<PAGE> 1
*****************************************************************************
* *
* AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1994 *
* *
* *
*****************************************************************************
REGISTRATION NO. 33-51765
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BALLY'S PARK PLACE FUNDING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
Delaware 7993 22-510861
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
</TABLE>
------------------------
PARK PLACE AND THE BOARDWALK
Atlantic City, New Jersey 08401
(609) 340-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
BALLY'S PARK PLACE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
Delaware 7993 22-2264974
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
</TABLE>
PARK PLACE AND THE BOARDWALK
Atlantic City, New Jersey 08401
(609) 340-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
DENNIS P. VENUTI
Park Place and The Boardwalk
Atlantic City, New Jersey 08401
(609) 340-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
LEE S. HILLMAN
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
(312) 399-1300
IRV BERLINER
Benesch, Friedlander,
Coplan & Aronoff
1100 Citizens Building
850 Euclid Avenue
Cleveland, Ohio 44114
(216) 363-4500
PHYLLIS G. KORFF
STACY J. KANTER
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
(212) 735-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. / /
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
BALLY'S PARK PLACE FUNDING, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING CAPTION OR LOCATION IN PROSPECTUS
----------------------------------------------- ----------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside Forepart of the Registration Statement;
Front Cover Page of Prospectus Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page of Prospectus;
Prospectus Outside Back Cover Page of Prospectus
3. Summary Information, Risk Factors and Ratio of Prospectus Summary; Summary Financial
Earnings to Fixed Charges Data; Investment Considerations
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be Registered Description of the Notes
10. Interest of Named Experts and Counsel Legal Matters
11. Information with Respect to the Registrants Outside Front Cover Page of Prospectus;
Available Information; Prospectus
Summary; Summary Financial Data;
Investment Considerations; The Company;
Ownership of Bally's Park Place and the
Issuer; Use of Proceeds; Consolidated
Capitalization; Selected Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management;
Security Ownership; Certain
Transactions; Description of the Notes;
Consolidated Financial Statements
12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
</TABLE>
<PAGE> 3
***************************************************************************
* *
* SUBJECT TO COMPLETION DATED FEBRUARY 28, 1994 *
* *
***************************************************************************
***************************************************************************
* *
* Information contained herein is subject to completion or amendment. A *
* registration statement relating to these securities has been filed *
* with the Securities and Exchange Commission. These securities may not *
* be sold nor may offers to buy be accepted prior to the time the *
* registration statement becomes effective. This Prospectus shall not *
* constitute an offer to sell or the solicitation of an offer to buy *
* nor shall there be any sale of these securities in any jurisdiction *
* in which such offer, solicitation or sale would be unlawful prior to *
* registration or qualification under the securities laws of any such *
* jurisdiction. *
* *
***************************************************************************
PROSPECTUS
$425,000,000
BALLY'S PARK PLACE FUNDING, INC.
% FIRST MORTGAGE NOTES DUE 2004
PAYMENT OF PRINCIPAL AND INTEREST FULLY AND UNCONDITIONALLY GUARANTEED BY
BALLY'S PARK PLACE, INC.
------------------------
The % First Mortgage Notes due 2004 (the "Notes") are being offered (the
"Offering") by Bally's Park Place Funding, Inc. (the "Issuer"), and are fully
and unconditionally guaranteed (the "Guaranty") on a senior basis by its parent,
Bally's Park Place, Inc., a Delaware corporation ("Bally's Park Place"), which
Guaranty will rank pari passu in right of payment with other senior debt of
Bally's Park Place. Bally's Park Place is a wholly owned subsidiary of Bally's
Casino Holdings, Inc., a Delaware corporation ("Casino Holdings"), which is a
wholly owned subsidiary of Bally Manufacturing Corporation, a Delaware
corporation ("Bally").
Interest on the Notes will be payable semi-annually on and
of each year, commencing , 1994 at a rate of % per
annum. The Notes will be redeemable at the option of the Issuer, in whole or in
part, at any time on or after , 1999, at the redemption prices set
forth herein, together with accrued and unpaid interest to the redemption date.
In addition, at any time prior to , 1997, the Issuer may, at its
option, redeem up to an aggregate of 33 1/3% of the principal amount of the
Notes originally issued with the net proceeds of one or more Public Equity
Offerings (as defined) at % of the principal amount thereof, together with
accrued and unpaid interest to the redemption date, provided that immediately
following such redemptions at least $100 million principal amount of the Notes
remains outstanding.
Upon a Change in Control (as defined), each holder of the Notes may require
the Issuer to repurchase all or a portion of such holder's Notes at 101% of the
principal amount thereof, together with accrued and unpaid interest to the
repurchase date. There can be no assurance that the Issuer will have sufficient
funds to satisfy its repurchase obligations upon a Change in Control. See
"Description of the Notes."
The Notes will be secured by certain collateral (the "Collateral"),
including a first mortgage on certain fee and leasehold interests comprising the
Bally's Park Place casino hotel in Atlantic City, New Jersey ("Bally's Park
Place Casino Hotel"), and by a security interest in certain personal property
located at Bally's Park Place Casino Hotel. In addition, the Notes will be
secured by the assignment of a $425 million promissory note of Bally's Park
Place's gaming subsidiary, Bally's Park Place, Inc., a New Jersey corporation
(the "Operating Company"). The Operating Company owns and operates Bally's Park
Place Casino Hotel. The Notes and the Guaranty will rank pari passu in right of
payment with other senior debt of the Issuer and Bally's Park Place
respectively. After giving effect to the Offering and the application of the net
proceeds as described herein, on December 31, 1993, the Issuer and Bally's Park
Place would have had approximately $430 million of consolidated indebtedness.
The Notes and the Guaranty are securities of the Issuer and Bally's Park Place,
respectively, and are not securities of either Bally or Casino Holdings.
Consummation of the Offering is conditioned upon, among other things, the
Refinancing (as defined). See "Use of Proceeds."
SEE "INVESTMENT CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS WHICH
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT IN THE
NOTES.
------------------------
NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION NOR THE NEW JERSEY DIVISION OF
GAMING ENFORCEMENT HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Notes are being offered from time to time in negotiated transactions or
otherwise at varying prices to be determined at the time of each sale. The
Underwriters have severally agreed, subject to the terms and conditions set
forth in the Purchase Agreement, to purchase the Notes from the Issuer at %
of their principal amount, plus accrued interest, if any, from March , 1994.
See "Underwriting." The proceeds to the Issuer from the sale of the Notes will
be $ , before deducting expenses payable by the Issuer estimated to be
$ .
------------------------
The Notes are being offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, and subject to the approval
of certain legal matters by counsel for the Underwriters and to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify the
offer and to reject orders in whole or in part. It is expected that delivery of
the Notes will be made in New York, New York on or about , 1994.
------------------------
MERRILL LYNCH & CO.
JEFFERIES & COMPANY, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LIBRA INVESTMENTS, INC.
The date of this Prospectus is February , 1994.
<PAGE> 4
AVAILABLE INFORMATION
The Issuer and Bally's Park Place have filed with the Securities and
Exchange Commission (the "SEC" or the "Commission") a Registration Statement on
Form S-1 (the "Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations
promulgated thereunder, with respect to the Notes offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. The omitted information may be obtained from the
Registration Statement and exhibits thereto, which may be inspected and copied
at the public reference facilities maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and its regional offices
located 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.
Bally's Park Place is subject to the reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files abbreviated reports with the SEC that
must be read in conjunction with the reports filed with the SEC by Bally.
Information regarding Bally's Park Place and Bally may be inspected at the
public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and its regional offices located
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.
In addition, under the Indenture, Bally's Park Place will be obligated to
file with the SEC the annual reports, quarterly reports and other reports
required to be filed with the SEC pursuant to Sections 13 or 15 of the Exchange
Act, regardless of whether Bally's Park Place is otherwise subject to the
reporting requirements of the Exchange Act. Bally's Park Place will be required
to file with the Trustee and provide to each Holder of the Notes within 15 days
after it files them with the SEC (or if any such filing is not permitted under
the Exchange Act, 15 days after Bally's Park Place would have been required to
make such filing) copies of such reports and documents.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Prospective purchasers of the Notes should carefully read the entire Prospectus
and should consider, among other things, the matters set forth under "Investment
Considerations."
Bally's Park Place Casino Hotel opened in 1979 under the ownership of the
Operating Company, a wholly owned subsidiary of Bally's Park Place. The Issuer
is also a wholly owned subsidiary of Bally's Park Place. Bally's Park Place was
a direct wholly owned subsidiary of Bally until June 16, 1993, when Bally
contributed all of the capital stock of Bally's Park Place to Casino Holdings.
Casino Holdings was formed as a wholly owned subsidiary of Bally in April 1993.
As used in this Prospectus, unless the context otherwise requires, "Bally's Park
Place" refers to Bally's Park Place and its subsidiaries and "Bally" refers to
Bally and its subsidiaries, including Bally's Park Place. The Notes will be
issued by the Issuer and are fully and unconditionally guaranteed on a senior
basis by Bally's Park Place.
THE COMPANY
Bally's Park Place, through the Operating Company, owns and operates the
Bally's Park Place Casino Hotel, which is situated on an eight-acre site with
ocean frontage at the well-known intersection of Park Place and the Boardwalk in
Atlantic City, New Jersey. The casino hotel complex is centrally located among
the nine other casino hotels adjacent to the Boardwalk and is within four blocks
of Atlantic City's Convention Hall and the new convention corridor, currently
under development, which will include a new convention facility. Bally's Park
Place Casino Hotel's central location on the Boardwalk contributes to its
success in attracting significant walk-in casino business, including strong
crossover business from competing casinos located nearby. Equipped with two
multi-story parking garages and surface valet parking lots, management believes
that Bally's Park Place Casino Hotel is also strongly positioned to attract the
desirable drive-in business.
Bally's Park Place Casino Hotel is one of the largest casino hotel
facilities in Atlantic City, currently encompassing approximately 2.2 million
square feet of space, including approximately 68,000 square feet of casino floor
space, a 30-story hotel tower, a 12-story hotel facility and two multi-story
parking garages providing over 2,000 parking spaces. The casino features
approximately 2,000 slot machines and 115 table games. Bally's Park Place Casino
Hotel employs the latest slot machine technology and places particular emphasis
on the location, design and lighting of its slot machine areas in its efforts to
further develop, expand and compete for slot machine play, which generates
higher margins than table game play. In addition, Bally's Park Place Casino
Hotel offers a full selection of table games, including baccarat, blackjack,
craps, roulette and poker, among others.
Bally's Park Place Casino Hotel offers more than 1,250 rooms (including 77
suites), making it the largest four-star hotel in New Jersey, approximately
50,000 square feet of meeting and exhibition space and a 38,000-square foot
health spa facility. Dining areas include three specialty restaurants, a
cocktail lounge, a coffee shop, a buffet, a delicatessen, two fast food
facilities and a bar and lounge in the spa. Bally's Park Place Casino Hotel
offers a variety of other facilities and amenities to its patrons. Bally's
Parking Place, a self-park garage located across the street from the casino
hotel, offers over 1,500 parking spaces and is connected to Bally's Park Place
Casino Hotel by a people-mover and glass-enclosed, climate-controlled skywalk.
Bally's Park Place Casino Hotel's operating strategy capitalizes on its
central location and quality facilities and promotes the diversity of Bally's
Park Place Casino Hotel's casino games and courteous approach to guests.
Historically believed to be a leader in Atlantic City's middle to upper middle
tier slot player segments, Bally's Park Place devotes significant managerial and
promotional resources to the maintenance and expansion of slot machine play,
including higher denomination slot business. Bally's Park Place Casino Hotel
also targets middle-market table game players.
The marketing strategy of Bally's Park Place Casino Hotel is to generate a
high volume of play from casino customers from New York, Philadelphia and other
northeastern metropolitan areas, as well as to develop its position in all
segments of the Atlantic City hotel and convention market. To foster casino
patron
3
<PAGE> 6
loyalty, Bally's Park Place Casino Hotel developed its "MVP Program," which
rewards players with a variety of complimentary services based on frequency of
play and amounts wagered. Bally's Park Place Casino Hotel is also increasing its
utilization of complimentary rooms in an effort to attract rated players from
its target markets and to encourage longer visits. In the latter part of 1993,
Bally's Park Place instituted a more aggressive marketing program including
additional promotional events and expanded media advertising. Bally's Park Place
expects this marketing strategy to continue in 1994 and to include additional
staff for hosts to support and service its casino patrons.
Bally's Park Place enjoys a share of total Atlantic City casino revenues in
excess of its proportionate share of total Atlantic City casino floor space due
to its emphasis on higher margin slot machine play. Slot revenues represented
70% of Bally's Park Place's casino revenues for the nine months ended September
30, 1993 as compared to 67% of total gaming revenues in the Atlantic City market
for this period, up from 69% for Bally's Park Place and 66% for the Atlantic
City market in 1992.
The Issuer was formed in June 1983 to serve solely as a financing
corporation to raise funds through the issuance of debt securities for the
benefit of the Operating Company. The Issuer is not authorized to conduct any
other business operations.
OWNERSHIP OF BALLY'S PARK PLACE AND THE ISSUER
The following chart illustrates the ownership of Bally's Park Place, the
Operating Company and the Issuer. The Notes offered hereby are securities of the
Issuer and are fully and unconditionally guaranteed on a senior basis by Bally's
Park Place.
------------------------------------------------------
Bally Manufacturing Corporation ("Bally")
------------------------------------------------------
------------------------------------------------------
Bally's Casino Holdings, Inc.*
("Casino Holdings")
------------------------------------------------------
------------------------------------------------------
Bally's Park Place, Inc.
(a Delaware corporation)
("Bally's Park Place")
------------------------------------------------------
-------------------------------------------------------------
------------------------------------------------------
Bally's Park Place, Inc.
(a New Jersey corporation)
(the "Operating Company")
------------------------------------------------------
------------------------------------------------------
Bally's Park Place Funding, Inc.
(the "Issuer")
------------------------------------------------------
*Bally's Casino Holdings, Inc. is wholly owned by Bally Manufacturing
Corporation through wholly owned subsidiaries of Bally Manufacturing
Corporation.
4
<PAGE> 7
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................... $425,000,000 principal amount of % First Mortgage
Notes due 2004 issued by the Issuer and fully and
unconditionally guaranteed on a senior basis by
Bally's Park Place.
Maturity Date........................ , 2004.
Interest Payment Dates............... and of each year commencing , 1994.
Optional Redemption.................. On or after , 1999, the Notes may be redeemed at
the option of the Issuer, in whole or in part, at any
time, at the redemption prices set forth herein
together with accrued and unpaid interest to the
redemption date. See "Description of the Notes --
Optional Redemption."
Optional Redemption upon Public
Equity
Offerings.......................... On or before , 1997, up to 33 1/3% of the
principal amount of the Notes originally issued may be
redeemed at the option of the Issuer, at % of the
principal amount thereof together with accrued and
unpaid interest to the redemption date, out of the net
proceeds of one or more Public Equity Offerings (as
defined), provided that immediately following such
redemptions at least $100 million principal amount of
the Notes remains outstanding. See "Description of the
Notes -- Optional Redemption."
Change in Control.................... In the event of a Change in Control (as defined), each
holder of Notes may require the Issuer to repurchase
such holder's Notes at 101% of the principal amount
thereof together with accrued and unpaid interest to
the repurchase date. See "Description of the Notes --
Change in Control."
Guaranty............................. The Notes will be fully and unconditionally guaranteed
by Bally's Park Place on a senior basis.
Security............................. The Notes will be secured by a first mortgage on
certain fee and leasehold interests comprising the
Bally's Park Place Casino Hotel and by a security
interest in certain property located at the Bally's
Park Place Casino Hotel. In addition, the Notes will
be secured by the assignment of a $425 million
promissory note issued by the Operating Company to the
Issuer. See "Description of the Notes -- Security."
Ranking
Principal and Interest............. The Notes will rank pari passu with all existing and
future Senior Debt (as defined) of the Issuer. The
Guaranty will rank pari passu with all existing and
future senior debt of Bally's Park Place, including
the guarantee of bank indebtedness under a new credit
facility (the "New Credit Facility") of the Operating
Company which will replace the existing credit
facility.
Security Interest in the The mortgage and security interests securing the Notes
Collateral...................... will rank pari passu with the mortgage and security
interests securing the New Credit Facility. See
"Description of the Notes -- Security."
</TABLE>
5
<PAGE> 8
<TABLE>
<S> <C>
Certain Covenants.................... The Indenture contains certain covenants, including,
but not limited to, covenants with respect to the
following matters: (i) limitation on indebtedness;
(ii) limitation on restricted payments; (iii)
limitation on transactions with affiliates; (iv)
limitation on encumbrances; (v) restriction on
preferred stock of subsidiaries; (vi) limitation on
dividends and other payment restrictions affecting
subsidiaries; (vii) limitations on issuance of
guarantees by subsidiaries; (viii) limitations on
business activities other than the ownership of casino
hotels; and (ix) restrictions on merger and sale of
assets. See "Description of the Notes -- Certain
Covenants."
Use of Proceeds...................... The net proceeds to the Issuer from the sale of the
Notes are estimated to be approximately $412.5
million. The net proceeds will be immediately loaned
by the Issuer to the Operating Company. Thereafter,
the Operating Company will immediately use
approximately $380.1 million of the proceeds to repay
a promissory note issued by the Operating Company to
the Issuer in connection with the Issuer's 11 7/8%
First Mortgage Notes due 1999 (the "Existing Notes")
and will declare and pay a dividend of approximately
$32.4 million to Bally's Park Place. The Issuer will
thereafter use approximately $380.1 million of the
proceeds to purchase and retire certain Existing Notes
at the Closing and redeem the remaining Existing Notes
in connection with a defeasance with respect to the
Existing Notes. Bally's Park Place will then pay a
dividend of approximately $32.4 million to Casino
Holdings. See "Use of Proceeds" and "Underwriting."
</TABLE>
FOR MORE DETAILED INFORMATION REGARDING THE TERMS OF THE NOTES AND FOR
DEFINITIONS OF CAPITALIZED TERMS NOT OTHERWISE DEFINED, SEE "DESCRIPTION OF THE
NOTES."
6
<PAGE> 9
SUMMARY FINANCIAL DATA
The following table sets forth summary historical and pro forma
consolidated financial and other data of Bally's Park Place for and at the
periods reflected. Bally's Park Place's business is seasonal, with casino and
other revenues peaking during the summer months. Therefore, the summary
financial data for the nine-month periods presented is not necessarily
indicative of the results of operations for the full year. The summary
historical financial data for the nine months ended September 30, 1993 and 1992
and for the years ended December 31, 1992, 1991 and 1990 should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of Bally's
Park Place and related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
YEARS ENDED DECEMBER 31,
------------------- ------------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues(a)........................ $267.1 $253.5 $331.1 $322.8 $324.6 $329.5 $305.5
Operating costs and expenses....... 195.7(b)(c) 203.1(b)(c) 268.4(b)(c) 268.4(b)(c)(d) 264.0(c) 258.9(c) 231.9(e)
Operating income................... 71.4 50.4 62.7 54.4 60.6 70.6 73.6
Interest expense(f)................ 33.9 36.2 48.0 48.9 46.3 22.3(g) 8.4
Income before income taxes......... 37.5 14.2 14.7 5.5 14.3 48.3 65.2
Income before extraordinary item
and cumulative effect on prior
years of change in accounting for
income taxes--
Historical..................... 21.4(h) 7.3 7.9 1.8 8.1 28.6 38.4
Pro forma(i)................... 23.4 10.7
Net income......................... 10.0(h) 7.3 7.9 1.8 8.1 20.2(g) 38.4
Ratio of earnings to fixed
charges(j)--
Historical..................... 2.1x 1.4x 1.3x 1.1x 1.3x 2.4x 4.1x
Pro forma(i)................... 2.4x 1.5x
OTHER DATA:
Depreciation and amortization...... $ 19.9 $ 20.7 $ 27.4 $ 28.1 $ 25.9 $ 25.0 $ 22.0
Cash provided by
operating activities............. 30.5 19.1 35.4 47.9 34.2 62.7 73.0
Capital expenditures............... 8.3 9.1 10.3 10.9 55.6(k) 71.1(k) 70.1(k)
Cash used in investing
activities....................... 9.2 11.4 12.6 13.0 55.6(k) 70.0(k) 73.5(k)
Cash provided by (used in)
financing activities............. (24.0)(l) (12.0) (23.0) (33.5) 17.0(l) 13.0(g)(l) (0.2)(l)
EBITDA(m).......................... 91.3 71.1 90.1 82.5 86.5 95.6 95.6
Ratio of EBITDA to historical
interest expense(m).............. 2.7x 2.0x 1.9x 1.7x 1.9x 4.3x 11.4x
Ratio of EBITDA to pro forma
interest expense(i)(m)........... 3.0x 2.1x
EBITDA margin(m)................... 34.2% 28.0% 27.2% 25.6% 26.6% 29.0% 31.3%
</TABLE>
(See following page for notes)
7
<PAGE> 10
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
---------------------
PRO
HISTORICAL FORMA(I)
---------- --------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and equivalents................................................... $ 9.6 $ 9.6
Property and equipment, net............................................ 487.3 487.3
Total assets........................................................... 531.7 545.2
Advances from affiliate payable on demand.............................. 7.0 7.0
Long-term debt, less current maturities................................ 352.7 427.7
Stockholder's equity................................................... 89.8 36.5
</TABLE>
<TABLE>
<S> <C>
(a) Includes interest income of $0.7 million and $1.6 million for the nine months ended
September 30, 1993 and 1992, respectively, and $1.9 million, $5.7 million, $5.1
million, $1.8 million and $1.1 million for the years ended December 31, 1992, 1991,
1990, 1989 and 1988, respectively.
(b) Includes charges allocated by Bally of $3.0 million and $2.9 million for the nine
months ended September 30, 1993 and 1992, respectively, and $3.7 million and $1.0
million for the years ended December 31, 1992 and 1991, respectively. Bally is a
holding company without significant operations of its own. During 1992 Bally completed
a major restructuring effort which began in late 1990 and which included the
divestiture of several of its non-core businesses including the businesses directly
operated by Bally. The businesses directly operated by Bally had previously supported
Bally's overhead costs and made measurement of costs associated with oversight of
subsidiary operations impractical and unnecessary. During 1991 Bally allocated costs to
Bally's Park Place consisting of Bally's Park Place's allocable share of Bally's
director's and officer's insurance and other Bally stockholder-related expenses
primarily attributable to the restructuring. During 1992 and 1993 Bally allocated costs
to Bally's Park Place consisting of Bally's Park Place's allocable share of Bally's
corporate overhead including executive salaries and benefits, public company reporting
costs and other corporate headquarters costs. While Bally's Park Place does not obtain
a measurable direct benefit from these allocated costs, management believes that
Bally's Park Place receives an indirect benefit from Bally's oversight. Bally's method
for allocating costs to its subsidiaries is designed to apportion its costs to its
subsidiaries based upon many subjective factors including size of operations and extent
of Bally's oversight requirements. Management of Bally and Bally's Park Place believe
that the methods used to allocate these costs are reasonable and expect similar
allocations in future years. Because of Bally's controlling relationship with Bally's
Park Place and the allocation of certain Bally costs, the operating results of Bally's
Park Place could be significantly different from those that would have been obtained if
Bally's Park Place operated autonomously.
(c) Commencing in 1989, certain administrative and support operations of Bally's Park Place
and a wholly owned subsidiary of Bally which owns and operates the casino hotel in
Atlantic City known as "The Grand" ("Bally's Grand") were consolidated. These shared
operations presently include legal services, purchasing, limousine services, and
certain aspects of human resources and management information systems. Costs of these
operations are allocated to or from Bally's Park Place either directly or using various
formulas based on utilization estimates of such services and, on a net basis, totaled
$1.0 million and $1.9 million for the nine months ended September 30, 1993 and 1992,
respectively, and $2.6 million, $2.5 million, $1.8 million and $1.0 million for the
years ended December 31, 1992, 1991, 1990 and 1989, respectively, all of which
management believes were reasonable.
(d) Includes charges of $3.5 million related to the closing and demolition of an ancillary
motel operated by Bally's Park Place and $2.0 million for the estimated cost of
settling certain non-recurring liabilities.
(e) Net of costs totaling $6.4 million allocated to other casinos owned by Bally, which
management believes was reasonable. The allocation of such costs ceased after 1988
since these Bally casino hotel subsidiaries, by the start of 1989, had established
separate management teams and implemented management information, budgeting and
accounting systems.
(f) Includes amortization of debt issuance costs and discounts.
(g) In September 1989, Bally's Park Place issued $350.0 million principal amount of the
Existing Notes and used a portion of the proceeds to retire $100.0 million principal
amount of its 13 7/8% Mortgage-Backed Bonds, which resulted in an extraordinary loss of
$8.4 million, net of income taxes of $5.6 million.
</TABLE>
8
<PAGE> 11
<TABLE>
<S> <C>
(h) Effective January 1, 1993, Bally's Park Place changed its method of accounting for
income taxes as required by Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes." The cumulative effect on prior years of this change
in accounting for income taxes was a charge of $11.4 million. In addition, the income
tax provision for the nine months ended September 30, 1993 was increased by $0.4
million as a result of applying the change in the U.S. statutory tax rate from 34% to
35% to deferred tax balances as of January 1, 1993.
(i) Assumes issuance of the Notes and application of net proceeds as described in "Use of
Proceeds", as if each had occurred at January 1, 1993 and 1992 for Statement of
Operations Data and for Other Data and at September 30, 1993 for Balance Sheet Data.
(j) The ratio of earnings to fixed charges has been computed by dividing (i) income before
income taxes, extraordinary item and cumulative effect on prior years of change in
accounting for income taxes plus amortization of capitalized interest and fixed charges
(excluding capitalized interest) by (ii) fixed charges. Fixed charges consist of
interest incurred (expensed or capitalized), including amortization of debt issuance
costs and discount.
(k) Includes capital expenditures for the construction of an 800-room hotel tower, a
parking garage and public area improvements during the three years ended December 31,
1990.
(l) In September 1993, an $11.0 million dividend was paid to Casino Holdings. During 1990,
Bally's Park Place borrowed $72.5 million through its revolving line of credit facility
and advanced $50.0 million to Bally, which receivable was subsequently cancelled and
declared a dividend in 1992. In addition, dividends of $3.9 million, $159.0 million and
$17.0 million were paid to Bally in the years ended December 31, 1990, 1989 and 1988,
respectively.
(m) EBITDA represents earnings before interest, taxes, depreciation and amortization and is
intended to facilitate a more complete analysis of Bally's Park Place's financial
condition. The ratio of EBITDA to interest expense represents the number of times
EBITDA exceeds interest expense and is intended to illustrate the ability of Bally's
Park Place to pay interest. The EBITDA margin represents EBITDA divided by revenues and
is intended to indicate the operating efficiency of Bally's Park Place. This data
should not be considered as an alternative to any measure of performance or liquidity
as promulgated under generally accepted accounting principles (such as net income or
cash provided by (used in) operating, investing and financing activities) nor should it
be considered as an indicator of Bally's Park Place's overall financial performance.
</TABLE>
9
<PAGE> 12
INVESTMENT CONSIDERATIONS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider the following factors before
purchasing the Notes offered hereby.
RELATIONSHIP WITH BALLY, CASINO HOLDINGS AND BALLY'S GRAND
Bally, through subsidiaries, owns 100% of the capital stock of Casino
Holdings and Casino Holdings owns 100% of the capital stock of Bally's Park
Place. Consequently, Bally has the ability to exercise control over the business
and affairs of Bally's Park Place by virtue of its ability to elect all the
members of the Board of Directors of Bally's Park Place and its voting power
with respect to actions requiring stockholder approval. In the event of a Change
in Control, which includes a Change in Control of Bally's Park Place, the
Issuer, the Operating Company, Casino Holdings or Bally, the Issuer will be
required to make an offer to purchase all outstanding Notes at a purchase price
of 101% of the principal amount of the Notes plus accrued and unpaid interest to
the repurchase date. There can be no assurance that in the event a Change in
Control occurs the Issuer will have sufficient funds to purchase all Notes that
are delivered to the Issuer for repurchase. See "Description of the
Notes -- Change in Control", "Management" and "Certain Transactions."
In October 1990, Bally's Board of Directors decided to conduct a complete
review of Bally's financial condition and operations with a view toward
restructuring Bally. Bally completed its restructuring during 1992, resulting in
reduced indebtedness, elimination of defaults on its indebtedness and
elimination of preferred stock dividend arrearages. Bally is a holding company
without separate operations of its own. Nevertheless, Bally has certain cash
obligations, including significant income tax obligations, that must be
satisfied by obtaining cash from its subsidiaries or disposing of or leveraging
certain assets. On December 15, 1993, Bally's Park Place declared and paid a
$5.7 million dividend to Casino Holdings which declared and paid a similar
dividend to Bally. On February 18, 1994, Bally's Park Place declared and paid a
$.6 million dividend to Casino Holdings which declared and paid a similar
dividend to Bally. Bally may be required to borrow additional funds or sell
assets in order to satisfy its cash flow requirements. At September 30, 1993,
Bally's consolidated total assets, debt and stockholders' equity were $2,093.2
million, $1,197.1 million and $386.4 million, respectively. For the nine months
ended September 30, 1993, Bally's consolidated revenues and income from
continuing operations were $995.3 million and $5.9 million, respectively.
Management of the Issuer and Bally's Park Place believes that Bally's financial
condition will not have any material adverse effect on the financial condition
or operations of Bally's Park Place or its subsidiaries, or its or its
subsidiaries' respective abilities to fund their operations. Bally's Park Place
is a party to a tax sharing agreement with Bally pursuant to which income taxes
are allocated based on amounts Bally's Park Place would pay or receive if it
filed a separate consolidated federal income tax return, except that Bally's
Park Place will receive credit from Bally for the tax benefit of Bally's Park
Place's net operating losses and tax credits, if any, that can be utilized in
Bally's consolidated federal income tax return, regardless of whether these
losses or credits could be utilized by Bally's Park Place and its subsidiaries
on a separate consolidated federal income tax return basis. Casino Holdings has
entered into a similar tax sharing agreement with Bally (which generally
excludes Bally's Park Place from its stand-alone computation). If there was an
event of default and, as a result thereof, an acceleration under the
$220,000,000 Senior Discount Notes due 1998 (the "Casino Holdings Notes") issued
by Casino Holdings, while Casino Holdings is a member of the Bally consolidated
group, payments to Bally, in the aggregate, under these two tax sharing
agreements would be decreased (retroactively to the date of the Casino Holdings
tax sharing agreement and refunded to the extent paid) to the extent that Casino
Holdings would have owed less, in the aggregate, if there had been a single tax
sharing agreement with Casino Holdings which included Bally's Park Place in its
stand alone computation. See "Certain Transactions -- Transactions with Bally"
and the notes to the consolidated financial statements included elsewhere in
this Prospectus.
Casino Holdings was formed in April 1993 to serve as a holding company for
Bally's Park Place and for acquiring and developing gaming operations and
expanding into newly emerging gaming jurisdictions. Casino Holdings owns and
operates a dockside casino in Tunica, Mississippi and a subsidiary of Casino
Holdings owns and operates Bally's Las Vegas, a first class casino resort and
convention center in Las Vegas. Casino Holdings is dependent upon dividends and
distributions from Bally's Park Place and other subsidiaries in order to satisfy
its obligations, including its obligations on the Casino Holdings Notes. Casino
Holdings' subsidiaries,
10
<PAGE> 13
including Bally's Park Place, have, or may have in the future, limitations on
their ability to pay dividends or otherwise distribute funds to Casino Holdings.
The future performance of Casino Holdings and its subsidiaries and their ability
to satisfy or refinance their obligations is affected by prevailing economic
conditions and is subject to financial, business and other factors, including
factors beyond the control of Casino Holdings and its subsidiaries. There can be
no assurance that Casino Holdings will receive distributions and payments from
its subsidiaries (including Bally's Park Place) in an amount sufficient to repay
the Casino Holdings Notes prior to their maturity. Consequently, Casino Holdings
may have to refinance all or a portion of the Casino Holdings Notes prior to
their maturity. There can be no assurance that, if required, Casino Holdings
could refinance all or a portion of the Casino Holdings Notes on satisfactory
terms or that refinancing would be permitted by the terms of debt instruments of
Casino Holdings' subsidiaries or under restrictions imposed by regulatory
bodies. Consequently, when the Casino Holdings Notes become due in 1998, Casino
Holdings may be required to sell assets (including the stock of Bally's Park
Place) in order to satisfy its obligations under the Casino Holdings Notes. See
"Certain Transactions."
Bally's Grand competes with Bally's Park Place. Certain senior executive
officers and other management personnel of Bally's Park Place function in
similar capacities at Bally's Grand and exercise decision making and operational
authority over both entities. Bally's Park Place Casino Hotel and Bally's Grand
also share certain administrative and support operations, a portion of the costs
of which are allocated between Bally's Park Place and Bally's Grand. Although
the sharing of management and administrative services reduces operating
expenses, Bally's Park Place from time to time does not have unfettered use of
management or certain administrative resources. Casino Holdings has entered into
an intercorporate agreement with Bally and Bally's Park Place. See "Certain
Transactions -- Transactions with Bally's Grand" and "-- Transactions With
Bally" and "Management." Additionally, because Bally, Bally's Grand and Bally's
Park Place are all active participants in the gaming industry, these companies
may compete for opportunities to expand their respective businesses.
LIMITATIONS ON ABILITY TO REALIZE ON COLLATERAL
The Notes and the New Credit Facility will be secured by first mortgages on
certain fee and leasehold interests comprising Bally's Park Place Casino Hotel
and by security interests in certain personal property of the Operating Company.
The rights of the Trustee for the Notes and the New Credit Facility lenders to
exercise their remedies with respect to the Collateral under their respective
agreements will be governed by an intercreditor agreement (the "Intercreditor
Agreement"). The Intercreditor Agreement limits the rights of the Trustee for
the Notes to control actions or pursue remedies with respect to the Collateral
upon an event of default. Any delays in the foreclosure of the Collateral could
adversely impact the ability of the Issuer and the Operating Company to repay
the Notes and the New Credit Facility (as the case may be) upon a liquidation of
the Collateral. If an acceleration were to occur with respect to the Notes or
the New Credit Facility and the Trustee were to foreclose on the Collateral
securing the Notes, there can be no assurance that the liquidation of the
Collateral would produce proceeds in an amount sufficient to pay the principal
of and accrued interest on the Notes and the New Credit Facility. In certain
limited circumstances, the Operating Company may be permitted to grant
additional pari passu security interests in the Collateral securing the Notes.
See "Description of the Notes -- Security," "-- Limitations on Ability to
Realize on Collateral" and "-- Certain Covenants -- Limitation on Encumbrances."
Bally's Park Place and the Issuer have obtained an appraisal of the Property (as
defined) from American Appraisal Capital Services, Inc. This appraisal places an
aggregate market value, as of January 10, 1994, of $745 million on the
Collateral. There can be no assurances that the Collateral, if sold, will be
sold for this amount.
In any foreclosure sale, the Trustee could bid the amount of the
outstanding Notes. The Trustee's ability to foreclose upon collateral
representing casino assets is limited by the New Jersey Casino Control Act (the
"New Jersey Act"), which requires that persons who own or manage a casino hotel
hold a casino license. No person can hold a casino license in the State of New
Jersey unless the person is found qualified to do so by the New Jersey Casino
Control Commission ("CCC"). If the Trustee were to acquire collateral
representing casino assets in a foreclosure sale and were unable or chose not to
qualify under the New Jersey Act to operate such assets, it would have to either
sell such assets or retain an entity licensed under the New Jersey Act to
11
<PAGE> 14
operate such assets. In addition, in any foreclosure sale or subsequent resale
by the Trustee, licensing requirements under the New Jersey Act would limit the
number of potential bidders, may delay any sale and may adversely affect the
sale price of such collateral. See "Business -- Gaming Regulation," and
"Description of the Notes -- Limitations on Ability to Realize on Collateral."
The ability to take possession and dispose of the Collateral securing the
Notes upon acceleration or foreclosure is likely to be significantly impaired or
delayed by applicable bankruptcy law if a bankruptcy case were to be commenced
by or against Bally, Bally's Park Place, the Operating Company or the Issuer.
See "Description of the Notes -- Limitation on Ability to Realize on
Collateral."
LEVERAGED FINANCIAL POSITION
On September 30, 1993, Bally's Park Place had total indebtedness of $359.8
million, stockholder's equity of $89.8 million and a debt-to-total
capitalization ratio of 80%. As of September 30, 1993, after giving effect to
the sale of the Notes and the expected use of the estimated net proceeds
therefrom, Bally's Park Place would have had total indebtedness of $434.7
million, stockholder's equity of $36.5 million and a debt-to-total
capitalization ratio of 92%. Bally's Park Place will depend primarily on cash
flow from operations generated by the Operating Company, and, to a lesser
extent, on funds available under the New Credit Facility to meet its debt
service and other operating obligations. The future operating results of Bally's
Park Place are subject to significant business, economic, regulatory and
competitive uncertainties and contingencies, many of which are beyond its
control, including seasonal fluctuations and dependence on summer operating
results which management believes are typical of casino hotel operations in
Atlantic City. If Bally's Park Place is unable to meet these obligations, it may
be required to refinance all or a portion of its existing debt or to obtain
additional financing. There can be no assurance that any such refinancing or
additional financing would be available or that such other measures could be
completed. Bally's Park Place's leverage may have the effect generally of
reducing Bally's Park Place's flexibility in responding to changing business and
economic conditions. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition." In addition, the indenture relating to the
Casino Holdings Notes (the "Casino Holdings Notes Indenture") contains certain
restrictions on the ability of Bally's Park Place to incur additional
indebtedness, make restricted payments and contains limitations on dividends and
other payments affecting subsidiaries, which limit the operating and financial
flexibility of Bally's Park Place. The New Credit Facility will contain similar
restrictions.
COMPETITION
Bally's Park Place faces intense competition in the Atlantic City market
from other companies in the gaming industry, some of which have significantly
greater financial resources than Bally's Park Place. Since April 1990, there
have been 11 other casino hotel facilities operating in Atlantic City in
competition with Bally's Park Place Casino Hotel, including Bally's Grand.
Although no new casinos have been opened in Atlantic City since April 1990 and
there have been no public announcements concerning new casino openings, the
addition of new casino hotels in the Atlantic City market would increase
competition. Several Atlantic City casinos have announced plans for expansion,
which will increase competition in the Atlantic City market, particularly as
those facilities add additional slot machines in connection with their
expansions. Bally's Park Place also competes with longer established casinos in
Las Vegas and elsewhere for customers prepared to travel significant distances.
Bally's Park Place faces significant competition from both established and
newly emerging gaming operations. Bally's Park Place believes that the recent
legalization of casino gambling in jurisdictions such as Mississippi, Louisiana,
South Dakota, Indiana, Iowa, Illinois, Missouri and Colorado, and Indian gaming
in Connecticut and elsewhere, has not, to date, had a material adverse impact on
the operations of Bally's Park Place Casino Hotel. There can be no assurance
that the opening of gaming facilities in such jurisdictions or additional gaming
facilities of such type will not have a material adverse effect on future
operations. Bally's Park Place, however, believes that the adoption of
legislation approving casino gaming in any jurisdiction near New Jersey,
particularly Delaware, Maryland, New York or Pennsylvania, could have a material
adverse effect on the operations of Bally's Park Place Casino Hotel. There have
been proposals made for casinos in a
12
<PAGE> 15
number of other jurisdictions, including New York and Pennsylvania, and several
large metropolitan areas, including Chicago, where Bally is headquartered.
Bally's Park Place also competes with other forms of legalized gaming, including
state-sponsored lotteries in many jurisdictions, including New Jersey, Delaware,
Maryland, Pennsylvania and New York. See "Business -- Competition."
GAMING REGULATION
Gaming is regulated in every jurisdiction in which it is currently
legalized, and regulations generally require receipt of a license prior to
commencement of gaming operations. The regulatory frameworks may impose
restrictions or costs, including additional taxes, that materially detract from
the feasibility or profitability of gaming ventures, including those of Bally's
Park Place. Gaming regulations and their enforcement are within the discretion
of the regulating jurisdictions, and Bally's Park Place cannot predict what
these regulations will be, how they will be enforced or what effect, if any,
these regulations will have on Bally's Park Place or the Issuer.
Gaming activities in Atlantic City are subject to the New Jersey Act,
regulations of the CCC and other applicable laws. The casino license of Bally's
Park Place was last renewed in September 1992 for a period ending September 30,
1994. The loss, suspension or non-renewal of casino licenses would have a
material adverse impact on Bally's Park Place and its ability to meet its
obligations under the Notes. In addition, any beneficial holder of the Notes may
be subject to investigation by the New Jersey gaming authorities if those
authorities have reason to believe that such ownership may be inconsistent with
New Jersey gaming policies. Persons who acquire beneficial ownership of 15% or
more of, or institutional investors who acquire 20% or more of, a publicly
traded debt issue of an affiliate of a New Jersey casino licensee may be subject
to certain reporting and qualification procedures established by New Jersey
gaming authorities if the use of proceeds of the debt issue is related to the
financing of a New Jersey casino licensee. The CCC may require divestiture of
the Notes held by any such holder who is disqualified and may limit the proceeds
therefrom to the holder's actual cost. In addition, the Issuer has the absolute
right to repurchase the Notes in the event the CCC disapproves of any transfer
at the lesser of market price or the holder's purchase price. See "Business --
Gaming Regulation."
ABSENCE OF A PUBLIC MARKET FOR THE NOTES
There is no public market for the Notes and the Issuer does not intend to
apply for listing of the Notes on any national securities exchange or for
quotation of the Notes through The NASDAQ Stock Market. The Issuer has been
advised by the Underwriters that, following the completion of the Offering of
the Notes, they presently intend to make a market in the Notes. However, the
Underwriters are under no obligation to do so and any market-making activities
with respect to the Notes may be discontinued at any time without notice. There
can be no assurance as to the liquidity of the public market for the Notes or
that an active public market will develop or, if developed, will continue. If an
active public market does not develop or is not maintained, the market price and
the liquidity of the Notes may be adversely affected. See "Underwriting."
13
<PAGE> 16
THE COMPANY
Bally's Park Place Casino Hotel opened in 1979 under the ownership of the
Operating Company, a wholly owned subsidiary of Bally's Park Place. The Issuer
is also a wholly owned subsidiary of Bally's Park Place. Bally's Park Place was
a direct wholly owned subsidiary of Bally until June 16, 1993, when Bally
contributed all of the capital stock of Bally's Park Place to Casino Holdings.
Casino Holdings was formed as a wholly owned subsidiary of Bally in April 1993.
As used in this Prospectus, unless the context otherwise requires, "Bally's Park
Place" refers to Bally's Park Place and its subsidiaries and "Bally" refers to
Bally and its subsidiaries, including Bally's Park Place. The Notes will be
issued by the Issuer and are fully and unconditionally guaranteed on a senior
basis by Bally's Park Place.
BALLY'S PARK PLACE
Bally's Park Place, through the Operating Company, owns and operates the
Bally's Park Place Casino Hotel, which is situated on an eight-acre site with
ocean frontage at the well-known intersection of Park Place and the Boardwalk in
Atlantic City, New Jersey. The casino hotel complex is centrally located among
the nine other casino hotels adjacent to the Boardwalk and is within four blocks
of Atlantic City's Convention Hall and the new convention corridor, currently
under development, which will include a new convention facility. Bally's Park
Place Casino Hotel's central location on the Boardwalk contributes to its
success in attracting significant walk-in casino business, including strong
crossover business from competing casinos located nearby. Equipped with two
multi-story parking garages and surface valet parking lots, management believes
that Bally's Park Place Casino Hotel is also strongly positioned to attract
desirable drive-in business.
Bally's Park Place Casino Hotel is one of the largest casino hotel
facilities in Atlantic City, currently encompassing approximately 2.2 million
square feet of space, including approximately 68,000 square feet of casino floor
space, a 30-story hotel tower, a 12-story hotel facility and two multi-story
parking garages providing over 2,000 parking spaces. The casino features
approximately 2,000 slot machines and 115 table games. Bally's Park Place Casino
Hotel employs the latest slot machine technology and places particular emphasis
on the location, design and lighting of its slot machine areas in its efforts to
further develop, expand and compete for slot machine play, which generates
higher margins than table game play. In addition, Bally's Park Place Casino
Hotel offers a full selection of table games, including baccarat, blackjack,
craps, roulette and poker, among others.
Bally's Park Place Casino Hotel offers more than 1,250 rooms (including 77
suites), making it the largest four-star hotel in New Jersey, approximately
50,000 square feet of meeting and exhibition space and a 38,000-square foot
health spa facility. Dining areas include three specialty restaurants, a
cocktail lounge, a coffee shop, a buffet, a delicatessen, two fast food
facilities and a bar and lounge in the spa. Bally's Park Place Casino Hotel
offers a variety of other facilities and amenities to its patrons. Bally's
Parking Place, a self-park garage located across the street from the casino
hotel, offers over 1,500 parking spaces and is connected to Bally's Park Place
Casino Hotel by a people-mover and glass-enclosed, climate-controlled skywalk.
Bally's Park Place Casino Hotel's operating strategy capitalizes on its
central location and quality facilities and promotes the diversity of Bally's
Park Place Casino Hotel's casino games and courteous approach to guests.
Historically believed to be a leader in Atlantic City's middle to upper middle
tier slot player segments, Bally's Park Place devotes significant managerial and
promotional resources to the maintenance and expansion of slot machine play,
including higher denomination slot business. Bally's Park Place Casino Hotel
also targets middle-market table game players.
The marketing strategy of Bally's Park Place Casino Hotel is to generate a
high volume of play from casino customers from New York, Philadelphia and other
northeastern metropolitan areas, as well as to develop its position in all
segments of the Atlantic City hotel and convention market. To foster casino
patron loyalty, Bally's Park Place Casino Hotel developed its "MVP Program,"
which rewards players with a variety of complimentary services based on
frequency of play and amounts wagered. Bally's Park Place Casino Hotel is also
increasing its utilization of complimentary rooms in an effort to attract rated
players from its target markets and to encourage longer visits. In the latter
part of 1993, Bally's Park Place instituted a more aggressive marketing program
including additional promotional events and expanded media advertising.
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<PAGE> 17
Bally's Park Place expects this marketing strategy to continue in 1994 and to
include additional staff for hosts to support and service its casino patrons.
Bally's Park Place enjoys a share of total Atlantic City casino revenues in
excess of its proportionate share of total Atlantic City casino floor space due
to its emphasis on higher margin slot machine play. Slot revenues represented
70% of Bally's Park Place's casino revenues for the nine months ended September
30, 1993 as compared to 67% of total gaming revenues in the Atlantic City market
for this period, up from 69% for Bally's Park Place and 66% for the Atlantic
City market in 1992.
The Issuer was formed in June 1983 to serve solely as a financing
corporation to raise funds through the issuance of debt securities for the
benefit of the Operating Company. The Issuer is not authorized to conduct any
other business operations.
The principal executive offices of Bally's Park Place and the Issuer are
located at Park Place and the Boardwalk, Atlantic City, New Jersey 08401. The
telephone number is (609) 340-2000.
OWNERSHIP OF BALLY'S PARK PLACE AND THE ISSUER
The following chart illustrates the ownership of Bally's Park Place, the
Operating Company and the Issuer. The Notes offered hereby are securities of the
Issuer and fully and unconditionally guaranteed by Bally's Park Place.
------------------------------------------------------
Bally Manufacturing Corporation ("Bally")
------------------------------------------------------
------------------------------------------------------
Bally's Casino Holdings, Inc.*
("Casino Holdings")
------------------------------------------------------
------------------------------------------------------
Bally's Park Place, Inc.
(a Delaware corporation)
("Bally's Park Place")
------------------------------------------------------
-------------------------------------------------------------
------------------------------------------------------
Bally's Park Place, Inc.
(a New Jersey corporation)
(the "Operating Company")
------------------------------------------------------
------------------------------------------------------
Bally's Park Place Funding, Inc.
(the "Issuer")
------------------------------------------------------
*Bally's Casino Holdings, Inc. is wholly owned by Bally Manufacturing
Corporation through wholly owned subsidiaries of Bally Manufacturing
Corporation.
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<PAGE> 18
USE OF PROCEEDS
The Issuer and Bally's Park Place intend to consummate a series of
transactions (the "Refinancing") designed to reduce the average interest rate of
borrowings, extend the maturity date of certain indebtedness and provide the
Issuer and Bally's Park Place with additional financial and operating
flexibility. The Refinancing is expected to consist of:
(i) the Offering;
(ii) the use of the net proceeds from the sale of the Notes to
terminate the obligations of the Issuer and Bally's Park Place under the
Existing Note Indenture by purchasing and retiring certain Existing Notes
at the Closing and depositing sufficient proceeds with the trustee under
the Existing Note Indenture to be used in connection with the Issuer's
subsequent call for redemption of all the remaining outstanding Existing
Notes (the "Defeasance"); and
(iii) the replacement of the existing credit facility with the New
Credit Facility of Bally's Park Place.
The Issuer does not intend to consummate the Defeasance or purchase
Existing Notes unless the Offering is consummated and the New Credit Facility
has been entered into. Consummation of the Offering is conditioned on, among
other things, the closing of the New Credit Facility and consummation of the
Defeasance and purchase of the Notes.
The net proceeds to the Issuer from the sale of the Notes are estimated to
be approximately $412.5 million and will be used by the Issuer to effect the
Refinancing. The net proceeds will be immediately loaned by the Issuer to the
Operating Company in exchange for a promissory note from the Operating Company
to the Issuer (the "Operating Company Note"). The Operating Company will
immediately use approximately $380.1 million of the proceeds to repay a
promissory note issued by the Operating Company to the Issuer and approximately
$32.4 million to declare and pay a dividend to Bally's Park Place. The Issuer
will thereafter use approximately $380.1 million of the proceeds to purchase and
retire certain Existing Notes at the Closing and defease the Existing Note
Indenture and redeem the remaining outstanding Existing Notes (which bear
interest at the rate of 11 7/8% per annum) and to pay accrued and unpaid
interest to the redemption date on the Existing Notes so redeemed in connection
with the Defeasance. Bally's Park Place will then declare and pay a dividend of
approximately $32.4 million to Casino Holdings. See "Underwriting."
The following table sets forth, on a summary basis, the estimated sources
of funds to be used by the Issuer to effect the Refinancing and the application
of the funds by the Issuer and Bally's Park Place, assuming (i) the consummation
of the Refinancing occurs on March 1, 1994, (ii) the Offering provides gross
proceeds totalling $425.0 million and (iii) $380.1 million is used in connection
with the Defeasance.
<TABLE>
<CAPTION>
AMOUNT
---------------------
(IN MILLIONS)
<S> <C>
Sources of Funds:
Total proceeds of the Offering..................................... $ 425.0
-------
-------
Uses of Funds:
Aggregate purchase and redemption consideration on Existing Notes
including accrued interest through August 15, 1994................ $ 380.1
Dividend to Casino Holdings........................................ 32.4
Estimated transaction fees and expenses............................ 12.5
-------
$ 425.0
-------
-------
</TABLE>
16
<PAGE> 19
CONSOLIDATED CAPITALIZATION
The following table sets forth the unaudited historical consolidated
capitalization of Bally's Park Place as of September 30, 1993 and the
capitalization of Bally's Park Place as adjusted to give effect to the Offering
and the expected use of the estimated proceeds therefrom. See "Use of Proceeds."
This table should be read in conjunction with the Bally's Park Place unaudited
condensed consolidated financial statements and related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1993
-----------------------
AS
HISTORICAL ADJUSTED
---------- --------
(IN MILLIONS)
<S> <C> <C>
Short-term debt (advances from affiliate payable on demand)..... $ 7.0 $ 7.0
---------- --------
---------- --------
Long-term debt (excluding current maturities)(a):
Existing Notes............................................. $350.0 $
Notes offered hereby....................................... 425.0
Other...................................................... 2.7 2.7
---------- --------
Total long-term debt.................................. 352.7 427.7
Stockholder's equity (b)........................................ 89.8 36.5
---------- --------
Total capitalization............................................ $442.5 $464.2
---------- --------
---------- --------
</TABLE>
(a) See the Bally's Park Place consolidated financial statements and related
notes thereto for the nine months ended September 30, 1993 and the year
ended December 31, 1992 for additional information with respect to existing
long-term debt.
(b) As adjusted, stockholder's equity reflects a $32.4 million dividend to
Casino Holdings and an extraordinary loss (net of tax benefit) of $20.9
million relating to the redemption and purchase of the Existing Notes. The
extraordinary loss is the result of the payment of the redemption and
purchase premiums, the net cost of interest during the period between
Defeasance and redemption of the Existing Notes and the write off of
unamortized debt issuance costs.
17
<PAGE> 20
SELECTED FINANCIAL DATA
The selected historical financial data for Bally's Park Place for each of
the five years ended December 31, 1992, with the exception of the ratio of
earnings to fixed charges, are derived from the audited consolidated financial
statements of Bally's Park Place. The selected financial data for the nine
months ended September 30, 1993 and 1992 are unaudited; however, in the opinion
of management, such data includes all adjustments (which were of a normal
recurring nature except for those required to apply the provisions of SFAS No.
109) necessary for a fair presentation of the information set forth therein.
Bally's Park Place's business is seasonal, with casino and other revenues
peaking during the summer months. Therefore, the selected financial data for the
nine-month periods presented are not necessarily indicative of the results of
operations for the full year. The selected historical financial data for the
nine months ended September 30, 1993 and 1992 and for the years ended December
31, 1992, 1991 and 1990 should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements of Bally's Park Place and related notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- ------------------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues(a)....................... $267.1 $253.5 $331.1 $322.8 $324.6 $329.5 $305.5
Operating costs and expenses...... 195.7(b)(c) 203.1(b)(c) 268.4(b)(c) 268.4(b)(c)(d) 264.0(c) 258.9(c) 231.9(e)
Operating income.................. 71.4 50.4 62.7 54.4 60.6 70.6 73.6
Interest expense(f)............... 33.9 36.2 48.0 48.9 46.3 22.3(g) 8.4
Income before income taxes........ 37.5 14.2 14.7 5.5 14.3 48.3 65.2
Income before extraordinary item
and cumulative effect on prior
years of change in accounting
for income taxes................ 21.4(h) 7.3 7.9 1.8 8.1 28.6 38.4
Net income........................ 10.0(h) 7.3 7.9 1.8 8.1 20.2(g) 38.4
Ratio of earnings to fixed
charges(i)...................... 2.1x 1.4x 1.3x 1.1x 1.3x 2.4x 4.1x
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and equivalents.............. $ 9.6 $ 8.2 $ 12.3 $ 12.5 $ 11.1 $ 15.6 $ 9.8
Property and equipment, net....... 487.3 505.1 499.4 515.9 533.9 503.8 455.5
Total assets...................... 531.7 551.7 550.7 618.2 640.4 559.6 495.3
Advances from affiliate payable on
demand.......................... 7.0 28.0 16.0 17.0
Long-term debt, less current
maturities...................... 352.7 355.8 355.8 372.6 431.1 357.6(g) 159.7
Stockholder's equity.............. 89.8(j) 90.2 90.8(j) 132.9 131.1(j) 127.0(j) 265.8(j)
OTHER DATA:
Depreciation and amortization..... $ 19.9 $ 20.7 $ 27.4 $ 28.1 $ 25.9 $ 25.0 $ 22.0
Cash provided by
operating activities............ 30.5 19.1 35.4 47.9 34.2 62.7 73.0
Capital expenditures.............. 8.3 9.1 10.3 10.9 55.6(k) 71.1(k) 70.1(k)
Cash used in investing
activities...................... 9.2 11.4 12.6 13.0 55.6(k) 70.0(k) 73.5(k)
Cash provided by (used in)
financing activities............ (24.0)(j) (12.0) (23.0) (33.5) 17.0(j) 13.0(g)(j) (0.2)(j)
EBITDA(l)......................... 91.3 71.1 90.1 82.5 86.5 95.6 95.6
Ratio of EBITDA to interest
expense(l)...................... 2.7x 2.0x 1.9x 1.7x 1.9x 4.3x 11.4x
EBITDA margin(l).................. 34.2% 28.0% 27.2% 25.6% 26.6% 29.0% 31.3%
</TABLE>
(See following page for notes)
18
<PAGE> 21
- ---------------
(a) Includes interest income of $0.7 million and $1.6 million for the nine
months ended September 30, 1993 and 1992, respectively, and $1.9 million,
$5.7 million, $5.1 million, $1.8 million and $1.1 million for the years
ended December 31, 1992, 1991, 1990, 1989 and 1988, respectively.
(b) Includes charges allocated by Bally of $3.0 million and $2.9 million for
the nine months ended September 30, 1993 and 1992, respectively, and $3.7
million and $1.0 million for the years ended December 31, 1992 and 1991,
respectively. Bally is a holding company without significant operations of
its own. During 1992 Bally completed a major restructuring effort which
began in late 1990 and which included the divestiture of several of its
non-core businesses including the businesses directly operated by Bally.
The businesses directly operated by Bally had previously supported Bally's
overhead costs and made measurement of costs associated with oversight of
subsidiary operations impractical and unnecessary. During 1991 Bally
allocated costs to Bally's Park Place consisting of Bally's Park Place's
allocable share of Bally's director's and officer's insurance and other
Bally stockholder-related expenses primarily attributable to the
restructuring. During 1992 and 1993 Bally allocated costs to Bally's Park
Place consisting of Bally's Park Place's allocable share of Bally's
corporate overhead including executive salaries and benefits, public
company reporting costs and other corporate headquarters costs. While
Bally's Park Place does not obtain a measurable direct benefit from these
allocated costs, management believes that Bally's Park Place receives an
indirect benefit from Bally's oversight. Bally's method for allocating
costs to its subsidiaries is designed to apportion its costs to its
subsidiaries based upon many subjective factors including size of
operations and extent of Bally's oversight requirements. Management of
Bally and Bally's Park Place believe that the methods used to allocate
these costs are reasonable and expect similar allocations in future years.
Because of Bally's controlling relationship with Bally's Park Place and the
allocation of certain Bally costs, the operating results of Bally's Park
Place could be significantly different from those that would have been
obtained if Bally's Park Place operated autonomously.
(c) Commencing in 1989, certain administrative and support operations of
Bally's Park Place and Bally's Grand were consolidated. These shared
operations presently include legal services, purchasing, limousine
services, and certain aspects of human resources and management information
systems. Costs of these operations are allocated to or from Bally's Park
Place either directly or using various formulas based on utilization
estimates of such services and, on a net basis, totaled $1.0 million and
$1.9 million for the nine months ended September 30, 1993 and 1992,
respectively, and $2.6 million, $2.5 million, $1.8 million and $1.0 million
for the years ended December 31, 1992, 1991, 1990 and 1989, respectively,
all of which management believes were reasonable.
(d) Includes charges of $3.5 million related to the closing and demolition of
an ancillary motel operated by Bally's Park Place and $2.0 million for the
estimated cost of settling certain non-recurring liabilities.
(e) Net of costs totaling $6.4 million allocated to other casinos owned by
Bally, which management believes was reasonable. The allocation of such
costs ceased after 1988 since these Bally casino hotel subsidiaries, by the
start of 1989, had established separate management teams and implemented
management information, budgeting and accounting systems.
(f) Includes amortization of debt issuance costs and discounts.
(g) In September 1989, Bally's Park Place issued $350.0 million principal
amount of the Existing Notes and used a portion of the proceeds to retire
$100.0 million principal amount of its 13 7/8% Mortgage-Backed Bonds, which
resulted in an extraordinary loss of $8.4 million, net of income taxes of
$5.6 million.
(h) Effective January 1, 1993, Bally's Park Place changed its method of
accounting for income taxes as required by SFAS No. 109. The cumulative
effect on prior years of this change in accounting for income taxes was a
charge of $11.4 million. In addition, the income tax provision for the nine
months ended September 30, 1993 was increased by $0.4 million as a result
of applying the change in the U.S. statutory tax rate from 34% to 35% to
deferred tax balances as of January 1, 1993.
(i) The ratio of earnings to fixed charges has been computed by dividing (i)
income before income taxes, extraordinary item and cumulative effect on
prior years of change in accounting for income taxes plus amortization of
capitalized interest and fixed charges (excluding capitalized interest) by
(ii) fixed charges. Fixed charges consist of interest incurred (expensed or
capitalized), including amortization of debt issuance costs and discounts.
(j) In September 1993, an $11.0 million dividend was paid to Casino Holdings.
In December 1992, a $50.0 million receivable due from Bally was cancelled
and a dividend in that amount declared to Bally. In addition, dividends of
$3.9 million, $159.0 million and $17.0 million were paid to Bally in the
years ended December 31, 1990, 1989 and 1988, respectively.
(k) Includes capital expenditures for the construction of an 800-room hotel
tower, a parking garage and public area improvements during the three years
ended December 31, 1990.
(l) EBITDA represents earnings before interest, taxes, depreciation and
amortization and is intended to facilitate a more complete analysis of
Bally's Park Place's financial condition. The ratio of EBITDA to interest
expense represents the number of times EBITDA exceeds interest expense and
is intended to illustrate the ability of Bally's Park Place to pay
interest. The EBITDA margin represents EBITDA divided by revenues and is
intended to indicate the operating efficiency of Bally's Park Place. This
data should not be considered as an alternative to any measure of
performance or liquidity as promulgated under generally accepted accounting
principles (such as net income or cash provided by (used in) operating,
investing and financing activities) nor should it be considered as an
indicator of Bally's Park Place's overall financial performance.
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Issuer is a wholly owned subsidiary of Bally's Park Place. The Issuer
was formed in June 1983 to serve solely as a financing corporation to raise
funds through the issuance of debt securities for the benefit of the Operating
Company. The Issuer is not authorized to conduct any other business operations.
This section presents management's discussion and analysis of financial
condition and results of operations of Bally's Park Place (on a consolidated
basis, including the Operating Company and the Issuer) for the nine months ended
September 30, 1993 and 1992 and the years ended December 31, 1992, 1991 and
1990. Management's discussion and analysis should be read in conjunction with
the consolidated financial statements of Bally's Park Place and the related
notes thereto included elsewhere in this Prospectus.
RESULTS OF OPERATIONS
Comparison of Nine Months Ended September 30, 1993 and September 30, 1992
Revenues of Bally's Park Place for the nine months ended September 30, 1993
were $267.1 million compared to $253.5 million for 1992, an increase of $13.6
million (5%). Casino revenues increased $13.4 million (6%) as a result of a
$12.0 million (8%) increase in slot revenues (which includes the discontinuation
of certain progressive slot jackpots), $1.3 million of poker revenues (commenced
in July 1993) and $0.1 million increase in other table game revenues. The slot
revenue increase was primarily attributable to a 10% increase in the slot handle
(volume), partially offset by a 2% reduction in the slot win percentage from
9.9% in the 1992 period to 9.7% in 1993. Slot revenues represented 70% of
Bally's Park Place's casino revenues in the nine months ended September 30, 1993
compared to 69% in the same period of 1992. As of September 30, 1993, Bally's
Park Place increased its number of slot machines by 103 machines (5%) from
September 30, 1992. The table game revenue increase, excluding poker, was due to
an increase in the amount wagered (drop) of 4% offset by a 4% decline in the
hold percentage from 16.8% in the 1992 period to 16.2% in 1993.
Rooms revenue of Bally's Park Place increased $0.9 million (5%) due to an
increase in rooms occupied in 1993 compared to 1992, partially offset by a
reduction in the average room rate. Food and beverage revenue remained
essentially unchanged. For the nine months ended September 30, 1993, interest
income from affiliates declined $0.9 million from the same period in 1992 due to
the elimination of an intercompany loan.
Atlantic City city-wide casino revenues, excluding poker and horse race
simulcasting, for the nine months ended September 30, 1993 increased
approximately 2% from the 1992 period, which was primarily attributable to a 5%
increase in slot revenues offset, in part, by a 4% decrease in table game
revenues. The 1993 period was negatively impacted by severe weather conditions
that hampered attendance on several weekends in the first quarter of 1993. The
number of slot machines in Atlantic City has increased approximately 8% since
September 1992, while the number of Atlantic City table game units, excluding
poker tables, has declined approximately 5%. City-wide slot revenues for the
1993 period represented 67% of total gaming revenues in Atlantic City compared
to 66% in 1992. Changes in gaming regulations, including modifications allowing
more slot machines on existing casino floor space and permitting unrestricted
24-hour gaming effective July 1992, have aided Atlantic City slot revenue
growth. In addition to the ongoing slot revenue trend, the introduction in the
second quarter of 1993 of poker and horse race simulcasting has also improved
the Atlantic City business climate. Bally's Park Place's competitors in Atlantic
City intensified their promotional slot marketing efforts during 1992 to expand
their share of slot revenues and this trend has continued into 1993. Bally's
Park Place believes it is well-positioned to compete for its share of casino
revenues by continuing to offer promotional slot and table game programs and
special events. However, Bally's Park Place anticipates that as a result of the
continued aggressive competition for slot patrons, the slot win percentage may
decline further.
Operating income of Bally's Park Place for the nine months ended September
30, 1993 was $71.4 million compared to $50.4 million in 1992, an increase of
$21.0 million (42%), due to the increase in revenues described above and to a
decrease in operating expenses. Operating expenses for the nine months ended
September 30, 1993 were $195.8 million as compared to $203.1 million for the
same period in 1992, a decrease of $7.3 million (4%). Casino operating expenses
decreased $1.9 million (2%) principally due to a $1.8 million decline in the
cost of providing complimentary services and promotional marketing events. Rooms
expense increased $1.2 million (19%) mainly due to increased operating costs
associated with higher room occupancy.
20
<PAGE> 23
Food and beverage and other operating expenses were essentially unchanged.
Selling, general and administrative expenses decreased $6.1 million (20%) due
primarily to a $3.3 million reduction in costs associated with a management
restructuring (including a $1.5 million gain realized pursuant to the terms of a
Retirement and Separation Agreement with a former executive), a $1.0 million
reduction in employee benefit expenses, and a $1.6 million reduction in legal
and other expenses. Depreciation and amortization expense decreased $0.8 million
(4%) due primarily to the elimination of certain assets that were previously
being amortized. In addition, operating costs and expenses for the nine months
ended September 30, 1993 and 1992 include charges for Bally's corporate overhead
(including executive salaries and benefits, public company reporting costs and
other corporate headquarters costs) allocated to Bally's Park Place of $3.0
million and $2.9 million, respectively. Management expects Bally to make similar
allocations in future years. Allocations for 1993 and 1992 have been, and
management expects allocations in subsequent years will be, based upon similar
cost categories and relative percentages subject to changes in circumstances
which may warrant modifications. Management of Bally has advised Bally's Park
Place that no such charges of any significance are presently contemplated.
Interest expense of Bally's Park Place was $33.9 million for the nine
months ended September 30, 1993 compared to $36.2 million for the same period in
1992. The decrease of $2.3 million (6%) reflects lower average line of credit
and intercompany borrowings and, to a lesser extent, lower average interest
rates charged on these borrowings.
For the nine months ended September 30, 1993 and 1992, the effective rate
of the income tax provision differed from the U.S. statutory tax rate due
principally to state income taxes, net of the related federal income tax
benefit. In addition, the income tax provision for the nine months ended
September 30, 1993 was increased by $0.4 million as a result of applying the
change in the U.S. statutory tax rate from 34% to 35% to deferred tax balances
as of January 1, 1993.
Effective January 1, 1993, Bally's Park Place changed its method of
accounting for income taxes as required by SFAS No. 109. SFAS No. 109 retains
the requirement to record deferred income taxes for temporary differences that
are reported in different years for financial reporting and for tax purposes;
however, the methodology for calculating and recording deferred income taxes has
changed. Under the liability method adopted by SFAS No. 109, deferred tax
liabilities or assets are computed using the tax rates that will be in effect
when the temporary differences reverse. Also, requirements for recognition of
deferred tax assets and operating loss and tax credit carryforwards have been
liberalized by requiring their recognition when and to the extent that their
realization is deemed to be more likely than not. As permitted by SFAS No. 109,
Bally's Park Place elected to use the cumulative effect approach rather than to
restate the consolidated financial statements of any prior periods to apply the
provisions of SFAS No. 109. The cumulative effect on prior years of this change
in accounting for income taxes as of January 1, 1993 was a charge of $11.4
million. The effect of this change in accounting for income taxes on the
provision of income taxes for the nine months ended September 30, 1993 was not
material.
Comparison of Years Ended December 31, 1992 and December 31, 1991
Revenues of Bally's Park Place for 1992 were $331.1 million compared to
$322.8 million for 1991, an increase of $8.3 million (3%). Casino revenues
increased $12.3 million (5%), with slot revenues increasing $15.0 million (9%)
as a result of a 13% increase in the slot handle, partially offset by a 4%
decline in the win percentage from 10.3% in 1991 to 9.9% in 1992. Bally's Park
Place added 119 slot machines (7%) during 1992. Table game revenues decreased
$2.7 million (3%) as a result of a decline in the table game drop of $21.6
million (4%), partially offset by an improvement in the win percentage from
16.8% in 1991 to 17.0% in 1992. Bally's Park Place's 1992 casino revenues
generally reflect the trend in the revenue mix of the Atlantic City market. Slot
revenues represented 68% of Bally's Park Place's casino revenues in 1992
compared to 66% in 1991.
Rooms and food and beverage revenues were essentially unchanged. Interest
income from Bally in 1992 was $0.8 million compared to $4.2 million in 1991.
This decrease was primarily due to the declaration as a dividend to Bally by
Bally's Park Place of an amount totaling $50.0 million formerly classified as a
demand note receivable and discontinued interest payments on the note effective
April 1, 1992.
21
<PAGE> 24
Atlantic City city-wide casino revenues for 1992 increased approximately 8%
from 1991, which management believes was negatively impacted in the first
quarter by the Persian Gulf War. The increase was also due to a 14% increase in
slot revenues partially offset by a 3% decrease in table game revenues. Slot
revenues for 1992 represented 66% of total gaming win in Atlantic City compared
to 62% in 1991. During 1992, Bally's Park Place's competition in Atlantic City
intensified their promotional slot marketing efforts to expand their share of
slot revenues. Additionally, changes in gaming regulations, including
modifications allowing more slot machines in existing casino floor space and
permitting unrestricted 24-hour gaming effective July 1992, have aided Atlantic
City slot revenue growth.
Operating income for 1992 was $62.7 million as compared to $54.4 million
for 1991, an increase of $8.3 million (15%), which was primarily due to the
increase in revenues discussed earlier, while total operating expenses remained
essentially unchanged. Casino operating expenses increased $4.7 million (4%)
principally due to an increase in payroll and related costs and the cost of
providing complimentary services in conjunction with intensified slot marketing
efforts, offset, in part, by a decrease in the provision for doubtful
receivables of $0.7 million (52%) due to lower credit play in 1992 as compared
to 1991. Rooms and food and beverage operating expenses decreased $1.2 million
(4%) due primarily to an increase in allocated costs of $3.0 million (16%) for
providing complimentary services to the casino offset, in part, by a $1.9
million (7%) increase in payroll and related costs. Other operating expenses
increased $2.0 million (4%) due to an increase in maintenance costs. Selling,
general and administrative expenses decreased $7.4 million (15%). Selling,
general and administrative expenses for 1991 also include charges of $3.5
million related to the closing and demolition of an ancillary motel operated by
Bally's Park Place and $2.0 million for the estimated cost of settling certain
non-recurring liabilities. Depreciation and amortization expenses decreased $0.8
million (3%) due to the reduction in amortization of a non-current asset. In
addition, operating costs and expenses in 1992 and 1991 include charges for
Bally's overhead expenses allocated to Bally's Park Place of $3.7 million and
$1.0 million, respectively.
Interest expenses, net of capitalized interest, declined $0.9 million (2%)
to $48.0 million in 1992 from $48.9 million in 1991, reflecting lower average
existing credit facility and intercompany borrowings and lower average interest
rates.
Effective income tax rates were 46% and 68% in 1992 and 1991, respectively.
The 1992 income tax rate differed from the U.S. statutory tax rate (34%) due
principally to state income taxes, net of the related federal income tax
benefit. The 1991 income tax variance was due principally to a nondeductible
write-off of property and equipment and to state income taxes, net of the
related federal income tax benefit. A reconciliation of the income tax provision
with amounts determined by applying the U.S. statutory tax rate to income before
income taxes is included in the notes to consolidated financial statements for
the year ended December 31, 1992 included elsewhere in this Prospectus.
Comparison of Years Ended December 31, 1991 and December 31, 1990
Revenues of Bally's Park Place for 1991 were $322.8 million compared to
$324.6 million for 1990, a decrease of $1.8 million (1%). Bally's Park Place
casino revenues decreased $1.2 million (less than 1%), which reflects an
increase in slot revenue of $6.2 million (4%) offset by a decrease in table game
revenues of $7.4 million (8%). The slot revenue increase resulted from a 5%
increase in the slot handle. The table game decrease was attributable to a
reduction in the drop of 6% and to a decline in the win percentage from 17.1% in
1990 to 16.8% in 1991.
Bally's Park Place's casino revenues are dependent on its ability to both
sustain and increase its share of slot revenues. In 1991, slot revenues
represented 66% of Bally's Park Place's casino revenues as compared to 62% for
the Atlantic City industry. In 1990, slot revenues represented 63% of Bally's
Park Place's casino revenues as compared to 58% for the Atlantic City industry.
Rooms and food and beverage revenues decreased $0.9 million (2%) due
primarily to economic and competitive conditions. Interest income from Bally and
affiliates increased $0.8 million (21%) due to interest earned for the entire
year on Bally's Park Place's March 1990 $50.0 million advance to Bally and a
$2.7 million advance to Bally's Grand which was made in December 1990.
Atlantic City city-wide casino win for 1991 compared to 1990 increased only
1% which reflects an increase in slot revenues of 7% offset principally by a 7%
decline in table game revenues. A change in gaming
22
<PAGE> 25
regulations in July 1991 to allow 24-hour gaming on weekends, holidays and for
special events and the introduction of two new table games improved the Atlantic
City casino business climate. While the aforementioned change in gaming
regulations improved the Atlantic City casino business climate, the weakened
economy in the northeastern United States and the opening of a twelfth casino
hotel in April 1990 (which expanded the Atlantic City casino capacity by 18%)
had a negative impact upon many of the Atlantic City casinos, including Bally's
Park Place. In addition, 1991 results were adversely impacted by the Persian
Gulf War.
Operating income for 1991 was $54.4 million, as compared to $60.6 million
in 1990, a decrease of $6.2 million (10%). Rooms operating expenses decreased
$0.7 million (8%) principally due to a reduction in payroll related costs. Food
and beverage operating expenses declined $1.0 million (5%) primarily related to
an increase in allocated costs of $0.8 million (6%) for providing complimentary
services to the casino. Casino and other operating expenses remained essentially
unchanged. Selling, general and administrative expenses increased $3.1 million
(7%) primarily due to a charge of $3.5 million related to the planned closing
and demolition of an ancillary motel operated by Bally's Park Place and a $2.0
million charge for the estimated cost of settling certain non-recurring
liabilities. These increases in selling, general and administrative expenses
were partially offset by a lower provision for pension costs in 1991 as compared
to 1990. The $2.2 million (9%) increase in depreciation and amortization is
attributable to a full year's depreciation associated with Bally's Park Place's
1990 opening of a new parking garage and hotel public area improvements. In
addition, operating costs and expenses for 1991 include a charge of $1.0 million
for Bally's overhead expenses allocated to Bally's Park Place.
Interest expense, net of capitalized interest, was $48.9 million in 1991
compared to $46.3 million in 1990. The increase of $2.6 million (6%) was
attributable to lower capitalized interest in 1991, resulting from completion of
the garage in 1990.
Effective income tax rates were 68% and 43% in 1991 and 1990, respectively.
The 1991 income tax rate differed from the U.S. statutory tax rate (34%) due
principally to a nondeductible write-off of property and equipment and to state
income taxes, net of the related federal income tax benefit. The 1990 income tax
rate variance was caused principally by state income taxes, net of the related
federal income tax benefit. A reconciliation of the income tax provision with
amounts determined by applying the U.S. statutory tax rate to income before
taxes is included in the notes to consolidated financial statements for the year
ended December 31, 1992 included elsewhere in this Prospectus.
LIQUIDITY AND CAPITAL RESOURCES
Bally's Park Place anticipates that its primary source of cash will be its
cash flow from operating activities. Historically, Bally's Park Place's cash
flow from operations has been substantially in excess of its consolidated debt
service obligations. Management of Bally's Park Place believes that such cash
flow, cash on hand and amounts available under its New Credit Facility will be
adequate to fund its near-term capital expenditure, working capital and debt
service requirements.
Bally's Park Place currently anticipates making capital expenditures of
approximately $18.0 million and $13.0 million in 1994 and 1995, respectively.
Anticipated capital expenditures include completion of suite rooms in the hotel
tower, casino expansion, casino slot renovations, the purchase of data
processing equipment, construction of a new players lounge, restaurant and
kitchen renovations, expansion of the casino floor by approximately 3,000 square
feet in 1994, the construction of a poker, horse race simulcasting and keno area
and other public area improvements necessary to maintain the facility in a first
class condition. Bally's Park Place expects to fund all such capital
expenditures out of its cash from operations.
Bally's Park Place's existing credit facility expires June 30, 1994, at
which time Bally's Park Place has the option to repay the outstanding balance or
convert the outstanding balance to a term loan payable in four semi-annual
installments beginning December 31, 1994. The existing credit facility provides
for maximum borrowings of $75.0 million. At September 30, 1993, Bally Park
Place's entire existing credit facility of $75.0 million was available. Bally's
Park Place intends to replace the existing credit facility with the New Credit
Facility as part of the Refinancing. The New Credit Facility with First Fidelity
Bank, National Association and Midlantic National Bank is a $50 million
revolving credit facility which will mature on December 31, 1996. The interest
rate is, at Bally's Park Place's option, based on the agent bank's base rate or
a LIBOR-based rate. Interest will be equal to the applicable base rate or LIBOR
rate plus a specified percentage which
23
<PAGE> 26
percentage increases, from 0 to 1% in the case of base rate loans and from 2.0%
to 2.75% in the case of LIBOR loans, as the total amount outstanding increases.
In addition, the New Credit Facility will provide for an annual fee of 1/2 of 1%
on the unused portion of the facility. The New Credit Facility will require
Bally's Park Place to maintain a net worth on a consolidated basis of at least
$1 million, which amount will increase over the life of the New Credit Facility
to a minimum of $17.5 million. In addition, the New Credit Facility will contain
a restricted payment covenant limiting the ability of Bally's Park Place to
declare and pay dividends or make other distributions with respect to its shares
of capital stock which is, in certain circumstances, more restrictive than that
contained in the Indenture for the Notes.
The Existing Note Indenture and the existing credit facility restrict,
among other things, the ability of Bally's Park Place to incur debt, pay
dividends, make acquisitions, create liens, sell assets and make certain
investments. Payments of dividends by Bally's Park Place are restricted in
amount and are generally limited to 50% of its aggregate consolidated net income
(as defined) earned since December 31, 1988. On September 20, 1993, an $11.0
million dividend was paid by Bally's Park Place to Casino Holdings and by Casino
Holdings to Bally. At September 30, 1993, approximately $5.8 million was
available under the Existing Note Indenture and existing credit facility to pay
dividends. On December 15, 1993, Bally's Park Place declared and paid a $5.7
million dividend to Casino Holdings which declared and paid a similar dividend
to Bally. On February 18, 1994, Bally's Park Place declared and paid a $.6
million dividend to Casino Holdings which declared and paid a similar dividend
to Bally. The Existing Note Indenture and the existing credit facility will be
discharged in connection with the Refinancing. The terms of the Indenture and
the New Credit Facility will impose restrictions on Bally's Park Place's ability
to incur debt and issue preferred stock, make acquisitions and certain
restricted payments, create liens, sell assets or enter into transactions with
affiliates. See "Description of the Notes -- Certain Covenants." The Casino
Holdings Notes Indenture contains certain restrictions on the ability of Bally's
Park Place to incur additional indebtedness and make restricted payments and
contains limitations on other payments effecting subsidiaries. The amount of
future dividends payable to Casino Holdings, if any, will depend on many
factors, including Bally's Park Place's ability to generate earnings, its
financial condition and its capital expenditure and other cash requirements, as
well as restrictive debt covenants and possibly the approval of regulators.
