1999, we had received
regulatory approvals in Mississippi, Nevada and New Jersey.
In the event of a closing on less than all of the properties, Starwood would
be required to conduct the retained properties in the ordinary course consistent
with the agreement and for our economic benefit. In addition, Starwood would be
required to use reasonable efforts to help us obtain the necessary consents and
approvals to convey the retained properties, and to convey the retained
properties to us as soon as those consents and approvals are obtained. If the
required consents and approvals are not obtained within six months of the
closing date, Starwood must, at our election, either:
- convey the retained properties to us notwithstanding our inability to
obtain the required consents and approvals; or
- sell the retained properties to a third party or parties and remit the net
proceeds of the sale to us.
If we were to close on less than all of the properties, we would bear the
following risks with respect to the retained properties, including:
- We would be required to pay all taxes, losses and reasonable costs
relating to the retained properties, and to reimburse Starwood for any net
cash shortfalls of the retained properties;
- We may not be able obtain the consents and approvals needed to acquire the
retained properties, and if we are unable to obtain such consents and
approvals and Starwood is required to sell the retained properties on our
behalf, Starwood may not obtain a price which reflects the fair value of
those properties; and
- Starwood may not operate the retained properties in a manner consistent
with the manner in which we would operate those properties, which could
reduce the value of those properties to us or a third party purchaser.
WE ARE A HOLDING COMPANY AND DEPEND ON THE BUSINESS OF OUR SUBSIDIARIES TO
SATISFY OUR OBLIGATIONS UNDER THE NOTES.
We are a holding company. Our subsidiaries conduct substantially all of our
consolidated operations and own substantially all of our consolidated assets.
Consequently, our cash flow and our ability to pay our debts depends upon our
subsidiaries' cash flow and their payment of funds to us. Our subsidiaries are
not obligated to make funds available to us for payment on the notes or
otherwise. In addition, our subsidiaries' ability to make any payments to us
will depend on their earnings, the terms of their indebtedness, business and tax
considerations, legal and regulatory restrictions and economic conditions. These
payments may not be adequate to pay interest and principal on the notes when
due. In addition, their ability to make payments to us depends on applicable law
and debt instruments to which they or we are a party, which may include
requirements to maintain minimum levels of working capital and other assets.
The notes will effectively rank junior to all existing and future
liabilities of our subsidiaries, including trade payables. In the event of a
bankruptcy, liquidation or dissolution of a subsidiary and following payment of
its liabilities, the subsidiary may not have sufficient assets remaining to make
any payments to us so that we can meet our obligations as the holding company,
including our obligations to you under the notes. Assuming completion of this
offering, as of June 30, 1999, our subsidiaries would have had approximately
$16 million of debt. The indenture governing the notes will not limit the
ability of our subsidiaries to incur substantial additional debt.
S-12
<PAGE>
WE MAY REQUIRE YOU TO DISPOSE OF YOUR NOTES OR REDEEM YOUR NOTES IF ANY GAMING
AUTHORITY FINDS YOU UNSUITABLE TO HOLD THEM.
We may require you to dispose of your notes or redeem your notes if any
gaming authority finds you unsuitable to hold them or in order to otherwise
comply with gaming laws to which we are subject, as more fully described in the
sections entitled "Regulation and Licensing" and "Description of Debt
Securities--Mandatory Disposition Pursuant to Gaming Laws."
LAKES GAMING, INC. MAY NOT BE ABLE TO SATISFY ITS INDEMNIFICATION OBLIGATIONS TO
GRAND AND THIS COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
In connection with Grand's spin-off of Lakes, Lakes and Grand agreed to
indemnify each other for liabilities retained by them. Among other things, Lakes
agreed to indemnify Grand for:
- liabilities related to Stratosphere Corporation, in which Grand formerly
had an ownership interest, including various lawsuits related to the
bankruptcy of Stratosphere Corporation to which Grand and some of its
current and former directors and officers are parties;
- other liabilities relating to the non-Mississippi business of Lakes, such
as tribal loan guarantees and real property lease guarantees; and
- Grand's ongoing indemnification obligations to current and former
directors and officers of Grand with respect to the foregoing.
As security to support Lakes' indemnification obligations to Grand, Lakes
agreed to irrevocably deposit, in trust for the benefit of Grand, as our
wholly-owned subsidiary, an aggregate of $30 million, consisting of four annual
installments of $7.5 million, during the four year period subsequent to
December 31, 1998. The first installment is due on December 31, 1999. Lakes'
ability to satisfy this funding obligation is materially dependent upon:
- the continued success of its operations;
- any National Indian Gaming Commission review of the Lakes' Indian casino
management contracts, including the assignment of these contracts to Lakes
in the spin-off; and
- the general risks inherent in the Lakes business.
If Lakes fails to fund the trust, or otherwise satisfy its indemnification
obligations to Grand, Grand would be required to satisfy any liabilities, which
could, either individually or in the aggregate, have a material adverse effect
on our business and results of operations.
Lakes will bear the cost of defending itself, its current and former
directors and officers, and Grand and its current and former officers and
directors for any settlement of or judgment in the Stratosphere litigation.
Although the Stratosphere lawsuits are in their early stages and Lakes plans to
defend itself vigorously, the costs of defense and any settlement or judgment
may have a material adverse effect on Grand if Lakes is unable to satisfy any of
its obligations to Grand. In the Lakes Form 10-Q for the period ended July 4,
1999, Lakes reported that it had total assets of $173 million (including cash of
$49 million) and total liabilities of $25 million at July 4, 1999.
For additional information concerning legal proceedings related to
Stratosphere, see our Form 10-K for the year ended December 31, 1998, and our
Form 10-Qs for the quarters ended March 31, 1999, and June 30, 1999, all of
which are incorporated by reference in the accompanying prospectus.
THE GAMING INDUSTRY IS HIGHLY COMPETITIVE.
To the extent that casino hotel room capacity is expanded by others in a
city where our casino hotels are located, competition will increase. The
completion of a number of room expansion projects and the opening of new casino
hotels led to a 3.8% increase in hotel capacity in Las Vegas in 1998 compared to
S-13
<PAGE>
1997, thereby increasing competition in all segments of the Las Vegas market.
Including our Paris Casino Resort, three new mega-resorts have opened in 1999.
We expect projects completed or under development to increase hotel room
capacity by nearly 10% in 1999 compared to 1998. The business of our Nevada
casino hotels might also be adversely affected if gaming operations of the type
conducted in Nevada were to be permitted under the laws of other states,
particularly California. Similarly, legalization of gaming operations in any
jurisdiction located near Atlantic City, New Jersey, or the establishment of new
large scale gaming operations on nearby Indian tribal lands, could adversely
affect our Atlantic City casino hotels. In addition, the supply in the Gulf
Coast region has recently increased with the opening of a new resort by a
competitor. This increase in supply could have an adverse effect on our Gulf
Coast properties. The expansion in any locale of riverboat gaming or casino
gaming on Indian tribal lands could also impact our gaming operations. Gaming
related referenda have been voted upon or are being proposed in several states
which could materially adversely affect us.
GAMING REFERENDA HAVE BEEN VOTED ON OR ARE BEING PROPOSED IN MISSISSIPPI AND
CALIFORNIA AND ADOPTION OF THESE REFERENDA COULD HAVE A MATERIAL ADVERSE EFFECT
ON OUR BUSINESS.
Voters in California approved Proposition Five, which was proposed by
California Indian tribes in the November 3, 1998 election. This referendum
sought to legalize games which several tribes operated in contravention of
California and Federal law, which could lead to the expansion of gaming
operations by California Indian tribes and could have a material adverse effect
on our Nevada operations. A legal action was filed in California State court
challenging the validity of Proposition Five under the California constitution.
On December 2, 1998, the California Supreme Court issued an order staying
implementation of Proposition Five. On August 23, 1999, the California Supreme
Court issued its decision on Proposition Five, concluding that Proposition Five
is invalid because it violates a state constitutional ban on Nevada-style casino
gambling. On September 10, 1999, nearly 60 Indian tribes and California's
Governor signed tribal-state agreements that would legalize casino-style
gambling in California. The agreements are contingent on a constitutional
amendment that would give tribes the right to offer a limited number of slot
machines and the range of house-banked card games. On September 10, 1999
California lawmakers approved the constitutional amendment along with a separate
measure ratifying the tribal-state agreements. California voters still must
approve the constitutional amendment which will appear on the March 2000 ballot.
In Mississippi, in three separate instances, referenda were proposed which,
if approved, would have amended the Mississippi Constitution to ban gaming in
Mississippi and would have required all currently legal gaming entities to cease
operations within two years of the ban. All three of the proposed referenda have
been ruled illegal by Mississippi state trial court judges because, among other
reasons, each of the proposed referenda failed to include required information
regarding the anticipated effect of such a ban on government revenues. The
proponents of the most recent referendum recently filed a notice of appeal of
the trial court ruling with the Mississippi Supreme Court, requesting expedited
action on the matter. Although briefing is underway, the Mississippi Supreme
Court has not scheduled any hearings with respect to the matter. Any such
referendum must be approved by the Mississippi Secretary of State and signatures
of approximately 98,000 registered voters must be gathered and certified in
order for such a proposal to be included on a statewide ballot for consideration
by the voters. The next election for which the proponents could attempt to place
such a proposal on the ballot would be in November 2000. It is likely at some
point that a revised initiative will be filed which will adequately address the
issues regarding the effect on government revenues of a prohibition of gaming in
Mississippi. However, while it is too early in the process for us to make any
predictions with respect to whether such a referendum will appear on a ballot or
the likelihood of such a referendum being approved by the voters, if such a
referendum were passed and gaming were prohibited in Mississippi, it would have
a material adverse effect on us and our Mississippi gaming operations.
S-14
<PAGE>
THE GAMING INDUSTRY IS HIGHLY REGULATED AND WE MUST ADHERE TO VARIOUS
REGULATIONS AND MAINTAIN OUR LICENSES TO CONTINUE OUR OPERATIONS.
The ownership, management and operation of gaming facilities are subject to
extensive federal, state, provincial, tribal and/or local laws, regulations, and
ordinances, which are administered by the relevant regulatory agency or agencies
in each jurisdiction. These laws, regulations and ordinances vary from
jurisdiction to jurisdiction, but generally concern the responsibility,
financial stability and character of the owners and managers of gaming
operations as well as persons financially interested or involved in gaming
operations. For a summary of gaming regulations that affect our business, see
"Regulation and Licensing." The regulatory environment in any particular
jurisdiction may change in the future and any such change could have a material
adverse effect on our results of operations.
THE NATIONAL GAMBLING IMPACT STUDY COMMISSION'S RECOMMENDATIONS MAY ADVERSELY
AFFECT THE GAMING INDUSTRY AND OUR OPERATIONS.
A National Gambling Impact Study Commission has been established by the
United States Congress to conduct a comprehensive study of the social and
economic impact of gaming in the United States. On April 28, 1999, the National
Commission voted to recommend that the expansion of gambling be curtailed. In
June 1999, the National Commission issued a final report of its findings and
conclusions, together with recommendations for legislative and administrative
actions. Below are highlights of some of those recommendations:
- Legal gaming should be restricted to those at least 21 years of age;
- Betting on college and amateur sports should be banned;
- The introduction of casino-style gambling at pari-mutuel racing facilities
for the primary purpose of saving the pari-mutuel facility financially
should be prohibited;
- Internet gaming should be banned within the United States;
- The types of gaming activities allowed by Indian tribes within a given
state should not be inconsistent with the gaming activities allowed to
other persons in that state; and
- State, local and tribal governments should recognize that casino gaming
provides economic development, particularly for economically depressed
areas. The National Commission differentiated casino gaming from
stand-alone slot machines (e.g., in convenience stores), Internet gaming
and lotteries which the commission stated do not provide the same economic
development.
Any additional regulation of the gaming industry which may result from the
National Commission's report may have an adverse effect on the gaming industry,
including us.
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THESE NOTES.
Prior to this offering, there was no public market for the notes. We have
been informed by the underwriters that they intend to make a market in the notes
after we complete this offering. However, the underwriters may cease their
market-making activity at any time. In addition, the liquidity of the trading
market in these notes, and the market price quoted for these notes, may be
adversely affected by changes in the overall market for these types of
securities and by changes in our financial performance or prospects or in the
prospects for companies in our industry generally. As a result, you cannot be
sure that an active trading market will develop for these notes.
S-15
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus and the documents
incorporated by reference in this prospectus supplement and the accompanying
prospectus include forward-looking statements. We intend for the words
"believes," "anticipates," "expects," "intends," "interested in," "plans,"
"continues," "projects" and similar expressions to identify forward-looking
statements. Forward-looking statements include, among other things, statements
relating to our plans, strategies, properties and adequacy of resources under
the headings "Summary," and "Properties of Caesars," and in our Form 10-K and
Form 10-Qs under the headings "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business and Properties of Park
Place." We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to risks, uncertainties, and assumptions about us and our
subsidiaries, including, among other things, factors discussed under the heading
"Risk Factors" in this prospectus supplement and in our filings with the
Securities and Exchange Commission and the following:
- the effect of economic, credit and capital market conditions in general
and on gaming companies in particular;
- construction and development issues, including environmental restrictions,
weather, soil conditions, building permits and zoning approvals;
- our ability to consummate the acquisition and successfully integrate
Caesars' operations into ours;
- the impact of competition, particularly from other gaming and hotel/gaming
operations;
- changes in laws or regulations, third party relations and approvals,
decisions of courts, regulators and governmental bodies;
- litigation outcomes and judicial action; and
- changes in customer demand.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus supplement and the accompanying prospectus
and the documents incorporated by reference in this prospectus supplement and
the accompanying prospectus might not occur.
S-16
<PAGE>
THE ACQUISITION
GENERAL
On April 27, 1999, we entered into a stock purchase agreement with Starwood
Hotels & Resorts Worldwide, Inc., a Maryland corporation, and several of its
subsidiaries, which we refer to collectively as "Starwood." Under this agreement
we have agreed to pay $3.0 billion in cash for:
(a) 100% of the stock of Caesars World Inc., a Florida corporation;
(b) 100% of the stock of Sheraton Tunica Corporation, a Delaware
corporation; and
(c) partnership interests, the acquisition of which will result in the
ownership of 95% of the total economic interests in Metropolitan
Entertainment Group, a Canadian partnership.
We refer to the gaming entities in (a), (b) and (c) above collectively in
this prospectus supplement as "Caesars."
The parties have agreed to adjust the purchase price upward (or downward) to
account for preclosing capital expenditures in excess of (or below) $5 million
per month. In addition, the parties have agreed to make similar adjustments for
net working capital in excess of (or below) $25 million as of the closing date.
If any financing obligations, including existing slot machine capital
leases, remain in existence at the closing of the acquisition, then at our sole
and exclusive option:
- the purchase price will be reduced by the amount of the financing
obligations; or
- the financing obligations will be discharged by paying out of the purchase
price the amount required to discharge the obligations.
Starwood has agreed to transfer to third parties, prior to the closing date,
and we will acquire no interest in, the following properties and assets that are
owned by Caesars: Cove Haven, Inc., Pocono Palace, Inc., Paradise Stream, Inc.,
Brookdale Resorts, Inc., Romantic Tours, Inc., Romantic Advertising, Inc., and
the Atlantic City Convention Center-Sheraton Hotel. Starwood will cause its
interest in the Sheraton Halifax Hotel to be transferred to Caesars, and we will
own this interest after the closing date of the acquisition.
COVENANTS
Until the closing of the acquisition, Starwood has agreed, among other
things, to:
- operate Caesars in the ordinary course and consistent with past practices;
- provide us with access to the facilities and employees of Caesars;
- refrain from soliciting other potential purchasers of Caesars;
- eliminate all intercompany indebtedness and other intercompany accounts
between Caesars and Starwood, other than a note for approximately
$23 million relating to a facility associated with Caesars Palace, Las
Vegas, Nevada;
- eliminate any indebtedness to third parties, other than capitalized
leases, which will be our obligation after the transaction's closing;
- terminate all intercompany agreements between Caesars and Starwood other
than certain agreements ancillary to the stock purchase agreement
described in more detail below under "Ancillary Agreements;" and
- cooperate with us in taking actions required to close the acquisition.
S-17
<PAGE>
We have agreed, among other things, to:
- cooperate with Starwood in taking actions required to close the
acquisition;
- provide the employees of Caesars with employee welfare and retirement
plans and programs that provide benefits substantially similar to those
provided to our other similarly situated employees, subject to any
contracts or other agreements with labor organizations and applicable law;
and
- pay specified severance, change of control and similar benefits that may
become payable as a result of the acquisition or as the result of the
termination of any employees of Caesars after the closing of the
acquisition, except that we and Starwood will each pay for one-half of all
severance benefits and change of control payments owing to an executive
officer of Caesars World, Inc.
REPRESENTATIONS AND WARRANTIES
Starwood has made representations to us regarding its ability to sell us its
interests in Caesars. We have made representations regarding our ability to
purchase Caesars.
TAX MATTERS
We have agreed with Starwood not to make an election under Section 338 of
the Internal Revenue Code with respect to this transaction except that we have
agreed to join in making a Section 338(h)(10) election with respect to the
acquisition of Sheraton Tunica Corporation and some of its subsidiaries so long
as the election does not require a corresponding election regarding Caesars
World and its subsidiaries.
CONDITIONS
The closing of the transaction is conditioned upon:
- the continued accuracy of the representations and warranties;
- the material performance of covenants;
- the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended;
- the receipt of other regulatory approvals; and
- the absence of any order, statute, regulation or similar restraint
enjoining or prohibiting the consummation of the transaction or any
material suit or proceeding by a governmental authority restraining the
transaction or rendering the stock purchase agreement ineffective.
On June 16, 1999, we received notification of the early termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
If all of the required regulatory approvals have not been obtained by
November 1, 1999, then the condition relating to regulatory approvals in the
acquisition agreement will be deemed satisfied when we have obtained regulatory
approvals from gaming authorities in Nevada, New Jersey, Indiana and Windsor,
Ontario. After these four regulatory approvals are obtained, we will be
obligated to purchase, at the full $3.0 billion purchase price, those properties
for which approvals have been obtained and any other properties that we can
acquire without causing a material liability or impairment of a material
contract. As of November 3, 1999 we had received regulatory approvals from
gaming authorities in Mississippi, Nevada and New Jersey. In the event of a
closing on less than all of the properties, Starwood would be required to
conduct the retained properties in the ordinary course consistent with the
agreement and for our economic benefit. In addition, Starwood would be required
to use reasonable efforts to help us obtain the necessary consents and approvals
to convey the retained properties, and to convey the retained properties to us
as
S-18
<PAGE>
soon as those consents and approvals are obtained. If the required consents and
approvals are not obtained within six months of the closing date Starwood must,
at our election, either:
- convey the retained properties to us notwithstanding our inability to
obtain the required consents and approvals; or
- sell the retained properties to a third party or parties and remit the net
proceeds of the sale to us.
During any period in which Starwood continues to hold retained operations
after the closing date, Starwood will be obligated to use its reasonable best
efforts to operate the retained operations in the ordinary course consistent
with the stock purchase agreement and to remit the net profits of the retained
operations to us (or, if it is not permitted by law to remit the net profits to
us, Starwood must set aside the net profits for our benefit pending conveyance
of the retained operations to us). We will be responsible for all costs
(including transfer taxes) incurred by Starwood in connection with any transfers
required to effectuate the foregoing.
TERMINATION
The stock purchase agreement may be terminated:
(1) by mutual consent of the parties; or
(2) by either party if:
(A) the other party materially breaches a representation, warranty or
covenant such that, after giving effect to a 30-day cure period, a
condition to the non-breaching party's obligation to close would not
be satisfied; or
(B) the closing has not occurred by January 31, 2000, other than as a
result of a breach of a representation, warranty or covenant of such
party; or
(C) the transaction has been permanently enjoined.
ANCILLARY AGREEMENTS
We intend to enter into agreements with Starwood, including a license
agreement to allow us to use the "Sheraton" name and related marks and to allow
Starwood to continue to use the "Caesars" name and related marks with respect to
properties that used these names prior to the transaction. In addition, we
intend to enter into an agreement with Starwood under which we will each provide
certain transitional services to each other at our respective costs. This
transitional services agreement's term will be for a period not to exceed one
year.
S-19
<PAGE>
USE OF PROCEEDS
We will use the net proceeds of the offering, estimated to be approximately
$393 million, to repay a portion of the outstanding debt under our five-year
revolving credit facility. As of June 30, 1999, we had approximately $1.4
billion outstanding under our five-year revolving credit facility bearing an
average interest rate of 6.26%. We incurred this indebtedness primarily to
consummate our spin-off from Hilton and repurchase the Grand 10 1/8% first
mortgage notes due 2003.
S-20
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization at June 30, 1999:
(a) on a historical basis;
(b) as adjusted after giving effect to our August 1999 issuance of
$300 million of senior notes due 2003 and this offering and the
application of the estimated net proceeds of $393 million as described
under "Use of Proceeds;" and
(c) pro forma for the acquisition.
You should read this information together with "The Acquisition," "Use of
Proceeds" and "Unaudited Pro Forma Condensed Financial Statements" and the
audited consolidated financial statements and related notes appearing elsewhere
in this prospectus supplement or incorporated by reference in the accompanying
prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
-------------------------------------------------------------------
ACTUAL AS ADJUSTED PRO FORMA
------------------------- ----------- -------------------------
($ IN MILLIONS)
<S> <C> <C> <C>
CASH AND EQUIVALENTS AND RESTRICTED CASH.................... $ 158 $ 158 $ 233
========================= ====== =========================
TOTAL CURRENT PORTION OF LONG-TERM DEBT..................... $ 7 $ 7 $ 18
========================= ====== =========================
LONG-TERM DEBT:
Revolving credit facilities(1)............................ $ 1,430 $ 741 $ 2,929
7 3/8% senior notes due 2002(2)........................... 299 299 299
7% senior notes due 2002(2)............................... 324 324 324
7 7/8% senior subordinated notes due 2005................. 400 400 400
7.95% senior notes due 2003............................... -- 298 298
8 1/2% senior notes due 2006.............................. -- 396 396
Commercial paper program.................................. 24 24 24
Other debt to fund acquisition(1)......................... -- -- 800
Other..................................................... 16 16 62
Less current portion of long-term debt.................. (7) (7) (18)
------------------------- ------ -------------------------
Total long-term debt, net of current portion............ $ 2,486 $2,491 $ 5,514
------------------------- ------ -------------------------
TOTAL STOCKHOLDERS' EQUITY.................................. 3,686 3,686 3,686
------------------------- ------ -------------------------
TOTAL CAPITALIZATION........................................ $ 6,179 $6,184 $ 9,218
========================= ====== =========================
</TABLE>
- ------------------------
(1) As of November 3, 1999, we had approximately $1.1 billion outstanding under
our five-year revolving credit facility. On August 31, 1999, we entered into
a new $2.0 billion revolving credit facility which replaced our prior
$650 million 364-day revolving credit facility. In addition to the new
$2.0 billion 364-day facility, we entered into a $1.0 billion 364-day
facility which may be used only to provide funding for the Caesars
acquisition. The pro forma figure in the table assumes that we issue
$1.5 billion in notes, inclusive of the $300 million aggregate principal
amount of 7.95% senior notes due 2003 we issued in August 1999 and these
notes, and use the proceeds to repay outstanding debt under our revolving
credit facilities. In order to fund the acquisition, we plan to borrow under
our existing $1.5 billion five-year revolving credit facility and our new
$2.0 billion 364-day revolving credit facility. For additional information,
see "Description of Other Indebtedness."
(2) In connection with our spin-off from Hilton, we assumed the payment
obligations with respect to these outstanding Hilton notes which are net of
unamortized discount.
S-21
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements are based
upon our historical consolidated financial statements and those of Grand and
Caesars. You should read this pro forma financial information together with
those historical consolidated financial statements and related notes, which are
included or incorporated by reference into this prospectus supplement or the
accompanying prospectus.
