<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1994
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RESORTS INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
7011
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
59-0763055
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
1133 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 344-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CHRISTOPHER D. WHITNEY, ESQ.
RESORTS INTERNATIONAL, INC.
1133 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 344-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
6719
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
65-0461729
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
1133 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 344-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CHRISTOPHER D. WHITNEY, ESQ.
RESORTS INTERNATIONAL, INC.
1133 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 344-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
RESORTS INTERNATIONAL HOTEL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
7011
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
21-0423320
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
1133 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 344-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CHRISTOPHER D. WHITNEY, ESQ.
RESORTS INTERNATIONAL, INC.
1133 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 344-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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Copies to:
PETER E. PANARITES, ESQ.
FREEDMAN, LEVY, KROLL & SIMONDS
1050 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
(202) 457-5105
STEVEN R. FINLEY, ESQ.
GIBSON, DUNN & CRUTCHER
200 PARK AVENUE
NEW YORK, NEW YORK 10166
(212) 351-4000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
From time to time after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box./X/
CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED
OFFERING MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED UNIT(1) OFFERING PRICE FEE
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11% Mortgage Notes due 2003(2)............................... $87,500,000 100% $87,500,000 $30,173
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Units, each Unit comprised of $1,000 principal amount of
11.375%
Junior Mortgage Notes due 2004(2), and one share of Class B
Redeemable Common Stock, par value $.01 per share(3)....... 24,500 Units $1,000 $24,500,000 8,449
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Common Stock, par value $.01 per share(3).................... 11,900,000 shs. $1.40625(5) $16,734,375 5,771
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Guarantees relating to the 11% Mortgage Notes due 2003(4)....
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Guarantees relating to the 11.375% Junior Mortgage Notes due
2004(4)....................................................
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Total fee................................................ $44,393
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Issued by Resorts International Hotel Financing, Inc.
(3) Issued by Resorts International, Inc.
(4) Issued by Resorts International Hotel, Inc.
(5) Average of high and low prices reported on American Stock Exchange on April
28, 1994.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CROSS REFERENCE SHEET
PURSUANT TO RULE 404(A)
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ITEM IN FORM S-1 CAPTION IN PROSPECTUS
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1. Forepart of Registration Statement and Outside Cover Outside Front Cover Page of
Page of Prospectus................................ Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Available Information
3. Summary Information, Risk Factors and Ratio of Prospectus Summary; Risk Factors;
Earnings to Fixed Charges......................... Selected Historical Financial
Data
4. Use of Proceeds..................................... Not Applicable
5. Determination of Offering Price..................... Not Applicable
6. Dilution............................................ Not Applicable
7. Selling Security Holders............................ Selling Securityholders
8. Plan of Distribution................................ Plan of Distribution
9. Description of Securities to be Registered.......... Description of Mortgage Notes;
Description of Junior Mortgage
Notes; Description of Common
Stock and Class B Common Stock;
Certain Federal Income Tax
Considerations
10. Interests of Named Experts and Counsel.............. Not Applicable
11. Information with Respect to the Registrant.......... The Company; Risk Factors;
Restructuring of Series Notes;
Selected Historical Financial
Data; Pro Forma Financial Data;
Market Prices of Common Stock;
Management's Discussion and
Analysis of Financial Condition
and Results of Operations;
Description of Business;
Management of RII; Management of
RIHF; Management of RIH; Security
Ownership; Certain Transactions;
Litigation
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities.................... Not Applicable
</TABLE>
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 29, 1994
PROSPECTUS
RESORTS INTERNATIONAL, INC.
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
RESORTS INTERNATIONAL HOTEL, INC.
All of the (i) 11,900,000 shares of Common Stock, par value $.01 per share
(the "Common Stock"), of Resorts International, Inc., a Delaware corporation
("RII"); (ii) $87,500,000 principal amount of 11% Mortgage Notes due 2003 (the
"Mortgage Notes") issued by Resorts International Hotel Financing, Inc., a
Delaware corporation and a wholly owned subsidiary of RII ("RIHF"), and
guaranteed (the "Mortgage Note Guaranty") by Resorts International Hotel, Inc.,
a New Jersey corporation and a wholly owned subsidiary of RII ("RIH"); and (iii)
24,500 Units (the "Units"), each Unit comprised of (a) $1,000 principal amount
of 11.375% Junior Mortgage Notes due 2004 (the "Junior Mortgage Notes") issued
by RIHF and guaranteed (the "Junior Mortgage Note Guaranty") by RIH, and (b) one
share of Class B Redeemable Common Stock, par value $.01 per share (the "Class B
Common Stock"), of RII, offered hereby are being offered by the Selling
Securityholders. See "Selling Securityholders." The term "Company" as used
herein includes RII and/or one or more of its subsidiaries, as the context may
require.
Interest on the Mortgage Notes accrues at the rate of 11% per year and is
payable in cash, semi-annually on March 15 and September 15 of each year. See
"Description of Mortgage Notes." The Mortgage Notes, as a class, are secured by
an assignment of a promissory note of RIH (the "RIH Promissory Note") in the
original principal amount of $125,000,000, payable in amounts and at times
necessary to pay the principal of and interest on the Mortgage Notes. The RIH
Promissory Note is secured by a lien on all real property, improvements thereon
and certain other property and equipment described below constituting Merv
Griffin's Resorts Casino Hotel in Atlantic City, New Jersey (the "Resorts Casino
Hotel"). The RIH Promissory Note and the Resorts Casino Hotel collectively are
referred to as the "Mortgage Note Trust Estate". In addition, RIH has issued the
Mortgage Note Guaranty of the payment of principal of and interest on the
Mortgage Notes, secured by a lien on the Resorts Casino Hotel. The Mortgage
Notes will be structurally subordinated to certain notes of RIHF (the "Senior
Facility Notes") that may be issued pursuant to a senior secured note purchase
agreement (the "Senior Facility"). See "Description of Mortgage Notes."
Interest on the Junior Mortgage Notes accrues at the rate of 11.375% per
year and is payable in cash or, at RIHF's option and subject to certain
limitations, additional Units comprised of Junior Mortgage Notes and Class B
Common Stock, semi-annually on June 15 and December 15 of each year. See
"Description of Junior Mortgage Notes". Interest may be paid in additional Units
("Payments-In-Kind") on any interest payment date on which RIH's Consolidated
Cash Flow (as defined in the indenture pursuant to which the Junior Mortgage
Notes were issued (the "Junior Mortgage Note Indenture")) for the most recently
completed four fiscal quarters is less than $35,000,000. Upon the redemption, or
cancellation following the purchase thereof, of each $1,000 principal amount of
Junior Mortgage Notes, RII will redeem, at $0.01, the one share of Class B
Common Stock issued as a Unit with each $1,000 principal amount of Junior
Mortgage Notes. The Junior Mortgage Notes and the Class B Common Stock
comprising the Units may not be transferred separately. The Junior Mortgage
Notes, as a class, are secured by an assignment of a junior promissory note of
RIH (the "RIH Junior Promissory Note") in the original principal amount of
$35,000,000, payable in amounts and at times necessary to pay the principal of
and interest on the Junior Mortgage Notes. The RIH Junior Promissory Note is
secured by a lien on the Resorts Casino Hotel. The RIH Junior Promissory Note
and the Resorts Casino Hotel collectively are referred to as the "Junior
Mortgage Note Trust Estate". In addition, RIH has issued the Junior Mortgage
Note Guaranty of the payment of principal of and interest on the Junior Mortgage
Notes, secured by a lien on the Resorts Casino Hotel. The Junior Mortgage Notes
will be structurally subordinated to RIHF's Senior Facility Notes, if issued,
and are structurally subordinated to the Mortgage Notes. See "Description of
Junior Mortgage Notes."
The Company will not receive any of the proceeds from the sale of the
Mortgage Notes, Units or Common Stock. Any or all of such Mortgage Notes, Units
or Common Stock may be sold, from time to time, by means of ordinary brokerage
transactions or otherwise at prices prevailing at the time of sale or at such
other prices as may be negotiated among the parties. The Mortgage Notes, Units
and Common Stock are listed on the American Stock Exchange (the "AMEX"). The
Mortgage Notes and Units have been so listed since May , 1994. Prior to that
time there was no market for those securities. See "Plan of Distribution."
FOR A DISCUSSION OF CERTAIN IMPORTANT CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE MORTGAGE NOTES, UNITS OR COMMON STOCK, SEE "RISK FACTORS."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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THE NEW JERSEY CASINO CONTROL COMMISSION HAS NOT PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
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THE DATE OF THIS PROSPECTUS IS MAY , 1994
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The Mortgage Notes, Units and Common Stock being offered hereby have been
registered under the Securities Act of 1933, as amended (the "Securities Act")
by the Company, in order to satisfy obligations of the Company to certain
holders of the Mortgage Notes, Units and Common Stock in connection with the
restructuring (the "Restructuring") of RII's former Senior Secured Redeemable
Notes that were due April 15, 1994 (the "Series Notes"). See "Restructuring of
Series Notes" and "Selling Securityholders." Substantially all of the expenses
of the offering, estimated at $400,000, will be paid by the Company.
---------------
AVAILABLE INFORMATION
RII, RIHF, RIH (collectively, the "Registrants") have filed a Registration
Statement on Form S-1 (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") under the Securities Act with respect to
the securities offered hereby. As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information, exhibits and undertakings
contained in the Registration Statement. Such additional information, exhibits
and undertakings can be inspected at and obtained from the Commission in the
manner set forth below. For further information with respect to the securities
offered hereby and the Registrants, reference is made to the Registration
Statement and the financial schedules and exhibits filed as part thereof.
RII and RIH are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act") and, in accordance therewith,
file periodic reports and other information with the Commission. Reports and
other information filed with the Commission, as well as the Registration
Statement, can be inspected and copied at the public reference facilities of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices located at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and at 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material also can
be obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Mortgage
Notes, Units and Common Stock are listed on the AMEX, and such reports and other
information regarding the Registrants can be inspected and copied at the offices
of the AMEX, 86 Trinity Place, New York, New York 10006. Copies of the various
documents referred to herein also may be obtained from RII upon request to RII
at its principal executive offices.
RIHF also is subject to the informational requirements of the Exchange Act.
However, in view of the limited nature of its activities, described in this
Prospectus, RIHF has filed an application under Section 12(h) of the Exchange
Act requesting an order of exemption, or other form of relief, from those
requirements. Accordingly, unless RIHF's request is denied, reports and other
information for RIHF, except as included in consolidated financial statements
and reports of RII, or in registration statements such as the Registration
Statement, will not be filed with the Commission or the AMEX.
The principal executive offices of RII, RIHF and RIH are located at 1133
Boardwalk, Atlantic City, New Jersey 08401. The telephone number of RII, RIHF
and RIH is (609) 344-6000.
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MAY NOT BE RELIED UPON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES, OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION IN WHICH, OR
TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE DISTRIBUTION OF ANY SECURITIES
HEREUNDER, UNDER ANY CIRCUMSTANCES, SHALL CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR IN THE INFORMATION CONTAINED
HEREIN SINCE THE DATE HEREOF.
2
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TABLE OF CONTENTS
<TABLE>
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PAGE
NO.
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AVAILABLE INFORMATION................................................................. 2
PROSPECTUS SUMMARY.................................................................... 7
The Registrants.................................................................. 7
Risk Factors..................................................................... 7
Emergence from Bankruptcy........................................................ 7
The Offering..................................................................... 7
Summary Historical and Pro Forma Financial Data.................................. 8
THE COMPANY........................................................................... 9
Recent Developments.............................................................. 9
RISK FACTORS.......................................................................... 9
Continuing High Leverage; Future Refinancings.................................... 9
Recent Net Losses................................................................ 10
Lack of Market for the Mortgage Notes and Units -- Other Market Considerations... 10
Involvement of Merv Griffin...................................................... 10
Certain Federal Income Tax Considerations........................................ 10
Additional Senior Secured Debt; Subordination.................................... 11
Security for the Mortgage Notes and the Junior Mortgage Notes.................... 11
Competition...................................................................... 11
New Jersey Regulatory Matters.................................................... 12
Potential Disqualification of Holders by the Casino Control Commission........... 13
Risk of Highly Leveraged Transaction............................................. 13
RESTRUCTURING OF SERIES NOTES......................................................... 14
Background....................................................................... 14
Restructuring.................................................................... 14
Paradise Island Assets Acquired by SIHL.......................................... 16
CAPITALIZATION OF RII................................................................. 17
CAPITALIZATION OF RIH................................................................. 18
SELECTED HISTORICAL FINANCIAL DATA.................................................... 19
RII.............................................................................. 19
RIH.............................................................................. 21
PRO FORMA FINANCIAL DATA.............................................................. 23
RIHF............................................................................. 23
RII.............................................................................. 24
RIH.............................................................................. 28
MARKET PRICES OF COMMON STOCK......................................................... 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................................... 33
Financial Condition.............................................................. 33
Results of Operations............................................................ 35
</TABLE>
3
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<TABLE>
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PAGE
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DESCRIPTION OF BUSINESS............................................................... 42
General.......................................................................... 42
Gaming Facilities................................................................ 42
Resort and Hotel Facilities...................................................... 42
Capital Improvements............................................................. 43
Marketing........................................................................ 43
New Convention Center............................................................ 43
Transportation Facilities........................................................ 44
Competition...................................................................... 44
Gaming Credit Policy............................................................. 45
Showboat Lease................................................................... 45
Security Controls................................................................ 46
Seasonal Factors................................................................. 46
Employees........................................................................ 46
Regulation and Gaming Taxes and Fees............................................. 46
Properties....................................................................... 49
MANAGEMENT OF RII..................................................................... 50
Directors and Executive Officers................................................. 50
Executive Compensation........................................................... 52
MANAGEMENT OF RIHF.................................................................... 56
Directors and Executive Officers................................................. 56
MANAGEMENT OF RIH..................................................................... 57
Directors and Executive Officers................................................. 57
Executive Compensation........................................................... 58
SECURITY OWNERSHIP.................................................................... 60
Security Ownership of Certain Beneficial Owners.................................. 60
Security Ownership of Management................................................. 60
CERTAIN TRANSACTIONS.................................................................. 61
DESCRIPTION OF MORTGAGE NOTES......................................................... 61
General.......................................................................... 61
Ranking.......................................................................... 61
Interest......................................................................... 62
Sinking Fund Requirements........................................................ 62
Mandatory Redemption............................................................. 62
Optional Redemption.............................................................. 62
Casino Control Act Regulation.................................................... 62
Intercreditor Agreement.......................................................... 63
Collateral....................................................................... 63
Release of Collateral............................................................ 63
Limitations on Ability to Realize on Collateral.................................. 64
Guaranty......................................................................... 64
Payments of Net Proceeds of Asset Sales.......................................... 64
Covenants........................................................................ 64
Events of Default................................................................ 69
</TABLE>
4
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Limitation on Consolidation, Merger, Conveyance, Transfer or Lease of Property
and Assets..................................................................... 72
Discharge of Mortgage Note Indenture; Defeasance................................. 73
Modification of Indenture........................................................ 74
Trustee.......................................................................... 74
Reports to Holders............................................................... 74
Certain Definitions.............................................................. 75
DESCRIPTION OF JUNIOR MORTGAGE NOTES.................................................. 79
General.......................................................................... 79
Ranking.......................................................................... 79
Interest......................................................................... 79
Sinking Fund Requirements........................................................ 80
Mandatory Redemption............................................................. 80
Optional Redemption.............................................................. 80
Limitation on Open-Market Purchases.............................................. 80
Casino Control Act Regulation.................................................... 81
Intercreditor Agreement.......................................................... 81
Collateral....................................................................... 81
Release of Collateral............................................................ 81
Limitations on Ability to Realize on Collateral.................................. 81
Guaranty......................................................................... 82
Payments of Net Proceeds of Asset Sales.......................................... 82
Covenants........................................................................ 82
Events of Default................................................................ 87
Limitation on Consolidation, Merger, Conveyance, Transfer or Lease of Property
and Assets..................................................................... 90
Discharge of Junior Mortgage Note Indenture...................................... 91
Modification of Indenture........................................................ 91
Trustee.......................................................................... 91
Reports to Holders............................................................... 91
Certain Definitions.............................................................. 92
DESCRIPTION OF COMMON STOCK AND CLASS B COMMON STOCK.................................. 96
General.......................................................................... 96
Casino Control Act Regulation.................................................... 96
Description of Common Stock...................................................... 97
Description of Class B Common Stock.............................................. 97
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............................................. 98
Treatment of the Debt Securities as Debt of RIH for Federal Income Tax
Purposes........................................................................ 98
Classification of Debt Securities as Debt Rather Than Equity..................... 99
OID With Respect to the New Debt Securities...................................... 99
Consequences if the Debt Securities are Issued with OID.......................... 100
Sale, Exchange or Redemption..................................................... 102
</TABLE>
5
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Market Discount.................................................................. 102
Potential Application of High Yield Debt Obligation Rules........................ 102
Backup Withholding............................................................... 103
LITIGATION............................................................................ 103
SELLING SECURITYHOLDERS............................................................... 103
PLAN OF DISTRIBUTION.................................................................. 105
LEGAL MATTERS......................................................................... 106
EXPERTS............................................................................... 106
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................. F-1
</TABLE>
6
<PAGE> 9
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus.
THE REGISTRANTS
RII is a holding company which, through its subsidiary, RIH, is principally
engaged in the ownership and operation of the Resorts Casino Hotel in Atlantic
City, New Jersey. In addition, RII owns land in Atlantic City at various sites,
including approximately 10 acres of Boardwalk property that the Company leases
to Atlantic City Showboat, Inc. ("ACS") under a 99-year net lease (the "Showboat
Lease") and approximately 90 acres which are available for development. RII was
incorporated in 1958 and is a Delaware corporation.
RIHF was incorporated in Delaware in 1993 for the limited purpose of
issuing the Mortgage Notes and the Junior Mortgage Notes, and receiving certain
corresponding promissory notes of RIH. RIHF also entered into the Senior
Facility. See "Restructuring of Series Notes." RIHF is a wholly owned subsidiary
of RII.
RIH owns and operates all the property and improvements of the Resorts
Casino Hotel. The Resorts Casino Hotel is located on the Boardwalk in Atlantic
City, New Jersey, and has approximately 670 guest rooms, a 60,000-square-foot
casino and related facilities. RIH was incorporated in 1903 and is a New Jersey
corporation. RIH has issued certain promissory notes and guarantees relating to
the Mortgage Notes and Junior Mortgage Notes.
RISK FACTORS
The Mortgage Notes, Units and Common Stock offered hereby involve certain
risks that should be carefully considered by prospective investors. See "Risk
Factors."
EMERGENCE FROM BANKRUPTCY
On May 3, 1994, a joint plan of reorganization proposed by RII, together
with certain of its debtor and non-debtor subsidiaries, including RIHF, became
effective. As a result, among other things, RII has significantly reduced its
consolidated debt and sold its former casino, hotel and resort operations on
Paradise Island in The Bahamas. See "Restructuring of Series Notes" and "Pro
Forma Financial Data."
THE OFFERING
The following securities may be offered from time to time by the Selling
Securityholders:
$87,500,000 principal amount of 11% Mortgage Notes due 2003, issued by
RIHF.
24,500 Units, each Unit consisting of $1,000 principal amount of
11.375% Junior Mortgage Notes due 2004, issued by RIHF, and one share of
Class B Common Stock, issued by RII.
11,900,000 shares of Common Stock, issued by RII.
The Mortgage Notes and Junior Mortgage Notes are guaranteed by RIH and
secured by the Resorts Casino Hotel. See "Description of Mortgage Notes" and
"Description of Junior Mortgage Notes."
None of the securities are being offered by the Company, which will receive
none of the proceeds of any sales. See "Selling Securityholders" and "Plan of
Distribution."
7
<PAGE> 10
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables set forth certain historical and pro forma consolidated
financial data for RII and RIH. The pro forma statement of operations data give
effect to the Restructuring as if it had occurred on January 1, 1993. See
"Restructuring of Series Notes." The pro forma balance sheet data give effect to
the Restructuring as if it had occurred on December 31, 1993. The unaudited pro
forma financial information is not necessarily indicative of future results or
what the respective entities' financial position or results of operations would
actually have been had the transactions occurred on the dates indicated. Such
information should not be used as a basis to project results for any future
periods. For additional information, see the Consolidated Financial Statements
and the notes thereto and "Pro Forma Financial Data" and the notes thereto.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------------------- -----------------
FOR THE YEAR ENDED DECEMBER 31, FOR THE
--------------------------------- YEAR ENDED
1991 1992 1993 DECEMBER 31, 1993
------ ------ ------- -----------------
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C>
RII Statement of Operations Data:
Operating revenues................................................... $418.2 $436.9 $ 439.6 $279.5
Depreciation......................................................... 23.8 25.3 27.9 13.8
Earnings from operations............................................. 16.0 21.5 12.9 21.2
Interest income (expense), net(a).................................... (58.4) (73.5) (105.3) (26.0)
Recapitalization costs............................................... (2.8) (8.8)
Loss before income taxes............................................. (42.4) (54.8) (101.2) (4.8)
Net loss............................................................. (41.6) (53.5) (102.2) (5.8)
Net loss per share................................................... (2.07) (2.65) (5.07) (.15)
Ratio of earnings to fixed charges(b)................................ -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
RII Balance Sheet Data:
Cash and cash equivalents(c)......................................................................... $ 62.5 $ 20.0
Net property and equipment........................................................................... 447.8 274.4
Total assets......................................................................................... 575.8 327.1
Current maturities of long-term debt(d).............................................................. 466.3 0.1
Long-term debt, excluding current maturities(d)...................................................... 85.0 232.5
Shareholders' equity (deficit)....................................................................... (113.7) .6
Book value per share................................................................................. (5.64) .02
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------------- -----------------
FOR THE YEAR ENDED DECEMBER 31, FOR THE
-------------------------------- YEAR ENDED
1991 1992 1993 DECEMBER 31, 1993
------ ------ ------ -----------------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
RIH Statement of Operations Data:
Operating revenues.................................................... $247.5 $262.7 $271.5 $ 271.5
Depreciation.......................................................... 9.1 11.4 13.7 13.7
Earnings from operations.............................................. 14.8 21.0 12.1 12.1
Interest income (expense), net (e).................................... 7.0 7.3 7.4 (17.8)
Recapitalization costs................................................ (.9) (2.7)
Earnings (loss) before income taxes................................... 21.8 27.4 16.8 (5.7)
Net earnings (loss)................................................... 13.1 16.4 16.4 (6.1)
Ratio of earnings to fixed charges (f)................................ 15.5 21.5 16.0 --
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------------
HISTORICAL PRO FORMA
---------- ---------
<S> <C> <C>
RIH Balance Sheet Data:
Cash and cash equivalents............................................................................ $ 25.9 $ 15.0
Net property and equipment........................................................................... 163.3 163.3
Total assets......................................................................................... 264.2 204.4
Current maturities of notes payable to affiliate and other long-term debt............................ 325.1 0.1
Notes payable to affiliate and other long-term debt, excluding current maturities.................... -- 147.6
Shareholder's equity (deficit)....................................................................... (148.0) 12.5
</TABLE>
- ---------------
(a) Amounts presented include amortization of debt discount.