Cash flows of Bally's Park Place for the nine months ended September 30,
1993 and 1992 and the years ended December 31, 1992, 1991 and 1990 are
summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
--------------- -------------------------
1993 1992 1992 1991 1990
----- ----- ----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Operating:
Income before cumulative effect on prior years of
change in accounting for income taxes........... $21.4 $ 7.3 $ 7.9 $ 1.8 $ 8.1
Depreciation and amortization..................... 19.9 20.7 27.4 28.1 25.9
Deferred income taxes............................. 8.0 2.6 1.0 (1.5) (.8)
Changes in operating assets and liabilities....... (20.0) (13.3) (5.1) 13.7 (3.2)
Other adjustments to reconcile to cash provided... 1.2 1.8 4.1 5.9 4.2
----- ----- ----- ----- -----
Cash provided by operating activities........... 30.5 19.1 35.3 48.0 34.2
Investing:
Purchases of property and equipment............... (8.3) (9.1) (10.3) (10.9) (55.6)
Other, net........................................ (.9) (2.3) (2.3) (2.1)
----- ----- ----- ----- -----
Cash used in investing activities............... (9.2) (11.4) (12.6) (13.0) (55.6)
Financing:
Debt transactions (including financing
transactions with affiliates and debt issuance
costs).......................................... (13.0) (12.0) (22.9) (33.6) 20.8
Dividends paid...................................... (11.0) -- (3.9)
----- ----- ----- ----- -----
Cash provided by (used in) financing activities... (24.0) (12.0) (22.9) (33.6) 16.9
----- ----- ----- ----- -----
Increase (decrease) in cash and equivalents......... (2.7) (4.3) (.2) 1.4 (4.5)
Cash and equivalents, beginning of period........... 12.3 12.5 12.5 11.1 15.6
----- ----- ----- ----- -----
Cash and equivalents, end of period................. $ 9.6 $ 8.2 $12.3 $12.5 $11.1
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
Bally's Park Place generated cash flow from operating activities of $30.5
million and $19.1 million in the nine months ended September 30, 1993 and 1992,
respectively. For the nine months ended September 30,
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<PAGE> 27
1993, "Changes in operating assets and liabilities" includes the effect of the
settlement of amounts owed to a former executive who retired in January 1993,
partially offset by a $3.2 million decrease in other assets related to the
surrender of an insurance policy on this former executive for cash by Bally's
Park Place. For the nine months ended September 30, 1992, "Changes in operating
assets and liabilities" includes deferred compensation payments to a former
executive.
For the nine months ended September 30, 1993 and 1992 expenditures for
property and equipment include refurbishment of hotel rooms in the original
structure, renovations of one of Bally's Park Place's specialty restaurants and
suites and the purchase of slot machines.
During the nine months ended September 30, 1993, Bally's Park Place repaid
the outstanding borrowings under the existing credit facility. In addition,
Bally's Park Place repaid $9.0 million of amounts advanced by Bally's Grand.
Bally's Grand and Bally's Park Place have a cash management arrangement whereby
Bally's Grand loans excess funds to Bally's Park Place. See "Certain
Transactions -- Transactions with Bally's Grand" and the notes to consolidated
financial statements included elsewhere in this Prospectus.
Bally's Park Place generated cash flow from operating activities of $35.3
million, $48.0 million and $34.2 million in 1992, 1991 and 1990, respectively.
The 1992 "Changes in operating assets and liabilities" principally reflect the
effect of deferred compensation payments to a former executive. The 1991
"Changes in operating assets and liabilities" represent the cumulative effect of
several financial events. Receivables declined $2.8 million as a result of a
reduced issuance of casino credit. Inventories declined $2.8 million as a result
of a reduced level of general inventories and retail merchandise. A $5.1 million
increase in accounts payable and accrued liabilities resulted from a $1.1
million accrual for the cost of demolishing a subsidiary's motel, $0.9 million
accrual related to Bally's Park Place's guarantee of certain guaranteed interest
contracts from an insolvent insurance company in Bally's Park Place's 401(k)
plan and other increases in accounts payable and accruals.
The 1992 and 1991 expenditures for property and equipment related to the
refurbishment of hotel rooms, casino slot renovations, other public area
improvements and the purchase and upgrade of various data processing equipment.
Expenditures in 1990 primarily related to the construction of a parking garage,
which opened in November 1990, and public area and restaurant renovations.
In 1992 and 1991, Bally's Park Place reduced borrowings under its existing
credit facility with its excess cash flows from operations and advances from
Bally's Grand. Financing transactions in 1990 are net of a $50.0 million advance
to Bally, which Bally's Park Place declared as a dividend to Bally in December
1992. In 1990, Bally's Park Place paid Bally a dividend of $3.9 million. In 1992
and 1991, no cash dividends were paid to Bally, although in 1992, as described
previously, the $50.0 million receivable from Bally was declared as a dividend.
YEAR ENDED DECEMBER 31, 1993
As discussed above, revenues for the nine months ended September 30, 1993
increased as compared to 1992. Preliminary year end results indicate that
revenues for 1993 were approximately $352 million, an increase of 6% from the
prior year and operating income for 1993 was approximately $86 million, an
increase of 37% over the prior year.
ISSUER
The Issuer serves solely as a financing corporation to raise funds through
the issuance of debt securities. In August 1989, the Issuer issued and sold the
Existing Notes in the principal amount of $350,000,000 and immediately loaned
the proceeds of the sale to the Operating Company, for which the Issuer received
the Operating Company's $350,000,000 promissory note (the "$350,000,000 Note").
The $350,000,000 Note bears interest at the rate of 11 7/8% per annum and
principal and interest repayments are identical to those in the Existing Notes.
The issuance of the Notes will be structured in the same manner as the issuance
of the Existing Notes. The proceeds from the sale of the Notes will be loaned to
the Operating Company, which will in turn deliver the Operating Company Note to
the Issuer. The amount of each principal and interest payment made by the
Operating Company will be equal to the amount of each principal and interest
payment required
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<PAGE> 28
to be paid by the Issuer on the Notes. In connection with the Defeasance, the
Operating Company will repay all of the outstanding principal and interest on
the $350,000,000 Note and the Issuer will defease and redeem all of the Existing
Notes and pay accrued and unpaid interest thereon through August 15, 1994 with
the proceeds from the sale of the Notes. See "Use of Proceeds." The Issuer has
no sources of income or cash other than payments on the Operating Company Note
and the $350,000,000 Note.
BUSINESS
Bally's Park Place owns and operates Bally's Park Place Casino Hotel, which
is situated on an eight-acre site with ocean frontage at the well-known
intersection of Park Place and the Boardwalk in Atlantic City, New Jersey. The
casino hotel complex is centrally located among the nine other casino hotels
adjacent to the Boardwalk and is within four blocks of Atlantic City's
Convention Hall and the new convention corridor, currently under development,
which will include a new convention facility. Bally's Park Place Casino Hotel's
central location on the Boardwalk contributes to its success in attracting
significant walk-in casino business, including strong crossover business from
competing casinos located nearby. Equipped with two multi-story parking garages
and surface valet parking lots, management believes that Bally's Park Place
Casino Hotel is also strongly positioned to attract the desirable drive-in
business.
Bally's Park Place Casino Hotel is one of the largest casino hotel
facilities in Atlantic City, currently encompassing approximately 2.2 million
square feet of space, including approximately 68,000 square feet of casino floor
space, a 30-story hotel tower, a 12-story hotel facility and two multi-story
parking garages providing over 2,000 parking spaces. The casino features
approximately 2,000 slot machines and 115 table games. Bally's Park Place Casino
Hotel employs the latest slot machine technology and places particular emphasis
on the location, design and lighting of its slot machine areas in its efforts to
further develop, expand and compete for slot machine play, which generates
higher margins than table game play. In addition, Bally's Park Place Casino
Hotel offers a full selection of table games, including baccarat, blackjack,
craps, roulette, and poker, among others. Management believes that recent
actions of the CCC have benefited Bally's Park Place Casino Hotel, as well as
other casino hotels in the Atlantic City market. The implementation of 24-hour
gaming, seven days per week has increased total gaming hours, providing
additional convenience for gaming patrons. In addition, the CCC has approved new
table games and modified its rules to permit an increase in the number of slot
machines in Atlantic City casinos and to permit poker and horse race
simulcasting. Under the New Jersey Act and the regulations of the CCC, because
of its hotel space, Bally's Park Place Casino Hotel is permitted to expand its
casino space substantially.
Bally's Park Place Casino Hotel offers more than 1,250 rooms (including 77
suites), making it the largest four-star hotel in New Jersey, approximately
50,000 square feet of meeting and exhibition space and a 38,000-square foot
health spa facility. Dining areas include three specialty restaurants, a
cocktail lounge, a coffee shop, a buffet, a delicatessen, two fast food
facilities and a bar and lounge in the spa. Bally's Park Place Casino Hotel
offers a variety of other facilities and amenities to its patrons. Bally's
Parking Place, a self-park garage located across the street from the casino
hotel, offers over 1,500 parking spaces and is connected to Bally's Park Place
Casino Hotel by a people-mover and glass-enclosed, climate-controlled skywalk.
Bally's Park Place Casino Hotel enjoys a share of total Atlantic City
casino revenues in excess of its proportionate share of total Atlantic City
casino floor space. Revenues from casino and other operations were $331.1
million in 1992, $322.8 million in 1991 and $324.6 million in 1990. Bally's Park
Place Casino Hotel has produced consistently high net operating cash flows, even
during the recent recessionary period, which has had a particularly adverse
effect on the economy of the northeastern United States. Bally's Park Place's
consistently high performance is a product of Bally's Park Place's focus on slot
machines, effective and efficient promotional programs and control of expenses.
Recent expense control measures include outsourcing design and construction
projects, controls on labor and payroll matters, budget and departmental
operation review procedures, reevaluation of administrative support services and
review of the cost-effectiveness of marketing strategy. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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<PAGE> 29
OPERATING STRATEGY
Bally's Park Place Casino Hotel's operating strategy capitalizes on its
central location and quality facilities and promotes the diversity of Bally's
Park Place Casino Hotel's casino games and courteous approach to guests.
Historically believed to be a leader in Atlantic City's middle to upper middle
tier slot player segments, Bally's Park Place devotes significant managerial and
promotional resources to the maintenance and expansion of slot machine play,
including higher denomination slot business. Bally's Park Place Casino Hotel
also targets middle-tier table game players.
Bally's Park Place Casino Hotel has been a leader in the Atlantic City
market with respect to recognizing and responding to the shifting balance of
table games and slot machines in favor of increased slot machine play and
intends to continue to focus efforts on increasing slot machine revenue. Slot
machine play, with its higher operating margins, represents the fastest growing
and most profitable segment of the Atlantic City gaming industry, while table
game play has declined in Atlantic City. For the nine months ended September 30,
1993, slot machine play represented 70% of Bally's Park Place's gaming revenues
for this period, as compared to 67% of total gaming revenues in the Atlantic
City market for this period, up from 69% for Bally's Park Place and 66% for the
Atlantic City market in 1992. Bally's Park Place's gaming revenues derived from
slot machine play represented 69% of its total gaming revenues for the year
ended December 31, 1993. Bally's Park Place Casino Hotel believes it has had
success in obtaining market share of higher denomination slot players ($1, $5
and $25) and intends to utilize its marketing data bases to pursue and cultivate
these premium players. Bally's Park Place Casino Hotel also offers a full
selection of table games, which continue to constitute an important part of its
gaming business, and is taking steps to increase its share of Atlantic City
table game revenues. In addition, Bally's Park Place has plans for the
construction of a larger poker, horse race simulcasting and keno area in 1994 to
offer more variety in its gaming activities.
MARKETING STRATEGY
Bally's Park Place Casino Hotel's marketing strategy capitalizes on the
casino hotel's central location and quality facilities to generate a high volume
of play from casino customers from New York, Philadelphia and other northeastern
metropolitan areas. It targets gaming customers from many segments of the
Atlantic City casino market, focusing primarily on middle-market patrons,
including drive-in, walk-in, bus and convention business. In the latter part of
1993, Bally's Park Place instituted a more aggressive marketing program
including additional promotional events and expanded media advertising. Bally's
Park Place expects this marketing strategy to continue in 1994 and to include
additional staff of hosts to support and service its casino patrons.
The middle-market patron includes drive-in patrons, who typically have
higher gaming budgets than the average walk-in patron and may stay at the hotel
overnight. The middle-market drive-in patron is targeted through direct mail and
promotional programs based on frequency and dollar amount of play. Additionally,
Bally's Park Place Casino Hotel's two large parking garages offer over 2,000
parking spaces, 1,500 of which are included in Bally's Parking Place, a
self-park garage connected to the casino hotel by a people-mover and
glass-enclosed, climate-controlled skywalk. Bally's Park Place Casino Hotel's
proximity to the main highway leading into Atlantic City also enables it to
attract drive-in traffic entering Atlantic City.
Management believes that targeted walk-in patrons, many of whom visit more
than one casino on each visit to Atlantic City, are attracted both by Bally's
Park Place Casino Hotel's central location on the Boardwalk and its quality
facilities. Such patrons include those traveling to Atlantic City as part of the
various bus programs serving the city's casinos, including those sponsored by
Bally's Park Place Casino Hotel. While bus customers enhance casino activity
Sunday through Thursday of each week, management believes that Bally's Park
Place Casino Hotel is less dependent on bus patrons than other Atlantic City
casinos, since its central location and quality facilities make it more
attractive to more profitable drive-in patrons.
Bally's Park Place Casino Hotel is located four blocks from Atlantic City's
Convention Hall and the new convention corridor currently under development,
which will include a new convention facility. Bally's Park Place Casino Hotel
has sales representatives responsible for convention business, and recent
initiatives of its sales and marketing department focus on marketing Bally's
Park Place Casino Hotel's convention facilities.
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<PAGE> 30
Bally's Park Place Casino Hotel offers the second largest amount of convention
space of all casino hotels in the Atlantic City market. As Atlantic City
International Airport continues to develop, and as construction of the new
Atlantic City convention center progresses, Bally's Park Place Casino Hotel
believes it will be well-positioned to benefit from increased patronage because
of its proximity to the convention facilities.
The MVP Program contributes to Bally's Park Place's Casino Hotel's strategy
to develop and retain a loyal following of players who return specifically to
Bally's Park Place Casino Hotel. Participation in this program is available to
any slot machine or table game player who wishes to have his or her play
tracked. Each player is issued an MVP card that may be inserted into card
readers that are attached to the slot machines or, in the case of table game
players, given to casino personnel to rate the player and keep track of the
frequency of play and the amounts wagered. Participating slot machine and table
game players receive complimentary services and earn opportunities to
participate in various promotional events. Bally's Park Place Casino Hotel has
recently increased its utilization of complimentary rooms in an effort to
attract rated players and to encourage longer visits to the facility. The MVP
Program also enables Bally's Park Place Casino Hotel to track, through a data
base system, the level and frequency of play of its gaming patrons, the type of
games played and other valuable marketing information. Bally's Park Place Casino
Hotel utilizes this data to tailor certain promotions, activities and special
events to certain gaming patrons, based on their level and type of play, to
identify new players, to foster loyalty among gaming patrons and to optimize
profit per customer.
Bally's Park Place Casino Hotel provides personalized service to its gaming
patrons through the employment of its casino host and customer development
programs. The casino host program, which is conducted on-site, is based on
developing relationships with gaming patrons at the facility and providing
various accommodations for them, such as dinner and show reservations and
providing them with certain complimentary services. The customer development
program includes both on-site efforts, such as in-house parties, a first time
player intercept program, special services to high-end players and telemarketing
to solicit repeat business from high-end slot players.
Most of Bally's Park Place Casino Hotel advertising is conducted through
direct mail and promotional campaigns which target participants in the MVP
Program, and billboard advertising. In addition, in 1993 Bally's Park Place
expanded its media advertising and expects this to continue in 1994.
CREDIT POLICY AND CONTROL PROCEDURES
Credit policies vary widely from one casino hotel to another and are
largely dependent on the profile of the targeted customers. Table game players,
for example, are typically extended more credit than slot players, and high-end
players are typically extended more credit than patrons who tend to wager lower
amounts. Gaming debts are legally enforceable under the current laws of New
Jersey; however, not all states and foreign countries will honor these policies
or enforce a judgment on a gaming debt entered in New Jersey.
Historically, Bally's Park Place Casino Hotel has extended credit to
selected gaming patrons in order to compete with other casino hotels which also
extend credit to customers. During 1992, Bally's Park Place extended gaming
credit of $71.2 million, or 13.8% of its table game drop, as compared to credit
of $78.7 million, or 14.7% of its table game drop in 1991. Since commencing
operations in 1979, approximately 99% of gaming receivables have been collected.
There can be no assurance, however, that Bally's Park Place Casino Hotel will
continue to maintain a satisfactory level of collections on gaming receivables.
If not controlled, gaming operations at Bally's Park Place Casino Hotel are
subject to risk of substantial loss as a result of employee or patron
dishonesty, credit fraud or illegal slot machine manipulation. Bally's Park
Place has in place control procedures to minimize such risks; however, there can
be no assurance that losses will not occur. Current controls include supervision
of employees, monitoring by electronic surveillance equipment and use of two-way
mirrors and overhead catwalks. Bally's Park Place Casino Hotel's activities are
observed and monitored on an ongoing basis by agents of both the CCC and the New
Jersey Division of Gaming Enforcement, each of which maintains a staff on the
premises of Bally's Park Place Casino Hotel.
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<PAGE> 31
EMPLOYEES
As of September 30, 1993, Bally's Park Place Casino Hotel employed
approximately 4,155 persons. At that date, Bally's Park Place had five
collective bargaining contracts with unions covering approximately 1,540 of its
employees. Of these collective bargaining agreements, one expires in September
1994, three expire in April 1996 and one expires in June 1996. Management
believes that its employee relations are good.
PROPERTIES
Bally's Park Place Casino Hotel is one of the largest casino hotel
facilities in Atlantic City, currently encompassing approximately 2.2 million
square feet of space, including approximately 68,000 square feet of casino floor
space, a 30-story hotel tower, a 12-story hotel facility and two multi-story
parking garages providing over 2,000 parking spaces. As a complement to the
casino, Bally's Park Place Casino Hotel has more than 1,250 rooms (including 77
suites), making it the largest four-star hotel in New Jersey, approximately
50,000 square feet of meeting and exhibition space and a 38,000-square foot
health spa facility. Bally's Parking Place, a self-park garage located across
the street from the casino hotel, offers over 1,500 parking spaces and is
connected to Bally's Park Place Casino Hotel by a people-mover and
glass-enclosed, climate-controlled skywalk.
Bally's Park Place also owns properties in Atlantic City, some of which are
leased to Bally's Grand. Properties leased to Bally's Grand include
approximately 237,000 square feet of surface parking space located adjacent to
Bally's Grand, which are leased pursuant to month-to-month lease arrangements
with monthly payments of approximately $20,500. Bally's Park Place also leases
to Bally's Grand approximately 191,000 square feet of surface parking space and
an approximately 26,000-square foot building, which contains offices and a
garage in Ventnor, New Jersey for employee parking, shuttle service and
limousine staging and servicing, pursuant to a five-year lease expiring August
1995 and providing for monthly payments of $37,500. Bally's Park Place received
approximately $700,000 in lease revenues for these properties in each of 1992
and 1991. See "Certain Transactions -- Transactions with Bally's Grand."
Substantially all of the properties of Bally's Park Place are subject to
first priority mortgage liens and security interests securing the Existing Notes
and the existing credit facility.
SEASONALITY
Bally's Park Place's operations are seasonal, with casino revenues peaking
during the summer season. Accordingly, Bally's Park Place's operations are
likely to be less profitable, or losses may be incurred, in the first and fourth
quarters of its fiscal year.
ISSUER
The Issuer serves solely as a financing corporation to raise funds through
the issuance of debt securities so that the Issuer and Bally's Park Place can
refinance a portion of their outstanding indebtedness. The Issuer is not
authorized to conduct any other business operations.
COMPETITION
Bally's Park Place faces intense competition in the Atlantic City market
from other companies in the gaming industry, some of which may have greater
financial resources than Bally's Park Place. Since April 1990, there have been
11 other casino hotel facilities operating in Atlantic City in competition with
Bally's Park Place, including Bally's Grand. Although no new casinos have been
opened in Atlantic City since April 1990 and there have been no public
announcements concerning new casino openings, the addition of new casino hotels
in the Atlantic City market would increase competition. Several Atlantic City
casinos have announced plans for expansion, which will increase competition in
the Atlantic City market, particularly as those facilities add additional slot
machines in connection with their expansions.
Bally's Park Place faces significant competition from both established
casinos, including those in Las Vegas and the Caribbean and newly emerging
gaming operations. Bally's Park Place believes that the recent
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<PAGE> 32
legalization of casino gaming in jurisdictions such as Mississippi, Louisiana,
South Dakota, Indiana, Iowa, Illinois, Missouri and Colorado, and Indian gaming
in Connecticut and elsewhere, has not, to date, had a material adverse impact on
the operations of Bally's Park Place Casino Hotel. Bally's Park Place, however,
believes that the adoption of legislation approving casino gaming in any
jurisdiction near New Jersey, particularly Delaware, Maryland, New York or
Pennsylvania, could have a material adverse effect on the operations of Bally's
Park Place Casino Hotel. The legalization of gaming in new jurisdictions, likely
will increase competition affecting the Company's new gaming ventures. There
have been proposals made for significant land-based casinos in a number of other
jurisdictions, including New York and Pennsylvania and several large
metropolitan areas, including Chicago, where Bally is headquartered. Bally's
Park Place also competes with other forms of legalized gaming, including
state-sponsored lotteries in many jurisdictions, including New Jersey, Delaware,
Maryland, Pennsylvania and New York.
Bally's Park Place believes that casino hotel competition in Atlantic City
is based primarily on the location and physical design of the casino hotel, the
extent and quality of personalized service offered to guests and casino
customers, the price and quality of rooms and food and beverage, the number and
quality of its restaurants, convention and other public facilities, promotional
allowances, the entertainment offered, the variety of games, table limits,
casino credit granted to customers and parking capacity. Management believes
that Bally's Park Place Casino Hotel's reputation as a first class facility
helps it compete in the Atlantic City market. Bally's Park Place Casino Hotel
also has a central location among the Atlantic City casinos, which management
believes has a positive effect on its competitive position.
GAMING REGULATION
Gaming is regulated in every jurisdiction in which it is currently
legalized, and regulations generally require receipt of a license prior to
commencement of gaming operations. The regulatory frameworks may impose
restrictions or costs, including additional taxes, that materially detract from
the feasibility or profitability of gaming ventures, including those
contemplated by Bally's Park Place. Gaming regulations and their enforcement are
within the discretion of the regulating jurisdictions, and Bally's Park Place
cannot predict what these regulations will be, how they will be enforced or what
effect, if any, these regulations will have on Bally's Park Place.
Gaming activities in Atlantic City are subject to the New Jersey Act,
regulations of the CCC and other applicable laws. No casino may operate unless
the required permits or licenses and approvals are obtained from the CCC. The
CCC 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. These laws and
regulations concern primarily (i) the financial stability, integrity,
responsibility, good character, honesty and business ability of casino service
suppliers and casino operators, their directors, officers and employees, their
security holders and others financially interested in casino operations, (ii)
the nature of casino hotel facilities, and (iii) the operating methods and
financial and accounting practices used in connection with the casino
operations. Taxes are imposed by the State of New Jersey on gaming operations at
the rate of eight percent of gross gaming revenues. In addition, the New Jersey
Act provides for an investment alternative tax of 2.5% of gross gaming revenues.
This investment alternative tax may be offset by investment tax credits, which
are obtained by purchasing bonds issued by or investing in housing or other
development projects approved by the New Jersey Casino Reinvestment Development
Authority, a state agency. See the "Casino Reinvestment Development Authority
investments" note in the Notes to the Consolidated Financial Statements. New
laws and regulations, as well as amendments to existing laws and regulations,
relating to gaming activities in Atlantic City are periodically introduced or
proposed and sometimes adopted.
The CCC has broad discretion with regard to the issuance, renewal and
revocation or suspension of casino licenses. A casino license is not
transferable, is issued for a term of up to one year for the first two renewals
and thereafter for a term of up to two years (subject to discretionary reopening
of the licensing hearing by the CCC at any time), and must be renewed by filing
an application which must be acted on by the CCC prior to the expiration of the
license in force. At any time, upon a finding of disqualification or
noncompliance, the CCC may revoke or suspend a license or impose fines.
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<PAGE> 33
The New Jersey Act imposes certain restrictions on the ownership and
transfer of securities issued by a corporation that holds a casino license or is
deemed a holding company, intermediary company, subsidiary or entity qualifier
(each, an "affiliate") of a casino licensee. "Security" is defined by the New
Jersey Act to include instruments that evidence either a beneficial ownership in
an entity (such as common and preferred stock) or a creditor interest in an
entity (such as a bond, note or mortgage). Pursuant to the New Jersey Act, the
corporate charter of a publicly traded affiliate of a casino licensee must
require that a holder of the company's securities dispose of such securities if
the holder's continued holding would result in the company or any affiliate
being no longer qualified to continue as a casino licensee under the New Jersey
Act. The corporate charter of a casino licensee or any privately held affiliate
of the licensee must (i) establish the right of prior approval by the CCC with
regard to a transfer of any privately held security in the company and (ii)
create the absolute right of the company to repurchase at the market price or
purchase price, whichever is less, any security in the company in the event the
CCC disapproves a transfer of such security under the New Jersey Act. The
corporate charters of Bally's Park Place and the Issuer conform with the New
Jersey Act's requirements described above for privately held companies.
If the CCC finds that an individual owner or holder of securities of a
corporate licensee or an affiliate of such corporate licensee is not qualified
under the New Jersey Act, the CCC may propose remedial action. The CCC may
require divestiture of the securities held by any disqualified holder who is
required to be qualified under the New Jersey Act (e.g., officers, directors,
security holders and key casino and other employees). In the event that
disqualified persons fail to divest themselves of the securities, the CCC may
revoke or suspend the license. However, if an affiliate of a casino licensee is
a publicly traded company and the CCC finds disqualified any holder of any
security thereof who is required to be qualified, and the CCC also finds that
(i) such company has complied with the aforesaid charter provisions; (ii) such
company has made a good faith effort, including the prosecution of all legal
remedies, to comply with any order of the CCC requiring the divestiture of the
security interest held by the disqualified holder; and (iii) such disqualified
holder does not have the ability to control the corporate licensee or any
affiliate thereof, or to elect one or more members of the board of directors of
such affiliate, the CCC will not take action against the casino licensee or its
affiliate with respect to the continued ownership of the security interest by
the disqualified holder.
For purposes of the New Jersey Act, a security holder is presumed to have
the ability to control a publicly traded corporation, or to elect one or more
members of its board of directors, if such holder owns or beneficially holds 5%
or more of the equity securities of such corporation, unless such presumption of
control or ability to elect is rebutted by clear and convincing evidence. An
"institutional investor," as that term is defined under the New Jersey Act, is
entitled to a waiver of qualification if it holds less than 10% of the equity
securities of a publicly traded holding or intermediary company of a casino
licensee and (i) the holdings were purchased for investment purposes only, (ii)
there is no cause to believe the institutional investor may be found
unqualified, and (iii) upon request by the CCC, the institutional investor files
a certified statement to the effect that it has no intention of influencing or
affecting the affairs of the issuer, the casino licensee or its other
affiliates. The CCC may grant a waiver of qualification to an institutional
investor holding 10% or more of such securities upon a showing of good cause and
if the conditions specified above are met.
With respect to debt securities, the CCC generally requires a person
holding 15% or more of a debt issue of a publicly traded affiliate of a casino
licensee to qualify as a "financial source" where the use of the proceeds from
the debt issue is related in any way to the financing of the casino licensee.
There can be no assurance that the CCC will continue to apply the 15% threshold,
and the CCC could at any time establish a lower threshold for qualification. An
exception to the qualification requirement is made for institutional investors,
in which case the institutional holder is entitled to a waiver of qualification
if the holder's position in the aggregate is less than 20% of the total
outstanding debt of the affiliate and less than 50% of any outstanding publicly
traded issue of such debt, and if the conditions specified in the above
paragraph are met. As with equity securities, a waiver of qualification may be
granted to institutional investors holding larger positions upon a showing of
good cause and if all conditions specified in the above paragraph are met.
Generally, the CCC would require each institutional holder seeking a waiver
of qualification to execute a certificate to the effect that (i) the holder has
reviewed the definition of institutional investor under the New Jersey Act and
believes that it meets the definition of institutional investor; (ii) the holder
purchased the
31
<PAGE> 34
securities for investment purposes only and holds them in the ordinary course of
business; (iii) the holder has no involvement in the business activities of, and
no intention of influencing or affecting the affairs of, the Issuer, the casino
licensee or any affiliate; and (iv) if the holder subsequently determines to
influence or affect the affairs of the Issuer, the casino licensee or any
affiliate, it shall provide not less than 30 days' notice of such intent and
shall file with the CCC an application for qualification before taking any such
action.
Commencing on the date the CCC serves notice on the licensee or an
affiliate of such licensee that a security holder of such corporation has been
found disqualified, it will be unlawful for the security holder to (i) receive
any dividends or interest upon any such securities, (ii) exercise, directly or
through any trustee or nominee, any right conferred by such securities, or (iii)
receive any remuneration in any form from the corporate licensee for services
rendered or otherwise.
Persons who are required to qualify under the New Jersey Act by reason of
holding debt or equity securities are required to place the securities into an
Interim Casino Authorization ("ICA") trust pending qualification. Unless and
until the CCC has reason to believe that the investor may not qualify, the
investor will retain the ability to direct the trustee how to vote, or whether
to dispose of, the securities. If at any time the CCC finds reasonable cause to
believe that the investor may be found unqualified, it can order the trust to
become "operative," in which case the investor will lose voting power, if any,
over the securities but will retain the right to petition the CCC to order the
trustee to dispose of the securities.
Once an ICA trust is created and funded, and regardless of whether it
becomes operative, the investor has no right to receive a return on the
investment until the investor becomes qualified. Should an investor ultimately
be found unqualified, the trustee would dispose of the trust property, and the
proceeds would be distributed to the unqualified applicant only in an amount not
exceeding the actual cost of the trust property. Any excess proceeds would be
paid to the State of New Jersey. If the securities were sold by the trustee
pending qualification, the investor would receive only actual cost, with
disposition of the remainder of the proceeds, if any, to await the investor's
qualification hearing.
In the event it is determined that a licensee has violated the New Jersey
Act or its regulations, then under certain circumstances, the licensee could be
subject to fines or have its license suspended or revoked. In addition, if a
person required to qualify under the New Jersey Act fails to qualify, or if a
security holder who is required to qualify fails to qualify and does not dispose
of his securities in the licensee or in any affiliate of the licensee, as may be
required by the New Jersey Act, then, under certain circumstances, the licensee
could have its license suspended or revoked.
If a casino license were not renewed, were suspended for more than 120 days
or were revoked, the CCC could appoint a conservator. The conservator would be
charged with the duty of conserving and preserving the assets so acquired and
continuing the operation of the hotel and casino of a suspended licensee or with
operating and disposing of the casino hotel facilities of a former licensee.
Such suspended licensee or former licensee, however, would be entitled only to a
fair rate of return out of net earnings on its investment, to be determined
under New Jersey law, with any excess to go to the State of New Jersey, if so
directed by the CCC. Suspension or revocation of any licenses or the appointment
of a conservator by the CCC would have a material adverse effect on the business
of the Issuer.
In connection with its approval of the Offering and the Refinancing, the
CCC has required, among other things, that any dividends paid by Bally's Park
Place to Casino Holdings as permitted by subparagraph (F) under the heading
"Limitation on Restricted Payments" in the section "Description of the Notes"
receive the prior approval of the CCC.
In September 1992, the casino license of Bally's Park Place was renewed by
the CCC for a two-year period ending September 30, 1994.
OTHER
Bally's Park Place is required to annually file documents with the Attorney
General of the United States in connection with the operation of slot machines.
All requisite filings for the present year have been made.
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<PAGE> 35
LEGAL MATTERS
Bally's Park Place is involved in various claims and lawsuits incidental to
its business. In the opinion of management, Bally's Park Place is adequately
insured against such claims and lawsuits, and any ultimate liability arising out
of such claims and lawsuits will not have a material adverse effect on the
financial condition or operations of Bally's Park Place.
33
<PAGE> 36
MANAGEMENT
BALLY'S PARK PLACE
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the directors
and executive officers of Bally's Park Place:
<TABLE>
<CAPTION>
NAME AGE BALLY'S PARK PLACE POSITION
- --------------------- --- ---------------------------------------------------------
<S> <C> <C>
Arthur M. Goldberg 52 Chairman of the Board of Directors and Chief Executive
Officer
Wallace R. Barr 48 President, Chief Operating Officer and Director
C. Patrick McKoy 42 Senior Vice President, Operations of the Operating
Company
Robert G. Conover 48 Senior Vice President, Management Information Systems of
the Operating Company
Dennis P. Venuti 50 Senior Vice President, Secretary and General Counsel
Joseph A. D'Amato 45 Vice President and Treasurer
Lee S. Hillman 38 Director
J. Kenneth Looloian 71 Director
</TABLE>
The tenure of the directors and executive officers of Bally's Park Place
and other information concerning the directors and executive officers of Bally's
Park Place are set forth below.
Mr. Goldberg has been Chairman of the Board of Directors and Chief
Executive Officer of Bally's Park Place and the Issuer since January 1993. Mr.
Goldberg has also been Chairman of the Board of Directors and Chief Executive
Officer of GNAC, CORP. ("GNAC") and GNF, CORP. ("GNF") since January 1993 and a
director of GNAC and GNF since August 1992. GNAC is a wholly owned subsidiary of
Bally, and, through its wholly owned subsidiary GNOC, CORP. ("GNOC"), operates
Bally's Grand. GNF is a wholly owned subsidiary of GNAC created to serve as a
financing entity. Mr. Goldberg was elected Chairman of the Board of Directors
and Chief Executive Officer of Bally in October 1990 and President of Bally in
January 1993. Mr. Goldberg has also served as the Chairman of the Board,
President and Chief Executive Officer of Casino Holdings since June 1993. He has
also served, since 1990, as a director of Bally's Health and Tennis Corporation
("BHTC"), a subsidiary of Bally and an operator of fitness centers. Mr. Goldberg
is also Chairman of Bally's Executive Committee. Since 1990, he has been
Chairman of the Board of Directors, Chief Executive Officer and President of Di
Giorgio Corporation, a corporation engaged in food distribution. From 1985 to
1989, he was Chief Executive Officer, President and a director of International
Controls Corporation, a manufacturing and engineering company. Mr. Goldberg is
also a director of First Fidelity Bancorp. In August 1992, Mr. Goldberg was
elected Chairman of the Board of Directors, President and Chief Operating
Officer of Bally's Grand, Inc. ("BGI"). From November 1991 to August 20, 1993,
BGI operated its business and managed its properties as a debtor-in-possession
under chapter 11 of the United States Bankruptcy Code. BGI's chapter 11 plan of
reorganization was confirmed September 15, 1992, and became effective August 20,
1993 at which time BGI emerged from bankruptcy. See "Investment Considerations
- -- Relationship with Bally, Casino Holdings and Bally's Grand."
Mr. Barr has been President and Chief Operating Officer of Bally's Park
Place and the Issuer and a director of Bally's Park Place since February 1993,
and from January 1993 to February 1993 he was Senior Vice President and Chief
Operating Officer. He has also served as the Executive Vice President, Chief
Operating Officer and a Director of Casino Holdings since June 1993. Mr. Barr
was a Senior Vice President of GNAC from June 1991 to February 1993, Chief
Operating Officer of GNAC since January 1993, and President and a director of
GNAC and GNF since February 1993. From March 1984 to June 1991, he served as
Senior Vice President, Operations of Bally's Park Place, from February 1981 to
June 1982, he served as its Treasurer, Corporate Controller and Chief Financial
Officer, and, from June 1982 to March 1984, he was Senior Vice President and
Chief Financial Officer. From January 1987 to September 1992, Mr. Barr was
Senior Vice President and Treasurer of BGI.
34
<PAGE> 37
Mr. McKoy has been a Senior Vice President, Operations of the Operating
Company since March 1993. He served as Vice President and Treasurer of the
Operating Company from February 1984 to June 1988. From May 1991 to March 1993,
Mr. McKoy was employed by Resorts International (Bahamas) 1984 Ltd. as Senior
Vice President, Finance (Office of the President). From June 1988 to January
1991, he was employed by Trump's Castle Associates Limited Partnership as Senior
Vice President, Finance and Administration. In March 1992, Trump's Castle
Associates Limited Partnership filed a voluntary petition for protection under
chapter 11 of title 11 of the United States Code. The plan of reorganization in
connection with this chapter 11 proceeding was confirmed in August 1992.
Mr. Conover has been a Senior Vice President of the Operating Company since
January 1993 and Vice President since 1983. Mr. Conover was elected Vice
President, Management Information Systems and Chief Information Officer of Bally
in December 1992. Mr. Conover has been Senior Vice President of GNOC since 1987.
Mr. Conover has also been President of the Bally Systems division of Bally
Gaming International, Inc. ("BGII") since October 1990. BGII was formerly a
subsidiary of Bally. Mr. Conover was Vice President, Management Information
Systems of BGI from January 1987 to September 1992.
Mr. Venuti has been a Senior Vice President of Bally's Park Place, the
Issuer, GNAC and GNF since January 1993, and has been Secretary and General
Counsel of Bally's Park Place, the Issuer, GNAC and GNF since February 1987. In
addition, from February 1987 to January 1993, Mr. Venuti served as Vice
President of Bally's Park Place, the Issuer, GNAC and GNF. Mr. Venuti was also
Vice President, Secretary and General Counsel of BGI from January 1987 to
September 1992. Mr. Venuti has also served as Vice President and Assistant
Secretary of Casino Holdings since June 1993.
Mr. D'Amato has been Vice President and Treasurer of Bally's Park Place and
the Issuer since August 1988. From December 1984 to August 1988, Mr. D'Amato was
employed by GNAC, initially as its Corporate Controller and subsequently as
Assistant Vice President and Treasurer.
Mr. Hillman has been a director of Bally's Park Place since January 1993.
He has also served as the Executive Vice President, Chief Financial Officer and
a Director of Casino Holdings since June 1993. He has been Senior Vice
President, Chief Financial Officer and Treasurer of BHTC since April 1991, and a
director of BHTC since September 1992. He was elected Vice President, Chief
Financial Officer, Treasurer and Controller of Bally in November 1991 and was
elected Executive Vice President in August 1992. In August 1993, Mr. Hillman was
elected Vice President-Administration of BGI. Mr. Hillman has also been a
director of GNAC since February 1993. From October 1989 to April 1991, Mr.
Hillman was a partner in the accounting firm of Ernst & Young. From 1987 to
October 1989, he was a principal with the accounting firm of Arthur Young &
Company, a predecessor to Ernst & Young.
Mr. Looloian has been a director of Bally's Park Place since January 1993.
He has been a director of GNAC and GNF since August 1992 and Executive Vice
President of Di Giorgio Corporation, a corporation engaged in food distribution,
for more than five years. He is a former partner in Arveron Investments, L.P.
and former Executive Vice President of International Controls Corporation. Mr.
Looloian is also a director of Bally. Since June 1992, Mr. Looloian has been a
director of Science Management Corporation, an engineering and consulting
company. Mr. Looloian has also served as a Director of Casino Holdings since
June 1993.
Directors are elected annually to serve until their successors are elected
and qualified. Members of the Board of Directors do not receive any additional
compensation for service on the Board of Directors.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by Bally's Park Place
to its Chief Executive Officer and the four most highly compensated executive
officers of Bally's Park Place whose cash compensation for 1993 for services
rendered in all capacities to Bally's Park Place exceeded $100,000. See "Certain
Transactions -- Transactions with Bally."
The executive officers named below participated in certain retirement plans
sponsored by Bally's Park Place or Bally that are intended to qualify for
tax-favored treatment under the Internal Revenue Code, including the Bally's
Park Place Supplemental Executive Retirement Plan (the "Bally's Park Place
SERP"),
35
<PAGE> 38
and the Bally's Park Place Profit-Sharing Plan and Trust (the "Bally's Park
Place Profit-Sharing Plan"). These executives also participated in the Bally
1989 Incentive Plan (the "Incentive Plan") and have received stock option grants
thereunder.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION($) ------------
NAME AND ------------------------ OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#)(A) COMPENSATION($)
- ------------------------- ---- ---------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Arthur M. Goldberg(b) 1993 -- -- --(b) --
(Chairman of the Board 1992 -- -- -- --
and Chief Executive 1991 -- -- --(b) --
Officer)
Wallace R. Barr(c) 1993 704,566 (d) 100,000 16,239(e)
(President and 1992 -- -- -- --
Chief Operating Officer) 1991 117,779 -- 10,000 (f)
Robert G. Conover 1993 190,000(g) 50,000 20,000 14,229(e)
(Senior Vice President 1992 191,058(g) 60,000 0 10,259
of the Operating Company) 1991 173,943 50,000 5,000(h) (f)
C. Patrick McKoy(i) 1993 165,577 50,000 15,000 14,229(e)
(Senior Vice President, 1992 -- -- -- --
Operations of the 1991 -- -- -- --
Operating Company)
Dennis P. Venuti 1993 201,539 50,000 20,000 14,229(e)
(Senior Vice President 1992 176,731 35,000 0 9,860
and General Counsel) 1991 161,846 30,000 5,000 (f)
</TABLE>
- ---------------
(a) Represents grants of non-qualified Bally stock options pursuant to the
Incentive Plan.
(b) Mr. Goldberg is the Chairman of the Board of Directors, President and Chief
Executive Officer of Bally. For serving in such capacities, Mr. Goldberg
received from Bally in 1993, 1992 and 1991 aggregate compensation of
$7,021,997, $3,740,816 and $2,950,000, respectively. Mr. Goldberg was also
awarded non-qualified Bally stock options for 450,000 shares and 1,000,000
shares of Bally's common stock in 1993 and 1991, respectively. In addition,
Bally awarded Mr. Goldberg stock options for 300,000 shares of BGII's
common stock that is owned by Bally. Bally allocates portions of its
corporate overhead costs, which includes Mr. Goldberg's salary, to Bally's
Park Place. See "Certain Transactions -- Transactions with Bally."
(c) Mr. Barr served as Senior Vice President, Operations of Bally's Park Place
from March 1984 to June 1991. From June 1991 to February 1993, he served as
Senior Vice President of GNAC. Since February 1993, Mr. Barr has served as
President and Chief Operating Officer of Bally's Park Place.
(d) Mr. Barr's bonus has not been determined as of the date hereof.
(e) Represents matching contributions by Bally's Park Place pursuant to the
Bally's Park Place Profit-Sharing Plan and, in the case of Mr. Barr,
includes $2,010 for life insurance premiums paid by Bally's Park Place.
(f) Information omitted in accordance with the transition provisions of the
SEC.
(g) This amount represents approximately two-thirds of Mr. Conover's annual
salary. The remaining approximately one-third of his salary is paid by
Bally's Park Place but Bally's Park Place is reimbursed for that amount by
BGII pursuant to the terms of an agreement between Bally's Park Place and
BGII.
(h) Does not include options for 35,000 shares of BGII's common stock granted
by BGII to Mr. Conover.
(i) Mr. McKoy has been an executive officer of Bally's Park Place since March
1993.
36
<PAGE> 39
BALLY STOCK OPTIONS
During 1993, Bally granted options to purchase Bally's common stock to
certain executive officers of Bally's Park Place. The following table sets forth
information concerning grants of options to purchase Bally's common stock made
during 1993 to the executive officers of Bally's Park Place named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ----------------------------------------------------------------------------- ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SHARES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(A)
OPTIONS EMPLOYEES PRICE EXPIRATION -------------------------
NAME GRANTED(#) IN 1993 ($/SH.) DATE 5%($) 10%($)
- -------------------------------- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Arthur M. Goldberg(b) -- -- -- -- -- --
Wallace R. Barr 50,000 18.5% 6.75 3/16/03 212,252 537,888
50,000(c) 18.5% 9.625 6/02/03 302,655 766,989
Robert G. Conover 10,000 3.7% 6.75 3/16/03 42,457 107,578
10,000(c) 3.7% 9.625 6/02/03 60,541 153,422
Dennis P. Venuti 10,000 3.7% 6.75 3/16/03 42,457 107,578
10,000(c) 3.7% 9.625 6/02/03 60,541 153,422
C. Patrick McKoy 15,000 5.6% 6.75 3/16/03 63,686 161,392
</TABLE>
- ---------------
(a) The potential realizable values represent future opportunity and have not
been reduced to present value in 1993 dollars. The dollar amounts included
in these columns are the result of calculations at assumed rates set by the
SEC for illustration purposes, and these rates are not intended to be a
forecast of Bally's common stock price and are not necessarily indicative of
the values that may be realized by the named executive officer.
(b) In 1993, Bally granted Mr. Goldberg, with regard to services for Bally,
options to purchase 450,000 shares of Bally common stock at an exercise
price of $9.625 per share, which options expire on September 30, 2003. The
potential realizable value of such options at assumed annual rates of stock
price appreciation for the option term of 5% and 10% would be $2,723,900 and
$6,902,897, respectively. The grant is subject to stockholder approval of an
amendment to the Incentive Plan.
(c) Grants are subject to stockholder approval of an amendment to the Incentive
Plan.
37
<PAGE> 40
The following table discloses, for the named executives, information
regarding stock options exercised during, or held at the end of, 1993 pursuant
to the Incentive Plan or otherwise.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY
ACQUIRED YEAR- OPTIONS/SARS
ON VALUE END (#) AT YEAR-END ($)
EXERCISE REALIZED (EXERCISABLE/ (EXERCISABLE/
NAME (#) ($) UNEXERCISABLE) UNEXERCISABLE)(A)
- --------------------- -------- --------- ------------- -----------------
<S> <C> <C> <C> <C>
Arthur M. Goldberg 0 0 1,520,000(E)/(b)(c) $ 10,120,000(E)/
450,000(U) 0(U)
Wallace R. Barr 0 0 9,167(E)/ 30,835(E)/
103,333(U) 102,915(U)
Robert G. Conover 0 0 27,668(E)/ 137,923(E)/(d)
33,332(U) 86,452(U)(e)
Dennis P. Venuti 0 0 4,334(E)/ 15,420(E)/
21,666(U) 25,205(U)
C. Patrick McKoy 0 0 0(E)/ 0(E)/
15,000(U) 26,250(U)
</TABLE>
- ---------------
(a) Value per share equals the closing price of Bally common stock on the New
York Stock Exchange or BGII common stock on the NASDAQ National Market
System as of December 31, 1993 ($8.50 and $17.25, respectively) minus the
applicable exercise or base price.
(b) Includes an award of options to purchase 500,000 shares of Bally's common
stock that can be deemed SARs at Mr. Goldberg's election. No other awards of
SARs were made to any of the other executive officers named in this table.
(c) Includes options to purchase 20,000 shares of BGII's common stock awarded by
Bally in 1991 and valued at $245,000.
(d) Includes options to purchase 23,334 shares of BGII's common stock awarded by
BGII in 1991 and valued at $122,504.
(e) Includes options to purchase 11,666 shares of BGII's common stock awarded by
BGII in 1991 and valued at $61,247.
BALLY'S PARK PLACE SERP
In January 1987, Bally's Park Place established the Bally's Park Place
SERP.
An example of the benefits provided under the Bally's Park Place SERP
(assuming retirement at age 60) is set forth in the following table:
<TABLE>
<CAPTION>
SERP TABLE
ANNUAL BENEFIT FOR THE FOLLOWING YEARS OF
SERVICE
AVERAGE --------------------------------------------
COMPENSATION 7 10 15 OR MORE
- ------------ ------------ ------------ ----------
<S> <C> <C> <C>
$ 100,000 $ 23,310 $ 33,300 $ 50,000
250,000 58,275 83,250 125,000
500,000 116,550 166,500 250,000
750,000 174,825 249,750 375,000
1,000,000 233,100 333,000 500,000
</TABLE>
The Bally's Park Place SERP fixes a minimum level for retirement benefits
based upon a participant's years of service with Bally's Park Place (or Bally
and its subsidiaries) and the highest average compensation ("Average
Compensation") for any three years falling within the last 10 years of the
participant's employment (or total employment if less than 10 years).
Participants who are vested under the Bally's Park Place SERP are entitled to
receive an annual benefit equal to 3.33% of Average Compensation for each year
of service
38
<PAGE> 41
(subject to a maximum of 15 years of service to be credited to any participant),
but not more than 50% of the participant's Average Compensation. Benefits under
the Bally's Park Place SERP are not subject to any deduction for Social Security
or other offset amounts. A participant becomes vested under the Bally's Park
Place SERP only if such participant has at least seven years of service and has
either retired after attaining age 60 or both attained age 50 and participated
in the Bally's Park Place SERP for at least three years. Solely for purposes of
determining vesting, a participant who is disabled (as determined under the
Bally's Park Place SERP) and terminates employment after attaining age 50 is
credited with years of service and participation until the participant's death.
The Bally's Park Place SERP annual benefit is payable for the life of a vested
participant and normally commences after the participant has both terminated
employment and attained age 60. A reduced benefit is payable to a vested
participant who is eligible for early retirement (after attainment of at least
age 55) or who is disabled and begins to receive benefit payments at an earlier
date. Upon the death of a vested participant, a death benefit is payable to
either the participant's surviving spouse or the participant's beneficiaries.
Depending on circumstances described in the Bally's Park Place SERP, death
benefits are to be paid in the form of either a monthly payment equal to a
percentage of the benefit payable to the participant (either 50% to the
surviving spouse for life or 100% to the surviving spouse or the beneficiaries
for a period not exceeding 10 years) or a lump-sum cash payment equal to two
times the participant's compensation in such participant's last full calendar
year of employment. Participation in the Bally's Park Place SERP is limited to
certain key executives designated by the Board of Directors of Bally's Park
Place. Benefits payable under the Bally's Park Place SERP may generally be
cancelled in the event a participant is discharged for cause or enters into
competition with the gaming business of Bally's Park Place other than Bally's
Grand. As of December 31, 1993, Bally's Park Place SERP is unfunded and is not
qualified under the Internal Revenue Code. Messrs. Conover and Venuti have
credit for 14 and 12 years of service, respectively, under the Bally's Park
Place SERP. Mr. Barr is fully vested pursuant to the terms of his employment
agreement.
GOLDBERG EMPLOYMENT AGREEMENT
Bally and Mr. Goldberg entered into an employment agreement (the
"Employment Agreement") dated as of November 1, 1990 for a three-year term at an
annual base salary of $700,000, plus bonuses, payable at the discretion of the
Bally compensation committee. The Employment Agreement is guaranteed by Bally's
Park Place. The Employment Agreement was amended, effective November 1, 1991,
to, among other things, extend the term for an additional year and to increase
the base salary to $2,200,000. The Employment Agreement was further amended
September 29, 1993 to, among other things, extend the term of the Employment
Agreement through October 31, 1997, with automatic annual extensions for
additional one year periods unless either party gives written notice to the
other prior to October 1 of any year fixing the remainder of the term at three
years without automatic extension. In addition, the Employment Agreement calls
for Bally to contribute, each year during the term of Mr. Goldberg's employment,
amounts to provide Mr. Goldberg with annual retirement benefits, if he is
employed by Bally until age 62, equal to the excess, if any, of (i) 50% of the
average of his cash compensation for any of the three highest years preceding
the year in which he attains age 62, over (ii) the sum of $258,189 and the
retirement benefit payable to Mr. Goldberg under Bally's other retirement or
similar benefit programs in which Mr. Goldberg participates, except the Bally
401(k) program ("the Supplemental Retirement Benefit Arrangement"). The
contributions under the Supplemental Retirement Benefit Arrangement are to be
paid (i) directly to Mr. Goldberg, (ii) to the appropriate governmental taxing
authority on Mr. Goldberg's behalf, or (iii) to a supplemental retirement
benefit trust, together with a tax gross-up payment so that the net benefit
received by Mr. Goldberg, after payment of all taxes, is equal to the required
contribution by Bally. In 1993, the cost to Bally of the contributions and the
tax gross-up was $597,463 and $487,509, respectively. Upon termination of Mr.
Goldberg's employment without cause, in addition to other payments, Bally is
required to make an additional contribution, which would equal three times the
contribution most recently made prior thereto, provided that all retirement
benefits from the Supplemental Retirement Benefit Arrangement would not exceed
the benefits described in the third preceding sentence. Furthermore, in the
event there is a change in control of Bally (as defined in the Employment
Agreement) and within two years thereafter Mr. Goldberg's employment is
terminated by Bally or by him voluntarily following a constructive termination
without cause, Mr. Goldberg will be entitled to a lump sum payment equal to the
greater of (i) the sum of his base salary for the remainder
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<PAGE> 42
of his employment term, plus the average of the semi-annual bonuses awarded to
him prior to his termination multiplied by two times the number of half-years
remaining in his employment term, or (ii) three times his base salary. In such
event, he shall also be entitled to any semi-annual bonuses awarded but not yet
paid, the value of his continued participation in certain employee benefit plans
of Bally (or continued participation in such plans until the end of the
employment term or the time Mr. Goldberg receives equivalent coverage from a
subsequent employer), certain retirement trust contributions and payment by
Bally of premiums on the split-dollar life insurance as if Mr. Goldberg had been
employed by Bally until age 62. Mr. Goldberg would also be entitled to a tax
gross-up payment with respect to any payment made after a change of control
subject to the excise tax. If a change of control of Bally occurred as of
December 31, 1993, Mr. Goldberg would be entitled to a payment of approximately
$29,600,000 under the Employment Agreement.
BARR EMPLOYMENT AGREEMENT
Bally and Mr. Barr entered into an employment agreement effective as of
January 1, 1993 for a term expiring December 31, 1995. The agreement provides
for an annual base salary of $700,000. Mr. Barr also received options to
purchase 50,000 shares of Bally common stock, subject to vesting. In the event
of an initial public offering of the common stock of either Bally's Park Place
or Bally's Grand during the term of the employment agreement, Mr. Barr will
receive stock options and/or stock awards in amounts consistent with the highest
grants of these types to other employees of Bally and its subsidiaries, other
than the Chairman of the Board or President of Bally. Upon execution of the
employment agreement, Mr. Barr became fully vested in the Bally's Park Place
SERP. In the event the employment agreement is terminated prior to its
expiration, except for cause, or the Bally's Park Place SERP is modified to
limit the credits Mr. Barr would have received for additional years of service,
Mr. Barr will be deemed to have an additional three years of service and credit
for compensation actually received or the base salary under the employment
agreement, whichever is greater. In the event of a change in control of Bally,
Mr. Barr may terminate the agreement and receive a lump sum payment equal to six
months of his base salary. In the event of a change in control of Bally, a
result of which Mr. Barr is asked to leave the employ of Bally, Mr. Barr is
entitled to receive a lump sum payment equal to either twenty-four months base
salary or an amount equal to his base salary for the balance of the term of his
employment agreement, whichever amount is greater. If a change of control of
Bally occurred as of December 31, 1993, and Mr. Barr was asked to leave the
employ of Bally, Mr. Barr would be entitled to a payment of $1,400,000.
CONOVER EMPLOYMENT AGREEMENT
Bally and Mr. Conover entered into an employment agreement effective as of
July 1, 1992 for a term expiring on December 31, 1994. The agreement provides
for an annual base salary of $285,000. Upon termination of Mr. Conover's
employment without cause, he will become fully vested in the Bally's Park Place
SERP regardless of his age. In the event of a change in control of Bally, Mr.
Conover may terminate the agreement and receive a lump sum payment equal to six
months of his base salary. In the event of a change in control of Bally, a
result of which Mr. Conover is asked to leave the employ of Bally, Mr. Conover
is entitled to receive a lump sum payment equal to 15 months of his base salary
or an amount equal to his base salary for the remainder of the term of his
agreement, whichever is greater. If a change of control of Bally occurred as of
December 31, 1993, and Mr. Conover was asked to leave the employ of Bally, Mr.
Conover would be entitled to a payment of $356,250 under his employment
agreement.
MCKOY SEVERANCE AGREEMENT
Bally's Park Place and Mr. McKoy entered into a severance agreement
effective as of March 15, 1993. The agreement provides that if Mr. McKoy's
employment is terminated within three years of the date of the agreement for any
reason other than Mr. McKoy's death, total disability, grossly negligent
performance of duties or voluntary resignation, then he is entitled to receive
from Bally's Park Place a lump-sum amount equal to 18 months of his then current
annual base salary. In addition, in such event, Mr. McKoy would continue to be
covered under Bally's Park Place's life, disability and health insurance for a
period of 18 months.
40
<PAGE> 43
GILLMAN EMPLOYMENT AND SEPARATION ARRANGEMENTS
On January 8, 1993, Bally, Bally's Park Place and Richard Gillman, formerly
the Chief Executive Officer, President and Chief Operating Officer of Bally's
Park Place, entered into a Retirement and Separation Agreement (the "Separation
Agreement") pursuant to which Mr. Gillman's employment agreement with Bally and
Bally's Park Place (the "Gillman Employment Agreement") was terminated and Mr.
Gillman resigned from all of his positions at Bally and its subsidiaries.
Prior to its termination, the Gillman Employment Agreement provided for a
three-year term at an annual base salary of $2,200,000, plus bonuses payable at
the discretion of Bally's compensation committee. In connection with entering
into the Gillman Employment Agreement, Mr. Gillman released all of his rights
under the Bally's Park Place SERP in exchange for Bally's Park Place agreeing to
pay a discounted value of the benefits under the Bally's Park Place SERP over
five years. Pursuant to this arrangement, Mr. Gillman received a payment of
$2,000,000 in 1991 and payments totalling $7,000,000 in 1992, leaving
approximately $18,600,000 unpaid at the date of the Separation Agreement.
Pursuant to the Separation Agreement, Mr. Gillman executed a covenant not
to compete, was paid $13,500,000 in lieu of the remaining aforementioned
$18,600,000 under the Gillman Employment Agreement, and $1,000,000 in exchange
for all other benefits and payments (including salary and bonus) otherwise
provided to Gillman under the Gillman Employment Agreement. In addition, Mr.
Gillman's options to purchase 666,666 shares of Bally common stock were
automatically vested.
TANNENBAUM SEPARATION AGREEMENT
Charles Tannenbaum, formerly Senior Vice President of Bally's Park Place,
and Bally's Park Place entered into a separation agreement, effective July 31,
1993, under which Mr. Tannenbaum will receive periodic payments in an amount
equal to his then existing base salary and a monthly car allowance until July
31, 1995 in lieu of certain retirement benefits under the Bally's Park Place
SERP. In addition, Mr. Tannenbaum is entitled to certain medical, insurance and
other benefits, and will be eligible for bonuses in 1993, 1994 and 1995 in
amounts generally consistent with previous awards. Mr. Tannenbaum also may
exercise all options to purchase Bally common stock currently held by him which
have vested or will vest prior to July 31, 1995. Effective August 1, 1995, Mr.
Tannenbaum will be entitled to receive benefits under the Bally's Park Place
SERP.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither Bally's Park Place nor the Issuer has a compensation committee or a
committee of the Board of Directors performing a similar function. During 1993,
Messrs. Goldberg and Barr participated in deliberations of the Bally's Park
Place Board of Directors concerning executive officer compensation. Since
January 8, 1993, Mr. Goldberg has been Chairman of the Board and Chief Executive
Officer and Mr. Barr has been President and Chief Operating Officer of Bally's
Park Place.
ISSUER
The By-laws of the Issuer provide, among other things, that the Board of
Directors of the Issuer consists of one member. Mr. Goldberg currently serves as
the sole director of the Issuer.
Mr. Goldberg serves as the Chairman of the Board and Chief Executive
Officer of the Issuer. Mr. Barr serves as President. Mr. D'Amato serves as Vice
President and Treasurer. Mr. Venuti serves as Senior Vice President and
Secretary. For additional information regarding Mr. Goldberg, Mr. Barr, Mr.
D'Amato and Mr. Venuti, see "Management -- Directors and Executive Officers."
The Issuer pays no compensation to its sole director or to its executive
officers.
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<PAGE> 44
SECURITY OWNERSHIP
All of the issued and outstanding capital stock of the Issuer is owned
directly by Bally's Park Place, which is an indirect wholly owned subsidiary of
Bally.
The following table sets forth, as of February 1, 1994, certain information
concerning the Bally common stock beneficially owned by (i) each director of
Bally's Park Place, and (ii) the named executive officers in the Summary
Compensation Table and (iii) all directors and executive officers of Bally's
Park Place as a group.
<TABLE>
<CAPTION>
SHARES OF BALLY COMMON
STOCK BENEFICIALLY
OWNED(A)
-------------------------
PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER CLASS
- -------------------------------------------------------------------- ---------- ----------
<S> <C> <C>
Arthur M. Goldberg.................................................. 2,236,300(b) 4.61%
2 Executive Drive-Suite 400
Somerset, New Jersey 08873
Wallace Barr........................................................ 37,834(c) *
Park Place and Boardwalk
Atlantic City, New Jersey 08401
Lee S. Hillman...................................................... 41,667 *
8700 West Bryn Mawr
Chicago, Illinois 60631
J. Kenneth Looloian................................................. 10,000 *
2 Executive Drive-Suite 400
Somerset, New Jersey 08873
Robert G. Conover................................................... 8,168 *
Dennis P. Venuti.................................................... 7,668 *
C. Patrick McKoy.................................................... 8,500 *
All directors and executive officers as a group (8 persons)......... 2,350,137 4.84%
</TABLE>
- ---------------
<TABLE>
<S> <C>
* Less than 1%
(a) Includes stock options which are immediately exercisable or exercisable within 60 days.
(b) Includes shares held by Nugget Partners, L.P., a New Jersey limited partnership, whose
sole general partner is Mr. Goldberg.
(c) Includes 1,000 shares held by Mr. Barr's spouse, as to which Mr. Barr disclaims
beneficial ownership.
</TABLE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH BALLY
Bally is a holding company without significant operations of its own.
During 1992 Bally completed a major restructuring effort which began in late
1990 and which included the divestiture of several of its non-core businesses
including the businesses directly operated by Bally. The businesses directly
operated by Bally had previously supported Bally's overhead costs and made
measurement of costs associated with oversight of subsidiary operations
impractical and unneccesary. During 1991 Bally allocated costs to Bally's Park
Place consisting of Bally's Park Place's allocable share of Bally's director's
and officer's insurance and other Bally stockholder-related expenses primarily
attributable to the restructuring. During 1992 and 1993 Bally allocated costs to
Bally's Park Place consisting of Bally's Park Place's allocable share of Bally's
corporate overhead including executive salaries and benefits, public company
reporting costs and other corporate headquarters costs. While Bally's Park Place
does not obtain a measurable direct benefit from these allocated costs,
management believes that Bally's Park Place receives an indirect benefit from
Bally's oversight. Bally's method for allocating costs to its subsidiaries is
designed to apportion its costs to its subsidiaries based upon
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<PAGE> 45
many subjective factors including size of operations and extent of Bally's
oversight requirements. Management of Bally and Bally's Park Place believe that
the methods used to allocate these costs are reasonable and expect similar
allocations in future years. Because of Bally's controlling relationship with
Bally's Park Place and the allocation of certain Bally costs, the operating
results of Bally's Park Place could be significantly different from those that
would have been obtained if Bally's Park Place operated autonomously. The
allocation of these costs and expenses by Bally to Bally's Park Place for the
nine months ended September 30, 1993 and the years ended December 31, 1992 and
1991 were $3.0 million, $3.7 million and $1.0 million, respectively.
Pursuant to a tax sharing arrangement between Bally's Park Place and Bally,
income taxes were allocated to Bally's Park Place based on amounts Bally's Park
Place would pay or receive if it filed a separate consolidated federal income
tax return, except that Bally's Park Place received credit from Bally for the
tax benefit of Bally's Park Place's net operating losses and tax credits, if
any, that were utilized in Bally's consolidated federal income tax return,
regardless of whether these losses or credits could have been utilized by
Bally's Park Place and its subsidiaries on a separate consolidated federal
income tax return basis. Payments were due to Bally when Bally filed the
applicable consolidated federal income tax return. Under this tax sharing
arrangement, Bally's Park Place had income taxes payable to Bally of $3.7
million and $1.7 million at December 31, 1992 and 1991, respectively. Bally's
Park Place is a party to a new tax sharing agreement providing for a tax sharing
arrangement on substantially the same terms. Casino Holdings has entered into a
similar tax sharing agreement with Bally (which generally excludes Bally's Park
Place from its stand-alone computation). If there is an event of default under
the indenture governing the Casino Holdings Notes, and as a result thereof an
acceleration, while Casino Holdings is a member of the Bally consolidated group,
payments to Bally, in the aggregate, under these two tax sharing agreements will
be decreased (retroactively to the date of the Casino Holdings tax sharing
agreement and refunded to the extent paid) to the extent that Casino Holdings
would have owed less, in the aggregate, if there had been a single tax sharing
agreement with Casino Holdings which included Bally's Park Place in its stand
alone computation.
Bally's Park Place purchased slot machines and related services from BGII
at an aggregate cost of $3.2 million, $1.6 million and $1.2 million in 1992,
1991 and 1990, respectively. Bally's Park Place believes the terms of these
purchases are as favorable as those which could be obtained from unaffiliated
third parties. During 1992, Mr. Richard Gillman was an executive officer of each
of Bally's Park Place, the Issuer, GNAC, BGII and Bally. Mr. Gillman resigned
from his positions with all such companies other than BGII in January 1993.
In April 1990, Bally's Park Place advanced $50.0 million to Bally, secured
by a promissory note. In October 1992, Bally petitioned the CCC to allow Bally's
Park Place to declare the receivable due from Bally as a dividend. The CCC
approved this request in December 1992. No interest was paid to Bally's Park
Place on this advance subsequent to April 1, 1992. Through March 31, 1992,
Bally's Park Place earned interest at the prime rate of its agent bank.
Intercompany interest earned on this advance was $0.8 million, $4.2 million and
$3.7 million in 1992, 1991 and 1990, respectively.
Bally's Park Place participated in the Bally insurance program for general
liability in 1990, 1988 and 1987 through a captive insurance company of Bally
whose operation was discontinued in 1991. Under this program, general liability
insurance expense was allocated to Bally's Park Place based on claims
experience, which management believes was reasonable. General liability
insurance expense allocated to Bally's Park Place was $1.2 million for 1990.
Bally's Park Place charged $0.5 million to operations in 1992 for a retroactive
premium adjustment related to claim years ended December 31, 1990, 1988 and 1987
and paid this amount to Bally in January 1993.
TRANSACTIONS WITH BALLY'S GRAND
During 1992, Mr. Gillman was, and since January 8, 1993, Mr. Goldberg has
been, the Chairman of the Board of Directors and Chief Executive Officer of each
of GNAC and Bally's Park Place. Similarly, during 1992, Mr. Gillman was, and
since February 1993 and January 8, 1993, Mr. Barr has been, President and Chief
Operating Officer, respectively, of each company. Additionally, certain other
executive officers of Bally's Park Place serve in a similar capacity for Bally's
Grand and exercise decision making and operational authority over both entities.
Although certain of the named executive officers of Bally's Park Place were also
employed by
43
<PAGE> 46
Bally's Grand during 1993, 1992 and 1991, each received all of his or her
compensation relating to Bally's casino hotels in Atlantic City from Bally's
Park Place, except Mr. Barr, who, during the second half of 1991 and all of
1992, was solely an officer of, and received his entire compensation from,
Bally's Grand. No allocation of cost was made between Bally's Park Place and
Bally's Grand for these executive officers as management believes these
allocable costs to be immaterial. See "Management--Executive Compensation."
Certain administrative and support operations of Bally's Park Place and
Bally's Grand are consolidated, including legal services, purchasing, limousine
services, and certain aspects of human resources and management information
systems. Costs of these operations are allocated to or from Bally's Park Place
either directly or using various formulas based on utilization estimates of such
services, which management believes is reasonable. See "Investment
Considerations--Relationship with Bally, Casino Holdings and Bally's Grand."
Bally's Park Place also leases surface area parking lots to Bally's Grand
located on Pacific Avenue adjacent to the Bally's Grand and a surface area
parking lot and building in Ventnor, New Jersey. Bally's Park Place recognized
$0.7 million in rental income for these properties in 1992 and 1991, and $0.4
million in 1990. Bally's Park Place recognized $0.5 million in rental income for
these properties in each of the nine months ended September 30, 1993 and 1992.
See "Business--Properties." Bally's Park Place believes the terms of these
leases are as favorable to Bally's Park Place as those which could be obtained
from unaffiliated third parties.
Funds were advanced to Bally's Park Place by Bally's Grand in 1992, 1991
and 1990. The advances are payable on demand. As of September 30, 1993, Bally's
Park Place had outstanding advances due to Bally's Grand totalling $7.0 million,
which advances were used to reduce the outstanding balance under the existing
credit facility. The interest rate on such advances is at the prime rate of
Bally's Park Place's agent bank and is payable monthly. In 1992, 1991 and 1990,
intercompany interest expense on these advances was $1.2 million, $0.9 million
and $0.2 million, respectively. Intercompany interest expense was $0.4 million
and $0.9 million for the nine months ended September 30, 1993 and 1992,
respectively.
In December 1990, Bally's Park Place advanced $2.7 million to Bally's
Grand. The advance was repaid in full in June 1992. The interest rate was based
on the prime rate of Bally's Park Place's agent bank. Intercompany interest
income earned on funds advanced to Bally's Grand for 1992, 1991 and 1990 was
$0.1 million, $0.2 million and less than $0.1 million.
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be direct obligations of the Issuer, secured by a mortgage
and security interests on certain real and personal property comprising Bally's
Park Place Casino Hotel in Atlantic City, New Jersey and by assignment of the
Operating Company Note. See "Security." The Notes will mature on , 2004
and will be limited to $425 million aggregate principal amount. Each Note will
bear interest at the rate set forth on the cover page hereof from , 1994,
or from the most recent interest payment date to which interest has been paid,
payable in cash semiannually on and each year, commencing
1994, to the Person in whose name the Note (or any predecessor Note) is
registered at the close of business on the or next preceding such
interest payment date. (Sections 202, 301 and 307)
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes will be exchangeable and transferable, at the office or agency of
the Issuer in the City of New York maintained for such purposes; provided,
however, that payment of interest may be made at the option of the Issuer by
check mailed to the Person entitled thereto as shown on the security register.
(Sections 301, 305 and 1002) The Notes will be issued only in fully registered
form without coupons, in denominations of $1,000 and any integral multiple
thereof. (Section 302) No service charge will be made for any registration of
transfer, exchange or redemption of Notes, except in certain circumstances for
any tax or other governmental charge that may be imposed in connection
therewith. (Section 305)
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<PAGE> 47
DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form, without coupons. The Notes offered hereby will be issued under an
Indenture to be dated as of , 1994 (the "Indenture") between the Issuer,
Bally's Park Place, the Operating Company, Realty Co. and First Bank National
Association, as Trustee (the "Trustee"), a copy of the form of which will be
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The Indenture is subject to, and is governed by, the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"). The following summaries of the
material provisions of the Indenture do not purport to be complete, and are
subject to, and are qualified in their entirety by reference to, all of the
provisions of the Indenture, including the definitions of certain terms therein
and those terms made a part of the Indenture by the Trust Indenture Act.
GUARANTY
Bally's Park Place will fully and unconditionally guarantee the due and
punctual payment of the principal of and interest on the Notes. The obligations
of Bally's Park Place are unconditional, irrespective of the enforceability of
the Indenture and the Notes or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. Bally's
Park Place waives all demands whatsoever against the Issuer prior to payment
under the Guaranty. In the event of acceleration of the Notes, the Notes will be
immediately due and payable by Bally's Park Place under the Guaranty,
notwithstanding any stay of such acceleration.
OPTIONAL REDEMPTION
Optional Redemption. The Notes will be subject to redemption at any time on
or after , 1999, at the option of the Issuer, in whole or in part, on not
less than 30 nor more than 60 days' prior notice in amounts of $1,000 or an
integral multiple of $1,000 at the following redemption prices (expressed as
percentages of the principal amount) (the "Redemption Price"), if redeemed
during the 12-month period beginning of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
1999... %
2000
2001
</TABLE>
and thereafter at 100% of the principal amount, in each case together with
accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on relevant record dates to receive interest due on an
interest payment date).
Optional Redemption Upon Public Equity Offering. At any time, or from time
to time, on or prior to , 1997, the Issuer may, at its option, use all or a
portion of the net cash proceeds of one or more Public Equity Offerings (as
defined below) to redeem up to an aggregate of 33 1/3% of the principal amount
of the Notes originally issued, at a redemption price equal to % of the
principal amount thereof plus accrued and unpaid interest, if any, to the
redemption date, provided that immediately following such redemption, at least
$100 million principal amount of Notes remain outstanding. In order to effect
the foregoing redemption with the proceeds of any Public Equity Offering, the
Issuer shall send the redemption notice not later than 60 days after the
consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Capital Stock of Bally's Park Place (other than
Redeemable Capital Stock) or Casino Holdings pursuant to a registration
statement filed with the Commission in accordance with the Securities Act, which
public equity offering results in gross cash proceeds to Bally's Park Place or
Casino Holdings, as the case may be, of not less than $30 million.
If less than all of the Notes are to be redeemed, the Trustee shall select
the Notes or portions thereof to be redeemed pro rata, by lot or by any other
method the Trustee shall deem fair and reasonable.
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<PAGE> 48
SECURITY
General. The Notes will be secured by certain property and assets as
described below, referred to herein in this Prospectus as "Collateral."
References herein to the "Security Documents" include all documents to be
entered into to create or perfect the security interests in the Collateral,
including the Mortgage and the pledge agreement pursuant to which the Issuer
pledges as security for its obligations under the Indenture the Operating
Company Note.
The Mortgage. The Notes will be secured by a mortgage lien and security
interest evidenced by a mortgage and security agreement with assignment of rents
and an assignment of leases and rents (collectively, the "Mortgage") by the
Operating Company and Bally's Park Place Realty Co. ("Realty Co.") to the
Trustee. The Mortgage will encumber the fee interest of Realty Co. and the fee
and leasehold interests of the Operating Company comprising the Casino Hotel,
the contiguous parking garage and property, any additions or improvements
constructed thereon and all furniture, fixtures, machinery, equipment and
supplies forming a part thereof or used in connection therewith, but excludes
all property leased by Bally's Grand (the "Property"). See "Business --
Properties" for a description of the Property. Pursuant to the terms of an
Intercreditor Agreement to be entered into by the Trustee and the lenders under
the New Credit Facility (the "Senior Lender"), the lien of the Mortgage will be
of equal priority for purposes of securing payment and performance to the lien
of the mortgage relating to the New Credit Facility. The Trustee will hold the
Mortgage and the Security Agreement for the benefit of the Holders of the Notes.
(Section 1201)
Bally's Park Place and the Issuer have obtained an appraisal of the
Property from American Appraisal Capital Services, Inc. This appraisal places an
aggregate market value as of January 10, 1994 of $745 million on the Collateral.
There can be no assurances that the Collateral, if sold, will be sold for this
amount.
As described below under "Limitations on Encumbrances," the Operating
Company and Realty Co. may have or permit liens on the Collateral which rank
junior to or pari passu with the lien of the Mortgage up to an aggregate
principal amount not to exceed the sum (without duplication) of (A) the original
principal amount of the Notes (less the principal amount of the Notes
outstanding at the time of any calculation), (B) the amount available under the
revolving credit facility described in clause (i) of the definition of Permitted
Indebtedness, (C) $100 million and (D) 66 2/3% of the cost of the Casino Hotel
Improvements (as defined below).
The Indenture will require the Issuer to obtain and deliver to the Trustee
at least as frequently as every 24 months updated appraisals of the Collateral.
(Section 1207) The Indenture will require the Issuer to deliver to the Trustee
at its expense one or more A.L.T.A. form title insurance policies providing
title insurance in the aggregate amount equal to $425 million with respect to
the real property Collateral, which policies will name the Trustee as insured
for the benefit of the Holders of the Notes. (Section 1202)
INTERCREDITOR AGREEMENT
The rights of the Trustee for the Notes and the Senior Lender under the New
Credit Facility to exercise their remedies with respect to the Collateral under
their respective agreements will be governed by the Intercreditor Agreement. The
Intercreditor Agreement limits the rights of the Trustee for the Notes to
control actions or pursue remedies with respect to the Collateral upon an event
of default.
RELEASE AND SUBSTITUTION OF COLLATERAL
Collateral may be released upon substitution of other Collateral with a
fair value equal to the fair value of the Collateral released or the deposit of
Cash Collateral (less any amount paid over for the benefit of the holders of
other liens ranking pari passu with the Lien of the Mortgage) in the collateral
account; provided that no Collateral consisting of real property, other than
real property that is substitute collateral, may be released, except that the
Dennis Hotel (a 12-story hotel facility containing 479 of the Bally's Park Place
Casino Hotel's 1,250 rooms) may be released if real property collateral, or a
letter of credit (the "Letter of Credit"), or a combination thereof, with a fair
value equal to the fair value of the Dennis Hotel, is substituted. Collateral
sold, assigned, transferred, licensed or otherwise disposed of because it has
become worn out,
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<PAGE> 49
obsolete or unserviceable (provided it is replaced with Collateral of at least
equal value and utility), or abandoned because it is no longer necessary or
desirable in, and is not material to, the conduct of the business of Bally's
Park Place, will be released, subject, in certain cases, to receipt by the
Trustee of certain reports and limitations on the fair value of property so
released. All Collateral will be released upon satisfaction and discharge of the
obligations of the Issuer under the Indenture in accordance with the provisions
under "Satisfaction and Discharge."
LIMITATIONS ON ABILITY TO REALIZE ON COLLATERAL
General. If there is a default under the Indenture or the Security
Documents, the Trustee will have rights, subject to the New Jersey Act, to
enforce the rights and remedies contained in the Security Documents. The net
amount realized in any foreclosure sale for the benefit of the Holders of the
Notes, the holders of the Existing Notes, the Senior Lender and the holders of
any other lien ranking pari passu with the Mortgage will be only that amount
which exceeds all amounts then due and owing to creditors having security
interests senior in right of payment to the Notes, if any, and certain costs,
taxes and other items. The net amount realized in such foreclosure sale will be
shared ratably among the Holders of the Notes, the holders of the Existing
Notes, the Senior Lender and holders of other Indebtedness secured by liens
ranking pari passu to the Mortgage, if any. There is currently no Indebtedness
secured by a lien ranking senior to or pari passu with the liens of the Mortgage
or the mortgage relating to the New Credit Facility (the "Credit Facility
Mortgage").
Certain Regulatory Considerations. In any foreclosure sale, the Trustee
could bid the amount of the outstanding Notes. The Trustee's ability to
foreclose upon Collateral representing casino assets is limited by the New
Jersey Act, which requires that persons who own or manage a casino hotel must
hold a casino license. No person can hold a casino license in the State of New
Jersey unless the person is found qualified to do so by the CCC. If the Trustee
acquires Collateral representing casino assets in a foreclosure sale and is
unable or chooses not to qualify under the New Jersey Act to operate such
assets, it would have to either sell such assets or retain an entity licensed
under the New Jersey Act to operate or sell such assets. In addition, in any
foreclosure sale or subsequent resale by the Trustee on behalf of the Holders of
the Notes, licensing requirements under such Act will limit the number of
potential bidders, may delay any sale and may adversely affect the sale price of
such Collateral. See "Business -- Gaming Regulation."
Certain Bankruptcy Limitations. The right of the Trustee to repossess and
dispose of the Collateral upon acceleration of the Notes is likely to be
significantly impaired by applicable bankruptcy law if a bankruptcy case were to
be commenced by or against the Issuer, Bally's Park Place and the Operating
Company prior to the Trustee having repossessed and disposed of the Collateral.
Under the Federal Bankruptcy Code, secured creditors, such as the Trustee on
behalf of the Holders of the Notes, are prohibited from repossessing their
security from a debtor in a bankruptcy case, or from disposing of security
repossessed from such debtor without bankruptcy court approval. Moreover, the
Federal Bankruptcy Code permits the debtor-in-possession to retain and to
continue to use the collateral even though the debtor is in default under the
applicable agreement, provided that the secured creditor, on its request,
generally is given "adequate protection" of its interest in the collateral.
Because "adequate protection" under the Federal Bankruptcy Code is based on the
value of the secured creditor's interest in the collateral and the Federal
Bankruptcy Code does not specify precisely how value is to be determined, there
is no hard and fast rule on the form and amount of "adequate protection."