With respect to our merger with Grand and as further described in the
accompanying footnotes, the unaudited pro forma condensed statement of income
for the year ended December 31, 1998, gives effect to:
- our merger with Grand applying the purchase method of accounting; and
- adjustments that are directly attributable to the Grand merger and are
anticipated to have a continuing impact.
The pro forma condensed statement of income reflecting our merger with Grand
assumes the merger was consummated on January 1, 1998.
With respect to the proposed acquisition of Caesars, the unaudited pro forma
condensed statements of income for the six months ended June 30, 1999 and the
year ended December 31, 1998 give effect to:
- our acquisition of Caesars applying the purchase method of accounting; and
- adjustments that are directly attributable to the acquisition and
anticipated to have a continuing impact.
The pro forma condensed statements of income reflecting the acquisition
assume we completed the Caesars' acquisition on January 1, 1998.
The unaudited pro forma condensed balance sheet presents our combined
financial position with Grand and Caesars as of June 30, 1999. The unaudited pro
forma condensed balance sheet reflects the acquisition of Caesars applying the
purchase method of accounting and adjustments that are directly attributable to
the acquisition and anticipated to have a continuing impact. The pro forma
condensed balance sheet assumes we completed the Caesars' acquisition as of
June 30, 1999.
We have prepared the unaudited pro forma condensed financial statements
based upon currently available information and assumptions that we have deemed
appropriate. This pro forma information may not be indicative of what actual
results would have been, nor does the data purport to represent our and Caesars'
combined financial results for future periods.
For the purpose of preparing these pro forma financial statements, we will
undertake a study to establish the fair value of the acquired assets and
liabilities of Caesars. The allocation of the purchase price to the assets and
liabilities acquired reflected in this pro forma financial data is preliminary.
Accordingly, the actual financial position and results of operations may differ
from these pro forma amounts.
The following table sets forth the calculation of the purchase price of
Caesars and the preliminary allocation as of June 30, 1999.
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Purchase Price.............................................. $3,000
Other adjustments, net...................................... 9
Transaction costs and expenses.............................. 25
------
$3,034
======
</TABLE>
S-22
<PAGE>
The preliminary allocation of the pro forma purchase price is as follows:
<TABLE>
<S> <C>
Property and equipment...................................... $2,500
Goodwill.................................................... 731
Other, net.................................................. (197)
------
$3,034
======
</TABLE>
We are currently in the process of allocating the purchase price among the
assets to be acquired and the liabilities assumed. The final purchase price and
its allocation will be based on independent appraisals, discounted cash flows,
quoted market prices and estimates by management and is expected to be completed
within one year following the Caesars acquisition.
S-23
<PAGE>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF JUNE 30, 1999
(IN MILLIONS)
<TABLE>
<CAPTION>
PARK PLACE
HISTORICAL CAESARS PRO FORMA PARK PLACE
(INCLUDING GRAND) HISTORICAL ADJUSTMENTS PRO FORMA
----------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................... $ 152 $ 75 $ -- $ 227
Restricted cash............................. 6 -- -- 6
Accounts receivable, net.................... 132 104 -- 236
Other current assets........................ 142 36 -- 178
------ ------ ------- -------
Total current assets...................... 432 215 -- 647
Investments................................. 181 56 -- 237
Property and equipment, net................. 5,250 1,990 510 (a) 7,750
Goodwill.................................... 1,278 -- 731 (b) 2,009
Goodwill--Caesars........................... -- 970 (970)(c) --
Other assets................................ 82 102 30 (d) 214
------ ------ ------- -------
Total assets.................................. $7,223 $3,333 $ 301 $10,857
====== ====== ======= =======
LIABILITIES AND EQUITY
Accounts payable and accrued expenses....... $ 345 $ 195 $ 25 (e) $ 565
Current maturities of long-term debt........ 7 11 -- 18
Income taxes payable........................ 4 32 -- 36
------ ------ ------- -------
Total current liabilities................. 356 238 25 619
Bank financing.............................. 1,430 1,536 (f) 2,929
(37)(g)
Notes and other............................. 1,056 185 1,494 (f)
(150)(h) 2,585
Deferred income taxes, net.................. 644 82 224 (i) 950
Due to parent and affiliates................ -- 1,039 (1,039)(j) --
Other non-current liabilities............... 51 37 -- 88
------ ------ ------- -------
Total liabilities......................... 3,537 1,581 2,053 7,171
------ ------ ------- -------
EQUITY
Common stock, 303 million shares
outstanding............................... 3 -- -- 3
Additional paid-in capital.................. 3,618 -- -- 3,618
Other....................................... (8) -- -- (8)
Retained earnings........................... 85 -- -- 85
Common stock in treasury at cost, 1.7
million shares............................ (12) -- -- (12)
Division equity............................. -- 1,752 (1,752)(k) --
------ ------ ------- -------
Total equity.............................. 3,686 1,752 (1,752) 3,686
------ ------ ------- -------
Total liabilities and equity.................. $7,223 $3,333 $ 301 $10,857
====== ====== ======= =======
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
S-24
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
The following pro forma adjustments have been made to the unaudited pro
forma balance sheet as of June 30, 1999:
(a) Reflects the net increase in the carrying value of Caesars' property and
equipment to adjust those assets to their estimated fair market value.
(b) Reflects as goodwill the excess purchase price over fair value of net
tangible assets acquired and liabilities assumed.
(c) Reflects the elimination of Caesars' historical goodwill.
(d) Reflects deferred financing charges related to the notes and increased bank
facility financings.
(e) Reflects the accrual of direct merger costs related to the acquisition.
(f) Reflects the increase in long-term debt of $1.5 billion to be drawn under
our revolving credit facilities and the issuance of long-term notes in the
aggregate amount of $1.5 billion.
(g) Reflects the adjustment to the purchase price for the net working capital
adjustment, capital expenditure adjustment and the slot machine capital
lease obligations pursuant to the purchase agreement.
(h) Reflects the elimination of Caesars' 8 7/8% senior subordinated notes which
Caesars redeemed in August 1999.
(i) Reflects the deferred tax liability due to the carryover tax basis of the
assets acquired and the fair value of such assets as recorded by Park Place.
(j) Reflects the elimination of Caesars' loans due to parent and affiliates.
(k) Reflects the elimination of Caesars' equity accounts.
S-25
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PARK PLACE
HISTORICAL CAESARS PRO FORMA PARK PLACE
(INCLUDING GRAND) HISTORICAL ADJUSTMENTS PRO FORMA
----------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues
Casino...................................... $1,070 $522 $ -- $1,592
Rooms....................................... 181 59 -- 240
Food and beverage........................... 132 54 -- 186
Other revenue............................... 104 64 -- 168
------ ---- ----- ------
1,487 699 -- 2,186
------ ---- ----- ------
Expenses
Casino...................................... 558 307 -- 865
Rooms....................................... 65 16 -- 81
Food and beverage........................... 122 47 -- 169
Other expenses.............................. 353 162 -- 515
Depreciation and amortization............... 142 88 22 (c)
(14)(d) 238
Pre-opening expense......................... 10 1 -- 11
Corporate expense........................... 17 -- -- 17
------ ---- ----- ------
1,267 621 8 1,896
------ ---- ----- ------
Operating income.............................. 220 78 (8) 290
Starwood management fee..................... -- (16) 16 (e) --
Interest and dividend income................ 6 -- -- 6
Interest expense and other, net............. (58) (20) (120)(f)
17 (g) (181)
Interest expense, net from unconsolidated
affiliates................................ (6) -- -- (6)
------ ---- ----- ------
Income before income taxes and minority
interest.................................. 162 42 (95) 109
Provision for income taxes.................. 73 21 (30)(h) 64
Minority interest, net...................... 2 (2) -- --
------ ---- ----- ------
Income from continuing operations............. $ 87 $ 23 $ (65) $ 45
====== ==== ===== ======
Basic earnings per share...................... $ 0.29 $ 0.15
====== ======
Diluted earnings per share.................... $ 0.28 $ 0.15
====== ======
Basic weighted average shares outstanding..... 303 303
====== ======
Diluted weighted average shares outstanding... 306 306
====== ======
</TABLE>
(FOOTNOTES ON FOLLOWING PAGES)
S-26
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PARK PLACE,
PARK PLACE GRAND AND
PARK PLACE GRAND PRO FORMA AND GRAND CAESARS PRO FORMA CAESARS
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Casino....................... $1,587 $ 513 $ -- $2,100 $ 937 $ -- $3,037
Rooms........................ 306 34 -- 340 105 -- 445
Food and beverage............ 230 35 -- 265 101 -- 366
Management fee income........ -- 92 (92)(a) -- -- -- --
Other revenue................ 182 13 -- 195 113 -- 308
------ ------ ------- ------ ------ ------- ------
2,305 687 (92) 2,900 1,256 -- 4,156
------ ------ ------- ------ ------ ------- ------
Expenses
Casino....................... 845 169 -- 1,014 558 -- 1,572
Rooms........................ 112 16 -- 128 33 -- 161
Food and beverage............ 230 37 -- 267 88 -- 355
Other expenses............... 555 216 4 (a) 775 257 -- 1,032
Depreciation and
amortization............... 225 59 -- 284 143 44 (c)
(27)(d) 444
Impairment losses and
other...................... 29 -- (13)(b) 16 39 -- 55
Pre-opening expense.......... -- -- -- -- 42 -- 42
Corporate expense............ 7 57 (31)(a) 33 -- -- 33
------ ------ ------- ------ ------ ------- ------
2,003 554 (40) 2,517 1,160 17 3,694
------ ------ ------- ------ ------ ------- ------
Operating income............... 302 133 (52) 383 96 (17) 462
Starwood Management Fee........ -- -- -- -- (33) 33 (e) --
Interest and dividend
income..................... 21 10 (5)(a) 26 -- -- 26
Interest expense and other,
net........................ (87) (45) -- (132) (26) (240)(f)
23(g) (375)
Interest expense, net from
unconsolidated
affiliates................. (13) -- -- (13) -- -- (13)
------ ------ ------- ------ ------ ------- ------
Income before income taxes
and minority interest...... 223 98 (57) 264 37 (201) 100
Provision for income taxes... 111 27 (16)(a) 122 22 (64)(h) 80
Minority interest, net....... 3 -- -- 3 (5) -- (2)
------ ------ ------- ------ ------ ------- ------
Income from continuing
operations................... $ 109 $ 71 $ (41) $ 139 $ 20 $ (137) $ 22
====== ====== ======= ====== ====== ======= ======
Basic earnings per share....... $ 0.42 $ 0.46 $ 0.07
====== ====== ======
Diluted earnings per share..... $ 0.42 $ 0.45 $ 0.07
====== ====== ======
Basic weighted average shares
outstanding.................. 261 303 303
====== ====== ======
Diluted weighted average shares
outstanding.................. 263 306 306
====== ====== ======
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
S-27
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF INCOME
The following pro forma adjustments have been made to the unaudited pro
forma statements of income for the six months ended June 30, 1999 and the year
ended December 31, 1998:
(a) Reflects the elimination of Lakes Gaming, Inc.
(b) Reflects the elimination of the transaction costs associated with our
spin-off from Hilton and our merger with Grand.
(c) Reflects the adjustment to depreciation expense due to the revaluation of
the acquired property and equipment resulting from the allocation of the
purchase price of Caesars. This adjustment also reflects the increase in
expense due to amortization of goodwill arising from our purchase of
Caesars. Goodwill is to be amortized over 40 years.
(d) Reflects the elimination of Caesars' historical goodwill.
(e) Reflects the elimination of the intercompany management fee charged by
Starwood.
(f) Reflects additional interest expense, including amortization of related
deferred finance charges, arising from expected borrowings incurred by us to
fund the purchase of Caesars. We expect to fund the acquisition with
borrowings under our revolving credit facilities. The pro forma effects of
borrowings under the revolving credit facilities, this offering, the August
1999 issuance of $300 million of 7.95% senior notes and the proposed
subsequent note offerings have been computed at a blended interest rate of
7.9%. Each 1/8% change in the rate on the borrowings would result in a
change in interest expense of $4 million for the year.
(g) Reflects the elimination of the interest expense on the Caesars World, Inc.
8 7/8% senior subordinated notes, which Caesars redeemed in August 1999, and
loans due to parent and affiliates.
(h) Reflects the tax effect of the pro forma adjustments using the statutory
rate of 35%, with the exception of the amortization of goodwill, which is
assumed to be non-deductible for tax purposes.
S-28
<PAGE>
SELECTED FINANCIAL DATA
In the following tables we are providing certain selected financial
information to aid you in your analysis of our company.
PARK PLACE SELECTED HISTORICAL FINANCIAL INFORMATION
We derived the following historical information from our audited financial
statements for 1995 through 1998 and unaudited financial statements for 1994 and
the six months ended June 30, 1998 and 1999 before giving effect to the
acquisition. The information is only a summary and you should read it together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our historical financial statements and related notes which are
set forth in the reports we have filed with the Commission and that are
incorporated by reference in the accompanying prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OR AS OF JUNE 30, FISCAL YEARS ENDED OR AS OF DECEMBER 31,
------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Total revenue..................... $1,487 $1,149 $2,305 $2,153 $ 970 $ 942 $ 899
Total operating income............ 220 187 302 201 92 165 162
Income from continuing
operations...................... 87 80 109 67(1) 36(2) 85 79
Income from continuing operations
per share--diluted.............. $ .28 $ .30 $ .42 $ .25 $ .18 $ .44 $ .41
OTHER OPERATING DATA:
EBITDA(3)......................... $ 372 $ 299 $ 556 $ 512 $ 216 $ 253 $ 240
Ratio of earnings to fixed
charges(4)...................... 2.6x 3.6x 2.7x 2.4x 2.1x 4.0x 3.8x
BALANCE SHEET(5):
Cash and equivalents, restricted
cash and temporary
investments..................... $ 158 $ 382 $ 234 $ 232 $ 38 $ 26
Total assets...................... 7,223 7,174 5,630 5,364 1,350 1,248
Total debt........................ 2,493 2,472 1,306 1,278 549 549
Total stockholders' equity........ 3,686 3,608 3,381 3,157 592 510
</TABLE>
- ------------------------
(1) Includes after-tax non-recurring charges totaling $59 million related to the
recognition of impairment losses related to a riverboat casino and an
impairment loss and other costs associated with the closure of another
riverboat casino.
(2) Includes after-tax non-recurring charges totaling $23 million, primarily
related to the write-off of pre-opening expenses for a riverboat casino and
losses associated with a planned relocation of another riverboat casino.
(3) EBITDA is earnings before interest, taxes, depreciation, amortization,
pre-opening costs, non-cash items and spin-off costs in 1998, which can be
computed by adding depreciation, amortization, pre-opening costs, spin-off
costs and non-cash items to operating income. We have presented EBITDA
supplementally because we believe it provides a more complete analysis of
results of operations. We have excluded non-cash items, such as asset
write-downs and impairment losses and pre-opening costs from EBITDA as these
items do not impact operating results on a recurring basis. Pre-tax non-cash
charges totaled $16 million for the year ended December 31, 1998 and
$96 million for the year ended December 31, 1997 and relate to the
recognition of impairment losses on a riverboat casino and an impairment
loss and other costs associated with the closure of another riverboat
casino. Our pre-tax non-cash charges totaled $1 million for the year ended
December 31, 1996 and relate to the write-down of an asset to estimated fair
market value. You should not consider EBITDA as an alternative to any
measure of performance as promulgated under generally accepted accounting
principles, such as
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operating income or income from continuing operations, nor should you
consider it to be an indicator of our overall financial performance. Our
calculations of EBITDA may be different from the calculations used by other
companies and therefore comparability may be limited. Our historical
depreciation, amortization, pre-opening costs, non-cash items and spin-off
costs for the six months ended June 30, 1999 and 1998 and the years ended
December 31 1998, 1997, 1996, 1995 and 1994 totaled $152 million,
$112 million, $254 million, $311 million, $124 million, $88 million and
$78 million, respectively.
(4) We determined the ratio of earnings to fixed charges by dividing (a)
earnings before income taxes and minority interests plus fixed charges
(excluding capitalized interest) by (b) fixed charges. Fixed charges consist
of interest on indebtedness, including capitalized interest, the portion of
rental expense that is considered to be interest, and amortization of loan
expense related to long-term debt.
(5) Gives effect to the Grand merger as of December 31, 1998 and June 30, 1999.
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PROPERTIES OF CAESARS
The following table sets forth information available to us at October 1999
about the Caesars properties in which we will have interests upon consummation
of the acquisition:
<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE
NUMBER OF CASINO
NAME LOCATION ROOMS/SUITES SQUARE FOOTAGE
- ------------------------------------ --------------------------------- ------------ --------------
<S> <C> <C> <C>
DOMESTIC CASINOS
Caesars Palace Las Vegas, Nevada 2,454 125,000
Caesars Atlantic City Atlantic City, New Jersey 1,149 120,000
Caesars Indiana(1) Harrison County, Indiana --(2) 90,000
Caesars Tahoe(3) Stateline, Nevada 440 40,000
Sheraton Casino & Hotel Robinsonville, Mississippi 134 33,000
Dover Downs(4) Dover, Delaware -- 25,000
INTERNATIONAL CASINOS
Windsor Casino(5) Windsor, Canada 389 100,000
Caesars Gauteng(6) Kempton Park, South Africa -- 65,000
Sheraton Casino Sydney(10) Cape Breton, Nova Scotia, Canada -- 15,000
Sheraton Halifax Hotel & Casino(10) Halifax, Nova Scotia, Canada 350 20,000(7)
Caesars Manila(8) Manila, Philippines -- 4,000
Caesars Palace at Sea S.S. Crystal Harmony -- 3,850(9)
S.S. Crystal Symphony -- 5,000(9)
----- -------
Total 4,916 645,850
===== =======
</TABLE>
- ------------------------
(1) Caesars Indiana is managed by Caesars and owned by a joint venture in which
Caesars owns in excess of 90% of the economic interests.
(2) A 500-room hotel tower is currently planned to be under construction in
2000.
(3) Caesars leases the building that houses the hotel and casino and leases the
underlying land under a long-term ground and structure lease.
(4) Caesars provides management services to the casino at the Dover Downs
racetrack in Delaware.
(5) Caesars has a 50% interest in Windsor Casino Limited, which operates this
hotel/casino complex. The Province of Ontario owns the complex.
(6) Caesars has an approximately 25% interest in a joint venture that owns
Caesars Gauteng and has an approximately 50% interest in a joint venture
that manages Caesars Gauteng.
(7) A permanent casino featuring approximately 33,000 square feet is currently
under construction.
(8) Caesars has a 50% interest in a joint venture which owns Caesars Manila and
receives a marketing services fee.
(9) Caesars operates the Caesars Palace at Sea casinos only while the cruise
ships on which they are located are in international waters.
(10) Caesars has a 95% interest in Metropolitan Entertainment Group, which owns
and operates the two Canadian properties.
CAESARS PALACE
Caesars Palace, which opened in 1966, is one of the premier gaming
properties in the world, attracting patrons from all over the world to its
luxurious guest rooms and 125,000 square foot casino. Caesars Palace
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is located on the corner of Las Vegas Boulevard and Flamingo Road, the "4
Corners," in the heart of the Las Vegas Strip. Caesars Palace has approximately
2,454 rooms in service, a 125,000 square foot casino including 99 table games
and 1,919 slot machines. It also has 14 restaurants and bars, 171,000 square
feet of meeting and banquet space, a 1,100-seat showroom, a 23,000 square foot
health spa, an "Omnimax" theater and the "Caesars Magical Empire," which
combines a dining experience with a unique entertainment program and theme. The
Caesars Palace property stands on approximately 80 acres, including 4.3 acres of
undeveloped land behind Caesars Palace which could be used for a number of
purposes including the expansion of the hotel, casino or meeting space.
Caesars Palace also boasts one of the premier retail shopping experiences in
all of Las Vegas, known as The Forum Shops, which is home to stores such as
Gucci, Armani and FAO Schwartz. The Forum Shops also houses world class
restaurants such as Spago and The Palm. Caesars Palace has made approximately
$594 million in maintenance and improvement capital expenditures over the past
three years to create a more exciting gaming environment, to add approximately
1,100 rooms and a new hotel tower, to add gaming space for slot machines and
table games, to construct other facilities for conventions, meeting and banquets
and to construct a new health club and spa. Caesars is currently in discussions
with the Forum Shops' developer for the construction of a third phase of the
Forum Shops, expected to add an additional 300,000 square feet of retail space.
We anticipate that the developer will bear the costs of construction and
maintenance of the new retail space.
CAESARS ATLANTIC CITY
Caesars Atlantic City is a casino/hotel complex located at the center of the
boardwalk in Atlantic City, New Jersey. Caesars Atlantic City has undergone
extensive renovation since 1996, investing approximately $420 million in
maintenance and improvement capital expenditures, to add approximately 620
additional rooms and approximately 38,000 square feet of casino space and to
enhance its convention, meeting and banquet facilities, including expanded
dining facilities, a multi-function grand ballroom and a four-story atrium. The
design incorporates an elaborate Roman theme with Corinthian columns, large
statues and extensive fountains. These improvements are expected to enhance the
appeal of Caesars Atlantic City as a convention site, as well as attract more
walk-in patrons from the boardwalk.
Caesars Atlantic City has approximately 1,149 rooms in service and a 120,000
square foot casino, including 139 gaming tables and 3,589 slot machines. It also
has 12 restaurants and bars, 34,000 square feet of meeting and banquet space, a
1,150-seat showroom, a shopping arcade, a Roman-themed transportation center
which accommodates approximately 2,100 cars and 12 buses, a health club and
tennis courts. The property on which Caesars Atlantic City stands consists of
approximately ten acres.
In August 1996, Caesars Atlantic City acquired the Ocean One retail mall for
approximately $20 million. The Ocean One mall is constructed on a pier which
extends 900 feet over the Atlantic Ocean and is located directly in front of the
Boardwalk entrance to Caesars Atlantic City. Ocean One contains approximately
400,000 square feet of restaurant and retail space on three floors. Under
current applicable local and state laws, Ocean One may not be used for gaming or
lodging activities. Development of Ocean One with gaming and lodging requires
approvals from local and state authorities and the New Jersey Casino Control
Commission.
CAESARS INDIANA
Caesars Indiana's "Glory of Rome" Riverboat is the largest riverboat casino
in the U.S. with approximately 90,000 square feet of gaming space, including 141
gaming tables and 2,791 slot machines. The riverboat commenced operations in
November of 1998 and is located near the Louisville, Kentucky border. Caesars
Indiana is currently constructing a 170,000 square foot pavilion that will house
retail space and restaurants and bars. Caesars Indiana is also planning to
construct a 500-room hotel in 2000.
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CAESARS TAHOE
Caesars Tahoe casino/hotel complex opened in 1979 and is located in
Stateline, Nevada, adjacent to Lake Tahoe. At that time, Caesars Tahoe entered
into a long-term ground and structure lease for the building that houses the
casino/hotel and the 24-acre property on which the casino/hotel stands. This
lease expires in 2004, but contains two 25-year options to renew. Caesars Tahoe
has 440 hotel rooms and suites, a 40,000 square foot casino, nine restaurants, a
1,500-seat showroom, 15,000 square feet of convention space, a Roman-themed
nightclub, bars, shops, outdoor tennis courts and an indoor health spa
containing a swimming pool and a racquetball court.
SHERATON CASINO & HOTEL
The Sheraton Casino & Hotel is located in Robinsonville, Mississippi. The
casino consists of 33,000 square feet of gaming space, including 48 gaming
tables and 1,300 slot machines. The attached hotel has approximately 134 rooms
and eight restaurants and bars.
OTHER DOMESTIC FACILITIES
Caesars is a party to a management agreement with respect to a video lottery
operation at the Dover Downs racetrack in Delaware.