(b) The ratios of earnings to fixed charges were computed by dividing earnings
available for fixed charges (earnings before income taxes adjusted for
interest expense, amortization of debt discount and one-third of rent
expense) by fixed charges. Fixed charges include interest expense,
amortization of debt discount and one-third of rent expense. Historical
earnings were insufficient to cover fixed charges by $42,402,000 for 1991;
$54,802,000 for 1992; and $101,164,000 for 1993. Pro forma earnings were
insufficient to cover fixed charges by $4,785,000. For ratios of earnings to
fixed charges for additional periods see "Selected Historical Financial
Data."
(c) Excludes restricted cash equivalents.
(d) Amounts are net of unamortized discounts.
(e) Pro forma amount includes amortization of debt discount.
(f) The ratios of earnings to fixed charges were computed by dividing earnings
available for fixed charges (earnings before income taxes adjusted for
interest expense, amortization of debt discount and one-third of rent
expense) by fixed charges. Fixed charges include interest expense,
amortization of debt discount and one-third of rent expense. Pro forma
earnings were insufficient to cover fixed charges by $5,720,000. For ratios
of earnings to fixed charges for additional periods see "Selected Historical
Financial Data."
8
<PAGE> 11
THE COMPANY
RII is a holding company which, through its subsidiary, RIH, is principally
engaged in the ownership and operation of the Resorts Casino Hotel in Atlantic
City, New Jersey. In addition, RII owns land in Atlantic City at various sites,
including approximately 10 acres of Boardwalk property that the Company leases
to ACS under the Showboat Lease, and approximately 90 acres which are available
for development. RII was incorporated in 1958 and is a Delaware corporation.
RIHF was incorporated in Delaware in 1993 for the limited purpose of
issuing the Mortgage Notes and the Junior Mortgage Notes, and receiving certain
corresponding promissory notes of RIH. RIHF also has entered into the Senior
Facility and may issue the Senior Facility Notes. RIHF is a wholly owned
subsidiary of RII.
RIH owns and operates all the property and improvements of the Resorts
Casino Hotel. The Resorts Casino Hotel is located on the Boardwalk in Atlantic
City, New Jersey, and has approximately 670 guest rooms, a 60,000-square-foot
casino and related facilities. RIH was incorporated in 1903 and is a New Jersey
corporation wholly owned by RII. RIH has issued certain promissory notes and
guarantees relating to the Mortgage Notes and Junior Mortgage Notes.
RECENT DEVELOPMENTS
On February 5, 1994, RII (and a subsidiary, GGRI, Inc. ("GGRI")) commenced
a solicitation of acceptances of a joint plan of reorganization (the "Plan")
prior to initiating cases under chapter 11 of Title 11 of the United States Code
(the "Bankruptcy Code") as part of a "prepackaged bankruptcy." The requisite
acceptances for confirmation of the Plan were received and, on March 21, 1994,
the Plan was filed with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") which confirmed the Plan on April 22, 1994.
The Plan became effective on May 3, 1994.
Pursuant to the Plan, RII's former Series Notes were exchanged for the
Mortgage Notes, Units consisting of the Junior Mortgage Notes and Class B Common
Stock, shares of Common Stock, shares of an unaffiliated corporation that now
owns the Company's former Paradise Island assets and operations in The Bahamas,
and certain cash consideration.
As a result of the Restructuring of the Series Notes effected by the Plan,
the Company's only significant remaining assets and operations are those located
in Atlantic City, New Jersey.
See "Risk Factors," "Restructuring of Series Notes," "Pro Forma Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" as to the foregoing and other related information
contained in this Prospectus.
RISK FACTORS
Investors should carefully consider all of the information set forth in
this Prospectus. In particular, careful consideration should be given to the
information set forth below with respect to certain risk factors generally
applicable to an investment in the Mortgage Notes, Units or Common Stock.
CONTINUING HIGH LEVERAGE; FUTURE REFINANCINGS
The Company is highly leveraged. The Company's aggregate publicly issued
recourse indebtedness totals approximately $160,000,000, assuming no borrowing
is made under the Senior Facility described under "Restructuring of Series
Notes." The Company's high leverage poses substantial risks to holders of the
Company's debt and equity securities.
Debt service on the Mortgage Notes and Junior Mortgage Notes is premised
solely on cash flows generated from the continued operation of the Resorts
Casino Hotel. There can be no assurance that the Company will generate
sufficient cash from operations to repay, when due, the principal amount of the
Mortgage Notes maturing in 2003, or the principal amount of the Junior Mortgage
Notes maturing in 2004.
9
<PAGE> 12
As a result, the Company may be required to refinance such amounts as they
become due and payable. While the Company believes that it will be able to
refinance such amounts, there can be no assurance that any such refinancing
would be consummated or, if consummated, would be in an amount sufficient to
repay such obligations, particularly in light of the Company's high level of
debt. If the Company is unable to effectuate such refinancings or renewals in
the ordinary course of business, it may be required to sell equity interests in
the Company. The sale of additional equity interests in the Company could result
in substantial dilution of the interests of the Company's existing equity
holders. There can be no assurance that such sales would be consummated or, if
consummated, would be in an amount sufficient to repay such obligations in full.
The failure to raise sufficient amounts of capital from such sales could
ultimately result in the Company's inability to meet its debt obligations,
including its obligations under the Mortgage Notes and the Junior Mortgage
Notes.
RECENT NET LOSSES
The Company experienced net losses of $41,571,000, $53,454,000 and
$102,164,000 in its fiscal years ended December 31, 1991, 1992 and 1993,
respectively. In addition, the Company's earnings before fixed charges were
inadequate to cover fixed charges by $42,402,000, $54,802,000 and $101,164,000
for the fiscal years ended December 31, 1991, 1992 and 1993, respectively. See
"Pro Forma Financial Data," in this connection.
LACK OF MARKET FOR THE MORTGAGE NOTES AND UNITS -- OTHER MARKET CONSIDERATIONS
The Mortgage Notes and Units are new issues of securities for which there
previously has been no market. Although the Mortgage Notes and the Units are
listed on the AMEX, there can be no assurance that an active trading market for
the Mortgage Notes or the Units will develop, and no assurance can be given as
to the price at which any such securities might trade. Factors such as quarterly
fluctuations in the financial and operating results of the Company, negative
announcements by the Company or others, and developments affecting the Company,
its customers or the gaming industry generally, could cause the market price of
such securities to fluctuate substantially. Market prices may also be affected
by the amount of Mortgage Notes and Units sold, and the timing of sales, by the
Selling Securityholders.
INVOLVEMENT OF MERV GRIFFIN
The involvement of Merv Griffin, Chairman of the Board of RII, in the
affairs of the Company is believed to be extremely important to its future
prospects. The Company believes Merv Griffin's participation enhances and
projects a high positive profile for the Company's operations, and helps to
distinguish the Company from its competitors. There can be no assurance that
Merv Griffin's involvement will continue beyond September 17, 1997, the
termination date of the License and Services Agreement (the "Griffin Services
Agreement"), dated and effective as of September 17, 1992, among The Griffin
Group, Inc. (the "Griffin Group"), a corporation controlled by Mr. Griffin, RII
and RIH.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Original Issue Discount. The Junior Mortgage Notes will be, and the
Mortgage Notes may be, issued with original issue discount ("OID"). A holder of
such notes may be required for Federal income tax purposes to report interest
income at a rate that is higher than the stated interest rate and in advance of
the receipt of cash interest. See "Certain Federal Income Tax
Considerations -- OID with Respect to the New Debt Securities."
Gaming Industry Excise Tax. Published reports have indicated that
President Clinton is considering implementing a 4% excise tax on "gambling
establishments" in connection with the pending welfare reform proposals. Due to
the lack of specific information regarding the nature and scope of such tax, it
is impossible to determine at this time the extent to which such tax, if
enacted, would adversely affect the Company.
10
<PAGE> 13
ADDITIONAL SENIOR SECURED DEBT; SUBORDINATION
The Company's senior secured note purchase agreement, the Senior Facility,
among RIHF, RII and RIH and certain funds and accounts advised or managed by
Fidelity Management & Research Company ("Fidelity"), allows RIHF to borrow up to
$20,000,000 through the issuance of Senior Facility Notes. The Company believes
that the Senior Facility will serve as a safeguard if an emergency arises from
current operations, or serve as a source of funds for a profitable investment
opportunity. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Financial Condition -- Liquidity." If borrowings
are made under the Senior Facility, the Company's debt burden would increase.
The Senior Facility Notes will be senior obligations issued by RIHF secured by,
among other things, an assignment of a promissory note of RIH (the "RIH Senior
Facility Promissory Note") in an aggregate principal amount of up to $20,000,000
payable in amounts and at times necessary to pay the principal of and interest
on the Senior Facility Notes. The RIH Senior Facility Promissory Note will be
secured by a lien on the Resorts Casino Hotel. The Senior Facility Notes will be
guaranteed by RIH (the "RIH Senior Facility Guaranty"). This guaranty also will
be secured by a lien on the Resorts Casino Hotel. RII also will issue a guaranty
of the payment of principal and interest on the Senior Facility Notes to be
secured by a pledge of the issued and outstanding stock of GGRI and RIHF. The
Senior Facility Notes also will be secured by a pledge by GGRI, which became
RIH's parent as a result of the Restructuring, of all issued and outstanding
shares of RIH.
The liens on the Resorts Casino Hotel securing the payment of the RIH
Promissory Note, the Mortgage Note Guaranty, the RIH Junior Promissory Note and
the Junior Mortgage Note Guaranty, respectively, will be subordinated to the
liens securing the RIH Senior Facility Promissory Note and the RIH Senior
Facility Guaranty.
SECURITY FOR THE MORTGAGE NOTES AND THE JUNIOR MORTGAGE NOTES
If an Event of Default (as defined in either the indenture pursuant to
which the Senior Facility Notes may be issued or the indenture pursuant to which
the Mortgage Notes were issued (the "Mortgage Note Indenture") or the Junior
Mortgage Note Indenture) occurs, there can be no assurance that a foreclosure on
the Resorts Casino Hotel would produce proceeds in an amount that would be
sufficient to pay, first, the principal of, and accrued interest on, the Senior
Facility Notes (if any), second, the principal of, and accrued interest on, the
Mortgage Notes, and third, the principal of, and accrued interest on, the Junior
Mortgage Notes.
In any foreclosure sale of the Resorts Casino Hotel, the purchaser would be
required to be licensed to own the Resorts Casino Hotel under the New Jersey
Casino Control Act and the regulations promulgated thereunder (the "Casino
Control Act"). If the trustee for either the Mortgage Notes or the Junior
Mortgage Notes, as the case may be, were unable to, or chose not to, sell the
Resorts Casino Hotel, the trustee for either the Mortgage Notes or the Junior
Mortgage Notes, as the case may be, would be required to be licensed under the
Casino Control Act to operate the Resorts Casino Hotel. Such requirements limit
the number of potential bidders and may delay the sale of, and may adversely
affect the sales price for, the Resorts Casino Hotel. The ability to take
possession and dispose of the Resorts Casino Hotel upon acceleration of the
Senior Facility Notes, the Mortgage Notes and the Junior Mortgage Notes is
likely to be significantly impaired or delayed by applicable bankruptcy law if a
reorganization case were to be commenced by or against RII, RIHF or RIH prior to
the foreclosure upon or disposition of the Resorts Casino Hotel by the trustee
for either the Senior Facility Notes, the Mortgage Notes or the Junior Mortgage
Notes.
COMPETITION
General. The Company competes directly with other casino operators in the
Atlantic City market in which it operates, principally on the basis of price,
quality and customer service. Such competition has intensified in recent years.
See "Description of Business." The Company faces competition from cruise lines,
riverboat gambling, casinos located in Atlantic City, New Jersey, New York,
Connecticut, Nevada, Puerto Rico, The Bahamas and other locations outside the
United States, from other forms of legalized gaming in New Jersey and in its
surrounding states such as lotteries, horse racing, jai-alai, dog racing and
other legalized
11
<PAGE> 14
gaming activities and from illegal wagering of various types. The Company also
would compete with any facilities in jurisdictions that may authorize casino
gaming or other forms of wager in the future. Legalized gambling in some form or
another is now allowed in 48 states. Since 1988, Indian tribes have negotiated
at least 87 compacts with 19 states to operate legalized gambling, not including
bingo parlors. The large increase in Indian reservation casinos, along with a
rapid expansion of riverboat gambling and other casino gambling, may adversely
affect the Company's operations, particularly if casino gaming were permitted in
jurisdictions adjacent to, or elsewhere in, New Jersey. Currently, casino gaming
is not allowed in other areas of New Jersey, but is under consideration in
Pennsylvania and the District of Columbia.
The Mashantucket Pequot Indians operate a casino facility in Ledyard,
Connecticut, located in the eastern portion of the state. The facility opened in
early 1991 with authorization to conduct table gaming operations only, and in
January 1993, slot machines were authorized. In July 1993, the Oneida Indians
opened a casino near Syracuse, New York. In October 1993 approval was granted
for the construction of a high-stakes gambling casino on the St. Regis Mohawk
reservation in New York State near the Canadian border, 50 miles southwest of
Montreal. Under New York state law, poker and slot machines currently are not
permitted. The casinos in Connecticut and New York may have an adverse effect on
the Atlantic City casino industry.
Atlantic City. Competition in the Atlantic City casino/hotel market is
intense. Casino/hotels compete primarily on the basis of promotional allowances,
entertainment, advertising, services provided to patrons, caliber of personnel,
attractiveness of the hotel and casino areas and related amenities and parking
facilities. There are 12 casino/hotels located in Atlantic City, including the
Resorts Casino Hotel, all of which compete for patrons. In the aggregate, those
casino/hotels contain approximately 854,000 square feet of casino space
including simulcast betting and poker rooms and 9,400 hotel rooms. The total
amount of gaming area of the competing properties is expected to increase as the
Showboat Casino Hotel (the "Showboat Casino") has recently announced plans for a
sizable addition to its casino gaming floor. The Showboat Casino is located on
approximately ten acres of Boardwalk property owned by the Company and leased to
ACS under the Showboat Lease. Also, several competitors are expected to add
racetrack simulcasting rooms which are permitted to house authorized table
games. Unlike casino gaming floor area, which is regulated based on the number
of guest rooms at a particular property, the size of simulcasting rooms is not
limited.
The Resorts Casino Hotel is located at the eastern end of the Boardwalk
adjacent to the Trump Taj Mahal Casino-Resort (the "Taj Mahal") and the Showboat
Casino. These three properties have a total of more than 2,400 hotel rooms and
278,000 square feet of gaming space in close proximity to each other. A 28-foot
wide enclosed pedestrian bridge between the Resorts Casino Hotel and the Taj
Mahal allows patrons of both hotels and guests for events being held at the
Resorts Casino Hotel and at the Taj Mahal to move between the facilities without
exposure to the weather. A similar enclosed pedestrian bridge connects the
Showboat Casino to the Taj Mahal, allowing patrons to walk under cover among all
three casino/hotels. The remaining nine Atlantic City casino/hotels are located
approximately one-half mile to one and one-half miles to the west on the
Boardwalk or in the Marina area of Atlantic City.
NEW JERSEY REGULATORY MATTERS
The ownership and operations of casino/hotel facilities and related
businesses in Atlantic City are the subject of strict state regulation under the
Casino Control Act. The Casino Control Act also imposes substantial restrictions
on the ownership of equity and debt securities of a company holding a casino
license, or an intermediary, holding company or affiliate of a casino licensee.
As a holding company of a casino licensee, RII is required to register with the
New Jersey Casino Control Commission (the "Casino Control Commission") and
obtain qualification approval by meeting essentially the same requirements as a
casino licensee.
A casino license initially is issued for a term of up to one year and must
be renewed annually by action of the Casino Control Commission for the first two
renewal periods succeeding the initial issuance of a casino license. Thereafter,
a casino license is renewed for a period of up to two years, although the Casino
Control Commission may reopen licensing hearings at any time. A license is not
transferable and may be conditioned, revoked or suspended at any time upon
proper action by the Casino Control Commission. The Casino Control
12
<PAGE> 15
Act also requires an operations certificate which, in effect, has a term
coextensive with that of a casino license. On February 26, 1979, the Casino
Control Commission granted a casino license to RIH for the operation of the
Company's Atlantic City casino. In February 1994, RIH's license was renewed
until January 31, 1996. RIH's renewed license is subject to several conditions,
including: (i) the submission of periodic reports and immediate notification of
certain events related to RII's public debt securities to the Casino Control
Commission; (ii) obtaining approval of the Casino Control Commission prior to
the implementation of any material changes to the Restructuring; (iii)
submission of certain financial and other reports relative to the Restructuring
and certain other periodic financial reports to the Casino Control Commission;
(iv) obtaining approval of the Casino Control Commission prior to making certain
payments from RIH to related parties; and (v) obtaining approval of the Casino
Control Commission prior to borrowing under the Senior Facility.
There can be no assurance that the Company will receive or continue to
receive all authorizations needed for the operation of the Company's Atlantic
City casino and thereby be permitted, in the future, to continue to operate the
Resorts Casino Hotel. Failure to maintain a casino license would have a material
adverse effect on the Company's ability to make payments in respect of the
Mortgage Notes and the Junior Mortgage Notes. See "Description of
Business -- Regulation and Gaming Taxes and Fees".
POTENTIAL DISQUALIFICATION OF HOLDERS BY THE CASINO CONTROL COMMISSION
Additionally, the Casino Control Commission imposes certain restrictions
upon the ownership of securities issued by a corporation which holds a casino
license or is a holding, intermediary, subsidiary or affiliated company of a
corporate licensee. Among other restrictions, the sale, assignment, transfer,
pledge or other disposition of any security issued by a corporation which holds
a casino license is conditional and shall be ineffective if disapproved by the
Casino Control Commission. If the Casino Control Commission finds that an
individual owner or holder of any securities of a corporate licensee or any
holding or affiliated company must be qualified and is not qualified under the
Casino Control Act, the Casino Control Commission has the right to propose any
necessary remedial action. In the case of corporate holding or affiliated
companies whose securities are publicly traded, the Casino Control Commission
may require divestiture of the security held by any disqualified holder who is
required to be qualified under the Casino Control Act.
If entities or persons required to be qualified refuse or fail to qualify
and fail to divest themselves of such security interest, the Casino Control
Commission has the right to take any necessary action, including the revocation
or suspension of the casino license. If any security holder of the licensee or
any holding or affiliated company who is required to be qualified is found
disqualified, it will be unlawful for the security holder: (i) to receive any
dividends or interest upon any such securities; (ii) to exercise, directly or
through any trustee or nominee, any right conferred by such securities; or (iii)
to receive any remuneration in any form from the corporate licensee for services
rendered or otherwise. The Amended and Restated Certificate of Incorporation of
RII provides that all securities of RII are held subject to the condition that,
if the holder thereof is found to be disqualified by the Casino Control
Commission pursuant to provisions of the Casino Control Act, such holder must
dispose of his or her interest in the securities.
RISK OF HIGHLY LEVERAGED TRANSACTION
The Junior Mortgage Note Indenture does not require RIHF to offer to
purchase the Junior Mortgage Notes upon occurrence of a change of control and
may not afford holders of the Junior Mortgage Notes protection in the event of a
highly leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company that may adversely affect holders the Junior
Mortgage Notes.
13
<PAGE> 16
RESTRUCTURING OF SERIES NOTES
BACKGROUND
The outstanding principal amount of RII's Series Notes, which were
scheduled to mature on April 15, 1994, was $481,907,000. According to the terms
of the Series Notes, the interest due on the maturity date would have been
approximately $36,000,000 and RII's total obligation at maturity would have
amounted to approximately $518,000,000.
The Company's ability to pay the principal balance due on the Series Notes
at maturity was premised on certain assumptions included in RII's 1990 plan of
reorganization (the "Old Plan"), the most significant of which was the Company's
ability to sell its former Paradise Island Resort & Casino, Ocean Club Golf &
Tennis Resort, Paradise Paradise Beach Resort and related assets, all located on
Paradise Island, The Bahamas, by December 31, 1991 at a price ranging from
$250,000,000 to $300,000,000. Other assumptions included the Company's ability
to generate substantial excess cash flow from its operations and the Company's
ability to sell its non-operating real estate holdings in Atlantic City at
acceptable prices. However, the recession in the United States, and more
specifically in the northeast sector, the acute competition in Atlantic City and
The Bahamas, the unexpected increase in competition from other jurisdictions,
the unforeseen difficulty in selling the Paradise Island assets at the projected
price, and the adverse impact of the conflict in the Persian Gulf in early 1991
on transportation and tourism, all adversely affected the Company's ability to
realize the assumptions in the Old Plan.
Although the Company did not discontinue its efforts to sell the Paradise
Island assets, it experienced a very limited amount of interest by prospective
purchasers. The only offer the Company received for its Paradise Island assets
prior to the Restructuring was made in August 1991. That offer would have netted
the Company approximately $150,000,000 if the transaction had been consummated.
This amount was inadequate to retire sufficient Series Notes at par so as to
permit the Company's then remaining Atlantic City operations to service the debt
that would have remained outstanding. Subsequent discussions with the
prospective purchaser did not lead to a definitive agreement, and the
discussions terminated in early 1992.
As the possibilities of a sale of the Paradise Island assets at other than
a depressed price diminished and the Company was unable to generate substantial
excess cash flow from its operations, the principal amount of the Series Notes
(originally $325,000,000) increased due to a payment-in-kind interest feature of
the Series Notes, which allowed the Company to satisfy interest obligations on
its Series Notes by the issuance of additional Series Notes in lieu of making
cash interest payments. Thus, it became evident that in order for the Company to
reduce its debt to a level that could be supported by the cash flow reasonably
anticipated on a continuing basis, it had to develop financial alternatives
other than, or in conjunction with, a sale of its Paradise Island assets. The
Company worked with its financial advisers on developing and analyzing financial
alternatives, as well as developing a long-term financial plan, since late 1991.
In this connection, management of the Company, with the assistance of its legal
and financial advisers, commenced discussions with representatives of major
holders of Series Notes in the summer of 1992 in an effort to reach an agreement
as to the terms of a possible restructuring of the Series Notes. This process
resulted in the Restructuring described below.
RESTRUCTURING
On October 25, 1993, RII and three of its subsidiaries, RIH, RIHF and P.I.
Resorts Limited ("PIRL"), filed a Form S-4 Registration Statement (No. 33-50733)
under the Securities Act. That registration statement described in detail the
Restructuring which RII and GGRI, RII's subsidiary which guaranteed the Series
Notes, proposed to accomplish through the Plan, which was proposed and for which
acceptances were solicited before commencing cases under chapter 11 of the
Bankruptcy Code. This process is known as a "prepackaged bankruptcy." On
February l, 1994, after certain amendments, the registration statement was
declared effective. On February 5, 1994 the solicitation of acceptances of the
Plan commenced with the mailing of the Information Statement/Prospectus for
Solicitation of Votes on Prepackaged Plan of Reorganization, ballots and other
materials to holders of Series Notes, RII's Common Stock and stock options (the
14
<PAGE> 17
"1990 Stock Options") issued pursuant to the RII Senior Management Stock Option
Plan (the "1990 Stock Option Plan"). Holders of Series Notes, Common Stock and
1990 Stock Options as of January 10, 1994 (the "Voting Record Date") were
entitled to vote on the Plan. The solicitation period ended on March 15, 1994.
