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As filed with the Securities and Exchange Commission on February 27, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
(AMENDMENT NO. 1)
BALLY'S GRAND, INC.
(Name of issuer)
BALLY'S GRAND, INC.
HILTON HOTELS CORPORATION
(Name of person(s) filing statement)
Common Stock, Par Value $0.01 per share CUSIP No. 05873J101
Warrants to Purchase Common Stock CUSIP No. 05873J119
(Title of Class of Securities) (CUSIP Number of Class of Securities)
--------------------
Bally's Grand, Inc. Hilton Hotels Corporation
David Arrajj Thomas E. Gallagher
Vice President and General Counsel Executive Vice President and
Bally's Grand, Inc. General Counsel
3645 Las Vegas Boulevard South Hilton Hotels Corporation
Las Vegas, Nevada 89109 9336 Civic Center Drive
(702) 739-4111 Beverly Hills, California 90210
(310) 278-4321
(Name, address and telephone number of person authorized to receive notices and
communications on behalf of person(s) filing statement)
COPIES TO:
Cynthia A. Rotell, Esq.
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
(213) 485-1234
This statement is filed in connection with (check the appropriate box):
a. [ ] The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under
the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of
1933.
c. [ ] A tender offer.
d. [X] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies. [ ]
CALCULATION OF FILING FEE
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Transaction Valuation (1) Amount of Filing Fee (2)
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$43,541,139 $8,710
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[ ] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing by
registration statement number, or the Form or Schedule and the date of
its filing.
Amount previously paid: _______________ Filing party:_____________________
Form or registration no.:______________ Date filed:_______________________
Instruction. Eight copies of this statement, including all exhibits,
should be filed with the Commission.
(1) The amount shown was estimated solely for purposes of calculating the
filing fee. The filing fee was determined based upon (a) 617,230
outstanding shares of Common Stock, par value $0.01 per share ("BGI
Common Stock"), of Bally's Grand, Inc. ("BGI") (excluding shares owned
by Hilton Hotels Corporation ("Hilton") and its affiliates) for a
consideration of $51.37 per share; and (b) 286,053.5 outstanding
Warrants to purchase shares of Common Stock ("BGI Warrants") (excluding
BGI Warrants owned by Hilton and its affiliates) for a consideration of
$41.37 per BGI Warrant.
(2) The amount of the filing fee, calculated in accordance with Rule 0-11 of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the Transaction Value. This fee was previously paid with the
initial filing of this Schedule 13E-3 on February 10, 1998 (the "Initial
Filing").
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CROSS REFERENCE SHEET
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The name of the issuer is Bally's Grand, Inc. ("BGI") and its
principal executive office is located at 3645 Las Vegas
Boulevard South, Las Vegas, Nevada 89109.
(b)(c)(d) The classes of securities to which this Statement relates are
BGI's Common Stock, par value $0.01 per share ("Common Stock")
and BGI's Warrants to purchase shares of Common Stock. The
information set forth in "Market Price Information" and "Certain
Information Concerning BGI" in the Transaction Statement is
incorporated by reference herein.
(e) Not applicable.
(f) The information set forth in "Market Price Information" and
"Special Factors--Background of the Merger" in the Transaction
Statement is incorporated herein by reference. Except as
disclosed in the Transaction Statement, neither Hilton nor BGI
has made any purchases of Common Stock or Warrants since January
1, 1996.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d)
and (g) This Schedule 13e-3 is being filed by Bally's Grand, Inc.
("BGI"), the issuer of the Common Stock and the Warrants, and by
Hilton Hotels Corporation ("Hilton"). BGI is a subsidiary of
Hilton. The information set forth in "Certain Information
Concerning BGI" and "Certain Information Concerning Hilton and
Merger Sub" in the Transaction Statement is incorporated herein
by reference.
(e)and(f) During the last five years, none of BGI or Hilton or, to the
best of their knowledge, any of their respective executive
officers and directors, (i) have been convicted in a criminal
proceeding (excluding traffic violations or similar
misdemeanors), or (ii) was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment,
decree or final order enjoining further violations of, or
prohibiting activities subject to, Federal or State securities
laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)-(b) The information set forth in "Special Factors--Background of the
Merger" and "--Plans for BGI Following the Merger" and "Special
Factors--Interests of Certain Persons in Securities of BGI and
the Merger" in the Transaction Statement is incorporated herein
by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in "Special Factors--Background of the
Merger" and "The Merger--The Merger Agreement" in the
Transaction Statement is incorporated herein by reference.
(b) Not applicable.
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ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(b) Not applicable.
(c)-(e) The information set forth in "Special Factors--Plans for BGI
Following the Merger" in the Transaction Statement is
incorporated herein by reference.
(f) The information set forth in "Special Factors--Certain Effects
of the Merger" in the Transaction Statement is incorporated
herein by reference.
(g) Not applicable.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) The information set forth in "The Merger--Source and Amount of
Funds" in the Transaction Statement is incorporated herein by
reference.
(b) The information set forth in "The Merger--Fees and Expenses" in the
Transaction Statement is incorporated herein by reference.
(c) Not applicable.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a)(c)
and (d) The information set forth in "Special Factors--Background of the
Merger;" "Special Factors--Purpose of and Reasons for the
Merger;" "Special Factors--Background of the Merger--Certain
Effects of the Merger," "The Merger--The Merger Agreement" and
"The Merger--Material Federal Income Tax Consequences" in the
Transaction Statement is incorporated herein by reference.
(b) Not applicable.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)(b)(e) The Information set forth on the cover page of the Transaction
Statement, and "Special Factors--Determinations by the Board;
Fairness of the Merger" in the Transaction Statement is
incorporated herein by reference.
(c) The information set forth on the cover page of the Transaction
Statement and "Introduction" in the Transaction Statement is
incorporated by reference herein.
(d) The information set forth in "Special Factors--Determinations by
the Board; Fairness of the Merger" is incorporated herein by
reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)-(c) The information set forth in "Special Factors--Determinations by
the Board; Fairness of the Merger" and "Special
Factors--Background of the Merger" in the Transaction Statement
is incorporated herein by reference.
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ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in "Special Factors--Interests of
Certain Persons in Securities of BGI and the Merger" in the
Transaction Statement is incorporated herein by reference.
(b) Not applicable.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE
ISSUER'S SECURITIES.
The information set forth in "Special Factors--Background of the
Merger" and "The Merger--The Merger Agreement" in the Transaction
Statement is incorporated herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATIONS OF CERTAIN PERSONS WITH
REGARD TO THE TRANSACTION.
(a) Not applicable.
(b) The information set forth on the cover page and in "Special
Factors--Determinations by the Board; Fairness of the Merger" in
the Transaction Statement is incorporated herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in "Transaction Statement"; "Special
Factors--Background of the Merger"; and "The Merger--Appraisal
Rights of Common Stockholders" is incorporated herein by
reference.
(b)-(c) Not applicable.
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in "Certain Information Concerning
BGI--Summary Financial Data of BGI" in the Transaction Statement
and the Audited Financial Statements included in BGI's Annual
Report on Form 10-K for its year ended December 31, 1996, a copy
of which is filed as Exhibit (d)(4) hereto, and included in
BGI's Form 10-Q for the nine month period ended September 30,
1997, a copy of which is filed as Exhibit (d)(5) hereto, are
incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a)-(b) Not applicable.
ITEM 16. ADDITIONAL INFORMATION.
All of the information contained in the Transaction Statement is
incorporated by reference herein in its entirety.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(a) Not applicable.
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(b) Opinions of Ladenburg Thalmann & Co. Inc., incorporated by
reference from Annex IV and Annex V to the Transaction Statement
filed as Exhibit (d)(1) hereto.
(c)(1) The Agreement and Plan of Merger among BGI, Hilton and CHLV
dated as of February 6, 1998, incorporated by reference from
Annex I to the Transaction Statement filed as Exhibit (d)(1)
hereto.
(c)(2) Memorandum of Understanding dated June 12, 1997. Previously
filed with the Initial Filing.
(c)(3) Stipulation of Settlement dated August 7, 1997. Previously
filed with the Initial Filing.
(c)(4) Final Order and Judgment dated October 9, 1997. Previously
filed with the Initial Filing.
(d)(1) Transaction Statement.
(d)(2) Form of Letter of Transmittal, incorporated by reference from
Annex II to the Transaction Statement filed as Exhibit (d)(1)
hereto.
(d)(3) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9 to be included with the Letter of
Transmittal.
(d)(4) Annual Report on Form 10-K of BGI for the fiscal year ended
December 31, 1996. Previously filed with the Initial Filing.
(d)(5) Quarterly Report on Form 10-Q of BGI for the nine month period
ended September 30, 1997. Previously filed with the Initial Filing.
(d)(6) Proxy Statement for Annual Meeting of Stockholders Held
February 7, 1997. Previously filed with the Initial Filing.
(e)(1) Text of Section 262 of the Delaware General Corporation Law,
incorporated by reference from Annex III to the Transaction
Statement filed as Exhibit (d)(1) hereto.
(e)(2) The information set forth in "The Merger--Appraisal Rights of
Dissenting Stockholders" in the Transaction Statement is
incorporated herein by reference.
(f) Not applicable.
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SIGNATURES
After due inquiry and to the best of the undersigned's knowledge and
belief, the undersigned certifies that the information set forth in this
Statement is true, complete and correct.
Dated: February 26, 1998 BALLY'S GRAND, INC.
By: /s/ DAVID ARRAJJ
----------------------------------
Name: David Arrajj
Title: Vice President and General
Counsel
HILTON HOTELS CORPORATION
By: /s/ THOMAS E. GALLAGHER
----------------------------------
Name: Thomas E. Gallagher
Title: Executive Vice President
and General Counsel
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EXHIBIT INDEX
17(a) Not applicable.
17(b) Opinions of Ladenburg Thalmann & Co. Inc., incorporated by
reference from Annex IV and Annex V to the Transaction Statement
filed as Exhibit (d)(1) hereto.
17(c)(1) The Agreement and Plan of Merger among BGI, Hilton and CHLV dated as
of February 6, 1998, incorporated by reference from Annex I to the
Transaction Statement filed as Exhibit (d)(1) hereto.
17(c)(2) Memorandum of Understanding dated June 12, 1997. Previously
filed with the Initial Filing.
17(c)(3) Stipulation of Settlement dated August 7, 1997. Previously
filed with the Initial Filing.
17(c)(4) Final Order and Judgment dated October 9, 1997. Previously
filed with the Initial Filing.
17(d)(1) Transaction Statement.
17(d)(2) Form of Letter of Transmittal, incorporated by reference from Annex
II to the Transaction Statement filed as Exhibit (d)(1) hereto.
17(d)(3) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 to be included with the Letter of Transmittal.
17(d)(4) Annual Report on Form 10-K of BGI for the fiscal year ended December
31, 1996. Previously filed with the Initial Filing.
17(d)(5) Quarterly Report on Form 10-Q of BGI for the nine month period ended
September 30, 1997. Previously filed with the Initial Filing.
17(d)(6) Proxy Statement for Annual Meeting of Stockholders Held February 7,
1997. Previously filed with the Initial Filing.
17(e)(1) Text of Section 262 of the Delaware General Corporation Law,
incorporated by reference from Annex III to the Transaction
Statement filed as Exhibit (d)(1) hereto.
17(e)(2) The information set forth in "The Merger--Appraisal Rights of
Dissenting Stockholders" in the Transaction Statement is
incorporated herein by reference.
17(f) Not applicable.
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Exhibit(d)(1)
TRANSACTION STATEMENT
BALLY'S GRAND, INC.
This Rule 13E-3 Transaction Statement (the "Transaction Statement") is
being sent on March __, 1998 to the holders of record of Common Stock, par
value $0.01 per share ("BGI Common Stock"), of Bally's Grand, Inc. ("BGI")
and to the holders of record of Warrants to purchase BGI Common Stock ("BGI
Warrants") as of March ___, 1998, in connection with the proposed
short-form statutory merger (the "Merger") of Bally's CHLV Inc. ("Merger
Sub"), an indirect, wholly owned subsidiary of Hilton Hotels Corporation
("Hilton"), with and into BGI. The Merger is to be consummated pursuant to
the terms of the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of February 6, 1998, by and among BGI, Merger Sub and Hilton and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"). The Merger Agreement was entered into pursuant to the terms of a
court approved Settlement Agreement (as defined). See "Special
Factors--Background of the Merger--Settlement Agreement." Merger Sub is the
holder of over 90% of the issued and outstanding shares of BGI Common Stock,
and the Merger will be accomplished pursuant to the provisions of Section 253
of the DGCL. As a result, no action by the holders of BGI Common Stock or
BGI Warrants is required to approve or consummate the Merger and no such
approval is sought. No meeting of the stockholders of BGI will be held. The
Merger will become effective on March __, 1998.
Pursuant to the terms of the court approved Settlement Agreement and the
Merger Agreement, (i) each share of BGI Common Stock outstanding immediately
prior to the time at which the Merger is consummated (the "Effective Time"),
other than those held by BGI, Merger Sub, Hilton or a subsidiary of Hilton,
will, without any action on the part of any holder thereof, be automatically
converted into the right solely to receive cash in the amount of $51.37
(representing $52.75 per share less a pro-rata percentage of attorneys' fees
and expenses in the amount of $1.38 per share) without interest thereon (the
"Stock Price"), subject to the rights of holders thereof to seek an appraisal
of their shares and (ii) each BGI Warrant outstanding immediately prior to
the Effective Time, other than those held by BGI, Merger Sub, Hilton or a
subsidiary of Hilton, will, without any action on the part of the holder
thereof, be automatically converted into the right solely to receive cash in
the amount of $41.37 (representing $42.75 per BGI Warrant less a pro-rata
percentage of attorneys' fees and expenses in the amount of $1.38 per BGI
Warrant) (the "Warrant Price" and together with the Stock Price, the "Merger
Price"), without interest thereon. See "Special Factors--Background of the
Merger--Settlement Agreement" herein. In order to receive payment of the
Stock Price and/or Warrant Price after the Effective Time, a properly
completed Letter of Transmittal in the form enclosed herewith, together with
certificates representing shares (or fractions thereof) of BGI Common Stock
or BGI Warrants, must be delivered to The Bank of New York, as paying agent,
by mail, hand delivery, or overnight courier in the manner set forth in the
Letter of Transmittal.
BGI'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND
DETERMINED THAT THE MERGER IS FAIR TO HOLDERS OF BGI COMMON STOCK AND BGI
WARRANTS. SEE "SPECIAL FACTORS--DETERMINATIONS BY THE BOARD; FAIRNESS OF THE
MERGER."
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
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This Transaction Statement is accompanied by a notice of the
availability of appraisal rights pursuant to Section 262(d)(2) of the DGCL.
Under Section 262 of the DGCL, holders of BGI Common Stock who do not wish to
accept the Stock Price have the right, if properly perfected, to seek an
appraisal of the "fair value" of their shares (which could be less than or
greater than the Stock Price that would otherwise have been paid to such
holder pursuant to the Merger Agreement). Holders of BGI Warrants are not
entitled to appraisal rights under the DGCL. For a discussion of the rights
of holders of BGI Common Stock to seek such an appraisal, see "The
Merger--Appraisal Rights of Common Stockholders."
This Transaction Statement is also accompanied by BGI's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996, its Quarterly Report
on Form 10-Q for the fiscal quarter ended September 30, 1997 and its Proxy
Statement for the Annual Meeting of Shareholders held February 3, 1997.
These reports contain additional information regarding BGI and should be read
together with the information set forth herein. For a discussion of the
availability of additional reports and other information regarding BGI and
Hilton, see "Available Information."
NO PROXIES OR CONSENTS ARE BEING SOLICITED IN CONNECTION WITH THE MERGER
AND YOU ARE REQUESTED NOT TO SUBMIT A PROXY OR CONSENT.
The date of this Transaction Statement is March __, 1998.
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TABLE OF CONTENTS
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PAGE
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INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SPECIAL FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . 1
Purpose of and Reasons for the Merger. . . . . . . . . . . . . . . . . . 3
Certain Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . 3
Plans for BGI Following the Merger . . . . . . . . . . . . . . . . . . . 3
Determinations by the Board; Fairness of the Merger. . . . . . . . . . . 4
Interests of Certain Persons in Securities of BGI and the Merger . . . . 11
THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Material Federal Income Tax Consequences . . . . . . . . . . . . . . . . 14
Accounting Treatment of the Merger . . . . . . . . . . . . . . . . . . . 15
Surrender of Certificates; Payment to Holders. . . . . . . . . . . . . . 15
Appraisal Rights of Common Stockholders. . . . . . . . . . . . . . . . . 17
Source and Amount of Funds . . . . . . . . . . . . . . . . . . . . . . . 19
Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
MARKET PRICE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 21
CERTAIN INFORMATION CONCERNING BGI . . . . . . . . . . . . . . . . . . . . 21
BGI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Summary Financial Data of BGI. . . . . . . . . . . . . . . . . . . . . . 22
Directors of BGI . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Executive Officers Of BGI. . . . . . . . . . . . . . . . . . . . . . . . 23
CERTAIN INFORMATION CONCERNING HILTON AND MERGER SUB . . . . . . . . . . . 24
Hilton and Merger Sub. . . . . . . . . . . . . . . . . . . . . . . . . . 24
Directors of Hilton. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Executive Officers of Hilton . . . . . . . . . . . . . . . . . . . . . . 26
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE. . . . . . . . . . . . . 27
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ANNEX I - Merger Agreement
ANNEX II - Letter of Transmittal
ANNEX III - Section 262 of the Delaware General Corporation Law
ANNEX IV - Opinion of Ladenburg Thalmann & Co. Inc. dated June 12, 1997
ANNEX V - Opinion of Ladenburg Thalmann & Co. Inc. dated February 6, 1998
i
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INTRODUCTION
This Rule 13E-3 Transaction Statement (the "Transaction Statement") is
being sent on March __, 1998 to the holders of record of Common Stock, par
value $0.01 per share ("BGI Common Stock"), of Bally's Grand, Inc. ("BGI")
and to the holders of record of Warrants to purchase BGI Common Stock ("BGI
Warrants") as of March ___, 1998, in connection with the proposed
short-form statutory merger (the "Merger") of Bally's CHLV Inc. ("Merger
Sub"), an indirect, wholly owned subsidiary of Hilton Hotels Corporation
("Hilton"), with and into BGI. The Merger is to be consummated pursuant to
the terms of the Agreement and Plan of Merger (the "Merger Agreement"), dated
as of February 6, 1998, by and among BGI, Merger Sub and Hilton and in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"). The Merger Agreement was entered into pursuant to the terms of a
court approved Settlement Agreement (as defined). See "Special
Factors--Background of the Merger--Settlement Agreement." Merger Sub is the
holder of over 90% of the issued and outstanding shares of BGI Common Stock,
and the Merger will be accomplished pursuant to the terms of Section 253 of
the DGCL. As a result, no action by the holders of BGI Common Stock or BGI
Warrants is required to approve or consummate the Merger and no such approval
is sought. No meeting of the stockholders of BGI will be held. The Merger
will become effective on March __, 1998.