Rather, the Federal Bankruptcy Code specifies three means of providing adequate
protection, which are neither exclusive nor exhaustive, namely: (a) a cash
payment or periodic cash payments by the estate to the extent of a decrease in
value of the secured creditor's interest in the collateral; (b) the provision of
an additional or replacement lien on other property to the extent of the
decrease in value of the collateral; or (c) any other relief that will result in
the realization by the secured creditor of the "indubitable equivalent" of its
interest in the collateral. In view of the lack of a precise definition of the
term "adequate protection" and the broad discretionary powers of a bankruptcy
court, it is impossible to predict how long payments under the Notes could be
delayed following commencement of a bankruptcy case, whether or when the Trustee
could repossess or dispose of the Collateral or whether or to what extent
Holders of the Notes
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<PAGE> 50
would be compensated for any delay in payment or loss of value of the Collateral
through the requirement of "adequate protection."
CHANGE IN CONTROL
Following the occurrence of any Change in Control, the Issuer will be
required to make an offer to purchase, at the option of each Holder, all such
Holder's outstanding Notes at a purchase price equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest to the date of
purchase.
Within 30 days after any Change in Control, the Issuer (with notice to the
Trustee), or the Trustee at the Issuer's request, will mail or cause to be
mailed to all Holders on the date of the Change in Control a notice of the
occurrence of such Change in Control and of the Holders' rights arising as a
result thereof. Such notice will contain all instructions and materials
necessary to enable Holders to surrender their Notes to the Issuer. The Notes
will be purchased 20 Business Days from the date the notice is mailed. Offers to
purchase outstanding Notes following the occurrence of a Change in Control will
be conducted in compliance with Section 14 of the Exchange Act, if applicable.
The Issuer shall not be required to make an offer to purchase if a third
party makes the offer and purchases Notes in the manner, at the times and
otherwise in compliance with the requirements applicable to the Issuer. (Section
1015)
"Change in Control" means such time as (i) a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of more
than 50% of the total voting power of the then outstanding Voting Stock of
Bally's Park Place, the Operating Company or the Issuer (other than Casino
Holdings, Bally or a subsidiary of Casino Holdings or Bally, of which Casino
Holdings or Bally, directly or indirectly, owns a majority of the total voting
power of the Voting Stock thereof) or Casino Holdings (other than Bally or a
majority-owned subsidiary of Bally) or Bally; (ii) the Issuer, Bally's Park
Place, the Operating Company or Realty Co. consolidates or merges with or into
another Person or conveys, transfers or leases all or substantially all of its
assets to any Person in one transaction or a series of related transactions, or
any Person consolidates or merges with or into the Issuer, Bally's Park Place,
the Operating Company or Realty Co., and in any such event the holders of the
Voting Stock of such company immediately prior to such transaction or series of
transactions shall beneficially own, directly or indirectly, less than 50% of
the Voting Stock of the surviving Person immediately after such transaction or
series of transactions, provided, however, that neither the merger or
consolidation or sale of any assets by any of the Issuer, Bally's Park Place,
the Operating Company or Realty Co. with or into any of the Issuer, Bally's Park
Place, the Operating Company or Realty Co. nor the liquidation or dissolution of
the non-surviving entity or transferor following any such transaction shall be
deemed a Change in Control; (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of any of the Issuer, Bally's Park Place, the Operating Company,
Realty Co., Casino Holdings or Bally (together with any directors whose election
by such Board of Directors or whose nomination for election by the shareholders
of the Issuer, Bally's Park Place, the Operating Company, Realty Co., Casino
Holdings or Bally, as the case may be, was approved by the vote of 66 2/3% of
the directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Issuer, Bally's Park Place, the Operating Company, Realty Co.,
Casino Holdings or Bally then in office; or (iv) other than as allowed in (ii)
above, the Issuer, Bally's Park Place, the Operating Company, Realty Co. or
Bally is liquidated or dissolved or adopts a plan of liquidation.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. Bally's Park Place will not, and will not
permit any of its Restricted Subsidiaries to, create, incur, assume, or directly
or (other than through Unrestricted Subsidiaries) indirectly guarantee or in any
other manner become directly or (other than through Unrestricted Subsidiaries)
indirectly liable for the payment of (collectively, "incur"), any Indebtedness
(excluding Permitted Indebtedness and
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including Acquired Indebtedness and Indebtedness which is a Guaranty permitted
pursuant to clause (v) of the last paragraph of "Limitations on Restricted
Payments") unless, at the time of such event and after giving effect thereto, on
a pro forma basis Bally's Park Place's Consolidated Fixed Charge Coverage Ratio
for the four full fiscal quarters for which financial information in respect
thereof is available immediately preceding such event, taken as one period,
calculated on the assumption that (i) such Indebtedness and any other
Indebtedness incurred since the first day of such four-quarter period had been
incurred on the first day of such four-quarter period, (ii) any acquisition or
disposition by Bally's Park Place and its Restricted Subsidiaries of any assets
outside the ordinary course of business since the first day of such last four
full fiscal quarters had been consummated on the first day of such four-quarter
period and (iii) any prepayment of Indebtedness prior to the scheduled maturity
thereof since the first day of such last four fiscal quarters had been
consummated on the first day of such four-quarter period, is at least equal to
the ratios set forth below during the years indicated below:
<TABLE>
<CAPTION>
YEAR RATIO
- -------------------- ------
<S> <C>
1994 2.00:1
1995 and thereafter 2.25:1
</TABLE>
Any Indebtedness (other than Permitted Indebtedness or Acquired
Indebtedness or Indebtedness which is a Guaranty permitted pursuant to clause
(v) of the last paragraph of "Limitation on Restricted Payments") may be
incurred hereunder only if (i) such Indebtedness has an Average Life to Stated
Maturity (A) greater than the remaining Average Life to Stated Maturity of the
Notes, if such Indebtedness ranks junior to the Notes, or (B) equal to or
greater than the remaining Average Life to Stated Maturity of the Notes, if such
Indebtedness ranks pari passu to the Notes and (ii) such Indebtedness has a
final scheduled maturity which (A) exceeds the final Stated Maturity of the
Notes, if such Indebtedness ranks junior to the Notes, or (B) is equal to or
exceeds the final Stated Maturity of the Notes, if such Indebtedness ranks pari
passu to the Notes. (Section 1007)
Limitation on Restricted Payments. Bally's Park Place will not, and will
not permit any of its Restricted Subsidiaries to, directly or (other than
through an Unrestricted Subsidiary) indirectly, (i) declare or pay any dividend
on, or make any distribution to holders of, any shares of Bally's Park Place
Capital Stock (other than dividends or distributions payable in shares of its
Capital Stock or in options, warrants or other rights to purchase such Capital
Stock, but excluding dividends or distributions payable in Redeemable Capital
Stock or in options, warrants or other rights to purchase Redeemable Capital
Stock), (ii) purchase, redeem or acquire or retire for value, any Capital Stock
of Bally's Park Place or any Subsidiary or any options, warrants or other rights
to acquire such Capital Stock, (iii) declare or pay any dividend or distribution
on any Capital Stock of any Subsidiary to any Person (other than Bally's Park
Place or any of its Wholly Owned Subsidiaries), (iv) prepay, repay, redeem,
defease or otherwise acquire or retire, for value prior to stated maturity of
principal, scheduled repayment or scheduled sinking fund payment, any
Indebtedness of Bally's Park Place or the Issuer that ranks junior in right of
payment to the Notes, (v) incur, create or assume any Guaranty of Indebtedness
of any Affiliate (other than with respect to (a) Guarantees of Indebtedness of
any Wholly Owned Subsidiary by Bally's Park Place or by any Restricted
Subsidiary or (b) Guarantees of Indebtedness of Bally's Park Place by any
Restricted Subsidiary, in each case in accordance with the terms of the
Indenture), or (vi) make any Investment (other than any Permitted Investment) in
any Person (such payments or other actions described in the foregoing clauses
(i) through (vi), are collectively referred to as "Restricted Payments"), unless
at the time of and after giving effect to the proposed Restricted Payment (the
amount of any such Restricted Payment, if other than cash, shall be as
determined by the Board of Directors of Bally's Park Place, whose determination,
if reasonable and based on the good faith business judgment of the Board of
Directors, shall be conclusive, and evidenced by a Board Resolution), (1) no
default or Event of Default shall have occurred and be continuing or shall occur
as a result of such Restricted Payment, (2) immediately before and immediately
after giving effect to such transaction on a pro forma basis, Bally's Park Place
could incur $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under the provisions of "Limitation on Indebtedness" and (3) the aggregate
amount of all Restricted Payments declared or made after the date the Notes are
issued shall not exceed the sum of:
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(A) 50% of the Consolidated Net Income of Bally's Park Place accrued
on a cumulative basis during the period beginning on April 1, 1994 and
ending on the last day of Bally's Park Place's last fiscal quarter ending
prior to the date of such proposed Restricted Payment (or, if such
aggregate cumulative Consolidated Net Income shall be a loss, minus 100% of
such loss);
(B) the aggregate Net Cash Proceeds received after the date of the
Indenture by Bally's Park Place from the issuance or sale (other than to
any of its Subsidiaries) of shares of Capital Stock of Bally's Park Place
(other than Redeemable Capital Stock) or warrants, options or rights to
purchase such shares of Capital Stock of Bally's Park Place (other than
Redeemable Capital Stock);
(C) the aggregate cash proceeds received after the date of the
Indenture by Bally's Park Place as capital contributions to Bally's Park
Place;
(D) the aggregate Net Cash Proceeds received after the date of the
Indenture by Bally's Park Place (other than from any of its Subsidiaries)
upon the exercise of options, warrants or rights to purchase shares of
Capital Stock of Bally's Park Place (other than Redeemable Capital Stock);
(E) the aggregate Net Cash Proceeds received after the date of the
Indenture by Bally's Park Place from the issue or sale of debt securities
or Redeemable Capital Stock that have been converted into or exchanged for
Capital Stock of Bally's Park Place (other than Redeemable Capital Stock),
plus the aggregate Net Cash Proceeds received by Bally's Park Place at the
time of such conversion or exchange; and
(F) $50 million.
Notwithstanding the foregoing, in the event the Company's Consolidated
Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters
exceeds 3.0:1, then the amount of Consolidated Net Income of Bally's Park Place
included in clause (A) above shall be 66 2/3% of Consolidated Net Income of
Bally's Park Place since April 1, 1994. In the event that at the end of any
succeeding fiscal quarter, the Company's Consolidated Fixed Charge Coverage
Ratio for the period of the preceding four consecutive fiscal quarters shall
equal or be less than 3.00:1, then the amount of Consolidated Net Income of
Bally's Park Place included in clause (A) above shall revert to 50% of
Consolidated Net Income of Bally's Park Place since April 1, 1994.
The foregoing provision will not be violated by reason of (i) the payment
of any dividend within 60 days after the date of declaration thereof, if at such
declaration date such declaration complied with the foregoing provision (in
which event such dividend shall be deemed to have been paid on such date of
declaration thereof for purposes of the foregoing provision); (ii) redemption of
any Capital Stock or Subordinated Indebtedness of Bally's Park Place or any
Subsidiary required by the CCC or the New Jersey Division of Gaming Enforcement
or any other agency regulating gaming activities of Bally's Park Place or any
Subsidiary; (iii) the redemption, repurchase or other acquisition or retirement
for value of Subordinated Indebtedness of Bally's Park Place which is made at a
time when there is no default or Event of Default continuing and which is made
in exchange for, or out of proceeds of the substantially concurrent issue and
sale (other than to a Subsidiary) of (A) shares of Capital Stock (other than
Redeemable Capital Stock) of Bally's Park Place, provided, however, that any Net
Cash Proceeds from such issue are excluded from clause 3(B) of the second
preceding paragraph or (B) new Indebtedness of Bally's Park Place, so long as
(1) such Indebtedness is expressly subordinated to the Notes at least to the
same extent as the Subordinated Indebtedness being so refinanced; (2) such
Indebtedness has an Average Life to Stated Maturity equal to or greater than the
remaining Average Life to Stated Maturity of the Notes; and (3) such
Indebtedness has a final scheduled maturity which exceeds the final Stated
Maturity of the Notes, provided, however, that any Net Cash Proceeds from such
issue are excluded from clause 3(E) of the second preceding paragraph; (iv)
redemption, repurchase or other acquisition or retirement for value of Capital
Stock of Bally's Park Place or any options, warrants or rights to acquire such
Capital Stock of Bally's Park Place which is made at a time when there is no
default or Event of Default continuing and which is made in exchange for, or out
of proceeds of the substantially concurrent issue and sale (other than to a
Subsidiary) of shares of Capital Stock (other than Redeemable Capital Stock) of
Bally's Park Place, provided, however, that any Net Cash Proceeds from such
issue are excluded from clause 3(B) of the second preceding paragraph; (v)
Guarantees of Indebtedness of Affiliates of the Company in an
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<PAGE> 53
amount not to exceed $20 million, provided, however, that such Restricted
Payment shall comply with clauses (1) and (2) of the first paragraph of this
covenant; and (vi) payments permitted pursuant to clauses (iv) and (v) under the
proviso contained in "Limitation on Transactions with Affiliates." The
Restricted Payments described in clauses (b)(i) and (ii) shall be included in
any computation of the aggregate amount of Restricted Payments by Bally's Park
Place and its Subsidiaries. Notwithstanding the foregoing, neither (i) the
payment of a dividend out of the net proceeds of the Offering nor (ii) any
payment in an amount equal to any amounts returned by the trustee under the
Existing Notes indenture to the Issuer in connection with the Defeasance deposit
shall be deemed a Restricted Payment for purposes of the calculation of the
aggregate amount of all Restricted Payments in clause (3) of the first paragraph
in this Section. (Section 1008)
Limitation on Transactions with Affiliates. Bally's Park Place will not,
and will not permit any of its Restricted Subsidiaries to, directly or (other
than through an Unrestricted Subsidiary) indirectly, enter into any transaction
or series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with any Affiliate
of Bally's Park Place (other than Bally's Park Place or a Wholly Owned
Subsidiary of Bally's Park Place) unless (i) such transaction or series of
transactions is or are on terms that are no less favorable to Bally's Park Place
or such Restricted Subsidiary, as the case may be, than could have been obtained
at the time of such transaction or transactions in a comparable transaction in
arm's length dealings with an unaffiliated third party, (ii) with respect to any
transaction or series of transactions involving aggregate payments in excess of
$1 million, but less than $10 million, Bally's Park Place delivers an officers'
certificate to the Trustee certifying that such transaction or series of
transactions complies with clause (i) above and that such transaction or series
of transactions has received the approval of a majority of the Board of
Directors of Bally's Park Place and (iii) with respect to any transaction or
series of transactions involving aggregate payments equal to or in excess of $10
million, Bally's Park Place delivers an officers' certificate to the Trustee
certifying that such transaction or series of transactions complies with clause
(i) above and that such transaction or series of transactions has received the
approval of a majority of the disinterested directors of the Board of Directors
of Bally's Park Place; provided, however, that the foregoing restrictions shall
not apply to (i) the payment of reasonable and customary fees to the directors
of Bally's Park Place and its Restricted Subsidiaries who are not employees of
Bally's Park Place or any such Restricted Subsidiary, (ii) loans and advances to
and other employment arrangements with any officer, director or employee of
Bally's Park Place or of any Restricted Subsidiary entered into in the ordinary
course of business and consistent with past practice, (iii) transactions
pursuant to lease agreements relating to the lease by Bally's Park Place of
surface parking lots (adjacent to the Bally's Grand) and the lease by Bally's
Park Place of a surface parking lot and building in Ventnor, New Jersey to GNAC,
(iv) transactions, including payments and reimbursements, in connection with
certain management and administrative services and insurance coverage provided
to Bally's Park Place by Bally, Casino Holdings and certain consolidated
GNAC/Bally's Park Place operations pursuant to the Intercorporate Agreement
dated as of June 24, 1993 among Casino Holdings, Bally and Bally's Park Place,
(v) payments to Bally pursuant to the Tax Sharing Agreement, (vi) Investments
that are Permitted Investments pursuant to clause (vi) of the definition of
Permitted Investments and (vii) Guaranties permitted pursuant to clause (v) of
the last paragraph of "Limitation on Restricted Payments." For purposes of this
provision, a director who is neither (i) an officer or an employee of the other
party to the transaction nor (ii) a person who has a personal interest directly
or indirectly in the transaction shall be deemed disinterested. (Section 1009)
Limitation on Encumbrances. Bally's Park Place will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume or otherwise suffer to exist or cause or otherwise suffer to become
effective any Lien in or on any right, title or interest to the Mortgage or any
Property (real or personal) that constitutes all or any portion of the
Collateral subject to the Lien of the Mortgage (a "Restricted Encumbrance,"
which term excludes the Lien created by the Mortgage and the Credit Facility
Mortgage), unless (i) such Restricted Encumbrance is a Permitted Encumbrance or
(ii) such Restricted Encumbrance ranks junior to or is pari passu with the Lien
of the Mortgage and is granted to secure Indebtedness which, together with all
other Indebtedness secured pursuant to this clause (ii), is in an aggregate
principal amount not to exceed the sum (without duplication) of (A) the original
principal amount of the Notes (less the principal amount of the Notes
outstanding at the time of any calculation), (B) the
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<PAGE> 54
amount available under the revolving credit facility described in clause (i) of
the definition of Permitted Indebtedness, (C) $100 million and (D) 66 2/3% of
the cost of all Casino Hotel Improvements reflected on the consolidated balance
sheet of Bally's Park Place since the date of the Indenture.
Notwithstanding the foregoing, Bally's Park Place or any Restricted
Subsidiary may create or incur or permit to exist purchase money Restricted
Encumbrances upon any personal Property acquired by Bally's Park Place or any
Restricted Subsidiary, provided that no such purchase money Restricted
Encumbrance upon any personal Property acquired by Bally's Park Place or any
Restricted Subsidiary after the date of the Indenture shall extend to or cover
any other property or, at the time incurred, secure Indebtedness in excess of
90% of the lesser of the cost or fair market value of the Property subject to
such purchase money Restricted Encumbrance, and provided, further, that the
aggregate principal amount of all Indebtedness at any time outstanding and
secured by Restricted Encumbrances permitted by this paragraph plus the
aggregate amount of all leases on personal Property comprising the Collateral
and secured by Restricted Encumbrances shall not, at any time, exceed $20
million. (Section 1010)
Limitation on Preferred Stock of Subsidiaries. Bally's Park Place will not
permit any Restricted Subsidiary to issue any Preferred Stock other than (i)
Preferred Stock issued to Bally's Park Place or a Wholly Owned Subsidiary or
(ii) Preferred Stock (other than Redeemable Capital Stock) issued to any person
(other than Bally's Park Place or a Wholly Owned Subsidiary) provided that at
the time of such issuance, and after giving pro forma effect thereto, a
Restricted Subsidiary of Bally's Park Place would be entitled to issue
Indebtedness in an amount equal to the maximum liquidation preference of the
Preferred Stock under "Limitation on Indebtedness." Bally's Park Place will not
sell, transfer or otherwise dispose of Preferred Stock issued by a Restricted
Subsidiary of Bally's Park Place or permit a Wholly Owned Subsidiary to sell,
transfer or otherwise dispose of Preferred Stock issued by a Restricted
Subsidiary, other than (i) to Bally's Park Place or a Wholly Owned Subsidiary,
or (ii) to any Person (other than Bally's Park Place or a Wholly Owned
Subsidiary) provided that such Preferred Stock is not Redeemable Capital Stock
and that at the time of such sale, transfer or disposition, and after giving pro
forma effect thereto, a Restricted Subsidiary of Bally's Park Place would be
entitled to issue Indebtedness in an amount equal to the maximum liquidation
preference of the Preferred Stock under "Limitation on Indebtedness."
Notwithstanding the foregoing, nothing in such covenant will prohibit the
ownership of Preferred Stock (other than Redeemable Capital Stock) issued by a
Person (other than an Unrestricted Subsidiary) prior to the time (A) such Person
becomes a Restricted Subsidiary of Bally's Park Place, (B) such Person merges
with or into a Restricted Subsidiary of Bally's Park Place or (C) a Restricted
Subsidiary of Bally's Park Place merges with or into such Person; provided,
further, that such Preferred Stock was not issued or incurred by such Person in
anticipation of a transaction contemplated by subclause (A), (B) or (C) above.
(Section 1011)
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. Bally's Park Place will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Restricted Subsidiary to (a) pay dividends or make any other distribution on its
Capital Stock, (b) pay any Indebtedness owed to Bally's Park Place or any other
Restricted Subsidiary, (c) make any Investment in Bally's Park Place or any
other Restricted Subsidiary, (d) transfer any of its property or assets to
Bally's Park Place or any other Restricted Subsidiary or (e) guarantee any
Indebtedness of Bally's Park Place or any of its Restricted Subsidiaries, except
(i) any encumbrance or restriction pursuant to an agreement in effect at or
entered into on the date of the Indenture; (ii) any encumbrance or restriction
with respect to a Restricted Subsidiary that is not a Subsidiary of Bally's Park
Place on the date of the Indenture, in existence at the time such Person becomes
a Subsidiary of Bally's Park Place or created on the date it becomes a
Subsidiary; and (iii) any encumbrance or restriction pursuant to any agreement
that extends, refinances, renews or replaces any agreement containing any of the
restrictions, described in the foregoing clauses (i) and (ii), provided that the
terms and conditions of any such restrictions taken as a whole, are not less
favorable to the Holders of the Notes than those under or pursuant to the
agreement extended, refinanced, renewed or replaced. Notwithstanding the
foregoing, this covenant shall not be violated by any restriction required by
the CCC or the New Jersey Department of Gaming Enforcement, except where such
restriction would affect the ability of the Operating Company to make payments
on the Promissory Note. (Section 1012)
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Limitation on Issuance of Guarantees by Subsidiaries.
(a) Bally's Park Place will not permit any Restricted Subsidiary, directly
or (other than through an Unrestricted Subsidiary) indirectly, to assume,
guarantee or in any other manner become liable with respect to any Indebtedness
of Bally's Park Place, the Operating Company, Realty Co. or any other Restricted
Subsidiary unless (i) such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a Guaranty of
payment of the Notes by such Restricted Subsidiary constituting senior
Indebtedness of such Restricted Subsidiary, (ii) the Guaranty of the Notes is on
terms at least as favorable as the assumption, Guaranty or other liability of
such Restricted Subsidiary, (iii) such Restricted Subsidiary does not create,
incur, assume or suffer to exist any Lien securing such assumption, Guaranty or
other liability unless (A) it complies with "Limitation on Encumbrances" and (B)
the Guaranty of Notes is equally and ratably secured and (iv) such Restricted
Subsidiary waives and will not in any manner whatsoever claim or take the
benefit or advantage of, any rights of reimbursement, indemnity or subrogation
or any other rights against Bally's Park Place, the Operating Company, Realty
Co. or any other Restricted Subsidiary as a result of any payment by such
Restricted Subsidiary under its Guaranty.
(b) Notwithstanding the foregoing, any Guaranty by a Restricted Subsidiary
of the Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon any sale, exchange or transfer, to
any Person not an Affiliate of Bally's Park Place, of all of Bally's Park
Place's Capital Stock in, or all or substantially all the assets of, such
Restricted Subsidiary, which is in compliance with the Indenture.
(c) Notwithstanding the foregoing, Realty Co. may guarantee Indebtedness
under the New Credit Facility. (Section 1016)
Ownership of Bally's Park Place Casino Hotel; Other Businesses. Except as
permitted by the provisions of the Indenture limiting mergers and sale of assets
described below, the Operating Company and Realty Co. will own and the Operating
Company will operate Bally's Park Place Casino Hotel. In addition, neither
Bally's Park Place nor the Operating Company shall conduct or engage in any
business other than the development, marketing, ownership or management of
casinos or casino hotels, including the hosting, production or promotion of
conventions, sporting events, amusements and other entertainment or investments
in entities conducting or engaged in the foregoing to the extent otherwise
permitted by the terms of the Indenture. (Section 1013)
Activities of the Issuer. The Issuer agrees that it will not conduct any
business (and will not incur any Indebtedness) whatsoever other than to collect
principal and interest (and any interest on overdue principal of, premium, if
any, or interest) under the Operating Company Note, to preserve and enforce its
rights under the Operating Company Note, the Notes and the Security Documents,
to do or cause to be done all things necessary or appropriate to protect the
Collateral and to preserve its rights therein, and to otherwise comply with its
obligations under the Indenture and the Notes. The Issuer will not merge into or
consolidate or amalgamate with or transfer its properties and assets to any
person, except (a) as permitted by and in compliance with "Merger and Sale of
Assets, etc.," if required and (b) any transaction involving Bally's Park Place
or the Operating Company. (Section 1019)
Reporting Requirements. Bally's Park Place will file with the Commission
the annual reports, quarterly reports and other documents required to be filed
with the Commission pursuant to Sections 13 and 15 of the Exchange Act, in the
form required by the Exchange Act, whether or not Bally's Park Place has a class
of securities registered under the Exchange Act. Bally's Park Place will be
required to file with the Trustee and provide to each Holder of the Notes within
15 days after it files them with the Commission (or if any such filing is not
permitted under the Exchange Act, 15 days after Bally's Park Place would have
been required to make such filing) copies of such reports and documents.
(Section 703)
MERGER AND SALE OF ASSETS, ETC.
Neither Bally's Park Place nor any Restricted Subsidiary shall consolidate
with or merge with or into any other Person or sell, assign, convey, transfer,
lease or otherwise dispose of all or substantially all of the properties and
assets of either (i) Bally's Park Place and its Subsidiaries taken as a whole,
(ii) the Operating
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Company, substantially as an entirety, or (iii) Realty Co. to any Person or
group of affiliated Persons unless at the time and after giving effect thereto
(i) either (a) Bally's Park Place or such Restricted Subsidiary shall be the
continuing corporation, or (b) the Person (if other than Bally's Park Place or a
Subsidiary) formed by such consolidation or merger, or to which such sale,
assignment, transfer, lease, conveyance or disposition shall have been made (the
"Surviving Entity"), is a corporation duly organized and validly existing under
the laws of the United States of America, any state thereof or the District of
Columbia and shall, in either case, expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of Bally's Park Place and the Issuer under the
Notes and the Indenture shall remain in full force and effect; (ii) immediately
prior to such transaction, and immediately after giving effect to such
transaction on a pro forma basis, no Default or Event of Default shall have
occurred and be continuing; (iii) immediately after giving effect to such
transaction on a pro forma basis, Bally's Park Place (or the Surviving Entity,
if Bally's Park Place is not the continuing obligor under the indenture) could
incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under
the "Limitation on Indebtedness" covenant described above; (iv) immediately
after giving effect to such transaction on a pro forma basis, the Consolidated
Net Worth of Bally's Park Place (or the Surviving Entity if Bally's Park Place
is not the continuing obligor under the Indenture) is at least equal to the
Consolidated Net Worth of Bally's Park Place immediately before such
transaction; (vi) the Lien of the Security Documents and the rights of the
Trustee and the Holders thereunder and under the Indenture have not been
impaired; and (vi) the Surviving Entity has all gaming licenses and other
permits and approvals required to operate the Bally's Park Place Casino Hotel
and any casino hotels then owned by such Surviving Entity and the Surviving
Entity or an Affiliate thereof has had prior experience in the operation and
management of casinos or casino hotels, or the Surviving Entity has retained
management with such prior experience. The merger or consolidation of, or sale
of assets by, any of Bally's Park Place, the Operating Company, the Issuer or
Realty Co. with or into or to any of Bally's Park Place, the Operating Company,
the Issuer or Realty Co. shall not be restricted by the foregoing if such
transaction complies with (i), (ii), (v) and (vi) above. (Section 801)
In connection with any consolidation, merger, transfer or lease
contemplated hereby, Bally's Park Place and the Issuer shall deliver, or cause
to be delivered, to the Trustee, in form and substance reasonably satisfactory
to the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with the provisions described herein and that all
conditions precedent herein provided for relating to such transaction have been
complied with and that the Lien of the Security Documents and the rights of the
Trustee and the Holders thereunder and under the Indenture have not been
impaired. (Section 801)
Upon any consolidation or merger or any transfer of all or substantially
all of the assets of Bally's Park Place and its Subsidiaries taken as a whole or
the Operating Company in accordance with the foregoing, the successor
corporation formed by such a consolidation or into which either Bally's Park
Place or a Subsidiary is merged or to which such transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, Bally's
Park Place and the Issuer under the Indenture with the same effect as if such
successor corporation had been named as Bally's Park Place or the Issuer
therein.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraphs in
which Bally's Park Place or the Issuer, as the case may be, is not the
continuing corporation, Bally's Park Place or the Issuer, as the case may be,
would be discharged from all obligations and covenants under the Indenture and
the Notes. (Section 802)
EVENTS OF DEFAULT
An Event of Default will occur under the Indenture upon:
(a) default in the payment of any interest on any Note when the same
becomes due and payable, and continuance of such default for a period of 30
days; or
(b) default in the payment of the principal of (or premium, if any,
on) any Note when the same becomes due and payable, whether at its Stated
Maturity, upon redemption or otherwise; or
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(c) default in the performance, or breach, of any covenant or warranty
of Bally's Park Place, the Operating Company, Realty Co. or the Issuer
under the Indenture (other than a default in the performance, or breach, of
a covenant or warranty that is specifically dealt with elsewhere herein),
or default in the performance, or breach, of any covenant or warranty in
the Security Documents, and, in any such case, continuance of such default
or breach for a period of 30 days after written notice of such default
shall have been given to Bally's Park Place or the Issuer by the Trustee or
to Bally's Park Place or the Issuer by the Holders of at least 25% in
principal amount of the Notes then outstanding; or
(d) an event or events of default as defined in any mortgage, bond,
indenture, loan agreement or other evidence of Indebtedness under which
there may be issued or by which there may be secured or evidenced any
Indebtedness of Bally's Park Place or the Issuer or any Subsidiary in
excess of $10 million in the aggregate, which default or defaults extend
beyond any period of grace provided with respect thereto and which default
or defaults relate to (i) the obligation to pay the principal of or
interest on any such Indebtedness, in either case, at final maturity or
(ii) any other obligation which shall result in such Indebtedness becoming
or being declared due and payable prior to the date on which it would
otherwise become due and payable; or
(e) final judgments or orders are rendered against Bally's Park Place,
the Issuer or any Subsidiary which require the payment of money, either
individually or in an aggregate amount, that is more than $10 million and
(i) an enforcement proceeding with respect thereto has been commenced or
(ii) such judgment or order remains unsatisfied or unstayed for 60 days; or
(f) the entry of a decree or order by a court having jurisdiction in
the premises (A) for relief in respect of Bally's Park Place, the Issuer or
any Material Subsidiary in an involuntary case or proceeding under the
Federal Bankruptcy Code or any other federal or state bankruptcy,
insolvency, reorganization or similar law or (B) adjudging Bally's Park
Place, the Issuer or any Material Subsidiary as bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of Bally's Park Place, the
Issuer or any Material Subsidiary under the Federal Bankruptcy Code or any
other applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or similar official) of
Bally's Park Place, the Issuer or any Material Subsidiary or any
substantial part of any of their properties, or ordering the winding up or
liquidation of any of their affairs, and the continuance of any such decree
or order unstayed and in effect for a period of 60 consecutive days; or
(g) the institution by Bally's Park Place, the Issuer or any Material
Subsidiary of a voluntary case or proceeding under the Federal Bankruptcy
Code or any other applicable federal or state law or any other case or
proceeding to be adjudicated as bankrupt or insolvent, or the consent by
Bally's Park Place, the Issuer or any Material Subsidiary to the entry of a
decree or order for relief in respect of Bally's Park Place, the Issuer or
any Material Subsidiary in any involuntary case or proceeding under the
Federal Bankruptcy Code or any other applicable federal or state law or to
the institution of bankruptcy or insolvency proceedings against Bally's
Park Place or the Issuer or any Material Subsidiary, or the filing by
Bally's Park Place, the Issuer or any Material Subsidiary of a petition or
answer or consent seeking reorganization or relief under the Federal
Bankruptcy Code or any other applicable federal or state law, or the
consent by it to the filing of any such petition or to the appointment of
or taking possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of any of Bally's Park
Place, the Issuer or any Material Subsidiary or of any substantial part of
its property, or the making by it of an assignment for the benefit of
creditors, or it becoming insolvent, or it being unable to pay debts
generally as they come due, or the admission by it in writing of its
inability to pay its debts generally as they become due or taking of
corporate action by Bally's Park Place, the Issuer or any Material
Subsidiary in furtherance of any such action; or
(h) default in the performance or breach of the provisions of "Merger
and Sale of Assets, etc." or a failure by the Issuer to provide the notice
to Holders or to make the payment required by "Change in Control"; or
(i) the occurrence of an Event of Default under the Security
Documents;
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(j) the revocation, suspension or loss for a period of more than 90
consecutive days of any gaming license (other than a voluntary
relinquishment of a gaming license by a Subsidiary other than a Subsidiary
holding the license to operate Bally's Park Place Casino Hotel) under which
Bally's Park Place or any Material Subsidiary owns, leases or operates a
casino hotel; or
(k) the Guaranty shall, at any time, cease to be in full force and
effect or shall be declared unenforceable, or the Issuer or the Company
shall assert in any pleading in a court of competent jurisdiction that such
Guaranty is invalid or unenforceable. (Section 501)
If an Event of Default (other than as specified in clauses (f) and (g)
above) occurs and is continuing, the Trustee or the Holders of at least 25% of
the principal amount of the Notes then outstanding may declare the Notes due and
payable immediately at their principal amount together with accrued interest to
the date the Notes become due and payable. Thereupon the Trustee may, at its
discretion, proceed to protect and enforce the rights of the Holders of Notes by
appropriate judicial proceeding. If an Event of Default specified in clause (f)
or (g) above occurs and is continuing, then the principal of all Notes shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder. (Section 502)
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the Holders of a
majority in aggregate principal amount of the Notes outstanding, by written
notice to the Issuer and the Trustee, may annul such declaration if (a) the
Issuer has paid or deposited with the Trustee a sum sufficient to pay (i) all
sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, (ii) all overdue interest on all Notes, (iii) the principal of and
premium, if any, on any Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the Notes,
and (iv) to the extent that payment of such interest is lawful, interest upon
overdue interest at the rate borne by the Notes; and (b) all Events of Default,
other than the nonpayment of principal of the Notes which have become due solely
by the declaration of acceleration, have been cured or waived.
The Holders of not less than a majority in principal amount of the Notes
then outstanding may on behalf of the Holders of all Notes waive any past
defaults under the Indenture, except a default in the payment of the principal
of, premium, if any, or interest on any Note, or in respect of a covenant or
provision which under the indenture cannot be modified or amended without the
consent of the Holder of each Note outstanding.
Bally's Park Place, the Operating Company and the Issuer are also required
to notify the Trustee within five business days of the occurrence of any
default.
DEFEASANCE OF INDENTURE
The Issuer may, at its option and at any time, elect to have the
obligations of Bally's Park Place, the Operating Company, Realty Co. and the
Issuer discharged with respect to the outstanding Notes ("legal defeasance").
Such legal defeasance means that the Issuer shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes, except
for (i) the rights of Holders of outstanding Notes to receive solely out of the
trust described below payments in respect of the principal of, premium, if any,
and interest on such Notes when such payments are due, (ii) the obligations of
Bally's Park Place and the Issuer with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen
Notes and the maintenance of an office or agency for payment and money for
security payments held in trust, (iii) the rights, powers, trusts, duties and
immunities of the Trustee, and (iv) the defeasance provisions of the Indenture.
Bally's Park Place, the Operating Company, Realty Co. and the Issuer may,
at their option and at any time, elect to have their obligations under the
provisions "Certain Covenants," "Merger and Sale of Assets, etc." and "Change of
Control" discharged with respect to the outstanding Notes ("covenant
defeasance"). Such covenant defeasance means that, with respect to the
outstanding Notes, Bally's Park Place, the Operating Company, Realty Co. and the
Issuer may omit to comply with and shall have no liability in respect
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of any term, condition or limitation set forth in any such provisions and such
omission to comply shall not constitute a default or an Event of Default.
(Section 1301)
In order to exercise defeasance, (i) the Issuer must have irrevocably
deposited with the Trustee, in trust, for the benefit of the Holders of the
Notes, cash in U.S. dollars, U.S. Government Obligations (as defined in the
Indenture), or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the Stated Maturity of such principal (and premium, if any) or installment of
interest or upon redemption; (ii) the Issuer shall have delivered to the Trustee
an opinion of counsel stating that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such defeasance and will be subject to federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance had not occurred, which such opinion, in the case of legal
defeasance, will state that (A) the Issuer has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, to
such effect; (iii) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as clauses (f) and (g) under
the first paragraph under "Events of Default" are concerned, at any time in the
period ending the 91st day after the date of deposit; (iv) such defeasance shall
not result in a breach or violation of or constitute a default under the
Indenture or any other material agreement or instrument to which Bally's Park
Place, the Operating Company and the Issuer is a party or by which it is bound;
and (v) Bally's Park Place, the Operating Company and the Issuer shall have
delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent relating to the defeasance have been
complied with. Upon the occurrence of legal or covenant defeasance, the Lien of
the Security Documents will be released only if the Issuer delivers to the
Trustee an opinion of counsel as to certain matters, including the
irrevocability of the trust. In addition, the Lien of the Security Documents
will remain in place for 91 days, unless the Issuer delivers to the Trustee an
appraisal of the Collateral and an opinion of counsel as to certain bankruptcy
matters, both as further described in the Indenture. (Section 1302)
SATISFACTION AND DISCHARGE
The Indenture will cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Notes, as expressly
provided for in the Indenture) as to all such outstanding Notes when (i) either
(a) all such Notes theretofore authenticated and delivered (except lost, stolen
or destroyed Notes which have been replaced or paid) have been delivered to the
Trustee for cancellation or (b) all such Notes not theretofore delivered to the
Trustee for cancellation have become due and payable or will become due and
payable within one year and the Issuer has irrevocably deposited or caused to be
deposited with the Trustee funds and U.S. government obligations in an amount
sufficient to pay and discharge the entire indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest to the date of deposit or Stated Maturity or
redemption; (ii) the Issuer has paid all other sums payable under the Indenture
by the Issuer and (iii) the Issuer has delivered to the Trustee an officers'
certificate and an opinion of counsel each stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the Indenture
have been complied with. On the occurrence of (i)(a), the Lien of the Security
Documents will be released. On the occurrence of (i)(b), the Lien of the
Security Documents will be released only if the Issuer delivers to the Trustee
an opinion of counsel as to certain matters, including the irrevocability of the
trust. In addition, the Lien of the Security Documents will remain in place for
91 days, unless the Issuer delivers to the Trustee an appraisal of the
Collateral and an opinion of counsel as to certain bankruptcy matters, both as
further described in the Indenture. In such case, holders of Notes must look to
the deposited money and U.S. government obligations for payment. (Section 401)
MODIFICATIONS AND AMENDMENTS
Modifications and amendments of the indenture may be made by Bally's Park
Place, the Issuer and the Trustee with the consent of the Holders of not less
than a majority in aggregate principal amount of the outstanding Notes;
provided, however, that no such modification or amendment may, without the
consent of
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the Holder of each outstanding Note affected thereby: (i) change the Stated
Maturity of the principal of, or any installment of interest on, any Note or
reduce the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or change the coin or currency in
which the principal of any Note or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment after the Stated Maturity thereof (or, in the case of redemption, on or
after the redemption date) or modify the obligations of the Issuer to purchase
Notes under the provisions of "Change of Control or (ii) reduce the percentage
in principal amount of outstanding Notes, the consent of whose Holders is
required for any such supplemental indenture or the consent of whose Holders is
required for any waiver; or (iii) modify any of the provisions relating to
supplemental indentures requiring the consent of Holders or relating to the
waiver of past defaults or relating to the waiver of certain covenants, except
to increase the percentage of outstanding Notes required for such actions or to
provide that certain other provisions of the Indenture cannot be modified or
waived without the consent of the Holder of each Note affected thereby. (Section
902)
The Holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture. (Section 1022)
CERTAIN DEFINITIONS
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from a Person, other than Indebtedness incurred in
connection with, or in contemplation of, such Person becoming a Subsidiary or
such acquisition, as the case may be. Acquired Indebtedness shall be deemed to
have been incurred on the date of the related acquisition of assets from any
Person or the date the acquired Person becomes a Subsidiary.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person, (ii) any spouse, immediate
family member or other relative who has the same principal residence of any
Person described in (i) above and (iii) any trust in which any such Person
described in clause (i) or (ii) above has a beneficial interest. For purposes of
this definition, control of a Person means the power, direct or indirect, to
direct or cause the direction of the management or policies of such Person,
whether by contract or otherwise; and the terms "controlling," "controlled" and
"under common control" have meanings correlative to the foregoing. For purposes
of this definition, beneficial ownership of ten percent or more of voting common
equity (on a fully diluted basis) or warrants to purchase such equity (whether
or not currently exercisable) of a Person shall be deemed to be control of such
Person.
"Average Life to Stated Maturity" means, as of the date of determination,
with respect to any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of (a) the number of years from the date of determination to the
date or dates of each successive scheduled principal payment of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Capital Lease Obligation" of any Person means any obligations of such
Person and its Subsidiaries on a consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as a
capitalized lease obligation, and the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligations determined in
accordance with GAAP.
"Capital Stock" of any Person means any and all shares, interests,
participation, or other equivalents (however designated) of such Person's
capital stock whether now outstanding or issued after the date of the Indenture.
"Casino Hotel Improvements" means the acquisition of, or development and
construction of, an addition to or expansion of the existing Casino Hotel
facility by Bally's Park Place and any Restricted Subsidiary in connection with
any proposed increase of hotel rooms and expansion of casino floor space, and
any addition to or expansion of any gaming, parking, dining, entertainment,
retail, promotional, storage, patron services, transportation or similar
facilities related thereto, in each case, after the date of the Indenture.
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"Consolidated Fixed Charge Coverage Ratio" of Bally's Park Place means, for
any period, the ratio of (a) the sum of Consolidated Net Income, Consolidated
Interest Expense, Consolidated Income Tax Expense and one-third of Consolidated
Rental Payments, plus, without duplication, all depreciation, amortization and
all other non-cash charges, of Bally's Park Place and its Restricted
Subsidiaries on a consolidated basis, as determined in accordance with GAAP to
(b) the sum of (i) Consolidated Interest Expense for such period and (ii)
one-third of Consolidated Rental Payments for such period; provided that in
making such computation, the Consolidated Interest Expense attributable to
interest on any Indebtedness computed on a pro forma basis and (A) bearing a
floating interest rate shall be computed as if the rate in effect on the date of
computation had been the applicable rate for the entire period and (B) which was
not outstanding during the period for which the computation is being made but
which bears, at the option of Bally's Park Place, a fixed or floating rate of
interest, Bally's Park Place shall apply, at its option, either the fixed or
floating rate for purposes of calculating the Consolidated Fixed Charge Coverage
Ratio and provided, further, that in making such computation, the Consolidated
Interest Expense attributable to interest on Indebtedness under any revolving
credit facility computed on a pro forma basis shall be computed assuming that
the amount of Indebtedness thereunder is equal to the weighted average balance
during the period for which the computation is being made.
"Consolidated Income Tax Expense" means for any period, as applied to any
Person and its Restricted Subsidiaries, the provision for federal, state, local
or foreign income taxes of such Person and its Restricted Subsidiaries for such
period as determined in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest that, in conformity with GAAP, would be set forth opposite the
caption "interest expense" or any like caption on a consolidated income
statement of Bally's Park Place and its Restricted Subsidiaries (including, but
not limited to, imputed interest on Capitalized Lease Obligations, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, the net costs associated with
hedging obligations, the interest portion of any deferred payment obligation,
amortization of discount or premium, if any, and all other non-cash interest
expense and excluding amortization of other financing fees and expenses) plus,
without duplication, all capitalized interest of Bally's Park Place and its
Restricted Subsidiaries for such period and all interest accrued or paid by
Bally's Park Place or any of its Restricted Subsidiaries under any Guaranty of
Indebtedness (including a Guaranty of principal, interest or any combination
thereof) of any Person for such period, plus any amounts payable as dividends
(whether or not paid) on Preferred Stock permitted to be outstanding pursuant to
the provisions of "Restriction on Preferred Stock of Subsidiaries," in each case
determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" of Bally's Park Place means, for any period, the
consolidated net income (or loss) of Bally's Park Place and its Restricted
Subsidiaries for such periods as determined in accordance with GAAP, adjusted,
to the extent included in calculating such net income (or loss), by excluding
(i) all extraordinary gains or losses (less all fees and expenses relating
thereto), (ii) the portion of net income (or loss) of Bally's Park Place and its
Restricted Subsidiaries allocable to minority interests in unconsolidated
Persons to the extent that cash dividends or distributions have not actually
been received by Bally's Park Place or one of its Restricted Subsidiaries, (iii)
net income (or loss) of any Person combined with Bally's Park Place or any of
its Restricted Subsidiaries in a "pooling of interests" basis attributable to
any period prior to the date of combination, (iv) net income (or loss) of any
Unrestricted Subsidiary except to the extent that cash dividends or
distributions have been made, (v) any gain or loss, net of taxes, realized upon
the termination of any employee pension benefit plan, (vi) any gains or losses
(less all fees and expenses relating thereto) in respect of dispositions of
assets other than in the ordinary course of business, or (vii) the net income of
any Restricted Subsidiary to the extent that the declaration of dividends or
similar distributions by that Restricted Subsidiary of that income is not at the
time permitted, directly or indirectly, by operation of the terms of its charter
or any agreement or instrument, or any judgment, decree, order, statute, rule or
governmental regulations (other than those issued by or on behalf of the CCC or
the New Jersey Division of Gaming Enforcement or those to which either of them
is a party) applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity (excluding Redeemable Capital Stock) of such Person and its consolidated
subsidiaries, as set forth on the most recent
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consolidated balance sheet of such Person and its consolidated subsidiaries
determined in accordance with GAAP.
"Consolidated Rental Payments" of Bally's Park Place means, for any period,
the aggregate rental obligations of Bally's Park Place and its Restricted
Subsidiaries under operating leases (not including taxes, insurance, maintenance
and similar expenses that the lessee is obligated to pay under the terms of the
relevant leases), determined on a consolidated basis in accordance with GAAP.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of the
United States Code, as amended from time to time.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, consistently applied, that
are in effect from time to time; provided, however, that with respect to the
obligations of any Person under the provisions "Merger and Sale of Assets, etc."
and "Certain Covenants -- Limitation on Indebtedness" and "-- Limitation on
Restricted Payments" described above and the definitions applicable thereto,
"GAAP" means generally accepted accounting principles on the date hereof.
"Guaranty" means, as applied to any obligation, (a) a guaranty (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (b) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of nonperformance) of any part or all of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit.
"Indebtedness" means, with respect to any Person, any indebtedness,
contingent or otherwise, in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof and including any indebtedness issued in exchange for
indebtedness for borrowed money), or evidenced by bonds, notes, debentures or
similar instruments or representing the balance deferred and unpaid of the
purchase price of any property, if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared on a consolidated basis in accordance with GAAP consistently applied
and letters of credit (or reimbursement obligations related thereto); provided,
however, that (a) "Indebtedness" shall not include accounts payable to trade
creditors or other indebtedness for goods or services created or assumed in the
ordinary course of business and Indebtedness incurred pursuant to the
Intercorporate Agreement or Tax Sharing Agreement referred to in the "Limitation
on Transactions with Affiliates" covenant and (b) Indebtedness shall include
only the principal component of any obligations described above. "Indebtedness"
shall also include the principal component of any Capital Lease Obligations; the
maximum liquidation preference of Redeemable Capital Stock, or Preferred Stock
issued in accordance with "Limitation on Preferred Stock of Subsidiaries";
obligations secured by a Lien to which any property or asset owned or held by
such Person is subject, whether or not the obligations secured thereby shall
have been assumed; and Guaranties of items that would be included within this
definition (regardless of whether such items would appear upon such balance
sheet); provided that for purposes of computing Indebtedness outstanding at any
time, such items shall be excluded to the extent that they would otherwise be
eliminated as intercompany items in consolidation. For purposes of the preceding
sentence, the maximum liquidation preference of any Redeemable Capital Stock
shall be the greatest amount payable in respect thereof on a liquidation,
whether voluntary or involuntary, including accrued and unpaid dividends. Any
reference in the Indenture to any Indebtedness shall be deemed to include any
renewals, extensions, refundings, amendments and modifications of any such
indebtedness.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated by
applying either a fixed or floating rate of interest on a stated notional amount
in exchange for periodic payments made by such Person calculated by applying a
fixed or floating rate of interest on the same notional amount or pursuant to
any interest rate protection agreement, interest rate future, interest rate
option or other interest rate hedge arrangement.
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"Investment" by any Person means, directly or indirectly, any advance, loan
or other extension of credit or capital contribution to (by means of any
transfer of cash or other property to others or any payment for property or
services for the account or use of others) or any purchase or acquisition by
such Person of any stock, bonds, notes, debentures or other securities issued or
owned by, any other Person. Investments shall exclude extensions of credit on
commercially reasonable terms in accordance with normal trade practice and past
practice.
"Lien" means any mortgage, charge, pledge, lien, privilege, security
interest or encumbrance of any kind.
"Material Subsidiary" means the Issuer, the Operating Company, Realty Co.
and, at the time of determination, any other Subsidiary of Bally's Park Place
that (a) accounted for more than fifteen percent of the consolidated net income
of Bally's Park Place for the most recently completed fiscal year of Bally's
Park Place or (b) was the owner of more than fifteen percent of the consolidated
assets of Bally's Park Place as at the end of such fiscal year, all as shown on
the consolidated financial statements of Bally's Park Place for such fiscal
year.
"Net Cash Proceeds" means with respect to any issuance or sale of Capital
Stock or warrants, or any issuance or sale of debt securities or Redeemable
Capital Stock that have been converted into Capital Stock, or payments made upon
exercise thereof, all as referred to in "Certain Covenants -- Limitation on
Restricted Payments," the cash proceeds of such issuance or payment, net of
attorneys' fees, accountants' fees, brokerage, consultant, underwriting and
other fees and expenses actually incurred in connection with such issuance, sale
or payment and net of taxes paid or payable as a result thereof.
"Non-Recourse Indebtedness" means Indebtedness or that portion of
Indebtedness (a) as to which neither Bally's Park Place nor any of its
Restricted Subsidiaries (i) provides credit support pursuant to any undertaking,
agreement or instrument that would constitute Indebtedness, (ii) is directly or
indirectly liable, or (iii) constitutes the lender, and (b) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of Bally's
Park Place or any of its Restricted Subsidiaries to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity.
"Permitted Encumbrance" shall have the meaning provided in the Mortgage.
"Permitted Indebtedness" means, without duplication, any of the following
Indebtedness of Bally's Park Place or any Restricted Subsidiary, as the case may
be:
(i) Indebtedness (including letters of credit) outstanding at any time
under any revolving credit facility, or any successor thereto, in an
aggregate principal amount not to exceed $50 million;
(ii) Any Guaranty by a Restricted Subsidiary under subparagraph (i)
above;
(iii) Indebtedness and obligations under the Notes;
(iv) Any Indebtedness and obligations outstanding on the date of the
Indenture;
(v) Indebtedness of a Wholly Owned Subsidiary to Bally's Park Place or
another Wholly Owned Subsidiary of Bally's Park Place;
(vi) Indebtedness the proceeds of which are used, directly or
indirectly, to refinance outstanding Indebtedness of Bally's Park Place or
any Subsidiary in a principal amount (or, if such Indebtedness does not
require cash payments prior to maturity, with an original issue price of
such Indebtedness) not to exceed the principal amount of the Indebtedness
so refinanced, plus accrued and unpaid interest with respect to the
Indebtedness being refinanced through and to the date of repayment, plus
any premium or penalty provided for in the instrument governing such
Indebtedness or any premium reasonably determined by the Board of Directors
of Bally's Park Place as necessary to accomplish such refinancing by means
of a tender offer, defeasance or privately negotiated purchase (or, if the
Indebtedness being refinanced was issued with an original issue discount,
the original issue price plus the amortized portion of the original issue
discount to the date that such refinancing Indebtedness was incurred and
any premium
61
<PAGE> 64
provided for in the instrument governing such Indebtedness or any premium
reasonably determined by the Board of Directors of Bally's Park Place as
necessary to accomplish such refinancing by means of a tender offer or
privately negotiated purchase) plus the amount of any fees, costs or
expenses Bally's Park Place incurred in connection with such refinancing;
provided that if the Indebtedness being refinanced is Indebtedness of
Bally's Park Place, such refinancing Indebtedness shall be Indebtedness of
Bally's Park Place, unless such refinancing Indebtedness is used in whole
or in part to refinance the entire principal amount of the Notes then
outstanding; provided further that Indebtedness the proceeds of which are
used to refinance Indebtedness of Bally's Park Place that is expressly
subordinated in right of payment to the Notes will only be permitted if (x)
such Indebtedness is expressly subordinated in right of payment to the
Notes at least to the same extent that the Indebtedness to be refinanced is
subordinated to the Notes, (y) the Average Life to Stated Maturity of such
indebtedness exceeds the Average Life to Stated Maturity of the Notes, and
(z) the final scheduled maturity of such Indebtedness exceeds the final
Stated Maturity of the Notes;
(vii) Indebtedness under Interest Swap Obligations and other
agreements between Bally's Park Place or a Subsidiary and one or more
financial institutions providing for "swap," "cap," "collar" or other
interest rate protection;
(viii) obligations in respect of performance bonds and surety bonds
provided by Bally's Park Place or any Subsidiary in the ordinary course of
business or related to Casino Hotel Improvements and any renewals,
extensions or amendments, modifications or supplements thereto;
(ix) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument drawn against
insufficient funds in the ordinary course of business, provided that such
Indebtedness is extinguished within two Business Days of its incurrence;
(x) Indebtedness pursuant to letters of credit in an amount not to
exceed $5 million at any one time; and
(xi) additional Indebtedness not to exceed $25 million in the
aggregate at any one time.
"Permitted Investment" means an Investment which consists of any one or
more of the following:
(i) Investment in a Restricted Subsidiary or another Person which,
immediately after such Investment, will be a Wholly Owned Subsidiary,
provided in each case such Restricted Subsidiary conducts a business which
is substantially identical to any business conducted by Bally's Park Place
or its Restricted Subsidiaries on the date of the Indenture or which is in
the business of the development, marketing, ownership or management of
casinos or casino hotels and businesses related to the development,
ownership, marketing or management of casinos or casino hotels, including
the hosting, production or promotion of conventions, sporting events,
amusements and other entertainment;
(ii) Investments by Subsidiaries in Bally's Park Place;
(iii) (a) commercial paper rated P1 by Moody's Investor Service, Inc.
or A-1 by Standard & Poor's Corporation on the date of acquisition, (b)
certificates of deposit of United States commercial banks (having a
combined capital and surplus in excess of $300 million), (c) obligations
of, or guaranteed by, the United States government or any agency thereof,
(d) repurchase agreements with terms of not more than 30 days with United
States commercial banking or other financial institution (having a combined
capital and surplus in excess of $300 million, with respect to the types of
investments described in subclauses (a), (b) and (c) of this clause (iii)),
(e) money market funds organized under the laws of the United States or any
state thereof that invest substantially all their assets in any of the
types of investments described in subclauses (a), (b), (c) and (d) of this
clause (iii), or (f) to the extent not comprehended by subclauses (a)
through (e) of this clause (iii), temporary investments of cash balances in
investments deemed to be cash equivalents under GAAP;
(iv) negotiable instruments held for collection; outstanding travel,
moving and other like advances to officers, employees and consultants;
lease, utility and other similar deposits; or stock, obligations or
securities received in settlement of debts owing to Bally's Park Place or a
Subsidiary as a result of foreclosure, perfection or enforcement of any
Lien, in each of the foregoing cases in the ordinary course of business of
Bally's Park Place or a Subsidiary, as the case may be, and consistent with
past practice;
62
<PAGE> 65
(v) receivables for sales of goods or services on trade credit terms
consistent with Bally's Park Place's and its Subsidiaries' past practices
or as otherwise consistent with trade credit terms in common use in the
industry;
(vi) Investments in Affiliates of Bally's Park Place in gaming or
gaming related ventures in an amount not to exceed $25 million;
(vii) loans to any employee in an amount not to exceed $250,000 for
any individual and $1 million for all employees in the aggregate;
(viii) Investments in effect on the date of this Indenture;
(ix) Investments required under the New Jersey Act; and
(x) purchases of Notes by the Operating Company or Bally's Park Place.
"Person" means any individual, corporation, or general partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock," as applied to any Person, means Capital Stock of any
class or classes (however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"Redeemable Capital Stock" means Capital Stock that, either by its terms,
by the terms of any security into which it is convertible or exchangeable or
otherwise, is or upon the happening of an event or passage of time would be
required to be redeemed prior to the final Stated Maturity of principal on the
Notes or is redeemable at the option of the holder thereof at any time prior to
such final Stated Maturity, or is convertible into or exchangeable for debt
securities at any time prior to such final Stated Maturity.
"Restricted Subsidiary" means any Subsidiary that is not an Unrestricted
Subsidiary.
"Stated Maturity", when used with respect to any Note or any installment of
interest thereon, means the date specified in such Note as the fixed date on
which the principal of such Note or such installment of interest is due and
payable.
"Subordinated Indebtedness" means all Indebtedness of Bally's Park Place
that is expressly subordinated in right of payment to any other Indebtedness of
Bally's Park Place.
"Subsidiary" means any Person a majority of the total voting power of the
Voting Stock of which is at the time owned, directly or indirectly, by Bally's
Park Place or by one or more such Subsidiaries, or by Bally's Park Place and one
or more such Subsidiaries.
"Unrestricted Subsidiary" means (i) any Subsidiary that at the time of
determination shall be designated an Unrestricted Subsidiary by the Board of
Directors of Bally's Park Place in the manner provided below and (ii) any
subsidiary of an Unrestricted Subsidiary. The Board of Directors of Bally's Park
Place may designate any newly-formed Subsidiary to be an Unrestricted
Subsidiary, provided that such Subsidiary (A) has assets of less than $1,000 at
designation, (B) has no Indebtedness other than Non-Recourse Indebtedness and
(C) does not own any equity securities of any Subsidiary (other than an
Unrestricted Subsidiary). The Board of Directors of Bally's Park Place may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary of Bally's
Park Place; provided, however, that immediately after giving effect to such
designation (x) Bally's Park Place could incur $1.00 of additional Indebtedness
under the "Limitation on Indebtedness" covenant and (y) no Default shall have
occurred and be continuing. Any such designation by the Board of Directors of
Bally's Park Place shall be evidenced to the Trustee by promptly filing with the
Trustee a copy of the board resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
foregoing provisions; provided, however, that the failure to so file such
resolution and/or Officers' Certificate with the Trustee shall not impair or
affect the validity of such designation.
"Voting Stock" means stock of the class or classes pursuant to which the
holders thereof have the general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or
63
<PAGE> 66
trustees of a corporation (irrespective of whether or not at the time stock of
any other class or classes shall have or might have voting power by reason of
the happening of any contingency).
"Wholly Owned Subsidiary" means any Restricted Subsidiary all of whose
outstanding Voting Stock (other than directors' qualifying shares, if any) is
owned directly or indirectly by Bally's Park Place.
UNDERWRITING
Subject to the terms and conditions set forth in the Purchase Agreement
among Bally's Park Place, the Issuer, the Operating Company, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), Jefferies & Company, Inc. ("Jefferies")
and Libra Investments, Inc. ("Libra" and, together with Merrill Lynch, DLJ and
Jefferies, the "Underwriters"), dated , 1994 (the "Purchase
Agreement"), the Issuer has agreed to sell to the Underwriters, and the
Underwriters have agreed to purchase the principal amount of the Notes set forth
opposite its name below.
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
- --------------------------------------------------------------------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................................. $
Jefferies & Company, Inc...................................................
Donaldson, Lufkin & Jenrette Securities Corporation........................
Libra Investments, Inc.....................................................
----------------
Total................................................................. $425,000,000
----------------
----------------
</TABLE>
The distribution of the Notes by the Underwriters is being effected from
time to time in negotiated transactions or otherwise at varying prices to be
determined at the time of each sale. In connection with the sale of any Notes,
the Underwriters may be deemed to have received compensation from the Issuer
equal to the difference between the amount received by the Underwriters upon the
sale of such Notes and the price at which the Underwriters purchased such Notes
from the Issuer. In addition, the Underwriters may sell Notes to or through
certain dealers, and dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriters and/or
any purchasers of Notes for whom they may act as agent (which compensation may
be in excess of customary commissions). The Underwriters may also receive
compensation from the purchasers of Notes for whom they may act as agent.
The Purchase Agreement provides that the obligations of the Underwriters to
pay for and accept delivery of the Notes are subject to certain conditions.
Under the terms and conditions of the Purchase Agreement, the Underwriters are
obligated to take and pay for all of the Notes if any are purchased. The
Purchase Agreement provides that Bally's Park Place and the Issuer will
indemnify the Underwriter against certain liabilities under the Securities Act
and will contribute to payments the Underwriters may be required to make in
respect thereof.
There is no public market for the Notes and the Issuer does not intend to
apply for listing of the Notes on any national securities exchange or for
quotation of the Notes through The NASDAQ Stock Market. The Issuer has been
advised by the Underwriters that, following the completion of the Offering of
the Notes, they presently intend to make a market in the Notes. However, the
Underwriters are under no obligation to do so and any market-making activities
with respect to the Notes may be discontinued at any time without notice. There
can be no assurance as to the liquidity of the public market for the Notes or
that an active public market will develop or, if developed, will continue. If an
active public market does not develop or is not maintained, the market price and
liquidity of the Notes may be adversely affected.
Bally's Park Place and the Issuer have agreed that they will not, without
prior written consent of the Underwriters, offer or sell debt securities, other
than commercial paper issued in the ordinary course of business, during the
90-day period immediately following the date of the price.
64
<PAGE> 67
In the past, Merrill Lynch has acted as an underwriter or purchaser of
securities of, and has provided investment banking and other services to,
Bally's Park Place and the Issuer and certain of its affiliates. Merrill Lynch
currently holds approximately $92.2 million principal amount of the Existing
Notes and DLJ currently holds approximately $10.1 million principal amount of
the Existing Notes, which are expected to be repurchased by the Issuer. Because
of such ownership of Existing Notes by Merrill Lynch and DLJ, the Offering will
be conducted in accordance with Article III, Section 44 of the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (the "NASD")
and with Schedule E to the By-Laws ("Schedule E") of the NASD. Under the
provisions of Schedule E, the yield on the Notes must be no lower than that
recommended by a qualified independent underwriter meeting certain standards.
Jefferies has conducted "due diligence" and has participated in the preparation
of the Registration Statement. Jefferies has agreed to act as qualified
independent underwriter in connection with the Offering. Therefore, the yield on
the Notes will be no lower than that recommended by Jefferies. In addition, no
NASD member participating in the distribution of the Notes will be permitted to
confirm sales to accounts over which it exercises discretionary authority
without the prior specific written consent of the customer.
In connection with the Offering, a financial advisory fee of $150,000 is
being paid to MCF Capital Corp. The sole shareholder of MCF Capital Corp. has
performed and continues to perform financial advisory and other services for
Bally's Park Place, Bally and their affiliates.
LEGAL MATTERS
Legal matters in connection with the issue and sale of the Notes will be
passed upon for the Issuer by Benesch, Friedlander, Coplan & Aronoff, Cleveland,
Ohio, and for the Underwriters by Skadden, Arps, Slate, Meagher & Flom, New
York, New York. George N. Aronoff, a partner of Benesch, Friedlander, Coplan &
Aronoff, is a director of Bally.
EXPERTS
The consolidated financial statements of Bally's Park Place, Inc. at
December 31, 1992 and 1991 and for each of the three years in the period ended
December 31, 1992, appearing in this Prospectus and Registration Statement, have
been audited by Ernst & Young, independent auditors, as set forth in their
reports thereon appearing herein and in the Registration Statement, and are
included in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
65
<PAGE> 68
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of independent auditors F-2
Consolidated balance sheet at December 31, 1992 and 1991 F-3
Consolidated statement of income for the years ended December 31, 1992, 1991 and 1990 F-5
Consolidated statement of stockholder's equity for the years ended December 31, 1992,
1991 and 1990 F-6
Consolidated statement of cash flows for the years ended December 31, 1992, 1991 and
1990 F-7
Notes to consolidated financial statements for the years ended December 31, 1992, 1991
and 1990 F-9
Supplementary data: quarterly consolidated financial data (unaudited) F-17
Condensed consolidated balance sheet at September 30, 1993 (unaudited) F-18
Consolidated statement of operations for the nine months ended September 30, 1993 and
1992 (unaudited) F-19
Consolidated statement of cash flows for the nine months ended September 30, 1993 and
1992 (unaudited) F-20
Notes to condensed consolidated financial statements for the nine months ended
September 30, 1993 and 1992 (unaudited) F-21
</TABLE>
F-1
<PAGE> 69
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholder
Bally's Park Place, Inc.
We have audited the accompanying consolidated balance sheet of Bally's Park
Place, Inc. (an indirect wholly owned subsidiary of Bally Manufacturing
Corporation) as of December 31, 1992 and 1991, and the related consolidated
statements of income, stockholder's equity, and cash flows for each of the three
years in the period ended December 31, 1992. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Bally's Park Place, Inc. at December 31, 1992 and 1991, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1992, in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Philadelphia, Pennsylvania
February 19, 1993, except for the "Summary of significant
accounting policies" and "Subsequent events" notes, as to which the date is
June 16, 1993
F-2
<PAGE> 70
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1992 1991
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents............................................... $ 12,275 $ 12,505
Receivables:
Hotel and casino, less allowances of $1,800 and $6,210.......... 2,346 3,173
Affiliates...................................................... 622 534
Notes and other................................................. 935 896
-------- --------
3,903 4,603
Inventories........................................................ 1,972 2,123
Deferred income taxes.............................................. 7,611 5,857
Other current assets............................................... 1,166 1,223
-------- --------
Total current assets.......................................... 26,927 26,311
Property and equipment, at cost:
Land............................................................... 83,845 83,845
Buildings and improvements......................................... 538,972 535,274
Furniture, fixtures and equipment.................................. 138,517 134,104
Construction in progress........................................... 906 3,672
-------- --------
762,240 756,895
Less accumulated depreciation...................................... 262,847 240,963
-------- --------
Net property and equipment.................................... 499,393 515,932
Deferred finance costs, less accumulated amortization of $5,676 and
$3,970............................................................. 9,214 10,545
Receivable from affiliates........................................... 52,700
Casino Reinvestment Development Authority investments................ 9,964 8,062
Other assets......................................................... 5,177 4,614
-------- --------
$550,675 $618,164
-------- --------
-------- --------
</TABLE>
See accompanying notes.
F-3
<PAGE> 71
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
CONSOLIDATED BALANCE SHEET (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1992 1991
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Payable to affiliate............................................... $ 16,000 $ 17,000
Accounts payable................................................... 3,782 5,652
Income taxes payable............................................... 3,697 1,741
Accrued liabilities --
Compensation and payroll taxes.................................. 6,335 7,777
Interest........................................................ 15,649 15,940
Progressive slot jackpots....................................... 2,859 2,928
Other........................................................... 15,635 12,426
Current portion of deferred compensation........................... 7,000
Current maturities of long-term debt............................... 1,038 8,539
-------- --------
Total current liabilities..................................... 64,995 79,003
Long-term debt, less current maturities.............................. 355,779 372,574
Deferred income taxes................................................ 15,571 12,768
Pension liability.................................................... 6,197 4,961
Deferred compensation................................................ 16,042 14,539
Other long-term liabilities.......................................... 1,261 1,429
Stockholder's equity:
Common stock, no par value, at stated value, authorized 3,000
shares, issued and outstanding 100 shares....................... 1 1
Additional paid in capital......................................... 90,829 128,640
Retained earnings.................................................. 4,249
-------- --------
Total stockholder's equity.................................... 90,830 132,890
-------- --------
$550,675 $618,164
-------- --------
-------- --------
</TABLE>
See accompanying notes.
F-4
<PAGE> 72
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1992 1991 1990
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Casino................................................... $277,997 $265,698 $266,881
Rooms.................................................... 23,724 23,454 23,879
Food and beverage........................................ 20,515 21,150 21,656
Interest income from affiliates.......................... 881 4,471 3,695
Other.................................................... 8,015 8,030 8,470
-------- -------- --------
331,132 322,803 324,581
Operating costs and expenses:
Casino................................................... 119,012 114,317 114,840
Rooms.................................................... 8,049 8,327 9,076
Food and beverage........................................ 17,844 18,737 19,748
Other operating expenses................................. 52,021 49,985 49,681
Selling, general and administrative...................... 40,488 47,873 44,770
Depreciation and amortization............................ 27,358 28,147 25,876
Allocations from Bally Manufacturing Corporation......... 3,660 1,000
-------- -------- --------
268,432 268,386 263,991
-------- -------- --------
Operating income........................................... 62,700 54,417 60,590
Interest expense........................................... 47,960 48,951 46,334
-------- -------- --------
Income before income taxes................................. 14,740 5,466 14,256
Provision for income taxes................................. 6,800 3,700 6,200
-------- -------- --------
Net income................................................. $ 7,940 $ 1,766 $ 8,056
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes.
F-5
<PAGE> 73
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
RETAINED TOTAL
NUMBER ADDITIONAL EARNINGS STOCK-
OF SHARES COMMON PAID IN (ACCUMULATED HOLDER'S
ISSUED STOCK CAPITAL DEFICIT) EQUITY
--------- ------ ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1989..... 100 $1 $128,640 $ (1,673) $126,968
Net income..................... 8,056 8,056
Dividend paid.................. (3,900) (3,900)
--- -- ---------- ------------ --------
Balance at December 31, 1990..... 100 1 128,640 2,483 131,124
Net income..................... 1,766 1,766
--- -- ---------- ------------ --------
Balance at December 31, 1991..... 100 1 128,640 4,249 132,890
Net income..................... 7,940 7,940
Receivable due from Bally
Manufacturing Corporation
declared as a dividend...... (37,811) (12,189) (50,000)
--- -- ---------- ------------ --------
Balance at December 31, 1992..... 100 $1 $ 90,829 $ -- $ 90,830
--- -- ---------- ------------ --------
--- -- ---------- ------------ --------
</TABLE>
See accompanying notes.
F-6
<PAGE> 74
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1992 1991 1990
-------- -------- --------
<S> <C> <C> <C>
Operating:
Net income................................... $ 7,940 $ 1,766 $ 8,056
Adjustments to reconcile to cash provided --
Depreciation and amortization............. 27,358 28,147 25,876
Deferred income taxes..................... 1,049 (1,461) (848)
Provision for doubtful receivables........ 889 1,846 2,754
Write-off of property and equipment....... 2,367
Changes in operating assets and
liabilities............................. (5,089) 13,720 (3,185)
Other, net................................ 3,209 1,524 1,524
-------- -------- --------
Cash provided by operating
activities......................... 35,356 47,909 34,177
Investing:
Purchases of property and equipment.......... (10,268) (10,922) (55,559)
Proceeds from disposal of property and
equipment................................. 345 191 1,461
Purchase of CRDA investments and credits..... (2,692) (2,235) (1,512)
-------- -------- --------
Cash used in investing activities.... (12,615) (12,966) (55,610)
Financing:
Debt transactions --
Increase (decrease) in revolving line of
credit, net............................. (22,000) (50,000) 72,500
Advances from (repayments to) affiliates,
net..................................... 1,700 17,000 (52,700)
Repayments of long-term debt.............. (2,296) (537) (560)
Proceeds from issuance of long-term
debt.................................... 1,626
Debt issuance costs....................... (375) (11)
-------- -------- --------
Cash provided by (used in) debt
transactions....................... (22,971) (33,537) 20,855
Dividend paid................................ (3,900)
-------- -------- --------
Cash provided by (used in) financing
activities......................... (22,971) (33,537) 16,955
-------- -------- --------
Increase (decrease) in cash and equivalents.... (230) 1,406 (4,478)
Cash and equivalents, beginning of year........ 12,505 11,099 15,577
-------- -------- --------
Cash and equivalents, end of year.............. $ 12,275 $ 12,505 $ 11,099
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes.
F-7
<PAGE> 75
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1992 1991 1990
-------- -------- --------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOWS INFORMATION
Changes in operating assets and liabilities:
(Increase) decrease in receivables............... $ (189) $ 2,814 $ (2,637)
(Increase) decrease in inventories............... 151 2,805 (1,144)
Increase in other assets......................... (612) (629) (1,328)
Increase (decrease) in accounts payable and
accrued liabilities............................ (463) 5,125 (2,152)
Increase in income taxes payable................. 1,956 1,176 76
Increase (decrease) in pension liability and
deferred compensation.......................... (5,764) 1,000 4,000
Increase (decrease) in other long-term
liabilities.................................... (168) 1,429
-------- -------- --------
$ (5,089) $ 13,720 $ (3,185)
-------- -------- --------
-------- -------- --------
Operating activities include cash payments for
interest and income taxes as follows:
Interest paid.................................... $ 45,141 $ 47,635 $ 45,344
Interest capitalized............................. (74) (149) (2,558)
Income taxes paid................................ 3,795 3,985 6,972
Investing and financing activities exclude the
following non-cash activities:
Receivable due from Bally Manufacturing
Corporation declared as a dividend............. $ 50,000 $ -- $ --
Donation of CRDA funds, net...................... 15 450
</TABLE>
See accompanying notes.
F-8
<PAGE> 76
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABULAR AMOUNTS IN THOUSANDS)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying consolidated financial statements include the accounts of
Bally's Park Place, Inc., a Delaware corporation (the "Company") and an indirect
wholly owned subsidiary of Bally Manufacturing Corporation ("BMC"), and its
subsidiaries. BMC is a holding company without significant operations of its
own. Nevertheless, BMC has certain cash obligations that must be satisfied by
obtaining cash from its subsidiaries or disposing of or leveraging certain
assets. BMC may be required to borrow additional funds or sell assets in order
to satisfy its cash flow requirements. Unless otherwise specified in the text,
references to the Company include the Company and its subsidiaries.
The Company operates in one industry segment. All significant revenues
arise from its casino and supporting hotel operations.
Certain reclassifications have been made to prior years' financial
statements to conform with the 1992 presentation.
Cash equivalents
The Company considers all highly liquid investments with original
maturities of three months or less when purchased to be cash equivalents. The
carrying amount of cash equivalents approximates fair value because of the short
maturity of those instruments.
Revenue recognition
Casino revenues consist of the net win from gaming activities, which is the
difference between gaming wins and losses. Operating revenues exclude the retail
value of complimentary food, beverage and hotel services furnished to customers,
which were approximately $36,809,000, $36,654,000 and $32,564,000 for 1992, 1991
and 1990, respectively. The estimated costs of providing such complimentary
services, which are classified as casino expenses through interdepartment
allocations from the departments granting the services, are as follows:
<TABLE>
<CAPTION>
1992 1991 1990
-------- -------- --------
<S> <C> <C> <C>
Rooms.......................................... $ 5,592 $ 4,625 $ 4,690
Food and beverage.............................. 16,478 14,399 13,551
Other.......................................... 2,763 3,197 4,901
-------- -------- --------
$ 24,833 $ 22,221 $ 23,142
-------- -------- --------
-------- -------- --------
</TABLE>
Inventories
Inventories of provisions and supplies are stated at the lower of cost
(first-in, first-out basis) or market, which approximates replacement cost.
Property and equipment
Depreciation of property and equipment is provided principally on the
straight-line method over the estimated economic lives of the related assets and
the terms of the applicable leases for leasehold improvements. Depreciation
expense was $26,462,000, $26,306,000 and $24,037,000 for 1992, 1991 and 1990,
respectively.
F-9
<PAGE> 77
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Deferred finance costs
Deferred finance costs are amortized using the bonds outstanding method.
Amortization expense was $1,706,000, $1,702,000 and $1,701,000 in 1992, 1991 and
1990, respectively.
Income taxes
Taxable income or loss of the Company is included in the consolidated
federal income tax return of BMC. Under a tax sharing agreement between the
Company and BMC, income taxes are allocated to the Company based on amounts the
Company would pay or receive if it filed a separate federal income tax return,
except that the Company receives credit from BMC for the tax benefit of the
Company's net operating losses and tax credits, if any, that can be utilized in
BMC's consolidated federal income tax return, regardless of whether these losses
or credits could be utilized by the Company on a separate consolidated federal
income tax return basis. Payments to BMC are due at such time and in such
amounts as payments are required to be made for income tax purposes. Payments by
BMC for such tax benefits are due at the time BMC files the applicable
consolidated federal income tax return. Under the tax sharing agreement, the
Company had income taxes payable to BMC of $3,697,000 and $1,741,000 at December
31, 1992 and 1991, respectively, which are classified as income taxes payable on
the accompanying consolidated balance sheet.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." SFAS No.
109 retains the current requirement to record deferred income taxes for
temporary differences that are reported in different years for financial
reporting and for tax purposes; however, the methodology for calculating and
recording deferred income taxes has changed. Under the liability method adopted
by SFAS No. 109, deferred tax liabilities or assets are computed using the tax
rates that will be in effect when the temporary differences reverse. Also,
requirements for recognition of deferred tax assets and operating loss and tax
credit carryforwards have been liberalized by requiring their recognition when
and to the extent that their realization is deemed to be more likely than not.
The Company adopted SFAS No. 109 effective January 1, 1993 using the cumulative
effect approach, which resulted in a charge of $11,377,000.
Fair value of financial instruments
The fair value of the Company's financial instruments approximates their
recorded book values at December 31, 1992, excluding the 11 7/8% First Mortgage
Notes due 1999 (the "Mortgage Notes") whose fair value, based on a quoted market
price, is approximately $363,125,000.
CASINO LICENSING
In September 1992, the New Jersey Casino Control Commission (the "CCC")
renewed the Company's casino license to operate Bally's Park Place Casino Hotel
and Tower through September 30, 1994. A New Jersey casino license is not
transferable, is issued for a term of one or two years and must be renewed by
filing an application. The CCC requires that dividends and other payments to BMC
by the Company and its subsidiaries, other than specifically defined payments
made in the ordinary course of business, receive prior approval.
ALLOCATIONS FROM BMC AND TRANSACTIONS WITH RELATED PARTIES
As described above, BMC is a holding company without significant operations
of its own. During 1992 BMC completed a major restructuring effort which began
in late 1990 and which included the divestiture of several of its non-core
businesses including the businesses directly operated by BMC. The businesses
directly operated by BMC had previously supported BMC's overhead costs and made
measurement of costs associated with oversight of subsidiary operations
impractical and unnecessary. During 1991 BMC allocated costs to the
F-10
<PAGE> 78
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company consisting of the Company's allocable share of BMC's director's and
officer's insurance and other BMC stockholder-related expenses primarily
attributable to the restructuring. During 1992 BMC allocated costs to the
Company consisting of the Company's allocable share of BMC's corporate overhead
including executive salaries and benefits, public company reporting costs and
other corporate headquarters costs. While the Company does not obtain a
measurable direct benefit from these allocated costs, management believes that
the Company receives an indirect benefit from BMC's oversight. BMC's method for
allocating costs to its subsidiaries is designed to apportion its costs to its
subsidiaries based upon many subjective factors including size of operations and
extent of BMC's oversight requirements. Management of BMC and the Company
believe that the methods used to allocate these costs are reasonable and expect
similar allocations in future years. Because of BMC's controlling relationship
with the Company and the allocation of certain BMC costs, the operating results
of the Company could be significantly different from those that would have been
obtained if the Company operated autonomously.
The Company purchased slot machines and related services from other BMC
affiliates on terms negotiated by the parties for aggregate amounts of
$3,181,000, $1,649,000 and $1,233,000 in 1992, 1991 and 1990, respectively.
Certain executive officers of the Company function in a similar capacity
for GNAC, CORP. ("GNAC"), a wholly owned subsidiary of BMC which owns and
operates the casino resort in Atlantic City known as "The Grand", and exercise
decision making and operational authority over both entities. No allocation of
cost is made from the Company to GNAC for these executive officers as management
deems the allocable cost to be immaterial. In addition, certain administrative
and support operations of the Company and GNAC are consolidated, including legal
services, purchasing, limousine services, and certain aspects of human resources
and management information systems. Costs of these operations are allocated to
or from the Company either directly or using various formulas based on
utilization estimates of such services and, on a net basis, totalled $2,568,000,
$2,486,000 and $1,806,000 in 1992, 1991 and 1990, respectively, which management
believes were reasonable. In addition, the Company leases surface area parking
lots to GNAC. Rental income was $696,000 in 1992 and 1991 and $399,000 in 1990.
In April 1990, the Company advanced BMC $50,000,000 secured by a promissory
note. In October 1992, BMC petitioned the CCC to allow the Company to declare
the receivable due from BMC as a dividend. The CCC approved this request in
December 1992. No interest was paid to the Company subsequent to April 1, 1992.