The Company received the requisite acceptances for confirmation of the Plan and
filed the Plan with the Bankruptcy Court on March 21, 1994. The Plan was
confirmed by the Bankruptcy Court on April 22, 1994 and on May 3, 1994 (the
"Effective Date"), all conditions to the effectiveness of the Plan were met and
the Plan became effective.
Accordingly, on the Effective Date pursuant to the Order of the Bankruptcy
Court confirming the Plan, all Series Notes were cancelled on the books of RII
and were settled in consideration of the right to participate in the
distributions under the Plan. Except as the context may otherwise indicate, all
references in this Prospectus to principal amounts of Mortgage Notes and Junior
Mortgage Notes, and shares of Class B Common Stock and Common Stock outstanding,
and to the ownership thereof, assume that the distribution of such securities
pursuant to the Plan occurred on the Effective Date.
The Plan was the result of extensive negotiations among RII, Fidelity and
TCW Special Credits on behalf of various funds and accounts advised or managed
by it ("TCW"). Fidelity and TCW separately advise and manage various funds and
accounts that as of the Voting Record Date held in the aggregate approximately
64% of the outstanding principal amount of Series Notes. In addition, RII,
Fidelity and TCW held discussions with Sun International Investments Limited
("SIIL"), an unaffiliated company, regarding the purchase of a 60% interest in
the Company's Paradise Island assets (the "SIHL Sale") through a subsidiary of
SIIL, Sun International Hotels Limited ("SIHL"), formed for that purpose.
Pursuant to the Plan, Fidelity and TCW and their agents are entitled to
reimbursement by the Company for reasonable fees and expenses incurred in
connection with the prepackaged bankruptcy effected under the Plan.
Pursuant to the Plan the Company effected, among other things, the exchange
of the Series Notes for: (i) $125,000,000 aggregate principal amount of Mortgage
Notes; (ii) Units consisting of a total of $35,000,000 aggregate principal
amount of Junior Mortgage Notes, and 35,000 shares of Class B Common Stock;
(iii) 40% of the Common Stock of RII on a fully diluted basis (excluding 1990
Stock Options and options to be issued under a newly implemented stock option
plan (the "1994 Stock Option Plan")); (iv) $65,000,000 in cash, plus interest at
an annual rate of 7.5% from January 1, 1994 through May 3, 1994, the closing
date of the SIHL Sale, plus 40% of the capital stock of SIHL, representing the
consideration received from the SIHL Sale; and (v) the Company's Excess Cash, as
defined in the Plan, which was in excess of $30,000,000.
The Plan also provided for certain funds or accounts managed by Fidelity to
enter into the Senior Facility with RIHF which, subject to the terms thereof,
will allow RIHF to borrow up to $20,000,000 through the issuance of the Senior
Facility Notes. The Senior Facility is available for a single borrowing during
the one-year period from the Effective Date. If issued, the Senior Facility
Notes will bear interest at 11% per year and mature in 2002. Any amount borrowed
by RIHF under the Senior Facility will be loaned by RIHF to RIH, and possibly by
RIH to RII, through intercompany transactions and will be used for working
capital and general corporate purposes. It is a condition of the Senior Facility
that any Senior Facility Notes issued thereunder be registered under the
Securities Act for public resale.
The following transactions, among others, also were effected in connection
with the consummation of the Plan: (i) the initial post-Restructuring directors
of RII were named to the RII Board of Directors (see "Management of RII"); (ii)
RII issued warrants to purchase 10% of RII's Common Stock on a fully diluted
basis (the "Griffin Warrants") to Griffin Group (see "Griffin Services
Agreement" under "Management of RII -- Executive Compensation -- Compensation
Committee Interlocks and Insider Participation"); (iii) termination of the 1990
Stock Option Plan (although existing holders of 1990 Stock Options retained
their options); and (iv) implementation of the 1994 Stock Option Plan, which
allows for the granting of options to purchase up to 5% of the outstanding
Common Stock of RII.
15
<PAGE> 18
PARADISE ISLAND ASSETS ACQUIRED BY SIHL
The Paradise Island assets acquired by SIHL in the SIHL Sale include all
the properties owned by the Company and its operations relating to its former
business in The Bahamas; principally, the Paradise Island Resort & Casino, the
Ocean Club Golf & Tennis Resort, and the Paradise Paradise Beach Resort. The
Paradise Island Resort & Casino includes two hotel towers totalling 1,186 guest
rooms, the 30,000 square foot Paradise Island casino and related facilities. The
Ocean Club Golf & Tennis Resort is an exclusive 71-room hotel with premium room
rates. The Paradise Paradise Beach Resort is a 100-room hotel complex that
offers more moderately priced accommodations. The assets acquired by SIHL
include convention facilities, shops, restaurants, bars and lounges, an 18-hole
golf course, tennis courts and swimming pools, approximately six miles of beach
and water frontage and other resort facilities on Paradise Island. A total of
562 acres on Paradise Island, 218 of which were not used in the Company's former
operations and were available for future development, were included in the SIHL
Sale. Also, certain assets located in Florida and used in connection with the
Company's former Paradise Island operations were included in the SIHL Sale. See
"Pro Forma Financial Data."
16
<PAGE> 19
CAPITALIZATION OF RII
The following table sets forth the historical consolidated capitalization
of RII and its subsidiaries at December 31, 1993, and RII's pro forma
capitalization at such date after giving effect to the Restructuring.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
------------------------
HISTORICAL PRO FORMA
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt:
Series A Notes(a)................................................. $ 254,200
Series B Notes(a)................................................. 211,929
Other............................................................. 207 $ 74
--------- ---------
Total current maturities.................................. 466,336 74
--------- ---------
Long-term debt:
Mortgage Notes(b)................................................. 116,625
Junior Mortgage Notes(c).......................................... 30,975
Senior Facility Notes(d)
Showboat Notes(e)................................................. 84,881 84,881
Other............................................................. 148 13
--------- ---------
Total long-term debt...................................... 85,029 232,494
--------- ---------
Shareholders' equity (deficit):
Common Stock...................................................... 202 377
Class B Common Stock(f)...........................................
Capital in excess of par.......................................... 102,092 133,615
Accumulated deficit............................................... (210,720) (133,363)
--------- ---------
(108,426) 629
Note receivable from related party................................ (5,318)
--------- ---------
Total shareholders' equity (deficit)...................... (113,744) 629
--------- ---------
Total capitalization...................................... $ 437,621 $ 233,197
--------- ---------
--------- ---------
</TABLE>
- ---------------
(a) The Series Notes comprise the Series A Notes and the Series B Notes.
Historical amounts are net of unamortized discounts of $8,331,000 and
$7,447,000 for the Series A Notes and the Series B Notes, respectively.
(b) See "Description of Mortgage Notes." Pro forma balance is net of unamortized
discount of $8,375,000.
(c) See "Description of Junior Mortgage Notes." Pro forma balance is net of
unamortized discount of $4,025,000.
(d) Assumes no borrowings under the Senior Facility.
(e) See Note 7 of Notes to Consolidated Financial Statements of RII for a
description of RII's First Mortgage Non-Recourse Pass-Through Notes due June
30, 2000 (the "Showboat Notes"). Amounts are net of unamortized discount of
$20,452,000.
(f) See "Description of Common Stock and Class B Common Stock -- Description of
Class B Common Stock."
17
<PAGE> 20
CAPITALIZATION OF RIH
The following table sets forth the historical consolidated capitalization
of RIH and its subsidiaries at December 31, 1993, and RIH's pro forma
capitalization at such date after giving effect to the Restructuring.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
----------------------
HISTORICAL PRO FORMA
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt:
Capitalized lease obligations....................................... $ 74 $ 74
Notes payable to affiliate(a)....................................... 325,000
--------- ---------
Total current maturities of long-term debt.................. 325,074 74
--------- ---------
Long-term debt:
RIH Promissory Note due to affiliate(b)............................. 116,625
RIH Junior Promissory Note due to affiliate(c)...................... 30,975
RIH Senior Facility Promissory Note(d)
Capitalized lease obligations....................................... 13 13
--------- ---------
Total long-term debt........................................ 13 147,613
--------- ---------
Shareholder's equity (deficit):
Common stock(a)..................................................... 1,000
Excess of liabilities over assets at August 1990 reorganization..... (198,829) (198,829)
Capital in excess of par............................................ 210,331
Retained earnings................................................... 50,834
--------- ---------
Total shareholder's equity (deficit)........................ (147,995) 12,502
--------- ---------
Total capitalization........................................ $ 177,092 $ 160,189
--------- ---------
--------- ---------
</TABLE>
- ---------------
(a) Notes payable to GGRI were exchanged for an amount of RIH common stock
representing 99.99% of the issued and outstanding stock of RIH as part of
the Restructuring.
(b) Note payable to RIHF with terms that mirror the Mortgage Notes. See
"Description of Mortgage Notes." Pro forma balance is net of unamortized
discount of $8,375,000.
(c) Note payable to RIHF with terms that mirror the Junior Mortgage Notes. See
"Description of Junior Mortgage Notes." Pro forma balance is net of
unamortized discount of $4,025,000.
(d) If there is a borrowing under the Senior Facility, RIH will have a note
payable to RIHF in an equal amount with terms that mirror those of the
Senior Facility Notes. See "Restructuring of Series Notes -- Restructuring"
for a brief description of the Senior Facility Notes.
18
<PAGE> 21
SELECTED HISTORICAL FINANCIAL DATA
The information presented below should be read in conjunction with the
consolidated financial statements, including notes thereto, presented elsewhere
in this Prospectus.
RESORTS INTERNATIONAL, INC.
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1990
-------------------------
THROUGH FROM
OPERATING INFORMATION (NOTE A) 1989 AUGUST 31 SEPTEMBER 1 1991 1992 1993
- ---------------------------------- --------- --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues (Note B)....... $ 451,254 $293,972 $129,591 $ 418,243 $ 436,934 $ 439,564
--------- --------- ------------ ------------ ------------ ------------
--------- --------- ------------ ------------ ------------ ------------
Earnings (loss) from operations
(Note B)........................ $ (7,850) $ 13,540 $ (1,214) $ 16,036 $ 21,502 $ 12,898
Recapitalization costs
(Notes A and C)................. (7,291) (187,018 ) (2,848) (8,789)
Write-off of goodwill............. (181,311)
Net gain from purchases of
subordinated debentures
(Note D)........................ 4,149
Other income (deductions), net
(Note E)........................ (114,286) 1,884 (12,317) (58,438) (73,456) (105,273)
--------- --------- ------------ ------------ ------------ ------------
Loss before income taxes and
extraordinary item.............. (306,589) (171,594 ) (13,531) (42,402) (54,802) (101,164)
Income tax benefit (expense)
(Note F)........................ 3,700 831 1,348 (1,000)
--------- --------- ------------ ------------ ------------ ------------
Loss before extraordinary item.... (302,889) (171,594 ) (13,531) (41,571) (53,454) (102,164)
Extraordinary item
(Notes F and G)................. 429,809
--------- --------- ------------ ------------ ------------ ------------
Net earnings (loss)............... $(302,889) $258,215 $(13,531) $ (41,571) $ (53,454) $ (102,164)
--------- --------- ------------ ------------ ------------ ------------
--------- --------- ------------ ------------ ------------ ------------
Net loss per share of common stock
(Note H)........................ $ (. 68) $ (2.07) $ (2.65) $ (5.07)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Ratio of earnings to fixed charges
(Note I)........................ -- -- -- -- -- --
--------- --------- ------------ ------------ ------------ ------------
--------- --------- ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------
BALANCE SHEET INFORMATION (NOTE A) 1989 1990 1991 1992 1993
- ------------------------------------------------- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Total assets..................................... $ 745,976 $568,746 $567,890 $568,950 $ 575,785
Current maturities of long-term debt (Note J).... $ 1,269 $ 1,528 $ 1,571 $ 828 $ 466,336
Long-term debt, excluding current maturities
(Note J)....................................... $ 858,931 $341,069 $392,667 $460,712 $ 85,029
Shareholders' equity (deficit)................... $(260,641) $ 77,041 $ 36,099 $(17,262) $(113,744)
</TABLE>
NOTES TO RII SELECTED HISTORICAL FINANCIAL DATA
Note A: During 1989, RII and certain of its subsidiaries filed consents to
involuntary petitions or filed voluntary petitions for relief under the
Bankruptcy Code. The effects of the bankruptcy proceedings reflected in the
selected financial data for periods during which the Company operated subject to
the jurisdiction of the Bankruptcy Court are (i) the Company stopped accruing
interest on its previously outstanding public debt issues in November and
December 1989, (ii) the Company stopped amortizing debt issuance costs on the
dates the respective interest accruals ceased, and (iii) the Company included in
long-term debt at December 31, 1989 sinking funds due in 1990 and accrued
interest on public debt stayed in bankruptcy proceedings.
19
<PAGE> 22
In 1990 the Company emerged from bankruptcy proceedings pursuant to the Old
Plan. The reorganization was accounted for using "fresh start" accounting.
Accordingly, all assets and liabilities were restated to reflect their estimated
fair values and the accumulated deficit was eliminated. The Company recorded the
effects of the reorganization as of August 31, 1990. The 1990 operating
information is presented separately for the periods "Through August 31" and
"From September 1" due to the new basis of accounting which resulted from the
application of fresh start accounting.
Changes in operations during the past five years include the following:
Amphibious airline operation was sold in December 1990. Security consulting
service operations were sold in 1990 and 1991.
Note B: Operating revenues for 1989 include the sales of various parcels
of vacant land in Atlantic City and The Bahamas for net proceeds of $5,053,000.
Earnings from operations for 1989 include a net loss of $317,000 on those sales.
Operating revenues for 1990 include the sales of various parcels of vacant
land in The Bahamas for net proceeds of $3,933,000. Earnings from operations for
1990 include gains of $247,000 on those sales.
Operating revenues for 1992 include the sale of a residential lot in The
Bahamas for net proceeds of $213,000. Earnings from operations for 1992 include
a net loss of $17,000 on that sale.
Operating revenues for 1993 include the sale of a residential lot in The
Bahamas for net proceeds of $445,000. Earnings from operations for 1993 include
a net gain of $224,000 on that sale.
Note C: See Note 1 of Notes to Consolidated Financial Statements of RII
for a discussion of this item in 1992 and 1993.
Note D: The 1989 net gain from purchases of subordinated debentures
resulted from the Company's purchases of $13,528,000 of its subordinated
debentures to satisfy sinking fund requirements.
Note E: This item includes interest income, interest expense and
amortization of debt discount and issuance costs.
Note F: For the years 1989 through 1992 the Company accounted for income
taxes in accordance with Statement of Accounting Standards No. 96, "Accounting
for Income Taxes".
For the year 1989 the Company had net operating losses for purposes of
federal and state income taxes. To the extent the carryforward of these net
operating losses reduced the existing deferred tax liability, it resulted in a
tax benefit for the year. The write-off of goodwill in 1989 was a non-deductible
item for income tax purposes.
No tax provision was recorded for the two periods of 1990 due to the
generation of net operating losses for federal and state income tax purposes.
The gain on exchange of debt which is reflected in the extraordinary item in
1990 was not taxable. A deferred tax benefit resulted from the elimination of
basis differences on the previously outstanding public debt, and is included in
the extraordinary item.
See Note 13 of Notes to Consolidated Financial Statements of RII for
discussion of income taxes for 1991, 1992 and 1993.
Note G: The exchange of securities in connection with the reorganization
in 1990 resulted in a gain of $421,611,000 which, together with the related
deferred income tax benefit of $8,198,000, was reported as an extraordinary
item.
Note H: See Note 2 of Notes to Consolidated Financial Statements of RII
for discussion of net loss per share of common stock. For 1989 and the period
through August 31, 1990 there was a sole shareholder of RII. Accordingly, no per
share data is disclosed for those periods.
Note I: The ratios of earnings to fixed charges were computed by dividing
earnings available for fixed charges (earnings before income taxes and
extraordinary item, adjusted for interest expense, amortization of debt discount
and expense and one-third of rent expense) by fixed charges. Fixed charges
include interest expense, amortization of debt discount and expense, capitalized
interest and one-third of rent expense.
20
<PAGE> 23
Earnings were insufficient to cover fixed charges by $306,688,000 for 1989;
$171,594,000 for the period through August 31, 1990; $13,531,000 for the period
from September 1, 1990; $42,402,000 for 1991; $54,802,000 for 1992; and
$101,164,000 for 1993.
Note J: These items are presented net of unamortized discounts.
Note K: RII has not paid any dividends on its capital stock during the
five years presented.
RESORTS INTERNATIONAL HOTEL, INC.
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1990
-----------------------
THROUGH FROM
OPERATING INFORMATION (NOTE A) 1989 AUGUST 31 SEPTEMBER 1 1991 1992 1993
- ------------------------------------ --------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating revenues.................. $ 255,054 $ 158,805 $ 76,216 $ 247,474 $ 262,740 $ 271,479
--------- --------- ----------- --------- --------- ---------
--------- --------- ----------- --------- --------- ---------
Earnings (loss) from operations..... $ (7,286) $ 3,449 $ 2,304 $ 14,819 $ 21,049 $ 12,068
Recapitalization costs (Note A)..... (2,430) (119,804) (874) (2,727)
Write-off of goodwill............... (105,161)
Affiliated bad debt write-off
(Note B).......................... (98,983)
Other income (deductions), net
(Note C).......................... (37,565) 5,209 2,696 6,942 7,181 7,422
--------- --------- ----------- --------- --------- ---------
Earnings (loss) before income taxes
and extraordinary item............ (152,442) (210,129) 5,000 21,761 27,356 16,763
Income tax benefit (expense)
(Note D).......................... 3,400 (8,704) (10,942) (400)
--------- --------- ----------- --------- --------- ---------
Earnings (loss) before extraordinary
item.............................. (149,042) (210,129) 5,000 13,057 16,414 16,363
Extraordinary item (Note B)......... (17,335)
--------- --------- ----------- --------- --------- ---------
Net earnings (loss)................. $(149,042) $(227,464) $ 5,000 $ 13,057 $ 16,414 $ 16,363
--------- --------- ----------- --------- --------- ---------
--------- --------- ----------- --------- --------- ---------
Ratio of earnings to fixed charges
(Note E).......................... -- -- 14.2 15.5 21.5 16.0
--------- --------- ----------- --------- --------- ---------
--------- --------- ----------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------
BALANCE SHEET INFORMATION (NOTE A) 1989 1990 1991 1992 1993
- ------------------------------------------------ -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Total assets.................................... $414,608 $ 221,193 $ 235,235 $ 250,636 $ 264,164
Current maturities of notes payable to affiliate
and other long-term debt...................... $ 482 $ 1,044 $ 958 $ 643 $ 325,074
Notes payable to affiliate and other long-term
debt, excluding current maturities............ $356,953 $ 326,787 $ 326,539 $ 325,904 $ 13
Shareholder's deficit........................... $ (6,365) $(193,829) $(180,772) $(164,358) $(147,995)
</TABLE>
NOTES TO RIH SELECTED HISTORICAL FINANCIAL DATA
Note A: At the end of 1989, when RII and certain of its subsidiaries
entered bankruptcy and stopped accruing interest on their public debt, RIH
stopped accruing interest on its affiliated notes payable, the terms of which
mirrored the terms of certain of the public debt. Also at that time RIH stopped
amortizing related debt issuance costs. At December 31, 1989, accrued interest
on RIH's affiliated notes payable is included in long-term, rather than current,
liabilities.
In 1990 the Company emerged from bankruptcy proceedings pursuant to the Old
Plan. The reorganization was accounted for using "fresh start" accounting.
Accordingly, all assets and liabilities were restated to reflect their estimated
fair values and the accumulated deficit was eliminated. The Company recorded the
21
<PAGE> 24
effects of the reorganization as of August 31, 1990. The 1990 operating
information is presented separately for the periods "Through August 31" and
"From September 1" due to the new basis of accounting which resulted from the
application of fresh start accounting.
Note B: RIH's affiliated bad debt write-off resulted from the 1990
reorganization discussed above.
Note C: Includes interest income, interest expense and amortization of debt
discount and issuance costs.
Note D: For the year ended December 31, 1989, RIH accounted for income
taxes under the liability method prescribed by Statement of Financial Accounting
Standards No. 96, "Accounting for Income Taxes."
No tax provision was recorded for the two periods of 1990 due to the
generation of additional net operating losses for federal and state income tax
purposes during the period through August 31 which were sufficient to offset
taxable income generated during the period from September 1.
See Note 10 of Notes to Consolidated Financial Statements of RIH herein for
discussion of income taxes for 1991, 1992 and 1993.
Note E: The ratios of earnings to fixed charges were computed by dividing
earnings available for fixed charges (earnings before income taxes and
extraordinary item, adjusted for interest expense, amortization of debt discount
and expense, and one-third of rent expense) by fixed charges. Fixed charges
include interest expense, amortization of debt discount and expense, and
one-third of rent expense. Earnings were insufficient to cover fixed charges by
$152,442,000 for 1989 and $210,129,000 for the period through August 31, 1990.
22
<PAGE> 25
PRO FORMA FINANCIAL DATA
Set forth below is certain unaudited pro forma financial information for
RII and RIH. The pro forma balance sheet information as of December 31, 1993
gives effect to the Restructuring as if it occurred on that date. The pro forma
statement of operations information for the year ended December 31, 1993 gives
effect to the Restructuring as if it occurred on January 1, 1993. However, the
pro forma statement of operations information excludes the gains (losses)
resulting from the Restructuring and the costs associated therewith. The
unaudited pro forma information is not necessarily indicative of future results
or what the respective entities' financial position or results of operations
would actually have been had the transactions occurred on the dates indicated.
Such information should not be used as a basis to project results for any future
period.
RIHF
Pro forma financial information is not presented for RIHF due to its recent
incorporation and lack of activity to date. Pursuant to the Restructuring, RIHF
is to have notes receivable from RIH (the RIH Promissory Note and the RIH Junior
Promissory Note) in amounts equal to its notes payable balance for the Mortgage
Notes and the Junior Mortgage Notes. Also, RIHF is to have interest income from
the notes receivable from RIH in an amount equal to the interest expense on its
notes payable. RIHF is not expected to have any other assets or liabilities or
engage in any transactions subsequent to the Restructuring except to the extent
that RIHF draws upon the Senior Facility. If RIHF does draw upon the Senior
Facility, RIHF will have an additional note receivable from RIH (the RIH Senior
Facility Promissory Note) in an amount equal to its notes payable balance
pursuant to the Senior Facility (the Senior Facility Notes), and will have
interest income from such note receivable in an amount equal to the interest
expense on its notes payable.