INTERNATIONAL PROPERTIES
Caesars owns a 50% interest in Windsor Casino Limited, which operates the
Windsor Casino hotel/casino complex, owned by the Province of Ontario,
comprising a 100,000 square foot casino and 389 rooms, in Windsor, Ontario,
directly across the river from Detroit, Michigan. Caesars also owns a 95%
interest in Metropolitan Entertainment Group, which operates a casino at the
Sheraton Halifax Hotel & Casino in Halifax, Nova Scotia, and which also operates
the Sheraton Casino Sydney, which is a stand-alone casino, in Sydney, Cape
Breton, Nova Scotia. Metropolitan Entertainment Group funded the construction of
the Nova Scotia properties and is being repaid, with interest out of the
operating revenues generated by the properties. In addition, Caesars operates
the Caesars Gauteng in Kempton Park, Johannesburg, South Africa, Caesars Manila
in Manila, Philippines, and Caesars Palace at Sea, which it operates on two
cruise ships while they are in international waters.
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<PAGE>
REGULATION AND LICENSING
Each of our casinos is subject to extensive regulation under laws, rules and
supervisory procedures primarily in the jurisdiction where located or docked.
Some jurisdictions, however, empower their regulators to investigate
participation by licensees in gaming outside their jurisdiction and require
access to and periodic reports respecting the gaming activities. Violations of
laws in one jurisdiction could result in disciplinary action in other
jurisdictions.
In connection with the acquisition, we and certain of our subsidiaries must
be found suitable as holding companies of subsidiaries that hold gaming
licenses. To the extent required, we have filed applications for findings of
suitability in each jurisdiction in which our subsidiaries will conduct gaming
activities. In addition, in certain jurisdictions the gaming regulatory
authorities must pre-approve the acquisition. These approvals have been obtained
in Nevada, New Jersey and Mississippi and we have filed the applications for
these approvals in all other jurisdictions. We cannot assure you that we will
obtain any of these approvals or that we will obtain any approval on a timely
basis. For a discussion of our obligations and Starwood's obligations in the
event regulatory approval is not received, see "The Acquisition--Conditions" and
"Risk Factors--Our ability to consummate the acquisition depends on, among other
things, receipt of regulatory approval, including gaming approvals in various
jurisdictions."
The information set forth below is only a summary of the regulatory
requirements applicable to us. For a more detailed description of the regulatory
requirements applicable to us, including under our Amended and Restated
Certificate of Incorporation, see "Additional Information--Regulation and
Licensing" in our Annual Report on Form 10-K for the year ended December 31,
1998, incorporated by reference in the accompanying prospectus.
Under provisions of gaming laws in which we have operations and under our
Amended and Restated Certificate of Incorporation, certain of our securities are
subject to restrictions on ownership which may be imposed by specified
governmental authorities. The restrictions may require a holder of our
securities to dispose of the securities or, if the holder refuses to dispose of
the securities, we may be obligated to repurchase the securities.
Each holder of a note, by accepting any note, will be deemed to have agreed
to be bound by the requirements imposed on holders of our debt securities by the
gaming authority of any jurisdiction in which we or any of our subsidiaries
conducts or proposes to conduct gaming activity. See "Description of Debt
Securities--Compliance with Gaming Laws." In addition, the indenture governing
the notes provides that each holder and beneficial owner thereof, by accepting
or otherwise acquiring an interest in any of the notes, will be deemed to have
agreed that if the gaming authority of any jurisdiction in which we or any of
our subsidiaries conducts or proposes to conduct gaming requires that a person
who is a holder or beneficial owner must be licensed, qualified or found
suitable under applicable gaming laws, the holder or beneficial owner will apply
for a license, qualification or finding of suitability within the required time
period. If the person fails to apply or become licensed or qualified or is found
unsuitable, we will have the right, at our option:
(1) to require the person to dispose of its notes or beneficial interest
therein within 30 days of receipt of notice of our election or an earlier
date as may be requested or prescribed by the Gaming Authority; or
(2) to redeem the notes at a redemption price equal to the lesser of:
(A) the person's cost; or
(B) 100% of the principal amount, plus accrued and unpaid interest to the
earlier of the redemption date and the date of the finding of
unsuitability, which may be less than 30 days following the notice of
redemption if so requested or prescribed by the Gaming Authority.
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<PAGE>
We will notify the trustee under the indenture in writing of any such redemption
as soon as practicable. We will not be responsible for any costs or expenses any
such holder or beneficial owner may incur in connection with its application for
a license, qualification or finding of suitability.
NEVADA GAMING LAWS
The ownership and operation of casino gaming facilities in the State of
Nevada are subject to the Nevada Gaming Control Act and the regulations
promulgated thereunder, and various local ordinances and regulations. Our Nevada
gaming operations are subject to the licensing and regulatory control of the
Nevada Gaming Commission, the Nevada State Gaming Control Board, and, depending
on the facility's location, the Clark County Liquor and Gaming Licensing Board
and the City of Reno. The Nevada Gaming Commission, the Nevada State Gaming
Control Board, the Clark County Liquor and Gaming Licensing Board and the City
of Reno are collectively referred to as the "Nevada Gaming Authorities."
Each of our subsidiaries that currently operates a casino in Nevada is
required to be licensed by the Nevada Gaming Authorities. We are required to be
registered by the Nevada Gaming Commission as a publicly-traded corporation and
as such, we are required periodically to submit detailed financial and operating
reports to the Nevada Gaming Commission and furnish any other information that
the Nevada Gaming Commission may require.
The Nevada Gaming Commission may, in its discretion, require the holder of
any debt security of a registered publicly-traded corporation, such as the
notes, to file applications, be investigated and be found suitable to own the
debt security of such corporation. If the Nevada Gaming Commission determines
that a person is unsuitable to own the security, then pursuant to the Nevada
Gaming Control Act, the registered publicly-traded corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Nevada Gaming Commission, it:
- pays to the unsuitable person any dividend, interest or any distribution
whatsoever;
- recognizes any voting right by such unsuitable person in connection with
such securities;
- pays the unsuitable person remuneration in any form; or
- makes any payment to the unsuitable person by way of principal,
redemption, conversion, exchange, liquidation or similar transaction.
On December 17, 1998, the Nevada Gaming Commission granted us prior approval
to make public offerings for a period of two years, subject to specified
conditions, which we refer to as the "shelf approval." On October 21, 1999, the
shelf approval was amended in conjunction with the approval of the Caesars
acquisition. The shelf approval also applies to any company we wholly own which
is a publicly-traded corporation pursuant to a public offering. The shelf
approval also includes approval for the licensed subsidiaries to guarantee any
security issued by, or to hypothecate their assets to secure the payment or
performance of any obligations evidenced by a security issued by, us or an
affiliate in a public offering under the shelf registration. The shelf approval,
however, may be rescinded for good cause without prior notice upon the issuance
of an interlocutory stop order by the Chairman of the Nevada Gaming Control
Board. The shelf approval does not constitute a finding, recommendation or
approval of the Nevada Gaming Commission or the Nevada Board as to the accuracy
or adequacy of this prospectus supplement or the investment merits of the
securities offered. Any representation to the contrary is unlawful. The public
offering of the notes will be made pursuant to the shelf approval.
We must obtain prior approval of the Nevada Gaming Commission with respect
to a change in control through merger, consolidation, stock or asset
acquisitions, management or consulting agreements, or any act or conduct by a
person whereby the person obtains control of us. Entities seeking to acquire
control of a registered publicly-traded corporation must satisfy the Nevada
Gaming Control Board and Nevada Gaming Commission in a variety of stringent
standards prior to assuming control of a registered
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<PAGE>
corporation. The Nevada Gaming 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 acquisition of Caesars World, Inc. and its registered and
licensed Nevada subsidiaries required the prior approval of the Nevada Gaming
Commission upon the recommendation of the Nevada Gaming Control Board. On
October 21, 1999, the Nevada Gaming Commission granted such approval.
NEW JERSEY GAMING LAWS
The ownership and operations of casino gaming facilities in Atlantic City
are subject to the New Jersey Casino Control Act, regulations of the New Jersey
Casino Control Commission and other applicable laws. No casino may operate
unless it obtains the required permits or licenses and approvals from New Jersey
Commission. The New Jersey Commission is authorized under the New Jersey Act to
adopt regulations covering a broad spectrum of gaming and gaming related
activities and to prescribe the methods and forms of applications from all
classes of licensees. The New Jersey Commission has jurisdiction similar to that
of the Nevada Gaming Commission over the holders and beneficial owners of the
debt and equity securities issued by us and may also require their investigation
and approval.
MISSISSIPPI GAMING LAWS
The ownership and operation of casino facilities in Mississippi are subject
to extensive state and local regulation, but primarily the licensing and
regulatory control of the Mississippi Gaming Commission and the Mississippi
State Tax Commission. An owner and operator of casino gaming facilities in
Mississippi and its related holding companies must register under the
Mississippi Gaming Control Act and its gaming operations are subject to the
licensing and regulatory control of the Mississippi Gaming Commission and
various local, city and county regulatory agencies. Although not identical, the
Mississippi Gaming Control Act is similar to the Nevada Gaming Control Act. The
Mississippi Gaming Commission has granted us a "shelf offering" approval that
permits us to make this note offering upon notification to the Commission Staff.
The Mississippi Gaming Commission has adopted regulations which are also similar
in many respects to the Nevada gaming regulations, including the requirement
that any person or entity who acquired any security of an owner and operator of
casino gaming facilities may be subject to a suitability finding.
LOUISIANA GAMING LAWS
The ownership and operation of a riverboat gaming vessel in the State of
Louisiana is subject to the Louisiana Riverboat Economic Development and Gaming
Control Act. The Louisiana Gaming Control Board regulates gaming activities. The
Louisiana Board is responsible for investigating the background of all
applicants seeking a riverboat gaming license, issuing the license and enforcing
the laws, rules and regulations relating to riverboat gaming activities.
The Louisiana Board must find suitable the applicant, its officers,
directors, key personnel, partners and persons holding a 5% or greater interest
in the holder of a gaming license. The Louisiana Board may, in its discretion,
also review the suitability of other security holders of, or persons affiliated
with, a licensee. This finding of suitability requires the filing of an
extensive application to the Louisiana Board disclosing personal, financial,
criminal, business and other information. Our Louisiana affiliate, Bally's
Louisiana, Inc., has filed the required forms with the Louisiana regulatory
authorities with respect to a finding of suitability.
QUEENSLAND GAMING LAWS
Queensland, Australia, like the jurisdictions discussed above, has
comprehensive laws and regulations governing the conduct of casino gaming. All
persons connected with the ownership and operation of a casino, including us,
our subsidiary that manages the Conrad Jupiters, Gold Coast and the Conrad
International Treasury Casino, Brisbane and their principal stockholders,
directors and officers, must be
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found suitable and/or licensed. The Queensland authorities have also conducted
an investigation of, and have found suitable, us and our subsidiary BI Gaming
Corporation, which holds our Australian gaming assets.
URUGUAY GAMING LAWS
Uruguay also has laws and regulations governing the establishment and
operation of casino gaming. The Internal Auditors Bureau of Uruguay, under the
authority of the Executive Power of the Oriental Republic of Uruguay, is
responsible for establishing the terms under which casino operations are
conducted, including suitability requirements of persons associated with gaming
operations, authorized games, specifications for gaming equipment, security,
surveillance and compliance. The Executive Power of the Oriental Republic of
Uruguay has authorized Baluma S.A., a corporation duly organized and existing
under the laws of the Oriental Republic of Uruguay, as owner of the Conrad
International Punta del Este Resort & Casino to conduct casino operations.
CAESARS PROPERTIES
In addition to the foregoing jurisdictions, following our acquisition of
Caesars we will also own and/ or operate properties, and be subject to the
gaming regulations, in the following jurisdictions.
DELAWARE GAMING LAWS
Video lottery operations in the State of Delaware are regulated by the
Delaware State Lottery Office through the powers delegated to the Director of
the lottery pursuant to Title 29 of the Delaware code. Under Delaware's video
lottery program, video lottery machines are permitted at Delaware's licensed
horse racing tracks.
Any person seeking to contract with the Delaware State Lottery Office for
the provision of goods or services related to video lottery operations,
including management services such as those provided by Caesars with respect to
video lottery operation at the Dover Downs race track in Delaware, must be
licensed by the Delaware State Lottery Office as a "technology provider." It is
the ongoing duty of each technology provider licensee to notify the Director of
the lottery of any change in officers, partners, directors, key employees, video
lottery operations employees or owners, collectively the "key individuals." An
owner is a person who owns, directly or indirectly, ten percent or more of an
applicant or licensee. Key individuals are subject to a background
investigation, and the failure of a key individual to satisfy a background
investigation may constitute "cause" for the suspension or revocation of the
technology provider's license.
INDIANA GAMING LAWS
Caesars' Indiana casino riverboat operations are subject to the Indiana
Riverboat Gambling Act and the licensing and regulatory control of the Indiana
Gaming Commission, as well as various local, county and state regulatory
agencies. The Indiana gaming regulations are similar to the gaming regulations
in Nevada and New Jersey.
Indiana's casino gaming laws, regulations and supervisory procedures are
extensive and reflect certain public policy considerations as to:
- the integrity of casino gaming operations and their participants;
- the need for strict governmental and regulatory control of casino gaming
operations;
- the creation of economic development, tourism, taxes and employment; and
- the maintenance and development of public confidence and trust in casino
gaming regulation and control.
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In addition, the riverboat must comply with U.S. Coast Guard requirements as
to boat design, on-board facilities, equipment, personnel and safety and must
hold a certificate of seaworthiness or must be approved by the American Bureau
of Shipping for stabilization and flotation. The U.S. Coast Guard requirements
establish design standards, set limits on the operation of the vessel and
require individual licensing of all personnel involved with the operation of the
vessel. Loss of the vessel's certificate of seaworthiness or the American Bureau
of Shipping approval would preclude its use as a floating casino. The land-based
facilities developed and used in connection with the riverboat are subject to
local zoning and building codes.
Changes to these laws, regulations and supervisory procedures could have an
adverse effect on Caesars' casino gaming operations.
ONTARIO, CANADA, GAMING LAWS
Caesars' Ontario casino gaming operations are subject to the regulatory
control of the Ontario Alcohol and Gaming Commission pursuant to the Ontario
Gaming Control Act and certain contractual obligations to the Ontario Casino
Corporation, a provincial crown corporation owned by the Province of Ontario.
Caesars owns 50% of Windsor Casino Limited, which operates the casino in
Windsor, Ontario, Canada, on behalf of the Ontario Casino Corporation, pursuant
to an operating agreement with the Ontario Casino Corporation. The operating
agreement imposes certain obligations on Windsor Casino Limited relating to the
operation of the Windsor Casino. Pursuant to a support agreement between the
shareholders of Windsor Casino Limited and the Ontario Casino Corporation, the
shareholders, including Caesars, have certain obligations relating to the
operation of Windsor Casino Limited.
Windsor Casino Limited is required under the Ontario Gaming Control Act to
be registered as a casino operator with the Ontario Alcohol and Gaming
Commission and must operate in accordance with the terms and conditions of its
registration.
Pursuant to the Ontario Gaming Control Act and the terms of Windsor Casino
Limited's registration, the Registrar of the Ontario Commission must approve any
change in the directors or officers of Windsor Casino Limited. The Ontario
Gaming Control Act also provides that the Ontario Commission may require the
submission of disclosures and informational material from any person who has an
interest in Windsor Casino Limited. This includes parent companies and their
directors and officers.
The Registrar of the Ontario Commission has the power, subject to the
Ontario Gaming Control Act, to grant, renew, suspend or revoke registrations.
The Registrar is entitled to make such inquiries and conduct such investigations
as are necessary to determine that applicants for registration meet the
requirements of the Ontario Gaming Control Act and to require information or
material from any person who has an interest in an applicant for registration.
The criteria to be considered in connection with registration under the Ontario
Gaming Control Act include the financial responsibility, integrity and honesty
of the applicant and the public interest. The Registrar may, at any time,
revoke, suspend or refuse to renew Windsor Casino Limited's registration for any
reason that would have disentitled it to registration.
Changes to these laws and regulations could have an adverse effect on
Caesars' casino gaming operations.
NOVA SCOTIA, CANADA, GAMING LAWS
Caesars' Nova Scotia casino gaming operations are subject to the regulatory
control of the Nova Scotia Gaming Control Commission pursuant to the Nova Scotia
Gaming Control Act and certain contractual obligations to the Nova Scotia Gaming
Corporation, a provincial crown corporation owned by the Province of Nova
Scotia.
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Caesars owns a 95% partnership interest in Metropolitan Entertainment Group,
which operates the Sheraton Casino Nova Scotia in Sydney and Halifax on behalf
of the Nova Scotia Gaming Corporation pursuant to an operating contract with the
Nova Scotia Gaming Corporation. The operating contract imposes certain
obligations on Metropolitan relating to the operation of the Sydney and Halifax
casinos. Caesars is also a party to the operating contract as a guarantor of
Metropolitan's obligations.
Metropolitan is required under the Nova Scotia Act to be registered as a
casino operator with the Nova Scotia Commission.
Under the Nova Scotia Act, the director of registration of the Nova Scotia
Commission must be notified, within 15 days, of any change in the officers or
directors of Sheraton Casino Nova Scotia. Sheraton Casino Nova Scotia is also
required to file a disclosure form with the director of registration within
15 days of:
- a person acquiring a beneficial interest in the business of the casino;
- a person exercising control, either directly or indirectly, over the
business of the casino; or
- a person providing financing, either directly or indirectly, to the
business of the casino.
The Nova Scotia Act also provides that the Director of Registration may
require information or material from Metropolitan or any person who has an
interest in the casino. This includes parent companies and their directors and
officers.
The Nova Scotia Commission has the power to suspend or to revoke
Metropolitan's registration, at any time, for any reason that would have
disentitled Metropolitan to obtain the registration. Grounds for suspension or
revocation include the financial responsibility, integrity and honesty of the
casino operator and its officers and directors and the public interest.
Changes to these laws and regulations could have an adverse effect on
Caesars' casino gaming operations.
PHILIPPINES GAMING LAWS
Gaming at the Caesars Club of Manila is conducted by the Philippine
Amusement and Gaming Corporation in accordance with its established rules and
regulations and pursuant to an agreement granting Caesars the exclusive right to
operate a casino out of one of the VIP rooms on the entry level of the Heritage
Hotel in Manila, referred to herein as the "exclusive agreement." The Philippine
Amusement and Gaming Corporation restricts the use of said gaming proceeds to
players provided by Caesars. In turn, Caesars agrees not to solicit the business
of any other entities to which the Philippine Amusement and Gaming Corporation
has granted the right to bring patrons to play in the Philippine Amusement and
Gaming Corporation's other casinos. For its services at the Caesars Club of
Manila, the Philippine Amusement and Gaming Corporation is paid 12.50% of gross
gaming revenues up to $10 million, 11.00% of gross gaming revenues between
$10 million and $15 million, and 10.00% of gross gaming revenues in excess of
$15 million. Caesars is subject to background checks and must provide the
Philippine Amusement and Gaming Corporation with documents necessary for this
purpose.
Under the exclusive agreement, the Philippine Amusement and Gaming
Corporation is required to provide, at its own expense, security and
surveillance personnel and facilities for the premises, including the
installation of two fixed cameras on each gaming table. If the Philippine
Amusement and Gaming Corporation is unable to comply with this obligation, and
if Caesars thereafter is unable or declines to continue providing players to
play at the premises, then the Philippine Amusement and Gaming Corporation shall
immediately cease all gaming at the premises.
Under the exclusive agreement, Caesars is obliged to pay necessary expenses
incurred by players to enable them to play at the premises, including airfare,
hotel accommodations, food and beverages,
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transportation services and other hotel expenses, whereas the Philippine
Amusement and Gaming Corporation is obliged to extend to players the same
assistance given to other persons playing under the Philippine Amusement and
Gaming Corporation's Foreign High Roller Marketing Program, including airport
facilitation/visa issuance and negotiating agreements with the hotel to provide
satisfactory accommodations services on a "best efforts" basis.
Caesars has agreed to hold the Philippine Amusement and Gaming Corporation
absolutely free and harmless from any damage, claim or liability that may arise
in connection with any agreement, dealing or transaction which Caesars may have
with the players. Caesars warrants to save the Philippine Amusement and Gaming
Corporation free and harmless from any claim and/or liability from any tax
obligations imposed upon Caesars by any taxing authority, including income
derived from performance under the agreement with the Philippine Amusement and
Gaming Corporation.
The Philippine Amusement and Gaming Corporation in turn has agreed to hold
Caesars absolutely free and harmless from any damage, claim or liability in
connection with any agreement, dealing or transaction that the Philippine
Amusement and Gaming Corporation may have with third parties for the provision
of goods and services as required under the agreement with Caesars.
The Philippine Amusement and Gaming Corporation has the right to terminate
the arrangement with Caesars at any time subject to fifteen days prior written
notice to Caesars in the event Caesars violates any term or condition of the
arrangement, including Caesars' failure to bring in qualified players. Caesars
has the right to terminate the arrangement by giving a 90-day notice to the
Philippine Amusement and Gaming Corporation at any time. Caesars shall terminate
the arrangement upon written notice to the Philippine Amusement and Gaming
Corporation at any time, effective upon receipt, if required to do so by any
government gaming authority with jurisdiction over any privileged license held
by Caesars or its affiliates.
SOUTH AFRICA GAMING LAWS
Caesars South African operations are subject to the Gauteng Gambling and
Betting Act No. 4 of 1995 and the regulations issued thereunder. Under
Section 38(1) of the Gauteng Gambling and Betting Act and regulation 20 of the
regulations issued thereunder, if an entity has directly or indirectly procured
a controlling or financial interest of 1% or more in a casino license holder in
Gauteng, then the provisions of Section 38(1) apply and the acquiring entity
will have to apply for the consent of the Gauteng Gambling Board for the holding
of such an interest.
Under Regulation 88(2) of the Gauteng Gambling and Betting Act, the
acquiring entity must apply to the Gauteng Gambling Board for consent to hold
such an interest within 14 days after the transaction closes and the interest is
procured.
The application for the consent of the Gauteng Gambling Board must be made
within a period and in a manner prescribed by the Gauteng Gambling Board. To
this end, the Gauteng Gambling Board has issued a standard application form.
In making such an application, all the relevant provisions of the Gauteng
Gambling and Betting Act relating to an application for a casino license apply.
These include:
- the application itself;
- representations by interested persons;
- response by the applicant to such representations;
- further information and oral representations;
- public inspection of the application and representations;
- obtaining of a police report;
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- the holding of a hearing in respect of the application which is open to
members of the public and where witnesses are called; and
- a decision being given on the application and conditions being applied in
the event of the application being granted.
A non-refundable license fee of R5,700.00 (approximately $913) is payable
with the application. Under Section 23 of the Gauteng Gambling and Betting Act,
the Gauteng Gambling Board may recover from the applicant all reasonable
expenses incurred by the Gauteng Gambling Board in conducting the necessary
investigation in respect of the application.
Section 38(3) of the Gauteng Gambling and Betting Act provides that where
consent is not granted, the acquiring entity shall, within the prescribed period
and in the manner prescribed or determined by the Gauteng Gambling Board,
dispose of the interest in question.
In addition, Regulation 88(1) provides that the casino license holder must
notify the Gauteng Gambling Board of the acquiring entity's identity and address
as soon as practicable after it becomes aware of the procurement of an interest
in it.
IRS REGULATIONS
The Internal Revenue Service requires operators of casinos located in the
United States to file information returns for U.S. citizens, including names and
addresses of winners, for keno and slot machine winnings in excess of stipulated
amounts. The IRS also requires operators to withhold taxes on some keno, bingo
and slot machine winnings of nonresident aliens. We are unable to predict the
extent, to which these requirements, if extended, might impede or otherwise
adversely affect operations of, and/or income from, the other games.
Regulations adopted by the Financial Crimes Enforcement Network of the
Treasury Department and the gaming regulatory authorities in some of the
domestic jurisdictions in which we operate casinos, or in which we have applied
for licensing to operate a casino, require the reporting of currency
transactions in excess of $10,000 occurring within a gaming day, including
identification of the patron by name and social security number. This reporting
obligation began in May 1985 and may have resulted in the loss of gaming
revenues to jurisdictions outside the United States which are exempt from the
ambit of these regulations.