Through March 31, 1992, the Company earned interest at the prime rate of its
agent bank. Intercompany interest earned on this advance was $808,000,
$4,243,000 and $3,684,000 in 1992, 1991 and 1990, respectively.
In December 1990, the Company advanced GNAC $2,700,000. This advance was
repaid in June 1992. The Company earned interest monthly on this advance (at the
prime rate of its agent bank) which totalled $73,000, $228,000 and $11,000 in
1992, 1991 and 1990, respectively.
The Company and GNAC have a cash management arrangement whereby GNAC
advances excess funds to the Company which the Company uses to reduce the
outstanding balance under its revolving credit agreement. The Company pays
interest monthly on these advances (at the prime rate of its agent bank) which
totalled $1,249,000, $862,000 and $234,000 in 1992, 1991 and 1990, respectively.
These advances are payable on demand.
The Company participated in the BMC insurance program for general liability
in 1990, 1988 and 1987 through a captive insurance company of BMC, whose
operation was discontinued in 1991. Under this program, general liability
insurance expense was allocated to the Company based on claims experience, which
management believes was reasonable. General liability insurance expense
allocated to the Company was $1,188,000 for 1990. The Company charged to
operations $500,000 in 1992 for a retroactive premium
F-11
<PAGE> 79
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
adjustment related to claim years ended December 31, 1990, 1988 and 1987 and
paid this amount to BMC in January 1993.
DISCONTINUED MOTEL OPERATION
In December 1991, the Company made a decision to close and demolish the
motel operation of one of its subsidiaries. In connection with this decision,
the Company recorded a $3,500,000 charge against operations in 1991 to write-off
the remaining net book value of the property and equipment of this motel and to
provide for the demolition cost and other related closing costs. The revenues
and operating income of this motel operation were immaterial.
CASINO REINVESTMENT DEVELOPMENT AUTHORITY INVESTMENTS
The New Jersey Casino Control Act (the "New Jersey Act") provides, among
other things, for an assessment of licensees equal to 1 1/4% of their gross
casino revenues. This assessment may be satisfied by the Company investing in
qualified eligible direct investments, by depositing funds with the Casino
Reinvestment Development Authority (the "CRDA") (which will be used to purchase
bonds issued by the CRDA), by making qualified contributions or, under certain
circumstances, donating funds on deposit with the CRDA in exchange for credits
against future CRDA obligations. The Company's investment obligation for 1992
was met by purchasing CRDA bonds, utilizing CRDA credits and depositing funds
with the CRDA. CRDA bonds have terms up to fifty years and bear interest at
below market rates. The Company records a charge to operations when it deposits
funds with the CRDA to reflect the estimated realizable value of its CRDA
investments. Additionally, the Company paid $869,000, $2,557,000 and $2,614,000
to GNAC in 1992, 1991 and 1990, respectively, for CRDA credits which were used
by the Company in satisfaction of its CRDA obligations.
The Company charged to operations $1,438,000, $2,164,000 and $1,410,000 in
1992, 1991 and 1990, respectively, to reflect the estimated realizable value of
its CRDA investments.
In January 1991, the Company received an assessment from the New Jersey
Department of the Treasury (the "Treasury") alleging, pursuant to the New Jersey
Act, that the Company in 1983 failed to have sufficient qualified investments in
excess of casino revenues. The New Jersey Act in effect in 1983 required in this
situation that a casino pay an assessment to satisfy its investment obligation.
In January 1992, the Company and the Treasury settled this dispute, and the
Company agreed to invest an additional $2,250,000 with the CRDA as follows:
$600,000 in 1992; $300,000 in 1993; $300,000 in 1994; $300,000 in 1995 and
$750,000 in 1996, and to participate in certain CRDA approved low income
mortgage guarantee programs. The Company charged $1,100,000 to operations in
1991 as a result of the settlement, representing the Company's estimated net
cost of the settlement obligation.
LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1992 1991
-------- --------
<S> <C> <C>
Mortgage Notes......................................................... $350,000 $350,000
Revolving credit agreement............................................. 3,000 25,000
Other secured and unsecured debt....................................... 3,817 6,113
-------- --------
356,817 381,113
Less current maturities................................................ 1,038 8,539
-------- --------
$355,779 $372,574
-------- --------
-------- --------
</TABLE>
F-12
<PAGE> 80
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In 1989, the Company issued $350,000,000 principal amount of the Mortgage
Notes. Beginning in August 1996, annual sinking fund payments are required which
will retire approximately 40 percent of the Mortgage Notes prior to maturity.
The Mortgage Notes may be redeemed beginning August 1994, in whole or in part,
with premiums ranging from 4.45 percent in 1994 to zero in 1997 and thereafter.
The Mortgage Notes are secured by certain property and equipment at Bally's Park
Place Casino Hotel and Tower, which had a net book value of $415,923,000 at
December 31, 1992.
The Mortgage Notes indenture and the revolving credit agreement contain
covenants restricting the Company's investment policies, total indebtedness,
encumbrances on property and equipment securing the Mortgage Notes and the
revolving credit agreement, sale, transfer or lease of assets, the amounts of
additional debt which may be incurred and minimum coverage of fixed charges.
Payments of dividends by the Company are generally limited to 50% of its
aggregate consolidated net income (as defined) earned since December 31, 1988.
At December 31, 1992, approximately $6,100,000 was available under the Mortgage
Notes indenture and revolving credit agreement to pay dividends.
In June 1992, the Company's credit agreement was amended to reduce the
maximum availability under the agreement from $100,000,000 to $75,000,000 and to
extend the term of the agreement for two years. The new expiration date is June
30, 1994 at which time the Company has the option to repay the outstanding
balance or convert the outstanding balance to a term loan payable in four
semiannual installments beginning December 31, 1994. The rate of interest on the
borrowings (6.0% at December 31, 1992) is at the Company's option, based upon
the agent bank's prime rate or certain other short-term rates. The annual fee on
the unused commitment is 1/2 of 1 percent. In addition, at the signing of the
agreement the Company paid to the banks a fee of 1/2 of 1 percent ($375,000) of
the total permitted borrowings, which will be amortized over the two year
extension period. Two additional covenants, providing for minimum coverage of
current maturities of long-term debt and fixed charges, were included in the
extension agreement. The unused amount of the credit line at December 31, 1992
is $72,000,000. In June 1991, the Company granted to the banks a mortgage on and
security interest in all the property and equipment securing the Mortgage Notes.
The banks rank pari passu in right of payment with the holders of the Mortgage
Notes.
Aggregate annual maturities of long-term debt for the five years after
December 31, 1992 are $1,038,000, $790,000, $1,542,000, $47,794,000 and
$47,046,000.
INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1992 1991 1990
------ ------- ------
<S> <C> <C> <C>
Current:
Federal............................................ $4,539 $ 3,848 $5,222
State.............................................. 1,212 1,313 1,826
------ ------- ------
5,751 5,161 7,048
Deferred:
Federal............................................ 764 (1,012) (505)
State.............................................. 285 (449) (343)
------ ------- ------
1,049 (1,461) (848)
------ ------- ------
$6,800 $ 3,700 $6,200
------ ------- ------
------ ------- ------
</TABLE>
F-13
<PAGE> 81
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of the provision for income taxes with amounts determined
by applying the U.S. statutory tax rate to income before income taxes is as
follows:
<TABLE>
<CAPTION>
1992 1991 1990
------ ------- ------
<S> <C> <C> <C>
Tax at U.S. statutory tax rate....................... $5,012 $ 1,858 $4,847
State income taxes, net of related federal income tax
benefit............................................ 988 570 979
Write-off of property and equipment.................. 698
Other, net........................................... 800 574 374
------ ------- ------
Provision for income taxes........................... $6,800 $ 3,700 $6,200
------ ------- ------
------ ------- ------
</TABLE>
The deferred income tax provision (benefit) arises from the tax effect of
timing differences as follows:
<TABLE>
<CAPTION>
1992 1991 1990
------ ------- -------
<S> <C> <C> <C>
Deferred compensation and pension................... $1,713 $ (402) $(1,609)
Depreciation and amortization....................... 1,427 1,150 2,583
Provision for bad debts............................. 38 378 (1,282)
CRDA investments.................................... (320) (1,077) (543)
Accrued expenses.................................... (1,633) (1,384) (458)
Other, net.......................................... (176) (126) 461
------ ------- -------
$1,049 $(1,461) $ (848)
------ ------- -------
------ ------- -------
</TABLE>
The Internal Revenue Service ("IRS") has completed an audit of BMC's
consolidated federal income tax returns for the calendar years 1983 and 1984.
During the audit, the IRS raised certain significant issues principally related
to the tax accounting method used by a subsidiary that operates its health clubs
to report income from membership contracts which resulted in a substantial
assessment. In July 1992, BMC and the IRS reached a settlement (confirmed in May
1993 by the Joint Committee on Taxation) with respect to the tax accounting
method used to report income from membership contracts. The settlement of this
issue significantly reduces, but does not fully eliminate, previously disclosed
concerns regarding a material adverse effect on BMC's liquidity with respect to
the tax accounting method used to report income from membership contracts. Since
BMC believes it has adequately provided deferred and current taxes related to
this matter, the settlement will not have a material adverse effect on BMC's
consolidated financial position or results of operations.
To the extent that BMC is unable to pay any amounts owed to the IRS as a
result of the aforementioned tax matters or any other issues when due, because
the Company was included in BMC's consolidated federal tax returns since its
inception, the Company, along with other BMC subsidiaries included in the
returns, is contingently liable for any such liabilities. While the Company is
unable to estimate the impact of BMC's tax deficiencies, if any, upon its
financial condition, the Company believes such matters will not have any impact
on the Company's ability to fund its capital expenditure, working capital and
debt service requirements.
The IRS has also completed an audit of the federal income tax returns of
certain of BMC's fitness center subsidiaries for periods ending on the days
these subsidiaries were acquired by BMC. Since these audits relate to periods
prior to inclusion of these fitness center subsidiaries in BMC's consolidated
federal income tax return, the Company would not be contingently liable for any
such liabilities. Among other things, the IRS is asserting that these
subsidiaries owe approximately $32,000,000 of additional taxes and $54,000,000
of interest (estimated as of December 31, 1992) with respect to BMC's election
to treat the purchases of stock of these
F-14
<PAGE> 82
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
subsidiaries as if they were purchases of assets. The Company has been advised
that BMC intends to vigorously oppose the IRS' assertions and has filed
petitions in the United States Tax Court contesting the IRS' proposed
deficiencies with respect to these issues. BMC estimates that if the issues are
fully litigated, the ultimate resolution of these issues is not likely to occur
for approximately three years (although a resolution may occur sooner if BMC and
the IRS resolve all or some of these issues by stipulation or otherwise). Based
on the information presently available, there can be no assurance of the outcome
of this matter; however, in the opinion of BMC's management, payment, if any, to
the IRS will not have a material adverse effect on BMC's consolidated financial
position or results of operations, since BMC believes that it has adequately
provided deferred and current taxes related to this matter, although it could
have an adverse effect on BMC's liquidity.
BENEFIT PLANS
The Company has a noncontributory supplemental executive retirement plan
(the "SERP") covering certain key executives. The age for normal retirement
under the SERP is 60, and the participants receive benefits based on years of
service and compensation. Pension costs of the SERP are unfunded.
The net pension cost for the Company's noncontributory supplemental
executive retirement plans in effect for 1992, 1991 and 1990 consists of the
following:
<TABLE>
<CAPTION>
1992 1991 1990
------ ------ ------
<S> <C> <C> <C>
Amortization of transition costs...................... $ 126 $ 140 $ 142
Service cost-benefits earned during the period........ 412 312 1,380
Interest cost on projected benefit obligations........ 478 1,037 2,374
Other................................................. 220 104
------ ------ ------
Net pension cost................................. $1,236 $1,489 $4,000
------ ------ ------
------ ------ ------
</TABLE>
The following sets forth the plan's obligations and funded status as of
December 31 for the continuing noncontributory supplemental executive retirement
plan.
<TABLE>
<CAPTION>
1992 1991
------ -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits............................................... $2,969 $ 2,762
Nonvested benefits............................................ 1,046 1,680
------ -------
Accumulated benefit obligations............................... 4,015 4,442
Effect of projected salary increases.......................... 3,038 1,720
------ -------
Projected benefit obligations................................. 7,053 6,162
Unrecognized transition obligation.............................. (856) (1,201)
------ -------
Accrued pension liability....................................... $6,197 $ 4,961
------ -------
------ -------
</TABLE>
The weighted average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations was 8% and 6%, respectively, in 1992, 1991 and
1990.
In 1991, the Company and one of its executives entered into an agreement to
terminate the executive's participation in another noncontributory supplemental
executive retirement plan sponsored by the Company. Pursuant to this agreement,
the Company agreed to pay the executive $27,600,000 over five years. The
F-15
<PAGE> 83
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company recorded the settlement in an amount equal to the net present value of
the required payments. No charge against operations in 1991 was required, as the
Company had fully accrued in prior years the value of this settlement as part of
its pension liability. The net present value of the remaining payments under
this termination agreement was $16,042,000 at December 31, 1992. On January 8,
1993, the Company and BMC entered into a Retirement and Separation Agreement
with this executive which, among other things, reduced the remaining amount
payable under the termination agreement to $13,500,000, which the Company paid
on such date. This payment, combined with additional amounts due this executive
under an employment contract, resulted in a gain of approximately $1,500,000
which was recorded in January 1993.
In addition to the defined benefit pension plans described above, the
Company has a defined contribution plan which covers certain non-union employees
and which is considered part of the Company's overall retirement program. The
plan is a 401(k) plan to which the Company contributes an amount allocable based
on eligible participants' compensation and a percent of eligible employees'
contributions. The expense for the Company's defined contribution plan was
$2,608,000, $3,800,000 and $2,302,000 for 1992, 1991 and 1990, respectively.
Certain employees of the Company are covered by union-sponsored,
collectively bargained, multiemployer defined benefit pension plans. The
contributions and charges to expense for these plans were $562,000, $567,000 and
$486,000 in 1992, 1991 and 1990, respectively.
In April 1991, an insurance company that issued guaranteed interest
contracts ("GICs") that were purchased by both BMC's and the Company's qualified
401(k) plans was declared insolvent by the State of California's Insurance
Commissioner (the "Commissioner"). Operations of this insurance company were
assumed by the Commissioner. Approximately $7,400,000 of these GICs are held in
a Master Trust for BMC's and its subsidiaries' employee benefit plans, of which
approximately 42% is attributable to the Company's 401(k) plan. Although BMC and
the Company had no legal obligation to fund any 401(k) plan losses, BMC's Board
of Directors, in June 1991, authorized BMC, and therefore the Company, to ensure
that participants in the Company's 401(k) plan not suffer any loss in principal,
as determined on March 31, 1991, to their 401(k) account balances which might
otherwise occur due to this insolvency. The Company charged $900,000 to
operations for its estimated cost of reimbursing any shortfall in the
participants' 401(k) account balances, which was included in the $3,800,000
defined contribution plan expense for 1991.
SUBSEQUENT EVENTS
In April 1993, BMC formed Bally's Casino Holdings, Inc. ("Casino Holdings")
to serve as a holding company for the Company and for acquiring and developing
gaming operations, including dockside and riverboat gaming, and expanding into
newly emerging gaming jurisdictions. On June 16, 1993, BMC contributed all of
the capital stock of the Company to Casino Holdings.
Effective June 16, 1993, the CCC no longer requires that dividends and
other payments to BMC by the Company and its subsidiaries receive prior
approval.
F-16
<PAGE> 84
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
SUPPLEMENTARY DATA
QUARTERLY CONSOLIDATED FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED
-------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
------------------- ------------------- ------------------- -------------------
1992 1991 1992 1991 1992 1991 1992 1991
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................ $73,566 $71,710 $83,947 $84,399 $96,014 $94,500 $77,605 $72,194
Operating costs and expenses.... 63,631 62,401 68,077 66,196 71,415 70,499 65,309 69,290
Operating income................ 9,935 9,309 15,870 18,203 24,599 24,001 12,296 2,904
Net income (loss)............... (1,241) (2,102) 2,083 3,489 6,435 6,496 663 (6,117)
</TABLE>
- ---------------
NOTES:
(1) The Company's operations are subject to seasonal factors.
(2) Revenues for the quarters ended March 31, June 30 and September 30, 1992
include interest from affiliates of $.9 million, $.8 million and $(.8)
million, respectively. Revenues for the quarters ended March 31, June 30,
September 30 and December 31, 1991 include interest from affiliates of $1.2
million, $1.6 million, $1.1 million and $.6 million, respectively.
(3) Operating costs and expenses for the third quarter of 1991 include $1.7
million for the estimated cost of settling certain non-recurring
liabilities.
(4) Operating costs and expenses for the fourth quarter of 1991 include a charge
of $3.5 million related to the closing and demolition of an ancillary motel
operated by the Company.
(5) Operating costs and expenses include charges allocated by Bally of $.8
million, $1.0 million, $1.1 million and $.8 million for the quarters ended
March 31, June 30, September 30 and December 31, 1992, respectively, and
$1.0 million for the quarter ended December 31, 1991.
F-17
<PAGE> 85
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30,
1993
-------------
<S> <C>
ASSETS
Current assets:
Cash and equivalents.............................................. $ 9,564
Receivables, less allowance for doubtful accounts of $1,150....... 3,684
Inventories....................................................... 1,672
Deferred income taxes............................................. 7,018
Other current assets.............................................. 1,759
-------------
Total current assets...................................... 23,697
Property and equipment, less accumulated depreciation of $278,402... 487,329
Deferred finance costs, less accumulated amortization of $6,960..... 7,930
Casino Reinvestment Development Authority investments............... 11,286
Other assets........................................................ 1,473
-------------
$ 531,715
-------------
-------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Payable to affiliate.............................................. $ 7,000
Accounts payable.................................................. 2,818
Income taxes payable.............................................. 6,410
Accrued liabilities............................................... 30,904
Current maturities of long-term debt.............................. 43
-------------
Total current liabilities................................. 47,175
Long-term debt, less current maturities............................. 352,738
Pension liability................................................... 6,770
Deferred income taxes............................................... 33,853
Other long-term liabilities......................................... 1,343
Stockholder's equity:
Common stock...................................................... 1
Additional paid in capital........................................ 89,835
Retained earnings.................................................
-------------
Total stockholder's equity................................ 89,836
-------------
$ 531,715
-------------
-------------
</TABLE>
See accompanying notes.
F-18
<PAGE> 86
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1993 1992
-------- --------
<S> <C> <C>
Revenues:
Casino............................................................. $225,951 $212,596
Rooms.............................................................. 18,948 18,030
Food and beverage.................................................. 15,683 15,827
Interest income from affiliates.................................... 881
Other.............................................................. 6,540 6,193
-------- --------
267,122 253,527
Operating costs and expenses:
Casino............................................................. 87,555 89,457
Rooms.............................................................. 7,332 6,144
Food and beverage.................................................. 14,273 13,751
Other operating expenses........................................... 39,541 40,063
Selling, general and administrative................................ 24,097 30,151
Depreciation and amortization...................................... 19,928 20,705
Allocations from Bally Manufacturing Corporation................... 3,024 2,852
-------- --------
195,750 203,123
-------- --------
Operating income..................................................... 71,372 50,404
Interest expense..................................................... 33,891 36,227
-------- --------
Income before income taxes and cumulative effect on prior years of
change in accounting for income taxes.............................. 37,481 14,177
Provision for income taxes........................................... 16,098 6,900
-------- --------
Income before cumulative effect on prior years of change in
accounting for income taxes........................................ 21,383 7,277
Cumulative effect on prior years of change in accounting for income
taxes.............................................................. (11,377)
-------- --------
Net income........................................................... $ 10,006 $ 7,277
-------- --------
-------- --------
</TABLE>
See accompanying notes.
F-19
<PAGE> 87
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1993 1992
-------- --------
<S> <C> <C>
Operating:
Income before cumulative effect on prior years of change in
accounting for income taxes..................................... $ 21,383 $ 7,277
Adjustments to reconcile to cash provided --
Depreciation and amortization................................... 19,928 20,705
Deferred income taxes........................................... 7,988 2,635
Provision for doubtful receivables.............................. (90) 564
Changes in operating assets and liabilities..................... (19,982) (13,361)
Other, net...................................................... 1,284 1,279
-------- --------
Cash provided by operating activities...................... 30,511 19,099
Investing:
Purchases of property and equipment................................ (8,270) (9,132)
Proceeds from disposal of property and equipment................... 406 113
Purchase of CRDA investments and credits........................... (1,322) (2,378)
-------- --------
Cash used in investing activities.......................... (9,186) (11,397)
Financing:
Debt transactions --
Decrease in revolving line of credit, net....................... (3,000) (23,000)
Advances from (repayments to) affiliate, net.................... (9,000) 13,700
Repayment of long-term debt..................................... (1,036) (2,284)
Debt issuance costs............................................. (375)
-------- --------
Cash used in debt transactions............................. (13,036) (11,959)
Equity transaction --
Dividend paid to Bally's Casino Holdings, Inc................... (11,000)
-------- --------
Cash used in financing activities.......................... (24,036) (11,959)
-------- --------
Decrease in cash and equivalents..................................... (2,711) (4,257)
Cash and equivalents, beginning of period............................ 12,275 12,505
-------- --------
Cash and equivalents, end of period.................................. $ 9,564 $ 8,248
-------- --------
-------- --------
SUPPLEMENTAL CASH FLOWS INFORMATION
Changes in operating assets and liabilities:
Decrease in receivables............................................ $ 309 $ 288
Decrease in inventories............................................ 300 28
(Increase) decrease in other assets................................ 3,111 (1,625)
Decrease in accounts payable and accrued liabilities............... (10,538) (8,890)
Increase in income taxes payable................................... 2,223 645
Decrease in pension liability and deferred compensation............ (15,469) (3,906)
Increase in other long-term liabilities............................ 82 99
-------- --------
$(19,982) $(13,361)
-------- --------
-------- --------
Operating activities include cash payments for interest and
income taxes as follows:
Interest paid................................................... $ 43,100 $ 44,553
Income taxes paid............................................... 5,887 3,620
</TABLE>
See accompanying notes.
F-20
<PAGE> 88
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Bally's Park Place, Inc., a Delaware corporation (the "Company") and
its subsidiaries. The Company was a direct wholly owned subsidiary of Bally
Manufacturing Corporation ("BMC") until June 16, 1993, when BMC contributed all
of the capital stock of the Company to Bally's Casino Holdings, Inc. ("Casino
Holdings"). Casino Holdings was formed as a wholly owned subsidiary of BMC in
April 1993 to serve as a holding company for the Company and for acquiring and
developing gaming operations, including dockside and riverboat gaming, and
expanding into newly emerging gaming jurisdictions. Unless otherwise specified
in the text, references to the Company include the Company and its subsidiaries.
The accompanying condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company for each
of the three years in the period ended December 31, 1992 included elsewhere in
this Prospectus.
Effective January 1, 1993, the Company changed its method of accounting for
income taxes as required by Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes." SFAS No. 109 retains the requirement to
record deferred income taxes for temporary differences that are reported in
different years for financial reporting and for tax purposes; however, the
methodology for calculating and recording deferred income taxes has changed.
Under the liability method adopted by SFAS No. 109, deferred tax liabilities or
assets are computed using the tax rates that will be in effect when the
temporary differences reverse. Also, requirements for recognition of deferred
tax assets and operating loss and tax credit carryforwards have been liberalized
by requiring their recognition when and to the extent that their realization is
deemed to be more likely than not. As permitted by SFAS No. 109, the Company
elected to use the cumulative effect approach rather than to restate the
consolidated financial statements of any prior periods to apply the provisions
of SFAS No. 109. The cumulative effect on prior years of this change in
accounting for income taxes as of January 1, 1993 was a charge of $11,377,000.
The effect of this change in accounting for income taxes on the provision for
income taxes for the nine months ended September 30, 1993 was not material.
All adjustments have been recorded which are, in the opinion of management,
necessary for a fair presentation of the condensed consolidated balance sheet of
the Company at September 30, 1993 and its consolidated statements of operations
and cash flows for the nine months ended September 30, 1993 and 1992. All such
adjustments were of a normal recurring nature, except for those adjustments
required to apply the provisions of SFAS No. 109.
Certain reclassifications have been made to prior period financial
statements to conform with the 1993 presentation.
SEASONAL FACTORS
The Company's operations are subject to seasonal factors and, therefore,
the results of operations for the nine months ended September 30, 1993 and 1992
are not necessarily indicative of the results of operations for the full year.
ALLOCATIONS FROM BMC AND TRANSACTIONS WITH RELATED PARTIES
BMC is a holding company without significant operations of its own. During
1992 BMC completed a major restructuring effort which began in late 1990 and
which included the divestiture of several of its non-core businesses including
the businesses directly operated by BMC. The businesses directly operated by BMC
had previously supported BMC's overhead costs and made measurement of costs
associated with oversight of
F-21
<PAGE> 89
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
subsidiary operations impractical and unnecessary. During 1992 and 1993 BMC
allocated costs to the Company consisting of the Company's allocable share of
BMC's corporate overhead including executive salaries and benefits, public
company reporting costs and other corporate headquarters costs. While the
Company does not obtain a measurable direct benefit from these allocated costs,
management believes that the Company receives an indirect benefit from BMC's
oversight. BMC's method for allocating costs to its subsidiaries is designed to
apportion its costs to its subsidiaries based upon many subjective factors
including size of operations and extent of BMC's oversight requirements.
Management of BMC and the Company believe that the methods used to allocate
these costs are reasonable and expect similar allocations in future years.
Because of BMC's controlling relationship with the Company and the allocation of
certain BMC costs, the operating results of the Company could be significantly
different from those that would have been obtained if the Company operated
autonomously.
Certain executive officers of the Company function in a similar capacity
for GNAC, CORP. (a wholly owned subsidiary of BMC which owns and operates the
casino resort in Atlantic City known as "The Grand"), and exercise decision
making and operational authority over both entities. No allocation of cost is
made from the Company to The Grand for these executive officers as management
believes the allocable cost to be immaterial. In addition, certain
administrative and support operations of the Company and The Grand are
consolidated, including legal services, purchasing, limousine services, and
certain aspects of human resources and management information systems. Costs of
these operations are allocated to or from the Company either directly or using
various formulas based on utilization estimates of such services and, on a net
basis, totalled $996,000 and $1,888,000 for the nine months ended September 30,
1993 and 1992, respectively, which management believes were reasonable.
The Company leases surface area parking lots to The Grand. Rental income
was $522,000 for each of the nine months ended September 30, 1993 and 1992. In
addition, the Company paid $869,000 to The Grand during the nine months ended
September 30, 1992 for Casino Reinvestment Development Authority ("CRDA")
credits which were used by the Company in satisfaction of a portion of its CRDA
obligations.
In April 1990, the Company advanced BMC $50,000,000 (secured by a
promissory note), with interest earned at the prime rate of its agent bank. In
October 1992, BMC petitioned the CCC to allow the Company to declare the
receivable due from BMC as a dividend. The CCC approved this request in December
1992. No interest was paid to the Company subsequent to April 1, 1992. The
Company recognized interest on this advance of $808,000 for the nine months
ended September 30, 1992.
In December 1990, the Company advanced The Grand $2,700,000. This advance
was repaid in June 1992. The Company earned interest monthly on this advance (at
the prime rate of its agent bank) which totalled $73,000 for the nine months
ended September 30, 1992.
The Company and The Grand have a cash management arrangement whereby The
Grand advances excess funds to the Company which the Company uses to reduce the
outstanding balance under its revolving credit agreement. As of September 30,
1993, the Company owed The Grand $7,000,000. These advances are payable on
demand. The Company pays interest monthly on these advances (at the prime rate
of its agent bank) which totalled $431,000 and $947,000 for the nine months
ended September 30, 1993 and 1992, respectively.
EXECUTIVE RETIREMENT AND SEPARATION AGREEMENT
On January 8, 1993, the Company and BMC entered into a Retirement and
Separation Agreement with a former executive of the Company and BMC. The Company
paid this executive $14,500,000 on such date in full settlement of the remaining
amounts due under his employment contract and for the liability under a
F-22
<PAGE> 90
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
previous settlement of his supplemental executive retirement plan (present value
at December 31, 1992 was $16,042,000), which resulted in a gain of approximately
$1,500,000 for the nine months ended September 30, 1993.
LONG-TERM DEBT
The indenture relating to the Company's 11 7/8% First Mortgage Notes (the
"Mortgage Notes") and the Company's revolving credit agreement contain covenants
restricting the Company's investment policies, total indebtedness, encumbrances
on property and equipment securing the Mortgage Notes and the revolving credit
agreement, payment of dividends, sale, transfer or lease of assets, the amounts
of additional debt which may be incurred and minimum coverage of current
maturities of long-term debt and fixed charges. In June 1993, Casino Holdings
completed a private placement of $220,000,000 principal amount of Senior
Discount Notes and that indenture also places certain restrictions on the
Company's ability to incur additional debt.
Payments of dividends by the Company are generally limited to 50% of its
aggregate consolidated net income (as defined) earned since December 31, 1988.
On September 20, 1993, a dividend of $11,000,000 was paid to Casino Holdings. At
September 30, 1993, approximately $5,800,000 was available to pay dividends.
The revolving credit agreement expires on June 30, 1994 at which time the
Company has the option to pay the outstanding balance or convert the outstanding
balance to a term loan payable in four semiannual installments beginning
December 31, 1994. The agreement provides for maximum borrowings up to
$75,000,000. The rate of interest on the borrowings (prime rate of 6% at
September 30, 1993) is at the Company's option, based upon the agent bank's
prime rate or certain other short-term rates. The Company pays an annual fee of
1/2 of 1 percent on the unused commitment. The entire credit line was available
at September 30, 1993.
INCOME TAXES
Taxable income or loss of the Company is included in the consolidated
federal income tax return of BMC. Under agreements between the Company, BMC and
Casino Holdings, income taxes are allocated to the Company based on amounts the
Company would pay or receive if it filed a separate consolidated federal income
tax return, except that the Company receives credit from BMC for the tax benefit
of the Company's net operating losses and tax credits, if any, that can be
utilized in BMC's consolidated federal income tax return, regardless of whether
these losses or credits could be utilized by the Company on a separate
consolidated federal income tax return basis.
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and income tax purposes. Significant components of the Company's deferred tax
assets and liabilities as of January 1, 1993, along with their classification,
are as follows:
F-23
<PAGE> 91
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS LIABILITIES
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Expenses which are not currently deductible for tax purposes:
Bad debts.................................................. $ 706 $
Deferred compensation and pension.......................... 8,937
Other...................................................... 9,857
Depreciation and capitalized costs........................... 38,437
Tax loss carryforwards....................................... 83
Other........................................................ 14
------- -----------
19,597 $38,437
-----------
-----------
Valuation allowance.......................................... (7)
-------
$19,590
-------
-------
Current...................................................... $ 6,888 $
Long-term.................................................... 12,702 38,437
------- -----------
$19,590 $38,437
------- -----------
------- -----------
</TABLE>
For the nine months ended September 30, 1993 and 1992, the effective rate
of the income tax provision differed from the U.S. statutory tax rate due
principally to state income taxes, net of the related federal income tax
benefit. In addition, the income tax provision for the nine months ended
September 30, 1993 was increased by $427,000 as a result of applying the change
in the U.S. statutory tax rate from 34% to 35% to deferred tax balances as of
January 1, 1993.
F-24
<PAGE> 92
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY BALLY'S PARK PLACE, THE ISSUER OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF BALLY'S PARK PLACE OR THE ISSUER SINCE THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................... 2
Prospectus Summary...................... 3
Investment Considerations............... 10
The Company............................. 14
Use of Proceeds......................... 16
Consolidated Capitalization............. 17
Selected Financial Data................. 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 20
Business................................ 26
Management.............................. 34
Security Ownership...................... 42
Certain Transactions.................... 42
Description of the Notes................ 44
Underwriting............................ 64
Legal Matters........................... 65
Experts................................. 65
Index to Financial Statements........... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$425,000,000
BALLY'S PARK
PLACE FUNDING, INC.
% FIRST MORTGAGE NOTES
DUE 2004
PAYMENT OF PRINCIPAL AND INTEREST
FULLY AND UNCONDITIONALLY
GUARANTEED BY
BALLY'S
PARK PLACE, INC.
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
JEFFERIES & COMPANY, INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LIBRA INVESTMENTS, INC.
, 1994
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 93
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth expenses in connection with the issuance of
the Notes being registered, other than discounts and commissions payable by the
Registrants. All of the amounts shown are estimates, except the registration fee
and the NASD fee:
<TABLE>
<S> <C>
SEC registration fee.............................................. $146,552
NASD fee.......................................................... $ 30,500
Accounting fees and expenses...................................... $ 70,000
Legal fees and expenses........................................... $250,000
Blue Sky fees and expenses........................................ $ 20,000
Trustee's fees and expenses....................................... $ 10,000
Printing expenses................................................. $150,000
Miscellaneous expenses............................................ $ 22,948
--------
Total expenses.......................................... $700,000
--------
--------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") permits the
Indemnification of the directors and officers of the Issuer. The By-laws of the
Issuer and Bally's Park Place provide it will indemnify the officers, directors,
employees and agents of the Issuer and Bally's Park Place to the extent
permitted by the DGCL.
Bally's Restated Certificate of Incorporation provides for the
indemnification of directors and officers of Bally, and persons who serve or
served at the request of Bally as a director, officer, employee or agent of
another corporation, including the Issuer, the Operating Company and Bally's
Park Place, including service with respect to employee benefit plans, against
all expense, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties in amounts paid or to be paid in settlement)
reasonably incurred with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, provided, however, Bally shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
Bally's Board. In the event a claim for indemnification by any person has not
been paid in full by Bally after written request has been received by Bally, the
claimant may at any time thereafter bring suit against Bally to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. The
right to indemnification conferred in the Restated Certificate of Incorporation
is a contract right and shall include the right to be paid by Bally the expenses
incurred in defending any such proceeding in advance of its final disposition.
Bally maintains insurance, at its expense, to protect itself and any director,
officer, employee or agent of Bally or another corporation, including the Issuer
and Bally's Park Place, against any such expense, liability or loss, whether or
not Bally would have the power to indemnify such person against such expense,
liability or loss under state law.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
II-1
<PAGE> 94
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<S> <C> <C>
1 Form of Purchase Agreement.
3(i) Certificate of Incorporation of the Issuer, as amended to date.
3(ii) Amended and Restated By-laws of the Issuer, as amended to date.
** 3(iii) Restated Certificate of Incorporation of Bally's Park Place.
3(iv) Amended and Restated By-laws of Bally's Park Place.
** 3(v) Amended and Restated Certificate of Incorporation of the Operating Company.
** 3(vi) Amended and Restated By-laws of the Operating Company.
*** 4(i) Form of Indenture governing the Notes.
*** 4(ii) Form of Note (included as part of Article II of the Indenture).
*** 4(iii) Form of Guaranty of Bally's Park Place of the Notes (included as part of
Article II of the Indenture).
** 4(iv) Indenture governing 11 7/8% First Mortgage Notes due 1999 of the Issuer (the
"Existing Note Indenture").
** 4(v) Form of Existing Note (included as Exhibit A to the Existing Note
Indenture).
** 4(vi) Guaranty of Bally's Park Place of Existing Notes.
5 Opinion of Benesch, Friedlander, Coplan & Aronoff.
* 10(i).1 Intercorporate Agreement dated as of June 24, 1993 among Casino Holdings,
Bally's Park Place and Bally.
* 10(i).2 Tax Sharing Agreement dated as of June 17, 1993 between Bally and Casino
Holdings.
* 10(i).3 Tax Sharing Agreement dated as of June 17, 1993 between Bally and Bally's
Park Place.
* 10(i).4 Amended and Restated Loan Agreement dated as of June 30, 1992 among Bally's
Park Place, the Operating Company, Bally's Park Place Realty Co. ("Realty
Co."), and the Senior Lender, as agent and the other banks named therein
governing the existing credit facility (filed as an exhibit to the Annual
Report on Form 10-K for Bally's Park Place for the year ended December 31,
1992).
10(i).5 Form of Mortgage and Security Agreement with Assignment of Rents among the
Operating Company, Realty Co., the Issuer and First Bank.
10(i).6 Form of Assignment of Leases and Rents among the Operating Company, Realty
Co. and First Bank.
10(i).7 Form of Note Pledge Agreement among the Operating Company, the Issuer and
First Bank.
10(i).8 Form of Operating Company Note.
10(i).9 Form of Intercreditor Agreement.
** 10(i).10 Mortgage and Security Agreement with Assignment of Rents dated August 31,
1989 among the Operating Company, Realty Co., the Issuer and First Fidelity
Bank.
** 10(i).11 Assignment of Leases and Rents dated August 31, 1989 among the Operating
Company, Realty Co. and First Fidelity Bank.
** 10(i).12 Note Pledge Agreement dated August 31, 1989 among the Operating Company,
Realty Co. and First Fidelity Bank.
** 10(i).13 $350,000,000 Note dated August 31, 1989.
** 10(ii).1 Lease Agreement dated June 8, 1977, between the Operating Company and the
Palley Blatt Company respecting the Marlborough-Blenheim Hotel Property
(filed as an exhibit to Bally's Park Place's Registration Statement on Form
S-1, Registration No. 2-65017).
</TABLE>
II-2
<PAGE> 95
<TABLE>
<S> <C> <C>
** 10(ii).2 Letter dated April 27, 1979, from the Operating Company to Alexander K.
Blatt and Norman Palley, as Trustees, agreeing to the purchase and
modification of the First Peoples National Bank of New Jersey's $4,000,000
mortgage loan to the Palley Blatt Company (filed as an exhibit to Bally's
Park Place's Registration Statement on Form S-1, Registration No. 2-65017).
** 10(iii).1.3 Retirement and Separation Agreement dated January 8, 1993 between Bally, the
Operating Company and Richard Gillman (filed as an exhibit to Bally's Park
Place's Annual Report on Form 10-K for the year ended December 31, 1992).
** 10(iii).4 Employment Agreement dated as of November 1, 1990, as amended, between Bally
and Arthur Goldberg (filed as an exhibit to Bally's Park Place's Annual
Report on Form 10-K for the year ended December 31, 1992).
** 10(iii).4.1 First Amendment to Employment Agreement effective as of November 1, 1991,
between Bally and Arthur Goldberg (filed as an exhibit to Bally's Park
Place's Annual Report on Form 10-K for the year ended December 31, 1992).
*** 10(iii).4.2 Second Amendment to Employment Agreement effective September 29, 1993
between Bally and Arthur Goldberg.
* 10(iii).5 Employment Agreement effective as of January 1, 1993 between Bally and
Wallace R. Barr.
* 10(iii).6 Employment Agreement effective as of January 1, 1993 between Bally and
Robert G. Conover.
*** 10(iii).7 Severance Agreement effective as of March 15, 1993 between Bally's Park
Place and C. Patrick McKoy.
* 10(iii).8 Settlement Agreement and Release dated July 30, 1993 between the Operating
Company and Charles Tannenbaum (filed as an exhibit to Bally's Casino
Holdings, Inc's. Amendment No. 1 to Registration Statement on Form S-1,
Registration No. 33-65438).
** 10(iii).9 Supplemental Executive Retirement Plan of the Operating Company effective as
of January 1, 1987.
** 10(iii).10 Amended and Restated Profit Sharing Plan and Trust Agreement of the
Operating Company effective as of January 1, 1984.
*** 12 Calculations of Historical and Pro Forma Ratios of Earnings to Fixed
Charges.
21 List of Subsidiaries of Bally's Park Place.
23.1 Consent of Ernst & Young.
23.2 Consent of Benesch, Friedlander, Coplan & Aronoff (contained in its Opinion
filed as Exhibit 5 hereto).
*** 23.3 Consent of American Appraisal Capital Services, Inc.
*** 24(i) Powers of Attorney for Bally's Park Place (set forth on page II-9).
*** 24(ii) Powers of Attorney for the Issuer (set forth on page II-8).
*** 25 Statement of Eligibility and Qualification of Trustee relative to the Notes
(bound separately).
</TABLE>
- ---------------
* Incorporated herein by reference and filed as an exhibit to Bally's Casino
Holdings, Inc.'s Registration Statement on Form S-1, Registration No.
33-65438, unless otherwise indicated.
** Incorporated herein by reference and filed as an exhibit to Bally's Park
Place Funding, Inc.'s Registration Statement on Form S-1, Registration No.
33-26464, unless otherwise indicated.
*** Previously filed.
(b) Financial Statement Schedules --
Report of Independent Auditors on Financial Statement Schedules
II-3
<PAGE> 96
<TABLE>
<S> <C>
Schedule II Amounts Receivable from Related Parties and Underwriters, Promoters, and
Employees Other Than Related Parties for the Years Ended December 31, 1992,
1991 and 1990.
Schedule V Property and Equipment for the Years Ended December 31, 1992, 1991 and 1990.
Schedule VI Accumulated Depreciation and Amortization of Property and Equipment for the
Years Ended December 31, 1992, 1991 and 1990.
Schedule VIII Valuation and Qualifying Accounts for the Years Ended December 31, 1992, 1991
and 1990.
Schedule X Supplementary Income Statement Information for the Years Ended December 31,
1992, 1991 and 1990.
</TABLE>
All other schedules specified under Regulation S-X for Bally's Park Place,
Inc. have been omitted because they are either not applicable, not required or
because the information required is included in the consolidated financial
statement or notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions or otherwise, the registrants
have been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrants in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrants will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by them is against public policy as
expressed in the Securities Act and will be governed by the lineal adjudication
of such.
The Registrants thereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as
a part of this Registration Statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4) or Rule 497(h) under the
Securities Act shall be deemed to be part of this Registration
Statement as at the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-4
<PAGE> 97
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF ATLANTIC
CITY, STATE OF NEW JERSEY, ON FEBRUARY 28, 1994.
BALLY'S PARK PLACE FUNDING, INC.
By: /s/ JOSEPH A. D'AMATO
Joseph A. D'Amato
Its: Vice President and
Treasurer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Joseph A. D'Amato, or any of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact, agent or
their substitutes may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ----------------------------------- ----------------------------------- ------------------
<S> <C> <C>
* Chairman of the Board and Chief February 28, 1994
___________________________________
Arthur M. Goldberg Executive Officer
/s/ JOSEPH A. D'AMATO Vice President and Treasurer February 28, 1994
- -----------------------------------
Joseph A. D'Amato (Chief Financial Officer and Chief
Accounting Officer)
</TABLE>
*By: /s/ JOSEPH A. D'AMATO
- ----------------------------------
Joseph A. D'Amato, attorney in
fact
II-5
<PAGE> 98
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF ATLANTIC
CITY, STATE OF NEW JERSEY, ON FEBRUARY 28, 1994.
BALLY'S PARK PLACE, INC.
By: /s/ JOSEPH A. D'AMATO
--------------------------
Joseph A. D'Amato
Its: Vice President and
Treasurer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Joseph A. D'Amato, or any of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact, agent or
their substitutes may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ----------------------------------- ----------------------------------- ------------------
<S> <C> <C>
* Chairman of the Board and Chief February 28, 1994
- ----------------------------------- Executive Officer
Arthur M. Goldberg
* President, Chief Operating Officer February 28, 1994
- ----------------------------------- and Director
Wallace R. Barr
* Director February 28, 1994
Lee S. Hillman
/s/ JOSEPH A. D'AMATO Vice President and Treasurer February 28, 1994
- ----------------------------------- (Chief Financial Officer and
Joseph A. D'Amato Chief Accounting Officer)
* Director February 28, 1994
- -----------------------------------
J. Kenneth Looloian
</TABLE>
*By: /s/ JOSEPH A. D'AMATO
--------------------------------
Joseph A. D'Amato, attorney
in fact
II-6
<PAGE> 99
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Report of Independent Auditors on Financial Statement Schedules......................... S-2
Schedule II Amounts Receivable from Related Parties and Underwriters, Promoters,
and Employees Other Than Related Parties for the Years Ended December
31, 1992, 1991 and 1990................................................ S-3
Schedule V Property and Equipment for the Years Ended December 31, 1992, 1991 and
1990................................................................... S-4
Schedule VI Accumulated Depreciation and Amortization of Property and Equipment for
the Years Ended December 31, 1992, 1991 and 1990....................... S-5
Schedule VIII Valuation and Qualifying Accounts for the Years Ended December 31,
1992, 1991 and 1990.................................................... S-6
Schedule X Supplementary Income Statement Information for the Years Ended December
31, 1992, 1991 and 1990................................................ S-7
</TABLE>
All other schedules specified under Regulation S-X for Bally's Park Place, Inc.
have been omitted because they are either not applicable, not required or
because the information required is included in the consolidated financial
statements or notes thereto.
S-1
<PAGE> 100
REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULES
We have audited the consolidated financial statements of Bally's Park
Place, Inc. (an indirect wholly owned subsidiary of Bally Manufacturing
Corporation) as of December 31, 1992 and 1991, and for each of the three years
in the period ended December 31, 1992, and have issued our report thereon dated
February 19, 1993, except for the "Summary of significant accounting policies"
and "Subsequent events" notes, as to which the date is June 16, 1993 (included
elsewhere in this Registration Statement). Our audits also included the
financial statement schedules listed in Item 16(b) of this Registration
Statement. These schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
ERNST & YOUNG
Philadelphia, Pennsylvania
February 19, 1993
S-2
<PAGE> 101
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES
AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES
OTHER THAN RELATED PARTIES
YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
<TABLE>
<CAPTION>
BALANCE AT END OF
BALANCE AT AMOUNT PERIOD
BEGINNING COLLECTED -----------------------
NAME OF DEBTOR OF PERIOD ADDITIONS AND OTHER CURRENT NON-CURRENT
- ------------------------------- ---------- --------- --------- ------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1992:
Bally Manufacturing
Corporation............... $ 50,000 $ $50,000 $ $
GNAC, CORP................... 2,700 2,700
---------- --------- --------- ------- -----------
$ 52,700 $ -- $52,700 $ -- $ --
---------- --------- --------- ------- -----------
---------- --------- --------- ------- -----------
1991:
Bally Manufacturing
Corporation............... $ 50,000 $ $ $ $50,000
GNAC, CORP................... 2,700 2,700
---------- --------- --------- ------- -----------
$ 52,700 $ -- $ -- $ -- $52,700
---------- --------- --------- ------- -----------
---------- --------- --------- ------- -----------
1990:
Bally Manufacturing
Corporation............... $ $50,000 $ $ $50,000
GNAC, CORP................... 2,700 2,700
---------- --------- --------- ------- -----------
$ -- $52,700 $ -- $ -- $52,700
---------- --------- --------- ------- -----------
---------- --------- --------- ------- -----------
</TABLE>
- ---------------
Notes:
(a) All amounts are exclusive of accrued interest.
(b) All amounts are secured by promissory notes, requiring payment on demand.
The notes bear interest at the prime rate of Bally's Park Place, Inc.'s
agent bank.
(c) The $50.0 million receivable due from Bally Manufacturing Corporation was
declared a dividend in 1992.
S-3
<PAGE> 102
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
SCHEDULE V -- PROPERTY AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF ADDITIONS AT OTHER END OF
CLASSIFICATION PERIOD COST RETIREMENTS CHANGES(C) PERIOD
- ----------------------- ------------ ------------ ----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1992:
Land................. $ 83,845 $ $ $ $ 83,845
Buildings and
improvements...... 535,274 122 261 3,837 538,972
Furniture, fixtures
and equipment..... 134,104 4,849 4,662 4,226 138,517
Construction in
progress.......... 3,672 5,297 (8,063) 906
------------ ------------ ----------- ---------- ----------
$756,895 $ 10,268 $ 4,923 $ -- $762,240
------------ ------------ ----------- ---------- ----------
------------ ------------ ----------- ---------- ----------
1991:
Land................. $ 83,739 $ 5 $ 5 $ 106 $ 83,845
Buildings and
improvements...... 537,101 565 5,534 3,142 535,274
Furniture, fixtures
and equipment..... 130,580 5,278 3,256 1,502 134,104
Construction in
progress.......... 3,348 5,074 (4,750) 3,672
------------ ------------ ----------- ---------- ----------
$754,768 $ 10,922 $ 8,795 $ -- $756,895
------------ ------------ ----------- ---------- ----------
------------ ------------ ----------- ---------- ----------
1990:
Land................. $ 81,759 $ 1,991 $ 11 $ $ 83,739
Buildings and
improvements...... 473,353 1,681 111 62,178 537,101
Furniture, fixtures
and equipment..... 122,703 10,165 2,579 291 130,580
Construction in
progress.......... 24,095 41,722 (62,469) 3,348
------------ ------------ ----------- ---------- ----------
$701,910 $ 55,559 $ 2,701 $ -- $754,768
------------ ------------ ----------- ---------- ----------
------------ ------------ ----------- ---------- ----------
</TABLE>
- ---------------
Notes:
(a) Property and equipment is depreciated principally on the straight-line
method, over lives ranging from 3 to 40 years.
(b) Retirements in 1991 include $6,288,000 relating to the closing and
demolition of a subsidiary's motel operations.
(c) Other changes represent principally amounts transferred from construction in
progress to buildings and improvements and furniture, fixtures and equipment
classifications.
S-4
<PAGE> 103
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
CLASSIFICATION OF PERIOD EXPENSES RETIREMENTS PERIOD
- ----------------------------------------- ---------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1992:
Buildings and improvements............. $137,532 $ 17,555 $ 177 $154,910
Furniture, fixtures and equipment...... 103,431 8,907 4,401 107,937
---------- ---------- ----------- ----------
$240,963 $ 26,462 $ 4,578 $262,847
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
1991:
Buildings and improvements............. $123,276 $ 17,432 $ 3,176 $137,532
Furniture, fixtures and equipment...... 97,618 8,874 3,061 103,431
---------- ---------- ----------- ----------
$220,894 $ 26,306 $ 6,237 $240,963
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
1990:
Buildings and improvements............. $108,292 $ 15,027 $ 43 $123,276
Furniture, fixtures and equipment...... 89,805 9,010 1,197 97,618
---------- ---------- ----------- ----------
$198,097 $ 24,037 $ 1,240 $220,894
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
- ---------------
Note:
Retirements in 1991 include $3,921,000 relating to the closing and
demolition of a subsidiary's motel operations.
S-5
<PAGE> 104
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
<TABLE>
<CAPTION>
ADDITIONS
----------------------
CHARGED
BALANCE AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- --------------------------------- ---------- --------- -------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
receivables:
1992............................. $6,210 $ 889 $ -- $5,299 $ 1,800
---------- --------- -------- ---------- ---------
---------- --------- -------- ---------- ---------
1991............................. $7,150 $ 1,846 $ -- $2,786 $ 6,210
---------- --------- -------- ---------- ---------
---------- --------- -------- ---------- ---------
1990............................. $5,400 $ 2,754 $ -- $1,004 $ 7,150
---------- --------- -------- ---------- ---------
---------- --------- -------- ---------- ---------
</TABLE>
- ---------------
Note: Deductions consist of write-offs of uncollectible amounts, net of
recoveries.
S-6
<PAGE> 105
BALLY'S PARK PLACE, INC.
(AN INDIRECT WHOLLY OWNED SUBSIDIARY OF BALLY MANUFACTURING CORPORATION)
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED DECEMBER 31, 1992, 1991 AND 1990
<TABLE>
<CAPTION>
CHARGED TO COSTS AND EXPENSES
-------------------------------
ITEM 1992 1991 1990
- -------------------------------------------------------------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Maintenance and repairs....................................... $17,548 $16,536 $16,102
------- ------- -------
------- ------- -------
Amortization:
CRDA credits............................................. $ 790 $ 1,661 $ 1,659
Other.................................................... 106 180 180
------- ------- -------
$ 896 $ 1,841 $ 1,839
------- ------- -------
------- ------- -------
Taxes other than payroll and income taxes:
State gaming taxes....................................... $22,396 $21,248 $21,155
Real estate and personal property taxes.................. 12,196 11,474 10,226
------- ------- -------
$34,592 $32,722 $31,381
------- ------- -------
------- ------- -------
Advertising................................................... $ 9,032 $ 8,863 $ 9,974
------- ------- -------
------- ------- -------
</TABLE>
S-7
<PAGE> 1
EXHIBIT 1
BALLY'S PARK PLACE FUNDING, INC.
(a Delaware corporation)
________% First Mortgage Notes due 2004
PURCHASE AGREEMENT
____________, 1994
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
JEFFERIES & COMPANY, INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
LIBRA INVESTMENTS, INC.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Dear Sirs:
Bally's Park Place Funding, Inc., a Delaware corporation (the "Company"),
confirms its agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch"), Jefferies & Company, Inc., Donaldson,
Lufkin & Jenrette Securities Corporation and Libra Investments, Inc. (together,
the "Underwriters") with respect to the sale by the Company and the purchase by
the Underwriters, acting severally and not jointly, of $425,000,000 principal
amount of its ______% First Mortgage Notes due 2004 (the "Securities"). The
Securities are to be issued pursuant to an indenture dated as of ________, 1994
(the "Indenture") among the Company, Bally's Park Place, Inc., a Delaware
corporation, as guarantor (the "Guarantor"), Bally's Park Place, Inc., a New
Jersey corporation (the "Operating Company"), Bally's Park Place Realty Co.,
("Realty Co."), a New Jersey corporation and First Bank National Association, a
______________ , as trustee (the "Trustee").
<PAGE> 2
Payment of principal and interest on the Securities will be guaranteed (the
"Guaranty") by the Guarantor. The Securities will be secured by certain
properties and assets of the Operating Company, a wholly owned subsidiary of
the Guarantor, and property of Realty Co., a wholly owned subsidiary of the
Operating Company. In order to create the security interests in such
properties and assets and to determine the relative rights therein of the
holders of the Securities, the Guarantor, the Company, the Operating Company
and Realty Co., as the case may be, will execute and deliver the Mortgage and
Security Agreement with Assignment of Rents, the Assignment of Leases and Rents
and the Note Pledge Agreement; such documents are sometimes collectively
referred to herein as the "Security Documents," and the properties and assets
subject thereto are collectively referred to as the "Collateral."
Prior to the purchase and public offering of the Securities by the several
Underwriters, the Company and Merrill Lynch, acting on behalf of the several
Underwriters, shall enter into an agreement substantially in the form of
Exhibit A hereto (the "Pricing Agreement"). The Pricing Agreement may take the
form of an exchange of any standard form of written telecommunication between
the Company and Merrill Lynch and shall specify such applicable information as
is indicated in Exhibit A hereto. The offering of the Securities will be
governed by this Agreement, as supplemented by the Pricing Agreement. From and
after the date of the execution and delivery of the Pricing Agreement, this
Agreement shall be deemed to incorporate the Pricing Agreement.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-1 (No. 33- 51765) and a
related preliminary prospectus for the registration of the Securities under the
Securities Act of 1933 (the "1933 Act"), has filed such amendments thereto and
such amended prospectuses as may have been required to the date hereof, and
will file such additional amendments thereto and such amended prospectuses as
may hereafter be required. Such registration statement (as amended) and the
prospectus constituting a part thereof (including in each case the information,
if any, deemed to be part thereof pursuant to Rule 430A(b) of the rules and
regulations of the Commission under the 1933 Act (the "1933 Act Regula-
2
<PAGE> 3
tions"), as from time to time amended or supplemented pursuant to the
1933 Act) are hereinafter referred to as the "Registration Statement" and the
"Prospectus," respectively, except that if any revised prospectus shall be
provided to the Underwriters by the Company in connection with the offering of
the Securities which differs from the Prospectus on file at the Commission at
the time the Registration Statement becomes effective (whether or not such
revised prospectus is required to be filed by the Company pursuant to Rule
424(b) of the 1933 Act Regulations), the term "Prospectus" shall refer to such
revised prospectus from and after the time it is first provided to the
Underwriters for such use.
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Underwriters deem advisable after the
Registration Statement becomes effective and the Pricing Agreement has been
executed and delivered.
Section 1. Representations and Warranties.
(a) The Company and the Guarantor, jointly and severally, represent and
warrant to each Underwriter as of the date hereof and as of the Pricing
Agreement (such latter date being hereinafter referred to as the
"Representation Date") as follows:
(i) At the time the Registration Statement becomes effective and at
the Representation Date, the Registration Statement will comply in all
material respects with the requirements of the 1933 Act and the 1933 Act
Regulations and the Trust Indenture Act of 1939, as amended, and the rules
and regulations of the Commission thereunder (the "1939 Act"), 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 statements
therein not misleading. The Prospectus, at the Representation Date (unless
the term "Prospectus" refers to a prospectus which has been provided to the
Underwriters by the Company for use in connection with the offering of the
Securities which differs from the Prospectus on file at the Commission at
the time the Registration Statement
3
<PAGE> 4
becomes effective, in which case at the time it is first
provided to the Underwriters for such use) and at Closing Time referred to
in Section 2, will not include 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
or Prospectus made in reliance upon and in conformity with information
furnished to the Company in writing by the Underwriters expressly for use in
the Registration Statement or Prospectus.
(ii) The accountants who certified the financial statements and
supporting schedules included in the Registration Statement are
independent public accountants as required by the 1933 Act and the 1933
Act Regulations.
(iii) The consolidated financial statements and related notes included
in the Registration Statement present fairly the financial position of
the Company and its consolidated subsidiaries as of the dates indicated
and the results of their operations for the periods specified; except as
otherwise stated in the Registration Statement, said financial
statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis; and the
supporting schedules included in the Registration Statement present
fairly the information required to be stated therein. The financial
information and statistical data set forth in the Prospectus under the
captions "Prospectus Summary," "Summary Financial Data," "Consolidated
Capitalization," "Selected Financial Data," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" are
prepared on an accounting basis consistent with such financial
statements, except as otherwise stated therein.
4
<PAGE> 5
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated or
contemplated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Guarantor and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, (B)
there have been no transactions entered into by the Guarantor or any of its
subsidiaries, other than those in the ordinary course of business, which are
material with respect to the Guarantor and its subsidiaries considered as one
enterprise, and (C) there has been no dividend or distribution of any kind
declared, paid or made by the Guarantor on any class of its capital stock.
(v) Each of the Guarantor and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of its state of incorporation with corporate power and authority to
own, lease and operate its respective properties and to conduct its
respective business as described in the Prospectus; and each of the
Guarantor and its subsidiaries 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 to qualify
would not have a material ad- verse effect on the condition, financial or
otherwise, or the earnings or business affairs of the Guarantor and its
subsidiaries considered as one enterprise.
(vi) The Guarantor had at the date indicated a duly authorized and
outstanding capitalization as set forth in the Prospectus under
"Consolidated Capitalization;" the
5
<PAGE> 6
shares of issued and outstanding capital stock of the Guarantor
have been duly authorized and validly issued and are fully paid and
non-assessable.
(vii) All of the issued and outstanding capital stock of each
subsidiary of the Guarantor has been duly authorized and validly issued, is
fully paid and non-assessable, is directly or through subsidiaries wholly
owned by the Guarantor, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, transfer restriction, claim or equity (except
those restrictions on transferability set forth in the charter documents of
such subsidiaries as required by the New Jersey Casino Control Act (the
"Casino Control Act")). Except for transactions described in the
Prospectus, there are no outstanding rights, warrants or options to acquire,
or instruments convertible into or exchangeable for, or agreements or
understandings with respect to the sale or issuance of, any shares of
capital stock of or other equity interest in any subsidiary of the
Guarantor.
(viii) The Securities have been duly and validly authorized by the
Company and the Securities, when authenticated by the Trustee and issued,
sold and delivered in accordance with this Agreement and the Indenture, will
have been duly and validly executed, authenticated, issued and delivered and
will constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to the
benefits provided by the Indenture, except as such enforcement may be
limited by (A) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect
relating to creditors' rights generally and (B) general principles of equity
(regardless of whether such enforcement may be sought in a proceeding in
equity or at law) and except that the waiver of rights under usury laws
contained in Section 515 of the Indenture may be unenforceable. The
Securities
6
<PAGE> 7
conform in all material respects to the description thereof contained
in the Prospectus.
(ix) The Guaranty has been duly and validly authorized by the
Guarantor, and the Guaranty, when the Notes are authenticated by the
Trustee, will constitute valid and binding obligations of the Guarantor,
enforceable against the Guarantor in accordance with their terms and
entitled to the benefits provided by the Indenture, except as such
enforcement may be limited by (A) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and (B) general principles of
equity (regardless of whether such enforcement may be sought in a proceeding
in equity or at law) and except that the waiver of rights under usury laws
contained in Section 515 of the Indenture may be unenforceable. The
Guaranty conforms in all material respects to the description thereof
contained in the Prospectus.
(x) The Indenture has been duly and validly authorized by the
Guarantor, the Company, the Operating Company and Realty Co., and the
Indenture, when executed and delivered by the Guarantor, the Company, Realty
Co., the Operating Company and the Trustee, will constitute a valid and
binding obligation of the Guarantor, the Company, the Operating Company and
Realty Co. enforceable against the Guarantor, the Company, the Operating
Company and Realty Co. in accordance with its terms, except as such
enforcement may be limited by (A) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and (B) general principles of
equity (regardless of whether such enforcement may be sought in a proceeding
in equity or at law) and except that the waiver of rights under usury laws
contained in Section 515 of the Indenture may be unenforceable. The
Indenture conforms in all mate-
7
<PAGE> 8
rial respects to the description thereof contained in the Prospectus.
(xi) This Agreement and the Pricing Agreement have been duly and
validly authorized, executed and delivered by the Guarantor, the Company and
the Operating Company and are valid and binding obligations of the
Guarantor, the Company and the Operating Company enforceable against the
Guarantor, the Company and the Operating Company in accordance with their
terms, except as such enforcement may be limited by (A) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (B) general principles of equity (regardless of whether such
enforcement may be sought in a proceeding in equity or at law) and except as
rights to indemnity and contribution hereunder may be limited by state or
federal securities laws or the public policy underlying such laws.
(xii) The Security Documents have been duly and validly authorized by
the Company, the Operating Company and Realty Co. as the case may be, and,
when executed and delivered by the Company, the Operating Company and Realty
Co., as the case may be, at or prior to the Closing Date, will constitute
valid and binding obligations of the Company, the Operating Company and
Realty Co., as the case may be, enforceable against the Company, the
Operating Company and Realty Co., as the case may be, in accordance with
their respective terms, except as such enforcement may be limited by (A)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (B) general principles of equity (regardless of whether such
enforcement may be sought in a proceeding in equity or at law); upon (x) the
release or cancellation of the mortgages and security agreements with
assignments of leases and rents and the assignments of leases and rents
(collectively, the
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<PAGE> 9
"Existing Mortgages") encumbering the real property portion of the
Collateral relating to (A) the Company's 11 7/8% First Mortgage Notes due
1999 (the "Existing Notes") and (B) the Loan Agreement dated as of June 30,
1992 by and among the Operating Company, the Guarantor, Realty Co. and First
Fidelity Bank, N.A., New Jersey (the "Senior Lender"), as agent for the
banks signatory thereto (the "Existing Loan Agreement"), (y) the termination
of the UCC Financing Statements encumbering the property described therein
relating to the Existing Notes and the Existing Loan Agreement, and (z) the
completion of all necessary registrations, recordings and filings thereof
under applicable law, as amended, encumbering the real property portion of
the Collateral, the Mortgage will create a valid first encumbrance lien in
and upon the real property portion of the Collateral, provided, however,
that the lien of the Mortgage will rank pari passu with the lien of security
documents relating to the new loan agreement to be entered into by and among
the Operating Company, the Guarantor, Realty Co., [the Company] and the
Senior Lender (the "New Loan Agreement"), and, except as set forth in the
Security Documents and the UCC-1 Financing Statements (the "Financing
Statements") or as described in the Prospectus, the Collateral is not
subject to any lien, charge, security interest or other encumbrance prior in
right to the security interests that will be created by the Security
Documents and the Financing Statements. The Security Documents conform in
all material respects to the description thereof in the Prospectus.
(xiii) Neither the Guarantor nor any of its subsidiaries is in
violation of its charter or by-laws and neither the Guarantor nor any of its
subsidiaries is in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which the Guarantor or any of its subsidiaries is a party or by which it or
any of them
9
<PAGE> 10
may be bound, or to which any of the property or assets of the
Guarantor or any of its subsidiaries is subject except for those defaults
which individually or in the aggregate would not have a material adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Guarantor and its subsidiaries
considered as one enterprise or would not materially adversely affect the
consummation of the transactions contemplated by this Agreement; and, upon
(x) the effectiveness of the New Loan Agreement and the termination of the
Existing Loan Agreement and the security documents relating thereto, and (y)
the purchase by the Company of certain out- standing Existing Notes, the
defeasance by the Company of the remaining outstanding Existing Notes and
the discharge of the indenture and release of the security documents
relating thereto, the execution, delivery and performance of this Agreement,
the Pricing Agreement, the Indenture, the Guaranty and the Security
Documents and the consummation of the transactions contemplated herein and
therein, including the issuance, sale and delivery of the Securities and the
Guaranty, will not conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Guarantor or any of its
subsidiaries pursuant to any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Guarantor 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 Guarantor or any of its
subsidiaries is subject, except such breaches or defaults as would not have
a material adverse effect on the condition, financial or otherwise, or the
earnings , business affairs or business prospects of the Guarantor and its
subsidiaries considered as one enterprise or would not materially adversely
affect the consummation of the transactions contemplated by this Agreement,
nor will such actions result in any violation of the provisions of the
charter or by-laws of the
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<PAGE> 11
Guarantor or any of its subsidiaries or any applicable law,
administrative regulation or administrative or court decree.
(xiv) No labor dispute with the employees of the Guarantor or any of
its subsidiaries exists or, to the knowledge of the Guarantor, is imminent;
and the Guarantor is not aware of any existing or imminent labor disturbance
by the employees of any principal suppliers or contractors of the Guarantor
or any of its subsidiaries which might be expected to result in any material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Guarantor and its subsidiaries
considered as one enterprise.
(xv) Other than as set forth in the Prospectus, there is no action,
suit or proceeding before or by any court or governmental agency, or body,
domestic or foreign, now pending, or to the knowledge of the Guarantor and
its subsidiaries, threatened, against or affecting the Guarantor or any of
its subsidiaries, which is required to be disclosed in the Prospectus wherein
an unfavorable ruling, finding or decision would result in any material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Guarantor and its subsidiaries
considered as one enterprise, or which would materially and adversely affect
the properties or assets thereof or which would materially or adversely
affect the consummation of this Agreement; all pending legal or governmental
proceedings to which the Guarantor or any subsidiary is a party or of which
any of their respective property or assets is the subject which are not
described in the Prospectus, including ordinary routine litigation incidental
to the business, are, considered in the aggregate, not material; and there
are no contracts or documents of the Company required to be filed as exhibits
to the Registration Statement by the 1933 Act or by
11
<PAGE> 12
the 1933 Act Regulation which have not been so filed.
(xvi) The Guarantor and its subsidiaries own, license or possess, or
can acquire on reasonable terms, the 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 and trade names presently
employed by them in connection with the business now operated by them, and
neither the Guarantor nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to
any such property, and such property has not been the subject of any
unfavorable decision, ruling or finding, which would result in any material
adverse change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Guarantor and its subsidiaries
considered as one enterprise.
(xvii) No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the sale of
the Securities hereunder, except such as may be required under the 1933 Act
or the 1933 Act Regulations and the qualification of the Indenture under the
1939 Act, which qualification has been obtained or, if the Registration
Statement has not yet become effective as of the date hereof, will be
obtained at such time as the Registration Statement becomes effective and
except such as may be required under state securities laws and such approvals
as may be required by the New Jersey Casino Control Commission and the New
Jersey Division of Gaming Enforcement (the "Gaming Authorities"), which such
Gaming Authorities approvals have been obtained or will be obtained prior to
the Closing Time (as defined).
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<PAGE> 13
(xviii) The Guarantor and its sub sidiaries possess such certificates,
licenses, authorities or permits and other governmental authorizations
(collectively, "Permits") issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now operated
by them (which Permits are valid and in full force and effect) the absence
of which would have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Guarantor and its subsidiaries considered as one enterprise, and are
operating in compliance with the Permits in all material respects, and
neither the Guarantor nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such Permit
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would materially and adversely affect the condition,
financial or otherwise, or the earnings, business affairs or business
prospects of the Guarantor and its subsidiaries considered as one enterprise.
(xix) Upon (x) the effectiveness of the New Loan Agreement and the
termination of the Existing Loan Agreement and the security documents
relating thereto, and (y) the purchase by the Company of certain outstanding
Existing Notes, the defeasance by the Company of the remaining outstanding
Existing Notes and the discharge of the indenture and release of the security
documents relating thereto, no default or event of default with respect to
any Indebtedness (as such term is defined in the Indenture) entitling the
holders thereof to accelerate the maturity thereof exists or will exist as a
result of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby and the Guarantor and its subsidiaries
have duly performed or observed all material obligations, agreements,
covenants or conditions contained in any material contract, in-
13
<PAGE> 14
denture, mortgage, agreement or instrument relating to any Indebtedness.
(xx) Each of the Guarantor, the Operating Company, the Company and
Realty Co., as the case may be, have full corporate power and authority to
execute, deliver and perform their obligations under this Agreement, the
Pricing Agreement, the Guaranty, the Security Documents and the Indenture and
the Company and the Guarantor have full corporate power and authority to
issue, sell and deliver the Securities and the Guaranty respectively.
(xxi) The Guarantor and each of its subsidiaries have good and
marketable title to, or valid leasehold interests in, their respective
properties, free and clear of all material liens, charges and encumbrances
and equities of record, except for Permitted Encumbrances (as defined in the
Mortgage) and as set forth in the Security Documents and the Prospectus and
except for the Existing Mortgages; and at the Closing Time, the Guarantor
will have good and marketable title to the Collateral, free and clear of all
liens and defects, except as set forth in the Security Documents or reflected
in the Prospectus. The properties of the Guarantor and its subsidiaries are
in good repair (reasonable wear and tear excepted), adequately insured and
suitable for their respective uses. Any real properties held under lease by
the Guarantor and its subsidiaries are held by them under valid subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the conduct of the business of the Guarantor and its
subsidiaries taken as a whole.
(xxii) Neither the Guarantor nor any subsidiary is, or as a result of
the transactions contemplated by the Prospectus would be, required to make
any filing or to register under the Investment Company Act or is or will
become a "holding company" or a "subsidiary company" of a "registered holding
company," as defined in the Public Utility Holding
14
<PAGE> 15
Company Act of 1935, as amended. Neither the Company nor the Guarantor nor
any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the issuance, execution or delivery of the Securities
to violate Regulation G (12 C.F.R. Part 207), Regulation U (12 C.F.R. Part
221) or Regulation X (12 C.F.R. Part 224), insofar as said Regulation applies
to Regulations G and U, of the Board of Governors of the Federal Reserve
System, in each case as in effect now or as the same may hereafter be in
effect at the Closing Time.
(xxiii) All United States federal income tax returns of Bally
Manufacturing Corporation ("Bally") and its consolidated subsidiaries,
including the Guarantor and each of its subsidiaries, required by law to be
filed have been filed and all taxes shown by the said 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 except for payments of
certain taxes owed by U.S. Health, Inc. for which an extension has been
requested. All United States federal income tax returns of Bally and its
consolidated subsidiaries, including the Guarantor and its subsidiaries,
through the fiscal year ended 1982 have been settled and no assessment in
connection therewith has been made against the Guarantor or Bally in
connection with the business of the Guarantor. The Guarantor and its
subsidiaries have filed all other tax returns which are required to have been
filed by them pursuant to applicable state, local or other law except insofar
as the failure to file such returns individually and in the aggregate would
not have a material adverse effect on the condition, financial or otherwise,
or on the earnings, business affairs or business prospects of the Guarantor
and its subsidiaries considered as one enterprise, and have paid all taxes
due pursuant to said returns or pursuant to any assessment received by the
Guarantor or its subsidiaries, except for such taxes, if any, as
15
<PAGE> 16
are being contested in good faith and as to which adequate reserves have been
provided. The charges, accruals and reserves on the consolidated books of
the Guarantor in respect of any income and corporation tax liability for any
years not finally determined are adequate (within the meaning of GAAP) to
meet any assessments or re-assessments for additional income tax for any
years not finally determined, except to the extent of any inadequacy which
would not have a material adverse effect on the condition, financial or
otherwise, or on the earnings, business affairs or business prospects of the
Guarantor and its subsidiaries considered as one enterprise.
(xxiv) The Guarantor 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.
(xxv) The Guarantor and its subsidiaries and Bally have all
governmental licenses and other authorizations necessary to carry on a gaming
business in New Jersey, as such business is presently conducted and to
otherwise own their respective properties and conduct their respective
businesses as described in the Prospectus. Neither the Guarantor nor any of
its subsidiaries has reason to believe that any of the Gaming Authorities are
considering modifying, suspending or revoking any of the gaming licenses held
by the Guarantor or any subsidiary or Bally necessary to carry on a gaming
business in New Jersey in
16
<PAGE> 17
such a way as to have a material adverse effect on the Guarantor and its
subsidiaries taken as a whole, and, to their knowledge, neither the Gaming
Authorities nor any other governmental agency is investigating either the
Guarantor or any of its subsidiaries or Bally or any directors or executive
officers of the Guarantor or any of its subsidiaries or Bally other than in
the ordinary course of administrative review. To the best knowledge of the
Guarantor and any of its subsidiaries, there is no existing basis for the
Gaming Authorities to deny the renewal of the current license(s) held by the
Guarantor or any of its subsidiaries or Bally to conduct gaming operations in
New Jersey.
(xxvi) There are no holders of securities of the Guarantor or its
subsidiaries who by reason of the filing of the Registration Statement under
the 1933 Act have the right to request the Guarantor or any of its
subsidiaries to register under the 1933 Act securities held by them.
(xxvii) The Guarantor is, and immediately after the Closing time will
be, Solvent. As used herein, the term "Solvent" means, with respect to the
Guarantor on a particular date, that on such date (A) the fair market value
of the assets of the Guarantor is greater than the total amount of
liabilities (including contingent liabilities) of the Guarantor, (B) the
present market value of the assets of the Guarantor is greater than the
amount that will be required to pay the probable liabilities of the Guarantor
on its debts as they become absolute and matured, (C) the Guarantor is able
to realize upon its assets and pay its debts and other liabilities, including
contingent obligations, as they mature, and (D) the Guarantor does not have
unreasonably small capital.
(xxviii) The Guarantor and its subsidiaries have conducted and are
conducting their business in compliance with all applicable federal, state
and local laws, rules, regu-
17
<PAGE> 18
lations, decisions, directives and orders, except where the failure to do so
would not, in the aggregate, have a material adverse effect on the condition,
financial or otherwise, or on the earnings, business affairs or business
prospects of the Guarantor and its subsidiaries considered as one enterprise.
(b) Any certificate signed by any officer of the Guarantor or any
subsidiary of the Guarantor and delivered to the Underwriters or to counsel for
the Underwriters shall be deemed a representation and warranty by the
Guarantor or such subsidiary to each Underwriter as to the matters covered
thereby.
Section 2. Sale and Delivery to Underwriters; Closing.
(a) 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
agreed upon by the Underwriters and the Company and set forth in the Pricing
Agreement, the principal amount of Securities set forth in Schedule A opposite
the name of such Underwriter (except as otherwise provided in the Pricing
Agreement).
(1) If the Company has elected not to rely upon Rule 430A under the
1933 Act Regulations, the initial public offering price of the Securities to
be paid by the several Underwriters and certain other principal terms of the
Securities have each been determined and set forth in the Pricing Agreement,
dated the date hereof, and an amendment to the Registration Statement and the
Prospectus will be filed before the Registration Statement becomes effective.
(2) If the Company has elected to rely upon Rule 430A under the 1933
Act Regulations, the purchase price of the Securities to be paid by the
several Underwriters and certain other principal terms of the Securities
shall be determined by agreement
18
<PAGE> 19
between the Underwriters and the Company. In the event that such prices have
not been agreed upon and the Pricing Agreement has not been executed and
delivered by all parties thereto by the close of business on the fourth
business day following the date of this Agreement, this Agreement shall
terminate forthwith, without liability of any party to any other party,
unless otherwise agreed to by the Company and the Underwriters.
(b) Payment of the purchase price for, and delivery of certificates for,
the Securities shall be made at the office of Skadden, Arps, Slate, Meagher &
Flom, 919 Third Avenue, New York, New York, or at such other place as shall be
agreed upon by the Underwriters and the Company, at 10:00 A.M. on ________,
1994 (unless postponed in accordance with the provisions of Section 10), or
such other time not later than ten 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 "Closing Time"). Payment shall be made to the Company by
wire transfer to an account or accounts to be designated by the Company at
least one business day prior to Closing Time in immediately available funds,
against delivery of the Securities to the Underwriters. The Securities shall
be in such denominations ($1,000 or integral multiples thereof) and registered
in such names as the Underwriters may request in writing at least two business
days before Closing Time. The Securities will be made available for
examination and packaging by the Underwriters not later than 10:00 A.M. on the
last business day prior to Closing Time.
Section 3. Covenants of the Company. The Company and the Guarantor covenant
with the Underwriters as follows:
(a) The Company and the Guarantor will notify the Underwriters
immediately, and (if requested by the Underwriters) will confirm the notice in
writing, (i) of the effectiveness of the Registration Statement and any
amendment thereto (including any post-effective amendment), (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional
19
<PAGE> 20
information, and (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose. The Company and the Guarantor 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.
(b) The Company and the Guarantor will give the Underwriters notice of
their intention to file or prepare any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement to the
Prospectus (including any revised prospectus which the Company proposes for use
by the Underwriters in connection with the offering of the Securities which
differs from the prospectus on file at the Commission at the time the
Registration Statement becomes effective, whether or not such revised
prospectus is required to be filed pursuant to Rule 424(b) of the 1933 Act
Regulations), will furnish the Underwriters with copies of any such amendment
or supplement a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file any such amendment or supplement or use
any such prospectus to which the Underwriters or counsel for the Underwriters
shall reasonably object.
(c) The Company and the Guarantor will deliver to the Underwriters as
many signed and conformed copies of the Registration Statement as originally
filed and of each amendment thereto (including exhibits filed therewith) as the
Underwriters may reasonably request.
(d) The Company and the Guarantor will furnish to each Underwriter, from
time to time during the period when the Prospectus is required to be delivered
under the 1933 Act or the Securities Exchange Act of 1934 (the "1934 Act"),
such number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request for the purposes contemplated by the 1933
Act or the 1934 Act or the respective applicable rules and regulations of the
Commission thereunder.
(e) If any event shall occur as a result of which it is necessary, in the
opinion of counsel for the Underwriters, to amend or supplement the Prospectus
in order to make the Prospectus not misleading in the
20
<PAGE> 21
light of the circumstances existing at the time it is delivered to a purchaser,
the Company and the Guarantor will forthwith amend or supplement the Prospectus
(in form and substance reasonably satisfactory to counsel for the Underwriters)
so that, as so amended or supplemented, the Prospectus will not include an
untrue statement of material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to the purchaser, not misleading, and the
Company and the Guarantor will furnish to the Underwriters a reasonable number
of copies of such amendment or supplement.
(f) The Company and the Guarantor will endeavor, in cooperation with the
Underwriters, to qualify the Securities for offering and sale under the
applicable securities laws of such states and other jurisdictions of the United
States as the Underwriters may designate; provided, however, that neither the
Guarantor nor the Company shall be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified or take any
action that would subject it to general service of process in suits or taxation
in any jurisdiction where it is not so subject. In each jurisdiction in which
the Securities have been so qualified, the Guarantor and the Company will file
such statements and reports as may be required by the laws of such jurisdiction
so long as is required for the distribution of the Securities.
(g) The Guarantor will make generally available to its security holders
as soon as practicable, but not later than 60 days after the close of the
period covered thereby, an earnings statement (in form complying with the
provisions of Rule 158 of the 1933 Act Regulations) covering a twelve-month
period beginning not later than the first day of the Guarantor's fiscal quarter
next following the "effective date" (as defined in said Rule 158) of the
Registration Statement.
(h) The Company will use the net proceeds received by it from the sale of
the Securities in the manner specified in the Prospectus under "Use of
Proceeds," including the defeasance and retirement of all the Existing
Notes at the Closing Time.
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<PAGE> 22
(i) If, at the time that the Registration Statement becomes effective,
any information shall have been omitted therefrom in reliance upon Rule 430A of
the 1933 Act Regulations, then immediately following the execution of the
Pricing Agreement, the Company will prepare, and file or transmit for filing
with the Commission in accordance with such Rule 430A and Rule 424(b) of the
1933 Act Regulations, copies of any amended Prospectus, or, if required by such
Rule 430A, a post effective amendment to the Registration Statement (including
an amended Prospectus), containing all information so omitted.