23
<PAGE> 26
RESORTS INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 62,546 $ 1,220 (a) $ 20,000
3,008 (b)
(38,774) (c)
(8,000) (d)
Restricted cash equivalents............................ 14,248 (1,220) (a) 4,309
(6,913) (c)
(1,806) (e)
Receivables, net....................................... 19,297 (13,269) (c) 6,028
Inventories............................................ 8,664 (6,910) (c) 1,754
Prepaid expenses....................................... 10,664 2,310 (b) 9,387
(2,581) (c)
(1,006) (d)
---------- ----------- ---------
Total current assets........................... 115,419 (73,941) 41,478
Property and equipment, net.............................. 447,840 (173,478) (c) 274,362
Deferred charges and other assets........................ 12,526 (1,264) (c) 11,262
---------- ----------- ---------
$ 575,785 $(248,683) $ 327,102
---------- ----------- ---------
---------- ----------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt, net.............. $ 466,336 $(466,262) (c) $ 74
Accounts payable and accrued liabilities............... 84,164 (40,366) (c) 39,905
(2,087) (d)
(1,806) (e)
---------- ----------- ---------
Total current liabilities...................... 550,500 (510,521) 39,979
---------- ----------- ---------
Long-term debt, net...................................... 85,029 147,465 (c) 232,494
---------- ----------- ---------
Deferred income taxes.................................... 54,000 54,000
---------- ---------
Shareholders' equity (deficit):
Common stock........................................... 202 169 (c) 377
6 (d)
Capital in excess of par............................... 102,092 30,665 (c) 133,615
858 (d)
Accumulated deficit.................................... (210,720) 85,140 (c) (133,363)
(7,783) (d)
---------- ----------- ---------
(108,426) 109,055 629
Note receivable from related party..................... (5,318) 5,318 (b) 0
---------- ----------- ---------
Total shareholders' equity (deficit)........... (113,744) 114,373 629
---------- ----------- ---------
$ 575,785 $(248,683) $ 327,102
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet of RII.
24
<PAGE> 27
RESORTS INTERNATIONAL, INC.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects the reclassification of the balance of the collateral account
for the Series Notes from restricted cash equivalents to non-restricted cash and
cash equivalents.
(b) Reflects (i) prepayment of fees due Griffin Group through September 17,
1994 pursuant to the Griffin Services Agreement by application of such amount as
a reduction of the balance of the note receivable from Griffin Group (the "Group
Note") and (ii) collection of the remaining balance of the Group Note.
(c) Reflects the exchange, net of related tax effects, of the Series Notes
for the following:
(i) $125,000,000 principal amount of Mortgage Notes;
(ii) $35,000,000 principal amount of Junior Mortgage Notes, and 35,000
shares of Class B Common Stock to be issued therewith;
(iii) Excess Cash, which has been adjusted to include the $2,542,000
distribution that RII received in March 1994 from a litigation trust ( the
"Litigation Trust") established under the Old Plan to pursue certain claims
against a former affiliate.
(iv) 40% of the outstanding Common Stock after giving effect to the
Restructuring, assuming the Griffin Warrants are exercised; and
(v) the consideration received from the SIHL Sale (see "Restructuring
of Series Notes -- Restructuring"). As this was not reflected in the
historical consolidated balance sheet of RII at December 31, 1993, the pro
forma adjustments recording this component of the exchange reflect the
elimination of balances of RII's subsidiaries whose equity or assets and
liabilities were transferred in the SIHL Sale (the "PIRL Group"), after
adjustment of their combined working capital to $12,000,000, of which cash
is a minimum of $5,000,000.
(d) Reflects the write-off of prepaid recapitalization costs and settlement
of other recapitalization costs through cash payments and the issuance of
612,500 shares of Common Stock, a portion of which were accrued for at December
31, 1993.
(e) Reflects the distribution of the remaining funds held for the benefit
of holders of beneficial interests in the Litigation Trust; at least a portion
of such distribution will be in settlement of Litigation Trust expenses.
25
<PAGE> 28
RESORTS INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1993
-------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Casino............................................... $ 307,059 $ (62,943) (f) $ 244,116
Rooms................................................ 35,708 (28,734) (f) 6,974
Food and beverage.................................... 46,843 (30,917) (f) 15,926
Other casino/hotel revenues.......................... 23,330 (18,867) (f) 4,463
Other operating revenues............................. 18,122 (18,121) (f) 1
Real estate related.................................. 8,502 (445) (f) 8,057
---------- ----------- ---------
439,564 (160,027) 279,537
---------- ----------- ---------
Expenses:
Casino............................................... 189,304 (47,696) (f) 141,608
Rooms................................................ 10,906 (7,504) (f) 3,402
Food and beverage.................................... 41,859 (24,149) (f) 17,710
Other casino/hotel operating expenses................ 69,918 (35,154) (f) 34,764
Other operating expenses............................. 14,697 (14,697) (f) 0
Selling, general and administrative.................. 71,700 (24,340) (f) 47,360
Provision for doubtful receivables................... 2,889 (1,988) (f) 901
Depreciation......................................... 27,924 (14,169) (f) 13,755
Real estate related.................................. 1,605 (221) (f) 1,384
Unallocated corporate expense........................ (4,136) (8) (f) (2,584)
4,635 (g)
(3,075) (h)
---------- ----------- ---------
426,666 (168,366) 258,300
---------- ----------- ---------
Earnings from operations............................... 12,898 8,339 21,237
Other income (deductions):
Interest income...................................... 3,174 6,350 (f) 2,774
(6,750) (i)
Interest expense..................................... (57,244) 50 (f) (26,034)
48,891 (j)
(17,731) (k)
Amortization of debt discount........................ (51,203) 49,170 (j) (2,762)
(729) (k)
Recapitalization costs............................... (8,789) 3,335 (f) 0
5,454 (l)
---------- ----------- ---------
Loss before income taxes............................... (101,164) 96,379 (4,785)
Income tax expense..................................... (1,000) (1,000)
---------- ----------- ---------
Net loss............................................... $ (102,164) $ 96,379 (m) $ (5,785)
---------- ----------- ---------
---------- ----------- ---------
Net loss per share..................................... $ (5.07) $ (.15)
---------- ---------
---------- ---------
Weighted average number of shares outstanding.......... 20,157 37,712(n)
---------- ---------
---------- ---------
Ratio of earnings to fixed charges..................... -- --
---------- ---------
---------- ---------
</TABLE>
See Notes to Pro Forma Consolidated Statement of Operations of RII.
26
<PAGE> 29
RESORTS INTERNATIONAL, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(f) Reflects the elimination of operating results of PIRL Group.
(g) Reflects the elimination of the management fee charged to PIRL Group by
RII. Such fee was based on 3% of certain PIRL Group gross revenues.
(h) Reflects the elimination of costs incurred by RII for services provided
to the PIRL Group including accounting, data processing and other support
services.
(i) Reflects the elimination of interest income on RIH's $50,000,000 note
receivable from a former Bahamian affiliate which was cancelled pursuant to the
terms of the Restructuring.
(j) Reflects the elimination of interest expense and amortization of debt
discount on the Series Notes.
(k) Reflects interest expense and amortization of debt discount on the
Mortgage Notes and the Junior Mortgage Notes.
(l) Reflects the elimination of recapitalization costs incurred in
connection with the Restructuring.
(m) The pro forma adjustments (f) through (l) affecting RII's consolidated
earnings do not include the gains (losses) resulting from the Restructuring and
the costs associated therewith. Assuming the Restructuring was effective
December 31, 1993, the operating loss on the Restructuring, resulting from the
difference between the carrying value of the PIRL Group and its fair value,
would have been approximately $62,000,000. For purposes of this computation,
fair value was estimated based on the terms of the SIHL Sale. Also assuming the
Restructuring was effective on that date, the extraordinary gain on the
Restructuring would have been approximately $145,000,000.
(n) Reflects (i) the issuance of 612,500 shares of Common Stock to
financial advisers in settlement of certain recapitalization costs and (ii) the
issuance to holders of the Series Notes of 40% of the outstanding Common Stock
after giving effect to the Restructuring, assuming the Griffin Warrants are
exercised.
27
<PAGE> 30
RESORTS INTERNATIONAL HOTEL, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
--------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 25,947 $ (10,947)(a) $ 15,000
Receivables, net...................................... 5,114 5,114
Interest receivable from affiliate.................... 1,125 (1,125)(b) 0
Note receivable from affiliate........................ 50,000 (50,000)(b) 0
Inventories........................................... 1,754 1,754
Prepaid expenses...................................... 5,642 2,310 (c) 7,952
---------- ----------- ---------
Total current assets.......................... 89,582 (59,762) 29,820
Property and equipment, net............................. 163,320 163,320
Deferred charges and other assets....................... 11,262 11,262
---------- ----------- ---------
$ 264,164 $ (59,762) $ 204,402
---------- ----------- ---------
---------- ----------- ---------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt.................. $ 74 $ 74
Accounts payable and accrued liabilities.............. 24,813 24,813
Notes payable to affiliate............................ 325,000 $(325,000)(d) 0
Due to parent company................................. 42,859 2,310 (c) 0
(45,169)(e)
---------- ----------- ---------
Total current liabilities..................... 392,746 (367,859) 24,887
---------- ----------- ---------
Notes payable to affiliate -- RIH Promissory Note and
RIH Junior Promissory Note, net....................... 147,600 (e) 147,600
----------- ---------
Other long-term debt.................................... 13 13
---------- ---------
Deferred income taxes................................... 19,400 19,400
---------- ---------
Shareholder's equity (deficit):
Common stock.......................................... 1,000 (d) 1,000
Excess of liabilities over assets at August 31, 1990
reorganization..................................... (198,829) (198,829)
Capital in excess of par.............................. (10,947)(a) 210,331
(51,125)(b)
324,000 (d)
(51,597)(e)
Retained earnings..................................... 50,834 (50,834)(e) 0
---------- ----------- ---------
Total shareholder's equity (deficit).......... (147,995) 160,497 12,502
---------- ----------- ---------
$ 264,164 $ (59,762) $ 204,402
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet of RIH.
28
<PAGE> 31
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects the distribution to GGRI of cash not needed for current operations.
GGRI, in turn, distributed these funds to RII for its distribution of
Excess Cash to holders of Series Notes.
(b) Reflects (i) the assumption by GGRI of RIH's note receivable from a former
Bahamian affiliate and accrued interest thereon and (ii) RIH's distribution
to GGRI of such note and accrued interest as a return of surplus.
(c) Reflects prepayment of fees due Griffin Group through September 17, 1994
pursuant to the Griffin Services Agreement by application of such amount as
a reduction of the Group Note balance receivable by RII.
(d) Reflects GGRI's exchange of RIH's note payable to GGRI for RIH's issuance to
GGRI of 999,900 shares of RIH common stock, which is to represent 99.99% of
the issued and outstanding common stock of RIH.
(e) Reflects the distribution to RII of the RIH Promissory Note and the RIH
Junior Promissory Note in repayment of the intercompany debt owed to RII by
RIH, with the balance being a return of surplus.
29
<PAGE> 32
RESORTS INTERNATIONAL HOTEL, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1993
-------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Casino................................................. $ 244,116 $ 244,116
Rooms.................................................. 6,974 6,974
Food and beverage...................................... 15,926 15,926
Other casino/hotel revenues............................ 4,463 4,463
---------- ---------
271,479 271,479
---------- ---------
Expenses:
Casino................................................. 141,608 141,608
Rooms.................................................. 3,402 3,402
Food and beverage...................................... 17,710 17,710
Other casino/hotel operating expenses.................. 34,764 34,764
Selling, general and administrative.................... 47,362 47,362
Provision for doubtful receivables..................... 901 901
Depreciation........................................... 13,664 13,664
---------- ---------
259,411 259,411
---------- ---------
Earnings from operations................................. 12,068 12,068
Other income (deductions):
Interest income........................................ 7,615 $ (6,750) (f) 865
Interest expense....................................... (193) (17,731) (g) (17,924)
Amortization of debt discount.......................... (729) (g) (729)
Recapitalization costs................................. (2,727) 2,727 (h) 0
---------- ----------- ---------
Earnings (loss) before income taxes...................... 16,763 (22,483) (5,720)
Income tax expense....................................... (400) (400)
---------- ----------- ---------
Net earnings (loss)...................................... $ 16,363 $ (22,483) $ (6,120)
---------- ----------- ---------
---------- ----------- ---------
Ratio of earnings to fixed charges....................... 16.0 --
---------- ---------
---------- ---------
</TABLE>
See Notes to Pro Forma Consolidated Statement of Operations of RIH.
30
<PAGE> 33
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(f) Reflects the elimination of interest income on the note receivable from a
former Bahamian affiliate, which note was distributed to GGRI as a return
of surplus.
(g) Reflects interest expense and amortization of debt discount on the RIH
Promissory Note and the RIH Junior Promissory Note.
(h) Reflects the elimination of recapitalization costs incurred in connection
with the Restructuring.
31
<PAGE> 34
MARKET PRICES OF COMMON STOCK
The Common Stock is listed and traded on the AMEX. As of April 15, 1994,
there were 20,157,234 shares of Common Stock outstanding and held of record by
approximately 1,924 holders. As a result of the Restructuring, approximately
17,000,000 additional shares of Common Stock were issued. The following table
sets forth, for the periods listed, the high and low quarterly sales prices per
share of Common Stock on the AMEX. In view of the Restructuring and other
factors that usually affect stock prices, the prices shown should not be
considered as an indication of future market prices.
<TABLE>
<CAPTION>
HIGH LOW
---- -----
<S> <C> <C>
1992:
First Quarter....................................................... $2 3/4 $1 1/4
Second Quarter...................................................... 2 3/8 1
Third Quarter....................................................... 1 1/4 3/4
Fourth Quarter...................................................... 1 1/4 11/16
1993:
First Quarter....................................................... 1 1/8 13/16
Second Quarter...................................................... 3 7/8 13/16
Third Quarter....................................................... 2 3/4 1 9/16
Fourth Quarter...................................................... 2 1/8 1 3/8
1994:
First Quarter....................................................... 1 7/8 1 5/16
Second Quarter (through May , 1994)............................
</TABLE>
On May , 1994, the last trading day prior to the date of this Prospectus,
the closing price for Common Stock on the AMEX was $ . No cash
dividends on the Common Stock were paid during any of the periods listed above.
There were no Mortgage Notes or Units, consisting of Junior Mortgage Notes
and Class B Common Stock, outstanding prior to the Effective Date. Consequently,
no market price information for these securities is included in this Prospectus.
32
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Following is management's discussion and analysis of financial condition
and results of operations ("M D & A") of the Company, RIH and RIHF. The
Company's Atlantic City casino/hotel segment and Resorts Casino Hotel are the
operations and property of RIH. For M D & A of RIH the relevant portions of the
Company's M D & A should be read in conjunction with the sections specifically
designated as "RIH." M D & A of RIHF, which was formed in June 1993 and has had
no operations to date, is limited to a prospective discussion specifically
identified in "Financial Condition -- Liquidity."
FINANCIAL CONDITION
Liquidity
The Company. At December 31, 1993, the Company's current liabilities
exceeded its current assets by $435,081,000 because the Series Notes, which were
due April 15, 1994 were classified as current liabilities (due within one year).
The Company's working capital at December 31, 1993 included unrestricted cash
and equivalents of $62,546,000. A substantial amount of the unrestricted cash
and equivalents is required for day-to-day operations, including approximately
$15,000,000 of currency and coin on hand which amount varies by days of the
week, holidays and seasons, as well as approximately $15,000,000 of additional
cash balances necessary to meet current working capital needs.
The principal amount of the Series Notes outstanding was $481,907,000.
According to the terms of the Series Notes, the interest due on the maturity
date would have approximated $36,000,000 and RII's total obligation would have
been approximately $518,000,000. See "Restructuring of Series Notes" for a
description of the recently effected Restructuring and "Pro Forma Financial
Data" for pro forma effects of the Restructuring on RII's working capital.
Management believes that the Restructuring will improve the Company's
long-term liquidity and enhance its ability to meet its financial obligations as
they become due. Although the Restructuring resulted in a significant reduction
in the Company's unrestricted cash and equivalents due to the distribution of
Excess Cash to holders of the Series Notes, the Company retained $20,000,000 of
unrestricted cash and equivalents and will have the $20,000,000 Senior Facility
available for one year from the Effective Date of the Restructuring should the
Company have unforeseen cash needs. The Company believes that the Senior
Facility will serve as a safeguard if an emergency arises from current
operations, or serve as a source of funds for a profitable investment
opportunity.
See "Risk Factors -- Continuing High Leverage; Future Refinancings" for a
discussion regarding the Company's long-term liquidity.
RIH. At December 31, 1993, RIH's current liabilities exceeded its current
assets by $303,164,000 because its notes payable to GGRI in the amount of
$325,000,000, which were due upon demand, were classified as current
liabilities. RIH's working capital at December 31, 1993 included $25,947,000 of
cash and equivalents. The day-to-day operations of RIH require approximately
$10,000,000 of currency and coin on hand which amount varies by days of the
week, holidays and seasons. Additional cash balances are necessary to meet
current working capital needs.
Pursuant to the Restructuring, the notes payable to GGRI were canceled.
Also, RIH, through its affiliated notes payable to RIHF, will be the principal
source of funds for servicing the Mortgage Notes and the Junior Mortgage Notes,
as well as the Senior Facility Notes to the extent issued. Based on projected
operating results, management believes that RIH's liquidity will continue to be
satisfactory after the Restructuring; however, management can give no assurances
as to RIH's future liquidity due to the possibility of unanticipated events and
circumstances inherent in any projections.
RIHF. RIHF was formed for the purpose of issuing the Mortgage Notes and
the Junior Mortgage Notes as part of the Restructuring, as well as the Senior
Facility Notes to the extent issued. Also as part of the Restructuring, RIHF
obtained notes receivable from RIH with terms that mirror the terms of the
Mortgage
33
<PAGE> 36
Notes and the Junior Mortgage Notes with the intent that RIH pay interest to
RIHF on RIHF's interest payment dates so that RIHF will have cash available to
make its interest payments on those dates. It is not anticipated that RIHF will
have any other operations.
Capital Expenditures and Other Uses of Funds
The Company. In recent years, capital expenditures consistently have been
a significant use of financial resources. See capital additions by geographic
and business segment in the table entitled "Identifiable Assets, Depreciation
and Capital Additions" below. Pursuant to a capital expenditure program
developed by the Company in 1989, virtually all guest rooms and public areas at
Resorts Casino Hotel were refurbished by the end of 1993. Also pursuant to this
program, virtually all guest rooms in the Company's Paradise Island facilities
were refurbished by 1991.
Capital additions for Resorts Casino Hotel in 1991 amounted to $22,734,000
as approximately 200 guest rooms in the East Tower were refurbished and certain
information systems were upgraded. In 1992, capital additions amounted to
$15,548,000 and included the conversion of the parking garage from valet to
self-parking, the construction of a covered walkway from the garage to the
Resorts Casino Hotel, the continued renovation of guest rooms, the purchase of
additional slot machines and improvements to the building's infrastructure.
Capital additions in 1993 amounted to $21,618,000, as the Company converted
certain back-of-the-house space into an 8,000 square foot simulcast facility
which houses nine betting windows and customer-operated terminals and
approximately 80 seats for simulcast betting operations, as well as 25 poker
tables, various other table games and a full service bar. Also, certain casino
renovations were completed, 280 slot machines were purchased, most of which
replaced older models, and the new VIP slot and table player lounge, "Club
Griffin," opened. In addition, guest room refurbishment continued and a new
centralized mobile communications system was installed. With the completion of
the capital expenditure program in 1993, recurring capital expenditures to keep
existing facilities competitive can be expected to approximate $12,000,000 per
year for the Resorts Casino Hotel.
Capital additions in 1991 for Paradise Island properties, which were
disposed of in the SIHL Sale, amounted to $3,726,000 as new carpeting was
installed in the casino, a new casino management system was implemented and
certain kitchen areas and guest rooms were renovated. Capital additions for 1992
totalled $4,317,000, and included the installation of 37 new slot machines,
expansion of the Paradise Island Airport parking lot, upgrading existing
computer equipment and restaurant renovations. In 1993 the Company expended
$3,747,000 which included the purchase of 110 new slot machines as replacements
for older models as well as various maintenance projects. The expenditures for
1991, 1992 and 1993 were somewhat curtailed from those originally planned, in
response to the operating performance of the Company's facilities on Paradise
Island. The Company's capital expenditures on Paradise Island in 1994 through
the SIHL Sale were limited to maintenance projects.
The Company continually monitors its capital expenditure plan and considers
both the timing and the scope of certain projects to be flexible. Thus, economic
developments and other factors may cause the Company to deviate from its present
capital expenditure plans.
Another significant use of funds in recent years has been recapitalization
costs. Payments of legal, financial and other advisory fees and costs amounted
to $8,095,000 and $2,460,000 in 1993 and 1992, respectively, in contemplation of
a restructuring of the Series Notes and payments of $237,000, $2,954,000 and
$5,883,000 in 1993, 1992 and 1991, respectively, for costs associated with the
Old Plan.
RIH. Expenditures for capital improvements described above have been, by
far, the largest use of funds for RIH for the periods discussed here. Deposits
made with the Casino Reinvestment Development Authority (the "CRDA") as required
by the New Jersey Casino Control Act, repayments of debt under capitalized
leases, and payment to RII of RIH's allocable portion (approximately one-third)
of recapitalization costs have been other uses of funds by RIH in these periods.
34
<PAGE> 37
Capital Resources and Other Sources of Funds
The Company. Since 1991, operations have been the most significant source
of funds to the Company.
In 1993 Merv Griffin, the Chairman of the Board of RII, made a partial
payment of $3,477,000 of principal on his note payable to RII (the "Griffin
Note"). As described in Note 10 of Notes to Consolidated Financial Statements of
RII, the Griffin Note was then cancelled and a new note (the Group Note) from
Griffin Group was substituted therefor. After certain amounts payable to Griffin
Group under the Griffin Services Agreement were offset against the Group Note,
pursuant to the Restructuring, the then remaining balance of the Group Note
(approximately $3,000,000) was collected by RII and distributed to holders of
Series Notes as part of Excess Cash.
As part of the Restructuring, and as noted above, the Company will have the
$20,000,000 Senior Facility available for one year from the Effective Date for
the Company's working capital and general corporate purposes.
RIH. Since 1991 operations have been the main source of funds for RIH.
RESULTS OF OPERATIONS
General
The following discussion addresses certain operations which were disposed
of through the SIHL Sale. They include the Paradise Island portion of the
casino/hotel segment, the Paradise Island portion of the real estate related
segment and the airline segment.