OTHER LAWS AND REGULATIONS
Each of the casino hotels and riverboat casinos described in this prospectus
supplement is subject to extensive state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages. We believe that we have obtained all
required licenses and permits and our businesses are conducted in substantial
compliance with applicable laws except for regulatory approvals in connection
with the acquisition described above, which is currently in progress.
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DESCRIPTION OF OTHER INDEBTEDNESS
The following is a brief summary of important terms of our material
indebtedness:
REVOLVING CREDIT FACILITIES. In December 1998, we entered into two
revolving credit facilities with a syndicate of financial institutions,
providing for borrowings of up to $2.15 billion, consisting of:
- a 364-day senior unsecured revolving credit facility of up to
$650 million; and
- a five-year senior unsecured revolving credit facility of up to $1.5
billion.
At June 30, 1999, approximately $1.4 billion of the aggregate commitment was
outstanding, leaving approximately $700 million available to us at that date.
In connection with the acquisition, on August 31, 1999 we entered into a new
$2.0 billion revolving credit facility which replaced the $650 million 364-day
facility. In addition to the new $2.0 billion 364-day facility, we also entered
into a $1.0 billion 364-day facility which may be used only to provide funding
for the Caesars acquisition. Availability under the $1.0 billion facility will
be reduced by the net proceeds of any public notes we may issue. Therefore, the
facility will be reduced to an approximately $607 million revolving credit
facility upon the issuance of the $400 million notes described in this
prospectus supplement.
The 364-day revolving credit facilities mature August 2000 and the five-year
revolving credit facility matures December 2003. Both the 364-day revolving
credit facilities and the five-year revolving credit facility may be extended in
one year increments at our request with the prior written consent of the
lenders. For additional details on the terms of our revolving credit facility,
including the terms of various covenants to which we are currently subject, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" in our Form 10-Q for the quarter
ended June 30, 1999.
SUBSEQUENT NOTES OFFERINGS. In connection with the acquisition, we may
issue approximately $1.2 billion in additional notes, including this offering.
The terms of these subsequent notes have not been determined. We cannot assure
you that any such notes will be issued.
HILTON DEBT. Concurrently with our spin-off from Hilton, we assumed primary
liability for $625 million of Hilton's fixed rate debt. The payment terms of
this debt assumption mirror the terms of Hilton's existing $300 million 7 3/8%
notes due 2002 and its $325 million 7% notes due 2004. We entered into
supplemental indentures with the trustee under these notes providing for our
assumption of the payment obligations under the existing indentures.
7 7/8% SENIOR SUBORDINATED NOTES DUE 2005. In December 1998, we issued
$400 million of 7 7/8% senior subordinated notes due December 2005 in a private
placement offering. The 7 7/8% notes are redeemable at any time prior to their
maturity at the redemption prices described in the indenture governing the
7 7/8% notes. The 7 7/8% notes are unsecured senior subordinated obligations and
are subordinated to all of our senior debt.
7.95% SENIOR NOTES DUE 2003. In August 1999, we issued $300 million
aggregate principal amount of 7.95% senior notes due 2003 in a private placement
offering. The 7.95% notes are redeemable at any time prior to their maturity at
the redemption prices described in the indenture governing the 7.95% notes. The
7.95% notes are unsecured senior obligations and rank equally with all of our
senior unsecured debt.
COMMERCIAL PAPER PROGRAM. We established a $1 billion commercial paper
program as of December 31, 1998. To the extent that we incur debt under this
program, we must maintain an equivalent amount of credit available under our
revolving credit facility. We have borrowed under the program for various
periods during 1999. At June 30, 1999, we had outstanding borrowings of
$24 million under the commercial paper program bearing an average interest rate
of 5.5%.
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DESCRIPTION OF NOTES
The notes offered by this prospectus supplement and the accompanying
prospectus constitute a series of debt securities, which are described more
fully in the accompanying prospectus, to be issued pursuant to an indenture
between Park Place and Norwest of Minneapolis, as trustee. The following
description of the particular terms of the notes offered hereby supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the debt securities set forth in the accompanying
prospectus. Capitalized terms used and not otherwise defined in the following
discussion are defined below under "Certain Definitions."
The following description is a summary of selected portions of the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of these notes. In this description, the words "Park Place" refer only
to Park Place Entertainment Corporation and not to any of its subsidiaries.
RANKING
The notes:
- are unsecured general obligations of Park Place;
- are equal in right of payment with all existing and future unsecured
senior Debt of Park Place;
- are senior in right of payment to all existing and future subordinated
Debt of Park Place.
The notes will effectively rank junior to secured indebtedness of Park
Place, if any, and to all liabilities of Park Place's subsidiaries, including
trade payables.
Assuming completion of this offering, Park Place's subsidiaries would have
had approximately $16 million of indebtedness outstanding at June 30, 1999. The
indenture will permit Park Place and its subsidiaries to incur additional Debt.
PRINCIPAL, MATURITY AND INTEREST
The notes will be limited to $400 million in aggregate principal amount.
Park Place will issue the notes in denominations of $1,000 and integral
multiples of $1,000. The notes will mature on November 15, 2006.
Interest on the notes will accrue at the rate of 8 1/2% per year. Interest
will be payable semi-annually in arrears on May 15 and November 15, beginning on
May 15, 2000. Park Place will make each interest payment to the holders of
record of the notes on the immediately preceding May 1 and November 1.
Interest on the notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
OPTIONAL REDEMPTION
Upon not less than 30 nor more than 60 days' notice, Park Place may redeem
the notes in whole but not in part at any time at a redemption price equal to
100% of the principal amount thereof plus the Make-Whole Premium, together with
accrued and unpaid interest thereon, if any, to the applicable redemption date.
SELECTION AND NOTICE
Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each holder of notes to be
redeemed at its registered address.
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Notes called for redemption become due on the date fixed for redemption. On
and after the redemption date, interest ceases to accrue on notes called for
redemption.
MANDATORY REDEMPTION
Park Place will not be required to make any mandatory sinking fund payments
in respect of the notes.
ADDITIONAL COVENANTS OF PARK PLACE
The covenant provisions of the indenture described under the caption
"Description of Debt Securities" in the accompanying prospectus will apply to
the notes. In addition to the foregoing, the following covenants of Park Place
will apply to the notes for the benefit of the holders of the notes:
LIMITATION ON LIENS. Other than as set forth below under "Exempted Liens
and Sale and Lease-Back Transactions," neither Park Place nor any of its
Subsidiaries may create, assume or suffer to exist any Lien:
(1) upon any Principal Property;
(2) upon any shares of capital stock of any Restricted Subsidiary owned by
Park Place or any Restricted Subsidiary; or
(3) securing Debt of any Restricted Subsidiary,
without equally and ratably securing the notes with, or prior to, the Debt
secured by such Lien, for so long as such Debt shall be so secured,
PROVIDED, HOWEVER, that this limitation will not apply to:
(a) Liens existing on the date of issuance of the notes;
(b) Liens existing:
- on property at the time of acquisition through a merger, a
consolidation or otherwise by Park Place or a Restricted
Subsidiary; or
- Liens existing on property or securing Debt of, or Capital Stock of
any corporation, partnership or other entity at the time such
corporation, partnership or other entity becomes a Restricted
Subsidiary;
(c) Liens to secure Debt with respect to all or any part of the
acquisition cost or the cost of construction or improvement of property,
provided, such Debt is incurred and related Liens are created within
24 months of the acquisition, completion of construction or improvement or
commencement of full operation, whichever is later, and such Debt does not
exceed the aggregate amount of the acquisition cost and/or the construction
cost thereof;
(d) Liens on shares of capital stock or property of a Restricted
Subsidiary to secure Debt with respect to all or part of the acquisition
cost of such Restricted Subsidiary, provided that such Debt is incurred and
related Liens are created within 24 months of the acquisition of such
Restricted Subsidiary and such Debt does not exceed the acquisition cost of
such Restricted Subsidiary;
(e) Liens to secure Debt incurred to construct additions to, or to make
Capital Improvements to, properties of Park Place or any Restricted
Subsidiary, provided such Debt is incurred and related Liens are created
within 24 months of completion of construction or Capital Improvements and
such indebtedness does not exceed the cost of such construction or Capital
Improvements;
(f) Liens in favor of Park Place or another Restricted Subsidiary;
(g) Liens to secure Debt on which interest payments are exempt from
Federal income tax under Section 103 of the Internal Revenue Code of 1986,
as amended;
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(h) Liens on the equity interest of Park Place or any Restricted
Subsidiary in any Joint Venture or any Restricted Subsidiary which owns an
equity interest in such Joint Venture to secure Debt, provided the amount of
such Debt is contributed and/or advanced solely to such Joint Venture;
(i) any extension, renewal or replacement, in whole or in part, of any
Liens referred to in the foregoing clauses (a) through (h) or of any Debt
secured thereby, including premium, if any, provided that the aggregate
principal amount secured does not exceed:
- the greater of (1) the principal amount secured thereby at the time
of such extension, renewal or replacement, or, as the case may be,
repayment or extinguishment, and (2) 80% of the fair market value
(in the opinion of the Park Place board of directors) of the
properties subject to such extension, renewal or replacement, plus
- any reasonable fees and expenses associated with such extension,
renewal or replacement,
and provided, further, that in the case of a replacement thereof, such Debt
is incurred and related Liens are created within 24 months of the repayment
or extinguishment of the Debt or Liens referred to in the foregoing clauses
(a) through (h);
(j) purchase money liens on personal property;
(k) Liens to secure payment of workers' compensation or insurance
premiums, or relating to tenders, bids or contracts (except contracts for
the payment of money);
(l) Liens in connection with tax assessments or other governmental
charges, or as security required by law or governmental regulation as a
condition to the transaction of any business or the exercise of any
privilege or right;
(m) mechanic's, materialman's, carrier's or other like Liens, arising in
the ordinary course of business; and
(n) Liens in favor of any domestic or foreign government or governmental
body in connection with contractual or statutory obligations.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. Other than as provided
below under "--Exempted Liens and Sale and Lease-Back Transactions," neither
Park Place nor any Restricted Subsidiary will enter into any arrangement with
any lessor (other than Park Place or a Restricted Subsidiary), providing for the
lease to Park Place or a Restricted Subsidiary for a period of more than three
years (including renewals at the option of the lessee) of any Principal Property
that has been or is to be sold or transferred by Park Place or such Restricted
Subsidiary to such lessor or to any other Person, and for which funds have been
or are to be advanced by such lessor or other Person on the security of the
leased property ("Sale and Lease-Back Transaction"), unless either:
(a) Park Place or such Restricted Subsidiary would be entitled, pursuant
to the provisions described in clauses (a) through (n) under "--Limitation
on Liens" above, to create, assume or suffer to exist a Lien on the property
to be leased without equally and ratably securing the notes; or
(b) an amount equal to:
- the greater of the net cash proceeds of such sale or the fair
market value of such property (in the opinion of Park Place's board
of directors), less
- the fair market value (in the opinion of Park Place's board of
directors) of any noncash proceeds of the sale of such property
(provided such noncash proceeds constitute "Principal Property,"
acquired on the date the property sold in the Sale and Lease-Back
Transaction was acquired by Park Place or any of its Restricted
Subsidiaries),
is applied within 180 days to the retirement or other discharge of the notes
or Debt ranking on a parity with the notes.
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EXEMPTED LIENS AND SALE AND LEASE-BACK TRANSACTIONS. Notwithstanding the
restrictions set forth in "--Limitation on Liens" and "--Limitation on Sale and
Lease-Back Transactions," Park Place or any Restricted Subsidiary may create,
assume or suffer to exist Liens or enter into Sale and Lease-Back Transactions
not otherwise permitted as described above, provided that at the time of such
event, and after giving effect thereto, the sum of outstanding Debt secured by
such Liens (not including Liens permitted under "--Limitation on Liens" above)
plus all Attributable Debt in respect of such Sale and Lease-Back Transactions
entered into (not including Sale and Lease-Back Transactions permitted under
"--Limitation on Sale and Lease-Back Transactions"), measured, in each case, at
the time any such Lien is incurred or any such Sale and Lease-Back Transaction
is entered into, by Park Place and Restricted Subsidiaries does not exceed 15%
of Consolidated Net Tangible Assets.
REPORTS
Whether or not required by the Commission, so long as any notes are
outstanding, Park Place will file with the applicable trustee such of the
supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 or Section 15(d) of the Exchange Act in respect
of a security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations.
COMPLIANCE WITH GAMING LAWS
Each holder of a note, by accepting any note, shall be deemed to have agreed
to be bound by the requirements imposed on holders of debt securities of Park
Place by the gaming authority of any jurisdiction of which Park Place or any of
its Subsidiaries conducts or proposes to conduct gaming activities. For a
description of the regulatory requirements applicable to Park Place, see
"Regulation and Licensing" herein, "Mandatory Disposition Pursuant to Gaming
Laws" in the accompanying prospectus and "Regulation and Licensing" in the our
Annual Report on Form 10-K for the fiscal year ended December 31, 1998, which is
incorporated by reference in the accompanying prospectus.
EVENTS OF DEFAULT
The following additional remedy will apply to the notes: In the case of an
Event of Default arising from certain events of bankruptcy or insolvency of Park
Place, all outstanding notes will become due and payable immediately without
further action or notice by the holders of notes or the trustee.
In addition, the following event of default replaces the fifth Event of
Default identified in the accompanying prospectus under "Description of Debt
Securities--Events of Default" with respect to the notes: the acceleration of
the maturity of indebtedness of Park Place (other than Non-recourse
Indebtedness), at any one time, in an aggregate amount in excess of the greater
of (i) $25 million and (ii) 5% of Consolidated Net Tangible Assets, if such
acceleration is not annulled within 30 days after written notice to Park Place
by the trustee and the holders of at least 25% in principal amount of the
outstanding notes.
CERTAIN DEFINITIONS
"Attributable Debt" with respect to any Sale and Lease-Back Transaction that
is subject to the restrictions described under "--Limitation on Sale and
Lease-Back Transactions" means the present value of the minimum rental payments
called for during the term of the lease (including any period for which such
lease has been extended), determined in accordance with generally accepted
accounting principles, discounted at a rate that, at the inception of the lease,
the lessee would have incurred to borrow over a similar term the funds necessary
to purchase the leased assets.
"Capital Improvements" means additions to properties or renovations or
refurbishing of properties which are designed to substantially upgrade such
properties or significantly modernize the operation thereof.
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"Capital Stock" means with respect to any Person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such Person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of Park Place and its Subsidiaries
(less applicable depreciation, amortization and other valuation reserves) after
deducting therefrom (a) all current liabilities of Park Place and its
Subsidiaries (excluding (i) the current portion of long-term indebtedness, (ii)
intercompany liabilities and (iii) any liabilities which are by their terms
renewable or extendible at the option of the obligor thereon to a time more than
12 months from the time as of which the amount thereof is being computed) and
(b) all goodwill, trade names, trademarks, patents, unamortized debt discount
and any other like intangibles, all as set forth on the most recent consolidated
balance sheet of Park Place and computed in accordance with generally accepted
accounting principles.
"Credit Facilities" means, with respect to Park Place, one or more debt
facilities or commercial paper facilities, in each case with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Debt" means notes, bonds, debentures or other similar evidences of Debt for
borrowed money or any guarantee of any of the foregoing.
"Default" means any event that after notice or lapse of time, or both, would
become an Event of Default.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and interest
rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Joint Venture" means any partnership, corporation or other entity, in which
up to and including 50% of the partnership interests, outstanding voting stock
or other equity interest is owned, directly or indirectly, by Park Place and/or
one or more Subsidiaries.
"Lien" means any mortgage, pledge, lien, encumbrance or other security
interest to secure payment of Debt.
"Make-Whole Premium" means, with respect to any note at any redemption date,
the excess, if any, of (a) the present value of the sum of the principal amount
and premium, if any, that would be payable on such note on its maturity date and
all remaining interest payments (not including any portion of such payments of
interest accrued as of the redemption date) to and including such maturity date,
discounted on a semi-annual bond equivalent basis from such maturity date to the
redemption date at a per annum interest rate equal to the sum of the Treasury
Yield (determined on the Business Day immediately
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preceding the date of such redemption), plus 50 basis points, over (b) the
principal amount of the note being redeemed.
"Non-recourse Indebtedness" means indebtedness the terms of which provide
that the lender's claim for repayment of such indebtedness is limited solely to
a claim against the property which secures such indebtedness.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Debt.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity.
"Principal Property" means any real estate or other physical facility or
depreciable asset, the net book value of which on the date of determination
exceeds the greater of $25 million or 2% of Consolidated Net Tangible Assets of
Park Place.
"Redeemable Capital Stock" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is or upon the happening of an
event or passage of time would be, required to be redeemed prior to the stated
maturity of the notes or is redeemable at the option of the holder thereof at
any time prior to the stated maturity of the notes, or is convertible into or
exchangeable for debt securities at any time prior to the stated maturity of the
notes.
"Restricted Subsidiary" means any Subsidiary of Park Place organized and
existing under the laws of the United States of America and the principal
business of which is carried on within the United States of America (x) which
owns, or is a lessee pursuant to a capital lease of, any Principal Property or
(y) in which the investment of Park Place and all its Subsidiaries exceeds 5% of
Consolidated Net Tangible Assets as of the date of such determination other
than, in the case of either clause (x) or (y), (i) each Subsidiary whose
business primarily consists of finance, banking, credit, leasing, insurance,
financial services or other similar operations, or any combination thereof, and
(ii) each Subsidiary formed or acquired after the date hereof for the purpose of
developing new assets or acquiring the business or assets of another Person and
which does not acquire any part of the business or assets of Park Place or any
Restricted Subsidiary.
"Significant Subsidiary" of Park Place means any Restricted Subsidiary of
Park Place that is a "significant subsidiary" as defined in Rule 1.02(v) of
Regulation S-X under the Securities Act.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation is, at the time, directly or
indirectly, owned by Park Place or by one or more Subsidiaries thereof, or by
Park Place and one or more Subsidiaries.
"Treasury Securities" mean any investment in obligations issued or
guaranteed by the United States government or any agency thereof.
"Treasury Yield" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the date
fixed for redemption (or, if such Statistical Release is no longer published,
any publicly available source of similar data)) most nearly equal to the then
remaining average life of the notes, provided that if the average life of the
notes is not equal to the constant maturity of a United States Treasury security
for which a weekly average yield is given, the Treasury yield shall be obtained
by linear interpolation (calculated to the nearest one-twelfth of a year) from
the weekly average yields of United States Treasury securities for which such
yields are given, except that if the average life of the notes is less than one
year,
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the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
"wholly owned" with respect to any Subsidiary, means any Subsidiary of any
Person of which at least 99% of the outstanding Capital Stock is owned by such
Person or another wholly-owned Subsidiary of such Person. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Subsidiary.
BOOK-ENTRY SYSTEM, FORM AND DELIVERY
The notes will be represented by one or more global securities registered in
the name of Cede & Co., the nominee of the Depository Trust Company, as
"Depositary," and the provisions set forth under "Description of Debt
Securities--Denominations, Registration, Transfer and Exchange" in the
accompanying prospectus will apply to the notes.
The Depositary is a limited-purpose trust company organized under New York
banking law, a "banking organization" within the meaning of New York banking
law, a member of the United States Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary holds securities that its participants deposit with
the Depositary. The Depositary also facilitates the settlement among its
participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. The Depositary is owned by a number of its direct participants
and by The New York Stock Exchange, Inc., the American Stock Exchange, Inc., and
the National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to indirect participants in the Depositary such as
securities brokers and dealers, banks and trust companies that clear through, or
maintain a custodial relationship with, a direct participant, either directly or
indirectly. The rules applicable to the Depositary and its participants are on
file with the Securities and Exchange Commission.
Purchases of the notes under the Depositary's system must be made by or
through direct participants, which will receive a credit for the notes on the
Depositary's records. The beneficial ownership interest of each actual purchaser
of each note is in turn to be recorded on the direct and indirect participants'
respective records. Beneficial owners will not receive written confirmation from
the Depositary of their purchase, but beneficial owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participant through
which the beneficial owner entered into the transaction. Transfers of ownership
interest in the notes are to be accomplished by entries made on the books of
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interest in notes except in
the event that use of the book-entry system for the notes is discontinued. As a
result, the ability of a person having a beneficial interest in the notes to
pledge such interest to persons or entities that do not participate in the
Depositary's system, or to otherwise take actions with respect to such interest,
may be affected by the lack of a physical certificate evidencing such interest.
In addition, the laws of some states require that certain persons take physical
delivery in definitive form of securities that they own and that security
interests in negotiable instruments can only be perfected by delivery of
certificates representing the instruments. Consequently, the ability to transfer
notes evidenced by the global notes will be limited to such extent.
To facilitate subsequent transfers, all notes deposited with the Depositary
by participants in the Depositary will be registered in the name of Cede & Co.
The deposit of the notes with the Depositary and their registration in the name
of Cede & Co. effect no change in beneficial ownership. The Depositary has no
knowledge of the actual beneficial owners of the notes; the Depositary's records
reflect only the identity
S-49
<PAGE>
of the direct participants to whose accounts such notes are credited, which may
or may not be the beneficial owners. The participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Payments of principal, interest and premium, if any, on the notes will be
made to Cede & Co. The Depositary's practice is to credit direct participants'
accounts on the relevant payment date in accordance with their respective
holdings shown on the Depositary's records unless the Depositary has reason to
believe that it will not receive payment on such payment date. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities for the accounts of
customers in bearer form or registered in "street-name," and will be the
responsibility of each participant and not of the Depositary, the underwriters,
or Park Place, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, interest and premium, if any, to
Cede & Co. is the responsibility of Park Place or the respective trustees.
Disbursement of such payments to direct participants is the responsibility of
the Depositary, and disbursement of such payments to the beneficial owners of
the notes is the responsibility of direct and indirect participants in the
Depositary.
CERTIFICATED NOTES
The Depositary may discontinue providing its services as securities
depository with respect to the notes at any time by giving reasonable notice to
Park Place. Under such circumstances and in the event that a successor
securities depository is not obtained, certificates for the notes are required
to be printed and delivered. In addition, Park Place may decide to discontinue
use of the system of book-entry transfers through the Depositary (or a successor
securities depository). In that event, certificates will be printed and
delivered.
Park Place will not have any responsibility or obligation to participants in
the Depositary or the persons for whom they act as nominees with respect to the
accuracy of the records of the Depositary, its nominee or any direct or indirect
participant with respect to any ownership interest in the notes, or with respect
to payments to or providing of notice for the direct participants, the indirect
participants or the beneficial owners of the notes.
The information contained herein under the caption "Description of
Notes--Book-Entry System, Form and Delivery" concerning the Depositary and the
Depositary's book-entry system has been obtained from sources that Park Place
believes to be reliable. Neither Park Place, the trustee nor the underwriters,
dealers or agents take responsibility for the accuracy or completeness of this
information.
SAME-DAY FUNDS SETTLEMENT AND PAYMENT
Settlement for the notes will be made by the underwriters in immediately
available funds. Payments in respect of the notes represented by global notes
(including principal, premium, if any, and interest) will be made in immediately
available funds to the accounts specified by the Depositary. With respect to
notes represented by Certificated Notes, Park Place will make all payments of
principal, premium, if any, and interest, by mailing a check to the registered
address of each holder of such notes. The notes will trade in the Depositary's
Same-Day Funds Settlement System until maturity, or until the notes are issued
in certificated form, and secondary market trading activity in the notes will
therefore be required by the Depositary to settle in immediately available
funds. No can provide no assurance as to the effect, if any, of settlement in
immediately available funds on trading activity in the notes.