On December 18, 1996, Hilton acquired Bally Entertainment Corporation
("Bally") pursuant to a merger of Bally with and into Hilton (the
"Hilton/Bally Merger"). As a result, on such date BGI, formerly an indirect
subsidiary of Bally, became an indirect subsidiary of Hilton. See "Special
Factors--Background of the Merger--Hilton/Bally Merger."
SPECIAL FACTORS
BACKGROUND OF THE MERGER
HILTON/BALLY MERGER. In May 1996, representatives of Hilton and Bally
engaged in discussions concerning a possible business transaction. In June
1996, Hilton and Bally entered into a definitive merger agreement, which was
approved by the shareholders of Hilton and Bally at special shareholder
meetings in September 1996. On December 18, 1996, pursuant to the terms of
the merger, Bally merged with and into Hilton with Hilton surviving the
merger, and each share of common stock of Bally was converted into the right
to receive one share of Hilton common stock and each share of Preferred
Redeemable Increased Dividend Equity Securities, 8% PRIDES, Convertible
Preferred Stock ("PRIDES") of Bally was converted into one share of Hilton
PRIDES. At the time of the Hilton/Bally Merger, Bally owned through its
wholly-owned subsidiaries approximately 84.0% of the outstanding shares of
BGI Common Stock and as a result of the Hilton/Bally Merger Hilton succeeded
to such ownership.
SETTLEMENT AGREEMENT. On October 9, 1996, prior to the Hilton/Bally
Merger, two derivative actions purportedly brought on behalf of BGI by BGI
shareholders against its directors and Bally, one commenced in October 1995
and the other in September 1996, were consolidated under the caption IN RE:
BALLY'S GRAND DERIVATIVE LITIGATION in the Court of Chancery of the State of
Delaware, in and for New Castle County. The consolidated complaint alleged
breaches of fiduciary duty and waste of corporate assets in connection with
certain actions including the sale by BGI to Bally of the capital stock of
Paris Casino Corp. (the "Paris Transaction"), alleged improper delegation of
duties by BGI's Board of Directors by virtue of a management agreement
between BGI and Bally (the "Management Agreement"), the designation pursuant
to the Management Agreement of recipients awarded BGI Common Stock pursuant
to the Incentive Stock Plan of BGI, purchases of BGI Common Stock by BGI and
Bally, and a consulting agreement entered into by BGI with Arveron
Investments L.P. in connection with BGI's investments in publicly-traded
securities and certain repurchases of BGI Common Stock. The plaintiff
shareholders sought, among other things: (i) rescission of the Paris
Transaction, (ii) a declaration that the Management Agreement was unlawful,
(iii) an accounting of damages to BGI and profits to defendants as a result
of the transactions complained of, (iv) an accounting for purchases of BGI
Common Stock by BGI and Bally, and (v) costs and expenses including
reasonable attorneys' fees. A third derivative action purportedly brought on
behalf of BGI against its directors, Bally, the manager under the Management
Agreement and Hilton was commenced in November 1996 under the caption TOWER
INVESTMENT GROUP, INC., ET AL. V. BALLY'S GRAND, INC., ET AL. in the Court of
Chancery of the State of Delaware, in and for New Castle County. The
complaint alleged breach of fiduciary duty and waste of corporate assets by
BGI's directors and Bally in connection with the Paris Transaction, aiding
and abetting by Hilton of the breaches of fiduciary duty and waste by
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BGI's directors and Bally, fraud, willful misconduct or gross negligence by
Bally and the manager under the Management Agreement in connection with the
Management Agreement, breach of fiduciary duty by BGI's directors in
connection with purchases of BGI's Common Stock by Bally while in possession
of material inside information concerning BGI's earnings, breach of fiduciary
duty by Bally in connection with alleged threats to abuse its controlling
interest in BGI, and violation by BGI's directors and Bally of Section 203 of
the Delaware General Corporation Law in connection with the Paris
Transaction. The plaintiffs sought among other things: (i) rescission of
the Paris Transaction, (ii) termination of the Management Agreement, (iii)
appointment of a custodian to manage BGI's affairs, (iv) compensatory
damages, (v) an order enjoining Bally and Hilton from conveying the Paris
Casino-Resort, (vi) disgorgement by Bally and Hilton of the profits of the
Paris Casino-Resort, (vii) disgorgement by Arthur M. Goldberg the Chief
Executive of Bally of all payments, warrants and interests received in
connection with the Hilton/Bally Merger, and (viii) disgorgement by Bally of
profits earned from any transactions in shares of BGI Common Stock based upon
material inside information. This action was subsequently consolidated with
the original consolidated action in January 1997 under the caption IN RE:
BALLY'S GRAND, INC. SHAREHOLDERS LITIGATION (collectively, the "Litigation").
On June 12, 1997, BGI reached an agreement in principle to settle the IN
RE: BALLY'S GRAND INC. SHAREHOLDERS LITIGATION pursuant to a Memorandum of
Understanding dated June 12, 1997 (the "Memorandum") containing the terms to
be provided in the Settlement Agreement (as defined below). Pursuant to the
Memorandum, on June 24, 1997 BGI repurchased 966,747 shares of BGI Common
Stock and 102,698 BGI Warrants from certain plaintiffs (the "Institutional
Plaintiffs") at a price of $52.75 per share in cash for the BGI Common Stock
and $52.75 less the exercise price per BGI Warrant in cash for the BGI
Warrants. The Institutional Plaintiffs remained responsible for the payment
of their own attorneys' fees and expenses. As a result of such repurchases,
Hilton became the indirect owner of approximately 95% of the outstanding
shares of BGI Common Stock.
On August 7, 1997, the parties entered into a Stipulation of Settlement
(the "Settlement Agreement"). Pursuant to the terms of the Settlement
Agreement, a subsidiary of Hilton will merge into BGI and each remaining
outstanding share of BGI Common Stock not currently owned by Hilton or its
affiliates will be converted into the right to receive $52.75 (less the pro
rata percentage of the court-awarded attorneys' fees and expenses) per share
in cash, and the remaining outstanding BGI Warrants not currently owned by
Hilton or its affiliates will be converted into the right to receive the
difference between $52.75 (less the pro rata percentage of the court-awarded
attorneys' fees and expenses) and the exercise price per BGI Warrant in cash.
See Cover pages of this Transaction Statement. The Settlement Agreement
states that in connection with the Merger, holders of outstanding shares of
BGI Common Stock will have appraisal rights under the DGCL and provides that
in any such appraisal, the dissenting shareholder may assert, as an element
of value, such holder's pro rata percentage of the derivative claims asserted
in IN RE: BALLY'S GRAND INC. SHAREHOLDER LITIGATION. The Court ruled that
the attorneys' fees and expenses of the remaining plaintiffs in the case,
amounting to $1.25 million, would be allocated to all shares of BGI Common
Stock (including shares issuable upon conversion of BGI Warrants) on a pro
rata percentage basis, whether or not shareholders seek appraisal. The
Settlement Agreement provides that with respect to shares for which appraisal
is sought, the pro rata percentage amount allocated to those shares shall be
deducted from the amount awarded in any appraisal proceeding. See "The
Merger--Appraisal Rights of Common Stockholders."
On October 9, 1997, the Court approved the Settlement Agreement and a
final order and judgment was entered (the "Final Order"). In the Final
Order, the court adjudged that the Settlement Agreement is fair, reasonable,
adequate and in the best interests of BGI and the holders of BGI Common Stock.
On October 28, 1997, a sole shareholder appealed the court approval of
the Settlement Agreement. On November 6, 1997, the Delaware Supreme Court
granted a motion for an expedited appeal. On November 17, 1997, the sole
shareholder voluntarily dismissed the appeal.
PURPOSE OF AND REASONS FOR THE MERGER
The purpose of the Merger is to facilitate the settlement of the
Litigation and provide an efficient mechanism whereby all shareholders of
BGI, including shareholders not parties to the Settlement Agreement, are
treated fairly and equitably. In negotiating with the plaintiff shareholders
to settle the Litigation, BGI agreed to repurchase all BGI Common Stock and
BGI Warrants held by the Institutional Plaintiffs. The Institutional
Plaintiffs represented more than a majority of BGI's public shareholders.
Consequently, a de minimis amount of shares would be left in public hands
after consummation of such a repurchase. The parties determined therefore
that it would be in the best interest of BGI and its shareholders to have BGI
repurchase the remaining outstanding shares of BGI Common Stock and BGI
Warrants not owned by Hilton or its affiliates for the equivalent
consideration realized by the Institutional Plaintiffs. A merger structure
was deemed to be the most practical and expeditious means of completing this
type of transaction. The members of BGI's Board of Directors did not give
consideration to any alternatives to the Merger as the most efficient and
cost-effective approach to accomplishing the objectives set forth above was
to engage in the Merger.
The Board of Directors believes that it was in the best interests of
BGI and its shareholders to settle the Litigation. The transaction is being
undertaken at this time because the Settlement Agreement requires that Hilton
use reasonable efforts to complete the Merger as soon as practicable so that
the plaintiffs and the remaining shareholders receive the consideration for
their shares as soon as practicable.
CERTAIN EFFECTS OF THE MERGER
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The following chart shows the corporate structure of Hilton and BGI
both before and after the Merger:
BEFORE MERGER AFTER MERGER
------------- Hilton(1) ------------ Hilton
100% 100%
Bally's Bally's
Intermediate Intermediate
Sub Inc. Sub Inc.
100% 100%
Bally's Sub Inc. Bally's Sub Inc.
100% 100%
Bally's Casino Bally's Casino
Holdings, Inc. Holdings, Inc.
100% 100%
Bally's CHLV BGI
Inc. 100%
8%
92% Unaffiliated
Stockholders
BGI Subsidiaries
100%
Subsidiaries
(1) Hilton has additional wholly-owned subsidiaries that are not related
to BGI and that are not illustrated below.
Following the Merger, Bally's Casino Holdings, Inc. will own the entire
equity interest of BGI. As a result of the Merger, Hilton's indirect equity
interest, which is currently 92%, will be increased to 100% and Hilton will
thus have a corresponding increased interest in the net earnings and net book
value of BGI. See "Certain Information Concerning BGI--Summary Financial
Data of BGI." Consummation of the Merger will deprive the public
stockholders of BGI the opportunity to continue to participate in any future
growth and will enable Hilton to benefit from any such growth. There can be
no assurance, however, that any such growth would be realized. The Merger
will provide the public stockholders of BGI with an opportunity to liquidate
their securities at an established price and eliminate any risk that the
trading prices of the BGI securities may decline. In addition, holders of
Common Stock have the right to seek an appraisal for their shares if they do
not wish to accept the Stock Price. See "The Merger-Appraisal Rights of
Common Stockholders" and "Material Federal Income Tax Consequences."
Upon the effectiveness of the Merger, the BGI Common Stock and the BGI
Warrants will cease to be outstanding and will be delisted from quotation on
the NASDAQ National Market System. Moreover, registration of the BGI Common
Stock and the BGI Warrants under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") will be terminated, whereupon BGI will no longer
file periodic reports with the Securities and Exchange Commission. Reversion
to private ownership will reduce certain general and administrative costs
related to BGI's status as a public reporting company under the federal
securities laws and will simplify and improve the administrative control of
BGI by permitting management to make decisions solely on the basis of BGI's
long range business interests without needing to address any possible adverse
effects on the interests of public stockholders or conflicts of interest with
the public stockholders. Furthermore, BGI will have access to Hilton's lower
cost of capital, as Hilton does not plan to make any such funding available
to BGI so long as there are public stockholders of BGI. BGI will benefit from
the cost savings attributable to the elimination of these reporting
obligations and the integration of BGI into the consolidated operations of
Hilton and its subsidiaries.
THE MERGER WILL BE EFFECTED UPON THE FILING OF A CERTIFICATE OF MERGER
WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE, WHICH WILL OCCUR ON
MARCH __, 1998.
PLANS FOR BGI FOLLOWING THE MERGER
Following the Merger, BGI's cash management procedures will be
integrated with those of Hilton and its subsidiaries. In accordance
therewith, BGI will make daily transfers of cash to Hilton. Depending on the
cash needs of Hilton and its subsidiaries at year end, any receivables of BGI
from Hilton may be canceled and treated as dividends to Hilton. In addition,
it is anticipated that shares of Hilton Common Stock held by BGI will be
canceled and retired.
In connection with the Hilton/Bally Merger, Hilton made a cash tender
offer for BGI's 10-3/8% First Mortgage Notes due 2003 (the "BGI Notes").
Pursuant thereto, Hilton purchased approximately $312.6 million of BGI Notes.
Following the Merger, Hilton and BGI intend to cancel the BGI Notes held by
Hilton. Pursuant to the terms of the Indenture governing the BGI Notes, BGI
may be discharged from certain obligations and covenants in respect thereof
by depositing cash with the trustee under the Indenture sufficient to pay all
principal and interest on the BGI Notes on the dates such payments are due in
accordance with the terms of the BGI Notes (a "Defeasance"). BGI intends to
effect a Defeasance with respect to the remaining approximately $2.4 million
aggregate principal amount of BGI Notes to be outstanding following the
Merger.
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Pursuant to the terms of the Merger Agreement, the directors of Merger
Sub will be the directors of BGI. Arthur Goldberg is the sole director of
Merger Sub. See "The Merger--The Merger Agreement--Directors and Officers of
the Surviving Company."
DETERMINATIONS BY THE BOARD; FAIRNESS OF THE MERGER
BACKGROUND. At a meeting held on June 12, 1997, BGI's Board of
Directors unanimously determined (i) to approve the settlement of the
litigation in accordance with the terms contemplated by the Memorandum and
the Settlement Agreement and (ii) that the Merger is fair to holders of BGI
Common Stock and BGI Warrants. The Board of Directors of BGI is comprised of
five directors, three of whom are independent directors.
In reaching its conclusions with respect to the fairness of the Merger
to BGI shareholders, BGI's Board of Directors considered the following
material factors:
(a) the presentation by, and the opinions of, the investment banking
firm of Ladenburg Thalmann & Co. Inc. ("Ladenburg") delivered to the BGI
Board of Directors at the June 12, 1997 meeting;
(b) the terms of the Memorandum and the proposed terms of the
Settlement Agreement which were negotiated on an arms-length basis with the
plaintiffs in the litigation and the fact that such plaintiffs owned in
excess of 50% of the outstanding shares of BGI Common Stock not owned by
Hilton or its affiliates;
(c) the price that BGI paid to repurchase shares of BGI Common Stock
from an unaffiliated third party in April 1997 (see "Market Price
Information" herein);
(d) the current and historical trading prices of BGI Common Stock; and
(e) the likely effects of current industry, economic and market
conditions on the financial condition, results of operations, prospects and
business of BGI.
The Board of Directors viewed the Ladenburg opinion to be an
important factor in its consideration of the fairness of the Merger as
Ladenburg, an internationally recognized investment banking firm, undertook a
detailed analysis of BGI, its business, its financial condition, its
competitors and its historical share prices in connection with rendering its
fairness opinion. See "Opinions of Financial Advisor" below. Furthermore, the
fairness of the Merger is implicit where, as here, the terms of the
settlement were the result of extensive arms-length negotiations with the
plaintiff shareholders owning in excess of a majority of the shares of BGI
Common Stock not owned by Hilton or its affiliates. The Board considered that
from January 1, 1996 through the quarter preceding that in which the
settlement was reached, the quarterly high bid price for the BGI Common Stock
ranged between $20 to $48 and the low bid price ranged from $16 to $34, and
the BGI Warrants had quarterly high bid ranges for such period between $10 3/8
and $37 and low bid prices ranging from $6.50 to $26 1/8. See "Market Price
Information." Such prices are all below the Stock Price and the Warrant
Price. Additionally, the Board considered that in April 1997 BGI repurchased
in a privately negotiated transaction with a sophistocated, unaffiliated
third party shares of BGI Common Stock at a price of $36 per share and BGI
Warrants at a price of $26.25 per Warrant, prices well below the
consideration to be received for such securities in the Merger. Finally, the
Board considered BGI's business and financial condition in light of current
industry conditions and the fact that BGI owns a single property on the Las
Vegas strip and the attendant risks to BGI's business as described under
"--Opinions of Financial Advisor--Qualitative Considerations." All the
foregoing factors supported the Board's finding that the Merger is fair to
the shareholders. Although the Board did not independently evaluate the net
book value, going concern value or liquidation value of BGI in connection
with its fairness determination, it received the opinion of Ladenburg that
the price to be paid to shareholders is fair, from a financial point of view,
to the shareholders. In addition, the Board of Directors did not seek any
offers from unaffiliated third parties to purchase BGI because more than 80%
of the equity of BGI was indirectly held by Hilton, and the Board did not
receive any such offers during the preceding eighteen month period.
BGI's Board of Directors did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the specific
factors considered in reaching its determination that the Merger is fair to
holders of BGI Common Stock and BGI Warrants.
A separate approval of the Merger by at least a majority of the
unaffiliated security holders was not necessary because the settlement had
already been approved by the plaintiff shareholders who owned in excess of
50% of the outstanding shares of BGI Common Stock not owned by Hilton or its
affiliates. The Board of Directors did not retain any unaffiliated
representative to act solely on behalf of unaffiliated security holders for
purposes of negotiating the terms of the transaction or preparing a report
concerning the fairness of the transaction, since the plaintiff shareholders
had already negotiated the terms of the transaction. BGI did retain
Ladenburg on its behalf, however, to render an opinion as to the fairness of
the transaction. See "--Opinions of Financial Advisor" below.
Hilton also believes that the Merger is fair to holders of BGI Common
Stock and BGI Warrants. In reaching its conclusion with respect to such
fairness, Hilton has adopted the analysis of BGI's Board of Directors
described above.
OPINIONS OF FINANCIAL ADVISOR. BGI retained Ladenburg to act as its
financial advisor with respect to the Merger based upon Ladenburg's
qualifications, experience and expertise. As part of its role as financial
advisor to BGI, Ladenburg was asked to render an opinion to the Board of
Directors of BGI as to the fairness of the transactions contemplated by the
proposed settlement of the litigation, from a financial point of view.