Revenues
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------
1991 1992 1993
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Casino/hotel:
Atlantic City, New Jersey:
Casino................................................ $218,881 $233,780 $244,116
Rooms................................................. 8,074 8,766 6,974
Food and beverage..................................... 16,406 16,056 15,926
Other casino/hotel.................................... 4,113 4,138 4,463
-------- -------- --------
247,474 262,740 271,479
-------- -------- --------
Paradise Island, The Bahamas:
Casino................................................ 61,003 66,120 62,943
Rooms................................................. 33,173 30,235 28,734
Food and beverage..................................... 36,053 32,851 30,917
Other casino/hotel.................................... 17,563 17,890 18,867
-------- -------- --------
147,792 147,096 141,461
-------- -------- --------
Total casino/hotel............................... 395,266 409,836 412,940
-------- -------- --------
Real estate related:
Atlantic City, New Jersey................................ 7,542 7,813 8,057
Paradise Island, The Bahamas............................. 213 445
-------- -------- --------
7,542 8,026 8,502
-------- -------- --------
Airline.................................................... 18,234 22,483 21,802
Other segments............................................. 97 162 115
Intersegment eliminations.................................. (2,896) (3,573) (3,795)
-------- -------- --------
Revenues from operations................................... $418,243 $436,934 $439,564
-------- -------- --------
-------- -------- --------
</TABLE>
35
<PAGE> 38
Casino/hotel -- Atlantic City, New Jersey
Casino revenues from the Company's Atlantic City casino/hotel increased by
$10,336,000 in 1993 and $14,899,000 in 1992. Disregarding casino revenues
derived from poker and simulcasting, which activities commenced on June 28,
1993, the increase in table and slot win was $4,591,000, or a 2% increase over
1992. The Atlantic City casino industry had a net increase in table and slot win
of 2% over 1992, while the average increase over the previous four years was
4.2%. The Company believes that the increased competition from other newly
opened or expanded jurisdictions which permit gaming has slowed the growth of
gaming revenue in Atlantic City and, for the Company in 1993, has significantly
increased the cost of obtaining additional revenue.
For both years the Company's increased casino revenues resulted primarily
from increased slot revenues. The improvement in slot revenues resulted from the
effect of increases in amounts wagered by patrons, while the hold percentage
(ratio of casino win to total amount wagered for slots or total amount of chips
purchased for table games) declined. This reflects management's decision to
decrease the slot hold percentage in order to attract more slot players and to
encourage increased slot wagering per player, as well as marketing programs
which targeted slot players.
In 1993 and 1992 the Company's table game revenues declined, as did the
entire Atlantic City casino industry's. In 1993 the Company's decline of 3.3%,
as compared to the industry's decline of 3.1%, was due to a lower hold
percentage, while the amounts wagered on table games did not fluctuate
significantly from the prior year. In 1992, the Company's decline of 6.5%, as
compared to the industry's decline of 3.3%, was due to a decrease in amounts
wagered and, to a lesser extent, a decrease in the table game hold percentage.
Although total occupancy was relatively flat in 1993 compared to 1992, the
number of complimentary rooms provided to casino patrons increased. The reduced
occupancy from rooms sold resulted in lower room revenues during 1993 and
contributed to the decrease in food and beverage revenues.
Casino/hotel -- Paradise Island, The Bahamas
Revenues from the Company's Paradise Island casino/hotel operations, which
were disposed of in the SIHL Sale, decreased by $5,635,000 in 1993 and by
$696,000 in 1992.
In 1993 casino revenues decreased $3,177,000 primarily due to the effect of
a decrease in table game hold percentage from 16.5% in 1992 to 14.4% in 1993.
The Company's average table game hold percentage over the four years ended 1992
was 17.2%. The effect of this decrease was partially offset by the effect of an
increase in table game drop and improved slot win. Room revenues and food and
beverage revenues also were lower in 1993 due to lower occupancy, net of
complimentary rooms. Although total air arrivals to the Paradise Island -- New
Providence Island area increased by 5% in 1993, the Company lost market share as
it did not continue to reduce room rates in response to significant rate
reductions by competitors.
In 1992 increased casino revenue was more than offset by decreased room
revenue and food and beverage revenue. Casino revenue was up due to increases in
both slot win and table game win. The increase in table game revenue reflected
an increase in drop (amount of chips purchased), the favorable effect of which
more than offset the impact of a decline in the table game hold percentage. The
decrease in room revenue was due to reduced room rates and occupancy, net of
complimentary rooms. The reduction in occupancy also had an adverse effect on
food and beverage revenue. Total air arrivals to the Paradise Island -- New
Providence Island area were down in 1992 by 10%, which management of the Company
attributed to the continuing economic recession and reduced air service
available. In addition, the Company's competitors reduced room rates in 1992 and
the Company, in an effort to maintain occupancy, did the same.
Real Estate Related
Atlantic City real estate related revenues in 1993, 1992 and 1991 represent
rent from ACS pursuant to the Showboat Lease. Such rent receipts are restricted
for the payment of interest on the Showboat Notes. See Note 7 of Notes to
Consolidated Financial Statements of RII.
36
<PAGE> 39
The Paradise Island real estate related revenues in 1993 and 1992 resulted
from the sale of residential lots on Paradise Island.
Airline
Airline revenues decreased by $681,000 in 1993 due primarily to a decrease
in passenger revenues during the fourth quarter of the year, as competition from
the south Florida-Nassau routes increased. In addition to the new Jet Shuttle
service that began operations earlier in the year, during the fourth quarter of
1993, Trinity Air, a Bahamian carrier, commenced operations offering jet service
at lower fares than those offered by the Company on its south Florida-Paradise
Island routes and by other carriers on their south Florida-Nassau routes. Also,
from mid-November 1993 through early January 1994, Bahamasair changed the
aircraft used for its south Florida-Nassau flights to jets with a larger seating
capacity. Also affecting airline revenues in 1993 was a decrease in revenues
from contract training, flight and maintenance work for non-affiliated parties.
Airline revenues increased by $4,249,000 in 1992 due primarily to an
increase in number of passengers flown as other airlines ceased their flights or
reduced the frequency of their flights to The Bahamas and the Company expanded
its flight schedule. Also, 1992 includes revenues from contracted training,
flight and maintenance work for non-affiliated parties.
Contribution to Consolidated Loss Before Income Taxes
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1991 1992 1993
-------- -------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Casino/hotel:
Atlantic City, New Jersey.................................. $ 14,817 $ 21,051 $ 12,069
Paradise Island, The Bahamas*.............................. (5,707) (5,592) (9,979)
-------- -------- ---------
9,110 15,459 2,090
-------- -------- ---------
Real estate related:
Atlantic City, New Jersey.................................. 5,911 6,425 6,654
Paradise Island, The Bahamas............................... (17) 224
-------- -------- ---------
5,911 6,408 6,878
-------- -------- ---------
Airline*..................................................... 83 77 (14)
Other segments............................................... (148) (70) (122)
Unallocated corporate expense................................ 1,080 (372) 4,066
-------- -------- ---------
Earnings from operations..................................... 16,036 21,502 12,898
Other income (deductions):
Interest income............................................ 4,824 4,969 3,174
Interest expense........................................... (31,157) (40,856) (57,244)
Amortization of debt discount.............................. (32,105) (37,569) (51,203)
Recapitalization costs..................................... (2,848) (8,789)
-------- -------- ---------
Loss before income taxes..................................... $(42,402) $(54,802) $(101,164)
-------- -------- ---------
-------- -------- ---------
</TABLE>
- ---------------
* The Paradise Island casino/hotel segment subsidized the operation of Paradise
Island Airlines, Inc. ("PIA"), a subsidiary of RII, in the amount of $760,000
and $3,329,000 for the years 1991 and 1993, respectively.
Casino/hotel -- Atlantic City, New Jersey
Casino, hotel and related operating results decreased by $8,982,000 for
1993 as increased revenues described above were offset by a net increase in
operating expenses. The most significant increases in operating expenses were
casino promotional costs ($7,700,000), payroll and related costs ($6,000,000),
other casino operating expenses ($2,600,000), depreciation ($2,300,000), fees to
Griffin Group for services rendered under
37
<PAGE> 40
the Griffin Services Agreement described in Note 10 of Notes to Consolidated
Financial Statements of RII ($2,200,000) and entertainers fees and
accommodations ($1,000,000). The increase in casino promotional costs was due
primarily to a new program in 1993 which rewards slot players by giving cash
back to patrons based on their level of play. Since the introduction of the
"cash-back" program the Company has reduced cash giveaways to bus patrons and
through other promotional mailings. The majority of the increase in payroll and
related costs was due to merit and union increases in salary and wage rates. The
remaining increase in payroll and related costs and a significant portion of the
casino operating costs increase were associated with the new simulcast and poker
facility. The increase in entertainment costs resulted from a return to offering
more headliner shows in 1993. The most significant cost reductions in 1993 were
in the performance and incentive bonus ($3,300,000) and in food and beverage
costs ($1,400,000).
Casino, hotel and related operating results improved by $6,234,000 for 1992
as increased revenues discussed above were partially offset by a net increase in
operating expenses. The most significant increases in operating expenses were
payroll and related costs ($3,500,000), depreciation ($2,300,000), casino win
tax ($1,400,000) and performance incentive bonuses ($1,200,000). The increase in
payroll and related costs was due to increases in wages, payroll taxes and union
benefits. For 1992 the most significant decrease in net operating expenses was
the provision for doubtful receivables ($2,100,000).
For a discussion of competition in the Atlantic City casino/hotel industry
see "Description of Business -- Competition."
Casino/hotel -- Paradise Island, The Bahamas
Casino, hotel and related operating results declined by $4,387,000 for 1993
as decreased revenues discussed above were partially offset by a net decrease in
operating expenses. These operations suffered, generally, as management's
attention was diverted by the impending disposition of the Paradise Island
operations contemplated in the Restructuring and the Company experienced the
loss of certain key management personnel.
The most significant reductions in operating expenses for 1993 were in
sales and marketing ($1,000,000), food and beverage and other direct costs
($900,000) and gaming taxes and fees ($700,000). The reduction in sales and
marketing costs resulted primarily from reductions in advertising during 1993.
Gaming taxes and fees declined relative to the decrease in casino revenue. A
reduction in occupancy resulted in decreased food, beverage and other direct
costs as well as reduced staffing levels and overall operating costs throughout
the facility. The most significant increase in operating expenses was the
subsidy of PIA ($3,329,000), RII's subsidiary which provides air service between
south Florida and the Company's Paradise Island Airport, which increased as
PIA's operating results declined. See "Airline" below.
Casino, hotel and related operating results improved by $115,000 for 1992
as decreased revenues discussed above were more than offset by net decreased
operating expenses. The most significant reductions in operating expenses were
food, beverage and other direct costs ($1,000,000), depreciation ($800,000),
payroll and related costs ($800,000) and the subsidy of PIA ($760,000). The
reduced occupancy level and the reduction in number of visitors to the area
contributed to an overall reduction in operating costs throughout the facility.
The subsidy of PIA decreased as PIA's operating results improved. See "Airline"
below. For 1992 the most significant increases in operating expenses were
marketing and promotional costs ($1,400,000) and gaming taxes and fees
($1,000,000). The Company increased its marketing and promotional efforts over
the prior year in an effort to attract a greater number of patrons to its
facilities.
Real Estate Related
The comparison of earnings from Atlantic City real estate related
activities is affected by increases in rental income under the Showboat Lease
described above.
The Paradise Island real estate related earnings represent the net gain in
1993 and net loss in 1992 on the sales of residential lots on Paradise Island
mentioned above.
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<PAGE> 41
Airline
Airline operating results before the subsidy from the Paradise Island
casino/hotel segment decreased by $3,420,000 in 1993 and increased by $754,000
in 1992. For 1993 the decrease resulted primarily from an increase in
maintenance costs and, to a lesser extent, the decrease in passenger revenues
discussed above.
For 1992 the increase resulted primarily from the contract work for
non-affiliated parties noted above.
Unallocated Corporate Expense
Unallocated corporate expense decreased by $4,438,000 in 1993 and increased
by $1,452,000 in 1992. These variances resulted primarily from charges recorded
in 1992 of approximately $2,900,000 in connection with the start-up, management
and subsequent termination of an agreement to manage a casino located in Black
Hawk, Colorado. Also affecting corporate expense for 1993 is a reduction in
corporate payroll and related costs ($800,000). Also affecting corporate expense
for 1992 was a reduction in certain corporate insurance costs ($600,000) and an
increase in the amount of overhead expense allocated from corporate to certain
operations ($600,000).
The Environmental Protection Agency ("EPA") has named a predecessor to RII
as a potentially responsible party in the Bay Drum hazardous waste site (the
"Site") in Tampa, Florida which the EPA has listed on the National Priorities
List. No formal action has commenced against RII and RII intends to dispute any
claims of this nature, if asserted. Although it may ultimately be determined
that RII is one of several hundred parties that are jointly and severally liable
for the costs of Site remediation and for damages to natural resources at the
Site caused by hazardous wastes, the extent of any such liability, if any,
cannot be determined at this time.
Other Income (Deductions)
The Company. The increase in interest expense in 1993 and 1992 was due to
a combination of (i) an increase in the stated interest rates of the Series
Notes; (ii) increased principal amounts of debt outstanding due to
payment-in-kind interest on the Series Notes; and (iii) changes in the market
value of the Series Notes as, through October 15, 1993, the Company recorded
interest at the estimated market value of additional Series Notes to be issued
in satisfaction of its interest obligations. Subsequent to October 15, 1993 the
Company's option to satisfy interest on the Series Notes through the issuance of
additional Series Notes was no longer available. Thus, effective October 16,
1993 the Company began recording interest expense on the Series Notes at the
stated rate in lieu of a discounted rate to reflect market value. Amortization
of debt discount increased in 1993 and 1992 primarily due to the additional
discounts associated with Series Notes issued in satisfaction of interest
obligations.
The Company's interest expense and amortization of debt discount are
expected to be significantly less after the Restructuring.
Recapitalization costs in 1993 and 1992 include costs of financial advisers
retained to assist in the development and analysis of financial alternatives
which would enable the Company to reduce its future debt service requirements
and other legal and advisory fees incurred in connection with the Restructuring.
RIH. RIH's interest income has been largely attributable to the
$50,000,000 note receivable from a former Bahamian affiliate, which bore
interest at 13.5% per year. This note was canceled as part of the Restructuring.
RIH's interest expense in recent years has been limited to minor amounts
incurred on capitalized lease obligations. After the Restructuring RIH is to
bear, indirectly, the interest on the Mortgage Notes, the Junior Mortgage Notes
and, to the extent issued, the Senior Facility Notes, through notes payable to
RIHF, the terms of which will mirror the terms of such debt of RIHF.
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<PAGE> 42
Income Taxes
The Company. See Note 13 of Notes to Consolidated Financial Statements of
RII for an explanation of changes in the Company's effective income tax rate
during the years 1991 through 1993.
RIH. See Note 10 of Notes to Consolidated Financial Statements of RIH for
a discussion of RIH's income tax expense for the years 1991 through 1993.
Identifiable Assets, Depreciation and Capital Additions
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
-------------------------------------------
LESS ACCUMULATED
DEPRECIATION AND
GROSS VALUATION NET CAPITAL
ASSETS ALLOWANCES ASSETS DEPRECIATION ADDITIONS
-------- ------------------- -------- ------------ ---------
FOR THE YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1993
------------------------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Casino/hotel:
Atlantic City, New Jersey................... $241,544 $ (40,326) $201,218 $ 13,654 $21,618
Paradise Island, The Bahamas................ 207,003 (46,398) 160,605 13,325 3,747
-------- ---------- -------- ------------ -------
448,547 (86,724) 361,823 26,979 25,365
-------- ---------- -------- ------------ -------
Real estate related:
Atlantic City, New Jersey................... 110,781 (97) 110,684 29
Paradise Island, The Bahamas................ 33,114 33,114
-------- ---------- -------- ------------
143,895 (97) 143,798 29
-------- ---------- -------- ------------
Airline....................................... 12,887 (2,750) 10,137 831 445
Other segments................................ 1,546 (47) 1,499 13 2
Corporate(A).................................. 58,883 (355) 58,528 72 101
-------- ---------- -------- ------------ -------
$665,758 $ (89,973) $575,785 $ 27,924 $25,913
-------- ---------- -------- ------------ -------
-------- ---------- -------- ------------ -------
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1992 DECEMBER 31, 1992
------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
Casino/hotel:
Atlantic City, New Jersey................... $212,668 $ (26,644) $186,024 $ 11,392 $15,548
Paradise Island, The Bahamas................ 208,899 (33,899) 175,000 12,973 4,317
-------- ---------- -------- ------------ -------
421,567 (60,543) 361,024 24,365 19,865
-------- ---------- -------- ------------ -------
Real estate related:
Atlantic City, New Jersey................... 110,824 (68) 110,756 29
Paradise Island, The Bahamas................ 33,414 33,414
-------- ---------- -------- ------------
144,238 (68) 144,170 29
-------- ---------- -------- ------------
Airline....................................... 12,923 (1,995) 10,928 805 4
Other segments................................ 1,542 (34) 1,508 13
Corporate(A).................................. 51,605 (285) 51,320 110 16
-------- ---------- -------- ------------ -------
$631,875 $ (62,925) $568,950 $ 25,322 $19,885
-------- ---------- -------- ------------ -------
-------- ---------- -------- ------------ -------
</TABLE>
40
<PAGE> 43
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
-------------------------------------------
LESS ACCUMULATED
DEPRECIATION AND
GROSS VALUATION NET CAPITAL
ASSETS ALLOWANCES ASSETS DEPRECIATION ADDITIONS
-------- ------------------- -------- ------------ ---------
FOR THE YEAR ENDED
DECEMBER 31, 1993 DECEMBER 31, 1993
------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C>
Casino/hotel:
Atlantic City, New Jersey................... $196,022 $ (16,680) $179,342 $ 9,084 $22,734
Paradise Island, The Bahamas................ 207,924 (21,684) 186,240 13,782 3,726
-------- ---------- -------- ------------ -------
403,946 (38,364) 365,582 22,866 26,460
-------- ---------- -------- ------------ -------
Real estate related:
Atlantic City, New Jersey................... 112,900 (26) 112,874 19
Paradise Island, The Bahamas................ 33,400 33,400
-------- ---------- -------- ------------
146,300 (26) 146,274 19
-------- ---------- -------- ------------
Airline....................................... 12,934 (1,163) 11,771 809 280
Other segments................................ 1,549 (20) 1,529 14
Corporate(A).................................. 42,909 (175) 42,734 106 10
-------- ---------- -------- ------------ -------
$607,638 $ (39,748) $567,890 $ 23,814 $26,750
-------- ---------- -------- ------------ -------
-------- ---------- -------- ------------ -------
</TABLE>
- ---------------
(A) Includes cash equivalents, restricted cash equivalents not pledged for
operations, and other corporate assets.
41
<PAGE> 44
DESCRIPTION OF BUSINESS
GENERAL
RII is a holding company which, through its subsidiary, RIH, is principally
engaged in the ownership and operation of the Resorts Casino Hotel in Atlantic
City, New Jersey. RII was incorporated in Delaware in 1958. It has no
significant operations other than those represented by RIH, the owner and
operator of the Resorts Casino Hotel. RIH was incorporated in New Jersey in
1903. Prior to the Restructuring, the Company had significant casino, hotel and
resort assets and operations in The Bahamas on Paradise Island. See
"Restructuring of Series Notes -- Paradise Island Assets Acquired by SIHL."
Approximately 10 acres of Boardwalk property owned by the Company is leased
to ACS under the 99-year net lease, the Showboat Lease. All lease payments due
under the Showboat Lease directly service the Company's interest obligations
under the Showboat Notes. The leased acreage is the site of the Showboat Casino
which is operated by ACS. The Company also owns other real estate in the
Atlantic City area, most of which consists of vacant land.
Casino operations are conducted under a casino license which is subject to
periodic review and renewal by action of the Casino Control Commission. The
Company's current license was renewed in February 1994 through January 31, 1996
and is subject to certain financial reporting and other conditions. See
"Regulation and Gaming Taxes and Fees" below.
RII's recent bankruptcy proceedings, including the Restructuring of RII's
Series Notes and the sale of the Company's former Paradise Island properties,
are discussed under "Restructuring of Series Notes."
GAMING FACILITIES
The Resorts Casino Hotel has a 60,000 square foot casino and a racetrack
simulcast betting and poker area of approximately 8,000 square feet. At December
3l, 1993, these gaming areas contained 50 blackjack tables, 25 poker tables, 13
dice tables, 10 roulette tables, 2 baccarat tables, 2 mini-baccarat tables, 2
pai gow poker tables, l big six wheel, 1 sic bo table, 1,916 slot machines and
nine betting windows and customer-operated terminals for race book. As described
below under "Capital Improvements," the casino and hotel facilities at the
Resorts Casino Hotel have undergone extensive renovation and remodeling pursuant
to a major capital improvements program.
During 1993, the Company had total gaming revenues from its Atlantic City
casino of $244,116,000. This compares to total gross win of $233,780,000 for
1992 and $218,881,000 for 1991. For 1993 this amount includes simulcast
commissions and poker revenue totaling $5,745,000; the Company has offered
simulcast betting and poker since late June 1993.
Casino gaming in Atlantic City is highly competitive and is strictly
regulated under the Casino Control Act, which affects virtually all aspects of
the Company's Atlantic City casino operations. See "Competition" and "Regulation
and Gaming Taxes and Fees" below.
RESORT AND HOTEL FACILITIES
The Resorts Casino Hotel commenced operations in May 1978 and was the first
casino/hotel opened in Atlantic City. This was accomplished by the conversion of
the former Haddon Hall Hotel, a classic hotel structure originally built in the
early 1900s, into a casino/hotel. It is situated on approximately seven acres of
land with approximately 310 feet of Boardwalk frontage overlooking the Atlantic
Ocean. The Resorts Casino Hotel consists of two hotel towers, the 15-story East
Tower and the nine-story North Tower. In addition to the casino facilities
described above, the casino/hotel complex includes approximately 670 guest rooms
and suites, the 1,400-seat Superstar Theatre, eight restaurants, two cocktail
and entertainment lounges, a new VIP slot and table player lounge, an indoor
swimming pool and health club, and retail stores. The complex also has
approximately 50,000 square feet of convention facilities, including eight large
meeting rooms and a 16,000 square foot ballroom.
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The Company owns a garage that is connected to the Resorts Casino Hotel by
a covered walkway. This garage is used for patrons' self-parking and
accommodates approximately 700 vehicles. The Company also offers valet parking
at nearby, uncovered leased lots that provide space for approximately 600 cars
and has an additional leased lot which provides self-parking for approximately
200 cars.
Consistent with industry practice, the Company reserves a portion of its
hotel rooms and suites as complimentary accommodations for high-level casino
wagerers. For 1993, 1992 and 1991 the average occupancy rates, including
complimentary rooms which were primarily provided to casino patrons, were 92%,
93% and 90%, respectively. The average occupancy rate and weighted average daily
room rental, excluding complimentary rooms, were 47% and $62, respectively, for
1993. This compares with 57% and $61, respectively, for 1992, and 51% and $67,
respectively, for 1991.
CAPITAL IMPROVEMENTS
The Company has pursued a major capital improvements program since 1989 in
order to compete more effectively in the Atlantic City market. During these five
years capital additions at Resorts Casino Hotel exceeded $100,000,000. In 1993
the Company converted certain back-of-the-house space into a simulcast facility,
which houses nine betting windows and customer-operated terminals and
approximately 80 seats for simulcast betting operations, as well as 25 poker
tables, various other table games and a bar with food service. Also, certain
casino renovations were completed, 280 slot machines were purchased, most of
which replaced older models, and the new VIP slot and table player lounge, "Club
Griffin," opened. In addition, guest room refurbishments continued and a new
centralized mobile communications system was installed. During the years 1989
through 1992 improvements included refurbishment of rooms in both the East Tower
and the North Tower, casino renovations, purchase of new slot machines and
gaming equipment, conversion of the parking garage from valet to self-parking,
restaurant remodeling and upgrading, renovation of public areas, installation of
new computer equipment and management information systems, as well as
improvements to the infrastructure such as elevators, air conditioning, and
exterior renovations and painting. With the completion of the capital
improvements program in 1993, management expects capital expenditures in 1994 to
decline to approximately $12,000,000 which will be primarily for maintenance of
existing facilities.