(j) So long as any of the Securities are outstanding, the Guarantor will
furnish to the Underwriters and the holders of the Securities as soon as
practicable after the end of each fiscal quarter and each fiscal year quarterly
unaudited or annual audited consolidated financial statements, as the case may
be, including statements of operations, balance sheets and statements of cash
flows, as the case may be, of the Guarantor that the Guarantor would be
required to include in annual or quarterly reports filed under Section 13 of
the 1934 Act, as amended, if the Guarantor had a class of securities listed on
a national securities exchange.
(k) The Company will supply the Underwriters with copies of all
correspondence to and from, and all documents issued to and by, the Commission
in connection with the registration of the Securities under the 1933 Act.
(l) Prior to the Closing Time, the Company and the Guarantor shall
furnish to the Underwriters, as soon as they have been prepared, copies of any
unaudited interim consolidated financial statements of the Guarantor and its
subsidiaries, for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statement and Prospectus.
(m) Prior to the Closing Time, neither the Guarantor nor any of its
subsidiaries will issue any press release or other communications directly or
indirectly or hold any press conference with respect to the Guarantor or any of
its subsidiaries, the condition, financial or otherwise, or the earnings,
business affairs or business prospects of any of them, without the prior
22
<PAGE> 23
written consent of the Underwriters, unless in the judgment of the Guarantor
and its counsel, and after notification to the Underwriters, such press release
or communication is required by law.
(n) Prior to the Closing Time, the Company and the Guarantor shall
deliver to you, in form and substance satisfactory to you, copies of one or
more commitments to issue title insurance prepared on the standard ALTA policy
form or local equivalent, pursuant to which title insurance companies
acceptable to you commit to issue a policy or policies (including, at your
request, reinsurance agreements) of title insurance insuring that the Mortgage
shall constitute a valid first encumbrance lien on the real property described
therein, in the amount of $425,000,000, provided, however, that the lien of
the Mortgage will rank pari passu with the lien of the security documents
relating to the New Loan Agreement. As soon as the policies are available
after the Closing Time, the Company and the Guarantor shall cause to be
delivered to you copies of such policies and, if any, endorsements, the
originals of which shall be delivered to the Trustee.
(o) Neither the Guarantor, the Operating Company, the Company, nor Realty
Co. will, directly or (other than through an Unrestricted Subsidiary (as
defined in the Indenture)) indirectly, without the prior consent of the
Underwriters, offer, sell, grant any option to purchase, or otherwise dispose
(or announce any offer, sale, grant of any option to purchase or other
disposition) of any debt securities of the Guarantor or its subsidiaries for a
period of 90 days after the date of the Prospectus, other than debt securities
representing indebtedness under the definition of Permitted Indebtedness (as
defined in the Indenture), except for clauses (vi) and (xi) thereunder.
Section 4. Payment of Expenses. The Guarantor will pay all expenses
incident to the performance of its obligations under this Agreement, including
(i) the printing and filing of the Registration Statement as originally filed
and of each amendment thereto, (ii) the printing of this Agreement, the Pricing
Agreement and the Indenture, (iii) the preparation, issuance and delivery of
the certificates for the Securities to the Underwriters, (iv) the fees and
disbursements of the Company's
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<PAGE> 24
counsel and accountants, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f), 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, (vi) the printing and delivery to the Underwriters of
copies of the Registration Statement as originally filed and each amendment
thereto, of the preliminary prospectuses, and of the Prospectus and any
amendments or supplements thereto, (vii) the fees and expenses of the Trustee,
(viii) the printing and delivery to the Underwriters of copies of the Blue Sky
Survey, (ix) the fee of the National Association of the Securities Dealers,
Inc. and (x) the fees charged by the rating agencies in connection with the
rating of the Securities.
If this Agreement is terminated by the Underwriters in accordance with the
provisions of Section 5 or Section 9(a)(i), the Company and the Guarantor shall
be jointly and severally liable to reimburse the Underwriters for all of their
reasonable actual out-of-pocket expenses, including the reasonable actual fees
and disbursements of counsel for the Underwriters.
Section 5. Conditions of Underwriters' Obligations. The obligations of
the Underwriters hereunder are subject to the accuracy of the representations
and warranties of the Guarantor and the Company herein contained, to the
performance by the Guarantor and the Company of their obligations hereunder,
and to the following further conditions:
(a) The Registration Statement shall have become effective not later than
5:30 P.M. on the date hereof, or with the consent of Merrill Lynch, at a later
time and date, not later, however, than 5:30 P.M. on the first business day
following the date hereof, or at such later time and date as may be approved by
the majority in interest of the Underwriters; and at Closing Time no stop order
suspending the effectiveness of the Registration Statement shall have been
issued under the 1933 Act or proceedings therefor initiated or threatened by
the Commission. If the Company has elected to rely upon Rule 430A of the 1933
Act Regulations, the price of the Securities and any price-related information
previously omitted from the effective Registration Statement pursu-
24
<PAGE> 25
ant to such Rule 430A shall have been transmitted to the Commission for filing
pursuant to Rule 424(b) of the 1933 Act Regulations within the prescribed time
period, and prior to Closing Time the Company shall have provided evidence
satisfactory to the Underwriters of such timely filing, or a post-effective
amendment providing such information shall have been promptly filed and
declared effective in accordance with the requirements of Rule 430A of the 1933
Act Regulations.
(b) At Closing Time the Underwriters shall have received:
(1) The opinion, dated as of Closing Time, of Benesch, Friedlander,
Coplan & Aronoff, counsel for the Company, in form and substance satisfactory
to counsel for the Underwriters, to the effect that:
(i) Each of the Guarantor and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under
the laws of its jurisdiction of incorporation.
(ii) Each of the Guarantor and its subsidiaries has corporate power and
authority to own, lease, license and operate its properties and to conduct
its respective business as described in the Prospectus.
(iii) To their knowledge, neither the Guarantor nor its subsidiaries is
required to be qualified as a foreign corporation to transact business in any
jurisdiction, except those jurisdictions where the failure to qualify would
not have a material adverse effect on the condition, financial or otherwise,
or the earnings or business affairs of the Company and its subsidiaries
considered as one enterprise.
(iv) The Guarantor has authorized, issued and outstanding capital stock
as set forth in the Prospectus under "Consolidated Capitalization" and the
shares of issued and outstanding capital stock of the Guarantor has
25
<PAGE> 26
been duly authorized and validly issued and are fully paid and non-assessable.
(v) All of the issued and outstanding capital stock of each subsidiary
of the Guarantor has been duly authorized and validly issued, is fully paid
and non-assessable and, to their knowledge, is directly or indirectly wholly
owned by the Guarantor, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, transfer restriction, claim or equity (except
those restrictions on transfer set forth in the charter documents of such
subsidiaries or required by the Casino Control Act, restrictions imposed by
applicable securities laws and the regulations promulgated thereunder or
pursuant to revolving credit facilities permitted under clause (i) of the
definition of "Permitted Indebtedness" in the Indenture). Except for
transactions described in the Prospectus, there are no outstanding rights,
warrants or options to acquire, or instruments convertible into or
exchangeable for, or agreements or understandings with respect to the sale or
issuance of, any shares of capital stock of or other equity interest in any
subsidiary of the Guarantor.
(vi) The Indenture has been duly and validly authorized, executed and
delivered by the Guarantor, the Company, the Operating Company and Realty
Co., and constitutes valid and binding obligations of the Company, the
Guarantor, the Operating Company and Realty Co., enforceable against them in
accordance with its terms, except as such enforcement may be subject to or
limited by (A) bankruptcy, insol- vency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in effect
relating to creditors' rights generally and (B) general principles of equity
(regardless of whether such enforcement may be sought in a proceeding in
equity or at law) and except that the waiver of rights under usury laws
contained in Section 515 of the Indenture may be unenforceable. The
Securities have been duly and validly autho-
26
<PAGE> 27
rized, executed, issued and delivered and, assuming authentication by the
Trustee, constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to the
benefits of the Indenture, except as such enforcement may be subject to or
limited by (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) general principles of equity (regardless
of whether such enforcement may be sought in a proceeding in equity or at
law) and except that the waiver of rights under usury laws contained in
Section 515 of the Indenture may be unenforceable. The Securities, the
Indenture, the Security Documents and the Guaranty conform to the
descriptions thereof contained in the Prospectus.
(vii) The Security Documents have been duly and validly authorized,
executed and delivered by the Guarantor, the Company, the Operating Company
and Realty Co. and constitute valid and binding obligations of the Guarantor,
the Company, the Operating Company and Realty Co. enforceable against the
Guarantor, the Company, the Operating Company and Realty Co., in accordance
with their respective terms, except as such enforcement may be subject to or
limited by (A) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) general principles of equity (regardless
of whether such enforcement may be sought in a proceeding in equity or at
law).
(viii) The provisions of the Note Pledge Agreement are effective to
create, in favor of the Trustee as security for the Obligations, including,
but not limited to, the Indebtedness, a valid security interest in the
Promissory Note. Assuming possession of the Promissory Note has been
obtained by the Trustee in New York and the Promissory Note continues to be
held by the Trustee, the security
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<PAGE> 28
interest of the Trustee in the Promissory Note will be perfected under the
Uniform Commercial Code as now in effect in the State of New York and such
security interest will be prior to any other security interest therein that
may be perfected thereunder.
(ix) The Guaranty of the Notes has been duly and validly authorized,
executed and delivered by the Guarantor and, assuming authentication of the
Securities by the Trustee, is a valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with its terms and
entitled to the benefits provided by the Indenture, except as such
enforcement may be subject to or limited by (A) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now
or hereafter in effect relating to creditors' rights generally and (B)
general principles of equity (regardless of whether such enforcement may be
sought in a proceeding in equity or at law) and except that the waiver of
rights under usury laws contained in Section 515 of the Indenture may be
unenforceable.
(x) Each of the Guarantor, the Company, the Operating Company and
Realty Co. has full corporate power and authority to enter into such of the
Agreement, the Pricing Agreement, the Indenture, the Guaranty and the
Security Documents to which it is a party and the Company has full corporate
power and authority to issue, sell, and deliver the Securities.
(xi) The Agreement and the Pricing Agreement have been duly and validly
authorized, executed and delivered by the Guarantor, the Company and the
Operating Company.
(xii) To their knowledge, all pending legal or governmental proceedings
to which the Guarantor or any subsidiary is a party or to which any of their
property is subject which are required to be disclosed in the Registration
Statement are so disclosed.
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<PAGE> 29
(xiii) They have been advised that the Registration Statement is
effective under the 1933 Act and, to their knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued
under the 1933 Act or proceedings therefor initiated or threatened by the
Commission.
(xiv) At the time the Registration Statement became effective and at
the Representation Date, the Registration Statement (other than the
financial statements and supporting schedules included therein, as to which
no opinion need be rendered) and the Statement of Eligibility and
Qualification of the Trustee on Form T-1 filed with the Commission complied
as to form in all material respects with the requirements of the 1933 Act,
the 1933 Act Regulations and the 1939 Act, as amended, and the rules and
regulations of the Commission thereunder.
(xv) To their knowledge, there are no contracts, indentures, mortgages,
loan agreements, notes, leases or other instruments required to be described
or referred to in the Registration Statement or to be filed as exhibits
thereto other than those described or referred to therein or filed as
exhibits thereto; the descriptions thereof or references thereto are correct
in all material respects; and, to their knowledge, no default on the part of
the Guarantor or any of its subsidiaries exists in the due performance or
observance of any material obligation, agreement, covenant or condition
contained in any such contract, indenture, mortgage, loan agreement, note,
lease or other instrument so described, referred to or filed. All
agreements, contracts, indentures, mortgages, loan agreements, notes, leases
and other instruments and documents known to us that are material to the
Guarantor and its subsidiaries taken as one enterprise have been filed as
exhibits to the Registration Statement.
(xvi) To their knowledge, no default with respect to any Indebtedness
known
29
<PAGE> 30
to them entitling the holders thereof to accelerate the maturity thereof
exists or will exist with notice or passage of time or as a result of the
execution and delivery of this Agreement or the consummation of the
transaction contemplated hereby and, to their knowledge, the Company has duly
performed or observed all material obligations, agreements, covenants, or
conditions contained in any contract, indenture, mortgage, agreement or
instrument relating to any Indebtedness.
(xvii) No authorization, approval, consent or order of any court or
governmental agency is required in connection with the sale of the Securities
to the Underwriters, except such as may be required under state securities
law, the 1933 Act or the 1933 Act Regulations, the 1939 Act or such approvals
as may be required by the Gaming Authorities; and, to their knowledge, the
execution and delivery of this Agreement, the Pricing Agreement, the
Indenture, the Guaranty and the Security Documents and the consummation of
the transactions contemplated herein and therein, including the issuance,
sale and delivery of the Securities, will not conflict with or constitute a
breach of, or default under, or, except as contemplated by the Indenture and
the Security Documents, result in the creation or imposition of any, lien,
charge or encumbrance upon any property or assets of the Guarantor or any of
its subsidiaries pursuant to any contract, indenture, mortgage, loan
agreement, note, lease or other instrument which is known to us and to which
the Guarantor 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 Guarantor
or any of its subsidiaries is subject, nor will such action result in any
violation of the provisions of the charter or by-laws of the Guarantor or any
subsidiary, or any applicable law, administrative regulation or, to their
knowledge, administrative or court decree.
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<PAGE> 31
(xviii) Neither the Guarantor nor any of its subsidiaries is, or as a
result of the transactions contemplated by the Prospectus would be, required
to make any filing or to register under the Investment Company Act or is or
will become a "holding company" or a "subsidiary company" of a "registered
holding company," as defined in the Public Utility Holding Company Act of
1935, as amended.
(xix) The Company's obligations under the Old Indenture have been
satisfied and discharged in accordance with the terms of Section 9.01 thereof
and are no longer of any effect except as to those obligations contained in
Sections 2.03, 2.04, 2.05, 2.06, 2.07, 5.01, 5.02, 8.07, 8.08, 9.02, 9.03 and
9.04 thereof and the obligations of the Company to indemnify the Trustee (as
defined in the Old Indenture) pursuant to Section 8.07 of the Old
Indenture, and the Trustee has provided written acknowledgement of such
discharge.
To the extent the opinion above involves questions of New Jersey law,
Benesch, Friedlander, Coplan & Aronoff may rely on the opinion of Dennis P.
Venuti, general counsel of the Company. To the extent the opinion above
involves questions of New York, an opinion of Pryor, Cashman, Sherman & Flynn
may be substituted to such extent.
(2) The opinion, dated as of Closing Time, of Sills Cummis Zuckerman
Radin Tischman Epstein & Gross, counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, to the effect that:
(i) All corporate action on the part of each of the Company, Realty Co.
and Operating Company necessary to authorize the execution, delivery and
performance of the Security Documents and financing statements has been
taken.
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<PAGE> 32
(ii) Each of the Company, Realty Co. and Operating Company has duly
executed and delivered each Security Document and each financing statement to
which it is a party.
(iii) Each Security Document, to the extent the laws of the state of
New Jersey are stated to govern such document, is the valid and binding
obligation of each grantor party thereto, enforceable against each grantor
part thereto in accordance with its terms, except as such enforcement may be
subject to or limited by (A) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights generally and (B) general principles of
equity (regardless of whether such enforcement may be sought in a proceeding
in equity or at law).
(iv) The Mortgage is in proper form so as to comply with recording
requirements of the State of New Jersey, and upon proper recordation of the
Mortgage in the real property recording office of Atlantic County, New Jersey
and the payment of the fees due in respect thereof, the Mortgage will create
in favor of the Trustee a valid and perfected mortgage lien against the real
property Collateral, securing payment of the obligations purported to be
secured thereby, and no further action will be required to perfect such lien.
(v) The provisions of the Mortgage are effective to create, in favor
of the Trustee for the benefit of the holders of Securities as security for
the Obligations, including, but not limited to, the Indebtedness (both as
defined in the Mortgage), a valid security interest in that portion of the
Collateral described therein which is subject to Article 9 of the New Jersey
Uniform Commercial Code (the "NJ UCC") and which constitutes personal
property or fixtures (the "Article 9 Collateral").
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<PAGE> 33
(vi) The financing statements are in appropriate form for filing in
the filing offices named in such opinion under the NJ UCC. To extent that
the filing of a financing statement is now effective to perfect a security
interest in the Article 9 Collateral under the NJ UCC, the security interest
in favor of the Trustee in the Article 9 Collateral will be perfected upon
the proper filing, acceptance of filing and presentation and acceptance of
the fees in respect of the filing of the financing statements in the filing
offices named in such opinion. The Uniform Commercial Code search report
identifies the correct filing offices and the correct debtor names to search
for the identity of persons who under the NJ UCC have on file financing
statements against the Operating Company and the Guarantor covering the
Article 9 Collateral as of the effective date of the UCC search report. The
UCC search report identifies no person who has filed a financing statement
covering the Article 9 Collateral in the filing offices prior to the
financing statements of the Trustee except as set forth on a schedule
thereto.
(vii) Based solely on a review of zoning ordinances, the applicable
zoning map and certificates of occupancy, the casino hotel operated by the
Operating Company may be operated as such in its present location in
compliance with all zoning rules, regulations, ordinances, statutes or
requirements applicable to the uses thereto.
(viii) The descriptions in the Registration Statement under the caption
"Investment Considerations--Limitation on Ability to Realize on Collateral"
and "--Gaming Regulation" and "Business--Gaming Regulation" insofar as such
statements constitute a summary of the provisions of the Casino Control Act
applicable to the Company, the Operating Company and the Guarantor when read
in their entirety present fairly, in all material respects, the provisions of
the Act.
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<PAGE> 34
(ix) No facts have come to their attention which would cause them to
believe that the sections of the Prospectus captioned "Investment
Considerations--Limitation on Ability to Realize on Collateral" and "--Gaming
Regulation" and "Business--Gaming Regulation", (i) at the time the
Registration Statement became effective contained an untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or (ii) as
of the date of the Prospectus and the Closing Time contained an untrue
statement of a material fact or omitted to state any material fact, required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading.
(x) To their knowledge, there is no pending or threatened action by
the Gaming Authorities to modify, suspend or revoke any of the gaming
licenses held by the Guarantor or any of its subsidiaries or Bally necessary
to carry on a gaming business in New Jersey and neither the Gaming
Authorities nor any other governmental agency is investigating either the
Guarantor or any of its subsidiaries or Bally or any directors or executive
officers of the Guarantor or any of its subsidiaries or Bally other than in
the ordinary course of licensing or administrative review (other than items
which will not adversely affect the continued validity of the casino license
held by the Operating Company or the casino service industry license of
Bally.
(xi) No authorization, approval, consent or order of any Gaming
Authority is required in connection with the sale of the Securities to the
Underwriters, except as such have been obtained.
(3) The favorable opinion, dated as of Closing Time, of counsel for the
Underwriters, with respect to the issuance and sale of the Securities, the
34
<PAGE> 35
Registration Statement and the Prospectus and such other related matters as the
Underwriters shall reasonably require.
(4) In giving their opinions required by subsections (a) (1) and (a) (3),
respectively, of this Section, counsel for the Company and counsel for the
Underwriters shall each additionally state that, in the course of preparation
by the Company and the Guarantor of the Registration Statement and Prospectus,
such counsel has participated in conferences with officers and other
representatives of the Company and the Guarantor, representatives of the
independent public accountants for the Company and the Guarantor,
representatives of the Underwriters and representatives of its counsel, at
which conferences the contents of the Registration Statement and Prospectus and
related matters were discussed and have reviewed certain other documents and,
although such counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement and the Prospectus, on the basis of the
foregoing, but without independent check or verification, such counsel confirms
to the Underwriters that nothing has come to their attention that would lead
them to believe that the Registration Statement, at the time it became
effective or at the Representation Date, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus, at the Representation Date (unless the term "Prospectus" refers to
a prospectus which has been provided to the Underwriters by the Company for use
in connection with the offering of the Securities which differs from the
Prospectus on file at the Commission at the Representation Date, in which case
at the time it is first provided to the Underwriters for such use) or at
Closing Time, included or includes an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. Without limiting the foregoing, such counsel may further state
that they assume no responsibility for, and have not independently verified,
the accuracy, completeness or fairness of the financial statements and
schedules and other financial data included in or excluded from the
Registration Statement or the exhibits to
35
<PAGE> 36
the Registration Statement, and they have not examined the accounting,
financial or statistical records from which such financial statements,
schedules and data are derived. Such counsel may also state that, although
certain portions of the Registration Statement (including financial statements
and schedules) have been included therein on the authority of "experts" within
the meaning of the 1933 Act, such counsel are not such experts with respect to
any portion of the Registration Statement including, without limitation, such
financial statements or schedules or the other financial data included therein.
(c) At 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
or any amendment or supplement thereto, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Guarantor and its subsidiaries considered as one
enterprise, other than as stated or contemplated in the Prospectus, whether or
not arising in the ordinary course of business, and the Underwriters shall have
received a certificate of the President or a Vice President of the Guarantor
and the chief financial or chief accounting officer of the Guarantor, dated as
of Closing Time, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties in Section 1 are true and
correct with the same force and effect as though expressly made at and as of
Closing Time, (iii) the Guarantor and its subsidiaries have com plied with all
agreements and satisfied all conditions on its part to be performed or
satisfied at or prior to 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 initiated or threatened by the Commission.
(d) At the time of the execution of this Agreement, the Underwriters
shall have received from Ernst & Young a letter dated such date, in form and
substance satisfactory to the Underwriters, to the effect that (i) they are
independent public accountants with respect to the Company and the Guarantor
and its subsidiaries within the meaning of the 1933 Act and the 1933 Act
Regulations; (ii) it is their opinion that the financial statements and
financial statement schedules includ-
36
<PAGE> 37
ed in the Registration Statement and covered by their opinions therein comply
as to form in all material respects with the applicable accounting requirements
of the 1933 Act and the 1933 Act Regulations; (iii) based upon limited
procedures set forth in detail in such letter, nothing has come to their
attention which causes them to believe that (A) the unaudited financial
statements and supporting schedules of the Guarantor and its subsidiaries
included in the Registration Statement do not comply as to form in all material
respects with the applicable accounting requirements of the 1933 Act and the
1933 Act Regulations or are not presented in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements included in the Registration Statement, (B) at
October 31, 1993, there was any change in the capital stock of the Guarantor
and its subsidiaries or any increase in the long term debt or any decrease in
consolidated net assets of the Guarantor and its subsidiaries as compared with
the amounts shown in the September 30, 1993 balance sheet included in the
Registration Statement or, during the period from October 1, 1993 to November
30, 1993, there were any decreases, as compared with the corresponding period
in the preceding year, in consolidated revenues, operating income or net income
of the Guarantor and its subsidiaries, or (C) at a specified date not more than
five days prior to the date of this Agreement, there has been any change in the
capital stock of the Guarantor and its subsidiaries or any increase in the
consolidated long term debt or any decrease in consolidated net assets of the
Guarantor and its subsidiaries as compared with the amounts shown in the
September 30, 1993 balance sheet included in the Registration Statement or,
during the period from October 1, 1993 to a specified date not more than five
days prior to the date of this Agreement, there were any decreases, as compared
with the corresponding period in the preceding year, in consolidated revenues,
operating income or net income of the Guarantor and its subsidiaries, except in
all instances for changes, increases or decreases which the Registration
Statement discloses have occurred or may occur; and (iv) in addition to the
examination referred to in their opinions and the limited procedures referred
to in clause (iii) above, they have carried out certain specified procedures,
not constituting an audit, with respect to certain amounts, percentages and
financial information which are included in the Registration State-
37
<PAGE> 38
ment and Prospectus and which are specified by the Underwriters, and have found
such amounts, percentages and financial information to be in agreement with the
relevant accounting, financial and other records of the Guarantor and its
subsidiaries identified in such letter.
(e) At Closing Time the Underwriters shall have received from Ernst &
Young a letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (d) of this
Section, except that the specified date referred to shall be a date not more
than five days prior to Closing Time.
(f) At Closing Time counsel for the Underwriters shall have been
furnished with such documents and opinions as they may reasonably require for
the purpose of enabling them to pass upon the issuance and sale by the
Securities as herein contemplated and related proceedings, 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 Guarantor, the Company, the Operating Company or Realty Co. in
connection with the issuance and sale of the Securities as herein contemplated
shall be reasonably satisfactory in form and substance to the Underwriters and
counsel for the Underwriters.
(g) The Underwriters shall have received copies of the commitments to
issue ALTA title insurance policies relating to the real property portion of
the Collateral which will insure the priority of the Mortgage as described in
the Prospectus.
(h) At Closing Time (i) the Company shall have purchased and retired
certain Existing Notes held by certain of the Underwriters, (ii) an amount
sufficient to defease all of the Company's remaining outstanding Existing Notes
for redemption on August 15, 1994 shall have been deposited with the trustee
under the indenture relating thereto, (iii) the trustee under such indenture
shall have provided written acknowledgment of the discharge pursuant to Section
9.01 thereof and (iv) the security documents securing the Existing Notes shall
have been released.
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<PAGE> 39
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 Closing Time,
and such termination shall be without liability of any party to any other party
except as provided in Section 4. Notwithstanding any such termination, the
provisions of Section 6, 7 and 8 shall remain in effect.
Section 6. Indemnification.
(a) The Company and the Guarantor, jointly and severally, agree 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 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 any amendment thereto), including the information deemed to be part of
the Registration Statement pursuant to Rule 430A(b) of the 1933 Act
Regulations, if applicable, 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 any preliminary
prospectus or the Prospectus (or amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in order
to make the statements therein, in the light of 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 such
39
<PAGE> 40
untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of the
Guarantor or the Company; and
(iii) against any and all expense whatsoever, as incurred (including,
subject to Section 6(c) hereof, the reasonable fees and disbursements of
counsel chosen by the Underwriters), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by a 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;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of (i) any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Guarantor or
the Company by the Underwriters, expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto) or (ii), with respect to
the sale of Securities by an Underwriter to any person, a failure by such
Underwriter to give a copy of the Prospectus to such person within the time
required by the 1933 Act (unless such failure was the result of the Company's
failure to furnish to such Underwriter sufficient copies of the Prospectus on a
timely basis) if, but only if, the untrue statement or alleged untrue statement
or omission or alleged omission of a material fact was corrected in the
Prospectus.
(b) Each Underwriter severally agrees to indemnify and hold harmless each
of the Guarantor and the Company, their directors, each of their officers who
signed the Registration Statement, and each person, if any, who controls the
Guarantor or the Company within the meaning of Section 15 of the 1933 Act
against any and all loss, liability, claim, damage and expense described in the
indemnity contained in subsection (a) of this Sec-
40
<PAGE> 41
tion, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment thereto) or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Underwriter expressly for
use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any suit 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
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of any
such action. 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.
Section 7. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Guarantor and the Company
and the Underwriters shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by said indemnity
agreement incurred by the Guarantor and the Company and the Underwriters, as
incurred, in such proportions that the Underwriters are responsible for that
portion represented by the percentage that the underwriting discount appearing
on the cover of the Prospectus bears to the initial public offering price and
the Guarantor and the Company are responsible for the balance; provided,
however, that 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
41
<PAGE> 42
fraudulent misrepresentation. For purposes of this Section, each person, if
any, who controls an Underwriter within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as such Underwriter, and each
director of the Guarantor and the Company, each officer of the Company and the
Guarantor who signed the Registration Statement, and each person, if any, who
controls the Guarantor or the Company within the meaning of Section 15 of the
1933 Act shall have the same rights to contribution as the Guarantor and the
Company.
Section 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement and
the Pricing Agreement, or contained in certificates of officers of the
Guarantor or the Company 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 Guarantor
or the Company, and shall survive delivery of the Securities to the
Underwriters.
Section 9. Termination of the Agreement.
(a) 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 date of this Agreement or since the respective dates as of which
information is given in the Registration Statement, any material adverse change
in the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Guarantor and its subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, or (ii)
if there has occurred any material adverse change in the financial markets in
the United States or any outbreak of hostilities or other calamity or crisis,
the effect of which is such as to make it, in the reasonable judgment of the
Underwriters, impracticable to market the Securities or to enforce contracts
for the sale of Securities, or (iii) if trading in the Common Stock of Bally
has been suspended by the Commission, or if trading generally on either the
American Stock Exchange or the New York Stock Exchange has been suspended, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by either of said Exchanges or by
order of the Commission or any other
42
<PAGE> 43
governmental authority, or if a banking moratorium has been declared by either
Federal, New York, New Jersey or Illinois authorities.
(b) 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. Notwithstanding any such termination, the provisions
of Sections 6, 7 and 8 shall remain in 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 and the Pricing
Agreement (the "Defaulted Securities"), the non- defaulting Underwriter(s)
shall have the right, within 24 hours thereafter, to make arrangements for one
or more of the non-defaulting Underwriter(s), 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 non-defaulting Underwriter(s) shall not have completed such arrangements
within such 24-hour period, then 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 the termination of
this Agreement, either the non-defaulting Underwriter(s) 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.
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 Merrill Lynch at Merrill Lynch World
Headquarters, North Tower, World Financial Center, New York, New York
10281-1201, attention of Keith L. Horn, Vice President; notices to the
43
<PAGE> 44
Company shall be directed to it at Bally's Park Place, Inc., Park Place & the
Boardwalk, Atlantic City, New Jersey 08401, attention of Wallace R. Barr,
President and Chief Operating Officer.
Section 12. Parties. This Agreement and the Pricing Agreement shall each
inure to the benefit of and be binding upon the Underwriters, the Guarantor,
the Company and the Operating Company and their respective successors.
Nothing expressed or mentioned in this Agreement or the Pricing Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters, the Guarantor, the Company and the Operating 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 the Pricing Agreement or any provision herein or
therein contained. This Agreement and the Pricing Agreement and all conditions
and provisions hereof and thereof are intended to be for the sole and exclusive
benefit of the Underwriters, the Guarantor, the Company and the Operating
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 Laws and Time. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable
to agreements made and performed in said State. Specified times of day refer
to New York City Time.
44
<PAGE> 45
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 among
the Underwriters, the Guarantor, the Company and the Operating Company in
accordance with its terms.
Very truly yours,
BALLY'S PARK PLACE FUNDING, INC.
By
Name:
Title:
BALLY'S PARK PLACE, INC.
(Delaware)
By
Name:
Title:
BALLY'S PARK PLACE, INC.
(New Jersey)
By
Name:
Title:
45
<PAGE> 46
CONFIRMED AND ACCEPTED
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
JEFFERIES & COMPANY, INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
LIBRA INVESTMENTS, INC.
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By
Name:
Title:
46
<PAGE> 47
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0018058.06-Chicago Server 1a Draft February 23, 1994 - 3:28 pm
47
<PAGE> 1
EXHIBIT 3(i)
CERTIFICATE OF INCORPORATION
OF
BALLY'S PARK PLACE FUNDING, INC.
The undersigned, in order to form a corporation pursuant to the
General Corporation Law of the State of Delaware, certifies:
FIRST: The name of the Corporation is: BALLY'S PARK PLACE FUNDING,
INC.
SECOND: The address of its registered office in the State of Delaware
is 306 South State Street, in the City of Dover, County of Kent. The name of
its registered agent at such address is United States Corporation Company.
THIRD: The purpose of the Corporation is to raise funds through the
public offering, sale and issuance of debt securities, to loan the funds raised
from the sale of debt securities to Bally's Park Place, Inc., a New Jersey
corporation and a sister corporation of the Corporation, and to engage in
activities which are incident thereto. The Corporation shall possess and may
exercise all powers and privileges necessary or convenient to effect the
foregoing purposes.
FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is Two Hundred (200) shares
of Common Stock, $.01 par value per share.
FIFTH: The name and mailing address of the incorporator is Clinton W.
Lane, c/o Sage Gray Todd & Sims, Two World Trade Center, 100th Floor, New York,
New York 10048.
SIXTH: The by-laws of the Corporation may be made, altered, amended
or repealed by the Board of Directors. Elections of directors need not be by
written ballot unless the by-laws so provide. The books of the Corporation
(subject to the provisions of the laws of the State of
<PAGE> 2
Delaware) may be kept outside of the State of Delaware at such places as may
be designated from time to time by the Board of Directors.
SEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation this 21st day of June, 1983.
/s/ Clinton W. Lane
Clinton W. Lane
Incorporator
2
<PAGE> 3
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on this 21st day of June, 1983, personally came
before me, the undersigned, a Notary Public, duly authorized to take
acknowledgement of deeds by the laws of the place where the foregoing
Certificate of Incorporation was signed, CLINTON W. LANE, the Incorporator who
signed the foregoing Certificate of Incorporation, known to me personally to be
such, and he acknowledged the said Certificate to be his act and deed and that
the facts therein stated are truly set forth.
Given under my hand and seal of office the day and year aforesaid.
/s/ Frank S. King
Notary Public
3
<PAGE> 4
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Bally's Park Place Funding, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said Corporation:
RESOLVED, that the Corporation's Certificate of
Incorporation is hereby amended by adding an Article Eighth, which
reads as follows:
EIGHTH:
Pursuant to the requirements of the New Jersey Casino
Control Act ("New Jersey Act"), the New Jersey Casino Control
Commission ("New Jersey Commission") shall have the right of
prior approval of any and all transfers of the securities,
shares or other interests in the Corporation and the
Corporation shall have the absolute right to repurchase, at
the market price or the purchase price, whichever is the
lesser, any security, share or other interest in the
Corporation in the event that the New Jersey Commission
disapproves a transfer in accordance with the provisions of
the New Jersey Act. Every security issued by the Corporation
shall bear on both sides of the certificate evidencing such
security, a statement of the restrictions imposed by this
provision.
To the extent that the continued holding of any
security of the Corporation by a holder would result in the
Corporation or any subsidiary, intermediary or holding company
thereof being no longer qualified to continue as a casino
licensee in the State of New Jersey, the Corporation shall
have the absolute right to repurchase the securities held by
said holder at the lesser of the price paid by said holder for
said securities or the market price. The Corporation shall
exercise its right to repurchase any security
<PAGE> 5
as provided above within ten (10) days after receipt from
the New Jersey Commission of notice of disapproval or
disqualification of a holder.
SECOND: That in lieu of a meeting and vote of the sole stockholder,
the sole stockholder has given written consent to said amendment in accordance
with the provisions of Section 228 of the General Corporation Law of the State
of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with applicable provisions of Sections 228 and 242 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said Bally's Park Place Funding, Inc. has caused
this Certificate to be signed by Richard Gillman, its Chairman of the Board,
and attested by Dennis P. Venuti, its Secretary, this 29th day of December,
1988.
BALLY'S PARK PLACE FUNDING, INC.
By: /s/ Richard Gillman
Richard Gillman
Chairman of the Board
ATTEST:
By: /s/ Dennis P. Venuti
Dennis P. Venuti
Secretary
2
<PAGE> 6
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Bally's Park Place Funding, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said Corporation:
RESOLVED, that Article EIGHTH of the Corporation's Certificate of
Incorporation, as amended, be amended in its entirety to read as
follows:
EIGHTH: Pursuant to the requirements of the New
Jersey Casino Control Act ("New Jersey Act"), the New Jersey
Casino Control Commission ("New Jersey Commission") shall have
the right of prior approval of any and all transfers of
privately-held securities, shares or other interests in the
Corporation, and the Corporation shall have the absolute right
to repurchase, at the market price or the purchase price,
whichever is the lesser, any security, share or other interest
in the Corporation in the event that the New Jersey Commission
disapproves a transfer in accordance with the provisions of
the New Jersey Act.
Every security of the Corporation is held subject to
the condition that if a holder thereof is found to be
disqualified pursuant to the provisions of the New Jersey Act,
such holder shall dispose of his interest in the Corporation.
SECOND: That in lieu of a meeting and vote of the sole stockholder,
the sole stockholder has given written consent to said amendment in accordance
with the provisions of Section 228 of the General Corporation Law of the State
of Delaware.
THIRD: The aforesaid amendment was duly adopted in accordance with
the provisions of Sections 228 and 242 of the General Corporation Law of the
State of Delaware.
<PAGE> 7
IN WITNESS WHEREOF, said Bally's Park Place Funding, Inc. has caused
this Certificate to be signed by Arthur M. Goldberg, its Chairman of the Board,
and attested by Dennis P. Venuti, its Secretary, this _____ day of February,
1994.
BALLY'S PARK PLACE FUNDING, INC.
By:
Arthur M. Goldberg
Chairman of the Board
ATTEST:
By:
Dennis P. Venuti
Secretary
2
<PAGE> 1
EXHIBIT 3(ii)
AMENDED AND RESTATED
BY-LAWS
OF
BALLY'S PARK PLACE FUNDING, INC.
ARTICLE I
STOCKHOLDERS
Section 1. Place of Stockholders' Meetings. All meetings of the stockholders
of the Corporation shall be held at such place or places, within or outside the
State of Delaware, as may be fixed by the Board of Directors from time to time
or as shall be specified in the respective notices thereof.
Section 2. Date, Hour and Purposes of Annual Meetings of Stockholders.
Annual Meetings of Stockholders shall be held on such day and such time during
the months of April, May or June of each years as the Directors may determine
from time to time by resolution, at which meeting the Stockholders shall elect,
by a plurality of the votes cast at such election, a Board of Directors, and
transact such other business as may properly be brought before the meeting. If
for any reason a Board of Directors shall not be elected at the Annual Meeting
of Stockholders, or if it appears that such Annual Meeting is not held on such
date as may be fixed by the Directors in accordance with the provisions of the
By-laws, then in either such event the Directors shall cause the election to be
held as soon thereafter as convenient.
Section 3. Special Meetings of Stockholders. Special meetings of the
stockholders entitled to vote may be called by the Chairman of the Board, the
Vice-Chairman of the Board, the President or any Vice-President, the Secretary
or by the Board of Directors, and shall be called by any of the foregoing at
the request in writing of stockholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the meeting.
Section 4. Notice of Meetings of Stockholders. Except as otherwise expressly
required or permitted by the laws of Delaware, not less than ten days nor more
than fifty days before the date of every stockholders' meeting the Secretary
shall give to each stockholder of record entitled to vote at such meeting
written notice stating the place, day and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
Such notice, if mailed, shall be deemed to be given when deposited in the
United States mail, with postage thereon prepaid, addressed to the stockholder
at the post office address for notices to such stockholder as it appears on the
records of the Corporation. An Affidavit of the Secretary
<PAGE> 2
or an Assistant Secretary or of a transfer agent of the Corporation that the
notice has been given shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
Section 5. Quorum of Stockholders.
(a) Unless otherwise provided by the laws of Delaware, at any meeting of
the stockholders the presence in person or by proxy of stockholders entitled
to cast a majority of the votes thereat shall constitute a quorum.
(b) At any meeting of the stockholders at which a quorum shall be present,
a majority of those present in person or by proxy may adjourn the meeting
from time to time without notice other than announcement at the meeting. In
the absence of a quorum, the officer presiding thereat shall have power to
adjourn the meeting from time to time until a quorum shall be present. Notice
of any adjourned meeting other than announcement at the meeting shall not be
required to be given, except as provided in paragraph (d) below and except
where expressly required by law.
(c) At any adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting
originally called, but only those stockholders entitled to vote at the
meeting as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof, unless a new record date is fixed by the Board of
Directors.
(d) If an adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.
Section 6. Chairman and Secretary of Meeting. The Chairman, or in his
absence, the Vice-Chairman, or in his absence, the President, or in his
absence, any Vice-President, shall preside at meetings of the stockholders. The
Secretary shall act as secretary of the meeting, or in his absence an Assistant
Secretary shall act, or if neither is present, then the presiding officer shall
appoint a person to act as secretary of the meeting.
Section 7. Voting by Stockholders. Except as may be otherwise provided by
the Certificate of Incorporation or by these By-laws, at every meeting of the
stockholders each stockholder shall be entitled to one vote for each share of
stock standing in his name on the books of the Corporation on the record date
for the meeting. All elections and questions shall be decided by the vote of a
majority in interest of the stockholders present in person or represented by
proxy and entitled to vote at the meeting, except as otherwise permitted or
required by the laws of Delaware, the Certificate of Incorporation or these
By-laws.
Section 8. Proxies. Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by his attorney-in-fact. Every proxy
shall be in writing, subscribed by the stockholder or his duly authorized
attorney-in-fact, but need not be dated, sealed, witnessed or acknowledged.
2
<PAGE> 3
Section 9. List of Stockholders.
(a) At least ten days before every meeting of stockholders, the Secretary
shall prepare or cause to be prepared a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing
the address of each stockholder and the number of shares registered in the
name of each stockholder.
(b) During ordinary business hours, for a period of at least ten days
prior to the meeting, such list shall be open to examination by any
stockholder for any purpose germane to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in
the notice of the meeting, or if not so specified, at the place where the
meeting is to be held.
(c) The list shall also be produced and kept at the time and place of the
meeting during the whole time of the meeting, and it may be inspected by any
stockholder who is present.
(d) The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Corporation, or to vote in person or by proxy at
any meeting of stockholders.
ARTICLE II
DIRECTORS
Section 1. Powers of Directors. The property, business and affairs of the
Corporation shall be managed by its Board of Directors, which may exercise all
the powers of the Corporation except such as are by the laws of Delaware or the
Certificate of Incorporation or these By-laws required to be exercised or done
by the stockholders.
Section 2. Number, Method of Election, Terms of Office of Directors. The
number of Directors which shall constitute the whole Board of Directors shall
be such as from time to time shall be determined by resolution of the Board of
Directors, but the number shall not be less than one provided that the tenure
of a Director shall not be affected by any decrease in the number of Directors
so made by the Board. Each Director shall hold office until his successor is
elected and qualified, provided however that a Director may resign at any time.
Section 3. Vacancies on Board of Directors.
(a) Any Director may resign his office at any time by delivering his
resignation in writing to the Chairman or the Vice-Chairman or the President
or the Secretary. It will take effect at the time specified therein, or if no
time is specified, it will be effective at the time of its receipt by the
Corporation. The acceptance of a
3
<PAGE> 4
resignation shall not be necessary to make it effective, unless expressly
so provided in the resignation.
(b) Any vacancy or newly created Directorship resulting from any increase
in the authorized number of Directors may be filled by vote of a majority of
the Directors then in office, though less than a quorum, and any Director so
chosen shall hold office until the next annual election of Directors by the
stockholders and until his successor is duly elected and qualified, or until
his earlier resignation or removal.
Section 4. Meetings of the Board of Directors.
(a) The Board of Directors may hold their meetings, both regular and
special, either within or outside the State of Delaware.
(b) Regular meetings of the Board of Directors may be held without notice
at such time and place as shall from time to time be determined by resolution
of the Board of Directors.
(c) The first meeting of each newly elected Board of Directors except the
initial Board of Directors shall be held as soon as practicable after the
Annual Meeting of the stockholders for the election of officers and the
transaction of such other business as may come before it.
(d) Special meetings of the Board of Directors shall be held whenever
called by direction of the Chairman, the Vice-Chairman or the President or at
the request of Directors constituting one-third of the number of Directors
then in office, but not less than two Directors.
(e) The Secretary shall give notice to each Director of any meeting of the
Board of Directors by mailing the same at least two days before the meeting
or by telegraphing or delivering the same not later than the day before the
meeting. Such notice need not include a statement of the business to be
transacted at, or the purpose of, any such meeting. Any and all business may
be transacted at any meeting of the Board of Directors. No notice of any
adjourned meeting need be given. No notice to or waiver by any Director shall
be required with respect to any meeting at which the Director is present.
Section 5. Quorum and Action. One-third of the entire Board of Directors, but
in no event less than two Directors, shall constitute a quorum for the
transaction of business; but if there shall be less than a quorum at any
meeting of the Board, a majority of those present may adjourn the meeting from
time to time. Unless otherwise provided by the laws of Delaware, the
Certificate of Incorporation or these By-laws, the act of a majority of the
Directors present at any meeting at which a quorum is present shall be the act
of the Board of Directors.
4
<PAGE> 5
Section 6. Presiding Officer and Secretary of Meeting. The Chairman or, in
his absence, a member of the Board of Directors selected by the members
present, shall preside at meetings of the Board. The Secretary shall act as
secretary of the meeting, but in his absence the presiding officers shall
appoint a secretary of the meeting.
Section 7. Action By Consent Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the records of the Board or committee.
Section 8. Executive Committee. The Board of Directors may appoint from
among its members and from time to time may fill vacancies in an Executive
Committee to serve during the pleasure of the Board. The Executive Committee
shall consist of three members, or such greater number of members as the Board
of Directors may by resolution from time to time fix. One of such members shall
be the Chairman of the Board and another shall be the Vice-Chairman of the
Board, who shall be the presiding officer of the Committee. During the
intervals between the meetings of the Board, the Executive Committee shall
possess and may exercise all of the powers of the Board in the management of
the business and affairs of the Corporation conferred by these By-laws or
otherwise. The Committee shall keep a record of all its proceedings and report
the same to the Board. A majority of the members of the Committee shall
constitute a quorum. The act of a majority of the members of the Committee
present at any meeting at which a quorum is present shall be the act of the
Committee.
Section 9. Other Committees. The Board of Directors may also appoint from
among its members such other committees of two or more Directors as it may from
time to time deem desirable, and may delegate to such committees such powers of
the Board as it may consider appropriate.
Section 10. Compensation of Directors. Directors shall receive such
reasonable compensation for their service on the Board of Directors or any
committees thereof, whether in the form of salary or a fixed fee for attendance
at meetings, or both, with expenses, if any, as the Board of Directors may from
time to time determine. Nothing herein contained shall be construed to preclude
any Director from serving in any other capacity and receiving compensation
therefor.
Section 11. Telephone Meetings. Members of the Board of Directors or any
committee designated by such Board, may participate in a meeting of such Board
or Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this Section shall
constitute presence in person at such meeting.
Section 12. Interested Directors. A Director of the Corporation shall not be
disqualified by his office from dealing or contracting with the Corporation as
a seller, purchaser or otherwise, nor shall any contract or transaction be void
or voidable with respect to the Corporation for the reason that it is between
the Corporation and one or more of its Directors
5
<PAGE> 6
or officers, or between the Corporation and any other corporation,
partnership, association or other organization in which one or more of its
Directors or officers are directors or officers, or have a financial interest,
or solely because the Director or officer is present at or participates in the
meeting of the Board or Committee thereof which authorizes such contract or
transaction, or solely because his or their votes are counted for such purpose,
if (i) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of Directors or
the Committee, and the Board or Committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
Directors, even though the disinterested Directors be less than a quorum; or
(ii) the material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, a Committee thereof, or the stockholders.
Common or interested Directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a Committee which
authorizes such contract or transaction.
ARTICLE III
OFFICERS
Section 1. Executive Officers of the Corporation. The executive officers of
the Corporation shall be chosen by the Board of Directors and shall be a
Chairman of the Board, a Vice-Chairman of the Board, a President, a
Vice-President, a Secretary and a Treasurer. Any two offices except those of
Chairman of the Board and Vice-Chairman of the Board, President and
Vice-President, or President and Secretary may be filled by the same person.
Section 2. Choosing of Executive Officers. The Board of Directors at its
first meeting after each Annual Meeting of Stockholders shall choose a Chairman
of the Board, a Vice-Chairman of the Board, a President, a Vice-President, a
Secretary and a Treasurer, none of whom need be a member of the Board, except
the Chairman of the Board, the Vice-Chairman of the Board and the President.
Section 3. Additional Officers. The Board of Directors may appoint
additional Vice-Presidents, Assistant Secretaries, Assistant Treasurers and
such other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board.
Section 4. Salaries. The salaries of all officers and agents of the
Corporation specially appointed by the Board shall be fixed by the Board of
Directors.
Section 5. Term, Removal and Vacancies. The officers of the Corporation
shall hold office until their respective successors are chosen and qualify. Any
officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of
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the Board of Directors. Any vacancy occurring in any office of the Corporation
by death, resignation, removal or otherwise shall be filled by the Board of
Directors.
Section 6. Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the Board of Directors and of the stockholders.
Section 7. Vice Chairman of the Board. The Vice-Chairman of the Board shall
preside at all meetings of the stockholders and the Board of Directors in the
absence of the Chairman of the Board and shall have such powers and perform
such duties as are provided in these By-laws or as may be delegated to him by
the President and shall perform such other duties as may from time to time be
assigned to him by the Board of Directors.
Section 8. President. The President shall be the chief executive officer of
the Corporation. He shall have general charge and supervision of the business
of the Corporation and shall exercise and perform all the duties incident to
the office of the chief executive officer. He shall have direct supervision of
the other officers and shall also exercise and perform such powers and duties
as may be assigned to him by the Board of Directors. In the absence or
disability of the President the powers and duties of the President shall be
exercised jointly by the Chairman and Vice-Chairman of the Board until such
authority is altered by action of the Board of Directors. In the absence of the
Chairman of the Board and Vice-Chairman of the Board, the President shall
preside at all meetings of the Board of Directors and the stockholders.
Section 9. Powers and Duties of Vice-Presidents. Any Vice-President
designated by the Board of Directors shall, in the absence, disability, or
inability to act of the President, perform all duties and exercise all the
powers of the President and shall perform such other duties as the Board may
from time to time prescribe. Each Vice-President shall have such other powers
and shall perform such other duties as may be assigned to him by the Board.
Section 10. Powers and Duties of Treasurer and Assistant Treasurers.
(a) The Treasurer shall have the care and custody of all the funds and
securities of the Corporation except as may be otherwise ordered by the Board
of Directors, and shall cause such funds to be deposited to the credit of the
Corporation in such banks or depositories as may be designated by the Board
of Directors, the Chairman, the Vice-Chairman, the President or the
Treasurer, and shall cause such securities to be placed in safekeeping in
such manner as may be designated by the Board of Directors, the Chairman, the
Vice-Chairman, the President or the Treasurer.
(b) The Treasurer, or an Assistant Treasurer, or such other person or
persons as may be designated for such purpose by the Board of Directors, the
Chairman, the Vice-Chairman, the President or the Treasurer, may endorse in
the name and on behalf of the Corporation all instruments for the payment of
money, bills of lading, warehouse receipts, insurance policies and other
commercial documents requiring such endorsement.
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(c) The Treasurer, or an Assistant Treasurer, or such other person or
persons as may be designated for such purpose by the Board of Directors, the
Chairman, the Vice-Chairman, the President or the Treasurer, may sign all
receipts and vouchers for payments made to the Corporation; he shall render a
statement of the cash account of the Corporation to the Board of Directors as
often as it shall require the same; he shall enter regularly in books to be
kept by him for that purpose full and accurate accounts of all monies
received and paid by him on account of the Corporation and of all securities
received and delivered by the Corporation.
(d) Each Assistant Treasurer shall perform such duties as may from time to
time be assigned to him by the Treasurer or by the Board of Directors. In the
event of the absence of the Treasurer or his incapacity or inability to act,
then any Assistant Treasurer may perform any of the duties and may exercise
any of the powers of the Treasurer.
Section 11. Powers and Duties of Secretary and Assistant Secretaries.
(a) The Secretary shall attend all meetings of the Board, all meetings of
the stockholders, and shall keep the minutes of all proceedings of the
stockholders and the Board of Directors in proper books provided for that
purpose. The Secretary shall attend to the giving and serving of all notices
of the Corporation in accordance with the provisions of the By-laws and as
required by the laws of Delaware. The Secretary may, with the President, a
Vice-President or other authorized officer, sign all contracts and other
documents in the name of the Corporation. He shall perform such other duties
as may be prescribed in these By-laws or assigned to him and all other acts
incident to the position of Secretary.
(b) Each Assistant Secretary shall perform such duties as may from time to
time be assigned to him by the Secretary or by the Board of Directors. In the
event of the absence of the Secretary or his incapacity or inability to act,
then any Assistant Secretary may perform any of the duties and may exercise
any of the Powers of the Secretary.
(c) In no case shall the Secretary or any Assistant Secretary, without the
express authorization and direction of the Board of Directors, have any
responsibility for, or any duty or authority with respect to, the withholding
or payment of any federal, state or local taxes of the Corporation, or the
preparation or filing of any tax return.
ARTICLE IV
CAPITAL STOCK
Section 1. Stock Certificates.
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(a) Every holder of stock in the Corporation shall be entitled to have a
certificate signed in the name of the Corporation by the Chairman or the
President or the Vice-Chairman or a Vice-President, and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying
the number of shares owned by him.
(b) If such a certificate is countersigned by a transfer agent other than
the Corporation or its employee, or by a registrar other than the Corporation
or its employee, the signatures of the officers of the Corporation may be
facsimiles and, if permitted by Delaware law, any other signature on the
certificate may be a facsimile.
(c) In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer at the date of issue.
(d) Certificates of stock shall be issued in such form not inconsistent
with the Certificate of Incorporation as shall be approved by the Board of
Directors. They shall be numbered and registered in the order in which they
are issued. No certificate shall be issued until fully paid.
Section 2. Record Ownership. A record of the name and address of the holder
of each certificate, the number of shares represented thereby, and the date of
issue thereof shall be made on the Corporation's books. The Corporation shall
be entitled to treat the holder of record of any share of stock as the holder
in fact thereof, and accordingly shall not be bound to recognize any equitable
or other claim to or interest in any share on the part of any other person,
whether or not it shall have express or other notice thereof, except as
required by the laws of Delaware.
Section 3. Transfer of Record Ownership. Transfers of stock shall be made on
the books of the Corporation only by direction of the person named in the
certificate or his attorney, lawfully constituted in writing, and only upon the
surrender of the certificate therefor and a written assignment of the shares
evidenced thereby. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented to the Corporation for
transfer, both the transferor and transferee request the Corporation to do so.
Section 4. Lost, Stolen or Destroyed Certificates. Certificates
representing shares of the stock of the Corporation shall be issued in place of
any certificate alleged to have been lost, stolen or destroyed in such manner
and on such terms and conditions as the Board of Directors from time to time
may authorize.
Section 5. Transfer Agent, Registrar, Rules Respecting Certificates. The
Corporation shall maintain one or more transfer offices or agencies where stock
of the Corporation shall be transferable. The Corporation shall also maintain
one or more registry offices where such stock shall be registered. The Board of
Directors may make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of stock certificates.
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Section 6. Fixing Record Date for Determination of Stockholders of Record.
The Board of Directors may fix in advance a date as the record date for the
purpose of determining the stockholders entitled to notice of, or to vote at,
any meeting of the stockholders or any adjournment thereof, or the stockholders
entitled to receive payment of any dividend or other distribution or the
allotment of any rights, or entitled to exercise any rights in respect of any
change conversion or exchange of stock, or to express consent to corporate
action in writing without a meeting, or in order to make a determination of the
stockholders for the purpose of any other lawful action. Such record date in
any case shall not be more than sixty days nor less than ten days before the
date of a meeting of the stockholders, nor more than sixty days prior to any
other action requiring such determination of the stockholders. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE V
SECURITIES HELD BY THE CORPORATION
Section 1. Voting. Unless the Board of Directors shall otherwise order, the
Chairman, the Vice-Chairman, the President, any Vice-President or the Treasurer
shall have full power and authority on behalf of the Corporation to attend, act
and vote at any meeting of the stockholders of any corporation in which the
Corporation may hold stock and at such meeting to exercise any or all rights
and powers incident to the ownership of such stock, and to execute on behalf of
the Corporation a proxy or proxies empowering another or others to act as
aforesaid. The Board of Directors from time to time may confer like powers upon
any other person or persons.
Section 2. General Authorization to Transfer Securities Held by the
Corporation.
(a) Any of the following officers, to-wit: the Chairman, the
Vice-Chairman, the President, any Vice-President, the Treasurer or the
Secretary of the Corporation shall be and are hereby authorized and empowered
to transfer, convert, endorse, sell, assign, set over and deliver any and all
shares of stock, bonds, debentures, notes, subscription warrants, stock
purchase warrants, evidences of indebtedness, or other securities now or
hereafter standing in the name of or owned by the Corporation, and to make,
execute and deliver under the seal of the Corporation any and all written
instruments of assignment and transfer necessary or proper to effectuate the
authority hereby conferred.
(b) Whenever there shall be annexed to any instrument of assignment and
transfer executed, pursuant to and in accordance with the foregoing paragraph
(a), a certificate of the Secretary or an Assistant Secretary of the
Corporation in office at the date of such certificate setting forth the
provisions hereof and stating that they are in full force and effect and
setting forth the names of persons who are then officers of the Corporation,
then all persons to whom such instrument and annexed certificate shall
thereafter come shall be entitled, without further inquiry or investigation
and regardless
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of the date of such certificate, to assume and to act in reliance upon the
assumption that the shares of stock or other securities named in such
instrument were theretofore duly and properly transferred, endorsed, sold,
assigned, set over and delivered by the Corporation, and that with respect
to such securities the authority of these provisions of the By-laws and of
such officers is still in full force and effect.
ARTICLE VI
DIVIDENDS
Section 1. Declaration of Dividends. Dividends upon the capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Payment and Reserves. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Directors shall think conducive to the interest
of the Corporation, and the Directors may modify or abolish any such reserves
in the manner in which they were created.
Section 3. Record Date. The Board of Directors may, to the extent provided
by law, prescribe a period, in no event more than sixty days prior to the date
for payment of any dividend, as a record date for the determination of
stockholders entitled to receive payment of any such dividend, and in such case
such stockholders and only such stockholders as shall be stockholders of record
on said date so fixed shall be entitled to receive payment of such dividend,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Signatures of Officers. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
The signature of any officer upon any of the foregoing instruments may be a
facsimile whenever authorized by the Board.
Section 2. Fiscal Year. The fiscal year of the Corporation shall end on
December 31 unless otherwise fixed by resolution of the Board of Directors.
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Section 3. Seal. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its incorporation and the words "Corporate Seal,
Delaware." Said seal may be used for causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
WAIVER OF OR DISPENSING WITH NOTICE
Whenever any notice of the time, place or purpose of any meeting of the
stockholders, Directors or a committee is required to be given under the laws
of Delaware, the Certificate of Incorporation or these By-laws, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the holding thereof, or actual attendance at the
meeting in person, or in the case of the stockholders, by his attorney-in-fact,
shall be deemed equivalent to the giving of such notice to such persons. No
notice need be given to any person with whom communication is made unlawful by
any law of the United States or any rule, regulation, proclamation or executive
order issued under any such law.
ARTICLE IX
AMENDMENT OF BY-LAWS
These By-laws, or any of them, may from time to time be supplemented, amended
or repealed by the Board of Directors, or by the vote of a majority in interest
of the stockholders represented and entitled to vote at any meeting at which a
quorum is present.
ARTICLE X
INDEMNIFICATION
Section 1. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo
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contendere or its equivalent, shall not of itself create a presumption
that the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a Director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and, reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 3. To the extent that a Director, officer, employee or agent of the
Corporation has been successful on the merits, or otherwise, in defense of any
action, suit or proceeding referred to in Sections 1 and 2, or in the defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Any indemnification under Sections 1 and 2 (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon determination that indemnification of the Director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be made (i)
by the Board of Directors by a majority vote of a quorum consisting of
Directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or even if obtainable a quorum of
disinterested Directors so directs by independent legal counsel in a written
opinion, or (iii) by the stockholders.
Section 5. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding as authorized by the Board of Directors in
the specific case upon receipt of an undertaking by or on behalf of the
Director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
Section 6. The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled to under any By-law,
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agreement, vote of stockholders or disinterested Directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while holding such office and shall continue as to a person who has ceased to
be a Director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
Section 7. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article.
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EXHIBIT 3 (iv)
AMENDED AND RESTATED
BY-LAWS
OF
BALLY'S PARK PLACE, INC.
ARTICLE I
STOCKHOLDERS
Section 1. Place of Stockholders' Meetings. All meetings of the stockholders
of the Corporation shall be held at such place or places, within or outside the
State of Delaware, as may be fixed by the Board of Directors from time to time
or as shall be specified in the respective notices thereof.
Section 2. Date, Hour and Purposes of Annual Meetings of Stockholders.
Annual Meetings of Stockholders shall be held on such day and such time during
the months of April, May or June of each years as the Directors may determine
from time to time by resolution, at which meeting the Stockholders shall elect,
by a plurality of the votes cast at such election, a Board of Directors, and
transact such other business as may properly be brought before the meeting. If
for any reason a Board of Directors shall not be elected at the Annual Meeting
of Stockholders, or if it appears that such Annual Meeting is not held on such
date as may be fixed by the Directors in accordance with the provisions of the
By-laws, then in either such event the Directors shall cause the election to be
held as soon thereafter as convenient.
Section 3. Special Meetings of Stockholders. Special meetings of the
stockholders entitled to vote may be called by the Chairman of the Board, the
Vice-Chairman of the Board, the President or any Vice-President, the Secretary
or by the Board of Directors, and shall be called by any of the foregoing at
the request in writing of stockholders owning a majority in amount of the
entire capital stock of the Corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the meeting.
Section 4. Notice of Meetings of Stockholders. Except as otherwise expressly
required or permitted by the laws of Delaware, not less than ten days nor more
than fifty days before the date of every stockholders' meeting the Secretary
shall give to each stockholder of record entitled to vote at such meeting
written notice stating the place, day and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
Such notice, if mailed, shall be deemed to be given when deposited in the
United States mail, with postage thereon prepaid, addressed to the stockholder
at the post office address for notices to such stockholder as it appears on
therecords of the Corporation. An Affidavit of the Secretary
<PAGE> 2
or an Assistant Secretary or of a transfer agent of the Corporation that the
notice has been given shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
Section 5. Quorum of Stockholders.
(a) Unless otherwise provided by the laws of Delaware, at any meeting of
the stockholders the presence in person or by proxy of stockholders entitled
to cast a majority of the votes thereat shall constitute a quorum.
(b) At any meeting of the stockholders at which a quorum shall be present,
a majority of those present in person or by proxy may adjourn the meeting
from time to time without notice other than announcement at the meeting. In
the absence of a quorum, the officer presiding thereat shall have power to
adjourn the meeting from time to time until a quorum shall be present. Notice
of any adjourned meeting other than announcement at the meeting shall not be
required to be given, except as provided in paragraph (d) below and except
where expressly required by law.
(c) At any adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting
originally called, but only those stockholders entitled to vote at the
meeting as originally noticed shall be entitled to vote at any adjournment or
adjournments thereof, unless a new record date is fixed by the Board of
Directors.
(d) If an adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.
Section 6. Chairman and Secretary of Meeting. The Chairman, or in his
absence, the Vice-Chairman, or in his absence, the President, or in his
absence, any Vice-President, shall preside at meetings of the stockholders. The
Secretary shall act as secretary of the meeting, or in his absence an Assistant
Secretary shall act, or if neither is present, then the presiding officer shall
appoint a person to act as secretary of the meeting.
Section 7. Voting by Stockholders. Except as may be otherwise provided by
the Certificate of Incorporation or by these By-laws, at every meeting of the
stockholders each stockholder shall be entitled to one vote for each share of
stock standing in his name on the books of the Corporation on the record date
for the meeting. All elections and questions shall be decided by the vote of a
majority in interest of the stockholders present in person or represented by
proxy and entitled to vote at the meeting, except as otherwise permitted or
required by the laws of Delaware, the Certificate of Incorporation or these
By-laws.
Section 8. Proxies. Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by his attorney-in-fact. Every proxy
shall be in writing,subscribed by the stockholder or his duly authorized
attorney-in-fact, but need not be dated, sealed, witnessed or acknowledged.
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Section 9. List of Stockholders.
(a) At least ten days before every meeting of stockholders, the Secretary
shall prepare or cause to be prepared a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order and showing
the address of each stockholder and the number of shares registered in the
name of each stockholder.
(b) During ordinary business hours, for a period of at least ten days
prior to the meeting, such list shall be open to examination by any
stockholder for any purpose germane to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in
the notice of the meeting, or if not so specified, at the place where the
meeting is to be held.
(c) The list shall also be produced and kept at the time and place of the
meeting during the whole time of the meeting, and it may be inspected by any
stockholder who is present.
(d) The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
Section or the books of the Corporation, or to vote in person or by proxy at
any meeting of stockholders.
ARTICLE II
DIRECTORS
Section 1. Powers of Directors. The property, business and affairs of the
Corporation shall be managed by its Board of Directors, which may exercise all
the powers of the Corporation except such as are by the laws of Delaware or the
Certificate of Incorporation or these By-laws required to be exercised or done
by the stockholders.
Section 2. Number, Method of Election, Terms of Office of Directors. The
number of Directors which shall constitute the whole Board of Directors shall
be such as from time to time shall be determined by resolution of the Board of
Directors, but the number shall not be less than three provided that the tenure
of a Director shall not be affected by any decrease in the number of Directors
so made by the Board. Each Director shall hold office until his successor is
elected and qualified, provided however that a Director may resign at any
time.*
* Pursuant to action by the Board of Directors of the Corporation,
this Article II, Section 2 of the By-Laws was deleted and replaced by
a new Article II, Section 2. See attached document for current
Article II, Section 2.
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Section 3. Vacancies on Board of Directors.
(a) Any Director may resign his office at any time by delivering his
resignation in writing to the Chairman or the Vice-Chairman or the President
or the Secretary. It will take effect at the time specified therein, or if no
time is specified, it will be effective at the time of its receipt by the
Corporation. The acceptance of a resignation shall not be necessary to make
it effective, unless expressly so provided in the resignation.
(b) Any vacancy or newly created Directorship resulting from any increase
in the authorized number of Directors may be filled by vote of a majority of
the Directors then in office, though less than a quorum, and any Director so
chosen shall hold office until the next annual election of Directors by the
stockholders and until his successor is duly elected and qualified, or until
his earlier resignation or removal.
Section 4. Meetings of the Board of Directors.
(a) The Board of Directors may hold their meetings, both regular and
special, either within or outside the State of Delaware.
(b) Regular meetings of the Board of Directors may be held without notice
at such time and place as shall from time to time be determined by resolution
of the Board of Directors.
(c) The first meeting of each newly elected Board of Directors except the
initial Board of Directors shall be held as soon as practicable after the
Annual Meeting of the stockholders for the election of officers and the
transaction of such other business as may come before it.
(d) Special meetings of the Board of Directors shall be held whenever
called by direction of the Chairman, the Vice-Chairman or the President or at
the request of Directors constituting one-third of the number of Directors
then in office, but not less than two Directors.
(e) The Secretary shall give notice to each Director of any meeting of the
Board of Directors by mailing the same at least two days before the meeting
or by telegraphing or delivering the same not later than the day before the
meeting. Such notice need not include a statement of the business to be
transacted at, or the purpose of, any such meeting. Any and all business may
be transacted at any meeting of the Board of Directors. No notice of any
adjourned meeting need be given. No notice to or waiver by any Director shall
be required with respect to any meeting at which the Director is present.
Section 5. Quorum and Action. One-third of the entire Board of Directors, but
in no event less than two Directors, shall constitute a quorum for the
transaction of business; but if
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there shall be less than a quorum at any meeting of the Board, a majority of
those present may adjourn the meeting from time to time. Unless otherwise
provided by the laws of Delaware, the Certificate of Incorporation or these
By-laws, the act of a majority of the Directors present at any meeting at which
a quorum is present shall be the act of the Board of Directors.
Section 6. Presiding Officer and Secretary of Meeting. The Chairman or, in
his absence, a member of the Board of Directors selected by the members
present, shall preside at meetings of the Board. The Secretary shall act as
secretary of the meeting, but in his absence the presiding officers shall
appoint a secretary of the meeting.
Section 7. Action By Consent Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the records of the Board or committee.
Section 8. Executive Committee. The Board of Directors may appoint from
among its members and from time to time may fill vacancies in an Executive
Committee to serve during the pleasure of the Board. The Executive Committee
shall consist of three members, or such greater number of members as the Board
of Directors may by resolution from time to time fix. One of such members shall
be the Chairman of the Board and another shall be the Vice-Chairman of the
Board, who shall be the presiding officer of the Committee. During the
intervals between the meetings of the Board, the Executive Committee shall
possess and may exercise all of the powers of the Board in the management of
the business and affairs of the Corporation conferred by these By-laws or
otherwise. The Committee shall keep a record of all its proceedings and report
the same to the Board. A majority of the members of the Committee shall
constitute a quorum. The act of a majority of the members of the Committee
present at any meeting at which a quorum is present shall be the act of the
Committee.
Section 9. Other Committees. The Board of Directors may also appoint from
among its members such other committees of two or more Directors as it may from
time to time deem desirable, and may delegate to such committees such powers of
the Board as it may consider appropriate.
Section 10. Compensation of Directors. Directors shall receive such
reasonable compensation for their service on the Board of Directors or any
committees thereof,whether in the form of salary or a fixed fee for attendance
at meetings, or both, with expenses, if any, as the Board of Directors may from
time to time determine. Nothing herein contained shall be construed to preclude
any Director from serving in any other capacity and receiving compensation
therefor.
Section 11. Telephone Meetings. Members of the Board of Directors or any
committee designated by such Board, may participate in a meeting of such Board
or Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this Section shall
constitute presence in person at such meeting.
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Section 12. Interested Directors. A Director of the Corporation shall not be
disqualified by his office from dealing or contracting with the Corporation as
a seller, purchaser or otherwise, nor shall any contract or transaction be void
or voidable with respect to the Corporation for the reason that it is between
the Corporation and one or more of its Directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its Directors or officers are directors or
officers, or have a financial interest, or solely because the Director or
officer is present at or participates in the meeting of the Board or Committee
thereof which authorizes such contract or transaction, or solely because his or
their votes are counted for such purpose, if (i) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the Committee, and the Board or
Committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested Directors, even though the
disinterested Directors be less than a quorum; or (ii) the material facts as to
his relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or ratified, by the Board
of Directors, a Committee thereof, or the stockholders. Common or interested
Directors may be counted in determining the presence of a quorum at a meeting
of the Board of Directors or of a Committee which authorizes such contract or
transaction.
ARTICLE III
OFFICERS
Section 1. Executive Officers of the Corporation. The executive officers of
the Corporation shall be chosen by the Board of Directors and shall be a
Chairman of the Board, a Vice-Chairman of the Board, a President, a
Vice-President, a Secretary and a Treasurer. Any two offices except those of
Chairman of the Board and Vice-Chairman of the Board, President and
Vice-President, or President and Secretary may be filled by the same person.
Section 2. Choosing of Executive Officers. The Board of Directors at its
first meeting after each Annual Meeting of Stockholders shall choose a Chairman
of the Board, a Vice-Chairman of the Board, a President, a Vice-President, a
Secretary and a Treasurer, none of whom need be a member of the Board, except
the Chairman of the Board, the Vice-Chairman of the Board and the President.
Section 3. Additional Officers. The Board of Directors may appoint
additional Vice-Presidents, Assistant Secretaries, Assistant Treasurers and
such other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the Board.
Section 4. Salaries. The salaries of all officers and agents of the
Corporation specially appointed by the Board shall be fixed by the Board of
Directors.
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Section 5. Term, Removal and Vacancies. The officers of the Corporation
shall hold office until their respective successors are chosen and qualify. Any
officer elected or appointed by the Board of Directors may be removed at any
time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
Section 6. Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the Board of Directors and of the stockholders.
Section 7. Vice Chairman of the Board. The Vice-Chairman of the Board shall
preside at all meetings of the stockholders and the Board of Directors in the
absence of the Chairman of the Board and shall have such powers and perform
such duties as are provided in these By-laws or as may be delegated to him by
the President and shall perform such other duties as may from time to time be
assigned to him by the Board of Directors.
Section 8. President. The President shall be the chief executive officer of
the Corporation. He shall have general charge and supervision of the business
of the Corporation and shall exercise and perform all the duties incident to
the office of the chief executive officer. He shall have direct supervision of
the other officers and shall also exercise and perform such powers and duties
as may be assigned to him by the Board of Directors. In the absence or
disability of the President the powers and duties of the President shall be
exercised jointly by the Chairman and Vice-Chairman of the Board until such
authority is altered by action of the Board of Directors. In the absence of the
Chairman of the Board and Vice-Chairman of the Board, the President shall
preside at all meetings of the Board of Directors and the stockholders.
Section 9. Powers and Duties of Vice-Presidents. Any Vice-President
designated by the Board of Directors shall, in the absence, disability, or
inability to act of the President, perform all duties and exercise all the
powers of the President and shall perform such other duties as the Board may
from time to time prescribe. Each Vice-President shall have such other powers
and shall perform such other duties as may be assigned to him by the Board.
Section 10. Powers and Duties of Treasurer and Assistant Treasurers.
(a) The Treasurer shall have the care and custody of all the funds and
securities of the Corporation except as may be otherwise ordered by the Board
of Directors, and shall cause such funds to be deposited to the credit of the
Corporation in such banks or depositories as may be designated by the Board
of Directors, the Chairman, the Vice-Chairman, the President or the
Treasurer, and shall cause such securities to be placed in safekeeping in
such manner as may be designated by the Board of Directors, the Chairman, the
Vice-Chairman, the President or the Treasurer.
(b) The Treasurer, or an Assistant Treasurer, or such other person or
persons as may be designated for such purpose by the Board of Directors, the
Chairman, the Vice-Chairman, the President or the Treasurer, may endorse in
the name and on behalf
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of the Corporation all instruments for the payment of money, bills of lading,
warehouse receipts, insurance policies and other commercial documents requiring
such endorsement.
(c) The Treasurer, or an Assistant Treasurer, or such other person or
persons as may be designated for such purpose by the Board of Directors, the
Chairman, the Vice-Chairman, the President or the Treasurer, may sign all
receipts and vouchers for payments made to the Corporation; he shall render a
statement of the cash account of the Corporation to the Board of Directors as
often as it shall require the same; he shall enter regularly in books to be
kept by him for that purpose full and accurate accounts of all monies
received and paid by him on account of the Corporation and of all securities
received and delivered by the Corporation.
(d) Each Assistant Treasurer shall perform such duties as may from time to
time be assigned to him by the Treasurer or by the Board of Directors. In the
event of the absence of the Treasurer or his incapacity or inability to act,
then any Assistant Treasurer may perform any of the duties and may exercise
any of the powers of the Treasurer.
Section 11. Powers and Duties of Secretary and Assistant Secretaries.
(a) The Secretary shall attend all meetings of the Board, all meetings of
the stockholders, and shall keep the minutes of all proceedings of the
stockholders and the Board of Directors in proper books provided for that
purpose. The Secretary shall attend to the giving and serving of all notices
of the Corporation in accordance with the provisions of the By-laws and as
required by the laws of Delaware. The Secretary may, with the President, a
Vice-President or other authorized officer, sign all contracts and other
documents in the name of the Corporation. He shall perform such other duties
as may be prescribed in these By-laws or assigned to him and all other acts
incident to the position of Secretary.
(b) Each Assistant Secretary shall perform such duties as may from time to
time be assigned to him by the Secretary or by the Board of Directors. In the
event of the absence of the Secretary or his incapacity or inability to act,
then any Assistant Secretary may perform any of the duties and may exercise
any of the Powers of the Secretary.
(c) In no case shall the Secretary or any Assistant Secretary, without the
express authorization and direction of the Board of Directors, have any
responsibility for, or any duty or authority with respect to, the withholding
or payment of any federal, state or local taxes of the Corporation, or the
preparation or filing of any tax return.
ARTICLE IV
CAPITAL STOCK
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Section 1. Stock Certificates.
(a) Every holder of stock in the Corporation shall be entitled to have a
certificate signed in the name of the Corporation by the Chairman or the
President or the Vice-Chairman or a Vice-President, and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary, certifying
the number of shares owned by him.
(b) If such a certificate is countersigned by a transfer agent other than
the Corporation or its employee, or by a registrar other than the Corporation
or its employee, the signatures of the officers of the Corporation may be
facsimiles and, if permitted by Delaware law, any other signature on the
certificate may be a facsimile.
(c) In case any officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the Corporation with the same
effect as if he were such officer at the date of issue.
(d) Certificates of stock shall be issued in such form not inconsistent
with the Certificate of Incorporation as shall be approved by the Board of
Directors. They shall be numbered and registered in the order in which they
are issued. No certificate shall be issued until fully paid.
Section 2. Record Ownership. A record of the name and address of the
holder of each certificate, the number of shares represented thereby, and the
date of issue thereof shall be made on the Corporation's books. The Corporation
shall be entitled to treat the holder of record of any share of stock as the
holder in fact thereof, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
required by the laws of Delaware.
Section 3. Transfer of Record Ownership. Transfers of stock shall be made on
the books of the Corporation only by direction of the person named in the
certificate or his attorney, lawfully constituted in writing, and only upon the
surrender of the certificate therefor and a written assignment of the shares
evidenced thereby. Whenever any transfer of stock shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer if, when the certificates are presented to the Corporation for
transfer, both the transferor and transferee request the Corporation to do so.
Section 4. Lost, Stolen or Destroyed Certificates. Certificates
representing shares of the stock of the Corporation shall be issued in place of
any certificate alleged to have been lost, stolen or destroyed in such manner
and on such terms and conditions as the Board of Directors from time to time
may authorize.
Section 5. Transfer Agent, Registrar, Rules Respecting Certificates. The
Corporation shall maintain one or more transfer offices or agencies where stock
of the Corporation shall be transferable. The Corporation shall also maintain
one or more registry offices where such stock
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shall be registered. The Board of Directors may make such rules and regulations
as it may deem expedient concerning the issue, transfer and registration of
stock certificates.
Section 6. Fixing Record Date for Determination of Stockholders of Record.
The Board of Directors may fix in advance a date as the record date for the
purpose of determining the stockholders entitled to notice of, or to vote at,
any meeting of the stockholders or any adjournment thereof, or the stockholders
entitled to receive payment of any dividend or other distribution or the
allotment of any rights, or entitled to exercise any rights in respect of any
change conversion or exchange of stock, or to express consent to corporate
action in writing without a meeting, or in order to make a determination of the
stockholders for the purpose of any other lawful action. Such record date in
any case shall not be more than sixty days nor less than ten days before the
date of a meeting of the stockholders, nor more than sixty days prior to any
other action requiring such determination of the stockholders. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE V
SECURITIES HELD BY THE CORPORATION
Section 1. Voting. Unless the Board of Directors shall otherwise order, the
Chairman, the Vice-Chairman, the President, any Vice-President or the Treasurer
shall have full power and authority on behalf of the Corporation to attend, act
and vote at any meeting of the stockholders of any corporation in which the
Corporation may hold stock and at such meeting to exercise any or all rights
and powers incident to the ownership of such stock, and to execute on behalf of
the Corporation a proxy or proxies empowering another or others to act as
aforesaid. The Board of Directors from time to time may confer like powers upon
any other person or persons.
Section 2. General Authorization to Transfer Securities Held by the
Corporation.
(a) Any of the following officers, to-wit: the Chairman, the
Vice-Chairman, the President, any Vice-President, the Treasurer or the
Secretary of the Corporation shall be and are hereby authorized and empowered
to transfer, convert, endorse, sell, assign, set over and deliver any and all
shares of stock, bonds, debentures, notes, subscription warrants, stock
purchase warrants, evidences of indebtedness, or other securities now or
hereafter standing in the name of or owned by the Corporation, and to make,
execute and deliver under the seal of the Corporation any and all written
instruments of assignment and transfer necessary or proper to effectuate the
authority hereby conferred.
(b) Whenever there shall be annexed to any instrument of assignment and
transfer executed, pursuant to and in accordance with the foregoing paragraph
(a), a certificate of the Secretary or an Assistant Secretary of the
Corporation in office at the date of such certificate setting forth the
provisions hereof and stating that they are in full
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force and effect and setting forth the names of persons who are then officers
of the Corporation, then all persons to whom such instrument and annexed
certificate shall thereafter come shall be entitled, without further inquiry or
investigation and regardless of the date of such certificate, to assume and to
act in reliance upon the assumption that the shares of stock or other
securities named in such instrument were theretofore duly and properly
transferred, endorsed, sold, assigned, set over and delivered by the
Corporation, and that with respect to such securities the authority of these
provisions of the By-laws and of such officers is still in full force and
effect.
ARTICLE VI
DIVIDENDS
Section 1. Declaration of Dividends. Dividends upon the capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Payment and Reserves. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Directors shall think conducive to the interest
of the Corporation, and the Directors may modify or abolish any such reserves
in the manner in which they were created.
Section 3. Record Date. The Board of Directors may, to the extent provided
by law, prescribe a period, in no event more than sixty days prior to the date
for payment of any dividend, as a record date for the determination of
stockholders entitled to receive payment of any such dividend, and in such case
such stockholders and only such stockholders as shall be stockholders of record
on said date so fixed shall be entitled to receive payment of such dividend,
notwithstanding any transfer of any stock on the books of the Corporation after
any such record date fixed as aforesaid.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Signatures of Officers. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
The signature of any officer upon any of the foregoing instruments may be a
facsimile whenever authorized by the Board.