Ladenburg delivered an oral opinion to the BGI Board of Directors on June 12,
1997 to the effect that (1) the price to be paid to the Institutional
Plaintiffs to repurchase their shares of BGI Common Stock and BGI Warrants is
fair from a financial point of view, to BGI and its shareholders
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other than the Institutional Plaintiffs, and (2) the price to be paid for the
remaining shares of BGI Common Stock in the Merger is fair, from a financial
point of view, to the shareholders of BGI other than Hilton. In addition,
Ladenburg delivered its written opinion to the Board of Directors of BGI
dated as of June 12, 1997 (the "June 12 Opinion"), a copy of which is
attached as Annex IV to this Transaction Statement, to the effect that as of
such date the price to be paid to the Institutional Plaintiffs to repurchase
their shares of BGI Common Stock and BGI Warrants is fair, from a financial
point of view, to the shareholders of BGI. On February 6, 1998, Ladenburg
delivered its written opinion to the Board of Directors of BGI dated as of
February 6, 1998 (the "February 6 Opinion" and, together with the June 12
Opinion, the "Opinions"), a copy of which is attached as Annex V to this
Transaction Statement, to the effect that as of such date, the price to be
paid for the remaining shares of BGI Common Stock and BGI Warrants is fair,
from a financial point of view, to the shareholders of BGI. BGI's
shareholders are urged to read the Opinions in their entirety for assumptions
made and matters considered by Ladenburg.
INFORMATION AND MATERIALS CONSIDERED. In connection with rendering
its Opinions, Ladenburg reviewed such information as it deemed necessary
or appropriate for the purpose of rendering the Opinions. In connection
with the June 12 Opinion, Ladenburg reviewed information including, but
not limited to, the following: (i) the Memorandum; (ii) the Annual
Reports on Form 10-K for BGI for the three fiscal years ended December
31, 1994, December 31, 1995 and December 31, 1996; (iii) detailed
internal financial statements for BGI for the fiscal years ended
December 31, 1995 and December 31, 1996 and the quarter ended March 31,
1997; (iv) management's five-year projected financial statements for
BGI for the fiscal years ending December 31, 1997, December 31, 1998,
December 31, 1999; December 31, 2000 and December 31, 2001; (v) BGI's
common stock price and volume trading history; and (vi) publicly
available market information regarding the industry, BGI and its
competitors. In connection with the February 6 Opinion, Ladenburg
reviewed information including, but not limited to, the following: (i)
the Merger Agreement; (ii) the Annual Reports on Form 10-K for BGI for
the three fiscal years ended December 31, 1994, December 31, 1995 and
December 31, 1996; (iii) the Quarterly Report on Form 10-Q for the
Company for the nine months ended September 30, 1997; (iv) detailed
internal financial statements for BGI for the fiscal years ended
December 31, 1995, December 31, 1996 and December 31, 1997; (v)
management's five-year projected financial statements for BGI for the
fiscal years ending December 31, 1998, December 31, 1999, December 31,
2000, December 31, 2001 and December 31, 2002; (vi) BGI's common stock
price and volume trading history; and (vii) publicly available market
information regarding the industry, BGI and its competitors. In
addition, Ladenburg met with members of senior management of BGI at its
offices in Las Vegas, Nevada to discuss the historical and prospective
industry environment and operating results for BGI.
In rendering its Opinions, Ladenburg assumed and relied upon the
accuracy, completeness and fairness, without assuming any responsibility
for the independent verification of, all financial and other information
that was available to it from public sources, that was provided to
Ladenburg by BGI, or that was otherwise reviewed by Ladenburg. With
respect to financial projections supplied to Ladenburg, Ladenburg assumed
that they were reasonably prepared based on BGI's then current estimate of
results, and Ladenburg has relied upon such projections and made no
independent verification of the bases, assumptions, calculations or other
information contained therein. Ladenburg has not made or been provided
with an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of BGI, and Ladenburg does not assume any
responsibility for verifying any of the information reviewed. Ladenburg
was not authorized to, and did not, solicit third party indications of
interest in acquiring all or part of BGI, and Ladenburg was not asked to
consider, and its Opinions do not
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address, the consideration BGI might receive from a third-party
purchaser, the relative merits of the settlement or the Merger as
compared to any alternative business strategies that might exist for BGI
or the effect of any other transaction in which BGI might engage. The
Opinions are necessarily based upon information available to Ladenburg,
and financial, stock market and other conditions and circumstances
existing and disclosed to Ladenburg, as of the date of each Opinion.
THE FULL TEXT OF THE WRITTEN OPINIONS, WHICH SET FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND LIMITATIONS OF THE REVIEWS UNDERTAKEN,
ATTACHED HERETO AS ANNEX IV AND ANNEX V, ARE INCORPORATED HEREIN BY
REFERENCE. HOLDERS OF BGI COMMON STOCK AND WARRANTS ARE URGED TO READ THE
OPINIONS CAREFULLY IN THEIR ENTIRETY. LADENBURG'S OPINIONS ARE DIRECTED
ONLY TO THE FAIRNESS TO THE HOLDERS OF BGI COMMON STOCK AND BGI WARRANTS OF
THE MERGER PRICE FROM A FINANCIAL POINT OF VIEW AND DO NOT ADDRESS ANY
OTHER ASPECT OF THE TRANSACTIONS. THE SUMMARY OF THE OPINIONS SET FORTH IN
THIS TRANSACTION STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINIONS.
OVERVIEW OF ANALYSES. Ladenburg used both quantitative and
qualitative assessments to evaluate BGI. Ladenburg's determination that
the Merger Price is fair, from a financial point of view, to the holders of
BGI Common Stock and BGI Warrants is based on all the quantitative and
qualitative analyses described herein.
Ladenburg conducted a number of valuation analyses of consideration
values to be received in the settlement and the Merger and determined a
range of per share equity values for BGI. The analyses used to determine
per share equity values for BGI included a historical market price
analysis, a market multiples analysis, an acquisition multiples analysis, a
discounted cash flow analysis and a takeover premium analysis. Ladenburg
used the median per share equity value from each analysis to develop a
range of values for BGI. Ladenburg compared the Merger Price to the range
of derived equity values for BGI.
QUALITATIVE CONSIDERATIONS. In addition to the quantitative analyses
discussed below, Ladenburg considered a number of qualitative factors
related to BGI. Ladenburg did not apply weightings to any of these
qualitative analyses. Among the qualitative factors relating to BGI,
Ladenburg noted: (i) BGI's position with only one logical buyer (Hilton)
served to limit the potential upside in an exit scenario; (ii) BGI's lack
of growth potential through projects outside its existing property; (iii)
BGI's single property position results in concentrated risk; (iv) the
increasing competition on the Las Vegas strip (the "Strip"); (v) the Paris
Project may impact BGI; (vi) BGI's dependence on convention business; and
(vii) BGI's lack of a marquee attraction which will pose a challenge in the
future given the trend towards themed properties on the Strip.
QUANTITATIVE ANALYSES. In connection with the June 12 Opinion,
Ladenburg reviewed BGI's historical financial performance for each of
the three fiscal years in the three-year period ended December 31, 1996
and the three months ended March 31, 1996 and March 31, 1997, and its
projected performance as developed by management based on assumptions
management believed were reasonable for the next five years. In
connection with the February 6 Opinion, Ladenburg reviewed BGI's
historical financial performance for each of the three fiscal years in
the three-year period ended December 31, 1996 and the nine months ended
September 30, 1996 and September 30, 1997, and its projected performance
as developed by management based on assumptions management believed were
reasonable for the next five years. Ladenburg evaluated BGI, through
various methods described below, to derive implied aggregate equity
values and implied per share equity values for 100% of the value of BGI.
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(a) HISTORICAL MARKET PRICE ANALYSIS. In connection with the June 12
Opinion, Ladenburg examined the closing market prices of BGI's common stock
over the 90-day trading period prior to June 11, 1997 during which time the
closing market price ranged from $31.75 to $40.63 and had an average high
and low trading price of $36.28 and $35.52, respectively, and a closing
price of $39.00 on June 10, 1997, two days prior to the date of the June 12
Opinion.
In connection with the February 6 Opinion, Ladenburg examined the
closing market prices of BGI's common stock over the 90-day trading period
prior to February 6, 1998 during which time the closing market price ranged
from $50.00 to $51.38 and had an average high and low trading price of
$50.90 and $50.77, respectively, and a closing price of $50.75 on February
4, 1998, two days prior to the date of the February 6 Opinion.
(b) MARKET MULTIPLES ANALYSIS. Ladenburg conducted a market
multiples analysis for BGI which determined the implied public market
value based on the multiples of comparable public companies. Ladenburg
derived results based upon the multiples of the following group of
public companies which Ladenburg believes are comparable to BGI in terms
of similar customer profiles and locations principally on or adjacent to
the Strip: Boyd Gaming Corporation, MGM Grand, Inc., Primadonna Resorts,
Inc., Rio Hotel & Casino, Inc., Riviera Holdings Corporation and Station
Casinos, Inc. (the "Comparable Companies").
For all the Comparable Companies, Ladenburg derived the following
median common stock trading multiples for the Comparable Companies: (i)
revenues; (ii) earnings before interest, taxes, depreciation and
amortization ("EBITDA"); (iii) earnings before interest and taxes ("EBIT");
(iv) net income; (v) projected net income; and (vi) book value. Revenue,
EBITDA and EBIT multiples are based on total enterprise value divided by
each financial measure, respectively. Total enterprise value is defined as
the market value of common stock, plus total debt, less cash and cash
equivalents. The net income, projected net income and book value multiples
are derived by dividing the market value of the common stock in aggregate,
or per share stock price as appropriate, by net income, projected net
income and book value.
The implied equity valuations for BGI based on revenue, EBITDA and
EBIT were calculated by multiplying BGI's revenue, EBITDA and EBIT by
the median revenue, EBITDA and EBIT multiples, respectively, for the
Comparable Companies, then subtracting debt outstanding and adding
cash and cash equivalents. To arrive at equity valuations based on
net income, projected net income and book value, Ladenburg multiplied
BGI's net income, projected net income and book value by the median net
income, projected net income and book value multiples, respectively,
for the Comparable Companies. This range of implied equity values was
divided by the total number of BGI's shares outstanding, assuming the
exercise of all BGI Warrants with an exercise price of $10.00 using the
treasury stock method, to derive a range of implied equity values per
share.
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In connection with the June 12 Opinion, Ladenburg calculated the
median market multiples for the Comparable Companies as follows: (1) 2.2x
as a multiple of revenues; (ii) 7.9x as a multiple of EBITDA; (iii) 10.9x
as a multiple of EBIT; (iv) 15.9x as a multiple of net income; (v) 13.3x as
a multiple of projected net income for year one; (vi) 11.6x as a multiple
of projected net income for year two; and (vii) 1.8x as a multiple of book
value. The results of this analysis indicated a range of per share equity
values for BGI's common stock of $25.57 to $62.34, the median of which was
$41.99 per share.
In connection with the February 6 Opinion, Ladenburg calculated the
median market multiples for the Comparable Companies as follows: (1) 2.2x
as a multiple of revenues; (ii) 7.5x as a multiple of EBITDA; (iii) 11.0x
as a multiple of EBIT; (iv) 17.7x as a multiple of net income; (v) 15.9x as
a multiple of projected net income for year one; (vi) 15.5x as a multiple
of projected net income for year two; and (vii) 2.1x as a multiple of book
value. The results of this analysis indicated a range of per share equity
values for BGI's common stock of $23.30 to $66.26, the median of which was
$54.94 per share.
(c) ACQUISITION MULTIPLES ANALYSIS. Ladenburg conducted an
acquisition multiples analysis which was similar to the market multiples
analysis but instead relied upon multiples from comparable merger and
acquisition transactions. For purposes of this analysis, the purchase
price was equal to the amount paid for the target's equity and the
transaction value was equal to the purchase price, plus the target's
outstanding interest-bearing debt, less cash and cash equivalents.
In connection with the June 12 Opinion, Ladenburg compared
multiples from merger and acquisition transactions of the following
target and acquiring companies, respectively: the pending acquisition of
Riviera Holdings Corporation by entities controlled by Allen Paulson,
the acquisition of Griffin Gaming & Entertainment, Inc. by Sun
International Resorts Ltd., the acquisition of Bally by Hilton, the
acquisition of Par-A-Dice Gaming Corporation by Boyd Gaming Corporation,
the acquisition of Boomtown, Inc. by Hollywood Park, Inc., the
acquisition of certain gaming interests owned by Edward J. DeBartolo
Corporation by Casino America, Inc., the acquisition of the Sahara Hotel
& Casino by Bill Bennett, the acquisition of the Hacienda Resort Hotel &
Casino by Circus Circus Enterprises, the acquisition of Gold Strike
Resorts, Inc. by Circus Circus Enterprises and the acquisition of
Caesar's World, Inc. by ITT Corporation. Ladenburg determined that the
following transactions represented a core group of transactions most
comparable to BGI in terms of the acquired company's gaming business
profile: the pending acquisition of Riviera Holdings Corporation by
entities controlled by Allen Paulson, the acquisition of Griffin Gaming
& Entertainment, Inc. by Sun International Resorts Ltd., the acquisition
of Bally by Hilton, the acquisition of Par-A-Dice Gaming Corporation by
Boyd Gaming Corporation, the acquisition of Boomtown, Inc. by Hollywood
Park, Inc., the acquisition of Gold Strike Resorts, Inc. by Circus
Circus Enterprises and the acquisition of Caesar's World, Inc. by ITT
Corporation.
The median multiples for the selected transactions were as follows:
(I) 1.7x as a multiple of revenues; (ii) 7.0x as a multiple of EBITDA;
(iii) 10.7x as a multiple of EBIT; (iv) 23.8x as a multiple of net income;
(v) 18.0x as a multiple of projected net income for year one; and (vi) 3.7x
as a multiple of book value. The range of implied equity values derived
from the acquisition multiples analysis was divided by the number of shares
of BGI's common stock outstanding, assuming the exercise of all BGI
Warrants with an exercise price of $10.00 using the treasury stock method,
to derive implied equity value per share. In connection with the June 12
Opinion,
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the range of implied equity values per share of BGI's common stock was
$41.35 to $62.89, the median of which was $52.88.
In connection with the February 6 Opinion, Ladenburg compared
multiples from merger and acquisition transactions of the following
target and acquiring companies, respectively: the pending acquisition
of Harveys Casino Resorts by Colony Capital Inc., the pending
acquisition of Station Casinos, Inc. by Crescent Real Estate, the
pending acquisition of Showboat, Inc. by Harrah's Entertainment, Inc.,
the pending acquisition of ITT Corporation by Starwood Hotels & Resorts,
the pending acquisition of Colorado Gaming & Entertainment Co. by
Ladbroke Group, PLC, the pending acquisition of Riviera Holdings
Corporation by entities controlled by Allen Paulson, the acquisition of
Griffin Gaming & Entertainment, Inc. by Sun International Hotels Ltd.,
the acquisition of Bally by Hilton, the acquisition of Par-A-Dice Gaming
Corporation by Boyd Gaming Corporation, the acquisition of Boomtown,
Inc. by Hollywood Park, Inc., the acquisition of certain gaming
interests owned by Edward J. DeBartolo Corporation by Casino America,
Inc., the acquisition of the Sahara Hotel & Casino by Bill Bennett, the
acquisition of the Hacienda Resort Hotel & Casino by Circus Circus
Enterprises, the acquisition of Gold Strike Resorts, Inc. by Circus
Circus Enterprises and the acquisition of Caesar's World, Inc. by ITT
Corporation. Ladenburg determined that the following transactions
represented a core group of transactions most comparable to BGI in terms
of the acquired company's gaming business profile: the pending
acquisition of Harveys Casino Resorts by Colony Capital Inc., the
pending acquisition of Station Casinos, Inc. by Crescent Real Estate,
the pending acquisition of Showboat, Inc. by Harrah's Entertainment,
Inc., the pending acquisition of Riviera Holdings Corporation by
entities controlled by Allen Paulson, the acquisition of Griffin Gaming
& Entertainment, Inc. by Sun International Hotels Ltd., the acquisition
of Bally by Hilton, the acquisition of Par-A-Dice Gaming Corporation by
Boyd Gaming Corporation, the acquisition of Boomtown, Inc. by Hollywood
Park, Inc., the acquisition of Gold Strike Resorts, Inc. by Circus
Circus Enterprises and the acquisition of Caesar's World, Inc. by ITT
Corporation.
The median multiples for the selected transactions were as follows:
(1) 1.7x as a multiple of revenues; (ii) 7.4 as a multiple of EBITDA; (iii)
12.0x as a multiple of EBIT; (iv) 21.3x as a multiple of net income; (v)
18.0x as a multiple of projected net income for year one; and (vi) 2.8x as
a multiple of book value. The range of implied equity values derived from
the acquisition multiples analysis was divided by the number of shares of
BGI's common stock outstanding, assuming the exercise of all BGI Warrants
with an exercise price of $10.00 using the treasury stock method, to derive
implied equity value per share. In connection with the February 6 Opinion,
the range of implied equity values per share of BGI's common stock was
$30.59 to $72.98, the median of which was $57.30.
(d) DISCOUNTED CASH FLOW ANALYSIS. Ladenburg conducted a
discounted cash flow analysis which derived implied equity values based
on the present value of future net cash flows, less current total debt,
plus current total cash and cash equivalents. The cash flows were
discounted using a range of discount rates based upon a representative
range of weighted average costs of capital in the industry. For
purposes of this analysis, annual free cash flow equals de-levered net
income, plus depreciation and amortization, less capital expenditures,
less the change in working capital. In the exit year, free cash flow
also included proceeds from the sale of the business, which is
typically assumed only for valuation purposes as a more representative
"terminal value" than using cash flows in perpetuity. The terminal
value was determined by applying a range of exit multiples based on the
median EBITDA multiple of the Comparable Companies.
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In connection with the June 12 Opinion, Ladenburg applied discount
rates of 12.1% to 14.1% and exit multiples of 7.4x to 8.4x. The equity
value was divided by the number of shares of BGI's common stock
outstanding, assuming the exercise of all BGI Warrants with an exercise
price of $10.00 using the treasury stock method, to derive implied equity
value per share. The equity value per share ranged from $48.70 to $61.68,
the median of which was $54.95.
In connection with the February 6 Opinion, Ladenburg applied discount
rates of 12.1% to 14.1% and exit multiples of 7.0x to 8.0x. The equity
value was divided by the number of shares of BGI's common stock
outstanding, assuming the exercise of all BGI Warrants with an exercise
price of $10.00 using the treasury stock method, to derive implied equity
value per share. The equity value per share ranged from $41.76 to $54.86,
the median of which was $48.07.
(e) TAKEOVER PREMIUM ANALYSIS. Ladenburg conducted a takeover premium
analysis which derived an implied per share stock price based on the market
value premium typically given to a public company upon the announcement of
a takeover of that company. In connection with the June 12 Opinion,
Ladenburg looked at 100% completed acquisitions of a public company from
June 10, 1996 to June 10, 1997. In connection with the February 6 Opinion,
Ladenburg looked at 100% completed acquisitions of a public company from
February 4, 1997 to February 4, 1998. Ladenburg compared the takeover
stock price of the target company to the target company stock price one day
and one week prior to the original announcement date. Ladenburg derived a
mean and median takeover price premium one day and one week prior to the
takeover announcement. Ladenburg then applied the mean and median
percentage premiums to BGI's stock price one day and one week prior to the
announcement of the Transaction on June 11, 1997 to derive a mean and
median implied share price, for the one day and one week periods,
respectively.