MARKETING
The Company continues to take advantage of the celebrity status of Merv
Griffin, who is actively engaged in the marketing of the Resorts Casino Hotel.
Mr. Griffin, who is Chairman of the Board of RII, is featured in television
commercials and in print advertisements. Mr. Griffin also produced live at the
Resorts Casino Hotel "Merv Griffin's New Year's Eve Special 1993" which was
broadcast nationwide. Mr. Griffin is to continue to participate in the
operations and marketing of the Resorts Casino Hotel through the term of the
Griffin Services Agreement. See "Griffin Services Agreement" under "Management
of RII -- Executive Compensation -- Compensation Committee Interlocks and
Insider Participation."
The Company's marketing strategy is designed to enhance the appeal of the
Resorts Casino Hotel to the mid-and premium-level slot and table game players.
For slot players, in 1993 the Company (i) introduced a new "cash-back" program
which rewards players with cash refunds or complimentaries based on their volume
of play; (ii) expanded and upgraded "Hollywood Hills," its high-limit slot area;
and (iii) opened a VIP slot and table player lounge, "Club Griffin." Also, in an
effort to attract mid and premium table game players, the Company has
established customer development teams to increase opportunities in this market
area. The entertainment product has also been modified to attract the mid and
premium players through increased booking of star headliners and, in 1993,
changing the revue show more frequently than in prior years.
NEW CONVENTION CENTER
In January 1992, the State of New Jersey enacted legislation that
authorized a financing plan for the construction of a new convention center to
be located on a 30-acre site next to the Atlantic City train station at the base
of the Atlantic City expressway. The Company understands that the new convention
center will have
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<PAGE> 46
500,000 square feet of exhibit space and an additional 104,200 square feet of
meeting rooms. Construction of the new convention center began in early 1993 and
it is scheduled to be completed in the fall of 1996.
The convention center is part of a broader plan that includes an additional
expansion of the Atlantic City International Airport and other improvements in
Atlantic City. Officials have commented upon the need for improved commercial
air service into Atlantic City as a factor in the success of the proposed
convention center. See further discussion under "Transportation Facilities"
below. Also, in order to spur construction of new hotel rooms and renovation of
substandard hotel rooms into deluxe accommodations to support the new convention
center, certain funds have been set aside by the CRDA, a public authority
created under the Casino Control Act, to aid in financing such projects. Ten
casino/hotels have filed proposals to obtain financing for such projects;
however, plans for these projects are considered preliminary.
Although these developments are viewed as positive and favorable to the
future prospects of the Atlantic City gaming industry, the Company, at this
point, can make no representations as to whether, or to what extent, its
operations may be improved by the completion of the new convention center, the
proposed airport expansion projects and the proposed increase in number of hotel
rooms in the area.
TRANSPORTATION FACILITIES
The lack of an adequate transportation infrastructure in the Atlantic City
area continues to negatively affect the industry's ability to attract patrons
from outside a core geographic area. In 1989 the terminal at the Atlantic City
International Airport (located approximately 12 miles from Atlantic City) was
expanded to handle additional air carriers and large passenger jets, but
scheduled service to that airport from major cities by national air carriers
remains extremely limited. Also, in 1989 Amtrak express rail service to Atlantic
City commenced from Philadelphia, New York, Washington and other major cities in
the northeast. This was expected to improve access to Atlantic City and expand
the geographic size of the Atlantic City casino industry's marketing base.
However, there has been no significant change in the industry's marketing base
or in the principal means of transportation to Atlantic City, which continues to
be automobile and bus. The resulting geographic limitations and traffic
congestion have restricted Atlantic City's growth as a major destination resort.
However, the Company understands that the South Jersey Transportation Authority
has begun work on a comprehensive master plan for the future development of the
airport. The plan is expected to be completed in 1994. Plans for expansion that
would approximately double the size of the existing passenger terminal have
already been announced and the Company understands that construction of this
project is scheduled for completion in 1995.
The Company continues to utilize day-trip bus programs. A non-exclusive
easement enables the Resorts Casino Hotel to utilize a bus tunnel under the
adjacent Taj Mahal, which connects Pennsylvania and Virginia Avenues, and a
service road exit from the bus tunnel. This reduces congestion around the
Pennsylvania Avenue bus entrance to the Resorts Casino Hotel. To comfortably
accommodate its bus patrons, the Company has a waiting facility which is located
indoors, adjacent to the casino, and offers various amenities.
COMPETITION
Competition in the Atlantic City casino/hotel industry is intense.
Casino/hotels compete primarily on the basis of promotional allowances,
entertainment, advertising, services provided to patrons, caliber of personnel,
attractiveness of the hotel and casino areas and related amenities, and parking
facilities. The Resorts Casino Hotel competes directly with 11 casino/hotels in
Atlantic City which, in the aggregate, contain approximately 786,000 square feet
of gaming area, including simulcast betting and poker rooms, and 8,700 hotel
rooms. The total amount of gaming area of these competing properties is expected
to increase as the Showboat has announced plans for a sizable addition to its
casino gaming floor and certain other casino/hotels are expected to add
simulcasting rooms which are permitted to house other authorized table games.
Unlike casino gaming floor area, which is regulated based on the number of guest
rooms at a particular property, the size of simulcasting rooms is not limited.
The Resorts Casino Hotel is located at the eastern end of the Boardwalk
adjacent to the Taj Mahal, which is next to the Showboat Casino. These three
properties have a total of more than 2,400 hotel rooms and
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<PAGE> 47
approximately 278,000 square feet of gaming space in close proximity to each
other. A 28-foot wide enclosed pedestrian bridge between the Resorts Casino
Hotel and the Taj Mahal allows patrons of both hotels and guests for events
being held at the Resorts Casino Hotel and at the Taj Mahal to move between the
facilities without exposure to the weather. A similar enclosed pedestrian bridge
connects the Showboat Casino to the Taj Mahal, allowing patrons to walk under
cover among all three casino/hotels. The remaining nine Atlantic City
casino/hotels are located approximately one-half mile to one and one-half miles
to the west on the Boardwalk or in the Marina area of Atlantic City.
All Atlantic City casino/hotels compete for customers with casino/hotels
located in Nevada, and in certain foreign resort areas, including The Bahamas,
particularly with respect to destination-oriented business, including
conventions. The Las Vegas casino/hotel industry benefits from a favorable
climate and nearby airport facilities that serve most major domestic carriers.
Atlantic City casino/hotels also compete with casinos located in other U.S.
jurisdictions, particularly those close to New Jersey. Colorado, Illinois, Iowa,
Louisiana, Mississippi, Missouri and South Dakota have legalized, and several
other states, including Pennsylvania, and the District of Columbia are currently
considering legalizing limited land-based and riverboat casino gaming.
Additionally, certain gaming operations are conducted or have been proposed on
Federal Indian reservations in a number of states. In January 1993, a casino on
an Indian reservation located in Connecticut was authorized to operate slot
machines and in September 1993 this facility was expanded to house more than
3,000 slot machines. Previously, this casino, which opened in early 1991, was
only authorized to conduct table gaming operations. In July 1993 the Oneida
Indians opened a casino near Syracuse, New York. In October 1993 approval was
granted for the construction of a high stakes gambling casino on the St. Regis
Mohawk reservation in New York State near the Canadian border, 50 miles
southwest of Montreal. Under New York state law, poker and slot machines
currently are not permitted. This rapid expansion of casino gaming, particularly
that which has been or may be introduced into jurisdictions in close proximity
to Atlantic City, may adversely affect the Company's operations as well as the
Atlantic City gaming industry.
GAMING CREDIT POLICY
Credit is extended to selected gaming customers primarily in order to
compete with other casino/hotels in Atlantic City which also extend credit to
customers. Credit play represented 24% of table game volume at the Resorts
Casino Hotel in 1993, 23% in 1992 and 24% in 1991. Gaming receivables, net of
allowance for uncollectible amounts, were $3,618,000, $4,503,000 and $5,586,000
as of December 31, 1993, 1992 and 1991, respectively. The collectibility of
gaming receivables has an effect on results of operations, and management
believes that overall collections have been satisfactory. Atlantic City gaming
debts are enforceable under the laws of New Jersey and certain other states,
although it is not clear whether other states will honor this policy or enforce
judgments rendered by the courts of New Jersey with respect to such debts.
SHOWBOAT LEASE
The Showboat Casino owned by ACS has approximately 515 guest rooms, a
60-lane bowling center, a 65,000 square foot casino and a 15,000 square foot
simulcast betting and poker room. The Showboat Casino is situated on
approximately 10 acres which are owned by the Company and leased to ACS pursuant
to the Showboat Lease, a 99-year net lease dated October 26, 1983, as amended.
The Showboat Lease provided for an initial annual rental, which commenced in
March 1987, of $6,340,000, subject to annual adjustment based upon changes in
the consumer price index. The annual rental is $8,326,000 for the 1994 lease
year.
The Showboat Notes are secured and serviced by the Showboat Lease, and all
lease payments are made to the Indenture Trustee for the Showboat Notes to meet
the Company's interest obligations under those notes. See Note 11 of Notes to
Consolidated Financial Statements of RII.
The Showboat Lease provides that if, under New Jersey law, the Company is
prohibited from acting as lessor, including any finding by the Casino Control
Commission that the Company is unsuitable, the Company must appoint a trustee,
acceptable to the Casino Control Commission, to act for the Company and collect
all lease payments on the Company's behalf. In that event, the trustee also must
proceed to sell the Company's
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interest in the Showboat Lease and the leased property to a buyer qualified to
act as lessor. The net proceeds of any such sale, together with any unremitted
rentals, would be paid to the Company. Also, if the Company is no longer able to
act as a lessor, as aforesaid, ACS would have an option to acquire ownership of
the 10 acres leased from the Company. The option would be exercisable during a
period of not more than three months. The purchase price would be an amount
equal to the greater of $66,000,000 or the fair market value of the leased
acreage, as defined, but in no event may the purchase price be more than 11
times the rent being paid by ACS in the year in which the option may become
effective. If the fair market value is not ascertained within the time required
by the Casino Control Commission, then the purchase price would be the lesser of
$66,000,000 or 11 times the rent being paid by ACS in the year the option may
become effective. In the event of any sale of the leased property under the
circumstances described above, the disposition of the proceeds of such sale
would be governed by the indenture for the Showboat Notes.
Under the Casino Control Act, both the Company and ACS, because of their
lessor-lessee relationship, are jointly and severally liable for the acts of the
other with respect to any violations of the Casino Control Act by the other. In
order to limit the potential liability that could result from this provision,
ACS, its parent, Ocean Showboat, Inc., and the Company have entered into an
indemnity agreement pursuant to which they agree to indemnify each other from
all liabilities and losses which may arise as a result of acts of the other
party that violate the Casino Control Act. The Casino Control Commission could
determine, however, that the party seeking indemnification is not entitled to,
or is barred from, such indemnification.
SECURITY CONTROLS
Gaming at the Resorts Casino Hotel is conducted by Company trained and
supervised personnel. Prior to employment, all casino personnel must be licensed
under the Casino Control Act. Security checks are made to determine, among other
matters, that job applicants for key positions have had no criminal ties or
associations. The Company employs extensive security and internal controls at
its casino. Security in the Resorts Casino Hotel utilizes closed circuit video
cameras to monitor the casino floor and money counting areas. The count of
monies from gaming is observed daily by government representatives.
SEASONAL FACTORS
The Company's business activities are strongly affected by seasonal factors
that influence the New Jersey beach tourist trade. Higher revenues and earnings
are typically realized from the Company's operations during the middle third of
the year.
EMPLOYEES
The Company has approximately 4,000 employees and believes that its
employee relations are satisfactory. Approximately 1,600 of the Company's
employees are represented by unions. Of these employees, approximately 1,300 are
represented by the Hotel Employees and Restaurant Employees International Union
Local 54, whose contract expires in September 1994. There are several union
contracts covering other union employees.
All of the Company's casino employees must be licensed under the Casino
Control Act. Casino employees are subject to more stringent requirements than
non-casino employees, including hotel employees who must be registered with the
Casino Control Commission. Each casino employee must meet applicable standards
pertaining to such matters as financial responsibility, good character, ability,
casino training and experience, and New Jersey residency.
REGULATION AND GAMING TAXES AND FEES
General
The Company's operations in Atlantic City are subject to regulation under
the Casino Control Act, which authorizes the establishment of casinos in
Atlantic City, provides for licensing, regulation and taxation of casinos and
created the Casino Control Commission and the Division of Gaming Enforcement.
These bodies
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<PAGE> 49
administer the Casino Control Act. In general, the provisions of the Casino
Control Act concern: the ability, character and financial stability and
integrity of casino operators, their officers, directors and employees and
others financially interested in a casino; the nature and suitability of hotel
and casino facilities, operating methods and conditions; and financial and
accounting practices. Gaming operations are subject to a number of restrictions
relating to the rules of games, number of games, credit play, size and
facilities of hotel and casino operations, hours of operation, persons who may
be employed, companies which may do business with casinos, the maintenance of
accounting and cash control procedures, security and other aspects of the
business.
There were significant regulatory changes in 1993 and early 1994. The
Casino Control Commission approved poker, which was implemented in the summer of
1993, and keno, which is anticipated to be implemented in the summer of 1994.
Also, the Casino Control Act was amended to allow casinos to expand their casino
floors before building the requisite number of hotel rooms, subject to approval
of the Casino Control Commission. This amendment was designed to encourage hotel
room construction by giving casino licensees an incentive and an added ability
to generate money to finance hotel construction. Further legislation was passed
allowing the Casino Control Commission to approve increasing a casino's gaming
space if a licensee rebuilds existing hotel rooms as part of a neighborhood
rehabilitation program. Previous law only allowed for casino expansion if a
casino built new hotel rooms. In addition, recent legislation allows gamblers to
buy casino chips directly with credit cards.
Casino License
A casino license is initially issued for a term of one year and must be
renewed annually by action of the Casino Control Commission for the first two
renewal periods succeeding the initial issuance of a casino license. Thereafter,
a casino license is renewed for a period of two years, although the Casino
Control Commission may reopen licensing hearings at any time. A license is not
transferable and may be conditioned, revoked or suspended at any time upon
proper action by the Casino Control Commission. The Casino Control Act also
requires an operations certificate which, in effect, has a term coextensive with
that of a casino license.
On February 26, 1979, the Casino Control Commission granted a casino
license to RIH for the operation of the Company's Atlantic City casino. In
February 1994, RIH's license was renewed until January 31, 1996. RIH's renewed
license is subject to several conditions, including (i) the submission of
periodic reports and immediate notification of certain events related to RII's
public debt securities to the Casino Control Commission; (ii) obtaining approval
of the Casino Control Commission prior to the implementation of any material
changes to the Restructuring; (iii) submission of certain financial and other
reports relative to the Restructuring and certain other periodic financial
reports to the Casino Control Commission; (iv) obtaining approval of the Casino
Control Commission prior to making certain payments from RIH to related parties;
and (v) obtaining approval of the Casino Control Commission prior to borrowing
under the Senior Facility.
Restrictions on Ownership of Equity and Debt Securities
The Casino Control Act imposes certain restrictions upon the ownership of
securities issued by a corporation which holds a casino license or is a holding,
intermediary or subsidiary company of a corporate licensee (collectively,
"holding company"). Among other restrictions, the sale, assignment, transfer,
pledge or other disposition of any security issued by a corporation which holds
a casino license is conditional and shall be ineffective if disapproved by the
Casino Control Commission. If the Casino Control Commission finds that an
individual owner or holder of any securities of a corporate licensee or its
holding company must be qualified and is not qualified under the Casino Control
Act, the Casino Control Commission has the right to propose any necessary
remedial action. In the case of corporate holding companies and affiliates whose
securities are publicly traded, the Casino Control Commission may require
divestiture of the security held by any disqualified holder who is required to
be qualified under the Casino Control Act.
In the event that entities or persons required to be qualified refuse or
fail to qualify and fail to divest themselves of such security interest, the
Casino Control Commission has the right to take any necessary action, including
the revocation or suspension of the casino license. If any security holder of
the licensee or its holding company or affiliate who is required to be qualified
is found disqualified, it will be unlawful for the
47
<PAGE> 50
security holder to: (i) receive any dividends or interest upon any such
securities; (ii) exercise, directly or through any trustee or nominee, any right
conferred by such securities; or (iii) receive any remuneration in any form from
the corporate licensee for services rendered or otherwise. The Amended and
Restated Certificate of Incorporation of RII provides that all securities of RII
are held subject to the condition that if the holder thereof is found to be
disqualified by the Casino Control Commission pursuant to provisions of the
Casino Control Act, then that holder must dispose of his or her interest in the
securities.
Remedies
In the event that it is determined that a licensee has violated the Casino
Control Act, or if a security holder of the licensee required to be qualified is
found disqualified but does not dispose of his securities in the licensee or
holding company, under certain circumstances the licensee could be subject to
fines or have its license suspended or revoked.
The Casino Control Act provides for the mandatory appointment of a
conservator to operate the casino and hotel facility if a license is revoked or
not renewed and permits the appointment of a conservator if a license is
suspended for a period in excess of 120 days. If a conservator is appointed, the
suspended or former licensee is entitled to a "fair rate of return out of net
earnings, if any, during the period of the conservatorship, taking into
consideration that which amounts to a fair rate of return in the casino or hotel
industry."
Under certain circumstances, upon the revocation of a license or failure to
renew, the conservator, after approval by the Casino Control Commission and
consultation with the former licensee, may sell, assign, convey or otherwise
dispose of all of the property of the casino/hotel. In such cases, the former
licensee is entitled to a summary review of such proposed sale by the Casino
Control Commission and creditors of the former licensee and other parties in
interest are entitled to prior written notice of sale.
License Fees, Taxes and Investment Obligations
The Casino Control Act provides for casino license renewal fees and other
fees based upon the cost of maintaining control and regulatory activities, and
various work permits and license fees for the various classes of employees. In
addition, a licensee is subject annually to a tax of 8% of "gross revenue"
(defined under the Casino Control Act as casino win, less provision for
uncollectible accounts up to 4% of casino win) and license fees of $500 on each
slot machine.
The following table summarizes, for the periods shown, the fees and taxes
assessed upon the Company by the Casino Control Commission.
<TABLE>
<CAPTION>
FOR THE YEAR
-----------------------------------------
1991 1992 1993
----------- ----------- -----------
<S> <C> <C> <C>
Gaming tax............................ $17,384,000 $18,788,000 $19,545,000
License, investigation, inspection and
other fees.......................... 4,730,000 4,417,000 3,985,000
----------- ----------- -----------
$22,114,000 $23,205,000 $23,530,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The Casino Control Act, as originally adopted, required a licensee to make
investments equal to 2% of the licensee's gross revenue (the "investment
obligation") for each calendar year, commencing in 1979, in which such gross
revenue exceeded its "cumulative investments" (as defined in the Casino Control
Act). A licensee had five years from the end of each calendar year to satisfy
this investment obligation or become liable for an "alternative tax" in the same
amount. In 1984 the New Jersey legislature amended the Casino Control Act so
that these provisions now apply only to investment obligations for the years
1979 through 1983. Certain issues have been raised concerning the satisfaction
of the Company's investment obligations for the years 1979 through 1983. See
Note 15 of Notes to Consolidated Financial Statements of RII for a discussion of
these issues.
48
<PAGE> 51
Effective for 1984 and subsequent years, the amended Casino Control Act
requires a licensee to satisfy its investment obligation by purchasing bonds to
be issued by the CRDA or by making other investments authorized by the CRDA, in
an amount equal to 1.25% of a licensee's gross revenue. If the investment
obligation is not satisfied, then the licensee will be subject to an investment
alternative tax of 2.5% of gross revenue. Licensees are required to make
quarterly deposits with the CRDA against their current year investment
obligations. The Company's investment obligations for the years 1993, 1992 and
1991 amounted to $3,054,000, $2,930,000, and $2,706,000, respectively, and have
been satisfied by deposits made with the CRDA. At December 31, 1993, the Company
held $4,873,000 face amount of bonds issued by the CRDA and had $12,946,000 on
deposit with the CRDA. The CRDA bonds issued through 1993 have interest rates
ranging from 5.8% to 7% and have repayment terms of between 41 and 50 years.
PROPERTIES
General
The Company's casino, resort hotel and related properties in Atlantic City,
together with certain other properties, described below, are owned in fee,
except for approximately 1.2 acres of the Resorts Casino Hotel site which are
leased pursuant to ground leases expiring from 2056 through 2067.
RIH's fee and leasehold interests in the Resorts Casino Hotel and the
contiguous parking garage, any additions or improvements to those properties,
and all furniture, fixtures, machinery and equipment of RIH related thereto
comprise the collateral securing the Mortgage Notes, the Mortgage Note Guaranty,
the Junior Mortgage Notes, the Junior Mortgage Note Guaranty and, if issued, the
Senior Facility Notes and the RIH Senior Facility Guaranty. The Showboat Lease,
including the land subject to the lease, secures the payment of the Showboat
Notes.
Other Properties
The Company owns various non-operating sites in Atlantic City that could be
developed and are available for sale. These sites consist primarily of vacant
land in Great Island, Brigantine Island and the marina area, and waterfront
parcels in the inlet section. In view of the generally depressed state of the
commercial real estate market in Atlantic City and the condition of the economy
generally, the Company does not anticipate any significant real estate activity
in the foreseeable future.
RII is the owner of real property located at Brigantine Boulevard on
Brigantine Island that consists of approximately 40 acres ("Rum Point"), of
which only approximately 17 acres can potentially be developed because the
remaining portions constitute wetlands areas and consequently are not available
for development. Additional environmental and coastal restrictions apply to the
development of Rum Point, though the Company currently is attempting to have the
restrictions modified to permit development.
RII owns in fee an approximately 552 acre parcel located in Atlantic City
on Blackhorse Pike (the "Great Island Property"), of which approximately 500
acres are considered to be wetlands. The Company owns in fee an eight acre
parcel located in the marina area of Atlantic City immediately adjacent to the
Harrah's Casino Hotel. The Company also owns in fee various individual parcels
of property located in the area of Atlantic City known as the South Inlet which
in the aggregate constitute approximately 10 acres and a parcel of land in
Atlantic City consisting of approximately seven acres and a warehouse thereon.
The Company is the owner of various additional properties at scattered sites in
Atlantic City. Principal among these is the so-called "Trans Expo" site, a 2.3
acre parcel located near the site of the new convention center.
49
<PAGE> 52
MANAGEMENT OF RII
DIRECTORS AND EXECUTIVE OFFICERS
The directors of RII are:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---------------------------------------------------------- --- ---------
<S> <C> <C>
Merv Griffin.............................................. 68 1988
Chairman of the Board of Directors
William Fallon............................................ 40 1994
Thomas E. Gallagher....................................... 49 1993
Jay Green................................................. 47 1994
Charles Masson............................................ 41 1994
Vincent Naimoli........................................... 56 1994
</TABLE>
Pursuant to RII's Amended and Restated Certificate of Incorporation, the
total number of directors is fixed at six. The Board of Directors is classified
into three equal classes, Class I, Class II, and Class III, which have staggered
three year terms. Notwithstanding the foregoing, each director shall serve until
his successor is elected and qualified or until his earlier death, resignation
or removal. Messrs. Gallagher and Green comprise Class I, Messrs. Naimoli and
Fallon comprise Class II, and Messrs. Griffin and Masson comprise Class III.