S-50
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the purchase agreement
among us and the underwriters in the table below, we have agreed to sell to the
underwriters, and each of the underwriters severally and not jointly has agreed
to purchase from us, the aggregate principal amount of the notes set forth
opposite its name below. The underwriters have agreed, subject to the terms and
conditions set forth in the purchase agreement, to purchase all of the notes
being sold pursuant to that agreement if any of the notes being sold pursuant to
that agreement are purchased.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
- ----------- ----------------
<S> <C>
Merrill Lynch, Pierce Fenner & Smith
Incorporated...................................... $120,000,000
Banc of America Securities LLC.............................. 100,000,000
Deutsche Bank Securities Inc................................ 60,000,000
SG Cowen Securities Corporation............................. 22,000,000
Scotia Capital (USA) Inc.................................... 22,000,000
BNY Capital Markets, Inc.................................... 18,000,000
First Union Securities, Inc................................. 18,000,000
PNC Capital Markets, Inc.................................... 18,000,000
Bear, Stearns & Co. Inc..................................... 12,000,000
Norwest Investment Services, Inc............................ 10,000,000
------------
Total............................................. $400,000,000
============
</TABLE>
The purchase agreement provides that the obligations of the underwriters to
pay for and accept delivery of the notes are subject to, among other conditions,
the delivery of specified legal opinions by their counsel.
We will indemnify the underwriters against liabilities incurred in
connection with the offering, and will contribute to payments that the
underwriters may be required to make in connection with the offering.
The underwriters propose initially to offer the notes directly to the public
at the public offering price set forth on the cover page of this prospectus
supplement, and to certain dealers at such price less a concession not in excess
of .375% of the principal amount of the notes. The underwriters may allow, and
such dealers may reallow, a discount not in excess of .25% of the principal
amount of the notes to certain other dealers. After the initial offering of the
notes, the offering price, concession and discount may be changed.
In connection with the offering, certain persons participating in the
offering may engage in transactions that stabilize, maintain or otherwise affect
the price of the notes after the offering. Specifically, the underwriters may
bid for and purchase the notes in the open market to stabilize the price of the
notes. The underwriters may also overallot this offering, creating a syndicate
short position. In addition, the underwriters may bid for and purchase the notes
in market-making transactions and impose penalty bids. These activities may
stabilize or maintain the market price of the notes above market levels that may
otherwise prevail. The underwriters are not required to engage in these
activities and, if commenced, may end these activities at any time. Neither we
nor the underwriters make any representation or prediction as to the magnitude
or direction of any effect these transactions may have on the price of the
notes.
There is no public trading market for the notes and we do not intend to
apply for listing of the notes on any national securities exchange or for
quotation of the notes on any automated dealer quotation system. We have been
advised by the underwriters that they presently intend to make a market in the
notes after the consummation of the offering, although they are under no
obligation to do so and may discontinue any market-making activities at any time
without any notice. Prior to the offering, there has
S-51
<PAGE>
been no active market for the notes. No assurance can be given as to the
liquidity of, or trading market for, the notes or an active public market for
the notes to develop. If an active trading market for the notes does not
develop, the market price and liquidity of the notes may be adversely affected.
If the notes are traded, they may trade at a discount from their initial
offering price, depending on prevailing interest rates, the market for similar
securities, our performance and certain other factors.
Some of the underwriters and their affiliates have provided investment and
commercial banking and financial advisory services from time to time for us in
the ordinary course of business for which they have received customary fees. Any
of the underwriters or their respective affiliates may in the future engage in
investment banking or other transactions of a financial nature with us or our
affiliates, including the provision of advisory services and the making of loans
to us or our affiliates, for which they would receive customary fees or other
payments.
LEGAL MATTERS
Latham & Watkins, Los Angeles, California, will pass upon various legal
matters for us relating to the issuance and sale of the notes. Cahill Gordon &
Reindel (a partnership including a professional corporation), New York, New
York, will pass upon various legal matters for the underwriters relating to the
offering.
INDEPENDENT PUBLIC ACCOUNTANTS
The combined consolidated financial statements of Starwood Hotels and
Resorts Worldwide, Inc. Gaming Operations To Be Sold To Park Place Entertainment
Corporation as of December 31, 1998 and 1997 and for the years then ended,
included in this prospectus supplement, have been audited by Arthur Andersen
LLP, independent public accountants, as stated in their report appearing herein.
In that report, that firm states that, with respect to Sheraton Halifax and
Sheraton Sydney, their opinion is based on the report of Ernst & Young LLP.
S-52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
STARWOOD HOTELS & RESORTS WORLDWIDE, INC. GAMING OPERATIONS
TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
Report of Independent Public Accountants.................. F-2
Auditors' Report.......................................... F-3
Combined Consolidated Balance Sheets at June 30, 1999
(unaudited) and December 31, 1998 and 1997.............. F-4
Combined Consolidated Statements of Income for the six
months ended June 30, 1999 and 1998 (unaudited) and the
years ended December 31, 1998 and 1997.................. F-5
Combined Consolidated Statement of Comprehensive Income
for the six months ended June 30, 1999 and 1998
(unaudited) and the years ended December 31, 1998 and
1997.................................................... F-6
Combined Consolidated Statements of Cash Flows for the six
months ended June 30, 1999 and 1998 (unaudited) and the
years ended December 31, 1998 and 1997.................. F-7
Notes to Combined Consolidated Financial Statements....... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Starwood Hotels & Resorts Worldwide, Inc.:
We have audited the accompanying combined consolidated balance sheets of
Starwood Hotels & Resorts Worldwide, Inc. Gaming Operations To Be Sold to Park
Place Entertainment Corporation (the "Company") as described in Note 1 to the
Financial Statements as of December 31, 1998 and 1997, and the related combined
consolidated statements of operations, comprehensive income and cash flows for
the years then ended. 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 did not audit the financial
statements of Sheraton Casinos Nova Scotia, which includes: the Sheraton Halifax
and Sheraton Sydney, which statements reflect total assets, total revenues and
operating income of 2.0%, 3.3% and 16.0% in 1998, and 1.6%, 3.9% and 18.2% in
1997, respectively of the consolidated totals. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for those entities, is based solely on the
report of the other auditors.
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, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of the Company as described in Note 1 to the Financial
Statements as of December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the years then ended, in conformity with
generally accepted accounting principles.
As explained in the Note 2 to the Financial Statements, effective
January 1, 1997, the Company changed its method of accounting for start-up
costs.
ARTHUR ANDERSEN LLP
New York, New York
May 21, 1999
F-2
<PAGE>
AUDITORS' REPORT
To the Partners of METROPOLITAN
ENTERTAINMENT GROUP, OPERATING
AS SHERATON CASINOS NOVA SCOTIA
We have audited the balance sheets of METROPOLITAN ENTERTAINMENT GROUP
OPERATING AS SHERATON CASINOS NOVA SCOTIA (the "Partnership") as at
December 31, 1998 and 1997, and the statements of income, partners' equity and
cash flow for the years then ended (not included herein). These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit to
obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the partnership as at December 31, 1998 and
1997, and the results of its operations and the changes in its financial
position for the years then ended in accordance with accounting principles
generally accepted in Canada.
Ernst & Young, LLP
Chartered Accountants
Halifax, Canada
January 29, 1999
F-3
<PAGE>
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
GAMING OPERATIONS TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
COMBINED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------- AS OF
1998 1997 JUNE 30, 1999
---------- ---------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 102,664 $ 63,488 $ 75,020
Receivables, net....................................... 122,860 136,933 104,233
Inventories............................................ 15,341 16,226 15,415
Prepaid expenses and other............................. 31,884 39,892 20,481
---------- ---------- ----------
Total current assets..................................... 272,749 256,539 215,149
---------- ---------- ----------
Property and equipment, net.............................. 1,992,590 1,767,408 1,989,862
Goodwill, net............................................ 983,748 1,010,389 970,085
Investments.............................................. 47,898 17,684 55,963
Other assets............................................. 92,729 90,933 101,561
---------- ---------- ----------
$3,389,714 $3,142,953 $3,332,620
========== ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses.................. $ 216,620 $ 234,098 $ 195,156
Current maturities of long-term debt and capital
leases............................................... 10,212 4,033 10,615
Accrued taxes payable.................................. 28,469 34,533 32,075
---------- ---------- ----------
Total current liabilities................................ 255,301 272,664 237,846
Due to parent and affiliates............................. 1,134,157 886,811 1,038,487
Long-term debt and capital leases, net of current
maturities............................................. 165,815 166,444 185,362
Deferred income taxes, net............................... 79,717 63,037 82,482
Other non-current liabilities............................ 31,156 38,296 27,489
Commitments and Contingencies
Minority interest........................................ 11,167 3,641 9,002
Shareholder's equity:
Starwood/ITT investment................................ 1,227,264 1,227,264 1,227,264
Retained earnings...................................... 489,014 483,303 526,304
Cumulative translation adjustment...................... (3,877) 1,493 (1,616)
---------- ---------- ----------
Total shareholder's equity............................... 1,712,401 1,712,060 1,751,952
---------- ---------- ----------
Total liabilities and shareholder's equity............... $3,389,714 $3,142,953 $3,332,620
========== ========== ==========
</TABLE>
The accompanying notes to the combined consolidated
financial statements are an integral part of these statements.
F-4
<PAGE>
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
GAMING OPERATIONS TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------------- -------------------
1998 1997 1999 1998
---------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Casino......................................... $ 936,649 $ 898,244 $521,706 $435,199
Hotel.......................................... 104,968 57,302 59,031 50,963
Food and beverage.............................. 101,190 68,416 54,347 49,155
Earnings of unconsolidated affiliate........... 16,151 14,040 18,051 7,647
Other.......................................... 97,622 85,165 45,787 44,572
---------- ---------- -------- --------
Total revenues................................... 1,256,580 1,123,167 698,922 587,536
Costs and expenses:
Casino......................................... 527,597 537,064 293,125 247,747
Hotel.......................................... 32,570 18,724 16,226 15,243
Food and beverage.............................. 87,998 60,177 46,606 42,592
Other operating expenses....................... 50,094 51,387 32,171 25,761
Selling, general and administrative............ 207,886 167,735 129,413 95,774
Pre-opening expenses........................... 41,661 20,878 934 26,469
Depreciation and amortization.................. 143,291 73,854 87,646 60,153
Provision for doubtful accounts................ 29,903 39,065 14,242 13,618
Special charges................................ 39,000 62,481 -- --
---------- ---------- -------- --------
Total costs and expenses......................... 1,160,000 1,031,365 620,363 527,357
Operating income before management service
fees......................................... 96,580 91,802 78,559 60,179
---------- ---------- -------- --------
Management service fees........................ 32,705 28,711 15,719 15,748
Operating income................................. 63,875 63,091 62,840 44,431
Other (income) expense:
Interest expense, net.......................... 26,143 11,053 20,239 10,728
Minority interest.............................. (10,675) 632 (2,165) (2,146)
---------- ---------- -------- --------
Income before income taxes and cumulative effect
of accounting change........................... 48,407 51,406 44,766 35,849
Provision for income taxes..................... 28,507 30,335 21,396 17,979
---------- ---------- -------- --------
Income before cumulative effect of accounting
change......................................... 19,900 21,071 23,370 17,870
Cumulative effect of accounting change........... -- 5,180 -- --
---------- ---------- -------- --------
Net income....................................... $ 19,900 $ 15,891 $ 23,370 $ 17,870
========== ========== ======== ========
</TABLE>
The accompanying notes to the combined consolidated
financial statements are an integral part of these statements.
F-5
<PAGE>
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
GAMING OPERATIONS TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
COMBINED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------- -------------------
1998 1997 1999 1998
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net income.............................................. $19,900 $15,891 $23,370 $17,870
Other comprehensive income (loss)
Foreign currency translation arising during the
period.............................................. (5,370) (458) 2,261 (1,381)
------- ------- ------- -------
Comprehensive income.................................... $14,530 $15,433 $25,631 $16,489
======= ======= ======= =======
</TABLE>
The accompanying notes to the combined consolidated
financial statements are an integral part of these statements.
F-6
<PAGE>
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
GAMING OPERATIONS TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
---------------------- ----------------------
1998 1997 1999 1998
--------- ---------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 19,900 $ 15,891 $ 23,370 $ 17,870
Reconciliation of net income to net cash provided by
operating activities:
Depreciation and amortization..................... 143,291 73,854 87,646 60,153
Provision for doubtful accounts................... 29,903 39,065 14,242 13,618
Special charges................................... 39,000 35,472 -- --
Earnings in excess of distributions from
unconsolidated affiliates....................... (8,104) (7,277) (7,381) (3,828)
Changes in assets and liabilities due to operating
activities:
Receivables, net................................ (30,030) (49,476) 4,385 13,542
Inventories..................................... 885 (2,207) (74) (260)
Prepaid expenses and other...................... (16,792) (29,998) 11,403 6,291
Accounts payable and accrued expenses........... (17,478) 53,559 (26,183) (54,089)
Accrued and deferred income taxes............... 10,616 31,641 25,011 19,985
Other, net........................................ (7,993) (34,453) (15,718) (28,499)
--------- ---------- --------- ----------
Net cash provided by operating activities... 163,198 126,071 116,701 44,783
Cash flows from investing activities:
Purchases of property and equipment............... (329,946) (672,414) (65,776) (200,064)
Investments in joint ventures..................... (22,110) -- (684) --
--------- ---------- --------- ----------
Net cash used in investing activities....... (352,056) (672,414) (66,460) (200,064)
Cash flows from financing activities:
Proceeds from long-term borrowings................ 6,831 26,022 19,950 --
Payments of long-term borrowings.................. (1,281) (27,721) -- (2,844)
Net (payments) borrowings from affiliates......... 247,346 574,956 (95,670) 190,737
Payment of dividends and equity transactions with
affiliates...................................... (14,188) (36,829) -- (2,145)
Minority interest................................. (10,674) 2,237 (2,165) (15,117)
--------- ---------- --------- ----------
Net cash (used in) provided by financing
activities................................ 228,034 538,665 (77,885) 170,631
Increase (decrease) in cash and cash equivalents.... 39,176 (7,678) (27,644) 15,350
Cash and cash equivalents at the beginning of
year.............................................. 63,488 71,166 102,664 63,488
--------- ---------- --------- ----------
Cash and cash equivalents at the end of year........ $ 102,664 $ 63,488 $ 75,020 $ 78,838
========= ========== ========= ==========
Supplemental cash flow disclosures:
Interest paid to third parties, net of amounts
capitalized..................................... $ 1,932 $ -- $ 5,447 $ 747
========= ========== ========= ==========
Income taxes paid................................. $ 17,077 $ 10,335 $ 19,442 $ 6,282
========= ========== ========= ==========
</TABLE>
The accompanying notes to the combined consolidated
financial statements are an integral part of these statements.
F-7
<PAGE>
STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
GAMING OPERATIONS TO BE SOLD TO PARK PLACE ENTERTAINMENT CORPORATION
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements include certain gaming operations of Starwood
Hotels & Resorts Worldwide, Inc. ("Starwood") to be sold to Park Place
Entertainment Corporation ("PPE") pursuant to a definitive agreement entered
into between Starwood and PPE on April 27, 1999. The gaming operations include
Caesars World, Inc., comprised primarily of Caesars Palace, Caesars Atlantic
City, Caesars Tahoe, Caesars Indiana, and its equity investments in casinos in
South Africa, Manila and Canada, and the Sheraton Tunica, Sheraton Halifax and
Sheraton Sydney (collectively the "Company"). All significant intercompany
balances and transactions within the Company have been eliminated. Investments
in unconsolidated affiliates are stated at cost adjusted by equity in
undistributed earnings.
Prior to February 23, 1998, the Company was owned by ITT Corporation ("ITT")
upon which date ITT was acquired by Starwood ("ITT Merger"). The acquisition was
treated as a reverse purchase for financial accounting purposes, whereupon, ITT
continued as the surviving corporation for accounting purposes. Accordingly, no
adjustments have been made to the carrying amounts of assets and liabilities as
a result of the Starwood acquisition.
INTERIM FINANCIAL INFORMATION
The combined consolidated financial statements for the six months ended
June 30, 1999 and 1998 included herein have been prepared by the Company,
without audit. Certain information and disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted, although the Company believes that the disclosures
are adequate to make the information presented not misleading. In the opinion of
management, all adjustments (which include normal recurring adjustments)
necessary for a fair statement of results for the interim periods have been
made. The results for the six-month periods are not necessarily indicative of
results to be expected for the full fiscal year.
NATURE OF OPERATIONS
The Company is primarily engaged in the ownership, operation and development
of gaming facilities. The Company's gaming operations are located in several key
domestic jurisdictions and in certain countries outside the United States.
CASINO REVENUE AND PROMOTIONAL ALLOWANCES
Casino revenue represents the net win from gaming wins and losses. Revenue
excludes the retail value of rooms, food, beverage, entertainment and other
promotional allowances provided on a complimentary basis to customers. The
estimated retail value of these promotional allowances was $174,267 and $139,979
F-8
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
for the years ended December 31, 1998 and 1997, respectively. The estimated
costs of providing such promotional allowances have been classified primarily as
casino costs and expenses as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Rooms................................................... $ 27,391 $ 21,789
Food and beverage....................................... 86,271 77,702
Other operating expenses................................ 10,807 11,173
-------- --------
$124,469 $110,664
======== ========
</TABLE>
CURRENCY TRANSLATION ADJUSTMENT
Assets and liabilities denominated in foreign currencies are translated into
U.S. dollars at the year-end exchange rates and the related translation gains
and losses are reflected in shareholder's equity.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
GOODWILL
Goodwill arose in connection with the acquisition of Caesars World, Inc. by
ITT in 1995 and is amortized using the straight-line method over 40 years.
Accumulated amortization was $108,248 and $80,542 at December 31, 1998 and 1997,
respectively.
The Company periodically reviews the carrying value of goodwill to assess
recoverability from future operations using undiscounted cash flows. Impairments
would be recognized in operating results if a permanent diminution in value is
deemed to have occurred.
INVENTORIES
Inventories are stated at the lower of cost or market, determined
principally on the first-in, first-out basis.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and includes interest on funds
borrowed to finance construction. Capitalized interest was $11,381 and $24,878
in 1998 and 1997, respectively. Depreciation and amortization are provided for
on the straight-line method over the following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Buildings and improvements.................... 5 to 40 years
Leasehold improvements........................ 3 to 40 years
Furniture, fixtures and equipment............. 2 to 10 years
</TABLE>
Betterments, renewals and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance charges are expensed as
incurred. The cost and related accumulated depreciation applicable to assets
retired are removed from the accounts and the gain or loss on disposition is
recognized in income.
F-9
<PAGE>
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company reviews the carrying value of its assets when events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. If it is determined that an impairment loss has occurred based upon
expected undiscounted cash flows, then a loss is recognized in the income
statement reducing the carrying amount of the asset to fair value.
AMORTIZATION OF LOAN COSTS
Debt discount and loan issuance costs in connection with long-term debt are
capitalized and amortized to interest expense during the period the debt is
outstanding using the effective interest method.
INCOME TAXES
The Company's domestic operations are in Starwood's consolidated Federal
income tax return. The Company records income taxes based upon the amount that
would have been incurred had each company filed a separate return. The Company
accounts for income taxes according to Statement of Financial Accounting
Standards No. 109. Deferred income taxes are provided for temporary differences
between book and tax recognition of revenues and expenses.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CONCENTRATION OF CREDIT RISK
The Company extends credit to certain casino patrons, a substantial portion
of whom reside in countries other than the United States, following background
investigations and evaluation of credit worthiness. The Company maintains an
allowance for doubtful casino accounts receivable which is based on management's
estimate of the amount expected to be uncollectible considering historical
experience and the information management obtains regarding the credit
worthiness of the customer. The collectibility of these receivables could be
affected by future business or economic trends or other significant events in
the countries in which such customers reside. Although management believes the
allowance is adequate, the estimated amount of cash collections with respect to
the casino accounts receivable could change.
NOTE 2. CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1997, the Company changed its method of accounting for
start-up costs on major gaming projects to expense these costs as incurred.
Prior to 1997, the Company capitalized these costs and amortized them over a
three-year period. The Company's 1997 results include a charge of $7,970 before
income taxes of $2,790 as the cumulative effect of this accounting change.
NOTE 3. SPECIAL CHARGES
In 1998, the Company abandoned plans to develop a shared services group
within the gaming business and wrote-off its investment relating to information
systems under development which aggregated approximately $24.8 million.
Additionally, reserves related to certain casino accounts receivables have been
recorded as special charges (See Note 5).
F-10
<PAGE>
NOTE 3. SPECIAL CHARGES (CONTINUED)
In November 1997, ITT entered into a definitive agreement to be acquired by
Starwood. As a result, the Company recorded a special charge of approximately
$27 million relating to the conversion of the accounting for stock options
issued to employees of the Company under the ITT Stock Option Plan to variable
accounting due to limited stock appreciation rights subject to exercise.
In 1997, the Company also deferred or abandoned a number of potential
development projects and wrote-off costs associated with such projects which
aggregated approximately $35.5 million. The decision to defer or abandon such
projects resulted from the uncertainties caused by the potential change in
control of ITT following Hilton Hotels Corporation unsolicited takeover offer in
February 1997.
NOTE 4. NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income"("SFAS 130"). SFAS
130 establishes new rules for the reporting and displaying of comprehensive
income and its components. The Company has included the required statements of
comprehensive income in the accompanying financial statements.
In 1998, the Company adopted Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information". The
Statement requires the Company to report segment financial information
consistent with the presentation made to the Company's management for decision
making purposes. The Company is managed as one segment and all revenues are
derived solely from casino operations and related activities.
For the years ended December 31, 1998 and 1997, approximately 6% of total
revenues and approximately 46% and 48%, respectively, of operating income was
derived from the Company's foreign operations.
NOTE 5. RECEIVABLES
Components of receivables were as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Accounts and notes receivable
Casino................................................ $135,992 $181,137
Hotel................................................. 13,092 8,067
Other................................................. 22,989 15,218
-------- --------
172,073 204,422
Less allowance for doubtful accounts.................... (49,213) (67,489)
-------- --------
$122,860 $136,933
======== ========
</TABLE>
In the third quarter of 1998, due to the economic deterioration in Asia, the
Company recorded an additional marker reserve of approximately $14 million.
At December 31, 1998 and 1997, approximately 58% and 61%, respectively, of
the Company's casino receivables were from customers whose primary residence is
outside the United States with one country making up approximately 22% of the
total gross casino receivables.
F-11
<PAGE>
NOTE 6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1998 1997
---------- ----------
<S> <C> <C>
Land................................................. $ 423,757 $ 368,101
Buildings and improvements........................... 1,247,054 705,699
Leasehold improvements............................... 72,261 64,446
Furniture, fixtures and equipment.................... 434,048 222,507
Construction in progress............................. 58,346 549,832
---------- ----------
2,235,466 1,910,585
Less accumulated depreciation and amortization....... (242,876) (143,177)
---------- ----------
$1,992,590 $1,767,408
========== ==========
</TABLE>
NOTE 7. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
In 1998, Caesars World, Inc. entered into a joint venture agreement with
Global Resorts, Inc., and the Black Empowerment Group to operate Caesars
Gauteng, a temporary casino, located in Johannesburg, South Africa. The
permanent casino, being built on the same site, is expected to be completed in
2000. The Company is to receive 50% of the management fee, based on 5% of net
revenues. During 1998, the Company contributed $22,111, representing its 25%
ownership interest in the joint venture. The temporary facility opened in the
middle of December 1998, therefore, the joint venture had no significant income
or losses from operations for the year.
In 1993, Caesars World, Inc. entered into a 50/50 joint venture agreement
with Hilton Hotels Corporation to operate Windsor Casino, Limited located in
Windsor, Canada. As of December 31, 1998 and 1997, Caesars World, Inc.'s
investment in this joint venture was $25,787 and $17,684, respectively. For the
years ended December 31, 1998 and 1997, Caesars World, Inc. earned income of
$16,151 and $14,040, respectively, in relation to this joint venture. No cash
advances have been made by Caesars World, Inc. to this joint venture during 1998
and 1997.