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Section 2. Fiscal Year. The fiscal year of the Corporation shall end on
December 31 unless otherwise fixed by resolution of the Board of Directors.
Section 3. Seal. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its incorporation and the words "Corporate Seal,
Delaware." Said seal may be used for causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
WAIVER OF OR DISPENSING WITH NOTICE
Whenever any notice of the time, place or purpose of any meeting of the
stockholders, Directors or a committee is required to be given under the laws
of Delaware, the Certificate of Incorporation or these By-laws, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the holding thereof, or actual attendance at the
meeting in person, or in the case of the stockholders, by his attorney-in-fact,
shall be deemed equivalent to the giving of such notice to such persons. No
notice need be given to any person with whom communication is made unlawful by
any law of the United States or any rule, regulation, proclamation or executive
order issued under any such law.
ARTICLE IX
AMENDMENT OF BY-LAWS
These By-laws, or any of them, may from time to time be supplemented, amended
or repealed by the Board of Directors, or by the vote of a majority in interest
of the stockholders represented and entitled to vote at any meeting at which a
quorum is present.
ARTICLE X
INDEMNIFICATION
Section 1. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not
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opposed to the best interests of the Corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 2. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a Director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees) actually and, reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. To the extent that a Director, officer, employee or agent of the
Corporation has been successful on the merits, or otherwise, in defense of any
action, suit or proceeding referred to in Sections 1 and 2, or in the defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Section 4. Any indemnification under Sections 1 and 2 (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon determination that indemnification of the Director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 1 and 2. Such determination shall be made (i)
by the Board of Directors by a majority vote of a quorum consisting of
Directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or even if obtainable a quorum of
disinterested Directors so directs by independent legal counsel in a written
opinion, or (iii) by the stockholders.
Section 5. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding as authorized by the Board of Directors in
the specific case upon receipt of an undertaking by or on behalf of the
Director, officer, employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
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Section 6. The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled to under any By-law, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office and shall continue as to a
person who has ceased to be a Director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 7. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article.
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Pursuant to action by the Board of Directors of the Corporation, the
following provision replaced Article II, Section 2 of the Corporation's
By-Laws:
"Section 2. Number, Method of Election, Terms of Office of Directors. The
number of Directors which shall constitute the whole Board of Directors shall
be such as from time to time shall be determined by resolution of the Board of
Directors; provided there shall be at least one member of the Board of
Directors. Each Director shall hold office until his successor is elected and
qualified; provided, however, that a Director may resign at any time."
<PAGE> 1
EXHIBIT 5
BENESCH, FRIEDLANDER, COPLAN & ARONOFF
Attorneys at Law
1100 Citizens Building
850 Euclid Avenue
Cleveland, Ohio 44114-3399
(216) 363-4500
February 28, 1994
Board of Directors
Bally's Park Place Funding, Inc.
Park Place and The Boardwalk
Atlantic City, New Jersey 08401
Board of Directors
Bally's Park Place, Inc.
Park Place and The Boardwalk
Atlantic City, New Jersey 08401
Gentlemen:
We have served as counsel to Bally's Park Place Funding, Inc., a
Delaware corporation (the "Company") and Bally's Park Place, Inc., a Delaware
corporation (the "Guarantor") in connection with the filing of a Registration
Statement on Form S-1 pursuant to the Securities Act of 1933, as amended (the
"Registration Statement"), with respect to a proposed public offering by the
Company of $425,000,000 principal amount of first mortgage notes due 2004 (the
"Notes") and a guaranty of the payment of the principal of and interest on the
Notes by the Guarantor (the "Guaranty").
The Notes are to be issued pursuant to the terms of an indenture among
the Company, the Guarantor, Bally's Park Place, Inc., a New Jersey corporation,
Bally's Park Place Realty Co., a New Jersey corporation and First Bank National
Association, as Trustee (the "Indenture").
We have examined and relied upon originals or copies, certified or
otherwise identified to our satisfaction as being true copies, of all such
records of the Company and the Guarantor, all such agreements, certificates of
officers of the Company and the Guarantor and others, and such other documents,
certificates and corporate or other records as we have deemed necessary as a
basis for the opinions set forth herein, including, without limitation, the
following: the
<PAGE> 2
Board of Directors
February 28, 1994
Page 2
Registration Statement, a form of the Indenture, a form of the Purchase
Agreement to be entered into by the Company, the Guarantor, Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith, Jefferies & Company, Inc.,
Donaldson, Lufkin & Jenrette Securities Corporation and Libra Investments, Inc.
(the "Purchase Agreement"), and the Certificates of Incorporation of the
Company and the Guarantor.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to authentic original documents of
all documents submitted to us as certified or photostatic copies.
We have assumed: that each entity that is a party to the Indenture or
the Purchase Agreement (other than the Company and the Guarantor), has been
duly organized or formed and is validly existing and in good standing as a
corporate or similar organization under the law of its jurisdiction of
organization, and is qualified to do business and is in good standing as a
foreign corporation or other organization in each jurisdiction where by law it
is required to be so qualified; that the Indenture and the Purchase Agreement
have been duly authorized and will be duly executed and delivered by each other
party and constitutes such party's valid and binding obligation, enforceable
against such party in accordance with their respective terms; that each other
party has the requisite corporate or other organization power and authority to
perform such party's obligations under the Indenture and the Purchase
Agreement, as the case may be; and that each other party to the Indenture and
the Purchase Agreement will perform such party's obligations under the
Indenture and the Purchase Agreement, as the case may be.
We have investigated such questions of law for the purpose of
rendering this opinion as we have deemed necessary. We express no opinion in
this letter concerning any law other than the laws of the State of Ohio and the
State of New York, the General Corporation Law of the State of Delaware and the
federal law of the United States of America.
On the basis of and in reliance on the foregoing, and subject to the
limitations, qualifications and exceptions set forth below, we are of the
opinion that the Notes and the Guaranty, when duly executed, authenticated,
delivered and paid for as contemplated in the Registration Statement, the
Indenture and the Purchase Agreement, will be validly issued and will be
binding obligations of the Company and the Guarantor, respectively.
The opinions in the foregoing paragraph are subject to the following
additional limitations, qualifications and exceptions:
A. The effect and application of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other laws now or
hereafter in effect which relate to or limit creditors' rights generally;
<PAGE> 3
Board of Directors
February 28, 1994
Page 3
B. The effect and application of general principles of equity,
whether considered in a proceeding in equity or at law;
C. Limitations imposed by or resulting from the exercise by any
court of its discretion; and
D. Limitations imposed by reason of generally applicable public
policy principles or considerations.
The opinions in this letter are rendered only to the Company and the
Guarantor in connection with the filing of the Registration Statement and is
solely for the benefit of the Company and the Guarantor in connection with such
filing. We consent to the filing of this letter as an exhibit to the
Registration Statement and to being named in the Registration Statement under
the heading "Legal Matters" as counsel for the Company. The opinions may not
be relied upon by any other person, firm or corporation for any purpose without
our prior written consent. This letter may not be paraphrased, quoted or
summarized, nor may it be duplicated or reproduced in part.
Very truly yours,
/s/ Benesch, Friedlander, Coplan & Aronoff
BENESCH, FRIEDLANDER,
COPLAN & ARONOFF
<PAGE> 1
EXHIBIT 10(i)5
MORTGAGE AND SECURITY AGREEMENT
WITH ASSIGNMENT OF RENTS
by and between
BALLY'S PARK PLACE, INC., a New Jersey corporation,
Mortgagor
and
Bally's Park Place Realty Co., a New Jersey corporation,
Bally's
and
Bally's Park Place Funding Inc., a Delaware corporation
and
First Bank National Association
Mortgagee
Dated as of _________, 1994
Record and Return to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: John A. Caruso, Esq.
This instrument was prepared by the below named attorney.
________________________________
John A. Caruso, Esq.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Warranty of Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2. Payment of Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. Requirements; Proper Care and Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. Taxes on Mortgagee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5. Payment of Impositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7. Condemnation/Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8. Sale of Encumbered Property; Additional Financing . . . . . . . . . . . . . . . . . . . . . . 35
9. Discharge of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10. Right of Contest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12. Provisions Regarding the Ground Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
14. Loan Document Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15. Mortgagee's Right to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
16. Mortgagee's Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
17. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
18. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
19. Security Agreement under Uniform Commercial Code . . . . . . . . . . . . . . . . . . . . . . 59
20. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
21. No Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
22. Brokerage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
23. Additional Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
24. Mortgage Subject to the Provisions of the Act . . . . . . . . . . . . . . . . . . . . . . 62
25. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
26. Waivers by Mortgagors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
27. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
28. Conflict with Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
29. No Modification; Binding Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
30. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
31. Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
32. Satisfaction/Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
33. Receipt of Copy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
</TABLE>
ii
<PAGE> 4
MORTGAGE AND SECURITY AGREEMENT
WITH ASSIGNMENT OF RENTS
THIS MORTGAGE AND SECURITY AGREEMENT WITH ASSIGNMENT OF RENTS, made as of
the ____ day of _________, 1994, by and between Bally's Park Place, Inc., a New
Jersey corporation, having an office at Park Place and the Boardwalk, Atlantic
City, New Jersey, 08401, as leasehold and fee mortgagor ("Mortgagor"), and
Bally's Park Place Realty Co., a New Jersey corporation, having an office at
Park Place and the Boardwalk, Atlantic City, New Jersey, 08401, as fee
mortgagor ("Bally's" and, together with Mortgagor, "Mortgagors"), Bally's Park
Place Funding, Inc., a New Jersey corporation, having an office at Park Place
and the Boardwalk, Atlantic City, New Jersey, 08401 ("Funding") and First Bank
National Association, as mortgagee ("Mortgagee") and as trustee under that
Indenture (hereinafter defined), dated as of the date hereof. ANY CAPITALIZED
TERM NOT DEFINED HEREIN SHALL HAVE THE MEANING SET FORTH IN THE INDENTURE.
WITNESSETH:
To secure the following obligations and liabilities: (a) the payment to the
holders of the ________% First Mortgage Notes due 2004 (the "Notes"), issued
pursuant to the provisions of the Indenture, dated as of _________ __, 1994
(the "Indenture"), between Bally's Park Place Funding, Inc., a Delaware
corporation, as obligor ("Obligor"), Bally's Park Place, Inc., a Delaware
corporation, as guarantor ("Guarantor"), Mortgagor, Bally's and Mortgagee, as
trustee, of (i) the principal amount of an indebtedness of Four Hundred Twenty
Five Million Dollars ($425,000,000), evidenced by the Notes to be issued
pursuant to the provisions of the Indenture, (ii) any and all interest due or
to become due on the Notes in accordance with the provisions of the Indenture
and the Notes, (iii) any and all other sums due or to become due under the
Indenture, the Notes, this Mortgage or any of the Loan Documents (hereinafter
defined) and further or subsequent advances or expenditures made under any
other Loan Document by Mortgagee pursuant to the provisions hereof (the items
set forth in clauses (i)-(iii) above being hereinafter collectively referred to
as the "Indebtedness"), and (b) the performance of all of
1
<PAGE> 5
the terms, covenants, conditions, agreements, obligations, and liabilities of
Mortgagors and Obligor (collectively, the "Obligations") under (i) this
Mortgage, (ii) the Indenture, (iii) the Notes, (iv) the Assignment of Leases
and Rents (the "Assignment"), dated as of the date hereof, by Mortgagors for
the benefit of Mortgagee, (v) all of the other Loan Documents, and (vi) any
extensions, renewals, replacements or modifications of any of the foregoing
(this Mortgage, the Indenture, the Assignment, the Notes, and all other
documents executed in connection with the foregoing being hereinafter
collectively referred to as the "Loan Documents" and, individually, as a "Loan
Document"), and in consideration of Ten Dollars ($10), in hand paid, the
receipt and legal sufficiency of which are hereby acknowledged,
(A) Mortgagor does hereby encumber, give, grant, bargain, sell, warrant,
alienate, remise, release, convey, assign, transfer, hypothecate, deposit,
pledge, set over, create and grant a security interest in and confirm to
Mortgagee the following described real property, tangible personal property,
rights, collateral and all substitutions for and all replacements, reversions
and remainders of such tangible personal property, whether now owned or held or
hereafter acquired by Mortgagor (collectively, the "Leasehold Encumbered
Property"):
The Mortgagor's leasehold interest in all those plots, pieces or parcels
of land more particularly described in Exhibit "A" annexed hereto and made a
part hereof, together with the right, title and interest of Mortgagor, if any,
in and to the streets and in and to the land lying in the bed of any streets,
roads or avenues, open or proposed, public or private, in front of, adjoining
or abutting said land to the center line thereof, the air space and development
rights pertaining to said land and the right to use such air space and
development rights, all rights of way, privileges, liberties, tenements,
hereditaments and appurtenances belonging, or in any way appertaining thereto,
all easements now or hereafter benefiting said land and all royalties and
rights appertaining to the use and enjoyment of said land, including, but
without limiting the generality of the foregoing, all alley, vault, drainage,
mineral, water, oil, coal, gas and other similar rights (all of
2
<PAGE> 6
the foregoing being hereinafter collectively referred to as the "Land");
TOGETHER with Mortgagor's right, title and interest in and to that certain
Lease (the "Ground Lease"), dated June 8, 1977, between the Palley-Blatt
Company, as ground lessor, and Bally Manufacturing of New Jersey, Inc., a New
Jersey corporation, currently known as Mortgagor, as ground lessee, as assigned
by that certain Assignment of Lease dated April 27, 1979 between Palley-Blatt
Company, as assignor, and Norman Palley, trustee under Declaration of Trust
dated April 10, 1979, and Alexander K. Blatt, trustee under Declaration of
Trust dated April 6, 1979, as assignees, and by that certain Assignment of
Lease dated April 27, 1979 by Norman Palley, trustee under Declaration of Trust
dated April 10, 1979, and Alexander K. Blatt, trustee under Declaration of
Trust dated April 6, 1979, as assignors, and Bally Manufacturing Corporation,
as assignee and by assignment to Bally's and the leasehold estate created
thereby (the "Leasehold Estate");
TOGETHER with Mortgagor's fee interest, right and title in and to the
buildings and other improvements now or hereafter erected on the Fee and
Leasehold Estate (as hereinafter defined) (such buildings and other
improvements being hereinafter collectively referred to as the "Buildings" and
the Leasehold Estate together with the Buildings and the Personal Property
(hereinafter defined) located on or used in connection with the Leasehold
Estate, being hereinafter collectively referred to as the "Leasehold Real
Estate");
TOGETHER with all and singular the reversion or reversions, remainder or
remainders, rents and revenues produced in connection with the Leases
(hereinafter defined) and all of the estate, right, title, interest, property,
possession, claim and demand whatsoever, both in law and at equity, of
Mortgagor of, in and to the Leasehold Real Estate and of, in and to every part
and parcel thereof, with the appurtenances, at any time belonging or in any way
appertaining thereto;
TOGETHER with Mortgagor's right, title and interest in and to all
chattels, furnishings, goods, equipment, fixtures, tangible personal property,
materi-
3
<PAGE> 7
als, and all other contents of every kind and nature, including, without
limitation, all tangible personal property used in connection with the hotel
and restaurant facilities located on the Leasehold Real Estate and all gaming
equipment, tables and slots that shall be owned or hereafter acquired, used in
connection with or placed prior to the satisfaction of the Indebtedness and
Obligations on the Leasehold Real Estate, including machinery, fixtures,
systems, apparatus, fittings, materials and equipment now or which may
hereafter be used in the operation of the Leasehold Real Estate, including, but
without limiting the generality of the foregoing, all heating, electrical,
mechanical, lighting, lifting, plumbing, ventilating, air conditioning and
air-cooling fixtures, systems, machinery, apparatus and equipment,
refrigerating, incinerating and power fixtures, systems, machinery, apparatus
and equipment, loading and unloading fixtures, systems, machinery, apparatus
and equipment, escalators, elevators, boilers, communication systems, casino
gambling equipment, switchboards, sprinkler systems and other fire prevention
and extinguishing fixtures, systems, machinery, apparatus and equipment, and
all engines, motors, dynamos, machinery, wiring, pipes, pumps, tanks, conduits
and ducts constituting a part of any of the foregoing, and all additions to,
substitutions for, renewals and proceeds of any of the foregoing, together with
all attachments, substituted parts, accessories, accessions, improvements and
replacements thereof, including the equity of Mortgagor in any such item that
is subject to a purchase money or other prior security interest (all such
tangible personal property, fixtures, additions, substitutions and proceeds
being sometimes hereinafter collectively referred to as the "Leasehold Personal
Property");
TOGETHER with Mortgagor's right, title and interest to and under all
leases, subleases, underlet- tings, licenses and other occupancy agreements
which now or hereafter may affect the Real Estate (hereinafter defined) or any
portion thereof and under any and all guarantees, modifications, renewals and
extensions thereof as listed in Exhibit "B" (collectively, the "Leases"), and
to and under all documents and instruments made or hereafter made in respect of
the Leases, and in and to any and all deposits made or hereafter made as
security under the Leases (excluding, however, any sums paid as "key money" in
connection with the execution or renewal
4
<PAGE> 8
thereof or any sums paid in connection with the execution or renewal of a Lease
as advance rental, to the extent the same has been paid prior to the occurrence
of an Event of Default (hereinafter defined)), subject to the legal rights
under the Leases of the persons or entities making such deposits, together with
any and all of the benefits, rentals, revenues, issues, profits, income and
rents due or to become due or to which Mortgagor is now or hereafter may become
entitled arising out of the Leases (collectively, the "Rents");
TOGETHER with all plans, specifications, engineering reports, land
planning maps, surveys, and any other reports, exhibits or plans used or to be
used in connection with the operation or maintenance of the Real Estate,
together with all amendments and modifications thereof;
TOGETHER with (a) subject to the provisions of Article 6 hereof,
Mortgagor's interest in and to all proceeds which now or hereafter may be paid
under any insurance policies now or hereafter obtained by Mortgagor in
connection with the conversion of the Encumbered Property (hereinafter defined)
or any portion thereof into cash or liquidated claims, together with the
interest payable thereon and the right to collect and receive the same,
including, but without limiting the generality of the foregoing, proceeds of
casualty insurance, title insurance, business interruption insurance and any
other insurance now or hereafter maintained with respect to the Real Estate or
in connection with the use or operation thereof (collectively, the "Insurance
Proceeds"), and (b) subject to the provisions of Article 7 hereof, all of
Mortgagor's right, title and interest in and to all awards, payments and/or
other compensation, together with the interest payable thereon and the right to
collect and receive the same, which now or hereafter may be made with respect
to the Encumbered Property as a result of (i) a taking by eminent domain,
condemnation or otherwise, (ii) the change of grade of any street, road or
avenue or the widening of any streets, roads or avenues adjoining or abutting
the Land, or (iii) any other injury to or decrease in the value of the
Encumbered Property or any portion thereof (collectively, the "Awards"), in any
of the foregoing circumstances described in clauses (a) or (b) above to the
extent of the entire amount of the Indebtedness outstanding as of the date of
Depositary's
5
<PAGE> 9
(hereinafter defined) receipt of any such Insurance Proceeds or Awards,
notwithstanding that the entire amount of the Indebtedness may not then be due
and payable, and also to the extent of reasonable attorneys' fees, costs and
disbursements incurred by Depositary or Mortgagee in connection with the
collection of any such Insurance Proceeds or Awards. Subject to the provisions
of Articles 6 and 7 hereof, Mortgagor hereby assigns to Mortgagee, and
Depositary is hereby authorized to collect and receive, all Insurance Proceeds
and Awards and to give proper receipts and acquittances therefor and to apply
the same in accordance with the provisions of this Mortgage. Mortgagor hereby
agrees to make, execute and deliver, from time to time, upon demand, further
documents, instruments or assurances to confirm the assignment of the Insurance
Proceeds and the Awards to Depositary and Mortgagee, free and clear of any
interest of Mortgagor whatsoever therein, except as specifically permitted in
this Mortgage, and free and clear of any other liens, claims or encumbrances of
any kind or nature whatsoever;
TOGETHER with all right, title and interest of Mortgagor in and to all
improvements, betterments, renewals and all substitutes and replacements of,
and all additions and appurtenances to, the Leasehold Real Estate, and in each
such case, the foregoing shall be deemed a part of the Leasehold Real Estate
and shall become subject to the lien of this Mortgage as fully and completely,
and with the same priority and effect, as though now owned by Mortgagor and
specifically described herein, without any further mortgage, conveyance,
assignment or other act by Mortgagor; and
(B) Mortgagors do hereby encumber, give, grant, bargain, sell, warrant,
alienate, remise, release, convey, assign, transfer, hypothecate, deposit,
pledge, set over, create and grant a security interest in and confirm to
Mortgagee the following described real property, tangible personal property,
rights, collateral and all substitutions for and all replacements, reversions
and remainders of such tangible personal property, whether now owned or held or
hereafter acquired by Mortgagors, (the "Fee Encumbered Property", and together
with the Leasehold Encumbered Property, the "Encumbered Property"):
6
<PAGE> 10
The Mortgagors' fee interest in the Land;
TOGETHER with Bally's right, title and interest in the Ground Lease (the
"Fee Interest", and together with the Land, the "Fee Estate"; the Leasehold
Estate and the Fee Estate collectively referred to as the "Fee and Leasehold
Estate");
TOGETHER with Mortgagors' fee interest, right and title in and to the
Buildings (the Fee Estate together with the Buildings and the Personal Property
located on or used in connection with the Fee Estate, being hereinafter
collectively referred to as the "Fee Real Estate"; the Fee Real Estate together
with the Leasehold Real Estate collectively referred to as the "Real Estate");
TOGETHER with all and singular the reversion or reversions, remainder or
remainders, rents and revenues produced in connection with the Fee Estate and
all of the estate, right, title, interest, property, possession, claim and
demand whatsoever, both in law and at equity, of Mortgagors of, in and to the
Fee Real Estate and of, in and to every part and parcel thereof, with the
appurtenances, at any time belonging or in any way appertaining thereto;
TOGETHER with Mortgagors' right, title and interest in and to all
chattels, furnishings, goods, equipment, fixtures, tangible personal property,
materials, and all other contents of every kind and nature, including, without
limitation, all tangible personal property used in connection with the hotel
and restaurant facilities located on the Fee Real Estate and all gaming
equipment, tables and slots that shall be owned or hereinafter acquired, used
in connection with or placed prior to the satisfaction of the Indebtedness and
Obligations on the Fee Real Estate, including machinery, fixtures, systems,
apparatus, fittings, materials and equipment now or which may hereafter be used
in the operation of the Fee Real Estate, including, but without limiting the
generality of the foregoing, all heating, electrical, mechanical, lighting,
lifting, plumbing, ventilating, air conditioning and air-cooling fixtures,
systems, machinery, apparatus and equipment, refrigerating, incinerating and
power fixtures, systems, machinery, apparatus and equipment, loading and
unloading
7
<PAGE> 11
fixtures, systems, machinery, apparatus and equipment, escalators, elevators,
boilers, communication systems, casino gambling equipment, switchboards,
sprinkler systems and other fire prevention and extinguishing fixtures,
systems, machinery, apparatus and equipment, and all engines, motors, dynamos,
machinery, wiring, pipes, pumps, tanks, conduits and ducts constituting a part
of any of the foregoing, and all additions to, substitutions for, renewals and
proceeds of any of the foregoing, together with all attachments, substituted
parts, accessories, accessions, improvements and replacements thereof,
including the equity of Mortgagors in any such item that is subject to a
purchase money or other prior security interest (all such tangible personal
property, fixtures, additions, substitutions and proceeds being sometimes
hereinafter collectively referred to as the "Fee Personal Property", and
together with the Leasehold Personal Property, the "Personal Property");
TOGETHER with Mortgagors' right, title and interest to and under all
Leases, and in and to any and all deposits made or hereafter made as security
under the Leases (excluding, however, any sums paid as "key money" in
connection with the execution or renewal thereof or any sums paid in connection
with the execution or renewal of a Lease as advance rental, to the extent the
same has been paid prior to the occurrence of an Event of Default), subject to
the legal rights under the Leases of the persons or entities making such
deposits, together with any and all Rents to which Mortgagors are now or
hereafter may become entitled and together with Bally's right, title and
interest in any rents paid under the Ground Lease to which Bally's is now or
hereafter may become entitled;
TOGETHER with all plans, specifications, engineering reports, land
planning maps, surveys, and any other reports, exhibits or plans used or to be
used in connection with the operation or maintenance of the Real Estate,
together with all amendments and modifications thereof;
TOGETHER with (a) subject to the provisions of Article 6 hereof, Bally's
interest in and to all Insurance Proceeds, and (b) subject to the provisions of
Article 7 hereof, all of Bally's right, title and interest in and to all
Awards, in any of the foregoing circum-
8
<PAGE> 12
stances described in clauses (a) or (b) above to the extent of the entire
amount of the Indebtedness outstanding as of the date of Depositary's receipt
of any such Insurance Proceeds or Awards, notwithstanding that the entire
amount of the Indebtedness may not then be due and payable, and also to the
extent of reasonable attorneys' fees, costs and disbursements incurred by
Depositary or Mortgagee in connection with the collection of any such Insurance
Proceeds or Awards. Subject to the provisions of Articles 6 and 7 hereof,
Bally's hereby assigns to Mortgagee, and Depositary is hereby authorized to
collect and receive, all such Insurance Proceeds and Awards and to give proper
receipts and 1acquittances therefor and to apply the same in accordance with
the provisions of this Mortgage. Bally's hereby agrees to make, execute and
deliver, from time to time, upon demand, further documents, instruments or
assurances to confirm the assignment of the Insurance Proceeds and the Awards
to Depositary and Mortgagee, free and clear of any interest of Bally's
whatsoever therein, except as specifically permitted in this Mortgage, and free
and clear of any other liens, claims or encumbrances of any kind or nature
whatsoever;
TOGETHER with all right, title and interest of Mortgagors in and to all
improvements, better-ments, renewals and all substitutes and replacements of,
and all additions and appurtenances to, the Fee Real Estate, and in each such
case, the foregoing shall be deemed a part of the Fee Real Estate and shall
become subject to the lien of this Mortgage as fully and completely, and with
the same priority and effect, as though now owned by Mortgagors and
specifically described herein, without any further mortgage, conveyance,
assignment or other act by Mortgagors.
TO HAVE AND TO HOLD the Encumbered Property and the rights and privileges
hereby encumbered or intended so to be unto Mortgagee and its successors and
assigns for the uses and purposes herein set forth.
Mortgagor, for itself and its successors and assigns, and Bally's, for
itself and its successors and assigns, further represent, warrant, covenant and
agree with Mortgagee as follows:
9
<PAGE> 13
1. Warranty of Title.
(a) Mortgagor warrants to Mortgagee that (i) it has good and marketable
title to the Leasehold Estate, (ii) it has good and marketable fee simple title
to the Buildings located on the Leasehold Real Estate and good title to the
Personal Property located on or used in connection with the Leasehold Real
Estate, (iii) it has the right to mortgage the Leasehold Real Estate in
accordance with the provisions set forth in this Mortgage, and (iv) this
Mortgage is a valid and enforceable first lien on the Leasehold Encumbered
Property, subject only to the exceptions to title more particularly described
in Exhibit "C" annexed hereto and made a part hereof (collectively, the
"Permitted Encumbrances"). Mortgagor shall (i) preserve such title and the
validity and priority of the lien of this Mortgage and shall forever warrant
and defend the same, subject to the Permitted Encumbrances and Additional
Mortgages (hereinafter defined), unto Mortgagee against the claims of all and
every person or persons, corporation or corporations and parties whomsoever,
and (ii) make, execute, acknowledge and deliver all such further or other
deeds, documents, instruments or assurances and cause to be done all such
further acts and things as may at any time hereafter be reasonably required to
confirm and fully protect the lien and priority of this Mortgage.
(b) Mortgagors warrant to Mortgagee that (i) they have good and
marketable title to their respective interests in the Fee Real Estate, (ii)
they have good and marketable fee simple title to their respective interests in
the Buildings located on the Fee Real Estate and good title to their respective
interests in the Personal Property located or used in connection with the Fee
Real Estate, (iii) they have the right to mortgage the Fee Real Estate in
accordance with the provisions set forth in this Mortgage, and (iv) this
Mortgage is a valid and enforceable first lien on the Fee Encumbered Property,
subject only to the exceptions to title more particularly described in Exhibit
"C". Mortgagors shall (i) preserve such title and the validity and priority of
the lien of this Mortgage and shall forever warrant and defend the same,
subject to the Permitted Encumbrances and Additional Mortgages, unto Mortgagee
against the claims of all and every person or persons, corporation or
corporations and parties whomsoever, and (ii) make,
10
<PAGE> 14
execute, acknowledge and deliver all such further or other deeds, documents,
instruments or assurances and cause to be done all such further acts and things
as may at any time hereafter be reasonably required to confirm and fully
protect the lien and priority of this Mortgage.
2. Payment of Indebtedness.
(a) Mortgagor shall pay the Indebtedness at the times and places and in
the manner specified in the Loan Documents and shall perform all of the
Obligations in accordance with the provisions set forth herein and in the other
Loan Documents.
(b) Any payment made in accordance with the terms of this Mortgage by any
person at any time liable for the payment of the whole or any part of the
Indebtedness, or by any subsequent owner of the Encumbered Property, or by any
other person whose interest in the Encumbered Property might be prejudiced in
the event of a failure to make such payment, or by any stockholder, officer or
director of a corporation or by any partner of a partnership which at any time
may be liable for such payment or may own or have such an interest in the
Encumbered Property, shall be deemed, as between Mortgagee and all persons who
at any time may be liable as aforesaid or may own the Encumbered Property, to
have been made on behalf of all such persons.
3. Requirements; Proper Care and Use.
(a) Subject to the right of Mortgagors to contest a Legal Requirement
(hereinafter defined) as provided in Article 10 hereof, Mortgagors promptly
shall comply with, or cause to be complied with, in all material respects, all
present and future laws, statutes, codes, ordinances, orders, judgments,
decrees, injunctions, rules, regulations, restrictions and requirements
(collectively, "Legal Requirements") of every Governmental Authority
(hereinafter defined) having jurisdiction over Mortgagors or the Encumbered
Property or the use, manner of use, occu- pancy, possession, operation,
maintenance, alteration, repair or Restoration (hereinafter defined) of the
Real Estate, without regard to the nature of the work to be done or the cost of
performing the same, whether foreseen or unforeseen, ordinary or extraordinary,
and shall perform, or cause to be performed,
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in all material respects, all obligations, agreements, covenants, restrictions
and conditions now or hereafter of record which may be applicable to Mortgagors
or to the Encumbered Property or to the use, manner of use, occupancy,
possession, operation, maintenance, alteration, repair or Restoration of the
Real Estate; provided, however, that Mortgagors shall not be required to comply
with any Legal Requirement which, by its terms, does not require that the
Encumbered Property so comply, or if such failure would not have a material
adverse effect on Mortgagor and its subsidiaries taken as a whole or Bally's
and its subsidiaries taken as a whole or the Encumbered Property or be
disadvantageous in any material respect to the Holders.
(b) Mortgagor, with respect to the Leasehold Real Estate, and Mortgagors,
with respect to the Fee Real Estate, shall (i) not abandon the Leasehold Real
Estate or the Fee Real Estate or any portion thereof, (ii) maintain, in all
material respects, the Leasehold Real Estate and the Fee Real Estate in good
repair, order and condition, reasonable wear and tear excepted, and supplied
with all necessary equipment, (iii) promptly make all necessary repairs,
renewals, replacements, additions and improvements to the Leasehold Real Estate
and the Fee Real Estate which, in the reasonable judgment of Mortgagors, may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, (iv) refrain from impairing
or diminishing in any material manner the value of the Leasehold Encumbered
Property and the Fee Encumbered Property or the priority or security of the
lien of this Mortgage, (v) not remove or demolish any of the Leasehold Real
Estate or Fee Real Estate if such removal or demolition might materially impair
the value of the Real Estate, except that Mortgagors shall have the right to
remove and dispose of, free of the lien of this Mortgage, such Personal
Property as may, from time to time, become worn out or obsolete or which, in
accordance with good business practices, should be removed or disposed of,
provided that if such removal shall materially adversely affect the value of
the Leasehold Encumbered Property or the Fee Encumbered Property,
simultaneously with, or prior to, such removal, any such Personal Property
shall be replaced with other Personal Property which shall have a value and
utility at least equal to that of the replaced Personal Property and which
shall be free of
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any security agreements or other liens or encumbrances of any kind or nature
whatsoever except as permitted in Article 8 herein; (vi) not make, install or
permit to be made or installed any alterations or additions to the Leasehold
Real Estate or the Fee Real Estate if doing so would materially impair the
value of the Leasehold Encumbered Property or the Fee Encumbered Property;
(vii) not make, suffer or permit any nuisance (it being acknowledged that
casino use shall not be deemed to be a nuisance) to exist on the Leasehold Real
Estate or the Fee Real Estate or any portion thereof, and (viii) subject to the
rights of tenants and other persons or entities in possession, permit Mortgagee
and its agents, at all reasonable times and with reasonable prior notice
(except in the case of an emergency), to enter upon the Real Estate for the
purpose of inspecting and appraising the Real Estate or any portion thereof.
(c) Mortgagors shall not, by any act or omission, permit any building or
other improvement located on any property which is not subject to the lien of
this Mortgage to rely upon the Real Estate or any portion thereof or any
interest therein to fulfill any Legal Requirement, except to the extent that
such reliance exists as of the date hereof, and Mortgagors hereby assign to
Mortgagee any and all rights to give consent for all or any portion of the Real
Estate or any interest therein to be so used. Mortgagors shall not, by any act
or omission, impair the integrity of the Real Estate, as it exists today, as a
single or multiple zoning lot or lots, as the case may be, separate and apart
from all other premises. Any act or omission by Mortgagors which would result
in a violation of any of the provisions of this Article 3 shall be null and
void.
(d) Mortgagors have and will maintain in effect at all times until the
Obligations are satisfied in full, all necessary licenses (including without
limitation all licenses necessary under the Act (hereinafter defined) or
otherwise to operate the casino portion of the Encumbered Property as a
casino), authorizations, registrations and approvals to own, use, occupy and
operate the Real Estate, and Mortgagors have full power and authority to carry
on its business at the Real Estate as currently conducted and have not received
any notice of any violation of any Legal Requirement that materially impairs
the value of the Real Estate.
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(e) During the term of this Mortgage and any renewals or extensions
hereof, as to any (i) "license," as such term is defined in N.J.S.A.
5:12-30, issued pursuant to the New Jersey Casino Control Act and regulations
promulgated thereunder (collectively being referred to herein as the "Act")
which is material to the continued lawful operation of Mortgagor as a casino
licensed pursuant to the provisions of the Act, and (ii) any material
requirements of the "Operation Certificate," as such term is defined in
[N.J.S.A. 5:12-35,] issued with regard to the Encumbered Property (the
foregoing subparagraphs (i) and (ii) are herein collectively referred to as the
"Operational Requirements"):
(1) The Operational Requirements are to the best of Mortgagor's knowledge
in good standing, free of material violations, and all conditions under which
they have been issued or renewed have been or are being satisfied and
fulfilled.
(2) Mortgagor will keep, maintain and preserve the Operational
Requirements in full force and effect and in good standing.
(3) Mortgagor will not knowingly violate, nor will it knowingly suffer
any violation of, the Operational Requirements.
(4) In the event Mortgagor knows of any fact, circumstances, or
occurrence which may result in a violation of the Operational Requirements,
Mortgagor shall promptly give Mortgagee written notice thereof.
4. Taxes on Mortgagee.
(a) If the United States of America, the State of New Jersey or any
political subdivision thereof or any city, town, county or municipality in
which the Real Estate is located or any agency, department, bureau, board,
commission or instrumentality of any of the foregoing now existing or hereafter
created (collectively, "Governmental Authorities" and, individually, a
"Governmental Authority") shall, at any time after the date hereof (whether or
not the lien of this Mortgage shall have been released), levy, assess or
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charge any tax, assessment or imposition upon this Mortgage or any other Loan
Document, the Indebtedness, the Obligations or the interest of Mortgagee in the
Encumbered Property by reason of this Mortgage or any other Loan Document, the
Indebtedness or the Obligations (excepting therefrom any income tax on payments
made under the Indenture and any franchise tax), Mortgagor shall pay all such
taxes, assessments and impositions to, for, or on account of, Mortgagee, as
they become due and payable and, on demand, shall furnish proof of such payment
to Mortgagee. If Mortgagor shall fail to pay any such tax, assessment or
imposition, then Mortgagee, at its option (but without any obligation to do
so), upon thirty (30) days' notice to Mortgagor (or such shorter period as
Mortgagee may deem reasonable if Mortgagee believes that failure to pay any
such tax, assessment or imposition promptly may subject the Encumbered Property
(or any portion thereof) to loss, forfeiture or a material diminution in
value), may pay such tax, assessment or imposition and, in such event, the
amount so paid (i) shall be deemed to be Indebtedness, (ii) shall be a lien on
the Encumbered Property prior to any right or title to, interest in, or claim
upon, the Encumbered Property subordinate to the lien of this Mortgage and
(iii) immediately shall be due and payable, on demand, together with interest
thereon at the rate of interest then payable under the Indenture, including, in
calculating such rate of interest, any additional interest which may be imposed
under the Indenture by reason of any default thereunder (such rate of interest
being hereinafter referred to as the "Interest Rate"), from the date of any
such payment by Mortgagee to the date of repayment to Mortgagee. In the event
of the passage of any law or regulation permitting, authorizing or requiring
any such tax, assessment or imposition to be levied, assessed or charged, which
law or regulation, may prohibit Mortgagor from paying the tax, assessment or
imposition to, for, or on account of, Mortgagee, then Mortgagee, upon written
notice, may declare the entire amount of Indebtedness due and payable one
hundred eighty (180) days after such notice.
(b) If any Governmental Authority shall at any time require revenue,
documentary or similar stamps to be affixed to this Mortgage or any other Loan
Document or shall require the payment of any tax with respect to the ownership
or recording of this Mortgage or
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any other Loan Document, Mortgagor, upon demand, shall pay for such stamps in
the required amount and shall deliver the same to Mortgagee, together with a
copy of the receipted bill therefor. If Mortgagor shall fail to pay for any
such stamps, then Mortgagee, at its option (but without any obligation to do
so), upon thirty (30) days' notice to Mortgagor (or such shorter period as
Mortgagee may deem reasonable if Mortgagee believes that failure to pay for any
such stamps promptly may subject the Encumbered Property (or any portion
thereof) to loss, forfeiture or a material diminution in value), may pay for
the same and, in such event, the amount so paid (i) shall be deemed to be
Indebt- edness, (ii) shall be a lien on the Encumbered Property prior to any
right or title to, or interest in, or claim upon, the Encumbered Property
subordinate to the lien of this Mortgage and (iii) immediately shall be due and
payable, on demand, together with interest thereon at the Interest Rate, from
the date of any such payment by Mortgagee to the date of repayment to
Mortgagee.
(c) In the event of the passage, after the date of this Mortgage, of any
law of the jurisdiction in which the Real Estate is located which shall deduct
from the value of the Encumbered Property, for purposes of taxation, any lien
thereon or shall change in any way the laws for the taxation of mortgages or
debts secured by mortgages for state or local purposes or the manner of the
collection of any such taxes and shall impose a tax, either directly or
indirectly, on this Mortgage or any other Loan Document, then, so long as
Mortgagor, Mortgagee, this Mortgage or the Indenture is not exempt from payment
of such tax and if Mortgagor shall be permitted by law to pay the whole of such
tax in addition to all other payments required hereunder and under the other
Loan Documents, Mortgagor shall pay such tax when the same shall be due and
payable and shall agree in writing to pay such tax when thereafter levied or
assessed against the Encumbered Property. In the event that any law or
regulation may prohibit Mortgagor from paying such tax, then Mortgagee, upon
written notice, may declare the entire amount of Indebtedness due and payable
one hundred eighty (180) days after such notice.
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5. Payment of Impositions.
(a) Subject to the provisions of Article 10 hereof, not later than the
date on which payment of the same shall be due, that is, the day before the
date on which any fine, penalty, interest, late charge or loss may be added
thereto or imposed by reason of the nonpayment thereof, Mortgagor shall pay and
discharge all taxes (including, but without limiting the generality of the
foregoing, all real property taxes and assessments and personal property
taxes), charges for any easement or agreement maintained for the benefit of the
Encumbered Property or any portion thereof, general and special assessments and
levies, permit, inspection and license fees, water and sewer rents and charges
and any other charges of every kind and nature whatsoever, foreseen or
unforeseen, ordinary or extraordinary, public or private, which, at any time,
are imposed upon or levied or assessed against Mortgagor or Bally's in
connection with the Encumbered Property or any portion thereof, or which arise
with respect to, or in connection with, the use, manner of use, occupancy,
possession, operation, maintenance, alteration, repair or Restoration of the
Real Estate or any portion thereof, together with any penalties, interest or
late charges which may be imposed in connection with any of the foregoing (all
of the foregoing taxes, assessments, levies and other charges, together with
such interest, penalties and late charges, being hereinafter collectively
referred to as "Impositions" and, individually, as an "Imposition"); provided,
however, that Mortgagor shall have the right to file for an extension in
connection with the payment of any Imposition and, if granted, to pay the
Imposition on or before the date specified in the extension, together with any
interest or penalty which may be imposed as a result of such extension. If,
however, any Legal Requirement shall allow that any Imposition may, at
Mortgagor's option, be paid in installments (whether or not interest shall
accrue on the unpaid balance of such Imposition), Mortgagor may exercise the
option to pay such Imposition in such installments, and, in such event,
Mortgagor shall be responsible for the payment of all such installments,
together with the interest, if any, thereon, in accordance with the provisions
of the applicable Legal Requirement. Not later than thirty (30) days after
request therefor by Mortgagee, Mortgagor shall deliver to Mortgagee evidence
reasonably acceptable to Mortgagee showing
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the payment of such Imposition. Mortgagor also shall deliver to Mortgagee,
within thirty (30) day; after request therefor, copies of all settlements and
notices pertaining to any Imposition which may be issued by any Governmental
Authority.
(b) At any time within three (3) months after the occurrence of an Event
of Default hereunder, Mortgagee may, but shall not be obligated to, require
Mortgagor to deposit with Mortgagee, monthly, one-twelfth (1/12th) of the
annual charges for real property taxes and assessments and other charges which
might become a lien upon the Encumbered Property or any portion thereof (each,
an "Escrow Deposit"). At Mortgagee's discretion, Escrow Deposits shall be made
for a period of six (6) months following Mortgagee's request therefor and may
be discontinued by Mortgagor at any time thereafter, so long as no Event of
Default has occurred or is occurring during that six (6) month period.
Mortgagee may, but shall not be obligated to, require Mortgagor to make Escrow
Deposits upon each subsequent Event of Default, which Escrow Deposits shall be
made for a period of six (6) months following Mortgagee's request therefor and
may be discontinued, following the passage, without the occurrence of an Event
of Default, of any and all cumulative six (6) month periods, as provided
herein. Upon such discontinuance, any amounts, together with any interest
earned thereon, remaining in the Escrow Deposit shall be returned to Mortgagor.
If the amounts so required to be deposited are estimated, based upon charges
for the preceding year, and Mortgagee determines, in its reasonable good faith
judgment, that the aggregate of the sums to be deposited in escrow as aforesaid
will be insufficient to make each of the payments aforementioned, Mortgagor
shall, on demand by Mortgagee, simultaneously therewith deposit or cause to be
deposited with Mortgagee, a sum of money which, together with the monthly
installments aforementioned, due subsequent to the date of such demand, will be
sufficient to make such payments at least thirty (30) days prior to the date
such payments are due. Should said charges not be ascertainable at the time
any Escrow Deposit is required to be made with Mortgagee, the Escrow Deposit
shall be made on the basis of the charges for the prior year, and when the
charges are fixed for the then current year, Mortgagor shall deposit any
deficiency with Mortgagee. All funds so deposited with Mortgagee shall be
deposited in a federal-
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ly insured interest bearing account or liquid assets account in any state in
the United States or the District of Columbia, may be commingled by Mortgagee
with its general funds and, provided that Mortgagee shall not otherwise have
used a portion of such funds in accordance with the provisions of this
Mortgage, such funds (less the amounts, if any, which are payable into the
escrow fund to be used to pay real property taxes and assessments not yet due
and payable) shall be applied in payment of the aforementioned charges when and
as payable, to the extent Mortgagee shall have such funds on hand. In the
event that there shall occur an Event of Default, the funds deposited with
Mortgagee, as aforementioned, may be applied in payment of the charges for
which such funds shall have been deposited or the payment of the Indebtedness
or any other charges affecting the security of this Mortgage, as Mortgagee
determines, in its sole discretion, but no such application shall be deemed to
have been made by operation of law or otherwise until actually made by
Mortgagee as herein provided. If Escrow Deposits are being made with Mortgagee
as aforesaid, Mortgagor shall furnish Mortgagee with bills for the charges for
which such deposits are required to be made hereunder and/or such other
documents necessary for the payment of same, on the later to occur of (i)
fifteen (15) days prior to the date on which the charges first become due and
payable and (ii) the date on which such bills are received by Mortgagor.
(c) Nothing contained in this Mortgage shall affect any right or remedy
of Mortgagee under this Mortgage or otherwise to pay, upon thirty (30) days'
notice to Mortgagor (or such shorter period as Mortgagee may deem reasonable if
Mortgagee believes that the failure to pay any such Imposition promptly may
subject the Encumbered Property (or any portion thereof) to loss, forfeiture or
a material diminution in value), any Imposition from and after the date on
which such Imposition shall have become due and payable and, in such event and
provided Mortgagee shall not have paid such Imposition with sums being held by
Mortgagee pursuant to subparagraph (b) of this Article 5 (provided, however,
that Mortgagee shall have no right to pay such Imposition while Mortgagor is
contesting the validity, enforceability or application of the same pursuant to
the provisions of Article 10 hereof or is otherwise paying such Imposition in
installments in accordance with the provisions
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hereof), the amount so paid (i) shall be deemed to be Indebtedness, (ii) shall
be a lien on the Encumbered Property prior to any right or title to, interest
in, or claim upon, the Encumbered Property subordinate to the lien of this
Mortgage and (iii) shall be immediately due and payable, on demand, together
with interest thereon at the Interest Rate, from the date of any such payment
by Mortgagee to the date of repayment to Mortgagee.
6. Insurance.
(a) Mortgagor shall provide and keep in full force and effect, or require
to be provided and kept in full force and effect, for the benefit of Mortgagee
as hereinafter provided:
(i) insurance for the Buildings and the Personal Property (t) against
loss or damage by fire, lightning, windstorm, tornado, hail and such other
further and additional hazards of whatever kind or nature as are now or
hereafter may be covered by standard extended coverage, (u) with "all risk"
endorsements (including, but without limiting the generality of the
foregoing, vandalism, malicious mischief and damage by water), (v) against
war risks as, when and to the extent such insurance is obtainable from the
United States of America or an agency thereof, (w) against flood disaster
pursuant to the Flood Disaster Protection Act of 1973, 84 Stat. 572, 42
U.S.C. SS. 4001, if the Real Estate is located in an area identified by the
United States Department of Housing and Urban Development as a flood hazard
area (it being understood and agreed that Mortgagor may obtain such insurance
from a private carrier satisfactory to the Mortgagee), (x) against
earthquakes (including subsidence), (y) against loss of rentals and business
interruption due to any of the foregoing causes for a minimum period of nine
(9) months, and (z) against any other risk commonly insured against by
persons operating properties similar to the Real Estate and located in the
vicinity of the Real Estate or conducting operations similar to the
operations conducted at the Real Estate;
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(ii) demolition and increased cost of construction coverage;
(iii) if a sprinkler system shall be located in the Buildings,
sprinkler leakage insurance;
(iv) commercial general liability insurance in respect of the operation
of the Real Estate with limits of not less than $100,000,000 combined single
limit for bodily injury per occurrence and/or property damage liability per
occurrence (collectively, the "Minimum Liability Coverage"); provided,
however, that the Minimum Liability Coverage may be reduced from time to
time, but in no event to limits of less than $25,000,000 on a "claims made"
basis, provided that Mortgagor shall deliver to Mortgagee, within thirty (30)
days after the expiration of the policy or policies containing the Minimum
Liability Coverage and thereafter within thirty (30) days after the end of
each fiscal year of Mortgagor until the Minimum Liability Coverage shall be
reinstated, an Officer's Certificate stating that Mortgagor was unable to
obtain commercial general liability insurance coverage in excess of the
amount actually obtained or on other than a "claims made" basis; and
(v) such other insurance in such amounts as may from time to time be
commonly insured against in the case of properties similar to the Real Estate
and located in the vicinity of the Real Estate or conducting operations
similar to the operations conducted at the Real Estate.
All insurance provided hereunder shall be in such form as is commonly obtained
by owners of property similar to the Real Estate and located in the vicinity of
the Real Estate or conducting operations similar to the operations conducted at
the Real Estate, shall not contain a coinsurance provision whereby Mortgagor in
the event of loss becomes a co-insurer, shall, in the case of casualty
insurance, name Mortgagee as a named insured under a standard New York
mortgagee endorsement or its equiva-
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lent, which shall be acceptable to Mortgagee, shall name Mortgagee as a named
insured in the case of insurance other than casualty insurance, shall provide
for loss payable to Mortgagee, except policies insuring against damage by fire
or other casualty, which shall provide for loss payable as more particularly
set forth in Paragraph 6(j) hereof, shall be provided by insurance companies
which have a then current Alfred M. Best Company, Inc., general policyholder's
rating of at least "A-12" or a financial rating reasonably acceptable to
Mortgagee or by such other insurance companies as are reasonably acceptable to
Mortgagee, shall be cancelable only upon thirty (30) days' prior written notice
to Mortgagee, may provide for a standard deduction not to exceed $500,000 in
the case of all insurance other than commercial general liability insurance,
and $1,000,000 in the case of commercial general liability insurance, and
otherwise shall be acceptable to Mortgagee in its reasonable discretion. For
purposes hereof, "Depositary" shall mean a bank, trust company, insurance
company, savings bank or governmental pension, retirement or welfare fund,
reasonably acceptable to Mortgagor and designated by Mortgagee to serve as
Depositary pursuant to this Mortgage. Anything contained herein to the
contrary notwithstanding, in no event shall the insurance provided under clause
(t) of Paragraph 6(a)(i) hereof be in an amount which is less than One Hundred
Percent (100%) of the full replacement cost of the Buildings and the Personal
Property, including the cost of debris removal, but excluding the value of
foundations and excavations, as determined from time to time by Mortgagee.
Mortgagor shall assign and deliver to Mortgagee all such certificates, policies
of insurance or duplicate originals thereof, as collateral and further security
for payment of the Indebtedness and performance of the Obligations. If any
insurance required to be provided hereunder shall expire, be withdrawn, become
void by breach of any condition thereof by Mortgagor or by any lessee of the
Real Estate or any portion thereof, or become void or questionable by reason of
the failure or impairment of the capital of any insurer, or if for any other
reason whatsoever any such insurance shall become unsatisfactory to Mortgagee,
as determined in its reasonable judgment, Mortgagor immediately shall obtain
new or additional insurance which shall be satisfactory to Mortgagee in its
reasonable discretion. If any insurance required to be provided hereunder
shall become unavailable to property owners in the area in which the
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Encumbered Property is located, then Mortgagor shall, within thirty (30) days
after demand by Mortgagee, obtain such other types of insurance, in such
amounts as may be reasonably required by Mortgagee. Mortgagor shall not take
out any separate or additional insurance which is contributing in the event of
loss unless it is properly endorsed and otherwise reasonably satisfactory to
Mortgagee in all respects.
(b) Mortgagor shall (i) pay as they become due all premiums for the
insurance required hereunder (it being understood that Mortgagor may pay all
such premiums in installments), and (ii) not later than thirty (30) days prior
to the expiration of each such policy, deliver to Mortgagee a renewal policy or
a duplicate original thereof or a certificate evidencing the insurance required
to be provided hereunder, accompanied by such evidence of payment of the
initial installment as shall be satisfactory to Mortgagee in its reasonable
discretion.
(c) If Mortgagor shall be in default of its obligation to so insure or
deliver any such prepaid policy or policies or certificate or certificates of
insurance to Mortgagee in accordance with the provisions hereof, Mortgagee, at
its option (but without any obligation to do so) and upon twenty-four (24)
hours' notice, may effect such insurance from year to year, and pay the premium
or premiums therefor, and, in such event, the amount of all such premium or
premiums (i) shall be deemed to be Indebtedness, (ii) shall be a lien on the
Encumbered Property prior to any right or title to, or interest in, or claim
upon, the Encumbered Property subordinate to the lien of this Mortgage and
(iii) shall be immediately due and payable, on demand, together with interest
thereon at the Interest Rate, from the date of any such payment by Mortgagee to
the date of repayment to Mortgagee.
(d) Mortgagor shall adjust the amount of insurance required to be
provided pursuant to the provisions of clause (t) of Paragraph 6(a)(i) hereof
at the time that each such policy of insurance is renewed (but, in no event,
less frequently than once during each twelve (12) month period) by using the F.
W. Dodge Building Index to determine whether there shall have been an increase
in the replacement cost of the Buildings and the
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Personal Property since the most recent adjustment to any such policy and, if
there shall have been any such increase, the amount of insurance required to be
provided hereunder shall be adjusted accordingly.
(e) Mortgagor promptly shall comply with, and shall cause the Buildings
and the Personal Property to comply with, (i) all of the provisions of each
such insurance policy, and (ii) all of the requirements of the insurers
thereunder applicable to Mortgagor or to any of the Buildings or the Personal
Property or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration, repair or Restoration of any of the Buildings or
Personal Property, even if such compliance would necessitate structural changes
or improvements or would result in interference with the use or enjoyment of
the Real Estate or any portion thereof. If Mortgagor shall use the Real Estate
or any portion thereof in any manner which would permit the insurer to cancel
any insurance required to be provided hereunder, Mortgagor immediately shall
obtain a substitute policy which shall be reasonably satisfactory to Mortgagee
and which shall be effective on or prior to the date on which any such other
insurance policy shall be cancelled.
(f) If the Buildings or the Personal Property or any portion thereof
shall be damaged, destroyed or injured by fire or any other casualty, Mortgagor
shall give immediate notice thereof to Mortgagee and Mortgagor promptly shall
commence and diligently shall continue and complete the repair, restoration,
replacement or rebuilding ("Restoration") of the Buildings and the Personal
Property so damaged, destroyed or injured substantially to their value,
condition and character immediately prior to such damage, destruction or
injury, in full compliance with all Legal Requirements. In addition, if the
Restoration to be done may materially impair the structural integrity of a
material portion of the Buildings or if the cost of the Restoration as
estimated by Mortgagee shall exceed the sum of Ten Million Dollars
($10,000,000) (in either case, "Major Restoration"), then Mortgagor shall,
prior to the commencement of the Major Restoration, furnish or cause to be
furnished to Mortgagee: (1) complete plans and specifications for the Major
Restoration, bearing the signed approval thereof by an architect reasonably
satisfactory to Mortgagee (the "Architect") and accompanied by the
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Architect's signed estimate, bearing the Architect's seal, of the entire cost
of completing the work (the "Plans"), which Plans shall be submitted to
Mortgagee for approval, which approval shall be granted or denied within
twenty-one (21) days of Mortgagee's receipt thereof (it being understood that
if Mortgagee shall fail to respond within such twenty-one (21)-day period,
Mortgagee shall be deemed to have granted its approval) and which approval
shall not be unreasonably withheld; provided, however, that Mortgagee's
approval of the Plans shall not be required in the case of (i) Major
Restoration consisting primarily of demolition or construction of the Buildings
for safety purposes, (ii) Major Restoration for which no permits or approvals
by Governmental Authorities are required by law, (iii) Major Restoration
consisting primarily of temporary, non-permanent construction, or (iv) Major
Restoration consisting primarily of painting or other items of decorative work;
(2) certified or photostatic copies of all permits and approvals required by
law in connection with the commencement and conduct of the Major Restoration;
and (3) either (x) a payment and performance bond for, and/or guaranty of the
payment for and completion of, the Major Restoration, which bond or guaranty
shall be in form reasonably satisfactory to Mortgagee, and shall be signed by a
surety or sureties, or guarantor or guarantors, as the case may be, who are
reasonably acceptable to Mortgagee, and shall be in an amount not less than One
Hundred Ten Percent (110%) of the Architect's estimate of the entire cost of
completing the Major Restoration, less the amount of Insurance Proceeds, if
any, then held by Depositary for application toward the cost of the Major
Restoration, or, at Mortgagor's option, (y) such other security as may be
reasonably satisfactory to Mortgagee. Notwithstanding anything to the contrary
contained herein, Mortgagee acknowledges that Major Restoration may be
performed on a "fast track" basis and, in such event, Mortgagor shall not be
required to submit full and complete Plans for approval prior to the
commencement of the Major Restoration, but shall submit such Plans as and when
they are prepared and submitted for approval to the applicable Governmental
Authorities.
(g) Mortgagor shall not commence any of the Major Restoration until
Mortgagor shall have complied with the applicable requirements referred to in
clause (f) above, and after commencing Major Restoration, Mort-
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gagor shall perform the Major Restoration diligently in a good and workmanlike
manner and in good faith substantially in accordance with the Plans, if
applicable, and in compliance with all applicable laws.
(h) Any Insurance Proceeds received by Depositary attributable to
business interruption insurance shall he promptly paid over to Mortgagor upon
receipt of the same by Depositary. All Insurance Proceeds delivered to
Depositary as aforesaid, other than proceeds attributable to business
interruption insurance, together with all Insurance Proceeds or portions
thereof paid directly to Depositary on account of damage or destruction to the
Buildings and/or the Personal Property (all of which Insurance Proceeds or
portions thereof, other than proceeds attributable to business interruption
insurance, shall be deposited by Depositary in an interest-bearing account),
together with any interest thereon, less the cost, if any, to Mortgagee and
Depositary of such recovery and of paying out such Insurance Proceeds
(including reasonable attorneys' fees and costs allocable to inspecting the
work and reviewing the Plans therefor), upon the written request of Mortgagor
and subject to compliance with the provisions of this Article 6, shall be made
available for application by Depositary to the payment of the cost of the Major
Restoration referred to in clause (f) above and shall be paid out from time to
time to Mortgagor and/or, at Mortgagee's or Depositary's option, exercisable
from time to time, directly to the contractor, subcontractors, materialmen,
laborers, engineers, architects and other persons rendering services or
materials in connection with the Major Restoration, as said Major Restoration
progresses, except as otherwise hereinafter provided, but subject to the
following conditions, any of which Mortgagee and Depositary may waive:
(i) If the Restoration to be done is Major Restoration, as determined
by Mortgagee, the Architect shall be in charge of the Restoration.
(ii) Each request for payment shall be made at least ten (10) days
prior to the requested date of disbursement and shall be accompanied by a
certificate of the Architect stating (1) that all of the Major Restoration
completed has been done in a good and workman-
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like manner and in substantial compliance with the approved Plans,
if any be required under clause (f) hereof, and in accordance with
the provisions of all applicable laws; (2) the sum requested is
justly required to reimburse Mortgagor for payments by Mortgagor to,
or is justly due to, the contractor, subcontractors, materialmen,
laborers, engineers, architects or other persons rendering services
or materials in con- nection with the Major Restoration (giving a brief
description of such services and materials), and that when added to all
sums previously paid out by Depositary, if any, does not exceed the value
of the Major Restoration (including the value of any "soft costs", such
as engineers' or architects' fees incurred in connection therewith) done
to the date of such certificate; and (3) that the amount of Insurance
Proceeds remaining in the hands of Depositary, together with other funds
otherwise available to Mortgagor, will be sufficient on completion of the
Major Restoration to pay for the same in full (giving in such reasonable
detail as Mortgagee or Depositary may require an estimate of the cost of
such completion and if such other funds are required, including a
certificate of an officer of Mortgagor, as to the sources of such funds).
(iii) Each request shall be accompanied by waivers or releases of
liens, satisfactory to Mortgagee and Depositary, covering that part of the
Major Restoration previously paid for, if any, and by a search prepared by a
title company or by other evidence reasonably satisfactory to Mortgagee and
Depositary that there has not been filed with respect to the Real Estate, or
any part thereof, any mechanic's lien or other lien or instrument for the
retention of title not discharged of record (by bonding or otherwise) in
respect of any part of the work and that there exist no encumbrances on or
affecting the Real Estate, or any part thereof, other than Permitted
Encumbrances and those which may have been approved by Mortgagee.
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(iv) There shall be no Event of Default on the part of Mortgagor or
Bally's under this Mortgage or the Indenture or any other Loan Document.
(v) The request for any payment after the Major Restoration has been
completed shall be accompanied by a copy of any certificate or certificates
required by law to render occupancy and operation of the Real Estate legal.
Upon completion of the Restoration and payment in full therefor and provided
there shall then be continuing any Event of Default hereunder, any Insurance
Proceeds (together with any interest earned thereon) remaining promptly shall
be paid by Depositary to Mortgagee for deposit in the Collateral Account or be
paid over for the benefit of the holders of any Additional Mortgage as provided
for in the Indenture. Any Insurance Proceeds remaining after completion of
such Restoration shall be paid to Mortgagor, provided that there shall not then
be continuing any Event of Default hereunder. Upon failure on the part of
Mortgagor promptly to commence or diligently to continue the Restoration, and
upon twenty-four (24) hours' notice by Mortgagee to Mortgagor, Mortgagee may
apply the amount of any Insurance Proceeds (together with any interest earned
thereon) then or thereafter in the hands of Depositary to the payment of the
Indebtedness; provided, however, that nothing herein contained shall prevent
Mortgagee from applying at any time the whole or any part of such Insurance
Proceeds (together with any interest earned thereon), and Mortgagee may so
apply such Insurance Proceeds (together with any interest earned thereon), to
the curing of any Event of Default under this Mortgage or the Indenture or any
other Loan Document.
(i) If within one (1) year after the occurrence of any damage or
destruction to the Buildings and Personal Property or any portion of either
thereof requiring Major Restoration in order to restore the Buildings and
Personal Property, Mortgagor shall not have submitted to Mortgagee and received
Mortgagee's approval, which approval shall not be unreasonably withheld or
delayed, as set forth above, of Plans for the Major Restoration of the
Buildings and the Personal Property so
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damaged or destroyed, or if, after such Plans are approved by all necessary
Governmental Authorities and Mortgagee, Mortgagor shall fail to commence
promptly such Major Restoration, or if thereafter Mortgagor fails diligently to
continue such Major Restoration or is delinquent in the payment to mechanics,
materialmen or others of the costs incurred in connection with such Major
Restoration (other than those costs which Mortgagor is, in good faith,
disputing), or, in the case of any damage or destruction to the Buildings
and/or the Personal Property or any part of either thereof not requiring Major
Restoration, as reasonably determined by Mortgagee, in order to restore the
Real Estate, if Mortgagor shall fail to repair, restore and rebuild promptly
the Buildings and Personal Property so damaged or destroyed, or in any other
respect fails to comply with its obligations under this Article 6, then, in
addition to all other rights herein set forth, and after giving Mortgagor
thirty (30) days' written notice of the nonfulfillment of one or more of the
foregoing conditions, and provided that such non-fulfillment shall not be cured
within said thirty (30)-day period, Mortgagee, or any lawfully appointed
receiver of the Buildings and Personal Property may, at their respective
options (but without any obligation to do so), perform or cause to be performed
such Major Restoration and may take such other steps as they deem advisable to
perform such work; provided, however, that Mortgagee shall be permitted to give
such shorter notice (and in such manner) as is reasonably practical in case of
emergency or other special circumstances. In such event, Depositary shall pay
over the Insurance Proceeds (together with any interest earned thereon) held by
it to Mortgagee or such receiver, as the case may be, upon request, to the
extent not previously paid to Mortgagor hereunder. Mortgagor and Bally's hereby
waive, for themselves and all others holding under them, any claim against
Mortgagee and such receiver arising out of anything done by Mortgagee or such
receiver pursuant hereto, other than due to the negligence or wilful misconduct
of Mortgagee or such receiver, and Mortgagee may apply all or a portion of the
Insurance Proceeds (without the need to fulfill any other requirements of this
Article 6) to reimburse Mortgagee and/or such receiver, for all amounts
reasonably expended or incurred by them, respectively, in connection with the
performance of such Major Restoration, and any excess costs shall be paid by
Mortgagor to Mortgagee upon demand.
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(j) Insurance Proceeds which are payable in connection with any damage
to, or destruction of, or injury to, the Buildings or the Personal Property (i)
in the case of a loss equal to or in excess of Twelve Million Dollars
($12,000,000), shall all be paid to Depositary and disbursed in accordance with
the provisions hereof; (ii) in the case of a loss in excess of Ten Million
Dollars ($10,000,000), but less than Twelve Million Dollars ($12,000,000), the
first Ten Million Dollars ($10,000,000) shall be paid to Mortgagor and the
remaining Insurance Proceeds shall be paid to Depositary and disbursed in
accordance with the provisions hereof; and (iii) in the case of a loss of Ten
Million Dollars ($10,000,000) or less, shall be paid directly to Mortgagor.
Mortgagor is hereby authorized to settle all claims under all policies of
insurance and to execute and deliver all necessary proofs of loss, receipts,
vouchers and releases required by the insurers, however, Mortgagee shall have
the right, but not the obligation, to join with Mortgagor in settling, and
approving the settlement of, any such claims except in the event of a claim
where the amount of insurance reasonably anticipated to be received with
respect to such claim is less than Ten Million Dollars ($10,000,000). Each
insurer is hereby authorized and directed to make payment of any Insurance
Proceeds or the portion thereof, as described in this Paragraph 6(j), under any
policies of insurance in connection with a loss in excess of Twelve Million
Dollars ($12,000,000) directly to Depositary instead of to Mortgagor and
Depositary jointly, and Depositary is hereby authorized to endorse any draft
therefor as Mortgagor's attorney-in-fact if Mortgagor shall fail to do so for
ten (10) days (or such lesser period of time as Mortgagee may reasonably
believe to be required) after request therefor by Mortgagee or Depositary. If,
prior to the receipt by Depositary or Mortgagor or both, as the case may be, of
any Insurance Proceeds or portion thereof, the Encumbered Property or any
portion thereof shall have been sold by Mortgagee pursuant to the power of sale
provided herein, Mortgagee shall have the right to receive the Insurance
Proceeds to the extent of any deficiency found to be due upon such sale,
whether or not a deficiency judgment on this Mortgage shall have been sought or
recovered or denied, together with interest thereon at the Interest Rate, and
the reasonable attorneys' fees, costs and
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disbursements incurred by Mortgagee in connection with the collection of the
Insurance Proceeds.
(k) The insurance required by this Mortgage may, at the option of
Mortgagor, be effected by blanket and/or umbrella policies issued to Mortgagor
covering the Buildings and the Personal Property as well as other properties
(real and personal) which are owned or leased by Mortgagor, provided that, in
each case, the policies otherwise comply with the provisions of this Mortgage
and allocate to the Buildings and the Personal Property, from time to time, the
coverage specified by Mortgagee, without possibility of reduction or
coinsurance by reason of, or damage to, any other property (real or personal)
named therein. If the insurance required by this Mortgage shall be effected by
any such blanket or umbrella policies, Mortgagor shall furnish to Mortgagee
original policies or duplicate originals thereof or certificates, with
schedules attached thereto showing the amount of the insurance provided under
such policies which is applicable to the Buildings and the Personal Property.
(l) Any conveyance of the Encumbered Property in accordance with the
provisions hereof shall transfer therewith all of Mortgagor's interest in all
insurance policies then covering the Buildings and the Personal Property or the
operations conducted at the Real Estate.
(m) Mortgagors hereby acknowledge that in the event Mortgagee is
permitted or required to exercise any discretion under this Article, Mortgagee
shall not be deemed to have abused such discretion provided that Mortgagee
shall have relied, at the expense of Mortgagor, on a recognized insurance
consultant with regard to insurance matters, a recognized construction
consultant with regard to restoration matters or such other recognized
consultants as may be appropriate or necessary to fulfill its obligation
hereunder. Any consultants referred to herein shall have not less than 10
years' experience.
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7. Condemnation/Eminent Domain.
(a) Notwithstanding (i) any taking by eminent domain, condemnation or
otherwise of all or any portion of the Encumbered Property, or (ii) the change
of grade of any street or the widening of streets, roads or avenues adjoining
or abutting the Land, or (iii) any other injury to or decrease in value of the
Encumbered Property by any Governmental Authority (any of the foregoing events
being hereinafter referred to as a "Taking"), Mortgagor shall continue to make
all payments due under this Mortgage and under the Indenture and the other Loan
Documents in accordance with the provisions of this Mortgage, the Indenture and
the applicable provisions of the other Loan Documents. Mortgagors shall notify
Mortgagee immediately upon obtaining knowledge of the institution of any
proceedings for any Taking or of any contemplated Taking of which Mortgagor or
Bally's as the case may be, is aware. No such proceeding with respect to any
Taking shall be settled without the prior consent of Mortgagee, which consent
shall not be unreasonably withheld or delayed, it being agreed that if
Mortgagee shall have failed to have either granted or denied its consent
thereto within twenty-one (21) days after request therefor, the same shall be
deemed to have been given; provided, however, that a proceeding where the
amount reasonably anticipated to be received by the Mortgagors collectively is
less than Ten Million Dollars ($10,000,000) shall not require such consent.
Mortgagors are hereby authorized to execute and deliver all necessary proofs of
loss, receipts, vouchers and releases required in connection with any Taking.
Each Governmental Authority is hereby authorized and directed to make payment
of any Award made in connection with any Taking directly to Mortgagors or
Depositary in accordance with the provisions of the next succeeding sentence
and Paragraph 7(b) hereof instead of to Mortgagors and Depositary jointly, and
Depositary is hereby authorized to endorse any draft therefor as Mortgagors'
attorney-in-fact if Mortgagors shall fail to endorse any such draft for ten
(10) days after request therefor by Mortgagee or Depositary. Anything
contained in any Legal Requirement, this Mortgage, or the Ground Lease to the
contrary notwithstanding, if there shall be a Taking of less than the entire
Encumbered Property and if there shall remain a sufficient portion of the
Encumbered Property so that it shall be possible for Mortgagors to continue to
conduct
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their business at such remaining Encumbered Property (a "Partial Taking"), (i)
in the event that the Award is less than Ten Million Dollars ($10,000,000), the
same shall be paid to Mortgagor, (ii) in the event that the Award shall be
equal to or be in excess of Ten Million Dollars ($10,000,000), but shall be
less than Twelve Million Dollars ($12,000,000), the first Ten Million Dollars
($10,000,000) of such Award shall be paid to Mortgagor and the remaining
portion of the Award shall be paid to Depositary, or (iii) in the event that
the Award shall be equal to or greater than Twelve Million Dollars
($12,000,000), the entire Award shall be paid to Depositary and, in the case of
(i) and (ii) above, Depositary shall pay the Award or portion thereof received
(after deducting therefrom all costs and expenses, including, but without
limiting the generality of the foregoing, reasonable attorneys' fees, costs and
disbursements incurred by Mortgagee in connection with the collection thereof
and any expenses of Depositary) to Mortgagor, in accordance, and upon there
being compliance, with the provisions of Article 6 hereof, for the sole purpose
of Mortgagor's Restoration of the Buildings and the Personal Property remaining
after any such Partial Taking, it being understood and agreed, however, that
neither Mortgagee nor Depositary shall have any obligation whatsoever to see to
the proper application of any Award so paid to Mortgagor. Mortgagor promptly
shall commence and diligently shall continue and complete the Restoration of
the Buildings and the Personal Property remaining after such Partial Taking
substantially to their value, condition and character immediately prior to such
Partial Taking, in accordance with the provisions of Article 6 hereof, as if
such Partial Taking had resulted in "damage or destruction to the Buildings or
Personal Property" (within the meaning of Paragraph 6(f) hereof), with
Mortgagor, Mortgagee and Depositary each having the same rights and obligations
with respect to the Award and Restoration as are set forth in Paragraphs 6(f)
through 6(j) hereof with respect to Insurance Proceeds, except that,
notwithstanding the provisions of Paragraph 6(f) hereof, Mortgagor shall
restore the Buildings and the Personal Property substantially to their value,
condition and character immediately prior to such Partial Taking, only to the
extent practicable, but otherwise in accordance with the provisions of
Paragraph 6(f). Any Award remaining after completion of such Restoration shall
be paid to Mortgagor, provided that there shall not then be continuing any
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Event of Default hereunder. If there shall then be continuing an Event of
Default hereunder, any such Award shall be paid to Mortgagee for deposit in the
Collateral Account or paid over for the benefit of the holders of any
Additional Mortgage as provided in the Indenture and may be applied to the
payment of the Indebtedness then outstanding.
(b) Notwithstanding anything contained herein to the contrary, in the
event of a total Taking or a Taking other than a Partial Taking, each
Governmental Authority is hereby authorized and directed to make payment of any
Award made in connection with any such Taking to Mortgagee for deposit in the
Collateral Account or for the benefit of the holders of any Additional Mortgage
as provided in the Indenture.
(c) Reduction of the outstanding amount of the Indebtedness resulting
from the application of any such Award by Mortgagee in accordance with the
provisions hereof shall be deemed to take effect only on the date of
Mortgagee's receipt of such Award in accordance with the terms of this Mortgage
and in such order of priority as Mortgagee may elect. If, prior to the receipt
by Mortgagee of any Award, the Encumbered Property or any portion thereof shall
have been sold by Mortgagee pursuant to the power of sale provided herein,
Mortgagee shall have the right to receive the Award to the extent of any
deficiency found to be due upon such sale, whether or not a deficiency judgment
on this Mortgage shall have been sought or recovered or denied, together with
interest thereon at the Interest Rate and the reasonable attorneys' fees, costs
and disbursements incurred by Mortgagee in connection with the collection of
the Award.
(d) Mortgagors hereby acknowledge that in the event Mortgagee is
permitted or required to exercise any discretion under this Article, Mortgagee
shall not be deemed to have abused such discretion provided that Mortgagee
shall have relied, at the expense of Mortgagor, on a recognized construction
consultant, an appraiser who is a member of the American Institute of Real
Estate Appraisers and who has been designated a "Member American Institute", or
such other recognized consultants as may be appropriate or necessary to fulfill
its obligations hereunder. Any consultants referred to herein shall have not
less than 10 years' experience.
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8. Sale of Encumbered Property; Additional Financing. Mortgagors shall
not, at any time, except as permitted pursuant to the Loan Documents,
(a) assign, transfer or convey all or any part of the Encumbered Property or
any interest therein; or
(b) (i) except as permitted pursuant to Section 1010 of the Indenture,
directly or indirectly, or permit any Restricted Subsidiary to directly or
indirectly, create, incur, assume or otherwise suffer to exist or cause or
otherwise suffer to become effective any lien in or any right, title or
interest to this Mortgage or any assets or property of any kind or nature
whatsoever, real, personal or mixed (including fixtures), whether tangible or
intangible ("Property") that constitutes all or any portion of the Collateral
subject to the lien of this Mortgage (a "Restricted Encumbrance," which term
excludes the lien created by this Mortgage and the Credit Facility Mortgage,
unless (x) the Restricted Encumbrance is a Permitted Encumbrance, (y) such lien
secures Indebtedness which ranks junior to or is pari passu in right of payment
with the Notes and, together with all other Indebtedness incurred pursuant to
this clause (y), is in an aggregate principal amount not to exceed the sum of
(without duplication) (A) the original principal amount of the Notes (less the
principal amount of the Notes outstanding at the time of any calculation), (B)
the amount available under the revolving credit facility described in clause
(i) of the definition of Permitted Indebtedness in the Indenture, (C) $100
million and (D) 66-2/3% of the cost of all Casino Hotel Improvements as
reflected on the consolidated balance sheet of Guarantor since the date
hereof (the liens of Restricted Encumbrances permitted under the foregoing
clauses being hereinafter collectively referred to as the "Additional
Mortgages"), or (ii) subject to the provisions otherwise set forth herein,
otherwise create, permit or suffer any lien, claim, charge or encumbrance of
any kind or nature whatsoever to be recorded against the Encumbered Property or
any portion thereof; provided, that, if the lien of a Restricted Encumbrance
permitted under the foregoing clause (y) is created, Mortgagee shall, at the
request of Guarantor, enter into an Intercreditor Agreement with the holder or
holders of the Indebtedness secured by such Restricted Encumbrance,
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substantially in the form of Schedule I annexed hereto and made a part hereof
(the "Intercreditor Agreement") and shall enter into such pari passu
certificates as are required pursuant to the Indenture. Notwithstanding the
foregoing provisions of this subsection 8(b), Guarantor or any Restricted
Subsidiary may create or incur or permit to exist purchase money Restricted
Encumbrances upon any personal Property acquired by Guarantor or any Restricted
Subsidiary; provided that no such purchase money Restricted Encumbrance upon
any personal Property acquired by Guarantor or any Restricted Subsidiary after
the date hereof shall extend to or cover any other Property or, at the time
incurred, secure Indebtedness in excess of 90% of the lesser of the cost or
fair market value of the Property subject to such purchase money Restricted
Encumbrance, and provided further that the aggregate principal amount of all
Indebtedness at any time outstanding and secured by Restricted Encumbrances
permitted by this clause plus the aggregate amount of all leases on personal
Property comprising the Collateral and secured by Restricted Encumbrances shall
not, at any time, exceed $20,000,000.
9. Discharge of Liens. Subject to the provisions of Article 10 hereof and
except as permitted by the Indenture or this Mortgage, Mortgagors at all times
shall keep the Encumbered Property free from the liens of mechanics, laborers,
contractors, subcontractors and materialmen and, except for the Permitted
Encumbrances, the Additional Mortgages, and any new or additional mortgages
which may be made to Mortgagee, free from any and all other liens, claims,
charges or encumbrances of any kind or nature whatsoever. If any such liens,
claims, charges or encumbrances shall be recorded, Mortgagors shall forthwith
deliver copies thereof to Mortgagee and Mortgagor shall, within thirty (30)
days after request therefor by Mortgagee, cause the same to be discharged of
record by payment or bonding.
10. Right of Contest. Mortgagors, at their sole cost and expense, may, in
good faith, contest, by proper legal actions or proceedings, the validity of
any Legal Requirement or the application thereof to Mortgagors or the
Encumbered Property, or the validity or amount of any Imposition or the
validity of the claims of any mechanics, laborers, subcontractors, contractors
or materialmen ("Contractor's Claims"). During the pendency
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<PAGE> 40
of any such action or proceeding, compliance with such contested Legal
Requirement or payment of such contested Imposition or payment of such
contested Contractor's Claim may be deferred, provided that, in each case, at
the time of the commencement of any such action or proceeding, and during the
pendency of such action or proceeding, (a) no Event of Default shall exist
hereunder and no other event shall have occurred which, with the giving of
notice or lapse of time, or both, would constitute an Event of Default
hereunder, (b) adequate reserves with respect thereto are maintained on
Mortgagors' books in accordance with generally accepted accounting principles
and the applicable provisions of the Indenture, and (c) Mortgagor reasonably
believes that noncompliance with the contested Legal Requirement or non-payment
of the contested Imposition or non-payment of such contested Contractor's Claim
would not have a material adverse effect upon the business of Mortgagors, the
Encumbered Property or the operation thereof or the Holders. Notwithstanding
any such reserves or the furnishing of any bond or other security, thirty (30)
days after notice from Mortgagee, Mortgagors shall comply with any contested
Legal Requirement or shall pay any contested Imposition or Contractor's Claim,
and compliance therewith or payment thereof shall not be deferred, if, at any
time, such deferral would have a material adverse effect on Mortgagors and
their subsidiaries taken as a whole or be disadvantageous in any material
respect to the Holders. If such action or proceeding is terminated or
discontinued adversely to Mortgagors and is not subject to appeal, Mortgagors
shall, within thirty (30) days of receiving request therefor, deliver to
Mortgagee evidence reasonably satisfactory to Mortgagee of Mortgagors'
compliance with such contested Legal Requirement or payment of such contested
Imposition or Contractor's Claim, as the case may be. Notwithstanding the
foregoing, Mortgagee shall have no obligation to request any matters referred
to herein and shall request such matters in Mortgagee's reasonable discretion.