Messrs. Masson and Naimoli serve as Class B Directors. See "Description of
Common Stock and Class B Common Stock."
The audit committee of the RII Board of Directors will consist of two
independent directors. Messrs. Griffin and Gallagher are members of the
Executive Committee of the Board of Directors.
Pursuant to the Plan, Antonio C. Alvarez II, Warren Cowan, Joseph G.
Kordsmeier and Paul C. Sheeline resigned from the RII Board of Directors as of
the Effective Date, and Messrs. Fallon, Green, Masson and Naimoli were appointed
to the Board of Directors.
The executive officers of RII are:
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE SINCE
--------------------------------------------------------------- ---- ---------
<S> <C> <C>
Merv Griffin................................................... 68 1988
Chairman of the Board of Directors
Christopher D. Whitney......................................... 50 1988
Office of the President, Executive Vice President, Chief of
Staff,
General Counsel and Secretary
Matthew B. Kearney............................................. 54 1982
Office of the President, Executive Vice President -- Finance,
Chief Financial Officer and Treasurer
David G. Bowden................................................ 53 1979
Vice President -- Controller, Chief Accounting Officer,
Assistant Secretary and Assistant Treasurer
</TABLE>
The officers of RII serve at the pleasure of the Board of Directors of RII.
Pursuant to an agreement dated as of September 27, 1993 between RII and
David P. Hanlon (the "Hanlon Termination Agreement") (see "Executive
Compensation" below), David P. Hanlon resigned as of October 31, 1993, from his
positions as President, Chief Executive Officer and a director of RII. RII
currently is managed by an Office of the President comprised of Mr. Whitney and
Mr. Kearney.
50
<PAGE> 53
Business Experience
The principal occupations and business experience for the last five years
or more of the directors and executive officers of RII are as follows:
Merv Griffin -- Chairman of the Board of RII since November 1988;
Chairman of Griffco Resorts Holding, Inc. ("Griffco," a company which
through September 1990 was owned by Mr. Griffin and from November 1988
through September 1990 was RII's parent) from its incorporation in May 1986
to September 1990; President of Griffco from September 1988 to September
1990; Chairman of Griffin Group since its incorporation in September 1988;
Chairman of January Enterprises, Inc. ("January Enterprises") a television
production and holding company doing business as Merv Griffin Enterprises,
from 1964 to May 1986, and Chief Executive Officer from 1964 through March
1994; director of Hollywood Park Operating Company from 1987 to June 1991;
television and radio producer since 1945. Merv Griffin created and produced
the nationally syndicated television game shows, "Wheel of Fortune" and
"Jeopardy." For 21 years, through 1986, Merv Griffin hosted "The Merv
Griffin Show", a nationally syndicated talk show. In 1986, Merv Griffin
sold January Enterprises to The Coca Cola Company, but he continues to act
as Executive Producer of "Wheel of Fortune" and "Jeopardy," presently
produced by an affiliate of Sony Pictures Entertainment, Inc.
William Fallon -- Executive Vice President of R.M. Bradley & Co. Inc.
("Bradley"), a real estate brokerage and management company, since March
1994; Senior Vice President of Bradley from 1988 to March 1994; other
positions with Bradley from 1979 to 1988; a director of Massachusetts
Certified Development Corporation, a small business development company,
since 1987.
Thomas E. Gallagher -- President and Chief Executive Officer of
Griffin Group since April 1992 and a director of Players International,
Inc., a riverboat gaming company, since December 1992. For the preceding 15
years, Mr. Gallagher was a partner of the law firm of Gibson, Dunn &
Crutcher.
Jay M. Green -- Executive Vice President Finance and Administration
and Treasurer of Culbro Corporation ("Culbro"), a diversified consumer and
industrial products company since 1988; Chairman of the Board of The Eli
Witt Company, a Culbro subsidiary, since February 1993; prior to 1988, Vice
President and Controller of Columbia Pictures Entertainment, Inc.
Charles Masson -- President of McCloud Partners, a private advisory
firm, since June 1993; a director of Salomon Brothers Inc from 1991 through
May 1993; Vice President of Salomon Brothers Inc from 1983 through 1990.
Vincent J. Naimoli -- Chairman, President and Chief Executive Officer
of Harvard Industries, Inc. since 1993; Chairman and Chief Executive
Officer of Doehler-Jarvis Corporation since 1991; Chairman, President and
Chief Executive Officer of Ladish Company, Inc. since 1993; Managing
General Partner of the Tampa Bay Baseball Ownership Group since 1992;
Chairman, President and Chief Executive Officer of Anchor Industries
International, Inc., an operating and holding company, since 1989; a
director of Lincoln Foodservice Products, Inc. since 1991; a director of
Simplicity Pattern Company since 1990; Chairman, President and Chief
Executive Officer of Anchor Glass Container Corporation from 1983 through
1989.
Christopher D. Whitney -- Office of the President of RII since
November 1993; Executive Vice President of RII since December 1989; General
Counsel to and Secretary of RII since February 1989; Chief of Staff of RII
since December 1988; Senior Vice President of RII from December 1988 to
December 1989; Senior Vice President, Law & Government and General Counsel
of Harrah's East, Inc. from November 1984 to December 1988; Vice President,
General Counsel and Secretary of Harrah's, the western branch of the casino
subsidiary of Holiday Corporation ("Holiday") located in Reno, Nevada, from
June 1983 to November 1984; Vice President, General Counsel and Secretary
of Perkins Restaurants, Inc., Holiday's restaurant group subsidiary then
located in Minneapolis, Minnesota from November 1981 to June 1983; Vice
President & Associate General Counsel (Litigation) of Holiday in Memphis,
Tennessee from January 1979 to November 1981.
51
<PAGE> 54
Matthew B. Kearney -- Office of the President of RII since November
1993; Executive Vice President -- Finance of RII since September 1993;
Chief Financial Officer of RII since 1982; Vice President -- Finance of RII
from 1982 through September 1993.
David G. Bowden -- Vice President -- Controller and Chief Accounting
Officer of RII since 1979.
EXECUTIVE COMPENSATION
The following table (the "RII Summary Compensation Table") sets forth
information concerning compensation earned by, paid to or awarded to each
individual serving as RII's Chief Executive Officer or acting in a similar
capacity during 1993 and to each of the other executive officers of RII who were
serving as executive officers at December 31, 1993, for services rendered in all
capacities to RII and its subsidiaries.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
-------------------------------------- COMPENSATION --
OTHER ANNUAL NUMBER OF STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS GRANTED COMPENSATION
- ----------------------------------- ---- -------- ---------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
David P. Hanlon.................... 1993 $677,103 $ 719,661(2) $2,682,714(7)
President and Chief 1992 $764,231 $1,206,435(3) $177,776(5) $ 36,738
Executive Officer(1) 1991 $750,000 $1,325,000(3) 1,094,800(6)
Christopher D. Whitney............. 1993 $300,000 $ 100,000(4) $ 13,379(7)
Office of the President, 1992 $300,000 $ 125,000(2) $ 14,592
Executive Vice President and 1991 $283,269 $ 150,000(2) 100,000
Chief of Staff
Matthew B. Kearney................. 1993 $281,712 $ 100,000(4) $ 26,419(7)
Office of the President, 1992 $275,000 $ 125,000(2) $ 16,074
Executive Vice 1991 $266,635 $ 125,000(2) 87,500
President -- Finance and Chief
Financial Officer
David G. Bowden.................... 1993 $135,000 $ 31,303(7)
Vice President -- Controller 1992 $135,000 $ 40,000(2) $ 8,126
and Chief Accounting Officer 1991 $131,654 $ 35,000(2) 25,000
</TABLE>
- ---------------
(1) Mr. Hanlon resigned from all positions with RII and its subsidiaries as of
October 31, 1993.
(2) Represents performance bonus for year in which presented.
(3) Includes $375,000 in each of 1992 and 1991 for special incentive bonus
payments in satisfaction of a guaranteed bonus in connection with Mr.
Hanlon's agreement to enter into employment with the Company. Also includes
performance bonuses of $831,435 for 1992 and $950,000 for 1991.
(4) Represents bonus in recognition of efforts relative to the Restructuring.
(5) Includes $157,776 for legal fees and expenses incurred in connection with
the preparation and negotiation of the Hanlon Employment Agreement (defined
below under "Employment Contracts and Termination of Employment and Change
in Control Arrangements -- David P. Hanlon").
(6) The 1990 Stock Option Plan provided for the grant to Mr. Hanlon of options
to purchase 5% of the shares of Common Stock Outstanding, as defined, which
amount by its definition is subject to adjustment. The amount reflected in
the table is based on Common Stock Outstanding at December 31, 1993. Due to
the expiration of certain 1990 Stock Options in connection with certain
employee terminations, since that date the number of shares under option to
Mr. Hanlon has decreased. As of April 15, 1994, Mr. Hanlon had options to
purchase 1,089,275 shares.
(7) Includes $2,648,656 for Mr. Hanlon pursuant to the Hanlon Termination
Agreement (see "Employment Contracts and Termination of Employment and
Change in Control Arrangements -- David P. Hanlon" below); the cost of group
life and health insurance: Mr. Hanlon -- $16,109, Mr. Whitney -- $7,379, Mr.
Kearney -- $20,794 and Mr. Bowden -- $28,603; the Company's contribution to
a defined contribution group retirement plan: Mr. Hanlon -- $10,000, Mr.
Whitney -- $6,000, Mr. Kearney -- $5,625 and Mr. Bowden -- $2,700; and the
cost of additional disability coverage for Mr. Hanlon -- $7,949.
See also the description of the Griffin Services Agreement under
"Compensation Committee Interlocks and Insider Participation -- Griffin Services
Agreement" below for a description of compensation to Griffin Group for certain
services rendered by Mr. Griffin.
52
<PAGE> 55
No options were granted in 1993 to the executive officers named in the RII
Summary Compensation Table. Accordingly, no "Option Grant Table" is presented
herein. The following table sets forth information as of December 31, 1993,
concerning the unexercised options held by executive officers named in the RII
Summary Compensation Table, none of whom exercised options in 1993. No options
held by those executive officers were in-the-money at December 31, 1993. Options
are "in-the-money" when the fair market value of underlying common stock exceeds
the exercise price of the option. All options held by the named executives have
an exercise price of $1.875 per share. The closing price of Common Stock on
December 31, 1993, was $1.625 per share.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS AT DECEMBER 31, 1993,
NAME ALL OF WHICH WERE EXERCISABLE
--------------------------------------------------------- --------------------------------
<S> <C>
David P. Hanlon.......................................... 1,094,800(1)
Christopher D. Whitney................................... 100,000
Matthew B. Kearney....................................... 87,500
David G. Bowden.......................................... 25,000
</TABLE>
-------------------------
(1) This amount was based on Common Stock Outstanding, as defined, as
of December 31, 1993. See Note (6) to RII Summary Compensation
Table above.
Compensation of Directors
RII's non-employee directors are each entitled to receive $35,000 annually
as compensation for serving as a director, $500 for each Board meeting attended
and $500 for each Committee meeting attended when such Committee meeting is not
held on the same day as a Board meeting or another Committee meeting. No
compensation was paid to Mr. Griffin or Mr. Hanlon for their services as
directors of RII in 1993. However, Griffin Group was compensated for certain
services provided by Mr. Griffin, including Mr. Griffin's serving as Chairman of
the Board of RII. See the description of the Griffin Services Agreement under
"Compensation Committee Interlocks and Insider Participation -- Griffin Services
Agreement" below.
Messrs. Alvarez, Cowan, Gallagher, Kordsmeier and Sheeline received
$41,500, $42,000, $6,333, $43,000 and $42,500, respectively, for their services
as directors during 1993.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
David P. Hanlon. Pursuant to the Hanlon Termination Agreement, RII and Mr.
Hanlon mutually agreed to the termination, as of October 31, 1993, of the
employment agreement (the "Hanlon Employment Agreement") between RII and Mr.
Hanlon dated as of September 17, 1992, pursuant to which Mr. Hanlon served as
President and Chief Executive Officer of RII.
Pursuant to the Hanlon Termination Agreement, Mr. Hanlon received a
$719,661 performance bonus for 1993 that was earned pursuant to the Hanlon
Employment Agreement but not yet paid as of October 31, 1993. In addition,
pursuant to the Hanlon Termination Agreement, Mr. Hanlon received the present
value of future base salary pursuant to the Hanlon Employment Agreement as
determined under the Hanlon Termination Agreement in the sum of $1,303,076 and
$1,345,580 in respect of the performance bonuses for fiscal years ending 1994
and 1995 payable under the Hanlon Employment Agreement. In addition, Mr. Hanlon
received a bonus from RII in the amount of $325,000 in connection with the
Restructuring. Finally, Mr. Hanlon will receive a bonus of $300,000 in
connection with the disposition of the Paradise Island operations. Accordingly,
Mr. Hanlon would receive a total of $625,000 in connection with the
Restructuring. Mr. Hanlon is also entitled to participate in all of RII's
benefit plans through and including September 16, 1995, unless Mr. Hanlon
receives a comparable benefit in connection with subsequent employment. Mr.
Hanlon will retain all 1990 Stock Options previously granted to him.
Christopher D. Whitney and Matthew B. Kearney. The Company has employment
agreements with Messrs. Whitney and Kearney, both dated as of May 3, 1991, which
were extended to May 1995. The
53
<PAGE> 56
respective terms of employment each will renew automatically for another year
unless either party to the agreement notifies the other that the term is not to
be renewed. Mr. Whitney's agreement provides for an annual salary of $300,000
and Mr. Kearney's agreement was recently amended to provide for an annual salary
of $300,000. If the Company terminates the executive's employment without cause,
as defined, the executive will be entitled to receive base salary payments
through the end of his term of employment. If such a termination of his
employment follows a change in control, as defined, the executive will receive a
lump-sum payment equal to the present value of such base salary payments.
Compensation Committee Interlocks and Insider Participation
Compensation Committee Members. Messrs. Griffin, Alvarez and Sheeline
served as members of the Compensation Committee of the Board of Directors of RII
during 1993. Mr. Griffin also served as an officer of RII.
Griffin Services Agreement. Griffin Group, Merv Griffin and RII entered
into a License and Services Agreement (the "Old Griffin Services Agreement") in
September 1990. Pursuant to the Old Griffin Services Agreement, Griffin Group
granted the Company a non-exclusive license to use the name and likeness of Merv
Griffin for purposes of advertising and promoting the Company's facilities and
operations, and Merv Griffin agreed to serve as Chairman of the Board of
Directors of RII. In addition, Griffin Group agreed to provide to the Company
the non-exclusive services of Merv Griffin, on a limited basis, to host or
present shows in which he is a featured performer at the Company's facilities.
Under the Old Griffin Services Agreement, the Company was not required to
compensate Griffin Group and the Company has not paid any compensation to
Griffin Group, or to Mr. Griffin directly, for Mr. Griffin's services to the
Company under the Old Griffin Services Agreement. The term of the Old Griffin
Services Agreement was for a period of two years, which expired on September 16,
1992.
In April 1993 RII and RIH entered into the Griffin Services Agreement,
dated and effective as of September 17, 1992 to replace the Old Griffin Services
Agreement as of its expiration. Pursuant to the Griffin Services Agreement,
Griffin Group granted RII and RIH a non-exclusive license to use the name and
likeness of Merv Griffin, in certain advertising media and limited
merchandising, for the sole purpose of advertising and promoting the Resorts
Casino Hotel. In connection with such license, Griffin Group will not grant any
similar license to any casino/hotel located in Atlantic City during the term of
the Griffin Services Agreement, so long as RII and RIH own or operate casino and
hotel facilities in Atlantic City. Although the Griffin Services Agreement also
granted the same license rights with respect to the Company's former Paradise
Island operations, Mr. Griffin is no longer associated with those operations.
Pursuant to the Griffin Services Agreement, Griffin Group also agreed to
provide to RII and RIH, for the term of the Griffin Services Agreement, the
non-exclusive services of Merv Griffin, subject to the performance by RII and
RIH of its obligations under the Griffin Services Agreement, as (i) Chairman of
the Board of Directors of RII, (ii) host, producer, presenter and featured
performer relative to certain shows to be presented at the Resorts Casino Hotel,
(iii) as consultant and marketing adviser, (iv) in certain capacities, as
spokesperson for RII and RIH and (v) as participant in certain radio, television
and print advertisements.
The Griffin Services Agreement will continue in force (unless earlier
terminated under certain circumstances, including but not limited to a change in
control of RII, Merv Griffin no longer serving as Chairman of the Board of
Directors of RII or a sale of the Resorts Casino Hotel) until September 17,
1997.
Under the Griffin Services Agreement, Griffin Group was entitled to receive
from RII and RIH $4,100,000 upon execution of such agreement, as compensation
for the first two years of services. The Griffin Services Agreement also
provides for additional compensation to Griffin Group in the amounts of
$2,205,000, $2,310,000 and $2,425,000 for services during the third, fourth and
fifth years, respectively, of the term of the Griffin Services Agreement. In
lieu of paying in cash, at the Company's option, it could satisfy its obligation
to make any of the payments required under the Griffin Services Agreement by
reducing the amount of the Group Note described below under "Indebtedness of
Management."
54
<PAGE> 57
RIH made the $4,100,000 payment for the first two years under the Griffin
Services Agreement in April 1993. In September 1993, RII satisfied its
obligation to make the $2,205,000 payment for the year ending September 16, 1995
by reducing the Group Note by that amount. Prior to the Effective Date, RII
satisfied the Company's $2,310,000 obligation to Griffin Group for the fourth
year of the Griffin Services Agreement also by reducing the principal amount of
the Group Note in an equal amount. RII received payment of the remaining balance
of the Group Note (approximately $3,000,000) plus accrued interest from the
Griffin Group and distributed the proceeds of such payment to the holders of the
Series Notes pursuant to the Plan.
Pursuant to the Griffin Services Agreement, as additional compensation, RII
issued to the Griffin Group, on the Effective Date of the Plan, the Griffin
Warrants to purchase 10% of the Common Stock of RII. The Griffin Warrants are
exercisable until the fourth anniversary of the Effective Date at the lesser of
(i) the average market price of RII's Common Stock for the 20 trading days
following the Effective Date and (ii) $1.875.
RII and RIH also have agreed to indemnify Merv Griffin and Griffin Group
for certain costs and liabilities arising in connection with the Griffin
Services Agreement or Merv Griffin's services, or the service of any employee of
Griffin Group, as a director or officer of RII or any subsidiary thereof.
Pursuant to the Griffin Services Agreement, RII and RIH have agreed to
maintain for at least four years comprehensive public liability, personal injury
and umbrella insurance coverage in specified amounts for both Griffin Group and
Merv Griffin, individually.
RII and RIH also have agreed to reimburse Griffin Group for certain
expenses incurred by Griffin Group and Merv Griffin in connection with the
license and services agreed to under the Griffin Services Agreement. If Griffin
Group fails to perform its obligations pursuant to the Griffin Services
Agreement, all unearned advance payments to Griffin Group will be repaid to the
Company.
Indemnity Agreement. RII agreed to indemnify Merv Griffin pursuant to an
Indemnity Agreement (the "Indemnity Agreement"), executed on September 19, 1990,
against any and all losses by reason of, arising from, in connection with, or
relating to the Acquisition Claims (as defined in the Indemnity Agreement). The
Acquisition Claims relate to all claims asserted against Mr. Griffin in
connection with the acquisition of RII by Griffco in November 1988, and all
transactions consummated in connection therewith, including the sale of the Taj
Mahal to certain affiliates of Donald J. Trump and the issuance of certain debt
securities by GGRI. RII also agreed to reimburse Mr. Griffin for any
out-of-pocket expenses (including counsel fees) incurred by him in connection
with the enforcement of, or preservation of any rights under, the Indemnity
Agreement.
Other Transactions. The Company reimbursed Griffin Group $358,000,
$396,000, $219,000 and $13,000 for charter air services rendered in 1991, 1992,
1993 and to date in 1994, respectively, to Mr. Griffin as well as other
directors and officers of RII for travel related to Company business.
In 1991, 1992 and 1993 the Company did business with various subsidiaries
of January Enterprises of which Merv Griffin was Chief Executive Officer through
March 1994. In 1991 the Company paid $235,000 and provided certain facilities
and personnel for the production of the "Ruckus Game Show" at Resorts Casino
Hotel. Also in 1991, the Company provided facilities, labor and accommodations
relative to the production of "Merv Griffin's 1991 New Year's Eve Special" which
was broadcast live from Resorts Casino Hotel. In 1992 the Company agreed to pay
$100,000 and provided certain facilities, labor and accommodations in connection
with the production of the live television broadcast of "Merv Griffin's New
Year's Eve Special 1992" from Resorts Casino Hotel. In 1993 the Company agreed
to the same terms as in 1992 for the production of the live television broadcast
of "Merv Griffin's New Year's Eve Special 1993." The Company received certain
promotional considerations in connection with the television broadcast of these
shows.
In 1994 the Company entered into a barter agreement with Griffin Group
whereby certain promotional spots would air on radio stations owned by Griffin
Group in exchange for certain packages including rooms, food and beverage and
entertainment at the Resorts Casino Hotel. The retail value of the services
exchanged are to total approximately $120,000.
55
<PAGE> 58
The Company paid Alvarez & Marsal, Inc. ("Alvarez & Marsal") $241,000 in
1991 for financial advisory services performed in connection with the Company's
1990 plan of reorganization. In early 1992, RII entered into an agreement with
Alvarez & Marsal pursuant to which it was to provide financial advisory services
in connection with the development and analysis of financial alternatives
available to the Company, and the development of a long-term financial plan. The
Company paid Alvarez & Marsal $300,000 for financial advisory services rendered
under this agreement in 1992. According to an amendment to this agreement, RII
paid no fees to Alvarez & Marsal during 1993; however, the Company paid a fee of
$225,000 in March 1994 and is to issue 112,500 shares of Common Stock to Alvarez
& Marsal. Mr. Alvarez, a shareholder of Alvarez & Marsal, was a member of RII's
Board of Directors from September 1990 until the Effective Date.
Certain Business Relationships. The Company retained Verner, Liipfert,
Bernhard, McPherson and Hand during 1992 and 1993 for certain legal services.
Mr. Sheeline, who was Of Counsel to such law firm through March 1993, was a
director of RII from 1990 until the Effective Date.
Indebtedness of Management. In September 1990, Merv Griffin, Chairman of
the Board of RII, purchased 4,400,000 shares of Common Stock for which RII
received $12,345,000 in cash and a $11,000,000 promissory note, the Griffin
Note. The Griffin Note was secured by a letter of credit issued by a bank, bore
interest at 8% per year and was due upon demand. In April 1993, simultaneous
with RIH's payment to Griffin Group of $4,100,000 for the first two years of
service under the Griffin Services Agreement described above under "Compensation
Committee Interlocks and Insider Participation -- Griffin Services Agreement,"
Mr. Griffin made a partial payment on the Griffin Note, resulting in a remaining
balance of $7,523,333. The Griffin Note was then canceled and the $7,523,333
Group Note, payable by Griffin Group, a company controlled by Merv Griffin, was
substituted therefor. The Group Note was payable on demand and bore interest at
the rate of 3% per year. Merv Griffin personally guaranteed payment of the Group
Note. The Group Note was retired as described above in "Griffin Services
Agreement".