In connection with the June 12 Opinion, the mean implied share price
for the one day and one week time periods was $50.14 and $51.50,
respectively. The median implied share price for the one day and one week
time periods was $46.02 and $48.88, respectively. The resulting median of
these four per share values indicated a per share stock price of $49.51.
In connection with the February 6 Opinion, the mean implied share
price for the one day and one week time periods was $49.60 and $54.55,
respectively. The median implied share price for the one day and one week
time periods was $47.37 and $52.24, respectively. The resulting median of
these four per share values indicated a per share stock price of $50.92.
COMPARISON OF THE CONSIDERATION TO THE VALUES OF BGI. Ladenburg
concluded that the Merger Price is fair, from a financial point of view,
to the shareholders (which includes the BGI Warrant holders) of BGI,
based on among other things (including the factors discussed above under
"--Qualitative Considerations"), the fact that the Merger Price falls
within the range of values for BGI of (i) $41.99 to $54.95 for the
June 12 Opinion and (ii) $48.07 to $57.30 for the February 6 Opinion.
LIMITATIONS OF ANALYSES. Although each of the analyses employed by
Ladenburg in rendering its Opinions is summarized above, the above summary
does not purport to be a complete description of Ladenburg's analyses and
contains those aspects of Ladenburg's analyses deemed most relevant. In
its analyses, Ladenburg made numerous assumptions with respect to industry
performance, general business, economic, market and financial conditions
and other matters, based on, among other things, information provided to
(and relied upon by) Ladenburg by BGI, many of which are beyond the control
of BGI. Any estimates contained in Ladenburg's analyses are not
necessarily indicative of actual values, which may be significantly more or
less favorable than as set forth therein. Additionally, estimates of the
value of businesses
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do not purport to be appraisals or necessarily to reflect the prices at
which businesses actually may be sold. Because such estimates are
inherently subject to uncertainty since the assumptions upon which such
estimates are based may not materialize, none of BGI, Ladenburg nor any
other person assumes responsibility for the accuracy of such estimates.
Ladenburg's analysis does not reflect, among other things, changes since
the date of each Opinion for BGI's business or prospects, changes in
general business and economic conditions or any other transaction or
event that has occurred or that may occur and that was not anticipated
at the time such materials were prepared.
Ladenburg is an internationally recognized investment banking firm
which, as part of its investment banking business, is continually engaged
in the valuation of businesses and their securities in connection with
mergers and acquisitions, merchant banking, leveraged buyouts, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate,
corporate and other purposes.
Ladenburg was engaged to render the Opinions and Ladenburg will
receive an aggregate fee in connection therewith of $200,000. In addition,
BGI agreed to reimburse Ladenburg for its reasonable, out-of-pocket
expenses. BGI also agreed, in a separate letter agreement, to indemnify
Ladenburg, its affiliates and each of their respective directors, officers,
agents, consultants and employees and each person, if any, controlling
Ladenburg or any of its affiliates against certain liabilities, including
liabilities under federal securities laws. In the ordinary course of its
business Ladenburg may trade the securities of BGI and Hilton for its own
account and for the account of its customers, and may at any time hold a
long or short position in such securities.
During the past two years, Ladenburg has performed financial services
for Bally Total Fitness Holding Corporation ("Bally Total Fitness").
Arthur Goldberg, a director and the President of BGI, is a director and
Chairman of the Board of Bally Total Fitness. Ladenburg received customary
compensation in connection with its role as one of the underwriters of
seven million shares of common stock of Bally Total Fitness and received
warrants to purchase 250,000 shares of Bally Total Fitness common stock for
$10 per share as compensation for a $7.5 million bridge loan to Bally Total
Fitness. In addition, Ladenburg also received customary compensation in
connection with its role as one of the placement agents of a private
placement of $225 million aggregate principal amount of senior subordinated
notes for Bally Total Fitness.
Copies of the Opinions are attached hereto as Annex IV and Annex V. The
Opinions will also be made available for inspection and copying at the principal
executive offices of BGI during regular business hours by any interested
security holder or its representative who has been so designated in writing.
INTERESTS OF CERTAIN PERSONS IN SECURITIES OF BGI AND THE MERGER
As of February 6, 1998, Hilton's wholly-owned subsidiaries held
7,153,238 shares (or approximately 92% of the outstanding shares) of the
outstanding BGI Common Stock. Such shares of BGI Common Stock held by
Hilton's affiliates will be canceled in the Merger and no consideration will
be paid therefor. See "The Merger--Conversion of Securities in the Merger."
Since the consummation of the Hilton/Bally Merger, Hilton has continuously
indirectly owned in excess of 84% of the outstanding BGI Common Stock and
currently indirectly owns approximately 92% of the outstanding shares of BGI
Common Stock. For a
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discussion of certain transactions between BGI and its affiliates, see the
information on pages 12 to 14 in the definitive Proxy Statement for BGI's
Annual Meeting of Stockholders held February 3, 1997 under the caption
"Certain Transactions with Affiliates and Management" incorporated by
reference herein, a copy of which is included herewith.
To the knowledge of Hilton and BGI, there are no contracts,
arrangements, understandings or relationships in connection with the Merger
with respect to the shares of BGI Common Stock or BGI Warrants other than the
Merger Agreement, the Memorandum, the Settlement Agreement, the Final Order
and the agreement with The Bank of New York to serve as paying agent.
To the knowledge of Hilton and BGI, after reasonable inquiry, as of
February 6, 1998, no executive officer, director or affiliate of BGI or of
Hilton or any of their affiliates (except as set forth above) owns any shares
of BGI Common Stock or BGI Warrants except for William D. Harrold, Executive
Vice President of BGI, who owns 266 shares of BGI Common Stock.
THE MERGER
THE MERGER AGREEMENT
The following discussion is a summary of the material provisions of the
Merger Agreement. This summary and all other discussions of the terms of the
Merger and the Merger Agreement included elsewhere in this Transaction
Statement are qualified in their entirety by reference to the Merger
Agreement, a copy of which is attached hereto as Annex I and incorporated by
reference herein.
THE MERGER. Pursuant to the Merger Agreement, at the Effective Time
Merger Sub will be merged with and into BGI in accordance with the applicable
provisions of the DGCL, with BGI as the surviving corporation (as such, the
"Surviving Company"), and the separate corporate existence of Merger Sub will
thereupon cease. The Merger will have the effects specified in the DGCL.
EFFECTIVE TIME. The Merger Agreement provides that, as soon as
practicable, BGI and Merger Sub will cause the Certificate of Merger to be
filed with the Secretary of State of the State of Delaware in accordance with
Section 253 of the DGCL. Upon completion of such filing, the Merger will
become effective in accordance with the DGCL.
CONVERSION OF SECURITIES IN THE MERGER. The Merger Agreement provides
that, at the Effective Time (i) each share of BGI Common Stock and each BGI
Warrant outstanding immediately prior to the Effective Time, held by BGI,
Merger Sub, Hilton or any subsidiary of Hilton will be canceled and
extinguished; (ii) each other share of BGI Common Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
BGI Common Stock held by a holder who demands and perfects rights of
appraisal in accordance with the applicable provisions of the DGCL) will, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive the Stock Price, without
interest, and will cease to be outstanding, (iii) each other BGI Warrant
issued and outstanding immediately prior to the Effective Time will, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive the Warrant Price, without
interest, from Hilton and will cease to be outstanding, and (iv) each share
of common stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into one share of common stock, par value $0.01 per share, of the Surviving
Company. As a result of the Merger, each holder of a certificate
representing BGI Common Stock that has not perfected his or her appraisal
rights under the DGCL will cease to have any rights with respect thereto,
except the right to receive the Stock Price upon
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surrender of such certificate as described below under the caption "--
Surrender of Certificates; Payment to Holders." Following consummation of
the Merger, BGI will be an indirect, wholly-owned subsidiary of Hilton.
CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING COMPANY. The
Merger Agreement provides that the Certificate of Incorporation and By-Laws
of BGI immediately prior to the Effective Time will be the Certificate of
Incorporation and By-Laws of the Surviving Company after the Effective Time.
DIRECTORS AND OFFICERS OF THE SURVIVING COMPANY. The Merger Agreement
provides that the members of the Board of Directors of Merger Sub immediately
prior to the Effective Time will be the members of the Board of Directors of
the Surviving Company after the Effective Time, until their successors have
been duly elected or appointed and qualified or until their earlier death,
resignation, or removal in accordance with the Certificate of Incorporation
and the By-Laws of the Surviving Company, and the officers of BGI immediately
prior to the Effective Time will be officers of the Surviving Company after
the Effective Time, until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Certificate of Incorporation and the By-Laws of the
Surviving Company.
PAYMENT FOR SHARES OF BGI COMMON STOCK AND BGI WARRANTS. Promptly after
the Effective Time, Hilton will make available to the Paying Agent (as
defined below) funds in the amount sufficient to effect the delivery of the
aggregate Stock Price and Warrant Price payable to the holders of BGI Common
Stock and BGI Warrants, respectively.
CLOSING OF STOCK TRANSFER RECORDS. No transfers of shares of BGI Common
Stock or BGI Warrants will be made on the stock transfer books of BGI after
the close of business on the day prior to the date of the Effective Time.
CONDITIONS. The obligation of each party to the Merger Agreement to
effect the Merger is subject to the satisfaction or waiver, prior to the
Effective Time, of the following: (i) no statute or rule or injunction shall
prevent the Merger and (ii) all governmental approvals required to consummate
the Merger have been received.
TERMINATION. Subject to the requirements of the Settlement Agreement,
the Merger Agreement may be terminated at any time prior to the Effective
Time by mutual agreement of BGI and Hilton or by BGI or Hilton if the
conditions become incapable of fulfillment (other than as a result of any
breach by a party seeking to terminate the Merger Agreement) and shall not
have been waived in accordance with the terms of the Merger Agreement.
REGULATORY APPROVALS
Other than (i) approvals of and filings made with certain gaming
regulators, including the Nevada Gaming Commission, which have been obtained
or made and (ii) the Final Order, no federal or state regulatory approvals
are required to be obtained, nor any regulatory requirements complied with,
by any party to the Merger Agreement, except for the requirements of the DGCL
in connection with consummation of the Merger and the requirements of federal
securities law.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material United States federal
income tax consequences of the Merger to persons who are holders of record of
BGI Common Stock (including the consequences of the receipt by stockholders
of any cash amounts pursuant to the exercise of appraisal rights) or holders
of record of BGI Warrants. None of BGI, Merger Sub, and Hilton intends to
seek a ruling from the Internal Revenue Service (the "Service") with respect
to any of these tax consequences. This summary is for general information
only and deals only with holders who hold shares of BGI Common Stock or BGI
Warrants (and, with respect to holders of BGI Warrants, who would hold the
BGI Common Stock issuable on exercise of such BGI Warrants) as capital assets
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the "Code"). The tax treatment of a holder of BGI Common Stock or
BGI Warrants will vary depending upon his or her particular situation, and
this summary does not purport to deal with all aspects of taxation that may
be relevant to holders of BGI Common Stock or BGI Warrants in light of such
holders' particular investment or tax circumstances, or to certain types of
holders subject to special treatment under the federal income tax laws,
including, without limitation, life insurance companies, certain financial
institutions, broker-dealers, stockholders holding BGI Common Stock or BGI
Warrants as part of a conversion transaction, as part of a hedge or hedging
transaction, or as a position in a straddle for tax purposes, tax-exempt
organizations, or foreign corporations, foreign partnerships and persons who
are not citizens or residents of the United States. In addition, this
discussion may not apply to holders of BGI Common Stock or BGI Warrants with
respect to shares of BGI Common Stock or BGI Warrants received by such
holders pursuant to the exercise of employee stock options or otherwise as
compensation. There can be no assurance that future changes in applicable
law or administration and judicial interpretations thereof, any of which
could have a retroactive effect, will not adversely affect the tax
consequences discussed herein or that there will not be differences of
opinion as to the interpretation of applicable law. In addition, the summary
below does not consider the effect of any foreign, state, local or other tax
laws that may be applicable to holders of BGI Common Stock or BGI Warrants.
ACCORDINGLY, EACH HOLDER OF BGI COMMON STOCK OR BGI WARRANTS IS URGED TO
CONSULT SUCH HOLDER'S OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES
OF THE MERGER TO SUCH HOLDER, INCLUDING THE APPLICATION AND EFFECT OF
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
CONSEQUENCES TO HOLDERS OF BGI COMMON STOCK. The conversion of BGI
Common Stock into the right to receive the Stock Price pursuant to the Merger
(including any cash amounts received by stockholders pursuant to the exercise
of appraisal rights) will be a taxable transaction for federal income tax
purposes. In general, for federal income tax purposes, a holder of BGI Common
Stock will recognize gain or loss equal to the difference between such
holder's adjusted tax basis in the BGI Common Stock converted in the Merger
and the amount of cash received therefor. Gain or loss must be determined
separately for each block of BGI Common Stock (I.E., BGI Common Stock
acquired at the same cost in a single transaction) converted to cash in the
Merger. Such gain or loss generally will be capital gain or loss and will be
long-term gain or loss if, on the date of the Merger, holders of BGI Common
Stock have held their shares for more than one year. Long-term capital gain
recognized by certain non-corporate holders of BGI Common Stock is subject to
federal income tax at preferential capital gains rates, and such gain
recognized with respect to an asset with a holding period of more than 18
months is subject to federal income tax at further reduced capital gains
rates.
CONSEQUENCES TO HOLDERS OF BGI WARRANTS. The conversion of BGI Warrants
into the right to receive the Warrant Price pursuant to the Merger will be a
taxable transaction for federal income tax
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purposes. In general, for federal income tax purposes, a holder of BGI
Warrants will recognize gain or loss equal to the difference between such
holder's adjusted tax basis in the BGI Warrants converted in the Merger
(generally, the amount, if any, of cash and the fair market value of other
property paid in exchange for such BGI Warrants at the time such BGI Warrants
were acquired by the holder thereof) and the amount of cash received
therefor. Gain or loss must be determined separately for each block of BGI
Warrants (I.E., BGI Warrants acquired at the same cost in a single
transaction) converted to cash in the Merger. Such gain or loss generally
will be capital gain or loss and will be long-term gain or loss if, on the
date of the Merger, holders of BGI Warrants had held their shares for more
than one year. Long-term capital gain recognized by certain non-corporate
holders of BGI Warrants is subject to federal income tax at preferential
capital gains rates, and such gain recognized with respect to an asset with a
holding period of more than 18 months is subject to federal income tax at
further reduced capital gains rates.
BACKUP WITHHOLDING. Payments in connection with the Merger may be
subject to "backup withholding" at a 31% rate. Backup withholding generally
applies if the stockholder (i) fails to furnish such stockholder's social
security number or other taxpayer identification number ("TIN"), (ii)
furnishes an incorrect TIN, (iii) fails properly to report interest or
dividends, or (iv) under certain circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN provided is such
stockholder's correct number and that such stockholder is not subject to
backup withholding. Backup withholding is not an additional tax but merely
an advance payment, which may be refunded to the extent it results in an
overpayment of tax. Certain persons generally are exempt from backup
withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include the reportable payments in income. Each holder of BGI Common Stock
or BGI Warrants should consult with such holder's own tax advisor as to such
holder's qualifications for exemption from backup withholding and the
procedure for obtaining such exemption.
ACCOUNTING TREATMENT OF THE MERGER
Because (i) BGI and Merger Sub are under the common control of Hilton,
(ii) Merger Sub has no assets other than its shares of BGI Common Stock and
(iii) the aggregate Merger Price will be paid by Hilton, the effects of the
Merger on BGI's financial condition and results of operations will be
insignificant.
SURRENDER OF CERTIFICATES; PAYMENT TO HOLDERS
PAYING AGENT. The Bank of New York has been designated as the paying
agent (the "Paying Agent") to process the surrender of certificates
("Certificates") representing shares (or fractions thereof) of BGI Common
Stock or BGI Warrants and to make payments of the Stock Price and/or the
Warrant Price as provided in the Merger Agreement.
PROCEDURES TO SURRENDER CERTIFICATES. In order to receive payment of
the Stock and/or the Warrant Price after the Effective Time, holders of
Certificates must complete the enclosed Letter of Transmittal (or a facsimile
thereof) and must present a properly completed and duly executed Letter of
Transmittal, any required signature guarantees, such Certificates and any
other required documents to the Paying Agent as follows:
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By Mail: By Hand or Overnight Courier:
The Bank of New York The Bank of New York
Tender and Exchange Department Tender and Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, NY 10286-1248 New York, NY 10286
A return envelope addressed to the Paying Agent is enclosed for your
convenience. THE METHOD OF DELIVERY OF CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS IS AT THE OPTION AND RISK OF THE HOLDER. IF CERTIFICATES AND SUCH
OTHER DOCUMENTS ARE SENT BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED. If
the Merger Agreement is terminated without the Merger being consummated, the
Paying Agent will promptly return all Certificates.
Holders of Certificates should carefully read and follow the
instructions set forth in the Letter of Transmittal. As provided in the
Letter of Transmittal, if a check is to be issued in a name different from
that in which the surrendered Certificates are registered, (i) such
Certificates must be endorsed by the registered owner(s), or accompanied by
an instrument of assignment executed by the registered owner(s), with the
signatures guaranteed by a financial institution that is a member in good
standing of a signature guarantee program within the meaning of Rule 17Ad-15
under the Exchange Act, and (ii) the person requesting such issuance in such
different name must pay to the Paying Agent any transfer or other taxes
required by reason of such issuance in such different name.
Promptly after the Effective Time, Hilton will make available to the
Paying Agent the funds in the amount sufficient to effect the delivery of the
aggregate Merger Price payable to the holders of BGI Common Stock and BGI
Warrants.
SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of a person other than the signer of the Letter of Transmittal or
if a check is to be sent to someone other than the signer of the Letter of
Transmittal or to an address other than that shown on the Letter of
Transmittal, the appropriate boxes on the Letter of Transmittal should be
completed.
DETERMINATION OF VALIDITY. All questions as to the validity, form and
eligibility for payment of any surrendered shares of BGI Common Stock or BGI
Warrants pursuant to any of the procedures described above will be determined
in the sole discretion of BGI, whose determination will be final and binding.
MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificate
has been mutilated, lost, stolen or destroyed, a holder may contact the
Paying Agent at telephone number (212) 507-9357 or (800) 507-9357 for further
instructions as to obtaining the documents which must be delivered in order
to complete the delivery, surrender or deposit of shares of BGI Common Stock
or BGI Warrants.
REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of this Transaction Statement or the Letter
of Transmittal may be directed to the Paying Agent.
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APPRAISAL RIGHTS OF COMMON STOCKHOLDERS
Pursuant to Section 262 of the DGCL ("Section 262"), any holder of BGI
Common Stock who does not wish to accept the consideration to be paid
pursuant to the Merger Agreement may elect to have the fair value of such
stockholder's shares of BGI Common Stock (exclusive of any element of value
arising from the accomplishment or expectation of the Merger) judicially
determined and paid to such stockholder in cash, together with a fair rate of
interest, if any, provided that such stockholder complies with the provisions
of Section 262. There can be no assurance, however, that if a stockholder
properly perfects his or her appraisal rights under the DGCL, he or she would
receive more or less than the price to be paid in the Merger. The following
summary of the provisions of Section 262 is not intended to be a complete
statement of such provisions and is qualified in its entirety by the full
text of Section 262, which is provided in its entirety as Annex III to this
Transaction Statement. In addition, the Settlement Agreement contains certain
provisions relating to any appraisal proceeding with respect to BGI Common
Stock. See "Special Factors--Background of the Merger--Settlement
Agreement." All references in Section 262 and in this summary to a
"stockholder" are to the record holder of the shares of BGI Common Stock as
to which appraisal rights are asserted. If you wish to exercise appraisal
rights but are not a record holder of BGI Common Stock beneficially owned by
you for which appraisal is sought, you must make arrangements to have the
record holder of such shares act for you in seeking appraisal.
This Transaction Statement constitutes notice of appraisal rights to
holders of BGI Common Stock. Any stockholder who wishes to exercise such
appraisal rights or who wishes to preserve the right to do so should review
carefully Annex III to this Transaction Statement. Failure to comply with
the procedures specified in Section 262 timely and properly will result in
the loss of appraisal rights. Moreover, because of the complexity of the
procedures for exercising the right to seek appraisal of the BGI Common
Stock, BGI believes that stockholders who consider exercising such rights
should seek the advice of counsel.
Any holder of BGI Common Stock wishing to exercise the right to demand
appraisal under Section 262 of the DGCL must satisfy each of the following
conditions:
(i) Such stockholder must deliver to BGI a written demand for
appraisal of such stockholder's shares within 20 days after the date of
mailing of this notice of appraisal rights, which demand will be sufficient
if it reasonably informs BGI of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of such holder's
shares; and
(ii) Such stockholder must continuously hold such shares from the date
of making the demand through the Effective Time. Accordingly, a
stockholder who is the record holder of shares of BGI Common Stock on the
date the written demand for appraisal is made but who thereafter transfers
such shares prior to the Effective Time will lose any right to appraisal in
respect of such shares.
A stockholder who elects to exercise appraisal rights should mail or
deliver a written demand with respect to the Merger in which such stockholder
desires to demand appraisal to: David Arrajj, Vice President and General
Counsel, Bally's Grand, Inc., 3645 Las Vegas Boulevard South, Las Vegas,
Nevada 89109. Written demand for appraisal pursuant to Section 262 must be
received by BGI no later than March __, 1998, which is the 20th day after the
date of mailing of this notice.
Prior to, or within ten days after the Effective Time, BGI must send
notice of the Effective Time to its stockholders. If such notice is sent
more than 20 days after the sending of this notice, such second
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notice will be sent only to those stockholders who have demanded appraisal
for their shares of BGI Common Stock.
FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN SECTION 262
OF THE DGCL WILL RESULT IN THE LOSS OF A STOCKHOLDER'S STATUTORY APPRAISAL
RIGHTS. CONSEQUENTLY, ANY HOLDER OF BGI COMMON STOCK WISHING TO EXERCISE
APPRAISAL RIGHTS IS URGED TO CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO
EXERCISE SUCH RIGHTS.
Any written demand for appraisal must be made by or for a holder of
record of BGI Common Stock. Accordingly, any such demand should be executed
by or for such holder of record, fully and correctly, as such holder's name
appears on the Certificate(s). If shares (or fractions thereof) of BGI
Common Stock are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the appraisal demand should be
made in such capacity. If shares (or fractions thereof) of BGI Common Stock
are owned of record by more than one person, as in a joint tenancy or tenancy
in common, the appraisal demand should be executed by or for all joint
owners. An authorized agent, including one of two or more joint owners, may
execute the demand for appraisal for a holder of record. However, the agent
must identify the record owner or owners and must expressly disclose the fact
that in executing the demand the agent is acting as agent for the record
owners.
A record owner, such as a broker, who holds shares (or fractions
thereof) of BGI Common Stock as nominee of others may exercise the right of
appraisal with respect to all or a portion of the BGI Common Stock held as
nominee. In such case, the written demand for appraisal should state the
number of shares of BGI Common Stock covered by such demand. Where no number
of shares of BGI Common Stock is expressly stated, the demand will be
presumed to cover all of the BGI Common Stock standing in the name of such
record owner.
Within 120 days after the Effective Time, the Surviving Company or any
holder of BGI Common Stock who has complied with the provisions of Section
262 of the DGCL may file a petition in the Delaware Court of Chancery
demanding a determination of the value of the BGI Common Stock of all
stockholders who have complied with such provisions. However, because BGI
has no obligation to file such a petition and does not currently intend to do
so, any stockholder that desires that such a petition be filed is advised to
do so on a timely basis. If neither BGI nor any stockholder files a petition
for appraisal within 120 days after the Effective Time, all appraisal rights
will cease, and stockholders will be entitled only to receive the Stock Price
without interest thereon, in exchange for their BGI Common Stock. Any holder
of BGI Common Stock may withdraw his or her demand for appraisal at any time
within 60 days after the Effective Time (or thereafter with the written
consent of BGI) and receive, pursuant to the terms of the Merger, the Stock
Price in cash, without interest, for each share of BGI Common Stock owned by
such holder. Notwithstanding the foregoing, no appraisal proceeding in the
Delaware Court of Chancery will be dismissed as to any stockholder without
the approval of the Court, and such approval may be conditioned upon such
terms as the Court deems just.
Within 120 days after the Effective Time, any holder of BGI Common Stock
who has complied with the foregoing provisions may also deliver to BGI a
written request for a statement listing the aggregate number of shares (or
fractions thereof) of BGI Common Stock with respect to which demands for
appraisal have been received and the aggregate number of holders thereof.
Such a statement will be mailed to the stockholder within 10 days after the
written request for it is received by BGI or within 10 days after the
expiration of the period for delivery of demands for appraisal, whichever is
later.
18
<PAGE>
Upon the filing of any petition by a holder of BGI Common Stock
demanding appraisal, service of a copy thereof will be made upon BGI which
will, within 20 days after such service, file in the office of the Register
in Chancery in which the petition was filed a duly verified list containing
the names and addresses of all stockholders who have demanded payment for
their BGI Common Stock and with whom agreements as to the value of their BGI
Common Stock have not been reached by BGI. If a petition is filed by BGI,
the petition will be accompanied by such a duly verified list. The Register
in Chancery, if so ordered by the Court, will give notice of the time and
place fixed for the hearing of such petition by registered or certified mail
to BGI and to the stockholders shown on the list at the addresses therein
stated, and such notice will also be given by publishing a notice at least
one week from the day of the hearing in a newspaper of general circulation
published in the City of Wilmington, Delaware, or such publication as the
Court deems advisable. The forms of the notices by mail and by publication
will be approved by the Court, and the costs thereof will be borne by BGI.
After determining the stockholders entitled to an appraisal under
Section 262 of the DGCL, the Court will appraise the BGI Common Stock owned
by such stockholders, determining the "fair value" thereof exclusive of any
element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any. The Court will direct
the payment of the appraised value of the BGI Common Stock, together with
interest, if any, by BGI to the stockholders entitled thereto upon surrender
to BGI of the Certificates. The costs of the appraisal proceeding may be
determined by the Court and taxed upon the parties as the Court deems
equitable in the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any stockholder in
connection with the appraisal proceeding, including without limitation
reasonable attorneys' fees and the fees and expenses of experts, to be
charged pro rata against the value of all of the shares (or fractions
thereof) of BGI Common Stock entitled to an appraisal. See also "Special
Factors--Background of the Merger--Settlement Agreement."
After the Effective Time, no stockholder who has demanded his or her
appraisal rights as set forth above will be entitled to vote such
stockholder's BGI Common Stock for any purpose or to receive payment of
dividends or other distributions on such stockholder's BGI Common Stock.
SOURCE AND AMOUNT OF FUNDS
All amounts required to pay the aggregate Merger Price payable to the
holders of BGI Common Stock and BGI Warrants pursuant to the Merger will be
provided by Hilton, which will fund such amounts from existing cash balances.
The maximum amount of funds to be required to pay the Merger Price is
estimated at approximately $43,541,139
FEES AND EXPENSES
Hilton has retained The Bank of New York to act as the Paying Agent in
connection with the Merger. The Paying Agent will receive reasonable and
customary compensation for its services, will be reimbursed for certain
reasonable out-of-pocket expenses, and will be indemnified against certain
liabilities and expenses in connection therewith.
Expenses estimated to be incurred in connection with the Merger are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate Merger Price . . . . . . . . . . . . . . . . . . . . . $43,541,139
Legal fees and expenses. . . . . . . . . . . . . . . . . . . . . 50,000
Other professional fees and expenses . . . . . . . . . . . . . . 225,000
Printing, mailing and distribution expenses. . . . . . . . . . . 15,000
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Paying Agent fees and expenses . . . . . . . . . . . . . . . . . 25,000
SEC filing fees. . . . . . . . . . . . . . . . . . . . . . . . . 8,710
Miscellaneous fees and expenses. . . . . . . . . . . . . . . . . 10,000
------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $43,874,849
</TABLE>
All costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby will be paid by Hilton. Brokers,
dealers, commercial banks, and trust companies will be reimbursed by Hilton
for customary mailing expenses incurred by them in forwarding materials to
their customers.
20
<PAGE>
MARKET PRICE INFORMATION
The BGI Common Stock and the BGI Warrants are listed for quotation through
the NASDAQ National Market System ("Nasdaq") under the symbols "BGLV" and
"BGLV.W," respectively. The table below sets forth, for the calendar quarters
indicated, the quarterly high and low bid quotations for the BGI Common Stock
and the BGI Warrants for the past two fiscal years and the current quarterly
period, as reported by Nasdaq.
<TABLE>
<CAPTION>
BGI COMMON STOCK BGI WARRANTS
---------------- ------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
FISCAL 1996
First Quarter $20.00 $16.00 $10 3/8 $ 6 1/2
Second Quarter 48.00 20.00 35 3/8 10 1/2
Third Quarter 46.00 34 1/8 37 26 1/8
Fourth Quarter 41 1/8 27 1/2 27 3/4 18
FISCAL 1997
First Quarter $39.00 $31.00 $28 1/2 $22 5/8
Second Quarter 52 3/4 33.00 42 3/4 23
Third Quarter 51 1/4 49 3/4 40 3/4 37 1/8
Fourth Quarter 51 1/2 50.00 41 1/16 40 1/8
FISCAL 1998
First Quarter (through
February 24, 1998) $50 1/2 $50 1/4 $40 3/4 $40.00
</TABLE>
As of the close of business on February 6, 1998, there were 75 holders
of record of the BGI Common Stock and 60 holders of record of the BGI
Warrants. No dividends have been paid to date on the BGI Common Stock.
Dividends are payable at the discretion of the Board of Directors.
On April 8, 1997, in a privately negotiated transaction with an
unaffiliated third party, BGI repurchased 1,228 shares of BGI Common Stock at
a price of $36 per share and 65,985 BGI Warrants at a price of $26.25 per BGI
Warrant.
CERTAIN INFORMATION CONCERNING BGI
BGI
BGI, a corporation organized and existing under the laws of the State of
Delaware, owns and operates the casino hotel resort in Las Vegas, Nevada
known as "Bally's Grand Las Vegas." BGI's principal executive offices are
located at 3645 Las Vegas Boulevard South, Las Vegas, Nevada 89109, and its
telephone number is (702) 739-4111.
BGI's certificate of incorporation provides that BGI's authorized
capital stock consists of 40,000,000 shares of BGI Common Stock and
10,000,000 shares of Preferred Stock. As of February 6, 1998, there were
7,770,468 shares of Common Stock outstanding and BGI Warrants to purchase
286,053.4874 shares of BGI Common Stock and no shares of Preferred Stock were
outstanding.
For additional information concerning BGI, see "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE."
21
<PAGE>
SUMMARY FINANCIAL DATA OF BGI
The following table presents certain summary historical financial data
of BGI for the periods indicated. Such financial data is derived from the
more detailed financial statements set forth in BGI's Annual Report on Form
10-K for the year ended December 31, 1996 and its Quarterly Report on Form
10-Q for the nine month period ended September 30, 1997 (collectively, the
"Reports"), which Reports are incorporated by reference herein. See
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE." A copy of each such
Report is being delivered together with this Transaction Statement. The
summary financial data should be read in conjunction with such financial
statements, including the notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" set forth in the
Reports.
<TABLE>
<CAPTION>
Fiscal Year Ended Nine Months Ended
(amounts in millions, except per share amounts)
DECEMBER 31, 1995 DECEMBER 31, 1996 SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Statement of Income Data:
Revenues. . . . . . . . . . . $283.5 $313.8 $230.5 $232.6
Operating income. . . . . . . 42.3 62.5 43.7 46.8
Interest Expense. . . . . . . 32.7 33.5 25.2 25.2
Net income. . . . . . . . . . 6.4 23.0 15.4 17.2
Average number of common
shares . . . . . . . . . . . 8.8 8.9 8.9 8.8
Net income per common
and common equivalent
share. . . . . . . . . . . . $ .72 $ 2.58 $ 1.73 $ 1.96
Balance Sheet Data:
Total assets. . . . . . . . . $518.1 $577.2 $573.2 $548.3
Working capital . . . . . . . 52.4 131.0 120.8 110.6
Total liabilities . . . . . . 440.8 458.6 460.3 461.0
Total stockholders' equity. . 77.3 118.6 112.9 87.3
Book value per share. . . . . 9.16 13.97 13.38 11.48
Other
Ratio of earnings to fixed
charges. . . . . . . . . . . 1.3 1.9 1.9 2.1
</TABLE>
DIRECTORS OF BGI
Each of the persons listed below and under "Executive Officers of BGI"
is a United States citizen, unless otherwise noted.
Arthur M. Goldberg was elected Chairman of the Board of Directors of BGI
in August 1992 and has been its Chief Executive Officer since September 1992.
Mr. Goldberg was President of the Company from August 1992 through May 1994
and was re-elected as President in June 1997. Mr. Goldberg has served as
Chairman of the Board of Directors, President, Chief Executive Officer and
Secretary of the Manager since September 1992; Chairman of the Board of
Directors and Chief Executive Officer of Bally between October 1990 and
December 1996; President of Bally between January 1993 and December 1996; and
Chairman of the Board of Directors, President and Chief Executive Officer of
Casino Holdings since June 1993. In addition, Mr. Goldberg serves as
Executive Vice President, President-Gaming Division and a director of Hilton;
Chairman of the Board of Directors and Chief Executive Officer of GNOC, CORP.
and Bally's Park Place, Inc. (both of which are subsidiaries of Hilton);
Chairman of the Board of Directors of Bally Total Fitness Holding
Corporation; as well as Chairman of the Board of Directors, President and
Chief Executive Officer of Di Giorgio Corporation and a director of White
Rose Foods, Inc. (food distributors) since February 1990. Mr. Goldberg is
also a director of First Union Corporation (a financial services company) and
Managing Partner of Arveron Investments, L.P. (an investment partnership).
22
<PAGE>
Jay Burnham was elected a director of BGI in August 1993. Mr. Burnham
has been a Vice President of DDJ Capital Management, LLC (a diversified
investment management firm) since March 1996. From January 1995 until March
1996, Mr. Burnham served as an investment advisor with Libra Investments (a
diversified investment management firm). From June 1990 until he joined Libra
Investments, Mr. Burnham performed investment analyst management for Paul D.
Sonz Partners (a diversified investment management firm). Mr. Burnham is
also a director of Live Entertainment, Inc. (a distributor of motion pictures
and home videos) and New Millenium Homes, LLC, a California home builder.
J. Kenneth Looloian was elected a director of BGI in October 1995. Mr.
Looloian is an Executive Vice President of Di Giorgio Corporation, a former
partner in Arveron Investments, L.P. and a former Executive Vice President of
International Controls Corporation. Mr. Looloian is also a director of Bally
Total Fitness Holding Corporation, Casino Holdings, Bally's Park Place, Inc.,
GNOC, CORP and Continucare Corporation, a Florida provider of outpatient
services.
Jack L. McDonald was elected a director of BGI in August 1993. Mr.
McDonald has served as a director of Triangle Pacific Inc. (a wood products
company) since June 1992, a director of U.S. Homes, Inc. (a home building
company) since June 1993, a director of American Homestar Corporation (a
mobile home manufacturer) since October 1994, and a director of New Millenium
Homes, LLC, a California home builder.
Nicholas H. Politan, Jr. was elected a director of BGI in October 1995.
Mr. Politan has been Chief Financial Officer of Kenetech Corp. (a developer
of energy systems) since April 1996. From April 1995 until March 1996, Mr.
Politan served as Vice President of Kenetech Energy Systems, Inc. and from
October 1992 until April 1995, Mr. Politan was Counsel for Kenetech Energy
Systems, Inc. From September 1986 until he joined Kenetech Energy Systems,
Inc., Mr. Politan was an attorney with Heller, Ehrman, White and McAuliffe (a
law firm). Mr. Politan is a Vice President of Kenetech Windpower, Inc., a
wholly-owned subsidiary of Kenetech Corp. which filed for protection under
Chapter 11 of the United States Bankruptcy Code in May 1996.
EXECUTIVE OFFICERS OF BGI
Information with respect to Arthur M. Goldberg, an executive officer who
is also a director of BGI, is set forth above.
David Arrajj was elected Vice President, General Counsel of BGI in March
1995. From May 1988 to February 1995, Mr. Arrajj served as a Deputy Attorney
General with the New Jersey Division of Gaming Enforcement.
William D. Harrold was elected Executive Vice President of BGI in July
1995 and was elected President of Las Vegas Hilton Corporation in May 1997.
From August 1992 to July 1995, Mr. Harrold served as Senior Vice
President-Marketing of the Company and from April 1990 to August 1992, he
served as its Vice President-Customer Development.
Paul Pusateri was elected Executive Vice President-Hotel Operations of
BGI in June, 1997. From August 1996 to the present, Mr. Pusateri has served
as Executive Vice President of Paris Casino Corp. From January 1993 to July
1996, Mr. Pusateri was the General Manager of the Four Seasons Beverly Hills
Hotel.