NOTE 8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Accounts payable........................................ $ 20,775 $ 15,165
Chip float.............................................. 23,848 23,895
Construction payable.................................... 24,693 75,095
Accrued salaries, wages and employee benefits........... 40,779 27,607
Other accrued expenses.................................. 106,525 92,336
-------- --------
$216,620 $234,098
======== ========
</TABLE>
F-12
<PAGE>
NOTE 9. LONG-TERM DEBT
Long-term debt including capital leases consisted of the following:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Senior subordinated notes, due August 15, 2002, at 8 7/8
percent payable semi-annually in February and August...... $150,000 $150,000
Note payable to vendor due November 1999, in monthly
installments of $158, including interest at 10% per
annum..................................................... 1,655 1,655
Mortgage note, due September 2011, in monthly installments
of $100, including interest at 10% per annum; with a
balloon payment of $500 at September 25, 2011............. 807 842
Harrison County Facility Loan, due ratably over three-year
period beginning 1999, including interest at 8% per
annum..................................................... 1,798 --
Capital lease obligations (See Note 11)..................... 21,767 17,980
-------- --------
176,027 170,477
Less current maturities..................................... (10,212) (4,033)
-------- --------
$165,815 $166,444
======== ========
</TABLE>
On August 15, 1992, Caesars World, Inc. issued $150,000 of 8 7/8 percent
Senior Subordinated Notes (the "Notes") that mature in 2002. The Notes are
subordinated to all senior indebtedness (as defined in the Indenture) and the
Notes are effectively subordinated to liabilities of the Company's subsidiaries
and are senior in the right of payment to other subordinated indebtedness. The
Notes are redeemable at the Company's option, in whole or in part, beginning
August 15, 1997, at a premium price of 103.27 percent, declining annually to par
at August 15, 2000, and thereafter. The original issue discount and costs are
being amortized over the term of the Notes.
The Notes contain covenants, among others, that require the maintenance of
certain financial ratios and include restrictions on the Company and its
subsidiaries with respect to additional debt, dividends, stock repurchases,
sales of certain assets, investments and capital expenditures, mergers,
consolidations and similar transactions, liens, acquisitions, disposition of
property, and prepayment of other debt.
The annual maturities of long-term debt, excluding capital leases, as of
December 31, 1998, follow:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1999........................................................ $ 2,870
2000........................................................ 619
2001........................................................ 21
2002........................................................ 150,023
2003........................................................ 26
Thereafter.................................................. 701
--------
$154,260
========
</TABLE>
F-13
<PAGE>
NOTE 10. INCOME TAXES
The Company determines its provision for income taxes and related asset and
liability accounts on a separate entity basis. Income tax data from continuing
operations is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Pretax income
U.S.................................................. $21,000 $21,291
Foreign.............................................. 27,407 30,115
------- -------
$48,407 $51,406
======= =======
Provision (benefit) for income tax
Current:
Federal.............................................. $ 2,784 $ 1,288
State................................................ (2,851) 779
Foreign.............................................. 11,867 12,960
------- -------
Total Current.......................................... 11,800 15,027
Deferred:
Federal.............................................. 15,226 14,760
State................................................ 1,481 548
Foreign.............................................. -- --
------- -------
Total Deferred......................................... 16,707 15,308
------- -------
$28,507 $30,335
======= =======
</TABLE>
The income tax effects of temporary differences between financial and income
tax reporting that gave rise to deferred income tax assets and liabilities were
as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Bad debt reserves................................... $ 17,465 $ 24,225
Deferred compensation............................... 9,453 9,453
Accrued expenses.................................... 22,344 19,225
Other............................................... 39,669 46,244
--------- ---------
Total deferred tax asset.............................. 88,931 99,147
--------- ---------
Deferred tax liabilities:
Depreciation........................................ (35,348) (28,598)
Asset basis difference.............................. (100,587) (100,587)
Other............................................... (32,713) (32,999)
--------- ---------
Total deferred tax liability.......................... (168,648) (162,184)
--------- ---------
Net deferred tax liability............................ $ (79,717) $ (63,037)
========= =========
</TABLE>
F-14
<PAGE>
NOTE 10. INCOME TAXES (CONTINUED)
The provision for income taxes differed from the amount computed at the
statutory rate of 35% as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Federal................................................... $16,942 $17,992
State income taxes, net of federal benefit................ (891) 863
Foreign income taxes in excess of the statutory rate...... 2,275 2,420
Non-deductible goodwill................................... 9,495 9,506
Other, net................................................ 686 (446)
------- -------
$28,507 $30,335
======= =======
</TABLE>
NOTE 11. LEASES
The Caesars Tahoe land and building are leased pursuant to an operating
lease which expires in 2004 and is renewable for two additional 25-year periods.
The lease provides for a minimum rent of $2,831 for the period from August 1,
1997 to July 1, 1998, increasing by $75 per year on August 1, 1998 and in each
subsequent year, and for percentage rent of 20 percent of the casino/hotel's net
profit (as therein defined). Percentage rent expense included in selling,
general and administrative expenses was $1,614 and $949 for the years ended
December 31, 1998 and 1997, respectively. The aggregate fixed lease payments,
including amounts paid on a mortgage note retired in prior years, are amortized
on a straight-line basis over the remaining initial lease term. At December 31,
1998 and 1997, there was $5,318 and $6,516, respectively, of prepaid rent
included in "Other Assets" related to this lease.
At December 31, 1998, the Company was obligated under non-cancelable
operating leases and capital leases to make future minimum lease payments as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, OPERATING CAPITAL
- ------------------------ --------- --------
<S> <C> <C>
1999..................................................... $ 5,351 $ 7,342
2000..................................................... 5,045 7,150
2001..................................................... 4,785 7,149
2002..................................................... 4,623 2,188
2003..................................................... 4,250 917
Thereafter............................................... 9,600 --
------- -------
Total minimum lease payments............................. $33,654 $24,746
======= =======
Less amount representing interest........................ (2,979)
Present value of minimum lease payments.................. 21,767
Less current maturities.................................. 7,342
-------
Long-term obligations.................................... $14,425
=======
</TABLE>
F-15
<PAGE>
NOTE 11. LEASES (CONTINUED)
Rental expense was comprised of the following:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Minimum rentals under lease obligations................... $ 7,876 $ 7,868
Less sublease income...................................... (2,158) (1,889)
Contingent rentals under operating and capital leases..... 2,123 1,800
------- -------
$ 7,841 $ 7,779
======= =======
</TABLE>
NOTE 12. STOCK OPTIONS
The Company participates in its parent's stock option plans. The Company
applies APB Opinion No. 25 and related interpretations in accounting for
stock-based compensation plans. Accordingly, compensation expense recognized was
different than what would have otherwise been recognized under the fair value
based method defined in SFAS No. 123, "Accounting for Stock-Based Compensation."
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS No. 123, the Company's net income would
have been reduced to the pro forma amount of $13,312 for the year ended December
31, 1998. The fair value of the option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1998: dividend yield of 3.0%; expected volatility
of 47.6%; risk-free interest rate of 4.5%; and expected lives of three to four
years for all options.
At the date of the ITT Merger, each ITT stock option and related stock
appreciation right that was outstanding became fully exercisable. In November
1997, due to the election of the holder of each ITT stock option to receive
cash, Starwood Units or a combination, variable accounting required an expense
to be recognized for the difference between the option price and the formula
market price. There is no pro forma effect to income in 1997 as a result of this
variable accounting.
At December 31, 1998, Starwood had 564,000 and 606,914 options outstanding
relating to Company employees at exercise prices of $49.19 and $54.85,
respectively. There are 246,811 stock options exercisable with an exercise price
of $54.85. During 1998, Starwood issued all of its stock options at market value
and the weighted average fair value of these options was $18.54.
NOTE 13. EMPLOYEE BENEFIT PLANS
The Company has defined benefit pension plans covering any officer or other
employee designated as a key executive of the Company and its subsidiaries. The
benefits are based on years of service (not to exceed 30) and the employee's
highest five years of compensation during the last 10 years of employment. The
Company has funded the vested benefits of certain current employees by making
contributions to revocable trusts. Income earned by the trusts accrues to the
benefit of the Company. At December 31, 1998, the amount in these revocable
trusts was $14,854 and is recorded in "Other Assets." Such trusts shall become
irrevocable in the event of a change of control (as defined).
F-16
<PAGE>
NOTE 13. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the plans' status and amounts recognized in
the Company's financial statements:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Net benefit obligation at beginning of year................. $ 18,102 $ 18,261
Service cost................................................ 1,659 1,287
Interest cost............................................... 1,150 1,221
Actuarial (gain) loss....................................... 2,206 (1,535)
Curtailments................................................ (4,100) --
Gross benefits paid......................................... (1,156) (1,132)
-------- --------
Net benefit obligation end of year.......................... $ 17,861 $ 18,102
======== ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year.............. $ -- $ --
Employer contributions...................................... 1,156 1,132
Gross benefits paid......................................... (1,156) (1,132)
-------- --------
Fair value of plan assets at end of year.................... $ -- $ --
======== ========
RECONCILIATION OF FUNDED STATUS:
Funded status at end of year................................ $(17,861) $(18,102)
Unrecognized net actuarial (gain) loss...................... 44 (1,736)
Unrecognized net transition obligation...................... -- 189
-------- --------
Net amount recognized at end of year........................ $(17,817) $(19,649)
======== ========
</TABLE>
Assumptions used in accounting for the Company's defined benefit plans were:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
1998 1997
-------- --------
<S> <C> <C>
Discount rate for obligations............................... 6.50% 7.25%
Rate of increase in compensation levels..................... 5.00% 5.00%
Expected long-term rate of return on plan assets............ N/A N/A
</TABLE>
F-17
<PAGE>
NOTE 13. EMPLOYEE BENEFIT PLANS (CONTINUED)
The periodic net pension expense included the following components:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Service cost............................................... $ 1,659 $1,287
Interest cost.............................................. 1,150 1,222
Amortization of net transition amount...................... 31 40
Recognized net gain........................................ (16) --
------- ------
SFAS 87 cost............................................... 2,824 2,549
Curtailment credit......................................... (3,500) --
------- ------
Net periodic benefit cost.................................. $ (676) $2,549
======= ======
</TABLE>
Effective February 23, 1998, Starwood adopted the Company's
401(k)-retirement plan covering substantially all of its non-union employees.
The plan provides for the Company to contribute 1 percent of certain
compensation for eligible employees who may also contribute up to 5 percent of
their base compensation to this plan and their contributions are matched by the
Company in an amount equal to 50 percent of each employee's contribution.
Employees may also contribute an additional 11 percent of base compensation to
the plan, with certain limitations, which is not matched by the Company. The
matching contributions vest to the employee ratably based on the employee's
years of service and fully vest after five years of service. The Company's one
percent contributions and all employee contributions vest immediately. The
Company's basic one percent and matching contributions for the years ended
December 31, 1998 and 1997 were $6,234 and $5,174, respectively.
In addition to the Company's plans described above, union employees are
covered by various multi-employer pension plans. The Company charged to expense
approximately $4,347 and $3,639 in 1998 and 1997, respectively, for such plans.
For the union sponsored plans, information from the plans' sponsors is not
available to permit the Company to determine its share of unfunded vested
benefits, if any.
NOTE 14. FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments at
December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
--------------------- ---------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Cash and cash equivalent............ $102,664 $102,664 $ 63,488 $ 63,488
Long-term debt...................... 176,027 176,777 170,477 173,852
</TABLE>
CASH AND CASH EQUIVALENTS
The estimated fair value of cash and cash equivalents is estimated based on
the quoted market price of the investments, where available. If quoted market
prices are not available, fair values are based on quoted market prices of
comparable investments.
LONG-TERM DEBT
The estimated fair value of long-term debt is based on the quoted market
prices for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities.
F-18
<PAGE>
NOTE 15. RELATED PARTY TRANSACTIONS
Starwood charges the Company a management service fee equal to 2.75% of net
revenues. The fee represents compensation for certain support services in the
fields of management, operations, administration, finance, treasury, tax,
personnel, accounting, legal, intellectual property, information systems, real
estate and insurance applicable to the business operations of the Company. The
service charge was $32,705 and $28,711 for the years ended December 31, 1998 and
1997, respectively.
In addition, Starwood charges the Company interest associated with certain
funds advanced to the Company. For the years ended December 31, 1998 and 1997,
Starwood charged the Company $23,926 and $21,153, respectively, as interest
expense.
A subsidiary of the Company also advances to and receives funds and services
with ITT Sheraton Corporation and its wholly owned subsidiary, Sheraton Gaming
Corporation, for operating capital, construction funding, upper management
payroll and benefits, reservation fees, and other marketing programs.
NOTE 16. COMMITMENTS AND CONTINGENCIES
DEVELOPMENT OBLIGATION
The New Jersey Casino Control Act obligation provides, among other things,
for an investment obligation on licensees based upon 1.25% of their gross casino
revenues, as defined. This obligation may be satisfied by investing in qualified
eligible direct investments, by purchasing bonds issued by the Casino
Reinvestment Development Authority ("CRDA"), and/or by making qualified
contributions. At December 31, 1998, all CRDA investment obligations had been
substantially satisfied or prepaid.
CAESARS INDIANA
RDI/Caesars Riverboat Casino LLC (the "LLC") is a limited liability company
formed under the laws of the state of Indiana. The members of the LLC include
Riverboat Development, Inc. and Roman Holding Corporation of Indiana, which is
owned by the Company. Pursuant to an operating agreement between the members,
certain equity and income (loss) allocations are provided. The agreement
provides that if any member has a deficit balance in their capital account, the
profits shall be allocated in proportion to those deficit balances until the
capital accounts of all members have been increased to zero. Profits are next
allocated so that the capital accounts of the members are proportionate to their
Units (as defined in the agreement). Thereafter, profits are allocated so that
RDI receives 25% of the LLC's profits less an imputed interest expense and Roman
receives all remaining profits.
DISPUTE WITH NOVA SCOTIA GAMING CORPORATION
Metropolitan Gaming Corporation (MEG), is a partnership between ITT Sheraton
Canada Ltd. and Purdy's Wharf Developments Limited which operates the casinos in
Halifax and Sydney. MEG is in dispute with the Nova Scotia Gaming Corporation
over the expense treatment of the Goods and Services Tax and the Harmonized
Sales Tax ("GST/HST") as it relates to deductibility for the purposes of the
income guarantee as defined in the Operating Contract. The parties expect to
enter into arbitration as provided for in the Contract. The outcome of the
arbitration is binding on both parties and cannot be appealed. The maximum
contingent liability related to the GST/HST dispute, including the effect of the
income guarantee, in the event of an outcome which is unfavorable to MEG, is
estimated to be approximately $14 million.
F-19
<PAGE>
NOTE 16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
LICENSE RENEWAL
During 1996, the New Jersey Casino Control Commission (the "CCC") renewed
the Company's license to operate its casino hotel complex in Atlantic City. A
casino license is not transferable, and must be renewed every four years by
filing an application which must be acted upon by the CCC no later than 30 days
prior to the expiration of the license then in force.
LITIGATION
On April 26, 1994, William H. Poulos brought an action in the U.S. District
Court for the Middle District of Florida, Orlando Division-William H. Poulos, ET
AL V. CAESARS WORLD, INC. ET AL-Case No. 39-478-CIV-ORL-22--in which various
parties (including the Company) alleged to operate casinos or be slot machine
manufacturers were named as defendants. The plaintiff sought to have the action
certified as a class action suit.
An action subsequently filed on May 10, 1994 in the United States District
Court for the Middle District of Florida--WILLIAM AHEARN, ET AL V. CAESARS
WORLD, INC. ET AL--Case No. 94-532--CIV-ORL-22--made similar allegations and was
consolidated with the Poulos action.
Both actions included claims under the Federal Racketeering-Influenced and
Corrupt Organizations Act and under state law, and sought compensatory and
punitive damages. The plaintiffs claimed that the defendants are involved in a
scheme to induce people to play electronic video poker and slot machines based
on false beliefs regarding how such machines operate and the extent to which a
player is likely to win on any given play.
In December 1994, the consolidated actions were transferred to the U.S.
District Court for the District of Nevada.
On September 26, 1995, Larry Schreier brought an action in the U.S. District
Court for the District of Nevada--LARRY SCHREIR, ET AL V. CAESARS WORLD, INC. ET
AL-Case No. CV-95-00923-DWH (RJJ).
The plaintiff's allegations in the Schreier action were similar to those
made by the plaintiffs in the Poulos and Ahearn actions, except that Schreier
claimed to represent a more precisely defined class of plaintiffs than Poulos or
Ahearn.
In December 1996, the court ordered the Poulos, Ahearn and Schreier actions
consolidated under the title WILLIAM H. POULOS, ET AL V. CAESARS WORLD, INC. ET
AL-Case No. CV-S-94-11236-DAE (RJJ)--(Base File), and required the plaintiffs to
file a consolidated and amended complaint. On February 14, 1997, the plaintiffs
filed a consolidated and amended complaint.
In March 1997, various defendants filed motions to dismiss or stay the
consolidated action until the plaintiffs submitted their claims to gaming
authorities and those authorities considered the claims submitted by the
plaintiffs.
In December 1997, the court denied all of the motions submitted by the
defendants, and ordered the plaintiffs to file a new consolidated and amended
complaint. That complaint was filed in February 1998. The plaintiffs have filed
a motion seeking an order certifying the action as a class action. Certain of
the defendants have opposed the motion. The Court has not ruled on the motion.
There are additional lawsuits currently pending against the Company arising
in the normal course of business. Management believes the final disposition of
the foregoing action will not have a material adverse effect on the Company's
financial position or its results of operations.
F-20
<PAGE>
PROSPECTUS
$1,000,000,000
[LOGO]
DEBT SECURITIES, PREFERRED STOCK,
DEPOSITARY SHARES, COMMON STOCK AND WARRANTS
---------------------
We may offer and sell from time to time in one or more classes or series and
in amounts, at prices and on terms that we will determine at the time of
offering, with an aggregate initial offering price of up to $1,000,000,000:
- debt securities, which may consist of debentures, notes or other types of
debt;
- shares of preferred stock, $.01 par value per share;
- shares of preferred stock represented by depositary shares;
- shares of common stock, $.01 par value per share; and
- warrants to purchase debt securities, preferred stock, depositary shares
or common stock.
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and any supplement carefully
before you invest.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAVE THESE ORGANIZATIONS
DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
THE MISSISSIPPI GAMING COMMISSION, THE NEW JERSEY CASINO CONTROL COMMISSION NOR
THE LOUISIANA GAMING CONTROL BOARD HAS APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL AND IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 8, 1999
<PAGE>
WE HAVE NOT AUTHORIZED ANY DEALER, SALESMAN OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING SUPPLEMENT TO
THIS PROSPECTUS. YOU MUST NOT RELY UPON ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT AS IF WE HAD AUTHORIZED IT. THIS PROSPECTUS AND THE
ACCOMPANYING SUPPLEMENT TO THIS PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH THEY RELATE, NOR DO THIS PROSPECTUS AND THE ACCOMPANYING
SUPPLEMENT TO THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. THE
INFORMATION CONTAINED IN THIS PROSPECTUS AND THE SUPPLEMENT TO THIS PROSPECTUS
IS ACCURATE AS OF THE DATES ON THEIR COVERS. WHEN WE DELIVER THIS PROSPECTUS OR
A SUPPLEMENT OR MAKE A SALE PURSUANT TO THIS PROSPECTUS, WE ARE NOT IMPLYING
THAT THE INFORMATION IS CURRENT AS OF THE DATE OF THE DELIVERY OR SALE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About This Prospectus....................................... 1
Where You Can Find More Information......................... 1
Incorporation Of Certain Documents By Reference............. 1
Disclosure Regarding Forward-Looking Statements............. 2
The Company................................................. 2
Use Of Proceeds............................................. 3
Ratio Of Earnings To Fixed Charges.......................... 3
Description Of Debt Securities.............................. 3
Description Of Capital Stock................................ 12
Common Stock................................................ 12
Preferred Stock............................................. 13
Description Of Depositary Shares............................ 15
Description Of Warrants..................................... 18
Plan Of Distribution........................................ 20
Legal Matters............................................... 21
Experts..................................................... 21
</TABLE>
i
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (the "Commission") utilizing a "shelf"
registration process. Under this shelf registration process, we may sell any
combination of the securities described in this prospectus in one or more
offerings up to an aggregate initial offering price of $1,000,000,000. This
prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the next heading
"Where You Can Find More Information."
When we refer to "we," "our" and "us" in this prospectus, we mean Park Place
Entertainment Corporation, excluding, unless the context otherwise requires or
as otherwise expressly stated, our subsidiaries. When we refer to "you" or
"yours," we mean the holders of the applicable series of securities.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities and
Exchange Act of 1934, and file annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy any
reports, proxy statements and other information we file at the Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at Seven World Trade Center, 13th Floor, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Please call the Commission at 1-800-SEC-0300 for
further information on the public reference rooms. You may also access filed
documents at the Commission's web site at http://www.sec.gov. In addition, you
may inspect reports and other information we file at the office of the New York
Stock Exchange ("NYSE") at 20 Broad Street, New York, New York 10005.
We have filed a registration statement on Form S-3 and related exhibits with
the Commission under the Securities Act of 1933, as amended (the "Securities
Act"). The registration statement contains additional information about us and
the securities. You may inspect the registration statement and exhibits without
charge and obtain copies from the Commission at prescribed rates at the
locations set forth above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to "incorporate by reference" the information we
file with it, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
Commission will automatically update and supersede this information. We
incorporate by reference the following documents we filed with the Commission:
- Amendment No. 1 to the Company's Registration Statement on Form 10 filed
with the Commission on December 18, 1998;
- Quarterly Report on Form 10-Q for the quarter ended September 30, 1998;
- Current Reports on Form 8-K filed with the Commission on November 25,
1998, December 16, 1998, January 8, 1999, January 20, 1999 and
February 5, 1999;
- The description of the Company's Preferred Share Purchase Rights contained
in our Registration Statement on Form 8-A filed with the Commission on
December 30, 1998; and
- all documents filed by us with the Commission pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act after the date of this
prospectus and before the termination of the offering.
<PAGE>
You may request a free copy of any of the documents incorporated by
reference in this prospectus (other than exhibits, unless they are specifically
incorporated by reference in the documents) by writing or telephoning us at the
following address:
Investor Relations
Park Place Entertainment Corporation
3930 Howard Hughes Parkway
Las Vegas, Nevada 89109
(702) 699-5000
You should rely only on the information incorporated by reference or
provided in this prospectus and any supplement. We have not authorized anyone
else to provide you with different information. You should not assume that the
information in this prospectus or any prospectus supplement is accurate as of
any date other than the dates on the front of these documents.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the documents that we incorporate by reference,
contains "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such statements are indicated by words or phrases
such as "anticipate," "estimate," "plans," "projects," "continuing," "ongoing,"
"expects," "management believes," "the Company believes," "the Company intends,"
"we believe," "we intend" and similar words or phrases. We have based these
forward-looking statements on our current expectations and projections about
future events. These forward-looking statements are subject to risks,
uncertainties, and assumptions about us and our subsidiaries, including, among
other things, factors discussed in our filings with the Commission and the
following:
- the effect of economic, credit and capital market conditions in general
and on gaming companies in particular;
- our construction and development activities;
- our ability to successfully integrate our operations with Grand Casinos,
Inc.;
- the impact of competition, particularly from other gaming and hotel/gaming
operations;
- changes in laws or regulations, third party relations and approvals and
decisions of courts, regulators and governmental bodies; and
- changes in customer demand.
Consequently, actual events and results may vary significantly from those
included in or contemplated or implied by such statements.
THE COMPANY
We are the world's largest gaming company, as measured by casino square
footage and revenues, and the only casino gaming company with a leading presence
in Nevada, New Jersey and Mississippi--the three largest gaming markets in the
United States.