11. Leases.
(a) Each Lease entered into from and after the date hereof including,
without limitation, all Leases which provide for an annual "base" or "minimum"
rent in excess of $100,000 (a "Major Lease") shall (i) not permit the lessee
thereunder to terminate or
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invalidate the terms thereof as a result of any action taken by Mortgagee to
enforce this Mortgage, including, without limitation, any sale of the
Encumbered Property or any portion thereof by Mortgagee pursuant to the power
of sale provided herein or otherwise, (ii) include a subordination clause
providing that the Lease and the interest of the lessee in the Encumbered
Property are in all respects subject and subordinate to this Mortgage, (iii)
provide that, at the option of Mortgagee or the purchaser at a sale by
Mortgagee pursuant to the power of sale provided herein or otherwise or the
grantee in a voluntary conveyance in lieu of such Mortgagee's sale, the lessee
thereunder shall attorn to Mortgagee or to such purchaser or grantee under all
of the terms of the Lease and recognize such entity as the lessor under the
Lease for the balance of the term of the Lease, and (iv) provide that, in the
event of the enforcement by Mortgagee of the remedies provided by law or in
equity or by this Mortgage, any person succeeding to the interest of Mortgagee
as a result of such enforcement shall not be bound by or liable for any (A)
prepayment of installments of Rent for more than thirty (30) days in advance of
the time when the same shall become due (excluding, however, any payments of
"key money" made by any lessee in connection with the execution or renewal of
its Lease or any other sums paid in connection with the execution or renewal of
a Lease as advance rental, to the extent the same has been paid prior to the
occurrence of an Event of Default) or (B) prior act or omission of any prior
landlord.
(b) Mortgagor shall (i) promptly perform all of the provisions of the
Leases on the part of the lessor thereunder to be performed, (ii) appear in and
defend any action or proceeding arising under, growing out of, or in any manner
connected with, the Leases or the obligations of the lessor or the lessees
thereunder, (iii) exercise, within thirty (30) days after demand by Mortgagee,
any right to request from the lessee under any Major Lease a certificate with
respect to the status thereof, (iv) deliver to Mortgagee, within thirty (30)
days after demand by Mortgagee, a written statement containing the names of all
lessees, the terms of all Leases and the spaces occupied and rentals payable
thereunder and a statement of all Leases which are then in default of any
monetary obligation, including the magnitude of any such monetary default and,
in the case of any
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non-monetary default, a statement of all Leases which, to the best of
Mortgagor's knowledge, are then in default of any non-monetary obligation,
including the nature and magnitude of any such non-monetary default, (v)
promptly deliver to Mortgagee, a fully executed copy of each Lease upon the
execution of the same. Notwithstanding the foregoing, Mortgagee shall have no
obligation to request any matters referred to herein and shall request such
matters in Mortgagee's reasonable discretion.
(c) Mortgagor hereby assigns to Mortgagee, from and after the date
hereof, primarily on a parity with the Encumbered Property, and not
secondarily, as further security for the payment of the Indebtedness and the
performance of the Obligations, the Leases and the Rents. Nothing contained in
this Article 11 shall be construed to bind Mortgagee to the performance of any
of the terms, covenants, conditions or agreements contained in any Lease or
otherwise impose any obligation on Mortgagee (including, but without limiting
the generality of the foregoing, any liability under the covenant of quiet
enjoyment contained in any Lease in the event that any lessee shall have been
joined as a party defendant in any action commenced by reason of an Event of
Default hereunder or in the event of the sale of the Encumbered Property by
Mortgagee pursuant to the power of sale contained herein or otherwise or in the
event lessee shall have been barred and foreclosed of any or all right, title
and interest and equity of redemption in the Encumbered Property), except that
Mortgagee shall be accountable for any money actually received pursuant to the
aforesaid assignment. Mortgagor hereby further grants to Mortgagee the right,
but not the obligation, (i) to enter upon and take possession of the Real
Estate for the purpose of collecting the Rents, (ii) to dispossess by the usual
summary proceedings any lessee defaulting in making any payment due under any
Lease to Mortgagee or defaulting in the performance of any of its other
obligations under its Lease, (iii) to let the Real Estate or any portion
thereof, (iv) to apply the Rents on account of the Indebtedness, it being
understood that the excess Rents, if any, remaining after all such payments
shall have been made shall be the property of and paid to Mortgagor, provided
there exists no Event of Default, and (v) to perform such other acts as
Mortgagee is entitled to perform pursuant to this Article 11. Such assignment
and grant shall continue in effect until the entire
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amount of the Indebtedness shall have been fully paid pursuant to the terms
hereof and the other Loan Documents, and all Obligations shall have been fully
performed in accordance with all provisions hereof and the other Loan Documents
or until this Mortgage shall be defeased in accordance with the provisions of
the Indenture, including without limitation, Sections 401 and 1301 thereof, the
execution of this Mortgage constituting and evidencing the irrevocable consent
of Mortgagor to the entry upon and taking possession of the Real Estate by
Mortgagee pursuant to such grant, subject, however, to the rights of any and
all parties in possession thereof, whether or not the Encumbered Property shall
have been sold by Mortgagee pursuant to the power of sale contained herein or
otherwise and without applying for a receiver. Mortgagee, however, grants to
Mortgagor, not as a limitation or condition hereof, but as a personal covenant
available only to Mortgagor and its successors and not to any lessee or other
person, a license, revocable by the consent of the Holders of One Hundred
Percent (100%) of the aggregate principal amount of the Notes then outstanding
and upon five (5) days' written notice to Mortgagor of such revocation, to
collect all of the Rents and to retain, use and enjoy the same and to do all
acts and perform such Obligations as Mortgagor is required to perform under the
Leases unless and until an Event of Default shall exist hereunder or unless and
until any event shall have occurred which, with the giving of notice or the
lapse of time, or both, would constitute an Event of Default hereunder.
(d) Upon notice and demand, Mortgagor shall, from time to time, execute,
acknowledge and deliver to Mortgagee, or shall cause to be executed,
acknowledged and delivered to Mortgagee, in form reasonably satisfactory to
Mortgagee, one or more separate assignments (confirmatory of the general
assignment provided in this Article 11) of the lessor's interest in any Lease.
Mortgagor shall pay to Mortgagee the reasonable expenses incurred by Mortgagee
in connection with the preparation and recording of any such instrument.
12. Provisions Regarding the Ground Lease.
(a) With respect to the Ground Lease, Mortgagors covenant and agree as
follows: (i) promptly and faithfully to observe, perform and comply with all
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the terms, covenants and provisions of the Ground Lease on their part to be
observed, performed and complied with, at the applicable times set forth in the
Ground Lease, within any applicable grace periods; (ii) to refrain from doing
anything, as a result of which, there could be a default or breach of any of
the terms of the Ground Lease; (iii) not to do, permit or suffer any event or
omission as a result of which there could occur a default or breach under the
Ground Lease; (iv) not to modify, amend or in any way alter or permit the
alteration of any of the terms of the Ground Lease and not to exercise any
right it may have under the Ground Lease to cancel or surrender the same; (v)
to give Mortgagee immediate notice of any default by anyone under the
Ground Lease and promptly to deliver to Mortgagee a copy of each notice of
default and all other notices, communications, plans, specifications and other
statements (including financial statements), responses, similar instruments
received or delivered by Mortgagors in connection with the Ground Lease; and
(vi) to furnish to Mortgagee copies of such information and evidence as
Mortgagee may reasonably require concerning Mortgagors' due observance,
performance and compliance with the terms, covenants and provisions of the
Ground Lease.
(b) In the event of the occurrence of any event which, with the giving of
notice, the passage of time or both, would constitute a default by Mortgagors
in the performance of any of their obligations under the Ground Lease and not
cured within any applicable grace period, including, without limitation, any
default in the payment of any sums payable thereunder, then, in each and every
case, Mortgagee may (but shall have no obligation to do so), at its option,
cause the default or defaults to be remedied and otherwise exercise any and all
of the rights of the Mortgagors thereunder in the name of and on behalf of
Mortgagors. Mortgagor shall, on demand, reimburse Mortgagee for all advances
made and expenses incurred by Mortgagee in curing any such default (including,
without limitation, reasonable attorneys fees and disbursements), together with
interest thereon at the Interest Rate from the date of any such payment by
Mortgagee, to the date of repayment to Mortgagee.
(c) With respect to the Ground Lease, Mortgagors hereby warrant and
represent as follows: (i) the Ground Lease is in full force and effect,
unmodified
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by any writing or otherwise; (ii) all rent, additional rent and/or other
charges reserved in or payable under the Ground Lease have been paid to the
extent that they are payable to the date hereof; (iii) Mortgagor enjoys the
quiet and peaceful possession of the Leasehold Estate; (iv) Mortgagors are not
in default under any of the material terms of the Ground Lease and, to the best
of their knowledge, are not in default under any other term of the Ground Lease
and there are no circumstances which, with the passage of time or the giving of
notice or both, would constitute a default under the Ground Lease; (v) the
execution and delivery of this Mortgage is permitted by the provisions of the
Ground Lease and does not violate any of the terms of the Ground Lease; and
(vi) Mortgagors have delivered to Mortgagee a true, accurate and complete copy
of the Ground Lease.
(d) If the Ground Lease is cancelled or terminated, and if Mortgagee or
its nominee shall acquire an interest in any new lease of the Land, Mortgagors
shall have no right, title or interest in or to the new lease or the leasehold
estate created by such new lease.
(e) Bally's hereby assigns to Mortgagee, from and after the date hereof,
primarily on a parity with the Encumbered Property, and not secondarily, as
further security for the payment of the Indebtedness and the performance of the
Obligations, the rents under the Ground Lease. Nothing contained in this
Article 12 shall be construed to bind Mortgagee to the performance of any of
the terms, covenants, conditions or agreements contained in the Ground Lease or
otherwise impose any obligation on Mortgagee (including, but without limiting
the generality of the foregoing, any liability under the covenant of quiet
enjoyment contained in the Ground Lease in the event that the lessee shall have
been joined as a party defendant in any action commenced by reason of an Event
of Default hereunder or in the event of the sale of the Encumbered Property by
Mortgagee pursuant to the power of sale contained herein or otherwise or in the
event lessee shall have been barred and foreclosed of any or all right, title
and interest and equity of redemption in the Encumbered Property), except that
Mortgagee shall be accountable for any money actually received pursuant to the
aforesaid assignment. Bally's hereby further grants to Mortgagee the right,
but not the obligation (i) to enter upon and take possession of the Real Estate
for
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the purpose of collecting the rents under the Ground Lease, (ii) to dispossess
by the usual summary proceedings any lessee defaulting in making any payment
due under the Ground Lease to Mortgagee or defaulting in the performance of any
of its other obligations under the Ground Lease, (iii) to let the Real Estate
or any portion thereof, (iv) to apply the rents under the Ground Lease on
account of the Indebtedness, it being understood that the excess rents under
the Ground Lease, if any, remaining after all such payments shall have been
made shall be the property of and paid to Bally's, provided there exists no
Event of Default, and (v) to perform such other acts as Mortgagee is entitled
to perform pursuant to this Article 12. Such assignment and grant shall
continue in effect until the entire amount of the Indebtedness shall be paid in
full and all of the Obligations relating to the Indenture and the Notes shall
be fully performed in accordance with this Mortgage and the other Loan
Documents, the execution of this Mortgage constituting and evidencing the
irrevocable consent of Bally's to the entry upon and taking possession of the
Real Estate by Mortgagee pursuant to such grant, subject, however, to the
rights of any and all parties in possession thereof, whether or not the
Encumbered Property shall have been sold by Mortgagee pursuant to the power of
sale contained herein or otherwise and without applying for a receiver.
Mortgagee, however, grants to Bally's, not as a limitation or condition hereof,
but as a personal covenant available only to Bally's and its successors and not
to any lessee or other person, a license, revocable by the consent of the
Holders of One Hundred Percent (100%) of the aggregate principal amount of the
Notes then outstanding and upon five (5) days' written notice to Bally's of
such revocation, to collect all of the Rents and to retain, use and enjoy the
same, unless and until an Event of Default shall exist hereunder or unless and
until any event shall have occurred which, with the giving of notice or the
lapse of time, or both, would constitute an Event of Default hereunder.
(f) Upon notice and demand, Bally's shall, from time to time, execute,
acknowledge and deliver to Mortgagee, or shall cause to be executed,
acknowledged and delivered to Mortgagee, in form reasonably satisfactory to
Mortgagee, one or more separate assignments (confirmatory of the general
assignment provided in this Article 12) of the lessor's interest in the Ground
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Lease. Mortgagor shall pay to Mortgagee the reasonable expenses incurred by
Mortgagee in connection with the preparation and recording of any such
instrument.
(g) Notwithstanding anything to the contrary contained herein, this
Mortgage shall not constitute an assignment of the Ground Lease within the
meaning of any provision thereof prohibiting its assignment and the Mortgagee
shall have no liability or obligation thereunder by reason of its acceptance of
this Mortgage. The Mortgagee shall be liable for the obligations of the tenant
arising under the Ground Lease for only that period of time during which the
Mortgagee is in possession of the Real Estate or has acquired, by foreclosure
or otherwise, and is holding, all of the Mortgagors' right, title and interest
therein.
13. Estoppel Certificates. Mortgagors and Mortgagee, within thirty (30)
business days after request by the other, shall deliver, in form reasonably
satisfactory to the other, a written statement, duly executed and acknowledged,
setting forth the amount of the Indebtedness then outstanding and whether, to
the best knowledge of the affiant, any offsets, claims, counterclaims or
defenses exist against the Indebtedness secured by this Mortgage.
14. Loan Document Expenses. Mortgagor shall pay, together with any
interest or penalties imposed in connection therewith, all reasonable expenses
of Mortgagee incident to the preparation, execution, acknowledgement, delivery
and/or recording of this Mortgage, the Assignment and UCC-1 financing
statements executed in connection with this Mortgage, including, but without
limiting the generality of the foregoing, all filing, registration and
recording fees and charges, documentary stamps, intangible taxes and all
federal, state, county and municipal taxes, duties, imposts, assessments and
charges now or hereafter required by reason of, or in connection with, this
Mortgage, the Assignment, such UCC-1 financing statements and UCC-3
continuation statements, and, in any event, otherwise shall comply with the
provisions set forth in Article 4 hereof.
15. Mortgagee's Right to Perform. In the event of any Event of Default
hereunder, Mortgagee may (but shall be under no obligation to), at any time,
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without waiving or releasing Mortgagors from any Obligations or any Event of
Default under this Mortgage, perform the Obligations and, in such event, the
cost thereof, including, but without limiting the generality of the foregoing,
reasonable attorneys' fees, costs and disbursements incurred in connection
therewith, (a) shall be deemed to be Indebtedness secured by this Mortgage, (b)
shall be a lien on the Encumbered Property prior to any right or title to,
interest in, or claim upon, the Encumbered Property subordinate to the lien of
this Mortgage, and (c) shall be payable, on demand, together with interest
thereon at the Interest Rate, from the date of any such payment by Mortgagee to
the date of repayment to Mortgagee. No payment or advance of money by
Mortgagee pursuant to the provisions of this Article 15 shall cure, or shall be
deemed or construed to cure, any such Event of Default by Mortgagors hereunder
or waive any rights or remedies of Mortgagee hereunder or at law or in equity
by reason of any such Event of Default.
16. Mortgagee's Costs and Expenses. If (a) Mortgagors shall fail to
perform any of the Obligations under this Mortgage, beyond applicable grace
periods, if any, or any other Loan Document, including the Indenture, beyond
any applicable grace period, or (b) Mortgagee shall exercise any of its rights
or remedies hereunder, or (c) any action or proceeding is commenced in which it
becomes necessary to defend or uphold the lien or priority of this Mortgage or
any action or proceeding relating to this Mortgage or any other Loan Document
is commenced to which Mortgagee is or becomes a party, or (d) the taking,
holding or servicing of this Mortgage by or on behalf of Mortgagee is alleged
to subject Mortgagee to any civil or criminal fine or penalty, or (e)
Mortgagee's review and approval of any document, including, but without
limiting the generality of the foregoing, any Major Lease (but excluding Leases
that are not Major Leases), is requested by Mortgagors or required by
Mortgagee, then, in any such event, all such reasonable costs, expenses and
fees incurred by Mortgagee in connection therewith (including, but without
limiting the generality of the foregoing, any civil or criminal fines or
penalties and attorneys' fees, costs and disbursements) (i) shall be deemed to
be Indebtedness secured by this Mortgage, (ii) shall be a lien on the
Encumbered Property prior to any right or title to, interest in, or claim upon,
the Encumbered Property subordinate to the
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lien of this Mortgage, and (iii) shall be payable, on demand, together with
interest thereon at the Interest Rate, from the date of any such payment by
Mortgagee to the date of repayment to Mortgagee. In any action to enforce any
remedy under this Mortgage, including, but without limiting the generality of
the foregoing, sale of the Encumbered Property by Mortgagee pursuant to the
power of sale contained herein or otherwise, or to recover or collect the
Indebtedness or any portion thereof, the provisions of this Article 16 with
respect to the recovery of costs, expenses, disbursements and penalties shall
prevail unaffected by the provisions of any Legal Requirement with respect to
the same to the extent that the provisions of this Article 16 are not
inconsistent therewith or violative thereof.
17. Defaults. The occurrence of any one or more of the following events
(regardless of the reason therefor), together with notice or demand, if
required hereunder, and the passage of any applicable grace period, shall
constitute a "Default" hereunder and, upon the giving of such notice of Default
and if required under Section 501 of the Indenture and the failure to cure the
same within any applicable grace period, shall become an "Event of Default"
hereunder:
(i) if Mortgagor or Bally's shall fail or neglect to comply with or
otherwise perform, keep or observe, any term, provision, condition,
covenant, warranty or representation contained in any Loan Document (other
than this Mortgage) that is required to be complied with or otherwise
performed, kept or observed by Mortgagor or Bally's or if for any reason
whatsoever a default, including an Event of Default (as such term is
defined in the Indenture), shall occur under any of the Loan Documents
(other than this Mortgage) and be continuing beyond the applicable grace
period, if any, contained in such Loan Document; or
(ii) any default beyond the applicable grace period by Mortgagor in
the due observance or performance of any of the terms, covenants or
provisions contained in the Ground Lease; or
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(iii) the failure to pay any Imposition or any installment on account
thereof (subject to Mortgagors' right to contest the same in accordance with
Article 10 hereof) or any insurance premiums for the insurance required to be
maintained hereunder when due and payable; or
(iv) the failure to furnish Mortgagee with proof of payment of the
Impositions required to be paid hereunder in accordance with Paragraph 5(a)
hereof or of any insurance premiums for the insurance required to be provided
hereunder by not later than thirty (30) days after request therefor by
Mortgagee; or
(v) the failure (x) to keep in full force and effect the insurance
required by this Mortgage or (y) to assign and deliver to Mortgagee the
policy or policies or certificate or certificates of insurance required to be
provided hereunder in accordance with the provisions hereof; or
(vi) unless permitted hereunder or under the Loan Documents, the actual
or threatened material removal or material demolition of, or material
alteration to, the Real Estate or any portion thereof; or
(vii) subject to Mortgagors' right to contest the same pursuant to, and
in accordance with, the provisions of Article 10 hereof, the failure to (x)
comply with any Legal Requirement or to cure any violation or notice of
violation of any Legal Requirement within the time period specified in such
Legal Requirement, or (y) comply with any requirement of any insurance
company issuing any policy of insurance required to be provided hereunder; or
(viii) if any representation or warranty, statement, report, financial
statement or certificate made or delivered by Mortgagor or any of its
officers, employees or agents or Bally's or any of its officers,
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employees or agents to Mortgagee shall not be true and correct in any
material respect as of the date when made or when reaffirmed and shall
materially adversely affect the Real Estate or Mortgagee's interest
therein; or
(ix) if the Real Estate or any portion thereof shall be materially
damaged, materially destroyed or materially injured by fire or other
casualty, or if there shall be a Partial Taking and, in either of such
cases, if Mortgagor shall fail to restore the Buildings and the Personal
Property in accordance with the provisions hereof; or
(x) if, except pursuant to the provisions hereof or of the Indenture,
(x) Mortgagor or Bally's shall make any new or additional mortgages or deeds
of trust on the Encumbered Property or any portion thereof, except for the
Additional Mortgages or (y) and except for the Permitted Encumbrances,
Mortgagor or Bally's otherwise shall encumber the Encumbered Property or any
portion thereof, or (z) and subject to the provisions otherwise set forth
herein, Mortgagor creates, permits or suffers any lien, claim, charge or
encumbrance of any kind or nature whatsoever to be recorded against the
Encumbered Property or any portion thereof; or
(xi) if, except pursuant to the provisions hereof or of the Indenture,
Mortgagor or Bally's shall (x) sell, transfer, assign or convey the
Encumbered Property or any portion thereof or any interest therein, by
operation of law or otherwise, except in connection with the Additional
Mortgages entered into by Mortgagors or in connection with Leases entered
into by Mortgagor and to the extent permitted by the Indenture, or (y) assign
or encumber the Rents or any portion thereof, except in connection with the
Additional Mortgages; or
(xii) if Mortgagors shall fail or neglect to comply with or otherwise
perform, keep or observe, in any material respect, any
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term, provision, condition, covenant, warranty or representation contained
in any mortgage or deed of trust affecting the Real Estate, including,
without limitation, the Additional Mortgages; or
(xiii) if Mortgagors shall otherwise fail or neglect to comply with or
otherwise perform, keep or observe, in any material respect, any other term,
provision, condition, covenant, warranty or representation contained in this
Mortgage that is required to be complied with or otherwise performed, kept
or observed by Mortgagors, after notice of such failure to comply from
Mortgagee and the passage of the applicable grace periods, if any (or if it
shall be impractical to comply with such terms, provisions, conditions or
covenants within the applicable grace periods, if any, to have failed to
have commenced compliance and/or to have diligently pursued such compliance;
provided that Mortgagee shall not be subject to any civil or criminal
liability for such failure to comply), or if no grace period shall be
specified, then, for thirty (30) days after notice thereof from Mortgagee.
To the extent that Mortgagors are entitled to receive notice of a Default
under the provisions of this Section 17, such notice shall be deemed to be the
same notice as is required for Defaults pursuant to Section 501 of the
Indenture, so that in no event shall Mortgagors be entitled to more than one
(1) notice of Default prior to such Default becoming an Event of Default. If a
Default shall be cured within the applicable grace period, it shall cease being
a "Default."
18. Remedies.
(a) Upon the occurrence of any Event of Default hereunder, Mortgagee may,
without further notice, presentment, demand or protest, all of which are hereby
expressly waived by Mortgagors, take such action as Mortgagee deems advisable,
in its sole discretion, to protect and enforce the rights of Mortgagee against
the Mortgagors and in and to the Encumbered Property or any part thereof,
including, but without limiting the gener-
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ality of the foregoing, the following actions, each of which may be pursued
concurrently or otherwise, at such time and in such manner as Mortgagee may
determine, in its sole discretion, without impairing or otherwise affecting the
other rights and remedies of Mortgagee hereunder or at law or in equity:
(i) Mortgagee may elect to cause the Encumbered Property or any portion
thereof to be sold in accordance with the provisions hereof and applicable
law.
(ii) Mortgagee may, without releasing Mortgagors from any Obligation
under this Mortgage or any other obligation under any other Loan Document and
without waiving any Event of Default, exercise any of its rights and remedies
under Article 15 hereof.
(iii) If the Indebtedness shall have been declared due and payable in
accordance with the provisions of the Indenture, then Mortgagee may (x)
institute and maintain an action with respect to the Encumbered Property
under any other Loan Document, or (y) take such other action as may be
allowed at law or in equity for the enforcement of this Mortgage and the
other Loan Documents. Mortgagee may proceed in any such action to final
judgment and execution thereon for the whole of the Indebtedness, together
with interest thereon at the Interest Rate, from the date on which Mortgagee
shall declare the same to be due and payable to the date of repayment to
Mortgagee, and all costs of any such action, including, but without limiting
the generality of the foregoing, reasonable attorneys' fees, costs and
disbursements.
(iv) Mortgagee, if it has not already revoked the license granted
pursuant to Articles 11 and 12 hereof, may revoke the license and may,
without releasing Mortgagors from any Obligation under this Mortgage, and
without waiving any Event of Default, enter upon and take possession of the
Real Estate or any portion thereof, either personally or by
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its agents, nominees or attorneys, and dispossess Mortgagors and their agents
and servants therefrom and, thereupon, Mortgagee may (w) use, manage, operate,
control, insure, maintain, repair, restore and otherwise deal with all and
every part of the Real Estate, (x) complete any construction on the Real
Estate, in such manner and form as Mortgagee deems advisable, (y) make
alterations, additions, renewals, replacements and improvements to or on the
Encumbered Property and (z) exercise all rights and powers of Mortgagors with
respect to the Encumbered Property, either in the name of Mortgagors or
otherwise, including, but without limiting the generality of the foregoing, the
right to make, cancel, enforce or modify Leases, obtain and evict lessees,
establish or change the amount of any Rents and the manner of collection
thereof and perform any acts which Mortgagee deems proper, in its sole
discretion, to protect the security of this Mortgage. Mortgagee may, but shall
not be obligated to, take any action pursuant to the Laws of the State of New
Jersey to enforce the provisions of any Operational Requirements and to secure
continued operation of the Encumbered Property as a licensed casino operation.
After deduction of all reasonable costs and expenses of operating and managing
the Real Estate, including, but without limiting the generality of the
foregoing, attorneys' fees, costs and disbursements, administration expenses,
management fees and brokers' commissions, satisfaction of liens on any of the
Encumbered Property, payment of Impositions, claims and insurance premiums,
invoices of persons who may have supplied goods and services to or for the
benefit of any of the Encumbered Property and all costs and expenses of the
maintenance, repair, Restoration, alteration or improvement of any of the
Encumbered Property, Mortgagee may apply the Rents received by Mortgagee to
payment of the Indebtedness or performance of the Obligations. Mortgagee may
apply the Rents received by Mortgagee to the payment of any or all of the
foregoing in such order and amounts as Mortgagee, in its sole discretion, may
elect.
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Mortgagee may, in its sole discretion, determine the method by which, and
extent to which, the Rents will be collected and the obligations of the
lessees under the Leases enforced and Mortgagee may waive or fail to
enforce any right or remedy of the lessor under any Lease.
(v) Mortgagee may disaffirm and cancel any Lease affecting the Real
Estate or any portion thereof at any time during the period that it is
exercising its remedies under this Article 18, even though Mortgagee shall
have enforced such Lease, collected Rents thereunder or taken any action that
might be deemed by law to constitute an affirmance of such Lease. Such
disaffirmance shall be made by notice addressed to the lessee at the Real
Estate or, at Mortgagee's option, such other address of the lessee as may be
set forth in such Lease.
(vi) Mortgagee may declare the entire unpaid Indebtedness to be
immediately due and payable.
(vii) Mortgagee may institute proceedings for the complete foreclosure
of this Mortgage in which case the Encumbered Property or the Mortgagors'
interest therein may be sold for cash or upon credit in one or more portions.
(viii) Mortgagee may, with or without entry, to the extent permitted
and pursuant to the procedures provided by applicable law, institute
proceedings for the partial foreclosure of this Mortgage for the portion of
the Indebtedness then due and payable, subject to the continuing lien of this
Mortgage for the balance of the Indebtedness not then due.
(ix) Mortgagee may sell for cash or upon credit the Encumbered Property
or any part thereof and all estate, claim, demand, right, title and interest
of Mortgagors therein and rights of redemption thereof, pursuant to power of
sale or otherwise, at one or more
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sales, in its entirety or in portions, at such time and place, upon such
terms and after such notice thereof as may be required or permitted by
law, and in the event of a sale, by foreclosure or otherwise, of less than
all of the Encumbered Property this Mortgage shall continue as a lien on
the remaining portion of the Encumbered Property.
(x) Mortgagee may institute an action, suit or proceeding in equity for
the specific performance of any covenant, condition or agreement contained
herein or in the Notes or in the Assignment or in any other Loan Document or
Document.
(xi) Mortgagee may recover judgment on the Notes either before, during
or after any proceedings for the enforcement of this Mortgage.
(xii) Mortgagee may apply for the appointment of a trustee, receiver,
liquidator or conservator of the Encumbered Property, without regard for the
adequacy of the security for the Indebtedness and without regard for the
solvency of the Mortgagor or Bally's, any guarantor or of any person, firm or
the entity liable for the payment of the Indebtedness.
(xiii) Mortgagee may cure such Event of Default, without relieving
Mortgagors of any liability in connection with such Event of Default, and (1)
Mortgagor, on demand, shall reimburse Mortgagee for any and all costs and
expenses incurred by Mortgagee in connection with the curing of any Event of
Default, together with interest thereon at the Interest Rate from the date
such costs and expenses are incurred to the date of repayment to Mortgagee,
and (2) Mortgagee shall be entitled to apply any sums then held by Mortgagee
pursuant to the provisions of this Mortgage to the curing of such Event of
Default or to reimburse the Mortgagee for costs and expenses incurred in
connection therewith; and/or
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(xiv) Mortgagee may pursue such other remedies as the Mortgagee may
have under any applicable law.
(b) The purchase money proceeds or avails of any sale made under or by
virtue of this Article 18, together with any other sums which then may be held
by Mortgagee under this Mortgage, whether under the provisions of this Article
18 or otherwise, shall be applied as follows:
First: To the payment of the costs and expenses of any such sale, including
reasonable compensation to Mortgagee's agents and counsel, and of any
judicial proceedings wherein the same may be made, and of all expenses,
liabilities and advances made or incurred by Mortgagee under this Mortgage
and together with interest as provided herein on all advances made by
Mortgagee and all taxes or assessments, except any taxes, assessments or
other charges subject to which the Encumbered Property shall have been sold.
Second: To the payment of amounts then due and unpaid for principal and
interest on the Notes.
Third: To the payment of the amount of Indebtedness then outstanding and
performance of all of the other Obligations, in such a manner and order of
priority or preference as Mortgagee may, in its sole discretion, determine.
Fourth: To the payment of outstanding Impositions.
Fifth: To the payment of the surplus, if any, to whomsoever may lawfully be
entitled to receive the same, including, without limitation, Mortgagors.
Mortgagee and any receiver of the Encumbered Property, or any part thereof,
shall be liable to account for only those rents, issues and profits actually
received by it.
(c) Mortgagee, in any action to enforce this Mortgage, shall be entitled
to the appointment of a
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receiver by a court of competent jurisdiction or may, in connection with any
foreclosure proceeding hereunder, request the Casino Control Commission, to
petition a court of the State of New Jersey for the appointment of a supervisor
to conduct the normal gaming activities on the Real Estate following such
foreclosure proceeding. If it shall become necessary, or in the opinion of
Mortgagee advisable, for Mortgagee or an agent or representative of Mortgagee
to become licensed under the provisions of the laws of the State of New Jersey,
or rules and regulations adopted pursuant thereto, as a condition to receiving
the benefit of the Real Estate, the Personal Property or other collateral
hereby encumbered for the benefit of Mortgagee, Mortgagor and Bally's do hereby
give their consent to the granting of such license or licenses and agree to
execute such further documents as may be reasonably required in connection with
the evidencing of such consent.
(d) The remedies and rights granted to Mortgagee hereunder are cumulative
and are not in lieu of, but are in addition to, and shall not be affected by
the exercise of, any other remedy or right available to Mortgagee whether now
or hereafter existing either at law or in equity or under this Mortgage or any
other Loan Document.
(e) Mortgagee may adjourn from time to time any sale by it to be made
under or by virtue of this Mortgage by announcement at the time and place
appointed for such sale or for such adjourned sale or sales; and, except as
otherwise provided by any applicable provision of law, Mortgagee, without
further notice or publication, may make such sale at the time and place to
which the same shall be so adjourned.
(f) Upon the completion of any sale or sales made by Mortgagee under or
by virtue of this Article 18, Mortgagee, or an officer of any court empowered
to do so, shall execute and deliver to the accepted purchaser or purchasers a
good and sufficient instrument, or good and sufficient instruments, conveying,
assigning and transferring all estate, right, title and interest in and to the
property and rights sold. Mortgagee is hereby irrevocably appointed the true
and lawful attorney of Mortgagor and Bally's, in their name and stead, to make
all necessary conveyances, assign-
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ments, transfers and deliveries of the Encumbered Property and rights so sold
and for that purpose Mortgagee may execute all necessary instruments of
conveyance, assignment and transfer, and may substitute one or more persons
with like power, Mortgagor and Bally's hereby ratifying and confirming all that
their said attorney or such substitute or substitutes shall lawfully do by
virtue hereof. Any such sale or sales made under or by virtue of this Article
18, whether made under the power of sale herein granted or under or by virtue
of judicial proceedings or of a judgment or decree of foreclosure and sale,
shall operate to divest all the estate, rights, title, interest, claim and
demand whatsoever, whether at law or in equity, of Mortgagor and Bally's in and
to the properties and rights so sold, and shall be a perpetual bar both at law
and in equity against Mortgagor and Bally's and against any and all persons
claiming or who may claim the same, or any part thereof from, through or under
Mortgagor and Bally's.
(g) Anything contained in the Notes or in this Mortgage to the contrary
notwithstanding, in the event of any sale made under or by virtue of this
Article 18 (whether made under the power of sale herein granted or under or by
virtue of judicial proceedings or a judgment or decree of foreclosure and sale)
the entire Indebtedness, if not previously due and payable, immediately
thereupon shall become due and payable.
(h) Upon any sale made under or by virtue of this Article 18 (whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale), Mortgagee may
bid for and acquire the Encumbered Property or any part thereof and in lieu of
paying cash therefor may make settlement for the purchase price by crediting
against the sales price the Indebtedness and the expenses of the sale, and the
costs of the action and any other sums which Mortgagee is authorized to deduct
under this Mortgage.
(i) No recovery of any judgment by Mortgagee and no levy of an execution
under any judgment upon the Encumbered Property or upon any property of
Mortgagor and Bally's shall affect in any manner or to any extent, the lien of
this Mortgage upon the Encumbered Property or any part thereof, or any liens,
rights,
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powers or remedies of Mortgagee hereunder, but such liens, rights, powers and
remedies of Mortgagee shall continue unimpaired as before.
(j) Upon the occurrence of any Event of Default and the acceleration of
the maturity hereof, if, at any time prior to the foreclosure sale, Mortgagor
or Bally's or any other person tenders payment of the amount necessary to
satisfy the Indebtedness, the same shall constitute an evasion of the payment
terms hereof and shall be deemed to be a voluntary prepayment hereunder, in
which case such payment must include the premium required under the prepayment
provisions, if any, contained herein or in the Notes, or, if at that time there
is no privilege of prepayment, then the payment shall include a premium of five
percent (5%) of the then unpaid Indebtedness. This provision shall be of no
force or effect if at the time that such tender of payment is made Mortgagor
has the right under this Mortgage or under the Notes to prepay the Indebtedness
without penalty or premium.
(k) Upon the occurrence of any Event of Default hereunder, it is agreed
that Mortgagor, if it is an occupant of the Real Estate or any part thereof,
shall immediately surrender possession of the Real Estate so occupied to the
Mortgagee, and if such occupant is permitted to remain in possession, the
possession shall be as tenant of Mortgagee and, on demand such occupant, subject
to applicable law, (a) shall pay to Mortgagee, monthly, in advance, a
reasonable rental for the space so occupied and (b) in default thereof may be
dispossessed by the usual summary proceedings. The covenants herein contained
may be enforced by a receiver of the Encumbered Property or any part thereof.
(l) If any payment due hereunder or under the Notes is not paid when due
after any applicable grace period, either at stated or accelerated maturity or
pursuant to any of the terms hereof, then and in such event, the Mortgagor
shall pay or shall cause to be paid interest thereon at the Interest Rate from
and after the date on which such payment first becomes due and such interest
shall be due and payable, on demand, at the Interest Rate until the entire
amount due is paid to Mortgagee, whether or not any action shall have been
taken or proceeding commenced to recover the same or to
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foreclose this Mortgage. Nothing in this Section or in any other provision of
this Mortgage shall constitute an extension of the time of payment of the
Indebtedness.
(m) After the happening of any Event of Default and immediately upon the
commencement of any action, suit or other legal proceedings by Mortgagee to
obtain judgment for the Indebtedness, or of any other nature in aid of the
enforcement of the Notes or of this Mortgage, Mortgagor and Bally's shall (a)
waive the issuance and service of process and enter their voluntary appearance
in such action, suit or proceeding, and (b) if required by Mortgagee, consent
to the appointment of a receiver or receivers of the Encumbered Property and of
all the profits thereof.
(n) Notwithstanding the appointment of any receiver, liquidator or
trustee of Mortgagor or Bally's, or of any of their property, or of the
Encumbered Property or any part thereof, Mortgagee shall be entitled to retain
possession and control of all property now and hereafter covered by this
Mortgage.
(o) Neither Mortgagors nor the corporate or partnership entity or
entities comprising Mortgagors, nor any other partner or stockholder of
Mortgagors, shall be personally liable for the repayment of any of the
principal of or interest on the Indebtedness or for any deficiency judgment
which Mortgagee may obtain after foreclosure on its collateral after default by
Mortgagors; provided, however, that Mortgagors (but not any stockholder or
limited partner therein unless such person is otherwise liable under a separate
written guarantee) shall not be exonerated or exculpated for any deficiency,
loss or damage suffered by Mortgagee as a result of the failure by Mortgagors
to comply with any of the terms or conditions of this Mortgage, the Assignment
or any other Loan Documents (other than the provisions relating to the payment
of principal, interest or late charges), including, but not limited to, losses
resulting from Mortgagors' failure to perform their obligation to properly
account to Mortgagee as mortgagee for any proceeds of insurance or condemnation
proceeds as required by this Mortgage; or from Mortgagors' failure to comply
with provisions of this Mortgage prohibiting the sale or further encumbering of
the collateral; or because of Mortgagors' attempts to interfere with
Mortgagee's
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rights under the Assignment or under the Loan Documents; or because Mortgagors
fail to apply proceeds of rents and other income of the collateral toward the
costs of maintenance and operation of the Encumbered Property and to the
payment of taxes, liens, claims, insurance premiums and debt service and other
indebtedness to the extent that this Mortgage, the Assignment or the other Loan
Documents require such rents and income to be so applied; and provided further,
that the foregoing limitations on Mortgagors' personal liability with respect
to principal and interest shall not impair the validity of the Indebtedness
secured by Mortgagee's collateral or the lien of or security interest in the
collateral or the right of Mortgagee as mortgagee or secured party to foreclose
and/or enforce its rights in the collateral after default by Mortgagors. In
the event any person shall have guaranteed all or part of the Indebtedness by
separate written guarantee, none of the foregoing limitations on Mortgagors'
personal liability for payment of principal and interest shall modify, diminish
or discharge the personal liability of any such guarantor as set forth in any
such written guarantee. Nothing herein shall be deemed to be a waiver of any
right which Mortgagee may have under Sections 506(a), 506(b), 1111(b) or any
other provision of the Bankruptcy Reform Act of 1978 or any successor thereto
or similar provisions under applicable state law to file a claim for the full
amount of the debt owing to Mortgagee by Mortgagors or to require that all
collateral shall continue to secure all of the Indebtedness owing to Mortgagee
in accordance with the Loan Documents.
19. Security Agreement under Uniform Commercial Code. It is the intention
of Mortgagors, Mortgagee and Funding that this Mortgage shall constitute and
this Mortgage does hereby constitute a Security Agreement among Mortgagors,
Mortgagee and Funding within the meaning of the Uniform Commercial Code of the
State of New Jersey. It is agreed that Funding shall be and hereby is bound by
all of the provisions of this Mortgage as fully as the Mortgagors except to the
extent any such provisions are clearly inapplicable to Funding.
Notwithstanding the filing of a financing statement covering any of the
Encumbered Property in the records normally pertaining to personal property,
all of the Encumbered Property, for all purposes and in all proceedings, legal
or equitable, shall be regarded, at Mortgagee's option (to the
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extent permitted by law), as part of the Real Estate whether or not any such
item is physically attached to the Real Estate or serial numbers are used for
the better identification of certain items. The mention in any such financing
statement of any of the Encumbered Property shall never be construed in any way
as derogating from or impairing this declaration and hereby stated intention of
Mortgagors and Mortgagee that such mention in the financing statement is hereby
declared to be for the protection of Mortgagee in the event any court shall at
any time hold that notice of Mortgagee's priority of this Mortgage, to be
effective against any third party, including the Federal government or any
authority or agency thereof, must be filed in the Uniform Commercial Code
records. Pursuant to the provisions of the Uniform Commercial Code, if
Mortgagors shall fail to execute any such financing or continuation statements
for twenty (20) days after request therefor is made by Mortgagee, Mortgagors
hereby authorize Mortgagee, without the signature of Mortgagors, to execute and
file financing and continuation statements if Mortgagee shall determine, in its
sole discretion, that such financing or continuation statements are necessary
or advisable in order to preserve or perfect its security interest in the
Personal Property covered by this Mortgage, and Mortgagor shall pay to
Mortgagee, on demand, any reasonable expenses incurred by Mortgagee in
connection with the preparation, execution and filing of such statements that
may be filed by Mortgagee.
20. Representations and Warranties. Mortgagor and Bally's each represent
and warrant for itself that: (a) such Mortgagor has the requisite power and
lawful authority to execute and deliver this Mortgage and to perform the
Obligations it is required to perform under the Loan Documents; (b) the
execution and delivery of this Mortgage by such Mortgagor and performance of
its obligations under this Mortgage will not result in such Mortgagor being in
default under any provision of its Certificate of Incorporation or By-Laws or
of any deed of trust, mortgage, document, instrument, credit or other agreement
to which it is a party or by which its assets are bound; (c) the Board of
Directors of such Mortgagor has duly authorized the execution and delivery of
this Mortgage; (d) on the date hereof, no portion of the Buildings or the
Personal Property has been materially damaged, destroyed or injured by fire or
other casualty
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which is not now fully restored or in the process of being restored; (e) such
Mortgagor has all necessary licenses, authorizations, registrations and
approvals to own, use, occupy and operate the Real Estate and has full power
and authority to carry on its business at the Real Estate as currently
conducted and has not received any notice of any violation of any Legal
Requirement that materially impairs the value of the Real Estate; and (f) as of
the date hereof, such Mortgagor has not received any notice of any Taking of
the Leasehold Encumbered Property or the Fee Encumbered Property (as the case
may be) or any portion thereof and such Mortgagor has no knowledge that any
such Taking is contemplated.
21. No Waivers, Etc. No failure by Mortgagee to insist upon the strict
performance by each Mortgagor of any of the terms and provisions of this
Mortgage shall be deemed to be a waiver of any of the terms, covenants,
conditions and provisions hereof and Mortgagee, notwithstanding any such
failure, shall have the right thereafter to insist upon the strict performance
by each Mortgagor of any and all of the terms, covenants, conditions and
provisions of this Mortgage to be performed by such Mortgagor. Mortgagee may
release, regardless of consideration and without the necessity for any notice
to or consent by the holder of any subordinate lien on the Encumbered Property,
any part of the security held for payment of the Indebtedness or any portion
thereof or for the performance of the Obligations secured by this Mortgage
without, as to the remainder of the security, in any manner whatsoever,
impairing or affecting the lien of this Mortgage or the priority of the lien of
this Mortgage over any subordinate lien. In the event of an occurrence of an
Event of Default hereunder, Mortgagee may resort for the payment of the
Indebtedness secured by this Mortgage to any other security therefor held by
Mortgagee in such order and manner as Mortgagee may elect.
22. Brokerage. Mortgagors and Mortgagee each hereby represent and warrant
that they have dealt with no broker, finder or like agent in connection with
the Indenture, the Notes or this Mortgage other than Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation, Libra Investments, Inc. and Jefferies & Company, Inc., as
underwriters in connection with the public offering of
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the Notes. The Mortgagors hereby indemnify and holds harmless Mortgagee from
and against any expense, cost or liability arising from or incurred in
connection with any claim by any other broker, finder or like agent who shall
claim to have dealt with Mortgagors.
23. Additional Rights. The holder of any subordinate lien, including the
Additional Mortgages, on the Encumbered Property shall have no right to
terminate the Ground Lease or any Lease whether or not such Lease is
subordinate to this Mortgage.
24. Mortgage Subject to the Provisions of the Act. Each provision of this
Mortgage is subject to the provisions of the Act, as defined in Section 3,
paragraph (e).
25. Environmental Matters.
(a) Mortgagor and Bally's each represent and warrant that, to the best of
Mortgagor's or Bally's knowledge:
(i) Environmental Matters. (i) Such Mortgagor and all real property
owned and/or occupied by Mortgagor in the state of New Jersey, including, but
not limited to, the Encumbered Property, are and have been in compliance
with, and there are no outstanding allegations by any person or entity that
any of them is or has not been in compliance with, all applicable federal,
state and local laws, regulations and rules (including common law relating to
personal injury and damage to, or interference with, property), permits,
licenses, registrations and other governmental authorizations, judgments,
decrees and orders relating to pollution, the preservation of the environment
(including historical preservation and endangered species) and the release or
disposal of, or exposure to, materials (including noise, radiation and odors)
in the environment or work place ("Environmental Laws"), except for failures
to be in compliance and allegations of noncompliance which would not have a
material adverse effect on Mortgagor and its subsidiaries taken as a whole or
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Bally's and its subsidiaries taken as a whole or the Encumbered Property or be
disadvantageous in any material respect to the Holders.
(ii) There are no past or present actions, conditions or occurrences
that could form the basis of any claim under Environmental Laws against, or
liability or obligation under such laws of, such Mortgagor or any real
property owned and/or occupied by Mortgagor in the state of New Jersey,
including, but not limited to, the Encumbered Property, or, to the knowledge
of Mortgagor, against or of any person or entity whose liability for such
claim, liability or obligation may have been retained or assumed by Mortgagor
under contract or law except for such claim, liability or obligation which
would not have a material adverse effect on Mortgagor and its subsidiaries
taken as a whole or Bally's and its subsidiaries taken as a whole or the
Encumbered Property or be disadvantageous in any material respect to the
Holders. Without limiting the foregoing:
(A) None of the real property owned and/or occupied by such Mortgagor
and located in the State of New Jersey, including, but not limited to, the
Encumbered Property, has ever been used by previous owners and/or operators
as a "Major Facility," as such term is defined in N.J.S.A. 58:10-23.llb(1),
and said real property, including, but not limited to, the Encumbered
Property, is not now and will not be used in the future as a "Major
Facility."
(B) There are and have been no underground storage tanks located upon
the Real Estate other than the two underground tanks which were used to store
heating oil. There is no friable, or damaged non-friable,
asbestos-containing material, urea formaldehyde foam insulation,
polychlorinated biphenyls or lead-exposed water pipes in or on the Real
Estate.
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(iii) Such Mortgagor has provided Mortgagee copies of all environmental
reports, investigations and studies in its possession or control relating to
the Real Estate, and has identified to Mortgagee all other such
environmental reports, investigations and studies not in its possession or
control of which it has knowledge.
(b) Mortgagor and Bally's each covenant and agree that:
(i) In the event that there shall be filed a lien against the
Encumbered Property by the New Jersey Department of Environmental Protection,
pursuant to and in accordance with the provisions of N.J.S.A.
58:10-23.11f(f), or by any other person or entity arising from an intentional
or unintentional action or omission of Mortgagor or Bally's, resulting in the
releasing, spilling, pumping, pouring, emitting, emptying or dumping of
materials regulated under Environmental Laws, then Mortgagor shall, within
thirty (30) days from the date that Mortgagor or Bally's is given notice
that the lien has been placed against the Encumbered Property or within such
shorter period of time in the event that the State of New Jersey or any
other person or entity has commenced steps to cause the Encumbered Property
to be sold pursuant to the lien, either (1) pay the claim and remove the
lien from the Encumbered Property, or (2) furnish (x) a bond satisfactory to
Mortgagee in the amount of the claim out of which the lien arises, (y) a
cash deposit in the amount of the claim out of which the lien arises, or
(z) other security reasonably satisfactory to Mortgagee in an amount
sufficient to discharge the claim out of which the lien arises.
(ii) Such Mortgagor shall comply fully with all applicable
Environmental Laws including without limitation by promptly, diligently and
expeditiously containing, reporting (as required by Environmental Laws) and
cleaning up any spill, leak, pumping, pour, emission, emptying or dumping of
materials
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regulated under Environmental Laws for which such Mortgagor is responsible.
(iii) If such Mortgagor shall fail to take any action required by this
Section 25(b), upon notice to such Mortgagor (which may be telephonic or by
any other means of communication), Mortgagee may make advances or payments
towards performance or satisfaction of the same but shall be under no
obligation to do so; and all sums so advanced or paid, including, without
limitation, reasonable counsel fees, fines, penalties, payments or sums
advanced or paid in connection with any judicial or administrative
investigation or proceeding relating thereto (1) shall be deemed to be
Indebtedness, (2) shall be a lien on the Encumbered Property pari passu with
the Indebtedness and (3) immediately shall be due and payable, on demand.
Mortgagor and Bally's shall execute and deliver promptly after request, such
instruments as Mortgagee may deem useful or required to permit Mortgagee to
take any such action.
(iv) Such Mortgagor absolutely and unconditionally agrees to indemnify
and to hold Mortgagee harmless from and against any and all loss, liability,
cost or expense incurred by Mortgagee as a result of or arising in connection
with: (A) such Mortgagor's breach of any representation, warranty or
covenant contained herein; (B) such Mortgagor's failure to comply with
Environmental Laws, including, without limitation, those related to the
presence of asbestos affecting the Encumbered Property; and (c) any liability
under Environmental Laws in any way related to the operations, acts or
omission to act of such Mortgagor or the Real Property, which
indemnification, notwithstanding the provisions of this Mortgage or the Loan
Documents, shall survive the release and discharge of this Mortgage of
record, and foreclosure or sale of the Encumbered Property under this
Mortgage, payment of the Notes, the Indenture, or any
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other discharge of the Indebtedness by operation of law or otherwise.
26. Waivers by Mortgagors.
(a) Mortgagors hereby waive all errors and imperfections, to the extent
permitted by law, in any proceedings instituted by Mortgagee under this
Mortgage, the Indenture or any other Loan Document and all benefit of any
present or future statute of limitations or any other present or future
statute, law, stay, moratorium, appraisal or valuation law, regulation or
judicial decision, nor shall Mortgagors at any time insist upon or plead, or in
any manner whatsoever, claim or take any benefit or advantage of any such
statute, law, stay, moratorium, regula- tion or judicial decision which (i)
provides for the valuation or appraisal of the Encumbered Property prior to any
sale or sales thereof which may be made pursuant to any provision herein or
pursuant to any decree, judgment or order of any court of competent
jurisdiction, (ii) exempts any of the Encumbered Property or any other
property, real or personal, or any part of the proceeds arising from any sale
thereof, from attachment, levy or sale under execution, (iii) provides for any
stay of execution, moratorium, marshalling of assets, exemption from civil
process, redemption or extension of time for payment, (iv) requires Mortgagee
to institute proceedings in foreclosure against the Encumbered Property before
exercising any other remedy afforded Mortgagee hereunder in the event of an
Event of Default, (v) affects any of the terms, covenants, conditions or
provisions of this Mortgage or (vi) conflicts with or may affect, in a manner
which may be adverse to Mortgagee, any provision, covenant, condition or term
of this Mortgage, the Indenture or any other Loan Document, nor shall
Mortgagors at any time after any sale or sales of the Encumbered Property
pursuant to any provision herein, claim or exercise any right under any present
or future statute, law, stay, moratorium, regulation or judicial decision to
redeem the Encumbered Property or the portion thereof so sold.
(b) Mortgagors hereby waive the right, if any, to require any sale to be
made in parcels, or the right, if any, to select parcels to be sold, and there
shall be no requirement for marshalling of assets.
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27. Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication shall or may be
given to or served upon either Mortgagors or Mortgagee, or whenever either
Mortgagors or Mortgagee shall desire to give or serve upon the other any such
communication with respect to this Mortgage or the Encumbered Property, each
such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and either shall be delivered in person with
receipt acknowledged or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to Mortgagee,
First Bank National Association
(b) If to Mortgagor,
Park Place and the Boardwalk,
Atlantic City, New Jersey 08401
With a copy to
Benesch, Friedlander, Coplan &
Aronoff
1100 Citizens Building
Cleveland, Ohio 44114
Attention: Chairperson,
Real Estate Department
(c) If to Bally's,
Park Place and the Boardwalk,
Atlantic City, New Jersey 08401
With a copy to
Benesch, Friedlander, Coplan &
Aronoff
1100 Citizens Building
Cleveland, Ohio 44114
Attention: Chairperson,
Real Estate Department
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(d) or to such other address as Mortgagors or Mortgagee may substitute by
notice given as herein provided. Every notice, demand, request, consent,
approval, declaration or other communication hereunder shall be deemed to have
been duly given or served on the date on which personally delivered, with
receipt acknowledged, or on the date of actual receipt or the date on which the
same shall be returned to the sender by the Post Office as unclaimed. Failure
or delay in delivering copies of any notice, demand, request, consent,
approval, declaration or other communication to the persons designated herein
to receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
28. Conflict with Indenture. If there shall be any inconsistencies between
the terms, covenants, conditions and provisions set forth in this Mortgage and
the terms, covenants, conditions and provisions set forth in the Indenture,
then, unless this Mortgage expressly provides otherwise by specific reference
to the Indenture, the terms, covenants, conditions and provisions of the
Indenture shall prevail.
29. No Modification; Binding Obligations. This Mortgage may not be
modified, amended, discharged or waived in whole or in part except by an
agreement in writing signed by Mortgagors and Mortgagee. The covenants of this
Mortgage shall run with the Land and shall bind Mortgagors and their respective
successors and assigns and all present and subsequent encumbrancers, lessees
and sublessees of any of the Encumbered Property and shall inure to the benefit
of Mortgagee and its respective successors, assigns and endorsees.
30. Miscellaneous.
(a) The Article headings in this Mortgage are used only for convenience
and are not part of this Mortgage and are not to be used in determining the
intent of the parties or otherwise in interpreting this Mortgage. As used in
this Mortgage, the singular shall include the plural as the context requires
and the following words and phrases shall have the following meanings: (a)
"provisions" shall mean "provisions, terms, covenants and/or conditions"; (b)
"lien" shall mean "lien, charge, pledge, security interest, mortgage, deed of
trust or
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other encumbrance of any kind"; (c) "obligation" shall mean "obligation, duty,
covenant and/or condition"; (d) "any of the Encumbered Property" shall mean
"the Encumbered Property or any portion thereof or interest therein", and "any
of the Leasehold Encumbered Property" shall mean "the Leasehold Encumbered
Property or any portion thereof or interest therein", and "any of the Fee
Encumbered Property" shall mean "the Fee Encumbered Property or any portion
thereof or interest therein"; and (e) "the Real Estate" shall mean "the Real
Estate or any portion thereof or interest therein." Any act which Mortgagee is
permitted to perform under this Mortgage, the Indenture or any other Loan
Document may be performed at any time and from time to time by Mortgagee or by
any person or entity designated by Mortgagee. Each appointment of Mortgagee as
attorney-in-fact for Mortgagors under this Mortgage, the Indenture or any other
Loan Document shall be irrevocable and coupled with an interest. If Mortgagee
shall fail or refuse to consent, approve, accept or indicate its satisfaction,
Mortgagors shall not be entitled to any damages for any withholding or delay of
such consent, approval, acceptance or indication of satisfaction by Mortgagee,
it being intended that Mortgagors' sole remedy shall be to bring an action for
an injunction or specific performance, which remedy of an injunction or
specific performance shall be available only in those cases where Mortgagee has
expressly agreed hereunder or under any other Loan Document not to unreasonably
withhold or delay its consent, approval, acceptance or indication of
satisfaction.
(b) No director, officer, employee, stockholder or incorporator, as such,
past, present or future, of Mortgagors or any successor corporation shall have
any liability for any obligations of Mortgagors hereunder or for any claim
based on, in respect of or by reason of such obligations or their creation.
Mortgagee, by accepting this Mortgage, waives and releases all such liability.
31. Enforceability. This Mortgage is made by Mortgagors and accepted by
Mortgagee in the State of New York and shall be construed, interpreted,
enforced and governed by and in accordance with the laws of such State, except
with respect to the provisions hereof which relate to the creation, grant,
perfection and priority of all security interests and other liens under or by
this
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Mortgage including security interests and liens in the Encumbered Property and
except with respect to provisions hereof which relate to (a) the right to
foreclose and (b) to realizing upon the security covered by this Mortgage, all
of which exceptions shall be governed by the laws of the State of New Jersey.
Whenever possible, each provision of this Mortgage shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Mortgage shall be prohibited by, or invalid under, applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remaining provisions of this Mortgage. Nothing
contained in this Mortgage or in any other Loan Documents shall require either
Mortgagor to pay, or Mortgagee to accept, interest in an amount which would
subject Mortgagee to penalty under applicable law. In the event that the
payment of any interest due hereunder or under the Indenture or any other Loan
Document would subject Mortgagee to penalty under applicable law, then, ipso
facto, the obligation of such Mortgagors to make such payment shall be reduced
to the highest rate then permitted under applicable law without penalty.
32. Satisfaction/Defeasance. At such time as the entire amount of the
Indebtedness shall have been fully paid pursuant to the terms hereof and the
other Loan Documents, and all Obligations shall have been fully performed in
accordance with all provisions hereof and the other Loan Documents or at such
time as this Mortgage shall be defeased in accordance with the provisions of
the Indenture, including, without limitation, Sections 401 and 1301 thereof,
then Mortgagee shall deliver to Mortgagors a satisfaction of this Mortgage in
recordable form.
33. Receipt of Copy. Each of Mortgagor Funding and Bally's acknowledges
that it has received a true copy of this Mortgage.
70
<PAGE> 74
IN WITNESS WHEREOF, the parties have caused this Mortgage to be duly
executed and acknowledged under seal as of the day and year first above
written.
Attest Mortgagor: BALLY'S PARK PLACE,
INC., a New Jersey corporation
_____________________ By: ___________________________
(Corporate Seal)
Attest Bally's: BALLY'S PARK PLACE
REALTY CO.
_____________________ By: ___________________________
(Corporate Seal)
Attest Funding: BALLY'S PARK PLACE
FUNDING, INC.
____________________ By: _________________________
(Corporate Seal)
Attest Mortgagee:
First Bank National Association
____________________ By: __________________________
(Corporate Seal)
71
<PAGE> 75
Guaranty
Guarantor hereby unconditionally guarantees performance by Mortgagors of all
the provisions of Section 25 hereof, irrespective of the validity, regularity
or enforceability of this Mortgage or the other Loan Documents, the absence of
any action to enforce the same, any waiver or consent by any holder of the
Notes with respect to any provisions hereof, any releases of collateral, any
delays in obtaining or realizing upon or failures to obtain or realize upon
collateral, the recovery of any judgment against any of Mortgagors or Funding
or their successors, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of
Guarantor.
Attest Guarantor: Bally's Park Place, Inc.
a Delaware corporation
_______________ By:_______________________
72
<PAGE> 76
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the ___ day of _________, 1994, before me personally came
____________________, to me known, who, being by me duly sworn, did depose and
say that he resides at ___________________ ___________________; that he is a
(Vice) President of Bally's Park Place, Inc., a New Jersey corporation, the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the board of directors
of said corporation; and that he signed his name thereto by like order.
Notary Public __________________________
73
<PAGE> 77
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the ___ day of _________, 1994, before me personally came ________
___________, to me known, who, being by me duly sworn, did depose and say that
he resides at ___________________ ___________________; that he is a (Vice)
President of Bally's Park Place Realty Co., the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation;
and that he signed his name thereto by like order.
Notary Public ______________________
74
<PAGE> 78
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the ___ day of _________, 1994, before me personally came
____________________, to me known, who, being by me duly sworn, did depose and
say that he resides at _____________________ _____________________; that he is
a (Vice) President of Bally's Park Place Funding, Inc., the corporation
described in and which executed the foregoing instrument; that he knows the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the board of directors of
said corporation; and that he signed his name thereto by like order.
Notary Public ________________________
75
<PAGE> 79
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the ___ day of _________, 1994, before me personally came ________
___________, to me known, who, being by me duly sworn, did depose and say that
he resides at ___________________ ___________________; that he is the (Vice)
President of First Bank National Association, the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation;
and that he signed his name thereto by like order.
Notary Public ___________________________
76
<PAGE> 80
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On the ___ day of _________, 1994, before me personally came
___________________, to me known, who, being by me duly sworn, did depose and
say that he resides at ___________________ ___________________; that he is a
(Vice) President of Bally's Park Place, Inc., a Delaware corporation, the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the board of directors
of said corporation; and that he signed his name thereto by like order.
Notary Public ______________________
77
<PAGE> 1
Exhibit 10(i).6
EXHIBIT B
This Instrument was prepared by
the below named attorney
_______________________________
John A. Caruso
ASSIGNMENT OF LEASES AND RENTS
This Agreement (hereinafter referred to as this "Assignment"),
made as of the ____ day of ______, 1994, between Bally's Park Place, Inc., a
New Jersey corporation, having an office at Park Place and the Boardwalk,
Atlantic City, New Jersey 08401, as leasehold and fee assignor, ("Assignor"),
and Bally's Park Place Realty Co., a New Jersey corporation, having an office
at Park Place and the Boardwalk, Atlantic City, New Jersey 08401, as fee
assignor, ("Bally's", and, together with Assignor, "Assignors") and First Bank
National Association ("Assignee").
W I T N E S S E T H:
Whereas, Assignor is (a) the tenant of certain real property
situated in Atlantic City, New Jersey, more particularly described and
indicated as the "Leased Land" on Exhibit "A" annexed hereto and made a part
hereof (the "Leased Land") pursuant to that certain Lease (the "Ground Lease"),
dated June 8, 1977, between the Palley- Blatt Company, as ground lessor, and
Bally Manufacturing of New Jersey, Inc., a New Jersey corporation, currently
known as Assignor, as ground lessee, as assigned by that certain Assignment of
Lease dated April 27, 1979 between Palley-Blatt Company, as assignor, and
Norman Palley, trustee under Declaration of Trust dated April 10, 1979, and
Alexander K. Blatt, trustee under Declaration of Trust dated April 6, 1979, as
assignees, and by that certain Assignment of Lease dated April 27, 1979 by
Norman Palley, trustee under Declaration of Trust dated April 10, 1979, and
Alexander K. Blatt, trustee under Declaration of Trust dated April 6, 1979, as
assignors, and Bally Manufacturing Corporation, as assignee, and by
0020167.01-01S3a
<PAGE> 2
assignment to Bally's and (b) the owner of certain real property situated in
Atlantic City, New Jersey, more particularly described and indicated as the
"Owned Land" on Exhibit "A" annexed hereto and made a part hereof (the "Owned
Land," and together with the Leased Land, the "Land"); and
Whereas, Bally's is the owner of the Leased Land and ground
lessor under the Ground Lease; and
Whereas, Assignor is the owner of the buildings and other
improvements now or hereafter erected on the Land (such buildings and other
improvements being herein- after collectively referred to as the "Buildings",
and the Land, together with the Buildings being hereinafter collectively
referred to as the "Property"); and
Whereas, Assignors are about to enter into an Indenture (the
"Indenture"), dated as of the date hereof, among Assignor, Bally's, Bally's
Park Place Funding, Inc., a Delaware corporation, ("Funding") as obligor,
Bally's Park Place, Inc., a Delaware corporation, as guarantor, and Assignee,
as trustee, pursuant to which Funding will execute and deliver its ______%
First Mortgage Notes due 2004 (the "Notes"), and Assignor, Bally's and Funding
are about to execute and deliver to Assignee a Mortgage and Security Agreement
with Assignment of Rents (the "Mortgage") to secure the Indenture and the
Notes, covering the Property in the amount of up to $425,000,000, dated as of
the date hereof; and
Whereas, Assignee is unwilling to accept the Indenture and the
Mortgage unless Assignor and Bally's make, execute and deliver this Assignment.
Now, Therefore, in consideration of the premises and in
consideration of the sum of Ten Dollars ($10.00) and other good and valuable
consideration paid by Assignee to Assignor and Bally's, the receipt and
sufficiency of which are hereby acknowl- edged, and to better secure the
payment to Assignee of (i) all monies that may be due and payable under the
Indenture, the Notes and the Mortgage and (ii) all monies which may be advanced
by Assignee on behalf of Assignor and/or Bally's under the terms of the
Mortgage, Assignor and Bally's hereby agree as follows:
0020167.01-01S3a 2
<PAGE> 3
1. (a) Assignor hereby grants, transfers, bargains,
sells, assigns, conveys, and sets over unto Assignee, its successors and
assigns, from and after the date hereof (including any period allowed by law
for redemption after any sale), all right, title and interest of Assignor in
and to (i) all leases, subleases, licenses and other occupancy agreements which
now or hereafter affect the Property or any part or parts thereof and all
guarantees, modifications, renewals and extensions thereof (collectively, the
"Leases"), and (ii) all documents and instruments made or hereafter made in
respect of the Leases, together with all of the rents and issues and profits,
due and to become due or to which Assignor is now or may hereafter become
entitled, arising out of the Leases and any of the Property covered by the
Leases (the "Leased Property"), excluding, however, any sums paid as "key
money" in connection with the execution or renewal of Leases or any sums paid
in connection with the execution or renewal of a Lease as advance rental
("Advance Rental") to the extent the same has been paid prior to the occurrence
of an Event of Default (as defined in the Mortgage) (collectively, the
"Rents").
(b) Bally's hereby grants, transfers, bargains,
sells, assigns, conveys, and sets over unto Assignee, its successors and
assigns, from and after the date hereof (including any period allowed by law
for redemption after any sale), all right, title and interest of Bally's in and
to (i) the Ground Lease and all guarantees, modifications, renewals, and
extensions thereof and (ii) all documents and instruments made or hereafter
made in respect of the Ground Lease, together with all of the rents and issues
and profits, due and to become due or to which Bally's is now or may hereafter
become entitled, arising out of the Ground Lease and the Land, excluding
however, any sums paid as "key money" in connection with the execution or
renewal of the Ground Lease or any sums paid in connection with the execution
or renewal of the Ground Lease as advance rental ("Ground Lease Advance
Rental") to the extent the same has been paid prior to the occurrence of an
Event of Default (as defined in the Mortgage) (collectively, the "Ground
Rents").
2. (a) Assignor further gives and grants unto
Assignee the power and authority to:
0020167.01-01S3a 3
<PAGE> 4
(i) enter upon and take possession of the
Leased Property and manage the same, subject to the rights of any and
all parties in possession thereof;
(ii) enforce, modify, cancel or accept a
surrender of any or all of the Leases;
(iii) (A) subject to and in accordance with
the terms of the Leases, demand, collect, sue for, attach, levy,
recover, receive, compromise, and (B) adjust and make, execute, and
deliver receipts and releases for, Rents which may be or may hereafter
become due, owing or payable from any present or future lessees,
sublessees, licensees or other occupants of the Leased Property or any
part thereof (the Lessees");
(iv) receive, endorse and deposit for
collection in the name of Assignor or Assignee any checks, promissory
notes or other evidences of indebtedness, whether made payable to
Assignor or Assignee, which are given in payment or on account of Rent
for the Leased Property or any part or parts thereof, or by way of
compromise or settlement of any indebtedness for such Rents;
(v) give acquittances for Rents received;
(vi) institute, prosecute, settle or
compromise any summary or other proceedings for the recovery of Rents
or for removing any and all of the Lessees upon their default under
their respective Leases;
(vii) subject to and in accordance with the
Leases, institute, prosecute, intervene in, settle or compromise any
proceedings for the protection of the Leased Property, for the
recovery of any damage done to the Leased Property or for the
abatement of any nuisance, including Hazardous Waste (as defined in
the Mortgage), thereon or thereabouts;
(viii) defend, settle or compromise any
legal proceedings brought, or claims made against, Assignee or its
agents, employees or servants which may affect the Leased Property,
and, at
0020167.01-01S3a 4
<PAGE> 5
the option of Assignee, defend, settle or compromise any claims made
or legal proceedings brought against Assignor which may affect the
Leased Property or any part thereof;
(ix) lease or rent the Leased Property or
any part thereof for such time and at such rentals as Assignee, in its
reasonable discretion, may deem advisable;
(x) make any changes or improvements,
structural or otherwise, on, in or to the Leased Property or any part
thereof which Assignee may deem reasonably necessary or expedient for
the leasing, renting or preservation thereof;
(xi) keep and maintain the Leased Property
in tenantable and rentable condition and in a good state of repair;
(xii) purchase such equipment and supplies
as may be reasonably necessary or desirable in the opinion of Assignee
for use in connection with the operation of the Leased Property;
(xiii) pay, from and out of the Rents
collected by Assignee hereunder, or from or out of any other funds,
all taxes, assessments, water charges, sewer rents and other
governmental charges levied, assessed or imposed against the Property
or any part thereof, and any and all other charges, costs and expenses
which Assignee may deem necessary or advisable to pay in connection
with the management and operation of the Property (including, without
limitation, brokers' fees and any accrued and unpaid interest,
principal and other payments due on any and all loans secured by
mortgages or deeds of trust on the Property, including the Mortgage,
the Indenture, the Notes, and Additional Mortgages (as defined in the
Mortgage)), it being understood that the excess Rents, if any,
remaining after all such payments shall have been made shall be the
property of and paid to Assignor, provided there exists no Event of
Default;
(xiv) contract for and purchase such
insurance as Assignee may deem advisable or neces-
0020167.01-01S3a 5
<PAGE> 6
sary for the protection of Assignee and the Leased Property and as
required to be maintained under the Mortgage, including, without
limitation, fire, general liability, boiler, plate glass, rent,
demolition and workers' compensation insurance;
(xv) execute and comply with all laws,
rules, orders, ordinances and requirements of the United States, the
state in which the Property is located and any political subdivision
thereof, and any agency, department, bureau, board, commission or
instrumentality of any of them (collectively, "Governmental
Authorities"), and remove any and all violations which may be filed
against the Leased Property;
(xvi) enforce, enjoin or restrain the
violation of any of the terms, provisions and conditions of the
Leases; and
(xvii) do or perform such other acts as may
be reasonably necessary to increase the Rents or to diminish the
expense of operating the Leased Property, whether herein expressly
authorized or not, and in all respects act in the place and stead of
Assignor and have all of the powers as owner as possessed by Assignor
for the purposes aforesaid.
All of the foregoing powers and rights may be executed by
Assignee or by its agents, servants or attorneys, in the name of Assignee or in
the name of Assignor, and in such manner as Assignee, its agents, servants, or
attorneys consider to be necessary, desirable, expedient, or appropriate;
provided, however, that under no circumstances shall Assignee be under any
obligation to exercise any of the foregoing powers or rights and Assignee shall
not, except in the case of negligence and/or wilful misconduct of Assignee, be
liable to Assignor or any other party for failure to exercise such powers and
rights.
(b) Bally's further gives and grants unto
Assignee the power and authority to:
(i) enter upon and take possession of the
Leased Land and manage the same, subject to the rights of any ground
tenant thereof;
0020167.01-01S3a 6
<PAGE> 7
(ii) enforce, modify, cancel or accept a
surrender of the Ground Lease;
(iii) (A) subject to and in accordance with
the terms of the Ground Lease, demand, collect, sue for, attach, levy,
recover, receive, compromise, and (B) adjust and make, execute, and
deliver receipts and releases for, Ground Rents which may be or may
hereafter become due, owing or payable from any present or future
ground tenant thereof (the "Ground Tenant");
(iv) receive, endorse and deposit for
collection in the name of Bally's or Assignee any checks, promissory
notes or other evidences of indebtedness, whether made payable to
Bally's or Assignee, which are given in payment or on account of
Ground Rents for the Land or any part or parts thereof, or by way of
compromise or settlement of any indebtedness for such Ground Rents;
(v) give acquittances for Ground Rents
received;
(vi) institute, prosecute, settle or
compromise any summary or other proceedings for the recovery of Ground
Rents or for removing the Ground Tenant upon its default under its
respective Ground Lease;
(vii) subject to and in accordance with the
Ground Lease, institute, prosecute, intervene in, settle or compromise
any proceedings for the protection of the Leased Land, for the
recovery of any damage done to the Leased Land or for the abatement of
any nuisance, including Hazardous Waste, thereon or thereabouts;
(viii) defend, settle or compromise any
legal proceedings brought, or claims made against, Assignee or its
agents, employees or servants which may affect the Leased Land, and,
at the option of Assignee, defend, settle or compromise any claims
made or legal proceedings brought against Bally's which may affect the
Leased Land or any part thereof;
0020167.01-01S3a 7
<PAGE> 8
(ix) lease or rent the Leased Land or any
part thereof for such time and at such rentals as Assignee, in its
reasonable discretion, may deem advisable;
(x) make any changes or improvements,
structural or otherwise, on, in or to the Leased Land or any part
thereof reasonably necessary or expedient for the leasing, renting or
preservation thereof;
(xi) keep and maintain the Leased Land in
tenantable and rentable condition and in a good state of repair;
(xii) purchase such equipment and supplies
as may be reasonably necessary or desirable in the opinion of Assignee
for use in connection with the operation of the Leased Land;
(xiii) pay, from and out of the Ground Rents
collected by Assignee hereunder, or from or out of any other funds,
all taxes, assessments, water charges, sewer rents and other
governmental charges levied, assessed or imposed against the Leased
Land or any part thereof, and any and all other charges, costs and
expenses which Assignee may deem necessary or advisable to pay in
connection with the management and operation of the Leased Land
(including, without limitation, brokers' fees and any accrued and
unpaid interest, principal and other payments due on any and all loans
secured by mortgages or deeds of trust on the Leased Land, including
the Mortgage, the Indenture, the Notes, and Additional Mortgages), it
being understood that the excess Ground Rents, if any, remaining after
all such payments shall have been made shall be the property of and
paid to Bally's, provided there exists no Event of Default;
(xiv) contract for and purchase such
insurance as Assignee may deem advisable or necessary for the
protection of Assignee and the Leased Land and as required to be
maintained under the Mortgage, including, without limitation, fire,
general liability, boiler, plate glass, rent, demolition and workers'
compensation insurance;
0020167.01-01S3a 8
<PAGE> 9
(xv) execute and comply with all laws,
rules, orders, ordinances and requirements of any Governmental
Authority, and remove any and all violations which may be filed
against the Leased Land;
(xvi) enforce, enjoin or restrain the
violation of any of the terms, provisions and conditions of the Ground
Lease; and
(xvii) do or perform such other acts as may
be reasonably necessary to increase the Ground Rents or to diminish
the expense of operating the Leased Land, whether herein expressly
authorized or not, and in all respects act in the place and stead of
Bally's and have all of the powers as owner as possessed by Bally's
for the purposes aforesaid.
All of the foregoing powers and rights may be executed by
Assignee or by its agents, servants or attorneys, in the name of Assignee or in
the name of Bally's, and in such manner as Assignee, its agents, servants, or
attorneys consider to be necessary, desirable, expedient, or appropriate;
provided, however, that under no circumstances shall Assignee be under any
obligation to exercise any of the foregoing powers or rights and Assignee shall
not, except in the case of negligence and/or wilful misconduct of Assignee, be
liable to Bally's or any other party for failure to exercise such powers and
rights.
3. Assignee shall have the unqualified right, subject to
the provisions of applicable law, to receive, use and apply the Rents and
Ground Rents collected and received by it under this Agreement (a) for the
payment of any and all costs and expenses incurred in connection with (i)
enforcing the terms of this Assignment, (ii) upholding and defending the rights
of Assignee hereunder, and (iii) collecting Rents due under the Leases and
Ground Rents due under the Ground Lease; and (b) for the operation and
maintenance of the Property and the payment of all costs and expenses in
connection therewith, including, without limitation, the payment of (i) accrued
and unpaid interest and principal due on any and all loans secured by mortgages
or deeds of trust on the Property including the Mortgage, the Indenture, and
the Notes, (ii) taxes, assessments, water charges and sewer rents and other
governmental charges levied, assessed or
0020167.01-01S3a 9
<PAGE> 10
imposed against the Property or any part thereof, which may then be due and
payable, (iii) insurance premiums, (iv) costs and expenses in prosecuting or
defending any litigation referred to herein, and (v) wages and salaries of
employees, commissions of agents and attorneys' fees. After the payment of all
such costs and expenses and after Assignee shall have set up such reserves
necessary for the proper management of the Leased Property, Assignee, subject
to the provisions of Subsections 2(a)(xiii) and 2(b)(xiii) hereof, shall apply
all remaining Rents and Ground Rents collected and received by it to the
reduction of the indebtedness secured by the Mortgage.
4. (a) Assignor hereby irrevocably constitutes and
appoints Assignee its true and lawful attorney, to undertake and execute any or
all of the powers described herein with the same force and effect as if
undertaken or executed by Assignor, and Assignor hereby ratifies and confirms
any and all things done or omitted to be done, other than those things done or
omitted to be done with negligence or wilful misconduct, by Assignee, its
agents, servants, employees or attorneys in, to or about the Property. The
appointment contained herein shall be effective only upon the termination by
Assignee of the license granted to Assignor pursuant to Article 13 hereof.
(b) Bally's hereby irrevocably constitutes and
appoints Assignee its true and lawful attorney, to undertake and execute any or
all of the powers described herein with the same force and effect as if
undertaken or executed by Bally's, and Bally's hereby ratifies and confirms any
and all things done or omitted to be done, other than those things done or
omitted to be done with negligence or wilful misconduct, by Assignee, its
agents, servants, employees or attorneys in, to or about the Leased Land. The
appointment contained herein shall be effective only upon the termination by
Assignee of the license granted to Bally's pursuant to Article 13 hereof.
5. (a) Assignee shall not in any way be liable to
Assignor for any act done or anything omitted to be done by it in good faith in
connection with the management of the Property, except for the consequences of
its own negligence or wilful misconduct, nor shall As- signee be liable for any
act or omission of its agents,
0020167.01-01S3a 10
<PAGE> 11
servants, employees or attorneys, provided that due care is used by Assignee in
the selection of such agents, servants, employees and attorneys. Assignee
shall be accountable to Assignor only for monies actually received by it
pursuant to this Assignment.
(b) Assignee shall not in any way be liable to
Bally's for any act done or anything omitted to be done by it in good faith in
connection with the management of the Leased Land, except for the consequences
of its own negligence or wilful misconduct, nor shall Assignee be liable for
any act or omission of its agents, servants, employees or attorneys, provided
that due care is used by Assignee in the selection of such agents, servants,
employees and attorneys. Assignee shall be accountable to Bally's only for
monies actually received by it pursuant to this Assignment.
6. (a) Assignor hereby covenants and agrees:
(i) to perform faithfully every obligation
which Assignor is required to perform under the Leases within the
applicable grace periods, if any, set forth therein;
(ii) to exercise its reasonable business
judgment in determining whether to enforce, or to secure the
performance of, any material obligation to be performed by any Lessee
under any Lease requiring a "minimum" or "base" rent of $100,000 or
more per annum (a "MAJOR LEASE");
(iii) except in connection with the initial
execution or renewal of a Lease, not to collect any Rent under the
Leases for more than thirty (30) days in advance of the time when the
same shall become due, or anticipate the rents thereunder, except for
security deposits, "key money" and Advance Rental;
(iv) subject to the right of Assignor to
contest and to not comply with a Legal Requirement (as defined in and
as provided in the Mortgage), to comply with, in all material
respects, all present and future laws, rules, orders, ordinances,
restrictions and requirements of all Governmental Authorities;
0020167.01-01S3a 11
<PAGE> 12
(v) to deliver to Assignee, upon request,
copies of all existing Leases and all Leases entered into after the
date hereof;
(vi) to appear in and defend, at Assignor's
sole cost and expense, any action or proceeding arising under, growing
out of, or in any manner connected with, the Leases or the
obligations, duties or liabilities of the lessor, Lessees or
guarantors thereunder; and
(vii) to comply with all of the provisions
of the Indenture, the Notes, the Mortgage and any other Loan Documents
(as such term is defined in the Mortgage).
(b) Bally's hereby covenants and agrees:
(i) to perform faithfully every obligation
which Bally's is required to perform under the Ground Lease within the
applicable grace periods, if any, set forth therein;
(ii) to exercise its reasonable business
judgment in determining whether to enforce, or to secure the
performance of, any material obligation to be performed by the Ground
Tenant under the Ground Lease;
(iii) except in connection with the initial
execution or renewal of the Ground Lease, not to collect any Ground
Rent under the Ground Lease for more than thirty (30) days in advance
of the time when the same shall become due, or anticipate the rents
thereunder, except for security deposits, "key money" and Ground Lease
Advance Rental;
(iv) subject to the right of Bally's to
contest and to not comply with a Legal Requirement (as defined in and
as provided in the Mortgage), to comply with, in all material
respects, all present and future laws, rules, orders, ordinances,
restrictions and requirements of all Governmental Authorities;
0020167.01-01S3a 12
<PAGE> 13
(v) to deliver to Assignee, upon request, a
copy of the Ground Lease and all amendments, assignments, and
modifications thereto;
(vi) to appear in and defend, at Bally's
sole cost and expense, any action or proceeding arising under, growing
out of, or in any manner connected with, the Land and the Ground Lease
or the obligations, duties or liabilities of the ground landlord,
Ground Tenant or guarantors thereunder; and
(vii) to comply with all of the provisions
of the Indenture, the Notes, the Mortgage and any other Loan
Documents.