23
<PAGE>
David B. Zerfing was elected Senior Vice President, Finance and
Administration, and Chief Financial Officer of BGI in January 1998. From
September 1997 to January 1998 he was Vice President of Finance Western
Region, of Hilton Gaming Corporation. From July 1996 to September 1997, Mr.
Zerfing was the Assistant General Manager/Vice President of Finance for
Bally's Saloon and Gambling Hall in Robinsville, Mississippi. From April
1993 to July 1996, Mr. Zerfing was employed by President Casino - Missouri,
Inc. as Director of Finance/Chief Financial Officer and Assistant General
Manager.
CERTAIN INFORMATION CONCERNING HILTON AND
MERGER SUB
HILTON AND MERGER SUB
Hilton, a Delaware corporation, is a leading owner and operator of
full-service hotels and gaming properties located in gateway cities, urban
and suburban centers and resort areas throughout the United States and in
selected international cities.
Effective December 18, 1996, Hilton completed the merger of Bally with
and into Hilton. As a result, BGI, formerly an indirect subsidiary of Bally,
became an indirect wholly-owned subsidiary of Hilton.
Merger Sub, a Delaware corporation, is an indirect wholly-owned
subsidiary of Hilton. Merger Sub does not have any assets or conduct any
business other than its ownership, as of February 6, 1998, of approximately
92% of the outstanding BGI Common Stock. Upon consummation of the Merger,
all of the outstanding capital stock of BGI will be owned by Bally's Casino
Holdings, Inc., a Delaware corporation and indirect, wholly-owned subsidiary
of Hilton
Hilton's and Merger Sub's principal executive offices are located at
9336 Civic Center Drive, Beverly Hills, California 90210, and their telephone
number is (310) 278-4321.
For additional information concerning Hilton and its subsidiaries, see
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
DIRECTORS OF HILTON
The following table sets forth certain information with respect to the
directors of Hilton. Each of the persons listed below and under "Executive
Officers of Hilton" is a United States citizen, unless otherwise noted:
Name, Principal Occupation
and Other Directorships
- --------------------------
Stephen F. Bollenbach Chief Financial Officer, The Trump Organization,
until March 1992, Chief Financial Officer, Marriott
Corporation, until October 1993, President and Chief
Executive Officer, Host Marriott Corporation, until
April 1995, Senior Executive Vice President and
Chief Financial Officer, The Walt Disney Co., until
February 1996 and, thereafter, President and Chief
Executive Officer, Hilton Hotels Corporation. He is
a director of America West Airlines, Inc., Kmart
Corporation and Ladbroke Group PLC.
A. Steven Crown General Partner, Henry Crown and Company, a holding
company which includes diversified manufacturing
operations, marine
24
<PAGE>
operations and real estate ventures.
Peter M. George Vice Chairman and Joint Managing Director, Ladbroke
Group PLC until January 1994 and, thereafter Vice
Chairman and Group Chief Executive, Ladbroke Group
PLC. Mr. George is a citizen of the United Kingdom.
Arthur M. Goldberg (See "Certain Information Concerning BGI--Directors
of BGI")
Barron Hilton Chairman of the Board, President and Chief Executive
Officer, Hilton Hotels Corporation, until February
1993, Chairman of the Board and Chief Executive
Officer, Hilton Hotels Corporation until February
1996 and, thereafter, Chairman of the Board, Hilton
Hotels Corporation.
Eric M. Hilton Senior Vice President-Real Estate Development,
International, Hilton Hotels Corporation, until May
1992, Executive Vice President-International
Operations, Hilton Hotels Corporation from May 1992
until May 1993 and, thereafter, Vice Chairman of the
Board, Hilton Hotels Corporation. Mr. Hilton
resigned as an officer of the Company in March 1997.
Dieter H. Huckestein Senior Vice President-Hawaii/California/Arizona
Region, Hilton Hotels Corporation, until May 1994
and, thereafter, Executive Vice President, Hilton
Hotels Corporation and President-Hotel Operations.
Mr. Huckestein is a citizen of Germany.
Robert L. Johnson Chairman and Chief Executive Officer of Black
Entertainment Television, a cable programming
service, and Chairman, President and Chief Executive
Officer of BET Holdings, Inc., a diversified media
holding company, since August 1991, and Chairman and
Chief Executive Officer of District Cablevision,
cable operator in the District of Columbia.
Donald R. Knab Chairman and Chief Executive Officer, BPT
Properties, L.P., a commercial real estate
development company, until January 1992 and, until
December 1992, Senior Consultant thereto and, since
January 1988, President, Donald R. Knab Associates,
Inc., an investment advisory firm, and, since
October 1994, Vice Chairman, Deansbank Investments,
Inc. property investments.
Benjamin V. Lambert Chairman and Chief Executive Officer, Eastdil Realty
Company L.L.C., real estate investment bankers.
Donna F. Tuttle Chairman and Chief Executive Officer, Ayer Tuttle,
the western division of NW Ayer Incorporated, an
international advertising firm from 1989 to 1992 and
from 1989 to 1995, President, Donna F. Tuttle, Inc.,
a travel and tourism consulting and public relations
firm, and, since 1992, President, Korn Tuttle
Capital Group, a financial consulting and
investments firm. She is a director of Phoenix Duff
& Phelps, Inc., a financial services firm.
Sam D. Young, Jr. Chairman, Trans West Enterprises, Inc., an
investment company, and director, Texas Commerce
Bank-El Paso.
25
<PAGE>
EXECUTIVE OFFICERS OF HILTON
The following table sets forth certain information with respect to the
executive officers of Hilton. Information with respect to executive officers
Stephen Bollenbach, Barron Hilton, Eric Hilton, Arthur Goldberg and Dieter
Huckestein is set forth above.
Name Position and Offices with Hilton
- ---- --------------------------------
Matthew J. Hart Executive Vice President and Chief Financial Officer
since May 1996. Prior to joining Hilton, Mr. Hart
served as Senior Vice President and Treasurer of The
Walt Disney Company since October 1995, Executive
Vice President and Chief Financial Officer of Host
Marriott Corporation from October 1992 until October
1995, and Senior Vice President and Treasurer of
Marriott Corporation until October 1992.
Thomas E. Gallagher Executive Vice President and General Counsel since
July, 1997. Prior to joining Hilton, Mr. Gallagher
served as President and Chief Executive Officer of
The Griffin Group, Inc., April 1992-June 1997.
During 1995 and 1996, he also served as President
and Chief Executive Officer of Griffin Gaming &
Entertainment, Inc. (formerly Resorts International,
Inc.). From 1977 to 1992 he was a partner in the
law firm of Gibson, Dunn & Crutcher.
AVAILABLE INFORMATION
Hilton and BGI have collectively filed with the Securities and Exchange
Commission (the "Commission") a Schedule 13E-3 (which, together with any
amendments thereto, is collectively referred to as the "Schedule 13E-3"),
under the Exchange Act with respect to the Merger. This Transaction
Statement does not contain all the information set forth in the Schedule
13E-3 and the exhibits thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Each of BGI and
Hilton currently is subject to the information and reporting requirements of
the Exchange Act and, in accordance therewith, files periodic reports, proxy
statements, and other information with the Commission.
The Schedule 13E-3 and the exhibits thereto will be made available for
inspection and copying at the principal executive offices of BGI during
regular business hours by any interested holder of BGI Common Stock or BGI
Warrants or by his or her representative who has been so designated in
writing.
The Schedule 13E-3 and the exhibits thereto, as well as such reports,
proxy statements, and other information may be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549; 7 World Trade Center, Suite 1300,
New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such reports, proxy statements, and
other information also can be obtained by mail from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
26
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents which have been filed by BGI with the Commission
are hereby incorporated by reference in this Transaction Statement: The
Annual Report on Form 10-K dated December 31, 1996, the Quarterly Report on
Form 10-Q dated September 30, 1997 and the definitive Proxy Statement for
BGI's Annual Meeting of Stockholders held February 7, 1997 (the "Proxy
Statement"). The following documents which have been filed by Hilton with
the Commission are hereby incorporated by reference in this Transaction
Statement: The Annual Report on Form 10-K dated December 31, 1996, the
Quarterly Report on Form 10-Q dated September 30, 1997 and the Proxy
Statement.
All documents and reports filed by either Hilton or BGI pursuant to
Section 13(a), 13(c), 14, or 15(d) of the Exchange Act after the date of this
Transaction Statement and prior to the Effective Time are deemed to be
incorporated by reference in this Transaction Statement and to be a part
hereof from the dates of filing of such documents or reports. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein is deemed to be modified or superseded for purposes of this
Transaction Statement to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded will not be deemed, except as so
modified or superseded, to constitute a part of this Transaction Statement.
This Transaction Statement incorporates by reference documents which are
not delivered herewith. These documents, other than exhibits to such
documents, are available, without charge, to any person, including any
beneficial owner of BGI Common Stock or BGI Warrants to whom this Transaction
Statement is delivered, on written or oral request to David Arrajj at Bally's
Grand, Inc., 3645 Las Vegas Boulevard South, Las Vegas, Nevada 89109,
telephone (702) 739-6278.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS TRANSACTION STATEMENT IN
CONNECTION WITH THE MERGER, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HILTON,
MERGER SUB, BGI OR ANY OTHER PERSON.
27
<PAGE>
ANNEX I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
among
HILTON HOTELS CORPORATION
BALLY'S CHLV INC.
and
BALLY'S GRAND, INC.
Dated as of February 6, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Section Page
------- ----
ARTICLE I
DEFINITIONS
<S> <C>
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
THE MERGER
2.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.3 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Certificate of Incorporation and
By-laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.5 Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.6 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS
3.1 Effect on Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3 Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Approval of Gaming Commissions;
Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V
CONDITIONS PRECEDENT
5.1 Conditions to Each Party's Obligation
to Effect the Merger. . . . . . . . . . . . . . . . . . . . . . . . 10
i
<PAGE>
ARTICLE VI
TERMINATION AND AMENDMENT
6.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.4 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII
GENERAL PROVISIONS
7.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.2 Headings; References . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 Parties in Interest; Assignment. . . . . . . . . . . . . . . . . . . . . 13
7.5 Severability; Enforcement. . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 6, 1998, among
HILTON HOTELS CORPORATION, a Delaware corporation ("Hilton"), BALLY'S CHLV
INC., a Delaware Corporation ("Parent"), and BALLY'S GRAND, INC., a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company is a party to that certain Memorandum of
Understanding (the "Memorandum"), dated June 12, 1997, and Stipulation of
Settlement, dated August 7, 1997 (the "Stipulation of Settlement"), with
respect to the settlement of In Re Bally's Grand Derivative Litigation,
Consolidated Civil Actions Nos. 14044 and 15325 in the Court of Chancery of
the State of Delaware in and for New Castle County, which Stipulation of
Settlement was approved by such court and a final order and judgment was
entered on October 9, 1997 (the "Final Order") pursuant to which the Company
and Parent have agreed to cause the Merger (as hereinafter defined) subject
to the terms and conditions set forth therein and herein;
WHEREAS, Hilton indirectly owns all of the outstanding voting stock
of Parent and Parent directly owns more than 90% of the outstanding voting
stock of the Company;
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, Parent will merge with and into the Company (the "Merger")
pursuant to Section 253 of the Delaware General Corporation Law, with the
Company continuing as the surviving corporation (the "Surviving Corporation");
WHEREAS, the respective Boards of Directors of Parent and the
Company have approved this Agreement and the transactions contemplated hereby;
<PAGE>
WHEREAS, Parent and the Company desire to make certain agreements
in connection with the Merger and also to prescribe certain conditions to the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
"BUSINESS DAY" shall mean a day other than a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or
required by law to close.
"CERTIFICATE OF MERGER" shall have the meaning set forth in Section
2.2.
"CERTIFICATES" shall have the meaning set forth in Section 3.2(b).
"CODE" shall have the meaning set forth in Section 3.2(d).
"COMPANY COMMON STOCK" shall have the meaning set forth in Section
3.1(c).
"COMPANY SECURITIES" shall mean the Company Common Stock and the
Company Warrants.
"COMPANY WARRANTS" shall mean the warrants of the Company issued
pursuant to the Warrant Agreement, dated as of August 20, 1993, between the
Company and Midlantic National Bank, as Warrant Agent, to purchase an aggregate
of 706,403 shares of Company Common Stock at $10.00 per share.
"DGCL" shall mean the Delaware General Corporation Law.
"DISSENTING SHARES" shall have the meaning set forth in Section 3.4.
"EFFECTIVE TIME" shall have the meaning set forth in Section 2.2.
2
<PAGE>
"GAMING COMMISSION" shall mean, collectively, the Nevada State
Control Board and the Nevada Gaming Commission.
"GAMING LAWS" shall mean any Federal, state, local or foreign
statute, ordinance, rule, regulation, policy, permit, consent, approval,
license, judgment, order, decree, injunction or other authorization governing
or relating to the casino and gaming and racetrack activities and operations
of the Company or Parent, as applicable, including the Nevada Gaming Control
Act and the rules and regulations promulgated thereunder, and the Clark
County, Nevada Code and the rules and regulations promulgated thereunder.
"GOVERNMENTAL AUTHORITY" shall mean any foreign, Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality.
"MEMORANDUM" shall have the meaning set forth in the first recital
of this Agreement.
"MERGER" shall have the meaning set forth in the second recital to
this Agreement.
"MERGER CONSIDERATION" shall have the meaning set forth in Section
3.1(c).
"PAYMENT AGENT" shall have the meaning set forth in Section 3.2.
"PAYMENT FUND" shall have the meaning set forth in Section 3.2.
"PERSON" shall mean an individual, corporation, partnership, trust
or unincorporated organization or a government or any agency or political
subdivision thereof.
"SUBSIDIARY" shall mean, with respect to any Person, (i) each
corporation, partnership, joint venture, limited liability company or other
legal entity of which such Person owns, either directly or indirectly, 50% or
more of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or
similar governing body of such corporation, partnership, joint venture or
other legal entity and (ii) each partnership or limited liability company in
which such Person or another Subsidiary of such Person is the
3
<PAGE>
general partner, managing partner or other otherwise controls.
"SURVIVING CORPORATION" shall have the meaning set forth in the
third recital of this Agreement.
1.2 OTHER TERMS. Other terms may be defined elsewhere in the text
of this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof,"
"herein," and "hereunder" and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) The terms "dollars" and "$" shall mean United States dollars.
ARTICLE II
THE MERGER
2.1 MERGER. Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with the DGCL, Parent shall be merged
with and into the Company at the Effective Time. Following the Merger, the
separate corporate existence of Parent shall cease and the Company shall
continue as the Surviving Corporation and shall succeed to and assume all the
rights and obligations of Parent in accordance with the DGCL.
2.2 EFFECTIVE TIME. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 6.1, on the first business day following the date on
which the last of the conditions set forth in Article V is fulfilled or
waived, or as soon as practicable thereafter, the parties hereto shall cause
the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant provisions
of the DGCL with the Secretary of State of the State of
4
<PAGE>
Delaware. The Merger shall become effective at such time as the Certificate
of Merger is so duly filed, or at such time thereafter as is provided in the
Certificate of Merger (the "Effective Time").
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects as
set forth in Section 259 of the DGCL.
2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The Certificate of Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation after the Effective Time, until
duly amended in accordance with its terms and the DGCL.
(b) The By-laws of the Company, as in effect immediately prior to
the Effective Time, shall be the By-laws of the Surviving Corporation, until
thereafter amended as provided therein, by Applicable Law or the Certificate
of Incorporation of the Surviving Corporation.
2.5 DIRECTORS. The directors of Parent immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignations or removal or until their respective successors
are duly elected and qualified, as the case may be.
2.6 OFFICERS. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors
are duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS
3.1 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Securities or the holder of any shares of the capital stock of Parent:
(a) CAPITAL STOCK OF PARENT. Each share of common stock of Parent
issued and outstanding immediately
5
<PAGE>
prior to the Effective Time shall be converted into and exchanged for one
share of common stock of the Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each
share of Company Common Stock and each Company Warrant that is directly owned
by the Company and each share of Company Common Stock and each Company
Warrant that is directly owned by Hilton, Parent or any subsidiary of Hilton
shall be canceled and retired and shall cease to exist and no consideration
shall be delivered or deliverable in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Each share of Common
Stock, par value $.01 per share ("Company Common Stock"), of the Company,
issued and outstanding immediately prior to the Effective Time (excluding
shares cancelled in accordance with Section 3.1(b) and other than Dissenting
Shares (as defined in Section 3.4)) shall be converted into the right to
receive an amount in cash equal to (i) $52.75 minus (ii) the quotient of
$1,250,000, representing the attorneys' fees and expenses awarded by the
Court under the Final Order divided by the sum of the aggregate number of
shares of Company Common Stock outstanding at the Effective Time and the
aggregate number of shares of Company Common Stock subject to the Company
Warrants outstanding at the Effective Time (the "Merger Consideration").
(d) CONVERSION OF COMPANY WARRANTS. Each Company Warrant to
purchase shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive an
amount in cash equal to (i) the product of (A) the Merger Consideration
multiplied by (B) the number of shares of Company Common Stock for which such
Company Warrant is exercisable minus (ii) the aggregate exercise price of
such Company Warrant.
(e) NO LIABILITY. None of Hilton, Parent or the Company shall be
liable to any holder of shares of Company Securities for cash which has been
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
6
<PAGE>
3.2 EXCHANGE OF CERTIFICATES.
(a) Prior to the Effective Time, Hilton shall designate the Bank of
New York to act as Paying Agent in connection with the Merger (the "Paying
Agent") for purposes of effecting the exchange of the Merger Consideration
for certificates which, prior to the Effective Time, represented Company
Securities and which are entitled to receive the Merger Consideration
pursuant to Section 3.1. Promptly after the Effective Time, Hilton will
provide the Paying Agent in trust for the benefit of the holders of Company
Securities with immediately available funds ("Payment Fund") in an aggregate
amount equal to the aggregate Merger Consideration to be paid to the holders
of Company Securities pursuant to Section 3.1. The Payment Fund shall be
invested in deposit reserves by the Paying Agent, as directed by Hilton, to
provide for the payment of principal and interest.