We were formed to succeed to the gaming business of Hilton Hotels
Corporation ("Hilton"). On December 31, 1998, Hilton distributed all of our
common stock to Hilton's stockholders and we became a publicly traded
corporation. Following the Hilton Distribution, we acquired the Mississippi
gaming operations of Grand Casinos, Inc. by means of a merger of our
wholly-owned subsidiary into Grand with Grand surviving the merger. Immediately
prior to the merger, Grand separated its Mississippi gaming business from its
non-Mississippi business (comprised primarily of the management of Indian-owned
2
<PAGE>
casinos and certain other assets and liabilities) through the distribution of
all of the common stock of Lakes Gaming, Inc. to the shareholders of Grand.
Our principal executive offices are located at 3930 Howard Hughes Parkway,
Las Vegas, Nevada 89109, and our telephone number is (702) 699-5000.
USE OF PROCEEDS
We intend to use the net proceeds from the sale of the securities for
general corporate purposes, including repaying, redeeming or repurchasing
existing debt, and for working capital, capital expenditures and other
acquisitions. We may invest funds not required immediately for such purposes in
short-term investment grade securities.
RATIO OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges are as follows for the periods
indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, FISCAL YEARS ENDED DECEMBER 31,
---------------- -------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......................... 3.4x 3.8x 2.4x 2.1x 4.0x 3.8x 4.1x
</TABLE>
We have computed the ratio of earnings to fixed charges by dividing income
before income taxes and minority interests plus fixed charges (excluding
capitalized interest) by fixed charges.
DESCRIPTION OF DEBT SECURITIES
This prospectus describes certain general terms and provisions of our debt
securities. When we offer to sell a particular series of debt securities, we
will describe the specific terms of the series in a supplement to this
prospectus. Accordingly, for a description of the terms of any series of debt
securities, you must refer to both the prospectus supplement relating to that
series and the description of the debt securities set forth in this prospectus.
A prospectus supplement may change any of the terms of the debt securities
described in this prospectus.
We may offer under this prospectus up to $1,000,000,000 aggregate principal
amount of debt securities, or if debt securities are issued at a discount, or in
a foreign currency or composite currency, such principal amount as may be sold
for an initial public offering price of up to $1,000,000,000.
The debt securities will be issued under an indenture between us and a
trustee chosen by us. We have summarized select portions of the indenture below.
The summary does not restate the indenture in its entirety. The form of the
indenture, which is subject to such amendments or supplements as may be adopted
from time to time, has been filed as an exhibit to the registration statement
and we urge you to read the indenture because it, and not this description,
defines your rights as holders of debt securities issued under the indenture.
Capitalized terms used in the summary have the meaning specified in the
indenture.
GENERAL
The debt securities will be our direct obligations, which may be secured or
unsecured, and which may be senior or subordinated indebtedness. We may issue an
unlimited amount of debt securities, in one or more series, under the indenture.
The terms of each series of debt securities will be established by a Board
Resolution or in a supplemental indenture. We need not issue all debt securities
of one series at the same time and, unless otherwise provided, we may reopen a
series, without the consent of the holders of the debt securities of that
series, for issuances of additional debt securities of that series.
3
<PAGE>
There may be more than one trustee under the indenture, each with respect to
one or more series of debt securities. Any trustee may resign or be removed by
us and we will appoint a successor trustee. Each trustee will be a trustee of a
trust under the indenture separate and apart from the trust administered by any
other trustee under the indenture. Except as otherwise indicated in this
prospectus, any action taken by the trustee may be taken by the trustee only
with respect to the series of debt securities for which it is the trustee.
We will set forth in a prospectus supplement (including any pricing
supplement) relating to any series of debt securities being offered, the
aggregate principal amount and the following terms of the debt securities:
- the title of the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- the price (expressed as a percentage of the aggregate principal amount) at
which we will sell the debt securities;
- whether we will issue the debt securities at a discount and the portion of
the principal amount of the debt securities payable upon declaration of
acceleration of the maturity of the securities or upon redemption, if
other than the principal amount, and the rate at which the original issue
discount will accrue;
- the date on which we will pay the principal on the debt securities;
- the rate (which may be fixed or variable) or the method used to determine
the rate (including any commodity, commodity index, stock exchange index
or financial index) at which the debt securities will bear interest, the
date from which interest will accrue, the date on which interest will be
payable and any regular record date for the interest payable on any
interest payment date;
- the place where we will pay (or the method of payment of) principal,
premium and interest on the debt securities, and where holders may
surrender the debt securities for conversion, registration of transfer or
exchange;
- any obligation we have to redeem or purchase the debt securities pursuant
to any sinking fund or analogous provisions or at the option of a holder
of debt securities;
- our right to redeem the debt securities and the date on which and the
price at which and the terms and conditions upon which we may redeem the
debt securities;
- the denominations in which we will issue the debt securities, if other
than denominations of $1,000 and any integral multiple thereof;
- provisions, if any, for the defeasance or discharge of our obligations
with respect to the debt securities;
- whether we will issue the debt securities in registered or bearer form;
- the currency in which we will pay principal, premium and interest on the
debt securities;
- if we will pay principal, premium or interest on the debt securities in
one or more currencies other than those in which the debt securities are
denominated, the manner in which we will determine the exchange rate on
these payments;
- the manner in which we will determine the amounts of payment of principal,
premium or interest on the debt securities if these amounts may be
determined by reference to an index based on a currency other than that in
which the debt securities are denominated or designated or by reference to
a commodity, commodity index, stock exchange index or financial index;
4
<PAGE>
- any addition to, or change or deletion of, any events of default or
covenants in the indenture;
- a discussion of any material and/or special United States Federal income
tax considerations applicable to the debt securities;
- any depositaries, trustees, interest rate calculation agents, exchange
rate calculation agents or other agents with respect to the debt
securities other than those originally appointed;
- whether we will issue the debt securities in the form of global securities
and whether we will issue the global securities in temporary or permanent
global form;
- any rights of the holders of the debt securities to convert the debt
securities into other securities or property and the terms and conditions
of the conversion;
- any subordination provisions relating to the debt securities;
- any listing of the debt securities on a securities exchange;
- any provisions relating to any security provided for the debt securities;
and
- any other terms of the debt securities that will not be inconsistent with
the indenture.
We may issue debt securities at a discount below their stated principal
amount. Even if we do not issue the debt securities below their stated principal
amount, for United States Federal income tax purposes the debt securities may be
deemed to have been issued with a discount because of certain interest payment
characteristics. We will set forth in a prospectus supplement the United States
Federal income tax considerations applicable to debt securities issued at a
discount or deemed to be issued at a discount. We will also set forth in a
prospectus supplement the special United States Federal income tax
considerations or other restrictions or terms applicable to debt securities
issuable in bearer form, offered exclusively to foreigners or denominated in a
foreign currency.
DENOMINATIONS, REGISTRATION, TRANSFER AND EXCHANGE
Unless we specify otherwise in the prospectus supplement, the debt
securities of any series will be issuable only in denominations of $1,000 and
integral multiples thereof, and will be payable only in U.S. dollars.
We may issue the debt securities in whole or in part in the form of one or
more global securities that will be deposited with, or on behalf of, a
depositary identified in the applicable prospectus supplement. We may issue the
global securities in either registered or bearer form and in either temporary or
permanent form. We will describe the specific terms of the depositary
arrangement with respect to a series of debt securities in the prospectus
supplement.
You may transfer or exchange certificated debt securities at any office we
maintain for this purpose in accordance with the terms of the indenture. We will
not charge a service fee for any transfer or exchange of certificated debt
securities, but we may require payment of a sum sufficient to cover any tax or
other governmental charge we are required to pay in connection with a transfer
or exchange.
You may effect the transfer of certificated debt securities and the right to
receive the principal, premium and interest on certificated debt securities only
by surrendering the certificate representing those certificated debt securities
and either reissuance by us or the trustee of the certificate to the new holder
or the issuance by us or the trustee of a new certificate to the new holder.
We are not required to:
- register, transfer or exchange debt securities of any series during a
period beginning at the opening of business 15 days before the day we
transmit a notice of redemption of debt securities of the series selected
for redemption and ending at the close of business on the day of the
transmission, or
5
<PAGE>
- to register, transfer or exchange any debt security so selected for
redemption in whole or in part, except the unredeemed portion of any debt
security being redeemed in part.
COVENANTS
We will set forth in the applicable prospectus supplement any restrictive
covenants applicable to an issue of debt securities.
CONSOLIDATION, MERGER OR SALE OF ASSETS
We may not consolidate or merge with or into, or sell, assign, convey or
transfer our properties and assets substantially in their entirety (computed on
a consolidated basis) to another corporation, person or entity unless:
- in the case of a consolidation or merger, (a) we are the surviving
corporation, or (b) the successor or transferree is an entity organized
and validly existing under the laws of the United States, any State
thereof or the District of Columbia and expressly assumes our obligations
under the debt securities and the indenture; and
- immediately after giving effect to the transaction, no event of default
exists.
EVENTS OF DEFAULT
Each of the following is an Event of Default with respect to a series of
debt securities:
- default in the payment of any interest upon any debt security of that
series when it becomes due and payable, and continuance of that default
for a period of 30 days;
- default in the payment of principal of or premium on any debt security of
that series when due and payable;
- default in the deposit of any sinking fund payment, when and as due in
respect of any debt security of that series;
- default in the performance or breach by us of any other covenant or
warranty in the indenture (other than a covenant or warranty that has been
included in the indenture solely for the benefit of a series of debt
securities other than that series), which default continues uncured for a
period of 60 days after we receive written notice from the trustee or we
and the trustee receive written notice from the holders of at least 25% in
principal amount of the outstanding debt securities of that series as
provided in the indenture;
- the acceleration of the maturity date of any of our indebtedness, other
than Non-recourse Indebtedness (as defined below), at any one time, in an
amount exceeding the greater of (1) $25 million and (2) 5% of Consolidated
Net Tangible Assets (as defined below), if the acceleration is not
annulled within 30 days thereafter;
- certain events of bankruptcy, insolvency or reorganization; and
- any other Event of Default provided with respect to debt securities of
that series that is described in the applicable prospectus supplement
accompanying this prospectus.
"Non-recourse Indebtedness" means indebtedness the terms of which provide
that the lender's claim for repayment of such indebtedness is limited solely
to a claim against the property which secures such indebtedness.
"Consolidated Net Tangible Assets" means the total amount of assets
(including investments in Joint Ventures) of the Company and its
subsidiaries (less applicable depreciation, amortization and other valuation
reserves) after deducting therefrom (a) all current liabilities of the
Company and its
6
<PAGE>
subsidiaries (excluding (i) the current portion of long-term indebtedness,
(ii) intercompany liabilities and (iii) any liabilities which are by their
terms renewable or extendible at the option of the obligor thereon to a time
more than 12 months from the time as of which the amount thereof is being
computed) and (b) all goodwill, trade names, trademarks, patents,
unamortized debt discount and any other like intangibles, all as set forth
on the most recent consolidated balance sheet of the Company and computed in
accordance with generally accepted accounting principles.
If an Event of Default with respect to outstanding debt securities of any
series occurs and is continuing, then the trustee or the holders of at least 25%
in principal amount of outstanding debt securities of that series may declare,
in a written notice, the principal amount (or specified amount) plus accrued and
unpaid interest (and premium, if payable) on all debt securities of that series
to be immediately due and payable. At any time after a declaration of
acceleration with respect to debt securities of any series has been made, the
holders of a majority in principal amount of the outstanding debt securities of
that series may rescind and annul the acceleration if:
- the holders act before the trustee has obtained a judgment or decree for
payment of the money due;
- we have paid or deposited with the trustee a sum sufficient to pay overdue
interest and overdue principal other than the accelerated interest and
principal; and
- we have cured or the holders have waived all Events of Default, other than
the non-payment of accelerated principal and interest with respect to debt
securities of that series, as provided in the indenture.
We refer you to the prospectus supplement relating to any series of debt
securities that are discount securities for the particular provisions relating
to acceleration of a portion of the principal amount of the discount securities
upon the occurrence of an Event of Default.
The trustee has no obligation to exercise any of its rights or powers under
the indenture at the request of any holder of outstanding debt securities,
unless the trustee receives indemnity satisfactory to it against any loss,
liability or expense. Subject to certain rights of the trustee, the holders of a
majority in principal amount of the outstanding debt securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee with respect to the debt securities of that
series.
No holder of any debt security of any series will have any right to
institute any judicial or other proceeding with respect to the indenture or for
the appointment of a receiver or trustee, or for any remedy under the indenture,
unless:
- that holder has previously given to the trustee written notice of a
continuing Event of Default with respect to debt securities of that
series; and
- the holders of at least a 25% in principal amount of outstanding debt
securities of that series have made written request, and offered
reasonable indemnity, to the trustee to institute the proceeding as
trustee, and the trustee has not received from the holders of a majority
in principal amount of the outstanding debt securities of that series a
direction inconsistent with that request and has failed to institute the
proceeding within 60 days.
Notwithstanding the foregoing, the holder of any debt security will have an
absolute and unconditional right to receive payment of the principal, premium
and any interest on that debt security on or after the due dates expressed in
that debt security and to institute suit for the enforcement of payment.
Within 120 days after the end of our fiscal year we will furnish to the
trustee a statement as to compliance with the indenture. The trustee may
withhold notice to the holders of debt securities of any series of any Default
or Event of Default (except in payment on any debt securities of that series)
with
7
<PAGE>
respect to debt securities of that series if it in good faith determines that
withholding notice is in the interest of the holders of those debt securities.
MODIFICATION AND WAIVER
We may modify the indenture, without prior notice to or consent of any
holders, for any of the following purposes:
- to evidence the succession of another corporation to our rights and the
assumption by the successor of our covenants and obligations in the
indenture and the debt securities;
- to add to the covenants for the benefit of the holders of the debt
securities or to surrender any right or power conferred upon us in the
indenture;
- to add any Events of Default;
- to add or change any provision of the indenture to permit or facilitate
the issuance of debt securities of any series in bearer form, to permit
bearer securities to be issued in exchange for registered securities, to
permit bearer securities to be issued in exchange for bearer securities of
other denominations or to permit the issuance of debt securities of any
series in uncertificated form, provided that the action will not adversely
affect the interests of the holders of debt securities or coupons in any
material respect;
- to change or eliminate any provision of the indenture, provided that the
change or elimination will become effective only when there is no
outstanding debt security issued under the indenture or coupon of any
series created prior to the modification which is entitled to the benefit
of the provision and as to which the modification would apply;
- to secure the debt securities or to provide that any of our obligations
under the debt securities or the indenture will be guaranteed and the
terms and conditions for the release or substitution of the security or
guarantee;
- to supplement any provisions of the indenture to permit or facilitate the
defeasance and discharge of any series of debt securities, provided that
the action will not adversely affect the interests of the holders of the
debt securities or coupons in any material respect;
- to establish the form or terms of debt securities and coupons as permitted
by the indenture;
- to evidence and provide for a successor or other trustee with respect to
one or more series of debt securities and to add or change any provision
of the indenture to provide for or facilitate the administration of the
trusts by more than one trustee; or
- to cure any ambiguity, to correct or supplement any provision of the
indenture which may be defective or inconsistent with any other provision
of the indenture, to eliminate any conflict between the terms of the
indenture and the debt securities and the Trust Indenture Act or to make
any other provisions which will not be inconsistent with any provision of
the indenture; provided such other provisions will not adversely affect
the interest of the holders of outstanding debt securities or coupons in
any material respect.
We may modify and amend the indenture with the written consent of at least a
majority in principal amount of the outstanding debt securities of each series
affected by the modifications or amendments; PROVIDED, HOWEVER, that such
modifications may not, without the consent of the holder of each outstanding
debt security of each series affected thereby:
- change the stated maturity of any debt security or coupon;
- reduce the principal amount of any payment to be made on any debt security
or coupon;
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- reduce the rate of interest (or extend the time for payment of interest)
or premium payable upon redemption of any debt security;
- change the coin or currency in which any debt security or any premium or
interest is payable;
- reduce the amount of the principal of a discount security that would be
due and payable upon a declaration of acceleration of the maturity;
- impair the right to institute suit for the enforcement of any payment on
or after the due date thereof;
- alter any redemption provisions in a manner adverse to the holders of the
debt securities;
- reduce the percentage in principal amount of the outstanding debt
securities;
- adversely affect the right of any holder to convert any debt security;
- modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the indenture
cannot be modified or waived without the consent of the holder of each
outstanding debt security affected thereby; or
- modify any provision described in the applicable prospectus supplement as
requiring the consent of each affected holder of debt securities.
A modification which changes or eliminates any covenant or other provision
of the indenture relating to one or more particular series of debt securities
and coupons, or which modifies the rights of the holder of debt securities and
coupons of that series, will be deemed not to affect the rights of the holders
of debt securities and coupons of any other series.
The holders of at least a majority in principal amount of the outstanding
debt securities of any series, by notice to the trustee, may on behalf of the
holders of all debt securities of that series waive any default and its
consequences under the indenture, except:
- a continuing default in the payment of interest on, premium or the
principal amount of any debt security held by a nonconsenting holder; or
- a default of a covenant or provision which cannot be modified or amended
without the consent of the holder of each outstanding debt security of
each series affected. Defeasance of Debt Securities and Certain Covenants
in Certain CircumstancesLegal Defeasance.We may be discharged from any and
all obligations in respect of the debt securities of any series except for
certain obligations:
- to pay additional amounts, if any, upon the occurrence of certain tax,
assessment or government charge events with respect to payments on the
debt securities;
- to register the transfer or exchange of debt securities of the series;
- to replace stolen, lost or mutilated debt securities of the series;
- to maintain paying agencies; and
- to hold money in payment for trust.
We will be discharged upon our deposit with the trustee, in trust, of money
and/or government obligations that will provide money in an amount sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay and discharge each installment of principal, premium and
interest on and any mandatory sinking fund payments in respect of the debt
securities of that series on the stated maturity of those payments.
We may be discharged only if, among other things, we have delivered to the
trustee an opinion of counsel stating that we have received from, or there has
been published by, the United States Internal
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Revenue Service a ruling (the "IRS Ruling") or, since the date of execution of
the indenture, there has been a change in the applicable United States Federal
income tax law, in either case to the effect that, the holders of the debt
securities of that series will not recognize income, gain or loss for United
States Federal income tax purposes as a result of the deposit, defeasance and
discharge.
DEFEASANCE OF CERTAIN COVENANTS. Upon compliance with certain conditions,
we may omit to comply with certain restrictive covenants contained in the
indenture and any omission to comply with the obligations will not constitute a
Default or Event of Default with respect to the debt securities. The conditions
include, among others:
- depositing with the trustee money and/or government obligations that,
through the payment of interest and principal in accordance with their
terms, will provide money in an amount sufficient in the opinion of a
nationally recognized firm of independent public accountants to pay
principal, premium and interest on and any mandatory sinking fund payments
in respect of the debt securities of that series on the date those
payments are due; and
- delivering to the trustee an IRS Ruling or an opinion of counsel to the
effect that the holders of the debt securities of the series will not
recognize income, gain or loss for United States Federal income tax
purposes as a result of the deposit and related covenant defeasance.
LIMITED LIABILITY OF CERTAIN PERSONS
No stockholder, incorporator, employee officer or director, as such, past,
present or future of our company or any successor corporation or any of our
affiliates will have any personal liability for our obligations under the
indenture or the debt securities because of his, her or its status as a
stockholder, incorporator, employee officer or director.
MANDATORY DISPOSITION PURSUANT TO GAMING LAWS
Each holder, by accepting the debt securities, will be deemed to have agreed
to apply for a license, qualification or a finding of suitability within the
required time period if required to do so under the applicable gaming laws of
the gaming authority of any jurisdiction of which we or any of our subsidiaries
conducts or proposes to conduct gaming. If the holder fails to apply or become
licensed or qualified or is found unsuitable, we have the right, at our option
to:
- require that person to dispose of their debt securities or beneficial
interest within 30 days of receipt of notice of our election or such
earlier date as may be requested by the gaming authority; or
- redeem those debt securities at a redemption price equal to the lesser of
(i) that person's cost or (ii) 100% of their principal amount, plus
accrued and unpaid interest, if any, to the earlier of the redemption date
or the date of the finding of unsuitability.
We will notify the trustee in writing of any such redemption as soon as
practicable. We will not be responsible for any costs or expenses any holder may
incur in connection with its application for a license, qualification or a
finding of suitability.
CONVERSION RIGHTS
We will set forth in the applicable prospectus supplement the terms and
conditions, if any, upon which the debt securities are convertible into common
stock or preferred stock. Those terms will include:
- whether the debt securities are convertible into common stock or preferred
stock;
- the conversion price (or manner of calculation);
- the conversion period;
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- provisions regarding whether conversion will be at our option or the
option of the holders;
- the events requiring an adjustment of the conversion price; and
- provisions affecting conversion in the event of the redemption of the debt
securities.
PAYMENT AND PAYING AGENTS
The indenture will require us to duly and punctually pay the principal,
premium and interest on the debt securities as provided in the debt securities
and the indenture.
If debt securities of a series are issuable only as registered securities,
we will maintain in each place of payment for that series an office or agency
where:
- holders may present or surrender for payment debt securities of that
series;
- holders may surrender debt securities of that series for registration of
transfer or exchange; and
- we may be served with notices and demands regarding the debt securities of
that series.
If debt securities of a series are issuable as bearer securities, we will
maintain or cause to be maintained:
- in the Borough of Manhattan, the City and State of New York, an office or
agency where holders may present or surrender for payment any registered
securities of that series, where holders may surrender for registration or
transfer any registered securities of that series, where holders may
surrender debt securities of that series for exchange or redemption, where
we may be served with notices and demands regarding the debt securities of
that series and where holders may present or surrender for payment bearer
securities of that series and related coupons in the circumstances
described in the following paragraph (and not otherwise);
- subject to any applicable laws or registration, in a place of payment for
that series which is located outside the United States, an office or
agency where holders may present and surrender for payment debt securities
of that series and related coupons; PROVIDED, HOWEVER, that if the debt
securities of that series are listed on The Stock Exchange of the United
Kingdom and the Republic of Ireland, the Luxembourg Stock Exchange or any
other stock exchange located outside the United States and such stock
exchange so requires, we will maintain a paying agent for the debt
securities of that series in London, Luxembourg or any other required city
located outside the United States, so long as the debt securities of that
series are listed on that exchange; and
- subject to any applicable laws or regulations, in a place of payment for
that series located outside the United States, an office or agency where
holders may surrender any registered securities of that series for
registration of transfer, where holders may surrender for exchange or
redemption debt securities of that series and where we may receive notices
and demands regarding the debt securities of that series.
We will give prompt written notice to the applicable trustee of the
locations, and any change in the locations, of such offices or agencies. If at
any time we fail to maintain any required office or agency or fail to furnish
the applicable trustee with the address, holders may make or serve such
presentations, surrenders, notices and demands at the corporate trust office of
the applicable trustee, except that holders may present and surrender bearer
securities of that series and the related coupons for payment at the offices
specified in the applicable debt security. We will appoint the applicable
trustee (or in the case of bearer securities, we may appoint such other agent as
may be specified in the applicable prospectus supplement) as our agent to
receive the foregoing presentations, surrenders, notices and demands.
We will make no payment of principal, premium or interest on bearer
securities at any of our offices or agencies in the United States or by check
mailed to any address in the United States or by transfer to an
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account maintained with a bank located in the United States; PROVIDED, HOWEVER,
that, if the debt securities of a series are denominated and payable in U.S.
dollars, we will pay principal and any premium and interest on the debt
securities of that series, if specified in the applicable prospectus supplement,
at the office of our paying agent in the Borough of Manhattan, the City and
State of New York, if (but only if) payment in U.S. dollars of the full amount
of such principal, premium, interest or additional amounts, as the case may be,
at all offices or agencies outside the United States maintained for the purpose
by us in accordance with the indenture is illegal or effectively precluded by
exchange controls or other similar restrictions.
DESCRIPTION OF CAPITAL STOCK
GENERAL
This prospectus describes certain general terms of our capital stock. For a
more detailed description of these securities, we refer you to the applicable
provisions of Delaware law and our Amended and Restated Certificate of
Incorporation (the "Amended and Restated Certificate"). When we offer to sell a
particular series of these securities, we will describe the specific terms of
the series in a supplement to this prospectus. Accordingly, for a description of
the terms of any series of securities, you must refer to both the prospectus
supplement relating to that series and the description of the securities set
forth in this prospectus. A prospectus supplement may change any of the terms of
the securities described in this prospectus.