7. (a) Except as otherwise set forth in Schedule I
annexed hereto and made a part hereof, Assign- or hereby represents and
warrants the following to Assignee:
(i) to the best of Assignor's knowledge, the
Major Leases which now affect the Leased Property are valid,
subsisting and in full force and effect, and have been duly executed
and unconditionally delivered by Assignor and, to the best of
Assignor's knowledge, have been duly executed and unconditionally
delivered by the tenants under such Leases;
(ii) Assignor has not executed or granted
any modifications or amendments of the Major Leases, other than as set
forth on Exhibit B to the Mortgage;
(iii) to the best of Assignor's knowledge,
there are no material defaults now existing under any of the Major
Leases and no event has occurred which, with the delivery of notice or
the passage of time or both, would constitute a material default or
which could entitle the landlord under the Major Leases or the Lessees
of the Major Leases to cancel the same or otherwise avoid their
obligations thereunder;
(iv) Assignor has not accepted Rent under
the Major Leases for more than thirty (30)
0020167.01-01S3a 13
<PAGE> 14
days in advance of the time the same shall become due except for
security deposits, "key money", Advance Rental and such other sums
payable in connection with the execution or renewal of any Major
Lease; and
(v) Assignor has not executed, and will not
execute, an assignment of any of the Leases or of its right, title and
interest therein or the Rents to accrue thereunder, except as provided
in the Mortgage.
(b) Except as otherwise set forth in SCHEDULE I
annexed hereto and made a part hereof, Bally's hereby represents and warrants
the following to Assignee:
(i) to the best of Bally's knowledge, the
Ground Lease is valid, subsisting and in full force and effect, and
has been duly executed and unconditionally delivered by Bally's and,
to the best of Bally's knowledge, has been duly executed and
unconditionally delivered by the Ground Tenant;
(ii) Bally's has not executed or granted any
modifications or amendments of the Ground Lease;
(iii) to the best of Bally's knowledge,
there are no material defaults now existing under the Ground Lease and
no event has occurred which, with the delivery of notice or the
passage of time or both, would constitute a material default or which
could entitle the ground landlord or Ground Tenant to cancel the
Ground Lease or otherwise avoid its obligations thereunder;
(iv) Bally's has not accepted Ground Rents
under the Ground Lease for more than thirty (30) days in advance of
the time the same shall become due except for security deposits, "key
money", Advance Rental and such other sums payable in connection with
the execution or renewal of the Ground Lease; and
(v) Bally's has not executed, and will not
execute, an assignment of the Ground Lease or of its right, title and
interest therein or the
0020167.01-01S3a 14
<PAGE> 15
Ground Rents to accrue thereunder, except as provided in the Mortgage.
8. It is understood and agreed that nothing contained in
this Assignment shall prejudice or be construed to prejudice the right of
Assignee under any of the other Loan Documents, without notice, to institute,
prosecute and compromise any action which it would deem advisable to protect
its interest in the Property, including any sale by the Assignee, as trustee,
pursu- ant to the power of sale contained in the Mortgage or otherwise, and in
such sale or action, to move for the appointment of a receiver of the Rents or
Ground Rents, or prejudice any rights which Assignee shall have by virtue of
any default under the Indenture, the Notes or the Mortgage. Assignee, however,
hereby agrees that it will use reasonable efforts to promptly give notice (the
"INFORMATIONAL NOTICE") to Assignor and Bally's, provided that failure to give
such notice or any defects in the manner in which such notice is given shall
not preclude Assignee from exercising any of its rights hereunder. This
Assignment shall survive, however, the commencement of any such action or sale.
9. Assignor and Bally's jointly and severally agree to
indemnify and hold Assignee harmless from and against any and all liability,
loss, damage, cost and expense, including reasonable attorneys' fees and
disbursements, other than those which arise as a result of the negligence or
wilful misconduct of Assignee, which Assignee may or shall incur under any of
the Leases or the Ground Lease, or by reason of this Assignment, or by reason
of any action taken by Assignee hereunder, and from and against any and all
claims and demands whatso-ever, other than those arising from the negligence or
wilful misconduct of Assignee, which may be asserted against Assignee by reason
of any alleged obligation or undertaking on its part to perform or discharge
any of the terms, covenants and conditions contained in any of the Leases or
the Ground Lease. Should Assignee incur any such liability, loss, damage, cost
or expense, the amount thereof, together with interest thereon at the rate of
interest then payable under the Indenture, including, in calculating such rate
of interest, any additional interest which may be imposed under the Indenture
by reason of any default thereunder (such rate of interest being hereinafter
referred to as the "INTEREST
0020167.01-01S3a 15
<PAGE> 16
RATE"), from the date such amount was suffered or incurred by Assignee until
the same is paid by Assignor or Bally's to Assignee, shall be jointly and
severally payable by Assignor and Bally's to Assignee immediately upon demand,
or, at the option of Assignee, Assignee may reimburse itself therefor out of
any Rents or Ground Rents collected by Assignee. Nothing contained herein
shall operate or be construed to obligate Assignee to perform any of the terms,
covenants or conditions contained in the Leases or the Ground Lease or
otherwise to impose any obligation upon Assignee with respect to any of the
Leases or the Ground Lease.
10. Upon request of Assignee, Assignor and Bally's shall
execute and deliver to Assignee such further instruments as Assignee may deem
reasonably necessary to effect this Assignment and the covenants of As- signor
and Bally's contained herein. Assignor, at its sole cost and expense, shall
cause such further instruments to be recorded in such manner and in such places
as may be required by Assignee. Notwithstanding the foregoing, Assignee shall
have no obligation to request any matters referred to herein and shall request
such matters in Assignee's reasonable discretion.
11. Assignor shall, upon thirty (30) days' notice
thereof, pay all required recording and filing fees in connection with this
Assignment and any agreements, instruments and documents made pursuant to the
terms hereof or ancillary hereto, as well as any and all taxes which may be due
and payable on the recording of this Assignment and any taxes hereafter imposed
on this Assignment. Should Assignor fail to pay the same within said thirty
(30) day notice period, all such recording and filing fees and taxes may be
paid by Assignee on behalf of Assignor and the amount thereof, together with
interest at the Interest Rate, shall be payable by As- signor to Assignee
immediately upon demand, or, at the option of Assignee, Assignee may reimburse
itself there- for out of the Rents or Ground Rents collected by Assignee.
12. Failure of Assignee to avail itself of any of the
terms, covenants and conditions of this Assignment shall not be construed or
deemed to be a waiver of any of its rights hereunder. The rights and remedies
of Assignee under this Assignment are cumulative and are not in
0020167.01-01S3a 16
<PAGE> 17
lieu of but are in addition to, and shall not be affected by the exercise of,
any other rights and remedies which Assignee shall have under or by virtue of
law or equity, the Indenture, the Notes, the Mortgage or the Loan Documents
(collectively, the "OTHER RIGHTS"). The rights and remedies of Assignee
hereunder may be exercised concurrently with any of the Other Rights.
13. (a) Assignee hereby gives Assignor a license to
collect all the Rents, to retain, use and enjoy the same and to do all acts and
perform such obligations as Assignor is required to perform under the Leases,
including, without limitation, all items listed in paragraph 2(a) hereof.
Assignor agrees to collect and receive said Rents and to use said Rents in
payment of principal and interest becoming due under the Indenture, the Notes,
the Mortgage and any Additional Mortgages (as defined in the Mortgage).
Subject to the provisions of Subsection 2(a)(xiii) hereof, the balance of
Rents, if any, remaining after all such payments shall have been made shall
belong to and be the property of Assignor. Such license hereby granted to
Assignor to collect and receive said Rents and to retain, use and enjoy the
same and to do all acts and perform such obligations as Assignor is required to
perform under the Leases may be revoked by the consent of the Holders (as
defined in the Indenture) of One Hundred Percent (100%) of the aggregate
principal amount of the Notes then outstanding and upon five (5) days' written
notice of such revocation, served personally upon or sent by registered or
certified mail to the record owner of the Property or automatically upon the
occurrence of any Event of Default. This Assignment shall continue in full
force and effect until (a) all sums due and payable under the Indenture, the
Notes and the Mortgage shall have been fully paid and satisfied, together with
any and all other sums which may become due and owing under this Assignment,
and (b) all other obligations of Assignor under the Indenture, the Notes, the
Mortgage, this Assignment and the Loan Documents are satisfied. Upon
termination of this Assignment as hereinbefore provided, this Assignment and
the authority and powers herein granted by Assignor to Assignee shall cease and
terminate, and, in that event, Assignee shall (i) execute and deliver to
Assignor such instrument or instruments effective to evidence the termination
of this Assignment and the reassignment to Assignor of the rights, powers and
authorities granted herein, and (ii)
0020167.01-01S3a 17
<PAGE> 18
deliver to Assignor all monies held by Assignee for the benefit of Assignor.
Assignor agrees that upon termination of this Assignment it shall assume
payment of all reasonable unmatured or unpaid charges, expenses or obligations
(including reasonable attorney's fees) incurred or undertaken by Assignee in
connection with the management of the Property.
(b) Assignee hereby gives Bally's a license to
collect all the Ground Rents, to retain, use and enjoy the same and to do all
acts and perform such obligations as Bally's is required to perform under the
Ground Lease, including without limitation, all items listed in paragraph 2(b)
hereof. Bally's agrees to collect and receive said Ground Rents and to use
said Ground Rents in payment of principal and interest becoming due under the
Indenture, the Notes, the Mortgage and any Additional Mortgages. Subject to
the provisions of Subsection 2(b)(xiii) hereof, the balance of Ground Rents, if
any, remaining after all such payments shall have been made shall belong to and
be the property of Bally's. Such license hereby granted to Bally's to collect
and receive said Ground Rents and to retain, use and enjoy the same and to do
all acts and perform such obligations as Bally's is required to perform under
the Ground Lease may be revoked by the consent of the Holders (as defined in
the Indenture) of One Hundred Percent (100%) of the aggregate principal amount
of the Notes then outstanding and upon five (5) days' written notice of such
revocation, served personally upon or sent by registered or certified mail to
the record owner of the Leased Land or automatically upon the occurrence of any
Event of Default. This Assignment shall continue in full force and effect
until (a) all sums due and payable under the Indenture, the Notes and the
Mortgage shall have been fully paid and satisfied, together with any and all
other sums which may become due and owing under this Assignment, and (b) all
other obligations of Bally's under the Indenture, the Notes, the Mortgage, this
Assignment and the Loan Documents are satisfied. Upon termination of this
Assignment as hereinbefore provided, this Assignment and the authority and
powers herein granted by Bally's to Assignee shall cease and terminate, and, in
that event, Assignee shall (i) execute and deliver to Bally's such instrument
or instruments effective to evidence the termination of this Assignment and the
reassignment to Bally's of the rights, powers and authorities granted
0020167.01-01S3a 18
<PAGE> 19
herein, and (ii) deliver to Bally's all monies held by Assignee for the benefit
of Bally's. Bally's agrees that upon termination of this Assignment it shall
assume payment of all reasonable unmatured or unpaid charges, expenses or
obligations (including reasonable attorney's fees) incurred or undertaken by
Assignee in connection with the management of the Land.
14. All of the representations, warranties, covenants,
agreements and provisions in this Assignment by or for the benefit of Assignee
shall bind and inure to the benefit of its successors and assigns.
15. Nothing in this Assignment shall be construed to give
to any person other than Assignee and its successors and assigns any legal or
equitable right, remedy or claim under this Assignment and this Assignment
shall be held to be for the sole and exclusive benefit of Assignee and its
successors and assigns.
16. If there shall be any conflict between the terms,
covenants, conditions and provisions set forth herein and the terms, covenants,
conditions and provisions set forth in the Indenture, then, unless this
Assignment specifically provides otherwise by specific reference to the
Indenture, the terms, covenants, conditions and provisions of the Indenture
shall prevail.
17. All notices, demands or requests made pursuant to
this Assignment must be in writing and personally delivered or mailed to the
party to which the notice, demand or request is being given by certified or
registered mail, return receipt requested, as follows, and shall be deemed
given on the date of actual receipt or the date on which the same shall be
returned to the sender by the Post Office as unclaimed, or upon personal
delivery with receipt acknowledged:
if to Assignee, at the address set forth above, to the
attention of: Corporate Trust Department
0020167.01-01S3a 19
<PAGE> 20
if to Assignor, at the address set forth above, to the
attention of: Corporate Secretary
with a copy to:
Benesch, Friedlander, Coplan & Aronoff
1100 Citizens Building
Cleveland, Ohio 44114
Attention: Chairperson, Real Estate Department
if to Bally's at the address set forth above, to the attention
of: Corporate Secretary
with a copy to:
Benesch, Friedlander, Coplan & Aronoff
1100 Citizens Building
Cleveland, Ohio 44114
Attention: Chairperson, Real Estate Department
or at such different address as Assignor, Bally's or Assignee shall hereafter
specify by written notice as provided herein.
18. This Assignment may not be changed orally, but only
by an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought.
19. Assignee acknowledges and agrees that it will not
assign this Assignment separate and apart from a sale or assignment of the
Notes and the Mortgage.
20. No director, officer, employee, stockholder or
incorporator, as such, past, present or future, of Assignor or any successor
corporation, or Bally's or any successor corporation, shall have any liability
for any obligations of Assignor or Bally's, as the case may be, under this
Assignment or for any claim based on, in respect of or by reason of such
obligations or their creation. Assignee, by accepting this Assignment, waives
and releases all such liability.
21. This Assignment is made by Assignors and accepted by
Assignee in the State of New York and shall be construed, interpreted, enforced
and governed by and in accordance with the laws of such State, except with
0020167.01-01S3a 20
<PAGE> 21
respect to the provisions hereof which relate to the creation, grant,
perfection and priority of all security interests and other liens under or by
this Assignment including security interests and liens in the Encumbered
Property (as defined in the Mortgage) and except with respect to provisions
hereof which relate to realizing upon the security covered by this Assignment,
all of which exceptions shall be governed by the laws of the State of New
Jersey. Whenever possible, each provision of this Assignment shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Assignment shall be prohibited by, or invalid
under, applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity without invalidating the remaining provisions of
this Assignment.
22. Each provision of this Assignment of Leases and Rents
is subject to the provisions of the New Jersey Casino Control Act and
regulations promulgated thereunder.
0020167.01-01S3a 21
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Assignment
as of the day and year first above written.
<TABLE>
<S> <C>
Attest Bally's Park Place, Inc.
By:
- ----------------------------------------------------- -----------------------------------------------------------
Attest Bally's Park Place Realty Co.
By:
- ----------------------------------------------------- -----------------------------------------------------------
Attest First Bank National Association
By:
- ----------------------------------------------------- -----------------------------------------------------------
</TABLE>
0020167.01-01S3a 22
<PAGE> 23
State of New York )
) ss.:
County of New York )
On the ____ day of _______, 1994, before me personally came
________ _______, to me known, who, being by me duly sworn, did depose and say
that he resides at _________________________________; that he is a (Vice)
President of Bally's Park Place, Inc., the corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the board of directors of said corporation; and that he
signed his name thereto by like order.
________________________________________
Notary Public
0020167.01-01S3a 23
<PAGE> 24
State of New York )
) ss.:
County of New York )
On the ____ day of _______, 1994, before me personally came
_______________, to me known, who, being by me duly sworn, did depose and say
that he resides at ____________________________________________; that he is the
(Vice) President of Bally's Park Place Realty Co., the corporation described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by order of the board of directors of said corporation;
and that he signed his name thereto by like order.
________________________________________
Notary Public
0020167.01-01S3a 24
<PAGE> 25
State of New York )
) ss.:
County of New York )
On the ____ day of _______, 1994, before me personally came
________ ______, to me known, who, being by me duly sworn, did depose and say
that he resides at ______________________________________; that he is the
(Vice) President of First Bank National Association, the national association
described in and which executed the foregoing instrument; that he knows the
seal of said national association; that the seal affixed to said instrument
is such seal; that it was so affixed by order of the board of directors of
said national association; and that he signed his name thereto by like order.
________________________________________
Notary Public
0020167.01-01S3a 25
<PAGE> 1
Exhibit 10(i).7
EXHIBIT C
_________________________________________________________
NOTE PLEDGE AGREEMENT
among
Bally's Park Place Funding, Inc.
(a Delaware Corporation)
Bally's Park Place, Inc.
(a New Jersey Corporation)
and
First Bank National Association
as Trustee for
the holders of the
______% First Mortgage Notes due 2004
of Bally's Park Place Funding, Inc.
________________________
Dated as of ________, 1994
________________________
_________________________________________________________
0020169.01-New York Server 3a Draft February 22, 1994 - 11:47 am
<PAGE> 2
NOTE PLEDGE AGREEMENT
NOTE PLEDGE AGREEMENT (the "Pledge Agreement"), dated as of
________, 1994 among Bally's Park Place Funding, Inc., a Delaware corporation
(the "Finance Company"), Bally's Park Place, Inc., a New Jersey corporation
(the "Operating Company"), and First Bank National Association (the "Trustee"),
in its capacity as trustee under the Indenture, dated as of
___________________, 1994 (the "Indenture"), relating to the Finance
Company's ______% First Mortgage Notes due 2004 (the "Securities"). As used
herein, all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Indenture.
W I T N E S S E T H:
WHEREAS, the Finance Company has advanced to the Operating
Company an amount equal to the entire proceeds derived from the sale by the
Finance Company of $425,000,000 aggregate principal amount of the Securities;
WHEREAS, the Operating Company has made and delivered to the
Finance Company its Note, dated ______ __, 1994 (the "Note"), evidencing the
aforementioned advances, in the principal amount of $425,000,000 and payable to
the order of the Finance Company;
WHEREAS, in order to secure the payment and performance of the
Indenture Obligations, the Finance Company desires to pledge by this Pledge
Agreement all of its right, title and interest in the Note to the Trustee; and
WHEREAS, the parties hereto desire to set forth their mutual
understanding and certain agreements regarding the terms and conditions of the
pledge of the Note made by the Finance Company to the Trustee for the benefit
of the Holders and certain agreements among the Finance Company, the Operating
Company and the Trustee relative to such pledge.
NOW, THEREFORE, in consideration of the premises and other
benefits to the Finance Company and the Operating Company, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Pledge. As collateral security for payment and
performance in full of the Indenture Obligations, in accordance with their
respective terms, the
0020169.01-New York Server 3a 2 Draft February 22, 1994 - 11:47 am
<PAGE> 3
Finance Company hereby pledges, hypothecates, assigns, transfers, sets over and
delivers unto the Trustee, and hereby grants unto the Trustee for the benefit
of the Holders, and unto its successors and assigns, a continuing security
interest in all of the right, title and interest of the Finance Company in, to
and under any and all of the following described property, rights and interests
and any and all documents evidencing such property, rights and interests
(collectively, the "Pledged Collateral"), to be held and administered by the
Trustee in accordance with the provisions hereof and of Article Four of the
Indenture):
(a) the Note, including all renewals, extensions
and modifications of the same, and without limiting the generality of the
foregoing, the present, continuing and future right to make claim for, collect
or cause to be collected, receive or cause to be received directly from the
Operating Company all payments of principal, premiums, if any, interest and
other sums of money payable thereunder; and
(b) any substituted or additional Property of the
kind or type described in subsection 1(a) required to be supplied under the
terms of this Pledge Agreement.
TO HAVE AND TO HOLD the Pledged Collateral, together with all
rights, titles, interests, powers, privileges and preferences pertaining or
incidental thereto, unto the Trustee for the benefit of the Holders, and unto
their respective successors and assigns; subject, however, to the terms,
covenants and conditions hereinafter set forth.
2. Representations, Warranties and Covenants of the
Finance Company. The Finance Company hereby represents and warrants, covenants
and agrees that:
(a) Except for (i) the security interest granted
hereunder to the Trustee for the benefit of the Holders and (ii) any
restrictions imposed pursuant to the New Jersey Casino Control Act and the
rules and regulations promulgated thereunder, the Finance Company is the legal
and equitable owner of the Pledged Collateral, holds the same free and clear of
all liens, claims, charges, encumbrances and security interests of every kind
and nature and has not made and will not make any other pledge, assignment,
mortgage, hypothecation or transfer of the Pledged Collateral.
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<PAGE> 4
(b) The Finance Company has valid right and legal
authority to pledge the Pledged Collateral in the manner hereby done or
contemplated and will defend its title thereto against the claims of all
persons whomsoever and shall maintain and preserve the security interest
granted hereunder with respect to the Pledged Collateral as long as this Pledge
Agreement shall remain in full force and effect.
(c) Neither the execution and delivery of this
Pledge Agreement by the Finance Company or the Operating Company nor the
consummation of the transactions herein contemplated nor the fulfillment of the
terms hereof violate or will violate the terms of any agreement, indenture,
mortgage, deed of trust, equipment lease, instrument or other document to which
the Finance Company or the Operating Company is a party, or conflict or will
conflict with any law, order, rule or regulation applicable to the Finance
Company or the Operating Company of any court or any government, regulatory
body or administrative agency or any other governmental body having
jurisdiction over the Finance Company, the Operating Company or their
respective Properties or assets, which violation or conflict would have a
material adverse effect on the business or condition of the Operating Company
and the Finance Company taken as a whole or on the value of the Pledged
Collateral.
(d) No consent or approval which has not been
obtained prior to the date hereof of any governmental body or regulatory
authority was or is necessary as a condition to the pledge hereunder of the
Pledged Collateral, and such pledge is effective to vest in the Trustee the
rights of the Trustee in the Pledged Collateral as set forth herein; provided,
however, that the exercise of the rights of the Trustee hereunder is subject to
the approval of the New Jersey Casino Control Commission.
(e) The Finance Company shall deliver the Note to
the Trustee concurrently with the execution of this Pledge Agreement and
each other item of Pledged Collateral immediately upon the Finance Company's
acquisition thereof. Upon delivery to the Trustee, any and all Pledged
Collateral shall be accompanied by such endorsements, instruments or documents
in order to perfect the pledge hereunder of such Pledged Collateral. The
Trustee shall have the right (but not the obligation) to hold the Note and any
other documents representing the Pledged Collateral in its own name or in the
name of its nominee, all in form and substance sufficient to make effective the
pledge hereunder and otherwise satisfactory to the Trustee.
0020169.01-New York Server 3a 4 Draft February 22, 1994 - 11:47 am
<PAGE> 5
(f) The Finance Company shall pay and discharge
all taxes, assessments and governmental charges or levies against any Pledged
Collateral prior to delinquency thereof and shall keep all Pledged Collateral
free of all unpaid charges whatsoever, unless contested in good faith and
appropriate reserves have been set aside in accordance with generally accepted
accounting principles.
(g) For so long as any of the Securities shall
remain outstanding, the Finance Company shall take no action discharging,
cancelling, extinguishing or otherwise impairing its right, title and interest
in and to any of the Pledged Collateral in contravention of the terms of the
Indenture. The Operating Company and the Finance Company shall at all times
remain liable to observe and perform all of their respective covenants and
obligations, if any, under the Note.
3. Administration of the Pledged Collateral. The Trustee
shall administer the Pledged Collateral in accordance with the provisions
hereof and of the Indenture.
4. Release and Substitution of Collateral. The Pledged
Collateral shall not be released from the security interest created hereunder
and no Property shall be substituted for any of the Pledged Collateral except
in accordance with the provisions of Section 16.
5. Default; Remedies.
(a) Defined. For purposes of this Pledge
Agreement, the terms "Default" and "Event of Default" shall have the respective
meanings provided in the Indenture.
(b) Remedies Generally. Subject to the New
Jersey Casino Control Act and the rules and regulations promulgated thereunder,
the Trustee shall be entitled to sue for, enforce payment of and receive any
and all amounts due from the Operating Company for principal and interest on
the Note, or any other sums due under the Pledged Collateral, with interest on
overdue payments of such principal, and interest on overdue installments of
interest, to the extent lawful, at the rate or rates set forth in the Pledged
Collateral, together with any and all fees, costs and expenses of collection
(including reasonable attorneys' fees and court costs), subject to statutory
and other legal requirements. Subject to the New Jersey Casino Control Act and
the rules and regulations promulgated
0020169.01-New York Server 3a 5 Draft February 22, 1994 - 11:47 am
<PAGE> 6
thereunder, if an Event of Default shall have occurred and be continuing, the
Trustee may retain the Pledged Collateral or sell, assign, transfer, endorse
and deliver the whole or, from time to time, any part of the Pledged Collateral
at public or private sale, for cash, upon credit or for other property, for
immediate or future delivery, and for such price or prices and on such other
terms as are reasonably satisfactory to the Trustee. Upon consummation of any
such sale, the Trustee shall have the right to assign, transfer, endorse and
deliver to the purchaser thereof the Pledged Collateral so sold. Any such
purchaser at any such sale shall hold the property sold absolutely free from
any claim or right on the part of the Finance Company, and the Finance Company
hereby waives (to the extent permitted by law) all rights of redemption, stay
or appraisal which the Finance Company now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted. The
Trustee shall give the Finance Company 5 days' written notice (which the
Finance Company agrees shall be deemed to be reasonable notification within the
meaning of Section 9-504(3) of the relevant Uniform Commercial Code) of the
Trustee's intention to make any such public or private sale. Any such sale
shall be held at such time or times and at such place or places as the Trustee
may fix. The Trustee shall not be obligated to make any sale of the Pledged
Collateral if it shall determine not to do so, regardless of the fact that
notice of sale of the Pledged Collateral may have been given. The Trustee may,
without notice or publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the time and place
fixed for sale, and such sale may, without further notice, be made at the time
and place to which the same was so adjourned. In case sale of the Pledged
Collateral is made on credit or for future delivery, the Pledged Collateral so
sold may be retained by the Trustee until the sale price is paid by the
purchaser or purchasers thereof, but the Trustee shall not incur any liability
in case any such purchaser or purchasers shall fail to take up and pay for the
Pledged Collateral so sold and, in case of any such failure, such Pledged
Collateral may be sold again upon like notice. As an alternative to exercising
the power of sale herein conferred upon it, the Trustee may proceed by suit or
suits at law or in equity to foreclose this Pledge Agreement and sell the
Pledged Collateral pursuant to judgment or decree of a court or courts having
competent jurisdiction.
(c) Preventing Impairment of the Pledged
Collateral. Regardless of whether or not there shall have occurred any Default
or Event of Default, the Trustee may institute and maintain or cause in the
name of the Finance Company or the Trustee, or both, to be instituted and
maintained, such suits and proceedings as the Trustee may be advised by its
counsel shall be
0020169.01-New York Server 3a 6 Draft February 22, 1994 - 11:47 am
<PAGE> 7
necessary or expedient to prevent any impairment of the Pledged Collateral in
contravention of the terms of the Indenture.
6. Regulatory Matters. The Trustee acknowledges and
agrees that:
(a) all required prior approvals under applicable
Gaming Laws will be obtained in connection with the Trustee's exercise of any
of the remedies set forth in Section 5 of this Pledge Agreement, including,
without limitation, any separate prior approvals required in connection with
the sale, transfer or other disposition of the Pledged Collateral; and
(b) the approval of this Pledge Agreement under
the Gaming Laws, if and to the extent applicable, shall not be deemed to
constitute an approval, either express or implied, of any of the actions of the
Trustee permitted hereunder to the extent that such actions require a separate
prior approval under applicable Gaming Laws, and in the event such separate
prior approval is required the Trustee shall not take such action without first
obtaining such separate prior approval.
7. Trustee Appointed Attorney-in-Fact. The Finance
Company hereby constitutes and appoints the Trustee its attorney-in-fact for
the purpose of carrying out the provisions, but subject to the terms and
conditions, of this Pledge Agreement and taking any action and executing any
instrument that the Trustee may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, but subject to the terms and
conditions of this Pledge Agreement, the Trustee shall have the right (but not
the obligation), with full power of substitution, either in the Trustee's name
or in the name of the Finance Company, to ask for, demand, sue for, collect,
receive, and give acquittance for any and all monies due or to become due under
or by virtue of any Pledged Collateral, to endorse checks, drafts, orders and
other instruments for the payment of money payable to the Trustee for the
benefit of the Holders, representing any distribution payable in respect of the
Pledged Collateral or any part thereof or on account thereof and to give full
discharge for the same, to settle, compromise, prosecute or defend any action,
claim or proceeding with respect thereto, and to sell, assign, endorse, pledge,
transfer and make any agreement respecting, or otherwise deal with, the same;
PROVIDED, HOWEVER, that nothing herein contained shall be construed as
requiring or obligating the Trustee to make any commitment or to make any
inquiry as to the nature or sufficiency of any payment received by
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<PAGE> 8
it, or to present or file any claim or notice, or to take any action with
respect to the Pledged Collateral or any part thereof or the monies due or to
become due in respect thereof or any property covered thereby, and no action
taken or omitted to be taken by the Trustee with respect to the Pledged
Collateral shall give rise to any defense, counterclaim or right of offset in
favor of the Finance Company or to any claim or right of action against the
Trustee, unless the Trustee's actions are taken or omitted to be taken with
gross negligence or bad faith or constitute willful misconduct.
8. Purchase of Pledged Collateral by the Trustee or the
Secured Creditors. At any sale of the Pledged Collateral, whether pursuant to
power of sale or otherwise hereunder, the Trustee or any Holder may, to the
extent permitted by applicable law, bid for and purchase, free from any right
of redemption, stay or appraisal (all such rights being hereby waived and
released by the Finance Company to the extent permitted by law), the Pledged
Collateral or any part thereof or any interest therein and upon compliance with
the terms of such sale may hold, retain, exploit, resell or otherwise dispose
of such property without further accountability to the Finance Company for the
proceeds of such sale. The Finance Company will execute and deliver, or cause
to be executed and delivered, such instruments, endorsements, assignments,
waivers, certificates and other documents and take such further action as the
Trustee shall request in connection with any such sale.
9. Application of Proceeds of Sale and Cash. The
proceeds of any sale of the Pledged Collateral, together with any other monies
held by the Trustee under the provisions of this Pledge Agreement, shall be
applied by the Trustee in accordance with the provisions of the Indenture. All
Revenues (as defined in Section 9) due and to become due under or pursuant to
the Pledged Collateral shall be paid by the Operating Company directly to the
Trustee.
10. Operating Company's Acknowledgment. The Operating
Company hereby joins in the execution of this Pledge Agreement to acknowledge:
(i) the pledge by the Finance Company to the Trustee of the Finance Company's
right, title and interest in and to the Pledged Collateral, (ii) the Operating
Company's agreement to make payment of all Revenues under the Pledged
Collateral directly to the Trustee at the address provided for notices in
Section 17 and to promptly and duly execute and deliver any and all instruments
or other documents and take any and all actions as instructed by the Trustee in
order to enable the Trustee to exercise any of its rights or powers, and (iii)
the right of the Trustee to exercise or enforce in its own name or in the name
of the Finance
0020169.01-New York Server 3a 8 Draft February 22, 1994 - 11:47 am
<PAGE> 9
Company, or both, all of the rights, powers and remedies of the Finance Company
in and to the Pledged Collateral. As used herein, the term "Revenues" shall
mean (x) all amounts paid or payable to the Finance Company by the Operating
Company under the Note and (y) the net proceeds realized upon or as a result of
the enforcement of the security interest granted under this Pledge Agreement or
upon or as a result of the exercise of any right or remedy under the Pledged
Collateral or this Pledge Agreement.
11. Waiver of Claims. Except as otherwise provided in
this Pledge Agreement, THE FINANCE COMPANY AND THE OPERATING COMPANY EACH
HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE OF JUDICIAL
HEARING IN CONNECTION WITH THE TRUSTEE'S TAKING POSSESSION OR THE TRUSTEE'S
DISPOSITION OF ANY OF THE PLEDGED COLLATERAL, INCLUDING, WITHOUT LIMITATION,
ANY AND ALL PRIOR NOTICES AND HEARINGS FOR ANY PREJUDGMENT REMEDY OR REMEDIES
AND ANY SUCH RIGHT THAT EITHER OF THEM WOULD OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and, to the
full extent permitted by applicable law, the Finance Company and the Operating
Company each hereby further waive:
(a) all damages occasioned by such taking of
possession except any damages which are the direct result of the Trustee's
gross negligence, bad faith or willful misconduct;
(b) all other requirements as to the time, place
and terms of sale or other requirements with respect to the enforcement of the
Trustee's rights and powers hereunder; and
(c) all rights of redemption, appraisement,
valuation, stay, marshalling of assets, extension or moratorium, existing at
law or in equity, by statute or otherwise, now or hereafter in force, in order
to prevent or delay the enforcement of this Pledge Agreement or the sale or
other disposition of the Pledged Collateral or any portion thereof, and each of
the Finance Company and the Operating Company, for itself and all who may claim
under it, insofar as it now or hereafter lawfully may, hereby waives all such
rights.
Any sale of, or exercise of any options to purchase, or any
other realization upon, any Pledged Collateral shall operate to divest all
right, title,
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<PAGE> 10
interest, claim and demand, at law or in equity, of the Finance Company therein
and thereto, and shall be a perpetual bar both at law and in equity against the
Finance Company and against any and all persons claiming or attempting to claim
the Pledged Collateral so sold, optioned or realized upon, or any part thereof,
through and under the Finance Company.
12. Remedies Cumulative; No Waiver. Each right, power
and remedy of the Trustee provided for herein or in any other Security Document
or the Indenture, or now or hereafter existing at law or in equity, by statute
or otherwise, shall be cumulative and concurrent and shall be in addition to
every other right, power or remedy of the Trustee, or the Holders in any other
Security Document or the Indenture, or now or hereafter existing at law or in
equity, by statute or otherwise. No failure on the part of the Trustee or the
Holders to exercise, and no delay in exercising, any right, power or remedy
hereunder or under any other Security Document or the Indenture, or now or
hereafter existing at law or in equity, by statute or otherwise, shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. No notice to or demand on the
Finance Company hereunder shall, of itself, entitle the Finance Company to any
other or further notice or demand in the same, similar or other circumstances.
13. Additional Collateral. Without notice or consent of
the Finance Company and without impairment of the security interest and rights
created by this Pledge Agreement, the Trustee may accept from any person or
persons additional collateral or other security for the Indenture Obligations.
Neither the creation of the security interest created hereunder nor the
acceptance of any such additional collateral or security shall prevent the
Trustee from resorting to such additional collateral or security or to the
Pledged Collateral, in any order without affecting the Trustee's rights
hereunder.
14. Further Assurances. The Finance Company agrees (i)
that it shall, at its own expense, file or record such notices, financing
statements, continuation statements, or other documents as may be necessary to
perfect the security interest of the Trustee hereunder, and (ii) that it shall,
at its own expense, do such further acts and things and execute and deliver to
the Trustee such additional conveyances, assignments, agreements and
instruments as the Trustee may at any time reasonably request in connection
with the administration and enforcement of this Pledge Agreement or relative to
the Pledged Collateral or any
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<PAGE> 11
part thereof or in order to assure and confirm unto the Trustee its rights,
powers and remedies hereunder.
15. Indemnification. The Trustee shall be entitled to
indemnification as set forth in Section 606 the Indenture.
16. Termination. At such time as the Indebtedness under
the Securities shall be fully paid or there has been defeasance of the
Securities in accordance with the provisions of the Indenture, including
Section 401 & 1301 thereof, this Pledge Agreement shall terminate and the
Trustee shall reassign and redeliver to the Finance Company all of the Pledged
Collateral which has not been sold, disposed of, retained or applied by the
Trustee in accordance with the terms hereof and the Indenture. Such
reassignment and redelivery shall be without warranty by or recourse to the
Trustee, and shall be at the expense of the Finance Company. At such time,
this Pledge Agreement shall no longer constitute a lien upon or grant any
security interest in any of the Pledged Collateral and the Trustee shall, at
the Finance Company's expense, deliver to the Finance Company written
acknowledgement thereof and cancellation of this Pledge Agreement in a form
reasonably requested by the Finance Company.
17. Notices. Any notices or other communications
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as
follows:
<TABLE>
<S> <C>
To the Finance Bally's Park Place
Company: Funding, Inc.
Park Place and the Boardwalk
Atlantic City, New Jersey 08401
Attn: Corporate Secretary
with a copy to: Benesch, Friedlander, Coplan &
Aronoff
1100 Citizens Building
Cleveland, Ohio 44114
Attn: Irv Berliner
To the Operating Bally's Park Place, Inc.
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C>
Company: Park Place and the Boardwalk
Atlantic City, New Jersey 08401
Attn: Corporate Secretary
with a copy to: Benesch, Friedlander, Coplan
& Aronoff
1100 Citizens Building
Cleveland, Ohio 44114
Attn: Irv Berliner
To the Trustee: First Bank National
Association
Attn: Corporate Trust Department
</TABLE>
0020169.01-New York Server 3a 12 Draft February 22, 1994 - 11:47 am
<PAGE> 13
Any party hereto may, by notice to each other party, designate such additional
or different addresses as shall be furnished in writing by such party. Any
notice or communication to any party shall be deemed to have been given or made
as of the date so delivered, if delivered personally or by courier; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and
five (5) calendar days after mailing, if sent by registered or certified mail
(except that a notice of change of address shall not be deemed to have been
given until actually received by the addressee). A copy of any notice given
under this Pledge Agreement to any party shall also be given to each other
party hereto. Any party hereto may give notice to the Holders at the addresses
set forth for them in the register kept by the Registrar under the Indenture or
may request that the Trustee notify them at such addresses.
18. Security Interest Absolute. All rights of the
Trustee and security interests hereunder, and all obligations of the Finance
Company and Operating Company hereunder, shall be absolute and unconditional
irrespective of:
(i) any lack of validity or
enforceability of any provision of the Indenture, the
Securities or any Security Document or any other
agreement or instrument relating thereto;
(ii) any change in the time, manner or
place of payment of, or in any other term of, or any
increase in the amount of, all or any of the Secured
Obligations, or any other amendment or waiver of any
term of, or any consent to any departure from any
requirement of, the Indenture, the Securities or any
Security Document;
(iii) any exchange, release or
non-perfection of any Lien on any other collateral,
or any release or amendment or waiver of any term of
any guaranty of, or consent to departure from any
requirement of any guaranty of, all or any of the
Secured Obligations; or
(iv) any other circumstance which might
otherwise constitute a defense available to, or a
discharge of, a borrower or a pledgor.
19. Binding Agreement; Assignment. This Pledge Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Pledge Agreement nor
any interest herein or in the Pledged Collateral, or any part thereof, may be
as-
0020169.01-New York Server 3a 13 Draft February 22, 1994 - 11:47 am
<PAGE> 14
signed by the Finance Company or the Operating Company; PROVIDED, HOWEVER, that
this Pledge Agreement shall be deemed to be automatically assigned by the
Operating Company to any person which is a successor to the Operating Company,
and by the Finance Company to any person which is a successor to the Finance
Company, each in accordance with Section 801 of the Indenture. This Pledge
Agreement shall be deemed to be automatically assigned by the Trustee to any
person who succeeds to the Trustee as Trustee in accordance with Section 609 of
the Indenture, and its assignee shall have all rights and powers of, and act
as, the Trustee hereunder.
20. Governing Law; Jurisdiction. THE PARTIES HERETO
EXPRESSLY ACKNOWLEDGE AND AGREE THAT, IN ACCORDANCE WITH THE PROVISIONS OF NEW
YORK GENERAL OBLIGATIONS LAW SECTION 5-1401 GOVERNING AGREEMENTS RELATING TO
ANY OBLIGATION ARISING OUT OF A TRANSACTION COVERING IN THE AGGREGATE NOT LESS
THAN $250,000, THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT
THE VALIDITY OR THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES
HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF
A JURISDICTION OTHER THAN NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS PLEDGE AGREEMENT MAY BE BROUGHT IN COURTS OF THE STATE OF NEW
YORK OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK,
AND, BY EXECUTION AND DELIVERY OF THIS PLEDGE AGREEMENT, EACH PARTY HERETO
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
21. Waiver of Jury Trial. THE FINANCE COMPANY AND THE
OPERATING COMPANY EACH HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
ANY RIGHT TO TRIAL BY JURY WHICH EITHER OF THEM MIGHT OTHERWISE HAVE UNDER THE
CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE IN ANY LEGAL
ACTION OR PROCEEDING BROUGHT WITH RESPECT TO, OR ARISING OUT OF, THIS PLEDGE
AGREEMENT.
22. Casino Control Act. This Pledge Agreement, and the
parties hereto, are subject to the provisions of the New Jersey Casino Control
Act and the rules and regulations of the New Jersey Casino Control Commission
thereunder including, but not limited to, any and all applicable licensing,
qualification, notice,
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<PAGE> 15
reporting or other requirements imposed by or pursuant to such Act, rules,
regulations or Commission.
23. Amendments. This Pledge Agreement may not be amended
or modified, except in conformity with Article Nine of the Indenture.
24. Severability. In the event that any provision
contained in this Pledge Agreement shall for any reason be held to be illegal
or invalid under the laws of any jurisdiction, such illegality or invalidity
shall in no way impair the effectiveness of any other provision hereof, or of
such provision under the laws of any other jurisdiction; PROVIDED, that in the
construction and enforcement of such provision under the laws of the
jurisdiction in which such holding of illegality or invalidity exists, and to
the extent only of such illegality or invalidity, this Pledge Agreement shall
be construed and enforced as though such illegal or invalid provision had not
been contained herein.
25. Headings. Section headings used herein are inserted
for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
26. Counterparts. This Pledge Agreement may be executed
in any number of counterparts, each of which when so executed and delivered
shall be an original, and all of which shall together constitute one and the
same instrument. A complete set of counterparts shall be lodged with the
Trustee.
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<PAGE> 16
IN WITNESS WHEREOF, the Finance Company, the Operating Company
and the Trustee have caused this Pledge Agreement to be executed and delivered
by their respective officers thereunto duly authorized as of the date first
above written.
BALLY'S PARK PLACE FUNDING, INC.
(a Delaware Corporation), as the Finance
Company
By: ______________________________
Its: ____________________________
BALLY'S PARK PLACE, INC.
(a New Jersey Corporation),
as the Operating Company
By:____________________________
Its: ____________________________
First Bank National Association as Trustee
By:______________________________
Its:______________________________
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<PAGE> 17
STATE OF )
: ss.:
COUNTY OF )
BE IT REMEMBERED, that on _________________________, before
me, the subscriber, personally appeared ______________, who, being by me duly
sworn on his/her oath, deposes and makes proof to my satisfaction, that he/she
resides at ______________________, that he/she is a _____________ Secretary
of [ ], a corporation, the corporation named in the within
instrument; that he/she _______________ is a (Vice) President of said
corporation; that the execution, as well as the making of this Instrument, has
been duly authorized by a proper resolution of the Board of Directors of said
corporation; that deponent well knows the corporate seal of said corporation;
and that the seal affixed to said Instrument is the proper corporate seal and
was thereto affixed said Instrument signed and delivered by said (Vice)
President as and for the voluntary act and deed of said corporation, in the
presence of deponent, who thereupon subscribed his/her name thereto as
attesting witness.
__________________________
Secretary
Sworn to and subscribed before me,
the date aforesaid.
_____________________________
Notary Public
0020169.01-New York Server 3a 17 Draft February 22, 1994 - 11:47 am
<PAGE> 18
STATE OF )
: ss.:
COUNTY OF )
BE IT REMEMBERED, that on _________________________, before
me, the subscriber, personally appeared ______________, who, being by me duly
sworn on his/her oath, deposes and makes proof to my satisfaction, that he/she
resides at ______________________, that he/she is a _____________ Secretary
of [ ], a corporation, the corporation named in the within
instrument; that he/she _______________ is a (Vice) President of said
corporation; that the execution, as well as the making of this Instrument, has
been duly authorized by a proper resolution of the Board of Directors of said
corporation; that deponent well knows the corporate seal of said corporation;
and that the seal affixed to said Instrument is the proper corporate seal and
was thereto affixed said Instrument signed and delivered by said (Vice)
President as and for the voluntary act and deed of said corporation, in the
presence of deponent, who thereupon subscribed his/her name thereto as
attesting witness.
__________________________
Secretary
Sworn to and subscribed before me,
the date aforesaid.
_____________________________
Notary Public
0020169.01-New York Server 3a 18 Draft February 22, 1994 - 11:47 am
<PAGE> 1
EXHIBIT 10(i).8
NOTE DUE __________, 2004
$425,000,000 __________, 1994
Bally's Park Place, Inc., a corporation duly organized and existing
under the laws of the State of New Jersey (the "Operating Company"), for value
received, hereby promises to pay to the order of Bally's Park Place Funding,
Inc., a corporation duly organized and existing under the laws of the State of
New Jersey (such corporation and any subsequent holder of this Note being
herein referred to as the "Holder"), having its principal office at the
Boardwalk and Park Place, Atlantic City, New Jersey 08404, the principal sum of
Four Hundred Twenty-Five Million Dollars ($425,000,000) on _________, 2004 (the
"Maturity Date") in accordance with the provisions hereof, with interest on
such principal sum from time to time outstanding, computed from the date
hereof, in semi-annual installments of interest on __________ and __________ of
each year, commencing initially on __________, 1994, at a rate of________ % per
annum on the unpaid balance hereof, until the principal hereof is paid in full.
Payments of principal and interest on this Note shall be made at the address of
the Holder set forth above, or at such other address as the Holder may
designate in writing. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. Principal and interest shall be paid in money of the
United States that at the time of payment is legal tender for public and
private debts. This note is entered into in connection with that certain
Indenture, dated as of __________, 1994 (the "Indenture"), among said Bally's
Park Place Funding, Inc., as Obligor, Bally's Park Place, Inc., a Delaware
corporation, as Guarantor, the Operating Company, Bally's Park Place Realty
Co. and First Bank National Association as trustee (the "Trustee").
1. (a) This Note shall be prepaid in connection with any optional
redemption, redemption pursuant to Section 1109 of the Indenture, repurchase
offer pursuant to Section 1015 of the Indenture, repurchase offer pursuant to
Section 1015 of the Indenture, or defeasance or discharge of the ______ % First
Mortgage Notes due 2004 (the "First Mortgage Notes"), of said Bally's Park
Place Funding, Inc. issued pursuant to the Indenture. Each such prepayment of
this Note shall be made at the time
<PAGE> 2
that payment is required to be made to the Trustee under the Indenture
in respect of any redemption of the First Mortgage Notes, repurchase offer
pursuant to Section 1015 of the Indenture, defeasance of the First Mortgage
Notes pursuant to Section 1301 of the Indenture or discharge of the First
Mortgage Notes pursuant to Section 401 of the Indenture. Any such prepayment
in the case of a defeasance or discharge shall be in the amount required
pursuant to Section 1301 or Section 402, respectively, of the Indenture and
such prepayment shall extinguish all further obligations under this Note. Any
such prepayment of this Note in the case of a redemption or repurcahse offer
shall be in an amount equal to the principal amount of the First Mortgage Notes
to be redeemed or repurchased, as the case may be; plus accrued interest on the
amount prepaid through the redemption date or Change of Control Payment Date,
as the case may be, of the First Mortgage Notes and a prepayment premium if and
to the extent that a premium is required to be paid in connection with the
redemption or repurchase, as the case may be, of the First Mortgage Notes; less
any discount if and to the extent the First Mortgage Notes are redeemed at a
discount pursuant to Section 1109 of the Indenture. Any amounts paid as such
repayment premium shall not reduce the principal amount of this Note. If First
Mortgage Notes are redeemed at a discount pursuant to Section 1109 of the
Indenture, the principal amount of the Note shall be reduced by the full
principal amount of First Mortgage Notes redeemed. The terms "redemption" and
"Change of Control Payment Date" as used herein shall have the meanings as used
in the First Mortgage Notes and the Indenture.
(b) Except as set forth in subparagraphs (a) above and (c) below, this
Note may not be prepaid in whole or in part.
(c) Notwithstanding the foregoing provisions of this pragraph 1, the
principal amount of this Note shall be reduced (and to such extent shall be
deemed satisfied) by the principal amount of any First Mortgage Notes purchased
or otherwise acquired by or on behalf of Bally's Park Place Funding, Inc. other
than pursuant to the redemption or repurchase provisions of the First Mortgage
Notes and surrendered to the Trustee for cancellation in accordance with the
provisions of the First
2
<PAGE> 3
Mortgage Notes. The same First Mortgage Note shall reduce the principal amount
of this Note only once.
2. The Operating Company shall pay interest on overdue principal at
the rate born by this Note; it shall also pay interest on overdue installments
of interest at the same rate, to the extent lawful.
3. If (i) the Operating Company defaults in the payment of interest
when the same becomes due and payable and the default continues for a period of
thirty (30) days; (ii) the Operating Company defaults in the payment of the
principal when the same becomes due and payable, at maturity, upon mandatory
prepayment, acceleration or otherwise; (iii) there shall occur any other Event
of Default under the Mortgage and Security Agreement with Assignment of Rents,
dated as of _______, 1994, given by or on behalf of Bally's Park Place Funding,
Inc., Bally's Park Place Realty Co. and the Operating Company as mortgagors,
to the Trustee, as mortgagee; or (iv) there shall
occur any other Event of Default under the Indenture, then on the happening of
any such event, the Holder may declare the entire unpaid principal balance
thereof and all accrued interest thereon and all other sums due under this Note
to become immediately due and payable.
4. The Operating Company hereby waives presentment and demand for
payment, notice of dishonor, protest and notice of protest of this Note and
agrees to pay all costs of collection when incurred, including reasonable
attorneys' fees, which costs may be added to the amount due under this Note and
be receivable therewith and to perform and comply with each of the terms,
convenants and provisions contained in this Note on the part of the Operating
Company to be observed or performed. Except as provided herein, no extension
of time for payment of this Note, or any installment hereof, and no alleration,
amendment or waiver of any provision of this Note shall release, discharge,
modify, change or affect the liability of the Operating Company under this
Note.
5. The terms of this Note shall be governed by and construed under the
internal laws of the State of New York.
3
<PAGE> 4
6. This Note may not be changed or terminated orally, but only by an
agreement in writing signed by the party against whom enforcement of such
change or termination is sought.
7. The Operating Company shall not claim any credit or deduction from
the interest or principal due hereunder by reason of payment of any tax
assessed upon the Collateral.
8. Whenever the provisions of this Note and the provisions of the
Indenture shall be inconsistent, the provisions of the Indenture shall govern.
9. Whenever used herein, the singular number shall include the plural,
the plural the singular, and the words "Holder" and "Operating Company" shall
include their respective successors and assigns.
IN WITNESS WHEREOF, the Operating Company has duly executed this Note
as of the day and year first above written.
Bally's Park Place, Inc., a
New Jersey corporation
By: _______________________
[Seal]
Attest:
___________________ 4
<PAGE> 1
Exhibit 10(i).9
EXHIBIT E
Intercreditor Agreement
INTERCREDITOR AGREEMENT (this "Intercreditor Agreement"),
dated as of _______, among [Lending Person(s)] (the "LENDER"(1)), Bally's Park
Place, Inc., a Delaware corporation ("PARK PLACE"), and Bally's Park Place
Realty Co., a New Jersey corporation ("REALTY"), and Bally's Park Place Funding
Inc., a Delaware corporation ("FUNDING," and together with Park Place and
Realty, collectively, the "MORTGAGOR"), and, ________ as Trustee ("Trustee") on
behalf of itself and the holders (the "MORTGAGE NOTE HOLDERS") of the __% First
Mortgage Notes due 2004 (the "SECURITIES") issued pursuant to a registration
statement (the "REGISTRATION STATEMENT") filed with the Securities and Exchange
Commission (the "SEC") and under the Indenture dated ________ __, 1994 (as
amended, modified or supplemented through the date hereof and as the same may
be amended, modified or supplemented from time to time, the "INDENTURE").
Capitalized terms used herein and not otherwise defined herein shall have the
meaning ascribed thereto the Indenture.
WITNESSETH
WHEREAS, Trustee has entered into the Indenture, pursuant to
which the Securities were issued; and
WHEREAS, the Securities are secured by a Mortgage and Security
Agreement with Assignment of Rents, dated as of ______ __, 1994 (as amended,
modified or supplemented through the date hereof and as the same may hereafter
be amended, modified or supplemented from time to time, the "MORTGAGE"), given
by Mortgagor, as grantor, to Trustee, as trustee, covering certain real
property, as well as all furniture, furnishings, fixtures, machinery,
equipment, supplies and certain other tangible personal property contained
thereon as more particularly described in the Mortgage (the "SECURED
PROPERTY"); and
____________________
(1) Conform definitions as appropriate.
0061866.06-New York Server 1a Draft February 23, 1994 - 5:43 pm
<PAGE> 2
WHEREAS, pursuant to the terms of the Indenture, Mortgagor is
permitted to enter into a credit arrangement (the "ADDITIONAL LOAN AGREEMENT"),
providing for the making of loans to Mortgagor (the "ADDITIONAL LOAN") for the
purpose and on the terms of Section 1010 of the Indenture (including, without
limitation, the execution hereof), which Additional Loan (i) will be evidenced
by Mortgagor's promissory note (the "ADDITIONAL NOTE") payable to Lender and
(ii) may be secured by a mortgage (as amended, modified or supplemented from
time to time, the "ADDITIONAL MORTGAGE") covering all or a portion of the
Secured Property (the "ADDITIONAL LOAN SECURED PROPERTY"); and
WHEREAS, in accordance with the provisions of the Indenture,
Trustee is required, and as a condition to the execu- tion and delivery by the
Mortgagor of the Additional Mortgage, Lender is required, to enter into this
Intercreditor Agreement in order to set forth the understanding between Trustee
and Lender, among other things, with respect to (i) their rights and priorities
regarding the Secured Property; and (ii) the order of priority that shall
govern the allocation and application of proceeds from the Secured Property for
the redemption or repayment of the Securities and the Additional Note.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, the parties hereto agree as
follows:
1. Lender: (a) acknowledges receipt of each of the Note
Documents (as hereinafter defined); and (b) agrees that Trustee shall have and
may exercise, with or without the knowledge or consent of Lender, except as
otherwise provided herein, such rights and perform such duties as are provided
for in the Indenture, the Securities, the Mortgage and any and all other
documents executed in connection therewith (collectively, the "NOTE DOCUMENTS")
including, but not limited to, rights and duties affecting or relating to the
Note Documents, the Secured Property and the indebtedness evidenced by the
Securities. Subject to the provisions of this Intercreditor Agreement, Lender
further agrees to promptly take such action and to execute such documents and
agreements as Trustee shall reasonably request to permit Trustee to exercise
its rights and perform its duties hereunder and under the Mortgage and any
assignment of
0061866.06-New York Server 1a 2 Draft February 23, 1994 - 5:43 pm
<PAGE> 3
leases and rents executed in connection therewith (the "ASSIGNMENT OF LEASES
AND RENTS," and together with the Mortgage, the "MORTGAGE DOCUMENTS").
2. Trustee: (a) acknowledges receipt of the Additional Loan
Documents (as hereinafter defined); and (b) agrees that Lender shall have and
may exercise, with or without the knowledge or consent of Trustee, except as
otherwise provided herein, such rights and perform such duties as are provided
for in the Additional Loan Agreement, the Additional Note, the Additional
Mortgage and any and all other documents executed in connection therewith
(collectively, the "ADDITIONAL LOAN DOCUMENTS"), including, but not limited to,
rights and duties affecting or relating to the Additional Loan Documents, the
Additional Loan Secured Property and the indebtedness evidenced by the
Additional Note. Subject to the provisions of this Intercreditor Agreement,
Trustee further agrees to promptly take such action and execute such documents
and agreements as Lender shall reasonably request to permit Lender to exercise
its right and perform its duties hereunder and under the Additional Mortgage
and any assignment of leases and rents executed in connection therewith (the
"Additional Mortgage Assignment of Leases and Rents," and together with the
Additional Mortgage, collectively, the "ADDITIONAL MORTGAGE DOCUMENTS").
3. The lien on the Additional Loan Secured Property created
by the Additional Mortgage (the "ADDITIONAL LIEN") shall be and at times remain
on equal priority on a pari passu basis to the lien created by the Mortgage
(the "INITIAL LIEN") but only with respect to the Additional Loan Secured
Property, notwithstanding the order of execution, creation, filing or recording
of the Note Documents and the Additional Loan Documents (collectively, the
"SECURITY DOCUMENTS"), the Additional Lien or the Initial Lien or any Uniform
Commercial Code financing statements or other instruments or notices related
thereto or the timing of any other method of perfection of such lien. The
Initial Lien and the Additional Lien, as between Trustee and Lender, shall be
of equal priority for purposes of securing payment and performance of the
obligations arising under, or in connection with, the Note Documents and the
Additional Loan Documents, notwithstanding the order of execution, creation,
filing or recording of the Security Documents, the Additional Lien,
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<PAGE> 4
the Initial Lien or any financing statements or other instruments or notices
related thereto or the timing of any other method of perfection of such lien,
which payment and performance shall be made in accordance with the provisions
hereunder.
4. Except as otherwise provided herein, Lender may amend or
waive any provision of the Additional Loan Documents and Lender may take such
other action as is authorized by the Additional Loan Documents, so long as such
action does not in any way directly adversely affect the status of the Initial
Lien or the rights of Trustee in connection with the Note Documents. Lender
shall provide Trustee with written notice of any such permitted written
amendment or waiver within twenty (20) business days after it becomes
effective.
5. (a) Subject to the provisions of Subsections (b) and
(c) of this Paragraph 5, until such time as no Securities remain outstanding
and all amounts due thereunder and under the Indenture have been paid in full,
Lender agrees not to enforce or exercise, by legal proceedings or otherwise,
without the written consent of Trustee, any right against Mortgagor under the
Additional Loan Documents or otherwise against the Secured Property.
(b) Until such time as no Securities remain outstanding
and all amounts due thereunder and under the Indenture have been paid in full,
Lender may notify Trustee if an event of default or termination shall have
occurred and been declared by Lender in writing under the Additional Loan
Documents (whether as a result of Mortgagor's failure to make the required
payments of principal and interest thereunder or otherwise as a result of any
other action or inaction on the part of Mortgagor or any other party); if
Trustee receives such notice, Trustee shall notify Lender promptly, but in any
event within thirty (30) days after its receipt of such notice and as promptly
as practicable in the event of an emergency, whether Trustee (i) intends to
declare or has declared an event of default under the Note Documents and (ii)
intends to exercise or has commenced exercising the rights to enforce the
Mortgage Documents and the Additional Mortgage Documents together. In the
event Trustee elects to declare said event of default and exercise the rights
to enforce the Mortgage Documents and the Additional Mortgage Documents as
provided in Para-
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<PAGE> 5
graphs 6 and 7 and so notifies Lender of such election within such thirty (30)
day period, Lender agrees not to enforce or exercise, by legal proceedings or
otherwise, without the written consent of Trustee, any right against Mortgagor
under the Additional Mortgage Documents. Notwithstanding anything in this
subsection (b) to the contrary, in the event the Trustee elects not to (i)
declare said event of default and (ii) exercise its rights hereunder to enforce
the Mortgage Documents and the Additional Mortgage Documents and so notifies
Lender, or if Trustee fails to notify Lender of its election within such thirty
(30) day period, Lender shall have the right to enforce any and all rights
against Mortgagor or any other party under the Additional Mortgage Documents,
provided that the enforcement of such rights and any action taken in connection
therewith does not adversely impair the validity, priority or enforceability of
the Initial Lien. Notwithstanding anything to the contrary herein, the Trustee
may enforce the Note Documents and enforce its rights and the rights of the
Mortgage Note Holders thereunder at any time pursuant to the terms thereof.
If, and for so long as, Trustee is enforcing the Mortgage Documents and the
Additional Mortgage Documents pursuant to this subsection (b), upon written
notice to Lender, Lender agrees to forebear any further enforcement or exercise
of any rights with respect to, by legal proceedings or otherwise, the
Additional Mortgage Documents.
(c) Notwithstanding anything to the contrary contained
in this Paragraph 5, Lender expressly retains the right to enforce or exercise,
by legal proceedings or otherwise, without the written consent of Trustee, any
right against Mortgagor under the Additional Loan Documents (other than the
Additional Mortgage Documents) against any and all property of the Mortgagor
(other than the Secured Property), provided that the enforcement of such rights
and any action taken in connection therewith does not adversely impair the
validity, priority or enforceability of the Mortgage Documents or the Initial
Lien.
6. (a) Subject to Subsections (b) and (c) of Paragraph 5,
Lender hereby irrevocably appoints and authorizes Trustee to act, upon the
occurrence and during the continuance of an event of default under the
Additional Loan Documents, as its exclusive agent in connec-
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<PAGE> 6
tion with the exercise and enforcement of all of Lender's rights under the
Additional Mortgage Documents with such powers as are expressly delegated to
Trustee by the terms of this Intercreditor Agreement, together with such other
powers as are reasonably incidental thereto; provided, however, that the
Trustee shall not be obligated to exercise such powers or have any liability in
connection with the exercise of such power or the failure to exercise the same,
except as provided in Paragraph 7 hereof. Notwithstanding anything contained
in this Agreement, the Trustee shall not take any action which, as between the
Lender and the Mortgagor, amends, modifies or waives the Mortgagor's express
obligations under the Additional Loan Documents to pay the principal amount of,
and interest on, the Additional Loan when due.
(b) In the event that, pursuant to Paragraph 6(a)
hereof, Trustee elects, or is required pursuant to Paragraph 7 hereof, to
exercise its rights hereunder to enforce the Additional Mortgage Documents,
Trustee shall have full and exclusive control and authority as agent for the
Lender, over all Secured Property as and to the extent provided in the
Additional Mortgage Documents.
7. Notwithstanding anything to the contrary contained herein,
if an event of default has occurred and been declared under the Note Documents
and the Additional Loan Documents, then, to the extent that Trustee enforces or
exercises its rights under the Mortgage Documents, the Trustee shall be
required to enforce and exercise its rights as agent under the Additional
Mortgage Documents, in a substantially similar manner, provided that the
Trustee shall have no Obligation under this Paragraph 7 unless the Additional
Mortgage is substantially similar to the Mortgage.
8. To further evidence the agreements referred to herein,
Lender agrees that, promptly and in any event within ten (10) business days
after request by Trustee, it will do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances and instruments as Trustee may
reasonably request for the better assuring and evidencing of the foregoing
agreements. Lender hereby appoints Trustee, its successors and assigns, as its
true and lawful attorney-in-fact, irrevocably, with power of substitution to do
any or all of the
0061866.06-New York Server 1a 6 Draft February 23, 1994 - 5:43 pm
<PAGE> 7
foregoing in the name, place and stead of Lender to the extent that Lender has
not done any of the foregoing within ten (10) business days after request by
Trustee. This power of attorney, being coupled with an interest, is
irrevocable as long as this Intercreditor Agreement shall remain in effect.
9. In exercising the control and authority as provided in
Paragraphs 6 and 7:
(a) Trustee agrees that, in the event Trustee
elects or is required to enforce the Additional Mortgage Documents as provided
herein, Trustee shall prosecute any foreclosure proceedings or any other action
instituted in connection therewith diligently and in good faith.
(b) In the event foreclosure proceedings are
instituted by Trustee in accordance with this Paragraph 9 with respect to both
the Mortgage Documents and the Additional Mortgage Documents, Trustee shall
have the full and complete right, power and authority, but not the obligation,
at all times in connection with such foreclosure or other enforcement sale to
do any one or more of the following: (i) to bid on the Secured Property at
such sale an amount equal to the sum of the aggregate principal amount of the
Securities then outstanding and the then outstanding principal balance of the
Additional Loan, plus interest, unpaid fees (including, without limitation,
those of the Trustee), costs and attorneys' fees and other sums secured by the
Mortgage and the Additional Mortgage; (ii) to acquire title in the foreclosure
proceedings for the benefit of the Mortgage Note Holders and/or Lender, but
subject to the priorities set forth herein; (iii) to manage, or to hire agents
to manage, the foreclosed Secured Property and sell or rent the same, upon such
terms and conditions as Trustee shall in good faith determine for the account
of the Mortgage Note Holders and/or Lender, but subject to the priorities set
forth herein; (iv) to sell the foreclosed Secured Property upon such terms and
conditions as Trustee shall in good faith determine; and (v) to receive as part
payment therefor a purchase money mortgage, any such purchase money mortgage to
be held by Trustee for the benefit of the Mortgage Note Holders and/or Lender,
but subject to the priorities set forth herein. Trustee shall have, and may,
but is not obligated to, exercise,
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<PAGE> 8
all of the rights, powers, options, privileges and remedies provided to Trustee
in this Paragraph 9 to the exclusion of Lender, and Lender shall not have, and
may not exercise, any of such rights, powers, options, privileges and remedies,
so long as Trustee shall be diligently and in good faith exercising the same.
Trustee shall have no obligation to exercise any right or remedy under the
Indenture or the Securities in order to remedy any default in the payment of
interest or principal owing under the Additional Loan Documents.
10. The rights granted to Trustee in Paragraphs 6, 7 and 9
shall be exclusive and irrevocable and shall continue until such time as no
Securities remain outstanding and all amounts due thereunder and under the
Indenture have been paid in full.
11. (a) Trustee and its officers, directors, employees and
agents shall not be liable or responsible, directly or indirectly, to Lender
for any action taken or omitted to be taken, whether hereunder, under the Note
Documents, the Additional Loan Documents or otherwise, nor shall it be liable
or responsible for any loss or expense suffered by any action or inaction,
provided such loss or expense was not caused by its gross negligence or wilful
misconduct. Lender and its officers, directors, employees and agents shall not
be liable or responsible, directly or indirectly, to Trustee for any action
taken or omitted to be taken, whether hereunder, under the Additional Loan
Documents or otherwise, nor shall it be liable or responsible for any loss or
expense suffered by any action or inaction, provided such loss or expense was
not caused by its gross negligence or wilful misconduct.
(b) Neither Lender nor Trustee shall, by any action or
inaction, be deemed to make any representation or warranty regarding the
accuracy, legality, validity, legal effect or sufficiency of (i) any act of
Mortgagor or any report, budget or financial information submitted to Trustee
or Lender in connection with or under any of the provisions of this Intercred-
itor Agreement, the Indenture, the Additional Loan Agreement or otherwise; or
(ii) the Security Documents and other agreements or documents creating or
relating to the Initial Lien, the indebtedness evidenced by the Securities, the
Additional Lien and the Additional Note, including any amendments thereto or
any instrument or
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<PAGE> 9
document delivered pursuant hereto or thereto, or the validity, legality,
sufficiency, perfection, enforceability or collectibility thereof.
(c) Except as otherwise provided herein with
respect to gross negligence or wilful misconduct, Trustee and its officers,
directors, employees and agents shall have no liability or responsibility in
connection with the collection or payment of any sums owed to Lender by
Mortgagor, except as set forth in this Intercreditor Agreement and the Security
Documents. Trustee shall apply any funds received by it as promptly as
practicable but in all events within three (3) business days of the date upon
which such funds are immediately available at Trustee's office, and any monies
received by Trustee need not be segregated from other funds except to the
extent required by law. Trustee shall be liable for interest on any funds
received by it and not applied as provided herein or as instructed by
Mortgagor, which interest shall be payable at the Federal funds rate published
in the "Money Rates Section" of The Wall Street Journal. Trustee shall have no
duty or obligation to perform any act hereunder or under the Additional Loan
Documents or any other instrument or document or to defend or prosecute any
action or proceeding on behalf of Lender unless it has been supplied with
adequate funds with which to take such action by Lender in an amount equal to
its Allocable Amount (as hereinafter defined) of such funds.
(d) Lender hereby indemnifies and agrees to hold
harmless to the extent of its proportionate share of the sum of the principal
amounts of the Securities and the Additional Note, Trustee and its respective
officers, directors, employees and agents from any claims, demands, actions,
liabilities, causes of action, losses, costs and expenses (including attorneys'
fees) arising out of any action or inaction by Trustee in connection with this
Intercreditor Agreement, the Note Documents and the Additional Loan Documents,
except that this indemnity shall not apply to claims, demands, actions,
liabilities, causes of action, losses, costs and expenses of Trustee or its
respective officers, directors, employees and agents caused by the gross
negligence or wilful misconduct of Trustee. Lender and its officers,
directors, employees and agents shall not be liable or responsible for acting
or failing to act upon any advice, notice, request, demand, consent or writing
believed by such
0061866.06-New York Server 1a 9 Draft February 23, 1994 - 5:43 pm
<PAGE> 10
parties to be genuine, or in acting in reliance thereon or upon the advice of
its counsel. Lender hereby agrees to advance to Trustee, upon demand, from
time to time, an amount (the Lender's "Allocable Amount") of all funds expended
or to be expended by the Trustee in connection with its enforcement of the
Additional Loan Documents, provided, however, in the event that such funds are
expended or are to be expended in the joint enforcement of the Note Documents
and the Additional Loan Documents such amount shall be multiplied by a
fraction, the numerator of which is equal to the then outstanding principal
amount due under the Additional Loan and the denominator of which is equal to
the aggregate principal amount of the sum of the Securities and the Additional
Loan which amounts shall be reduced proportionately by any amounts received by
Trustee from Mortgagor in connection therewith pursuant to the Security
Documents.
(e) Except as otherwise provided herein, no delay
on the part of Trustee or Lender in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by Trustee or
Lender of any right or remedy shall preclude other or further exercise thereof
or the exercise of any other right or remedy, nor shall any modification,
waiver or discharge of any of the provisions of this Intercreditor Agreement be
binding upon Trustee, Lender or Mortgagor, except as expressly set forth in
writing, duly signed and delivered on behalf of Trustee, Lender or Mortgagor,
as the case may be.
12. To the extent, and only to the extent, that the Trustee
is enforcing the Mortgage and the Additional Mortgage together, Trustee and
Lender hereby agree that any cash or other payment or distribution that becomes
available from the sources described in Paragraph 13 for the redemption or
repayment of the Securities and the Additional Note shall be applied in the
following order of priority:
(a) FIRST, to the payment in full of all
unreimbursed reasonable out-of-pocket costs, expenses and liabilities incurred
by Trustee in the performance of its duties hereunder and under the Mortgage
Documents and Additional Mortgage Documents with respect to the Secured
Property;
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<PAGE> 11
(b) SECOND, to the reimbursement of Trustee and
Lender of all amounts advanced to preserve, maintain and protect the Secured
Property and/or to enforce the Mortgage Documents and Additional Mortgage
Documents with respect to the Secured Property;
(c) THIRD, to the payment of the aggregate
principal amount of the Securities then outstanding, plus accrued interest,
premium, fees and other amounts outstanding under the Note Documents, and the
aggregate principal amount under the Additional Loan then outstanding, plus
accrued interest, premium, fees and other amounts outstanding under the
Additional Loan Documents, on a pro rata basis based on the total amounts;
(d) FOURTH, the remainder shall be paid to
Mortgagor or its successors or assigns or to whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may
direct.
13. The payment priorities set forth in Paragraph 12 shall
apply to all cash or other payment or distribution that becomes available from
(i) the enforcement by the Trustee of the Note Documents and the Additional
Loan Documents to the extent that they are enforced together, (ii) the sale or
other disposition of the Additional Loan Secured Property or proceeds thereof
and (iii) the distribution of title insurance proceeds, proceeds of other
insurance (including casualty insurance) and condemnation awards, made in
connection with the Additional Loan Secured Property. This Section 13 shall
apply only to the extent that such cash or other payment or distribution
becomes available for the payment of the Securities and the Security Documents
do not require that such cash or other payment or distribution be applied other
than as set forth in this Section 13.
14. Subject to the provisions of Paragraph 15, the priorities
established by Paragraph 12 shall be continuing priorities and shall apply both
before and after a default under the Indenture, the Additional Loan and the
Security Documents relative thereto, and before and after the institution by or
against Mortgagor of any proceeding or proceedings under any chapter or
provision of Title 11 of the United States Code or any proceeding or
proceedings for a reorganization, liquidation, compo-
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<PAGE> 12
sition, receivership or similar relief under any other federal or state law.
15. (a) Notwithstanding anything to the contrary
contained in this Intercreditor Agreement, if Lender shall voluntarily (except
for the pursuit of foreclosure proceedings permitted hereunder) take any
actions or cause any action to be taken, that results in the Additional Lien or
any Additional Loan Documents becoming ineffective or unenforceable as to the
Addi- tional Loan Secured Property (other than at the request of the Trustee),
Lender shall not share in the proceeds received from the sale or disposition of
the Secured Property until no Securities remain outstanding and all amounts due
thereunder and under the Indenture have been paid in full, and all such
proceeds shall be disbursed exclusively to Trustee for redemption or repayment
of the Securities other than amounts due in connection therewith.
(b) In the event that any of the Securities are
determined to be invalid or unenforceable, in whole or in part, or the Initial
Lien is determined to be unenforceable or subordinate to the Additional Lien as
a result of any action taken by Lender, Lender agrees that, solely as between
Trustee and Lender, any and all such Securities and the Initial Lien shall be
deemed valid and enforceable, and the obligations of the parties hereunder with
respect thereto shall not be affected by any such determination but shall
continue in full force and effect.
(c) In the event that any mechanic's or
materialman's lien shall be placed upon the Additional Loan Secured Property
which mechanic's or materialman's lien takes priority over the Additional Lien
or any part thereof, any and all proceeds from the sale or other disposition of
the Additional Loan Secured Property otherwise payable to Trustee for the
benefit of the Mortgage Note Holders or Lender shall first be applied toward
the payment and removal of such mechanic's or materialman's liens and shall be
held by Trustee during the pendency of any dispute contesting the validity or
enforceability of such mechanic's or materialman's liens.
16. Lender hereby waives: (a) as to the Trustee, notice
of the payments due under the Indenture
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<PAGE> 13
or any non-payment thereof; and (b) except as otherwise provided herein, all
diligence in collection or protection of or realization upon the payments due
under the Indenture or the Securities or any security therefor.
17. This Intercreditor Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of New York;
provided, however, that the provisions hereof which relate to realizing upon
the Secured Property shall be governed by the laws of the State of New Jersey.
18. Whenever possible, each provision of this
Intercreditor Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision herein shall be held to be
prohibited or invalid, such provision shall be ineffective only to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Intercreditor Agreement.
19. Trustee and Lender shall not challenge the legality,
validity, enforceability or perfection of any of the Note Documents and the
Additional Loan Documents.
20. This Intercreditor Agreement shall be binding upon
and inure to the benefit of the respective parties, their successors and
assigns. Any successor trustee under the Indenture shall be entitled to the
benefits of this Intercreditor Agreement to the same extent as if such
successor trustee were specifically named as Trustee in this Intercreditor
Agreement, and such successor trustee shall be deemed to have agreed to assume
and be bound by the terms of this Intercreditor Agreement with respect to the
Secured Property and any rights or interests relative thereto.
21. Notice, demand or request arising under this
Intercreditor Agreement or required by the provisions hereof shall be in
writing and may be served in person with receipt acknowledged or by mail by
depositing the same in any post office or letter box, postage prepaid, by
registered or certified mail, addressed to the parties at their addresses set
forth on the signature page hereto. Such addresses may be changed by notice to
the other parties given in the same manner. Personally delivered notices shall
be deemed received when delivered
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<PAGE> 14
if such delivery is acknowledged by receipt in writing. Mailed notices shall
be deemed received on the date of actual receipt or the date on which the same
shall be returned to the sender by the Post Office as unclaimed.
22. Nothing contained herein shall constitute a waiver,
change, modification or amendment in favor of Mortgagor of any term, provision,
covenant or condition in the Security Documents or any other contract,
agreement or document. No rights, powers or remedies are vested in any party
other than Trustee, Lender and their respective successors and assigns,
including, by way of illustration and not limitation, any rights as a third
party beneficiary of this Intercreditor Agreement.
23. This Intercreditor Agreement may be modified,
altered, varied or amended, and the authority of Trustee to act as such under
this Intercreditor Agreement may be terminated, only by written agreement
executed by the parties hereto.
24. This Intercreditor Agreement and any amendments,
waivers or supplements may be executed in any number of counterparts, each of
which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. This Intercreditor Agreement shall
become effective when the Additional Loan Agreement becomes effective pursuant
thereto.
25. Notwithstanding anything to the contrary contained
herein, in the event of a filing or institution by or against Mortgagor of any
proceeding or proceedings, under any chapter or provision of Title 11 of the
United States Code or of any proceeding or proceedings for a reorganization,
liquidation, composition, receivership or similar relief under any other
federal or state law, which proceeding or proceedings result in the allowance
by the bankruptcy trustee of the enforcement of the Additional Lien or the
Initial Lien, but not both, the party that shall be prohibited from enforcing
its lien shall have no right to share in any proceeds collected by the party
permitted to enforce its lien in accordance with the bankruptcy proceedings.
26. Trustee, Lender and Mortgagor hereby agree that, in
the event that Mortgagor enters into more than
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<PAGE> 15
one Additional Loan Agreement pursuant to Section 1010 of the Indenture,
Trustee, Lender (at any time when indebtedness in respect of the Additional
Loan remains outstanding or the Lender remains obligated to make advances in
respect of the Additional Loan), Mortgagor and any such additional lender
("ADDITIONAL LENDER") shall enter into an Amended and Restated Intercreditor
Agreement which shall (a) place such Additional Lender in the same position as
Lender with regard to (i) Trustee's, Lender's, and Additional Lender's rights
and priorities regarding the Secured Property and (ii) the order of priority
that shall govern the allocation and application of proceeds from the Secured
Property for the redemption or repayment of the Securities and the Additional
Loan, and any loan with any Additional Lender, and (b) otherwise be
substantially in the form of this Agreement with such changes thereto as
Mortgagor may reasonably request, that would not affect the Trustee's, Lender's
or Additional Lender's pari passu priority with respect to the Secured Property
or otherwise impair such rights hereunder of the Trustee and the Lender that
are necessary for the practical realization of the substantive benefits
afforded them hereunder.
27. Each provision of this Intercreditor Agreement is
subject to the provisions of the New Jersey Casino Control Act and regulations
promulgated thereunder, as from time to time amended, or any successor
provision of law.
28. Before the Trustee acts or refrains from acting
hereunder, it may require at its own expense an opinion of counsel, and the
Trustee shall not be liable and shall be fully protected for any action it
takes or omits to take in reliance on such opinion.
29. Lender and Trustee agree that for so long as the
Mortgage shall be in full force and effect and subsequent to the Trustee's
election to proceed under Paragraph 6 or is required to proceed under Paragraph
7, in the event of any conflict between the provisions of the Additional
Mortgage Documents and the provisions of the Mortgage Documents that are
irreconcilable by their terms, unless waived in writing by Trustee, the
provisions of the Mortgage Documents shall govern and Mortgagor shall be
required to only perform the duties and obligations of the Mortgage Documents.
Mortgagor's full
0061866.06-New York Server 1a 15 Draft February 23, 1994 - 5:43 pm
<PAGE> 16
and satisfactory performance of obligations under the Note Documents shall
relieve it of its contradictory obligations under the Additional Mortgage
Documents and shall prevent Lender from asserting an event of default against
Mortgagor arising from such nonperformance under the Additional Mortgage
Documents.
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<PAGE> 17
IN WITNESS WHEREOF, the parties have caused this Intercreditor
Agreement to be executed as of the date first set forth above.
[TRUSTEE]
[Address]
By:_________________________
Name:
Title:
BALLY'S PARK PLACE, INC.
[Address]
By:________________________
Name:
Title:
BALLY'S PARK PLACE REALTY CO.
[Address]
By:________________________
Name:
Title:
BALLY'S PARK PLACE FUNDING INC.
[Address]
By:________________________
Name:
Title:
[LENDING PERSON(S)]
By:________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 21
BALLY'S PARK PLACE, INC. (DELAWARE)
LIST OF SUBSIDIARIES
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Bally's Park Place, Inc.
Delaware
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Bally's Park Place Funding, Inc.
Delaware
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Bally's Park Place, Inc.
New Jersey
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Bally's Park Place Realty Co.
New Jersey
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BW Realty Corp.
New Jersey
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Bally Warwick, Inc.
New Jersey
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<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports on (i) the consolidated financial statements of Bally's
Park Place, Inc. dated February 19, 1993, except for the "Summary of significant
accounting policies" and "Subsequent events" notes as to which the date is June
16, 1993 and (ii) the financial statement schedules for the years ended December
31, 1992, 1991 and 1990 dated February 19, 1993, all included in the Amendment
No. 2 to Registration Statement on Form S-1 (No. 33-51765) and related
Prospectus of Bally's Park Place Funding, Inc. and Bally's Park Place, Inc. for
the registration of $425 million principal amount First Mortgage Notes due 2004.
ERNST & YOUNG
Philadelphia, Pennsylvania
February 25, 1994