(b) Prior to the Effective Time, the Company shall cause to be
mailed to each record holder of an outstanding certificate or certificates of
Company Common Stock or Company Warrants (the "Certificates"), a form of
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates for payment therefor. Upon
surrender to the Paying Agent of a Certificate, together with such letter of
transmittal duly executed, and any other required documents, following the
Merger the holder of such Certificate shall receive promptly in exchange
therefor the Merger Consideration for each Company Common Stock or Company
Warrant formerly evidenced thereby, and such Certificate shall forthwith be
cancelled. No interest will be paid or accrued on the cash payable upon the
surrender of the Certificates. If payment is to be made to a person other
than the person in whose name the surrendered Certificate is registered, it
shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person requesting such payment shall pay any transfer or other taxes required
by reason of the payment to a person other than the registered holder of the
Certificate surrendered or establish to the satisfaction of Hilton that such
tax has been paid or is not applicable. One Hundred Eighty (180)
7
<PAGE>
days after the Effective Time, Hilton shall be entitled to require the Paying
Agent to deliver to it any cash (including any interest received with respect
thereto) which it has made available to the Paying Agent and which has not
been disbursed to holders of Certificates, and thereafter such holders shall
be entitled to look to the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) only as general unsecured creditors
thereof with respect to the cash payable upon due surrender of their
Certificates. Hilton shall pay all charges and expenses, including those of
the Paying Agent, in connection with the distribution of the Merger
Consideration for Company Common Stock and Company Warrants. From and after
the Effective Time, until surrendered in accordance with the provisions of
this Section 3.2(b), each Certificate (other than Certificates which
represented Company Common Stock or Company Warrants held by the Company,
Hilton, Parent or any direct or indirect wholly-owned Subsidiary of the
Company, Hilton or Parent and other than Dissenting Shares) shall represent
for all purposes only the right to receive consideration equal to the Merger
Consideration multiplied by the number of shares of Company Common Stock (or
for which the Company Warrant is exercisable) evidenced by such Certificate,
without any interest thereon. From and after the Effective Time, holders of
Certificates shall have no right to vote or to receive any dividends or other
distributions with respect to any Company Common Stock which were theretofore
represented by such Certificates, other than any dividends or other
distributions payable to holders of record as of a date prior to the
Effective Time, and shall have no other rights other than as provided herein
or by applicable law.
(c) From and after the Effective Time, there shall be no transfers
on the stock transfer books of the Surviving Corporation of the Company
Common Stock or Company Warrants which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented
to the Paying Agent or the Surviving Corporation, they shall be cancelled and
exchanged for the Merger Consideration in accordance with the procedures set
forth in this Article III.
(d) The Paying Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any holder
of Company Common Stock or Company Warrants such amounts as the Paying Agent
is required to deduct and withhold with respect to the
8
<PAGE>
making of such payment under the Internal Revenue Code of 1986, as amended
(the "Code"). To the extent that amounts are so withheld by the Paying
Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Certificates in respect of
which such deduction and withholding was made by the Paying Agent.
(e) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Paying Agent
will issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof as determined in
accordance with this Article III, PROVIDED that the person to whom the Merger
Consideration is paid shall, as a condition precedent to the payment thereof,
give the Surviving Corporation a bond in such sum as it may direct or
otherwise indemnify the Surviving Corporation in a manner satisfactory to it
against any claim that may be made against the Surviving Corporation with
respect to the Certificate claimed to have been lost stolen or destroyed.
3.3 DISSENTERS' RIGHTS. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock that are outstanding
immediately prior to the Effective Time and held by a holder who has
delivered a written demand for appraisal of such shares in accordance with
Section 262 of the DGCL ("Dissenting Shares"), shall not be converted into
the right to receive the Merger Consideration, as provided in Section 2.1
hereof, unless and until such holder fails to perfect or effectively
withdraws or otherwise loses his right to appraisal and payment under the
DGCL. If, after the Effective Time, any such holder fails to perfect or
effectively withdraws or otherwise loses his right to appraisal, such
Dissenting Shares shall thereupon be treated as if they had been converted as
of the Effective Time into the right to receive the Merger Consideration,
without interest or dividends thereon. The Company shall give Hilton prompt
notice of any demands received by the Company for appraisal of shares of
Company Common Stock, and, prior to the Effective Time, Parent shall have the
right to participate in all negotiations and proceedings with respect to such
demands. Prior to the Effective Time, the Company shall not, except with the
prior written consent of Hilton, make any payment with respect to, or settle
or offer to settle, any such demands.
9
<PAGE>
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 APPROVAL OF GAMING COMMISSIONS; REGULATORY MATTERS. Hilton and
Parent shall as promptly as practicable, file or submit those filings and
other submissions under applicable Gaming Laws in connection with the Merger,
this Agreement and the transactions contemplated hereby, and to respond as
promptly as practicable to inquiries received from state or local gaming
authorities and to appear before such authorities as promptly as practicable
in order to obtain as soon as practicable those approvals and consents
required or necessary in connection with the Merger, this Agreement or the
transactions contemplated hereby. In addition, Hilton shall, and shall cause
its Subsidiaries to (and shall use its reasonable efforts to cause its
affiliates other than its Subsidiaries to), if it is necessary to obtain any
regulatory approval for the Merger, disassociate themselves from any person
or persons deemed, or reasonably likely to be deemed, unacceptable by any
Gaming Commission and, in the case of any such person who is a nominee to
serve as a director of Hilton or any of its Subsidiaries, Hilton shall, and
shall cause its relevant Subsidiary or Subsidiaries to replace any such
director nominee with a suitable nominee. Hilton shall keep the Company
apprised of the status of any communications with, and any inquiries or
requests for additional information from, the Gaming Commissions and shall
comply promptly with any such inquiry or request.
ARTICLE V
CONDITIONS PRECEDENT
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger shall be subject
to the satisfaction or waiver on or prior to the Effective Time of the
following condition:
(a) EXECUTION AND FINAL JUDICIAL APPROVAL OF SETTLEMENT AGREEMENT.
The parties to the Memorandum shall have obtained final judicial approval of
the Stipulation of Settlement.
10
<PAGE>
(b) NO INJUNCTIONS OR RESTRAINTS. No statute, rule, regulation,
decree, preliminary or permanent injunction, temporary restraining order
or other order of any nature of any court or Governmental Authority shall
be in effect that restrains, prevents or materially changes the
transactions contemplated hereby; PROVIDED, HOWEVER, that in the case of
a decree, injunction or other order, the party invoking this condition
shall have used reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any
decree, injunction or other order.
(c) GOVERNMENT APPROVALS. Hilton and Parent shall have received all
requisite government approvals required to consummate the Merger,
including those required under applicable Gaming Laws.
ARTICLE VI
TERMINATION AND AMENDMENT
6.1 TERMINATION. Subject to the requirements of the Stipulation of
Settlement, this Agreement may be terminated and the Merger may be abandoned
at any time prior to the Effective Time:
(a) by mutual written consent of the Company, on the one hand,
and Hilton, on the other hand, or by mutual action of their respective
boards of directors; or
(b) by either the Company or Hilton if any of the conditions set
forth in Article 5 shall have become incapable of fulfillment (other than
as a result of any breach by the party seeking to terminate the Agreement)
and shall not have been waived in accordance with the terms of this
Agreement.
6.2 EFFECT OF TERMINATION. In the event of termination by the
Company or Hilton pursuant to Section 6.1, written notice thereof shall
promptly be given to the other party and, except as otherwise provided
herein, the transactions contemplated by this Agreement shall be terminated
and become void and have no effect. Nothing in this Section 6.2 shall be
deemed to release any party from
11
<PAGE>
any liability for any willful and material breach by such party of the terms
and provisions of this Agreement.
6.3 AMENDMENT. This Agreement may be amended, modified or
supplemented only by written agreement of Hilton, Parent and the Company at
any time prior to the Effective Time with respect to any of the terms
contained herein.
6.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective boards
of directors, may, to the extent legally allowed: (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto; and (ii) waive compliance with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. The failure of any party hereto to assert
any of its rights hereunder shall not constitute a waiver of such rights.
ARTICLE VII
GENERAL PROVISIONS
7.1 ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter
contained herein, supersedes and cancels all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral or
written, respecting such subject matter. There are no restrictions,
promises, representations or warranties, agreements or undertakings of any
party hereto with respect to the transactions contemplated by this Agreement
other than those set forth herein or made hereunder.
7.2 HEADINGS; REFERENCES. The article, section and paragraph
headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
All references herein to "Articles", "Sections" or "Exhibits" shall be deemed
to be references to Articles or Sections hereof or Exhibits hereto unless
otherwise indicated.
12
<PAGE>
7.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts and each counterpart shall be deemed to be an original, but all
of which shall constitute one and the same original.
7.4 PARTIES IN INTEREST; ASSIGNMENT. Neither this Agreement nor
any of the rights, interest or obligations hereunder shall be assigned by any
of the parties hereto without the prior written consent of the other parties.
Subject to the preceding sentence this agreement shall inure to the benefit
of and be binding upon the Company, Hilton and Parent and shall inure to the
sole benefit of the Company, Hilton and Parent and their respective
successors and permitted assigns.
7.5 SEVERABILITY; ENFORCEMENT. The invalidity of any portion hereof
shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to
permit enforcement of such restriction to its fullest extent, each party
agrees that a court of competent jurisdiction may enforce such restriction to
the maximum extent permitted by law, and each party hereby consents and
agrees that such scope may be judicially modified accordingly in any
proceeding brought to enforce such restriction.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
HILTON HOTELS CORPORATION
By: /s/ SCOTT LA PORTA
-----------------------------------------
Name: Scott La Porta
Title: Senior Vice President and Treasurer
BALLY'S CHLV INC.
By: /s/ MATTHEW HART
------------------------------------------
Name: Matthew Hart
Title:
BALLY'S GRAND INC.
By: /s/ DAVID ARRAJJ
-------------------------------------------
Name: David Arrajj
Title: Vice President and General Counsel
14
<PAGE>
ANNEX II
LETTER OF TRANSMITTAL
For the Surrender of Certificates
Representing Common Stock and Warrants
BALLY'S GRAND, INC.
in connection with the merger of
BALLY'S CHLV INC. with and into
BALLY'S GRAND, INC.
______________________
THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL
SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
BELOW WILL NOT CONSTITUTE A VALID DELIVERY
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(FOR ELIGIBLE INSTITUTIONS ONLY)
TENDER & EXCHANGE TENDER & EXCHANGE DEPARTMENT
P.O. BOX 11248 (212) 815-6213 101 BARCLAY STREET
CHURCH STREET STATION RECEIVE AND DELIVER WINDOW
NEW YORK, NEW YORK 10286-1248 NEW YORK, NEW YORK 10286
FOR INFORMATION TELEPHONE:
(800) 507-9357
DESCRIPTION OF SHARES OF COMMON STOCK SURRENDERED
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) STOCK CERTIFICATE(S) BEING SURRENDERED
APPEAR(S) ON CERTIFICATE(S) OR, IF ALREADY (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
FILLED IN, PLEASE CORRECT ANY ERRORS) ---------------------------------------------
Total Number of
Certificate Shares Represented by
Number(s) Certificate(s)
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Total Shares
- -------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF WARRANTS SURRENDERED
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) WARRANTS BEING SURRENDERED
APPEAR(S) ON CERTIFICATE(S) OR, IF ALREADY (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
FILLED IN, PLEASE CORRECT ANY ERRORS) ---------------------------------------------
Total Number of
Shares of
Common Stock
Represented Current
Dates(s) by Exercise
of Issue Warrant(s)* Price
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
--------------------------------------------
Total
Shares
- -------------------------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW
</TABLE>
* Please indicate the number of shares as they appear on the Warrant
Certificate.
<PAGE>
PLEASE READ AND FOLLOW CAREFULLY THE ACCOMPANYING INSTRUCTIONS
(Send this Letter of Transmittal and Stock Certificates and/or Warrant
Certificates to the Paying Agent at the address set forth on the first page
of this Letter of Transmittal)
Ladies and Gentlemen:
The undersigned has been advised that the merger (the "Merger") of
Bally's CHLV Inc. (the "Parent"), an indirect wholly owned subsidiary of
Hilton Hotels Corporation ("Hilton"), with and into Bally's Grand, Inc. (the
"Company" or the "Surviving Corporation") is anticipated to become effective
on March __, 1998 (the "Effective Time") in accordance with the terms of an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of February
6, 1998, by and among the Company, the Parent and Hilton.
With respect to shares (the "Shares") of Common Stock, par value
$.01 per share, of the Company (the "Common Stock") held by the undersigned
at the Effective Time, the undersigned hereby surrenders the above-described
certificates representing such Shares accompanied by this executed Letter of
Transmittal and any other documents required by this Letter of Transmittal,
and in exchange therefor, you are hereby requested to deliver to the
undersigned as soon as practicable following such surrender, a check in an
amount equal to the product obtained by multiplying (A) the number of Shares
evidenced by such certificate or certificates by (B) $51.37.
With respect to Warrants to purchase shares of Common Stock (the
"Warrants") held by the undersigned at the Effective Time, the undersigned
hereby surrenders the above-described certificates representing such Warrants
accompanied by this executed Letter of Transmittal and any other documents
required by this Letter of Transmittal, and in cancellation and settlement of
such Warrants, you are hereby requested to deliver to the undersigned as soon
as practicable following such surrender, a check in an amount equal to the
excess of (x) the product obtained by multiplying (A) the number of shares of
Common Stock issuable upon the exercise of the Warrants held by the
undersigned at the Effective Time by (B) $51.37, over (y) the aggregate
exercise price of all Warrants held by the undersigned at the Effective Time.
The name and address of the registered owner(s) of Shares, should
be printed, if they are not already printed, under "Description of Shares of
Common Stock Surrendered," as they appear on the certificate(s) representing
Shares surrendered hereby. The name and address of the registered owners of
Warrants should be printed, if they are not already printed, under
"Description of Warrants Surrendered," as they appear on the certificate(s)
representing Warrants surrendered hereby. The certificate(s), the date(s) of
issue, the exercise price(s), the number of Shares and/or the number of
shares of Common Stock represented by Warrants that the undersigned wishes to
surrender should be indicated in the appropriate boxes. The undersigned
will, upon request, execute any additional documents deemed reasonably
necessary or desirable to complete the transmittal of the Shares and/or
Warrants surrendered hereby. The undersigned hereby represents and warrants
that (a) the undersigned has full power and authority to surrender the Shares
and/or Warrants being transmitted herewith as described above for payment as
provided herein and that, when the consideration payable to the undersigned
is paid in accordance with the Merger Agreement and as set forth above,
neither Hilton nor the Surviving Corporation will be subject to any adverse
claim in respect of such Shares and/or Warrants, (b) the undersigned has good
title to the Shares and/or Warrants being transmitted herewith, free and
clear of all liens, claims and encumbrances, and (c) the undersigned has read
and agrees to all terms and conditions set forth herein.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive the death or incapacity of, the undersigned.
Delivery of the enclosed certificate(s) shall be effected, and risk
of loss and title shall pass, only upon proper delivery thereof to you at the
address given above. Surrender of a certificate or certificates representing
Shares or Warrants is irrevocable.
Unless otherwise indicated under "Special Payment Instructions",
please issue the check(s) for the consideration described above in the name
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions", please mail the check(s) for such amounts to the
address appearing under "Description of Shares of Common Stock Surrendered"
and/or Description of Warrants Surrendered."
<PAGE>
INSTRUCTIONS
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATE(S); SIGNATURE
GUARANTEES. Certificates for all surrendered Shares and/or Warrants, as well
as a properly completed and duly executed Letter of Transmittal and any other
documents required by this Letter of Transmittal, must be received by the
Paying Agent at the address set forth in this Letter of Transmittal in order
for the appropriate person to receive the consideration set forth in the
Letter of Transmittal.
Notwithstanding any other provision hereof, the consideration set forth
in the Letter of Transmittal shall in all cases be paid only after receipt by
the Paying Agent of certificate(s) for such Shares and/or Warrants
surrendered hereby, a properly completed and duly executed Letter of
Transmittal and all other required documents.
If this Letter of Transmittal is signed by the registered holder of the
Shares and/or Warrants surrendered hereby, the signature must correspond with
the name written on the face of the certificate(s) or on the agreement(s)
without any change whatsoever. If certificate(s) are registered in the name
of a person other than the signer of this Letter of Transmittal, the
certificate(s) must be duly endorsed, or accompanied by stock power(s) signed
by the registered holder(s), with the signature(s) on the endorsement(s) or
stock power(s) guaranteed thereon and on this Letter of Transmittal as
provided below. If the surrendered certificate(s) are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If this Letter of Transmittal is executed by an officer on behalf of a
corporation or by an executor, administrator, trustee, guardian, attorney,
agent or other person acting in a fiduciary or representative capacity, the
person signing must forward with the Letter of Transmittal such person's full
title in such capacity and appropriate evidence of authority to act in such
capacity (including court orders and corporate resolutions where necessary),
as well as evidence of the authority of the person signing to surrender the
Shares and/or Warrants. Questions regarding such evidence of authority may
be referred to the Paying Agent.
IF SHARES AND/OR WARRANTS ARE SURRENDERED BY A REGISTERED HOLDER WHO HAS
COMPLETED THE BOX ENTITLED "SPECIAL DELIVERY INSTRUCTIONS," SIGNATURES ON
THIS LETTER OF TRANSMITTAL MUST BE GUARANTEED BY A FINANCIAL INSTITUTION
(INCLUDING MOST BANKS, SAVINGS AND LOAN ASSOCIATIONS AND BROKERAGE HOUSES)
THAT IS A PARTICIPANT IN THE SECURITIES TRANSFER AGENTS MEDALLION PROGRAM,
THE NEW YORK STOCK EXCHANGE MEDALLION SIGNATURE PROGRAM OR THE STOCK
EXCHANGES MEDALLION PROGRAM (EACH, AN "ELIGIBLE INSTITUTION"). NO SIGNATURE
GUARANTEE IS REQUIRED, HOWEVER, IF THIS LETTER OF TRANSMITTAL IS SIGNED BY
THE REGISTERED HOLDER(S) OF THE SHARES AND/OR WARRANTS SURRENDERED HEREWITH
AND PAYMENT IS TO BE MADE DIRECTLY TO SUCH REGISTERED HOLDER(S) BY CHECK OR
WIRE TRANSFER.
2. METHOD OF DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATE(S). The
method of delivery of this Letter of Transmittal, the certificate(s), and any
other required documents is at the option and risk of the stockholder or
warrantholder, but the delivery will be deemed made only when actually
received by the Paying Agent. It is suggested that you use overnight courier
mail or properly insured registered mail with return receipt requested. A
return envelope for mailing is enclosed.
3. NO CONDITIONAL SURRENDER. No alternative, conditional, irregular or
contingent surrender of Shares and/or Warrants or transmittal of this Letter
of Transmittal will be accepted. Partial surrender of certificates will not
be permitted.
4. MULTIPLE REGISTRATIONS. If a stockholder's Shares or a
warrantholder's Warrants are registered differently on several certificates,
it will be necessary for such stockholder and/or warrantholder to complete,
sign and submit as many separate Letters of Transmittal as there are
different registrations for such stockholder's Shares and/or such
warrantholder's Warrants.
5. INADEQUATE SPACE. If the space provided in this Letter of
Transmittal is inadequate, the certificate numbers, the dates of issue, the
exercise prices, number of Shares, and/or the number of shares of Common
Stock represented by Warrants should be listed on a separate schedule to be
affixed hereto.