Pursuant to our Amended and Restated Certificate, our authorized capital
stock consists of 400,000,000 shares of common stock, par value $0.01 per share,
and 100,000,000 shares of preferred stock, par value $0.01 per share. At
January 1, 1999, we had outstanding approximately 303,000,000 shares of common
stock and no shares of preferred stock.
COMMON STOCK
Subject to any preferential rights that our board of directors may grant in
connection with the future issuance of preferred stock, each holder of common
stock is entitled to one vote per share on all matters voted upon by the
stockholders. Each holder of common stock is entitled to receive ratably any
dividends declared on the common stock by the board of directors from funds
legally available for distribution. In the event of our liquidation, dissolution
or winding up, after we pay all debts and other liabilities and any liquidation
preference on the preferred stock, each holder of common stock would be entitled
to share ratably in all of our remaining assets. The common stock has no
subscription, redemption, conversion or preemptive rights. All shares of common
stock are fully paid and nonassessable.
DELAWARE GENERAL CORPORATION LAW SECTION 203
As a corporation organized under the laws of the State of Delaware, we are
subject to Section 203 of the General Corporation Law of the State of Delaware
(the "DGCL"), which restricts certain business combinations between us and an
"interested stockholder" (in general, a stockholder owning 15% or more of our
outstanding voting stock) or that stockholder's affiliates or associates for a
period of three years following the date on which the stockholder becomes an
"interested stockholder." The restrictions do not apply if:
- prior to an interested stockholder becoming such, our board of directors
approves either the business combination or the transaction in which the
stockholder becomes an interested stockholder;
- upon consummation of the transaction in which the stockholder becomes an
interested stockholder, the interested stockholder owns at least 85% of
our voting stock outstanding at the time the transaction commenced,
subject to certain exceptions; or
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- on or after the date an interested stockholder becomes such, the business
combination is both approved by our board of directors and authorized at
an annual or special meeting of our stockholders (and not by written
consent) by the affirmative vote of at least 66 2/3% of the outstanding
voting stock not owned by the interested stockholder.
PREFERRED STOCK
Under the Amended and Restated Certificate, our board of directors is
authorized generally without stockholder approval to issue shares of preferred
stock from time to time, in one or more classes or series. Prior to the issuance
of shares of each series, the board of directors is required by the DGCL and the
Amended and Restated Certificate to adopt resolutions and file a certificate of
designation with the Secretary of State of the State of Delaware. The
certificate of designation fixes for each class or series the designations,
powers, preferences, rights, qualifications, limitations and restrictions,
including, but not limited to, the following:
- the number of shares constituting each class or series;
- voting rights;
- rights and terms of redemption (including sinking fund provisions);
- dividend rights and rates;
- dissolution;
- terms concerning the distribution of assets;
- conversion or exchange terms;
- redemption prices; and
- liquidation preferences.
All shares of preferred stock offered hereby will, when issued, be fully
paid and nonassessable and will not have any preemptive or similar rights. Our
board of directors could authorize the issuance of shares of preferred stock
with terms and conditions which could have the effect of discouraging a takeover
or other transaction that might involve a premium price for holders of the
shares or which holders might believe to be in their best interests.
We will set forth in a prospectus supplement relating to the class or series
of preferred stock being offered the following terms:
- The title and stated value of the preferred stock;
- The number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred stock;
- The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation applicable to the preferred stock;
- Whether dividends are cumulative or non-cumulative and, if cumulative, the
date from which dividends on the preferred stock will accumulate;
- The procedures for any auction and remarketing, if any, for the preferred
stock;
- The provisions for a sinking fund, if any, for the preferred stock;
- The provision for redemption, if applicable, of the preferred stock;
- Any listing of the preferred stock on any securities exchange;
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- The terms and conditions, if applicable, upon which the preferred stock
will be convertible into common stock, including the conversion price (or
manner of calculation) and conversion period;
- Voting rights, if any, of the preferred stock;
- Whether interests in the preferred stock will be represented by depositary
shares;
- A discussion of any material and/or special United States Federal income
tax considerations applicable to the preferred stock;
- The relative ranking and preferences of the preferred stock as to dividend
rights and rights upon the liquidation, dissolution or winding up of our
affairs;
- Any limitations on issuance of any class or series of preferred stock
ranking senior to or on a parity with the class or series of preferred
stock as to dividend rights and rights upon liquidation, dissolution or
winding up of our affairs; and
- Any other specific terms, preferences, rights, limitations or restrictions
of the preferred stock.
RANK
Unless we specify otherwise in the applicable prospectus supplement, the
preferred stock will rank, with respect to dividends and upon our liquidation,
dissolution or winding up:
- senior to all classes or series of our common stock and to all of our
equity securities ranking junior to the preferred stock;
- on a parity with all of our equity securities the terms of which
specifically provide that the equity securities rank on a parity with the
preferred stock; and
- junior to all of our equity securities the terms of which specifically
provide that the equity securities rank senior to the preferred stock.
The term "equity securities" does not include convertible debt securities.
PREFERRED STOCK PURCHASE RIGHTS
On December 29, 1998, our Board of Directors adopted a Preferred Share
Purchase Rights Plan ("Rights Plan") and declared a dividend distribution of one
Right on each outstanding share of our common stock and one Right on each share
of common stock issued between such date and the earliest of the Distribution
Date and the Expiration Date (as these terms are defined in the Rights Plan).
Stockholders may transfer the Rights with the common stock only until they
become exercisable.
Generally, the Rights become exercisable only if a person or group (other
than Exempt Persons, as defined below) acquires 15% or more of the then
outstanding shares of common stock or announces a tender offer which would
result in ownership by a person or group of 15% or more of the then outstanding
shares of common stock. Each Right entitles stockholders to buy one
one-hundredth of a share of a new series of junior participating preferred stock
at an exercise price of $40.
If a person or group (other than Exempt Persons) acquires 15% or more of our
shares of common stock, each holder of a Right will be entitled to receive upon
exercise a number of shares of our common stock having a market value equal to
two times the then current purchase price of the Right. If, after a person or
group acquires 15% or more of our shares of common stock, we are acquired in a
merger or engage in certain other business combination transactions or transfers
of assets, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price.
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Following the acquisition by a person or group of beneficial ownership of
15% or more of our common stock (other than Exempt Persons) and prior to an
acquisition of 50% or more of our common stock, our board of directors may
exchange the Rights (other than Rights owned by the person or group), in whole
or in part, at an exchange ratio described in the Rights Plan.
Prior to the acquisition by a person or group of beneficial ownership of 15%
or more of our common stock, the Rights are redeemable for $.001 per Right at
the option of the board of directors.
"Exempt Person" means:
- us or any of our subsidiaries;
- any of our or our subsidiaries' employee benefit plans;
- any entity or trustee holding shares of our capital stock for or pursuant
to the terms of any such plan or for the purpose of funding other employee
benefits for our or our subsidiaries' employees; or
- Barron Hilton or the Conrad N. Hilton Fund.
REGISTRAR AND TRANSFER AGENT
ChaseMellon Shareholder Services LLC is the registrar and transfer agent for
the common stock.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
We may issue depositary shares, each of which will represent a fractional
interest of a share of a particular series of preferred stock, as specified in
the applicable prospectus supplement. We will deposit with a depositary (the
"preferred stock depositary") shares of preferred stock of each series
represented by depositary shares. We will enter into a deposit agreement (each a
"deposit agreement") with the preferred stock depositary and holders from time
to time of the depositary receipts issued by the preferred stock depositary
which evidence the depositary shares ("depositary receipts"). Subject to the
terms of the deposit agreement, each owner of a depositary receipt will be
entitled, in proportion to the holder's fractional interest in the preferred
stock, to all the rights and preferences of the series of the preferred stock
represented by the depositary shares (including dividend, voting, conversion,
redemption and liquidation rights).
Immediately after we issue and deliver the preferred stock to a preferred
stock depositary, we will cause the preferred stock depositary to issue the
depositary receipts on our behalf. You may obtain copies of the applicable form
of deposit agreement and depositary receipt from us upon request. The statements
made in this section relating to the deposit agreement and the depositary
receipts are summaries of certain anticipated provisions. These summaries are
not complete and we may modify them in a prospectus supplement. For more detail
we refer you to the deposit agreement itself, which we will file as an exhibit
to the registration statement.
DIVIDENDS AND OTHER DISTRIBUTIONS
The preferred stock depositary will distribute all cash dividends or other
cash distributions received in respect of the preferred stock to the record
holders of depositary receipts in proportion to the number of the depositary
receipts owned by the holders, subject to the obligations of holders to file
proofs, certificates and other information and to pay certain charges and
expenses to the preferred stock depositary.
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In the event of a distribution other than in cash, the preferred stock
depositary will distribute property received by it to the record holders of
depositary receipts in proportion to the number of the depositary receipts owned
by the holders, unless the preferred stock depositary determines that it is not
feasible to make the distribution, in which case the preferred stock depositary
may, with our approval, sell the property and distribute the net proceeds from
the sale to the holders.
No distribution will be made in respect of any depositary share that
represents any preferred stock converted into other securities.
WITHDRAWAL OF STOCK
Upon surrender of the depositary receipts at the corporate trust office of
the preferred stock depositary (unless we have previously called for redemption
or converted into other securities the related depositary shares), the holders
will be entitled to delivery at that office of the number of whole or fractional
shares of the preferred stock and any money or other property represented by the
depositary shares. Holders of depositary receipts will be entitled to receive
shares of the related preferred stock as specified in the applicable prospectus
supplement, but holders of the shares of preferred stock will not thereafter be
entitled to receive depositary shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever we redeem shares of preferred stock held by the preferred stock
depositary, the preferred stock depositary will concurrently redeem the number
of depositary shares representing shares of the preferred stock so redeemed,
provided we have paid the applicable redemption price for the preferred stock to
be redeemed plus an amount equal to any accrued and unpaid dividends to the date
fixed for redemption. The redemption price per depositary share will be equal to
the corresponding proportion of the redemption price and any other amounts per
share payable with respect to the preferred stock. If fewer than all the
depositary shares are to be redeemed, the depositary shares to be redeemed will
be selected pro rata (as nearly as may be practicable without creating
fractional depositary shares) or by any other equitable method determined by us.
From and after the date fixed for redemption:
- all dividends in respect of the shares of preferred stock called for
redemption will cease to accrue;
- the depositary shares called for redemption will no longer be deemed to be
outstanding; and
- all rights of the holders of the depositary receipts evidencing the
depositary shares called for redemption will cease, except the right to
receive any moneys payable upon the redemption and any money or other
property to which the holders of the depositary receipts were entitled
upon redemption and surrender to the preferred stock depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the preferred stock depositary will mail the
information contained in the notice of meeting to the record holders of the
depositary receipts. Each record holder of these depositary receipts on the
record date (which will be the same date as the record date for the preferred
stock) will be entitled to instruct the preferred stock depositary as to the
exercise of the voting rights pertaining to the amount of preferred stock
represented by the holder's depositary shares. The preferred stock depositary
will vote the amount of preferred stock represented by the depositary shares in
accordance with the instructions, and we will agree to take all reasonable
action necessary to enable the preferred stock depositary to do so. The
preferred stock depositary will abstain from voting the amount of preferred
stock represented by the depositary shares for which it does not receive
specific instructions from the holders of depositary receipts evidencing the
depositary shares. The preferred stock depositary will not be responsible for
any failure to carry out
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any instruction to vote, or for the manner or effect of any vote made, as long
as the action or non-action is in good faith and does not result from the
preferred stock depositary's negligence or willful misconduct.
LIQUIDATION PREFERENCE
In the event that we voluntarily or involuntarily liquidate, dissolve or
wind up, the holders of each depositary receipt will be entitled to the fraction
of the liquidation preference accorded each share of preferred stock represented
by the depositary shares, as set forth in the applicable prospectus supplement.
CONVERSION OF PREFERRED STOCK
The depositary shares, as such, are not convertible into common stock or any
of our other securities or property. Nevertheless, if we so specify in the
applicable prospectus supplement relating to an offering of depositary shares,
holders may surrender depositary receipts to the preferred stock depositary with
written instructions to the preferred stock depositary to instruct us to convert
the preferred stock represented by the depositary shares into whole shares of
common stock, other shares of our preferred stock or other shares of stock. We
have agreed that upon receipt of the instructions and any amounts payable, we
will convert the depositary shares using the same procedures as those provided
for converting preferred stock. If the depositary shares evidenced by a
depositary receipt are to be converted in part only, the preferred stock
depositary will issue a new depositary receipt(s) for any depositary shares not
converted. No fractional shares of common stock will be issued upon conversion,
and if the conversion would result in a fractional share being issued, we will
pay an amount in cash equal to the value of the fractional interest based upon
the closing price of the common stock on the last business day prior to the
conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
We may amend the form of depositary receipt and any provision of the deposit
agreement at any time by agreement between us and the preferred stock
depositary. However, any amendment that materially and adversely alters the
rights of the holders of depositary receipts or that would be materially and
adversely inconsistent with the rights granted to the holders of the related
preferred stock will not be effective unless the holders of at least 66 2/3% of
the depositary shares evidenced by the depositary receipts then outstanding
approve the amendment. No amendment will impair the right, subject to the
exceptions set forth in the depositary agreement, of any holder of depositary
receipts to surrender any depositary receipt with instructions to deliver to the
holder the related preferred stock and all money and other property, if any,
represented by the depositary receipt, except in order to comply with law. Every
holder of an outstanding depositary receipt at the time any such amendment
becomes effective will be deemed, by continuing to hold the receipt, to consent
and agree to the amendment and to be bound by the deposit agreement as amended.
We may terminate the deposit agreement upon not less than 30 days' prior
written notice to the preferred stock depositary if a majority of each series of
preferred stock affected by the termination consents to the termination. Upon
termination, the preferred stock depositary will deliver or make available to
each holder of depositary receipts, upon surrender of the depositary receipts
held by the holder, the number of whole or fractional shares of preferred stock
represented by the depositary shares evidenced by the depositary receipts
together with any other property held by the preferred stock depositary with
respect to the depositary receipt.
In addition, the deposit agreement will automatically terminate if:
- all outstanding depositary shares have been redeemed;
- there has been a final distribution of the related preferred stock in
connection with our liquidation, dissolution or winding up and the
distribution has been distributed to the holders of depositary receipts
evidencing the depositary shares representing the preferred stock; or
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- each share of the related preferred stock has been converted into our
securities which are not represented by depositary shares.
CHARGES OF PREFERRED STOCK DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the existence of the deposit agreement. In addition, we will pay the
fees and expenses of the preferred stock depositary in connection with the
performance of its duties under the deposit agreement. However, holders of
depositary receipts will pay the fees and expenses of the preferred stock
depositary for any duties requested by the holders to be performed which are
outside of those expressly provided for in the deposit agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The preferred stock depositary may resign at any time by delivering to us
notice of its election to do so, and we may at any time remove the preferred
stock depositary. Any such resignation or removal will take effect upon our
appointment of a successor preferred stock depositary. We must appoint a
successor preferred stock depositary within 60 days after delivery of the notice
of resignation or removal, and any preferred stock depositary must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
MISCELLANEOUS
The preferred stock depositary will forward to holders of depositary
receipts any reports and communications the preferred stock depositary receives
from us relating to the preferred stock.
We will not be liable, nor will the preferred stock depositary be liable, if
we are prevented from or delayed in, by law or any circumstances beyond our
control, performing our obligations under the deposit agreement. Our obligations
and the obligations of the preferred stock depositary under the deposit
agreement will be limited to performing our duties in good faith and without
negligence (in the case of any action or inaction in the voting of preferred
stock represented by the depositary shares), gross negligence or willful
misconduct. We will not be obligated, nor will the preferred stock depositary be
obligated, to prosecute or defend any legal proceeding in respect of any
depositary receipts, depositary shares or shares of preferred stock represented
thereby unless satisfactory indemnity is furnished to us. We may rely, and the
preferred stock depositary may rely, on written advice of counsel or
accountants, or information provided by persons presenting shares of preferred
stock represented thereby for deposit, holders of depositary receipts or other
persons we believe in good faith to be competent to give such information, and
on documents we believe in good faith to be genuine and signed by a proper
party.
In the event the preferred stock depositary receives conflicting claims,
requests or instructions from holders of depositary receipts, on the one hand,
and us, on the other hand, the preferred stock depositary will be entitled to
act on such claims, requests or instructions received from us.
DESCRIPTION OF WARRANTS
We may issue warrants to purchase debt securities ("debt warrants"),
preferred stock ("preferred stock warrants"), depositary shares ("depositary
shares warrants") or common stock ("common stock warrants," collectively with
the debt warrants, the preferred stock warrants and the depositary shares
warrants ("warrants")). We may issue warrants independently or together with any
other securities we offer pursuant to a prospectus supplement and the warrants
may be attached to or separate from the securities. We will issue each series of
warrants under a separate warrant agreement that we will enter into with a bank
or trust company, as warrant agent. We will set forth additional terms of the
warrants and the applicable warrant agreements in the applicable prospectus
supplement.
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DEBT WARRANTS
We will describe in the applicable prospectus supplement the terms of the
debt warrants being offered, the warrant agreement relating to the debt warrants
and the debt warrant certificates representing the debt warrants, including the
following:
- the title of the debt warrants;
- the aggregate number of the debt warrants;
- the price or prices at which the debt warrants will be issued;
- the designation, aggregate principal amount and terms of the debt
securities purchasable upon exercise of the debt warrants, and the
procedures and conditions relating to the exercise of the debt warrants;
- the designation and terms of any related debt securities with which the
debt warrants are issued, and the number of the debt warrants issued with
each security;
- the date, if any, on and after which the debt warrants and the related
debt securities will be separately transferable;
- the principal amount of debt securities purchasable upon exercise of each
debt warrant, and the price at which the principal amount of the debt
securities may be purchased upon exercise;
- the date on which the right to exercise the debt warrants will commence,
and the date on which the right will expire;
- the maximum or minimum number of the debt warrants which may be exercised
at any time;
- a discussion of the material United States Federal income tax
considerations applicable to the exercise of the debt warrants; and
- any other terms of the debt warrants and terms, procedures and limitations
relating to the exercise of the debt warrants.
Holders may exchange debt warrant certificates for new debt warrant
certificates of different denominations, and may exercise debt warrants at the
corporate trust office of the warrant agent or any other office indicated in the
applicable prospectus supplement. Prior to the exercise of their debt warrants,
holders of debt warrants will not have any of the rights of holders of the
securities purchasable upon the exercise and will not be entitled to payments
principal, premium or interest on the securities purchasable upon the exercise.
OTHER WARRANTS
We will describe in the applicable prospectus supplement the terms of the
preferred stock warrants, depositary shares warrants and common stock warrants
being offered, including the following:
- the title of the warrants;
- the securities for which the warrants are exercisable;
- the price or prices at which the warrants will be issued;
- the number of the warrants issued with each share of preferred stock,
common stock or depositary share;
- any provisions for adjustment of the number or amount of shares of
preferred stock, common stock or depositary shares receivable upon
exercise of the warrants or the exercise price of the warrants;
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- if applicable, the date on and after which the warrants and the related
preferred stock, common stock or depositary shares will be separately
transferable;
- if applicable, a discussion of the material United States Federal income
tax considerations applicable to the exercise of the warrants;
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants;
- the date on which the right to exercise the warrants will commence, and
the date on which the right will expire; and
- the maximum or minimum number of the warrants which may be exercised at
any time.
EXERCISE OF WARRANTS
Each warrant will entitle the holder of the warrant to purchase for cash at
the exercise price set forth in the applicable prospectus supplement the
principal amount of debt securities or shares of preferred stock, common stock
or depositary shares being offered. Holders may exercise warrants at any time up
to the close of business on the expiration date set forth in the applicable
prospectus supplement. After the close of business on the expiration date,
unexercised warrants are void.
Holders may exercise warrants as set forth in the prospectus supplement
relating to the warrants being offered. Upon receipt of payment and the warrant
certificate properly completed and duly executed at the corporate trust office
of the warrant agent or any other office indicated in the prospectus supplement,
we will, as soon as practicable, forward the debt securities, depositary shares
or shares of preferred stock or common stock purchasable upon the exercise. If
less than all of the warrants represented by the warrant certificate are
exercised, we will issue a new warrant certificate for the remaining warrants.
PLAN OF DISTRIBUTION
We may sell the securities:
- directly to purchasers;
- through agents;
- through dealers;
- through underwriters; or
- through a combination of any of the foregoing methods of sale.
We may distribute the securities from time to time in one or more
transactions at:
- a fixed price or prices, which may be changed;
- market prices prevailing at the time of sale;
- prices related to such prevailing market prices; or
- negotiated prices.
We may solicit directly offers to purchase the securities being offered
pursuant to this prospectus. We may also designate agents to solicit offers to
purchase the securities from time to time. We will name in a prospectus
supplement any agent involved in the offer or sale of our securities.
If we utilize a dealer in the sale of the securities being offered pursuant
to this prospectus, we will sell the securities to the dealer, as principal. The
dealer may then resell the securities to the public at varying prices to be
determined by the dealer at the time of resale.
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If we utilize an underwriter in the sale of the securities being offered
pursuant to this prospectus, we will execute an underwriting agreement with the
underwriter at the time of sale and we will set forth the name of any
underwriter in the prospectus supplement which the underwriter will use to make
resales of the securities to the public. In connection with the sale of the
securities, we, or the purchasers of securities for whom the underwriter may act
as agent, may compensate the underwriter in the form of underwriting discounts
or commissions. The underwriter may sell the securities to or through dealers,
and the underwriter may compensate those dealers in the form of discounts,
concessions or commissions.
We will describe in the applicable prospectus supplement any compensation we
pay to underwriters, dealers or agents in connection with the offering of the
securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers. Dealers and agents participating in the
distribution of the securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the debt securities may be deemed to be underwriting discounts and
commissions. We may enter into agreements to indemnify underwriters, dealers and
agents against certain civil liabilities, including liabilities under the
Securities Act, or to contribute to payments they may be required to make in
respect thereof.
If we so specify in the applicable prospectus supplement, we will authorize
underwriters, dealers and agents to solicit offers by certain institutions to
purchase the securities pursuant to contracts providing for payment and delivery
on future dates. The institutions with which the contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others. The purchaser's
obligations under the contracts will not be subject to any conditions except
that:
- the purchase of the securities will not at the time of delivery be
prohibited under the laws of the jurisdiction to which the purchaser is
subject; and
- if the securities are also being sold to underwriters, we will have sold
to the underwriters the securities not sold for delayed delivery.
The underwriters, dealers and agents will not be responsible for the
validity or performance of the contracts. We will set forth in the prospectus
supplement relating to the contracts the price to be paid for the securities,
the commissions payable for solicitation of the contracts and the date in the
future for delivery of the securities.
The underwriters, dealers and agents may engage in transactions with us, or
perform services for us, in the ordinary course of business.
LEGAL MATTERS
Latham & Watkins, Los Angeles, California, will pass upon the validity of
the securities being offered pursuant to this prospectus.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
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$400,000,000
[LOGO]
8 1/2% SENIOR NOTES DUE 2006
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PROSPECTUS SUPPLEMENT
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LEAD MANAGER
JOINT BOOK RUNNING MANAGER
MERRILL LYNCH & CO.
CO-LEAD MANAGER
JOINT BOOK RUNNING MANAGER
BANC OF AMERICA SECURITIES LLC
CO-LEAD MANAGER
DEUTSCHE BANC ALEX. BROWN
SG COWEN
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SCOTIA CAPITAL
BNY CAPITAL MARKETS, INC.
FIRST UNION SECURITIES, INC.
PNC CAPITAL MARKETS, INC.
BEAR, STEARNS & CO. INC.
NOVEMBER 9, 1999
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