6. WAIVER OF APPRAISAL RIGHTS. The holder hereby waives any appraisal
rights pursuant to Section 262 of the Delaware General Corporation Law with
respect to the Shares held by such holder. All Shares represented by
certificates delivered to the Paying Agent will be deemed to have been
surrendered.
7. 31% BACKUP WITHHOLDING. In order to avoid "backup withholding" of
Federal income tax on any payment received upon the surrender of Shares or
Warrants, a U.S. stockholder or warrantholder must, unless an exemption
applies, provide such stockholder's or warrantholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 on this Letter of
Transmittal and certify, under penalties of perjury, that such number is
correct. If the correct TIN is not provided, a $50 penalty may be imposed on
the stockholder or warrantholder by the Internal Revenue Service and the
consideration paid for the Shares or Warrants may be subject to backup
withholding of 31%.
<PAGE>
If backup withholding applies, 31% of any payment paid to the
stockholder or warrantholder or other payee will be withheld. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld,
provided that the required information is given to the Internal Revenue
Service. If withholding results in an overpayment of taxes, a refund may be
obtained by the stockholder, warrantholder, or payee from the Internal
Revenue Service.
The TIN that is to be provided on the Substitute Form W-9 is that of the
registered holder(s) of the Shares or Warrants or of the last transferee
appearing on the transfers attached to, or endorsed on, the Shares or
Warrants. The TIN for an individual is such individual's social security
number. If the Shares or Warrants are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder or warrantholder has not been issued a TIN and has
applied for a TIN or intends to apply for a TIN in the near future. If the
box in Part 3 is checked, the stockholder, warrantholder or other payee must
also complete the Certificate of Awaiting Taxpayer Identification Number
below the Substitute Form W-9 in this Letter of Transmittal in order to avoid
having backup withholding. Notwithstanding that the box in Part 3 is checked
and the Certificate of Awaiting Taxpayer Identification Number is completed,
31% on all payments made prior to the time a properly certified TIN is
provided will be withheld. However, such amounts will be refunded to such
stockholder or warrantholder if a TIN is provided within 60 days.
Certain stockholders and warrantholders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. In order for a foreign individual to
qualify as an exempt recipient, the stockholder or warrantholder must submit
a Form W-8, signed under penalties of perjury, attesting to that individual's
exempt status. A Form W-8 with instructions is attached. If a completed
Form W-8 from a non-U.S. stockholder or warrantholder is not received, 31% on
all payments made will be withheld.
8. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares or Warrants has been lost, destroyed or stolen, the
stockholder and/or warrantholder should promptly notify the Surviving
Corporation by checking the box immediately following special payment and
special delivery instructions and indicating the number of Shares and/or
Warrants lost. The stockholder and/or warrantholder will then be instructed
as to the steps that must be taken in order to replace the certificate and/or
agreement. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates
and/or agreements have been followed.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance may be directed to, or additional copies of this Letter of
Transmittal may be obtained from the Surviving Corporation at the mailing
address set forth on the first page of this Letter of Transmittal.
DELIVERY OF THE CERTIFICATE(S) SHALL BE EFFECTED, AND RISK OF LOSS AND TITLE
SHALL PASS, ONLY UPON PROPER DELIVERY THEREOF TO THE SURVIVING CORPORATION,
AS SET FORTH IN THE INSTRUCTIONS PROVIDED IN THIS LETTER OF TRANSMITTAL
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTION 1)
To be completed ONLY if the undersigned is entitled to receive in excess of
$250,000 and desires payment by wire transfer.
Pay the Consideration by Wire Transfer to:
Name of Bank: __________________________________
Address of Bank: _______________________________
ABA Number: ____________________________________
Account Number: ________________________________
Name on Account: _______________________________
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTION 1)
To be completed ONLY if a check is to be sent to someone other than the
undersigned or to an address other than that shown under "Description of
Shares of Common Stock Surrendered," and/or "Description of Warrants
Surrendered" above.
Issue check to:
Name: ___________________________________________
(Please Print)
Address: ________________________________________
_________________________________________________
(Zip Code)
/ / CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING THE SHARES AND/OR
WARRANTS BEING SURRENDERED HAVE BEEN LOST OR DESTROYED AND SEE
INSTRUCTION 8.
Number of Shares represented by the lost or destroyed certificate: ________
Number of Warrants represented by the lost or destroyed certificate: ______
<PAGE>
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON FOLLOWING PAGE)
----------------------------------------------------------------
----------------------------------------------------------------
(Signature(s) of Stockholder(s))
(Must be signed by the registered holder(s) exactly as name(s)
appear(s) on stock or warrant certificate(s) or on a security
position listing or by person(s) authorized to become registered
holder(s) by certificates and documents transmitted herewith or by
a duly authorized representative of any such person. If signature
is by an officer on behalf of a corporation or by an executor,
administrator, trustee, guardian, attorney, agent or other person
acting in a fiduciary or representative capacity, please provide the
following information. (See Instruction 1.)).
Dated: ___________________________________________________________
Name(s): __________________________________________________________
___________________________________________________________________
(Please Print)
Capacity (Full Title) _____________________________________________
Address ___________________________________________________________
___________________________________________________________________
(Include Zip Code)
Daytime Area Code and Telephone No. _______________________________
Employer Identification or
Social Security No. _______________________________________________
GUARANTEE OF SIGNATURES
(If Required -- See Instruction 1)
Authorized Signature ______________________________________________
Name ______________________________________________________________
(Please Print)
Name of Firm ______________________________________________________
Address ____________________________________________________________
(Include Zip Code)
Daytime Area Code and Telephone No. _______________________________
Dated: ____________________________________________________________
<PAGE>
SUBSTITUTE FORM W-9
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN")
PART 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW:
Social Security Number or
Employer Identification Number
______________________________
PART 2--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding either because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject
to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding, do not cross out such item
(2).
SIGNATURE ________________________
DATE _____________________________
PART 3
Awaiting TIN / /
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU. PLEASE REVIEW
INSTRUCTION 7 ABOVE AND THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered
an application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld,
but that such amounts will be refunded to me if I then provide a taxpayer
identification number within 60 days.
______________________________________ ___________________________
Signature Date
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYOR --
Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by one
hyphen: i.e. 00-0000000. The table below will help determine the number to give
the payor.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE
SOCIAL SECURITY
NUMBER OF --
- --------------------------------------------------------------------------------
<S> <C> <C>
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the account or,
account) if combined funds, the first
individual on the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4a. The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b. So-called trust account that is not The actual owner(1)
a legal or valid trust under State
Law
5. Sole proprietorship account The owner(3)
<CAPTION>
- --------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
IDENTIFICATION
NUMBER OF --
- --------------------------------------------------------------------------------
<S> <C> <C>
6. Sole proprietorship account The owner(3)
7. A valid trust, estate, or pension The legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not
designated in the account title)(4)
8. Corporate account The corporation
9. Association, club, religious, The organization
charitable, educational or other
tax-exempt organization
10. Partnership account The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district or
prison) that receives agricultural
program payments
</TABLE>
- ------------------------------------------------
- ------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner.
(4) List first and circle the name of the valid trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER (TIN) ON SUBSTITUTE FORM W-9
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE)
Page 2
NAME
If you are an individual, generally provide the name shown on your social
security card. However, if you have changed your last name, for instance, due to
marriage, without informing the Social Security Administration of the name
change, please enter your first name and both the last name shown on your social
security card and your new last name.
SOLE PROPRIETOR
You must enter your individual name. (Enter either your SSN or EIN in Part
1.) You may also enter your business name or "doing business as" name on the
business line. Enter your name as shown on your social security card and
business name as it was used to apply for your EIN on Form SS-4.
OBTAINING A NUMBER
If you don't have a taxpayer identification number ("TIN"), apply for one
immediately. To apply, obtain Form SS-5, Application for a Social Security
Number Card, or Form SS-4, Application for Employer Identification Number, at
the local office of the Social Security Administration or the Internal Revenue
Service (the "IRS").
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for
which no information reporting is required. For interest and dividends, all
listed payees are exempt except item (9). For broker transactions, payees listed
in (1) through (13), and a person registered under the Investment Advisors Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except that a corporation
that provides medical and health care services or bills and collects payments
for such services is not exempt from backup withholding or information
reporting.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), or an individual
retirement plan ("IRA"), or a custodial account under section 403(b)(7).
(3) The United States or any agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures Trading
Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the Investment
Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc. Nominee List.
(15) An trust exempt from tax under Section 664 or described in section 4947.
Payments of dividends generally not subject to backup withholding also
include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYOR'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYOR.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044,
6045, 6049, 6050A, and 6050N, and the regulations under those sections.
PRIVACY ACT NOTICE. -- Section 6109 requires you to furnish your correct TIN
to persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your TIN whether or not you are
qualified to file a tax return. Payors must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
TIN to a payor. Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TIN. -- If you fail to furnish your correct TIN to a
payor, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION
CONTACT YOUR TAX CONSULTANT OR THE IRS
<PAGE>
ANNEX III
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SECTION 262. APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of
this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by
the Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this section.
As used in this section, the word "stockholder" means a holder of record of
stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of
a member of a nonstock corporation; and the words "depository receipt" mean a
receipt or other instrument issued by a depository representing an interest
in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsections (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an
III-1
<PAGE>
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title is
not owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing
to take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the merger or consolidation and that appraisal rights are available for
any or all of the shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
III-2
<PAGE>
rights. Such notice may, and, if given on or after the effective date of
the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify the stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective
date of the merger or consolidation notifying each of the holders of any
class or series of stock of such constituent corporation that are entitled
to appraisal rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such a second notice
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated herein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided, that if the notice
is given on or after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is fixed and
the notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the notice
is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall
be entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
III-3
<PAGE>
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal proceedings;
and if any stockholder fails to comply with such direction, the Court may
dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant
to subsection (f) of this section and who has submitted his certificates of
stock to the Register in Chancery, if such is required, may participate fully
in all proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as
the Court may direct. Payment shall be so made to each such stockholder, in
the case of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree
may be enforced as other decrees in the Court of Chancery may be enforced,
whether such surviving or resulting corporation be a corporation of this
State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the
stock (except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal shall
be filed within the time provided in subsection (e) of this section, or if
such stockholder shall deliver to the surviving or resulting corporation a
written withdrawal of his demand for an appraisal and an acceptance
III-4
<PAGE>
of the merger or consolidation, either within 60 days after the effective
date of the merger or consolidation as provided in subsection (e) of this
section or thereafter with the written approval of the corporation, then the
right of such stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery shall be
dismissed as to any stockholder without the approval of the Court, and such
approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
III-5
<PAGE>
ANNEX IV
June 12, 1997
The Board of Directors
Bally's Grand, Inc.
3645 Las Vegas Boulevard
Las Vegas, NV 89109
Gentlemen:
You have engaged us pursuant to the engagement letter, dated as of June
11, 1997, between Bally's Grand, Inc. ("Bally's Grand" or the "Company") and
Ladenburg Thalmann & Co. Inc. ("Ladenburg"). Specifically, you have requested
our opinion as to whether or not the consideration to be paid in connection
with the purchase of common shares (and warrants to purchase common shares)
from certain shareholders of the Company for cash consideration of $52.75 per
share (and for the warrants the difference between $52.75 per share and the
warrant exercise price) (the "Transaction"), pursuant to the Memorandum of
Understanding (the "Repurchase Agreement") attached hereto as Exhibit A, is
fair, from a financial point of view, to the shareholders of the Company.
The Repurchase Agreement provides that at the closing of the
Transaction, the Company will repurchase 388,561 shares of Bally's Grand
common stock and 61,285 warrants to purchase shares of Bally's Grand common
stock held by Tower Investment Group, Inc. (Tower") and 578,186 shares of
Bally's Grand common stock and 41,413 warrants to purchase shares of Bally's
Grand common stock held by Executive Life of New York ("Executive Life") at a
price of $52.75 per share in cash for stock, and, for warrants, the
difference between $52.75 per share in cash less the exercise price of
warrants.
In connection with rendering this opinion, we have reviewed such
information as we have deemed necessary or appropriate for the purpose of
stating the opinions expressed herein, including but not limited to the
following: (i) the Repurchase Agreement; (ii) the Annual Reports on Form 10-K
for Bally's Grand for the three fiscal years ended December 31, 1994,
December 31, 1995 and December 31, 1996; (iii) detailed internal financial
statements for Bally's Grand for the fiscal years ended December 31, 1995 and
December 31, 1996 and the first quarter ended March 31, 1997; (iv)
management's five-year projected financial statements for Bally's Grand; (v)
Bally's Grand's common stock price and volume trading history; and (vi)
publicly available information regarding the industry, Bally's Grand, Inc.
and its competitors. In addition, we met with members of senior management
of Bally's Grand at its offices in Las Vegas, Nevada to discuss the
historical and prospective industry environment and operating results for
Bally's Grand.
In rendering our opinion, we have assumed and relied upon the accuracy,
completeness and fairness, without assuming any responsibility for the
independent verification of, all financial and other information that was
available to us from public sources, that was provided to us by Bally's
Grand, or that was otherwise reviewed by us. With respect to financial
projections
<PAGE>
supplied to us, we assume that they have been reasonably prepared based on
the Company's then current estimate of results, and we have relied upon such
projections and made no independent verification of the bases, assumptions,
calculations or other information contained therein. We have not made or
been provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Bally's Grand, and we do not assume
any responsibility for verifying any of the information reviewed by us. Our
opinion is necessarily based upon information available to us, and financial,
stock market and other conditions and circumstances existing and disclosed to
us, as of the date hereof.
In conducting our investigation and analyses and in arriving at our
opinion expressed herein, we have taken into account such accepted financial
and investment banking procedures and considerations as we have deemed
relevant, including: (i) historical revenues, operating earnings, net income
and capitalization of the Company and certain other publicly held companies in
businesses we believe to be comparable to the Company's; (ii) the current
financial and market position and results of operations of the Company; and
(iii) the general condition of the securities market.
Ladenburg, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with
mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for estate, corporate or
other purposes. Ladenburg has been retained by the Board of Directors of
Bally's Grand to provide this opinion and has received fees and indemnification
against certain liabilities for the services rendered pursuant to this
engagement. Ladenburg has not provided investment banking or financial
advisory services to Bally's Grand in the past.
In the ordinary course of business, we actively trade securities for our
own account and for the accounts of our customers and, accordingly, may at any
time hold a long or short position in the debt or equity securities of the
Company.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Consideration to be paid in
the Transaction is fair, from a financial point of view, to the shareholders of
the Company.
Very truly yours,
LADENBURG THALMANN & CO. INC.
<PAGE>
ANNEX V
February 6, 1998
The Board of Directors
Bally's Grand, Inc.
3645 Las Vegas Boulevard
Las Vegas, NV 89109
Gentlemen:
You have engaged us pursuant to the engagement letter, dated as of June
11, 1997, as supplemented by the letter dated February 5, 1998, between Bally's
Grand, Inc. ("Bally's Grand" or the "Company") and Ladenburg Thalmann & Co.
Inc. ("Ladenburg"). Specifically, you have requested our opinion as to whether
or not the consideration to be received in connection with the sale of all
remaining common shares (and warrants to purchase common shares) of the Company
not already held by Hilton Hotels Corporation ("Hilton") to Hilton for cash
consideration of $52.75 per share, less attorney's fees and other expenses (and
for the warrants the difference between $52.75 per share and the warrant
exercise price, less attorney's fees and other expenses) (the "Transaction"),
pursuant to the draft Merger Agreement dated as of February 6, 1998 (the
"Merger Agreement"), is fair, from a financial point of view, to the
shareholders (and warrant holders) of the Company.
The Merger Agreement provides that at the closing of the Transaction,
Hilton will acquire all remaining shares of Bally's Grand common stock not
already held by Hilton in exchange for $52.75 per share in cash (less
attorney's fees and expenses awarded by the Court) for stock, and, for
warrants, the difference between $52.75 per share in cash (less attorney's fees
and expenses awarded by the Court) less the exercise price of warrants.
In connection with rendering this opinion, we have reviewed such
information as we have deemed necessary or appropriate for the purpose of
stating the opinions expressed herein, including but not limited to the
following: (i) the Merger Agreement; (ii) the Annual Reports on Form 10-K for
Bally's Grand for the three fiscal years ended December 31, 1994, December 31,
1995 and December 31, 1996; (iii) the Quarterly Report on Form 10-Q for the
Company for the nine months ended September 30, 1997; (iv) detailed internal
financial statements for Bally's Grand for the fiscal years ended December 31,
1995, December 31, 1996 and December 31, 1997; (v) management's five-year
projected financial statements for Bally's Grand; (vi) Bally's Grand's common
stock price and volume trading history; and (vi) publicly available information
regarding the industry, Bally's Grand, Inc. and its competitors. In addition,
we met with members of senior management of Bally's Grand at its offices in
Las Vegas, Nevada to discuss the historical and prospective industry
environment and operating results for Bally's Grand.
<PAGE>
The Board of Directors
Bally's Grand, Inc.
February 6, 1998
Page 2
In rendering our opinion, we have assumed and relied upon the accuracy,
completeness and fairness, without assuming any responsibility for the
independent verification of, all financial and other information that was
available to us from public sources, that was provided to us by Bally's Grand,
or that was otherwise reviewed by us. With respect to financial projections
supplied to us, we assume that they have been reasonably prepared based on the
Company's then current estimate of results, and we have relied upon such
projections and made no independent verification of the bases, assumptions,
calculations or other information contained therein. We have not made or been
provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Bally's Grand, and we do not assume
any responsibility for verifying any of the information reviewed by us. Our
opinion is necessarily based upon information available to us, and financial,
stock market and other conditions and circumstances existing and disclosed to
us, as of the date hereof.
In conducting our investigation and analyses and in arriving at our
opinion expressed herein, we have taken into account such accepted financial
and investment banking procedures and considerations as we have deemed
relevant, including: (i) historical revenues, operating earnings, net income
and capitalization of the Company and certain other publicly held companies in
businesses we believe to be comparable to the Company's; (ii) the current
financial and market position and results of operations of the Company; and
(iii) the general condition of the securities market.
Ladenburg, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with
mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for estate, corporate or
other purposes. Ladenburg has been retained by the Board of Directors of
Bally's Grand to provide this opinion and has received fees and indemnification
against certain liabilities for the services rendered pursuant to this
engagement. Ladenburg has not provided investment banking or financial
advisory services to Bally's Grand in the past.
In the ordinary course of business, we actively trade securities for our
own account and for the accounts of our customers and, accordingly, may at any
time hold a long or short position in the debt or equity securities of the
Company and Hilton.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Consideration to be
received in the Transaction is fair, from a financial point of view, to the
shareholders (which includes the warrant holders) of the Company.
Very truly yours,
LADENBURG THALMANN & CO. INC.