MANAGEMENT OF RIHF
DIRECTORS AND EXECUTIVE OFFICERS
The directors of RIHF are:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
------------------------------------------------------------ --- ------
<S> <C> <C>
Christopher D. Whitney...................................... 50 1993
Matthew B. Kearney.......................................... 54 1993
</TABLE>
The executive officers of RIHF are:
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE SINCE
------------------------------------------------------------ --- ------
<S> <C> <C>
Christopher D. Whitney...................................... 50 1993
President
Matthew B. Kearney.......................................... 54 1993
Executive Vice President -- Finance
and Chief Financial Officer
</TABLE>
See "Management of RII" for a description of the business experience of
Messrs. Whitney and Kearney. The officers and directors of RIHF presently
receive no compensation specifically for their services as directors. However,
both of the officers and directors of RIHF serve as officers of RII and are
compensated for such services. Messrs. Whitney and Kearney have employment
agreements with RII. See "Management of RII -- Executive
Compensation -- Employment Contracts and Termination of Employment and Change in
Control Arrangements."
56
<PAGE> 59
MANAGEMENT OF RIH
DIRECTORS AND EXECUTIVE OFFICERS
The directors of RIH are:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
------------------------------------------------------------- ---- ------
<S> <C> <C>
Christopher D. Whitney....................................... 50 1991
Matthew B. Kearney........................................... 54 1993
</TABLE>
The executive officers of RIH are:
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE SINCE
-------------------------------------------------------------- ---- ---------
<S> <C> <C>
John P. Belisle............................................... 40 1991
Executive Vice President and Chief Operating Officer
Christopher D. Whitney........................................ 50 1989
Executive Vice President, Chief of Staff and Secretary
Matthew B. Kearney............................................ 54 1982
Vice President and Chief Financial Officer
Kimberly A. Corrigan.......................................... 37 1991
Vice President -- Hotel Operations
William C. Murtha............................................. 38 1994
Vice President and General Counsel
Paul E. Patay................................................. 63 1989
Vice President -- Food and Beverage
Michelle Perna................................................ 41 1988
Vice President -- Human Resources
Anthony P. Rodio.............................................. 35 1993
Vice President -- Finance
</TABLE>
Business Experience
See "Management of RII -- Directors and Executive Officers -- Business
Experience" above for information regarding Messrs. Whitney and Kearney. The
principal occupations and business experience for the last five years or more of
the directors and executive officers of RIH who do not also serve as executive
officers of RII are as follows:
John P. Belisle -- Executive Vice President and Chief Operating
Officer of RIH since November 1993; Senior Vice President -- Casino
Operations of RIH from May 1993 to November 1993; Vice
President -- Marketing of RIH from June 1990 to May 1993; Vice
President -- Marketing of Trump Castle in Atlantic City, New Jersey from
January 1990 to June 1990; Vice President -- Marketing of RIH from
September 1989 to January 1990; various other positions with RIH from
December 1981 to September 1989.
Kimberly A. Corrigan -- Vice President -- Hotel Operations of RIH
since September 1991; Executive Director -- Hotel Operations of Taj Mahal
from September 1990 to September 1991; Executive Director of Operations of
Bally's Grand casino/hotel in Atlantic City, New Jersey from June 1986 to
August 1989.
William C. Murtha -- Vice President and General Counsel of RIH since
April 1994; private practice, William C. Murtha, Attorney at Law, from
October 1993 to March 1994; Vice President and
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<PAGE> 60
General Counsel to the Casino Association of New Jersey from March 1990 to
September 1993; Vice President and General Counsel of RIH from 1989 to
February 1990.
Paul E. Patay -- Vice President -- Food and Beverage of RIH since
April 1989; manager of food and beverage operations of RIH from December
1988 to April 1989; Vice President -- Food and Beverage of Trump Castle
casino/hotel in Atlantic City, New Jersey from September 1985 to May 1988.
Michelle Perna -- Vice President -- Human Resources of RIH since
November 1988; Manager -- Employee Relations and various other positions
with Harrah's Marina in Atlantic City, New Jersey from May 1980 to November
1988.
Anthony P. Rodio -- Vice President -- Finance of RIH since September
1993; Director of Operational Accounting of RIH from October 1990 to
September 1993; Casino Controller of Trump Plaza Hotel and Casino in
Atlantic City, New Jersey from August 1987 to October 1990.
EXECUTIVE COMPENSATION
The following table (the "RIH Summary Compensation Table") sets forth
information concerning compensation earned by, paid to or awarded to RIH's Chief
Executive Officer and to each of the other four most highly compensated
executive officers of RIH who were serving as executive officers at December 31,
1993, and another executive officer no longer with RIH, for services rendered in
all capacities to RIH, RII and RII's other subsidiaries.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- ------------------------------------ ---- -------- ------- ------------ -------------
<S> <C> <C> <C> <C> <C>
David P. Hanlon..................... 1993 (1) (1)
President and Chief Executive 1992 (1) (1) (1)
Officer(3)
Christopher D. Whitney.............. 1993 (1) (1)
Executive Vice President 1992 (1) (1)
Matthew B. Kearney.................. 1993 (1) (1)
Vice President and Chief 1992 (1) (1)
Financial Officer
John R. Spina....................... 1993 $212,404 $ 184,214(2)
Executive Vice President and 1992 $198,077 $97,568 $ 7,285
Chief Operating Officer(4)
John P. Belisle..................... 1993 $184,021 $ 17,110(2)
Executive Vice President and Chief 1992 $174,646 $53,068 $ 9,337
Operating Officer
Michelle Perna...................... 1993 $146,065 $ 5,185(2)
Vice President -- Human Resources 1992 $127,015 $53,068 $ 8,046
</TABLE>
- ------------------
(1) Messrs. Hanlon, Whitney and Kearney were executive officers of RII during
1993. See the RII Summary Compensation Table for information regarding their
compensation.
(2) Includes $176,250 settlement for Mr. Spina in connection with his
termination; the cost of group life and health insurance: Mr.
Spina -- $3,690, Mr. Belisle -- $13,480 and Ms. Perna -- $2,315; employer's
contribution to a defined contribution group retirement plan: Mr.
Spina -- $4,274, Mr. Belisle -- $3,630 and Ms. Perna -- $2,870.
(3) Mr. Hanlon served in this capacity through October 1993.
(4) Mr. Spina served in this capacity through November 1993.
Certain executives of RIH participate in RII's 1990 Stock Option Plan.
Their options are to purchase shares of RII's Common Stock. No options were
granted in 1993 to the executive officers named in the RIH
58
<PAGE> 61
Summary Compensation Table. Accordingly, no Option Grant Table is presented
herein. The following table sets forth information as of December 31, 1993,
concerning the unexercised options held by those executive officers, none of
whom exercised options in 1993. No options held by those executive officers were
in-the-money at December 31, 1993. All options held by the named executives have
an exercise price of $1.875 per share. The closing price of RII's Common Stock
on December 31, 1993 was $1.625 per share.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS AT DECEMBER 31, 1993,
NAME ALL OF WHICH WERE EXERCISABLE
--------------------------------------------------------- -----------------------------
<S> <C>
David P. Hanlon.......................................... (1)
Christopher D. Whitney................................... (1)
Matthew B. Kearney....................................... (1)
John R. Spina............................................ 35,000
John P. Belisle.......................................... 35,000
Michelle Perna........................................... 30,000
</TABLE>
----------------------------
(1) For information regarding fiscal year end option values for Messrs.
Hanlon, Whitney and Kearney, see the table of unexercised options at
December 31, 1993 under "Management of RII -- Executive Compensation."
Compensation of Directors
The directors of RIH presently receive no compensation specifically for
their services as directors. However, both directors of RIH serve as officers of
RII and are compensated for such services. Also, Mr. Hanlon who served as a
director through October 31, 1993, received no compensation specifically for his
service as an RIH director, but was compensated as an RII executive officer.
Employment Contracts and Termination of Employment and Change in Control
Arrangements
Messrs. Whitney and Kearney have employment agreements with RII. See
"Management of RII -- Executive Compensation -- Employment Contracts and
Termination of Employment and Change in Control Arrangements." Pursuant to the
Hanlon Termination Agreement, David P. Hanlon resigned as of October 31, 1993,
from his positions as an officer and director of RIH. In connection with Mr.
Spina's termination in November 1993, RIH paid Mr. Spina a lump sum settlement
of $176,250.
59
<PAGE> 62
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the beneficial ownership
of Common Stock as of May , 1994, giving effect to the Restructuring, by
persons known by RII to be holders of 5% or more of the outstanding Common
Stock. The number of shares beneficially owned is based on information furnished
by the persons named in the table.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS(3)
- ------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Merv Griffin...................................................... 9,065,115(1) 21.37%
c/o The Griffin Group, Inc.
780 Third Avenue, Suite 1801
New York, NY 10017
Certain funds and accounts advised or managed by Fidelity......... 6,678,157(2) 17.69%
Certain funds and accounts advised or managed by TCW.............. 2,567,967(2) 6.81%
</TABLE>
- ---------------
(1) Ownership includes 4,667,000 shares issuable upon exercise of Griffin
Warrants. Related percentage gives effect to their exercise.
(2) The public resale of these shares has been registered under the Securities
Act pursuant to the Registration Statement of which this Prospectus is a
part. See "Selling Securityholders" and "Plan of Distribution."
(3) The percentages shown give effect to the issuance in the Restructuring of
16,985,000 shares to the holders of the Series Notes and 612,500 shares to
financial advisers in settlement of certain recapitalization costs.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as to the beneficial
ownership of Common Stock as of April 15, 1994, as adjusted to give effect to
the Restructuring, by each person who continued as a director, or became a
director on the Effective Date, and by each executive officer (except David P.
Hanlon -- see Note (3) to the table) named in the RII Summary Compensation Table
and by all such directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED CLASS(5)
--------------------------------------------------------- ---------------- ----------
<S> <C> <C>
Merv Griffin............................................. 9,065,115(1) 21.37%
William Fallon........................................... None None
Thomas E. Gallagher...................................... None None
Jay Green................................................ None None
Charles Masson........................................... None None
Vincent Naimoli.......................................... None None
Christopher D. Whitney................................... 100,000(2) .26%
Matthew B. Kearney....................................... 87,500(2) .23%
David G. Bowden.......................................... 25,000(2) .07%
Directors and officers as a group (nine persons)(3)...... 9,277,615(4) 21.76%
</TABLE>
-------------------------
(1) Includes 4,667,000 shares issuable upon exercise of the Griffin
Warrants.
(2) Ownership represents shares issuable upon exercise of 1990 Stock
Options. Related percentages shown give effect to the exercise of
options for such shares.
60
<PAGE> 63
(3) David P. Hanlon, who is named in the RII Summary Compensation Table,
was a director and executive officer of RII until October 31, 1993. As
of April 15, 1994, he beneficially owned 1,089,275 shares of Common
Stock, or 2.80% of the shares outstanding (as adjusted for the
Restructuring), based on the number of shares issuable upon exercise of
1990 Stock Options. The 2.81% ownership percentage gives effect to the
exercise of options for his shares. See Note (6) to RII Summary
Compensation Table under "Management of RII -- Executive Compensation".
(4) Includes 212,500 shares which are issuable upon exercise of 1990 Stock
Options and 4,667,000 shares issuable upon exercise of the Griffin
Warrants. Related percentage shown gives effect to the exercise of all
such stock options and the Griffin Warrants.
(5) The percentages shown give effect to the issuance in the Restructuring
of 16,985,000 shares to the holders of the Series Notes and 612,500
shares to financial advisers in settlement of certain recapitalization
costs.
CERTAIN TRANSACTIONS
Messrs. Alvarez, Griffin and Sheeline served as members of the Compensation
Committee of the Board of Directors of RII during 1993. Mr. Griffin also served
as an officer of RII. See "Management of RII -- Executive
Compensation -- Compensation Committee Interlocks and Insider Participation" for
more information relating to these directors.
The Company paid Rogers & Cowan, Inc. $147,000 and $128,000 for public
relations services rendered in 1991 and 1992, respectively, on a non-exclusive
basis for the Company's Atlantic City and Paradise Island properties. Mr. Cowan,
who was the Chairman of the Board and a shareholder of Rogers & Cowan, Inc.
until July 1992, was a director of RII from September 1990 until the Effective
Date.
The Company retained Gibson, Dunn & Crutcher during 1992, 1993 and 1994 to
provide certain legal services, including legal services related to the
Restructuring. Mr. Gallagher, who was a partner of such law firm through March
31, 1992 has been a director of RII since November 1, 1993.
DESCRIPTION OF MORTGAGE NOTES
The following is a summary of certain provisions of the Mortgage Notes and
the Mortgage Note Indenture. Wherever particular provisions of the Mortgage Note
Indenture or Mortgage Notes are referred to, such provisions are incorporated by
reference herein. References to Sections or Articles refer to Sections or
Articles of the Mortgage Note Indenture. The definitions of certain terms used
below are set forth in "Certain Definitions" below in this section. All other
capitalized terms used in this section but not defined in this Prospectus have
the meanings ascribed thereto in the Mortgage Note Indenture and are
incorporated by reference herein.
GENERAL
The Mortgage Notes were issued pursuant to the Mortgage Note Indenture,
dated May 3, 1994, among RIHF, RIH and State Street Bank and Trust Company of
Connecticut, National Association, as trustee (the "Mortgage Note Trustee"). A
copy of the Mortgage Note Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The terms of the Mortgage Note
Indenture also are governed by certain provisions of the Trust Indenture Act of
1939 (the "TIA"). The Mortgage Notes are secured subordinated obligations of
RIHF in the aggregate principal amount of $125,000,000. The Mortgage Notes will
mature on September 15, 2003.
RANKING
Although the Mortgage Notes are not contractually subordinated to the
Senior Facility Notes as to priority of payment, the lien securing the Mortgage
Notes is junior to the lien securing the Senior Facility Notes, and the Mortgage
Notes therefore are structurally subordinated to the Senior Facility Notes. The
lien
61
<PAGE> 64
on the Resorts Casino Hotel securing payment of the RIH Promissory Note is pari
passu with the lien securing the Mortgage Note Guaranty and subordinated to the
liens securing payment of the RIH Senior Facility Promissory Note, the Senior
Facility Guaranty and any other secured Working Capital Facility. (Section
4.03).
The aggregate principal amount that may be outstanding under the Senior
Facility and any other Working Capital Facility is limited to $20,000,000.
INTEREST
Interest on the Mortgage Notes accrues at a rate of 11% per year. Interest
is payable semi-annually on March 15 and September 15 in each year to holders of
record at the close of business on the first day of the month in which the
Interest Payment Date occurs. RIHF is required to pay interest on overdue
principal and, to the extent permitted by law, overdue interest at the rate of
14% per year.
SINKING FUND REQUIREMENTS
None.
MANDATORY REDEMPTION
In the event of an RIH Sale, all the Mortgage Notes shall be redeemed by
RIHF whether such RIH Sale occurs before, on or after the fifth anniversary of
the Effective Date, at par together with interest, if any, accrued and unpaid
thereon to the Redemption Date; provided, however, that such obligation of RIHF
to redeem the Mortgage Notes in the event of a proposed RIH Sale shall cease to
exist if the Holders of not less than 66 2/3% in Outstanding Amount of the
Outstanding Mortgage Notes have consented to such proposed RIH Sale. (Section
3.12).
OPTIONAL REDEMPTION
The Mortgage Notes are redeemable at any time in whole, or from time to
time in part, on or after the fifth anniversary of the Effective Date at the
election of RIHF, at a redemption price of 100% of their principal amount plus
any accrued and unpaid interest to the Redemption Date. (Section 3.12).
From and after any Redemption Date, if funds for the redemption of any
Mortgage Notes called for redemption shall have been made available, such
Mortgage Notes will cease to bear interest and the only right of the holders
will be to receive payment of the Redemption Price and all interest accrued to
such Redemption Date. (Section 13.06).
The Mortgage Note Indenture requires that notice of any redemption of any
Mortgage Notes be given to holders at their addresses, as shown in the register,
not less than 30 nor more than 60 days prior to the Redemption Date. The notice
of redemption must specify, among other things, the Redemption Date, the
Redemption Price, the principal amount of Mortgage Notes to be redeemed, and, if
less than all outstanding Mortgage Notes are to be redeemed, the identification
(and, in the case of partial redemption, the respective principal amounts) of
the Mortgage Notes to be redeemed and the place or places where the Mortgage
Notes to be redeemed are to be surrendered for payment of the Redemption Price.
(Section 13.04).
The Mortgage Note Indenture provides that in the event of redemption of
less than all the outstanding Mortgage Notes, the particular Mortgage Notes to
be redeemed will be selected by the Mortgage Note Trustee by a random, automated
selection process or pro rata, as deemed appropriate by the Mortgage Note
Trustee. (Section 13.03).
CASINO CONTROL ACT REGULATION
The Mortgage Notes are subject to the qualification, divestiture and
redemption provisions under the Casino Control Act that are described in
"Description of Business -- Regulation and Gaming Taxes and Fees". (Section
13.08).
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<PAGE> 65
INTERCREDITOR AGREEMENT
The RIH Senior Facility Promissory Note, the RIH Senior Facility Guaranty,
the RIH Promissory Note, the Mortgage Note Guaranty, the RIH Junior Promissory
Note and the Junior Mortgage Note Guaranty are all secured, in part, by the
Resorts Casino Hotel. See "Collateral", "Guaranty", "Description of Junior
Mortgage Notes -- Collateral" and "Description of Junior Mortgage
Notes -- Guaranty".
RII, RIH, RIHF, the Mortgage Note Trustee and the Junior Mortgage Note
Trustee have entered, and any other lender or lenders (or any trustee or agent
acting on behalf of such lender or lenders) under the Junior Mortgage Facility
or the Working Capital Facility and the trustee for the indenture pursuant to
which the Senior Facility Notes may be issued (the "Senior Facility Trustee"),
will enter, into an intercreditor agreement (the "Intercreditor Agreement"),
which defines the rights of each such lender in and to its respective security
interest in the Resorts Casino Hotel.
The Intercreditor Agreement provides that: (i) the liens securing payment
of the RIH Senior Facility Promissory Note and the RIH Senior Facility Guaranty
will be pari passi with each other and senior to liens securing payment of the
RIH Promissory Note, the Mortgage Note Guaranty, the RIH Junior Promissory Note
and the Junior Mortgage Note Guaranty with respect to payment from proceeds
realized upon any sale or other disposition of the Resorts Casino Hotel; and
(ii) the liens securing payment of the RIH Promissory Note and the Mortgage Note
Guaranty will be pari passu with each other, and senior to the liens securing
payment of the RIH Junior Promissory Note and the Junior Mortgage Note Guaranty,
and junior to the liens securing payment of the RIH Senior Facility Promissory
Note and the RIH Senior Facility Guaranty with respect to payment from proceeds
realized upon any sale or other disposition of the Resorts Casino Hotel.
COLLATERAL
General
The Mortgage Notes are secured by the Mortgage Note Trust Estate pursuant
to the Mortgage Documents described below. (Article Six).
The "Mortgage Note Trust Estate" consists of an assignment by RIHF to the
Mortgage Note Trustee for the benefit of the holders of the Mortgage Notes, of
the RIH Promissory Note in the original aggregate principal amount of
$125,000,000, payable in amounts and at times necessary to pay the principal of
and interest on the Mortgage Notes, which is secured by a lien on the Resorts
Casino Hotel, consisting of RIH's fee and leasehold interests comprising the
Resorts Casino Hotel, the contiguous parking garage and property, all additions
or improvements constructed thereon, all rents, leases and profits derived
therefrom and certain tangible and intangible personal property located on, or
used in connection with, the operation of the Resorts Casino Hotel
(collectively, the "RIH Mortgage"), comprising the trust estate encumbered
pursuant to the RIH Mortgage between RIH, as mortgagor, and RIHF, as mortgagee.
The RIH Mortgage
The RIH Mortgage creates a mortgage lien and security interest (subject to
the liens securing the RIH Senior Facility Promissory Note, the RIH Senior
Facility Guaranty and any other secured Working Capital Facility) in the Resorts
Casino Hotel.
RELEASE OF COLLATERAL
No portion of the Mortgage Note Trust Estate may be released without the
consent of the Holders of not less than 66 2/3% in Outstanding Amount of the
Mortgage Notes then Outstanding. (Section 11.02). Section 2.02 of the RIH
Mortgage provides that, unless an Event of Default shall have occurred and be
continuing, RIH may sell or dispose of certain elements of the Resorts Casino
Hotel which may have become obsolete or unfit for use or which are no longer
necessary in the conduct of its businesses.
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<PAGE> 66
LIMITATIONS ON ABILITY TO REALIZE ON COLLATERAL
General
If there is an Event of Default under the Mortgage Note Indenture or the
RIH Mortgage, the Mortgage Note Trustee, subject to the requirements of the
Casino Control Act, may enforce the rights and remedies arising under the RIH
Mortgage. The net amount realized in any foreclosure sale for the benefit of
holders of the Mortgage Notes will be only that amount that exceeds all amounts
then due and owing to creditors, if any, having senior security interests
(including the holders of the Senior Facility Notes or the parties to any other
secured Working Capital Facility) and certain costs, taxes and other items.
Certain Regulatory Considerations
In any foreclosure sale with respect to the Resorts Casino Hotel, the
Mortgage Note Trustee could bid the amount of the outstanding Mortgage Notes.
The Mortgage Note Trustee would be required to comply with the applicable
requirements of the Casino Control Act in any foreclosure sale, including
obtaining a casino license.
Certain Bankruptcy Considerations
In the event of the filing of a petition under the Bankruptcy Code for RIHF
or RIH, applicable provisions of the Bankruptcy Code, including the automatic
stay provisions of section 362 of the Bankruptcy Code, may operate to prevent
the Mortgage Note Trustee, from taking action to realize on the Mortgage Note
Trust Estate if there is an Event of Default.
Ground Leases
A substantial portion of the North Tower of the Resorts Casino Hotel, a
portion of the adjacent parking garage and a small portion of the casino/hotel
are located on land that is owned by unrelated third parties and leased to RIH
under long-term ground leases. The ground leases do not provide certain
mortgagee protections and, in the event of a default thereunder, the Mortgage
Note Trustee may not have the right to cure any such default. However, the
Mortgage Note Trustee has the right under the Mortgage Note Indenture to tender
defaulted ground lease payments to RIH and require RIH to transmit such funds to
the respective ground lessor. If such default is not cured, the lessor under any
ground lease may have the right to terminate the ground lease. The termination
of any or all of such ground leases could result in the loss of portions of, or
rights with respect to, the property subject to the terminated ground lease.
GUARANTY
RIH has guaranteed payment of principal of and interest on the Mortgage
Notes pursuant to the Mortgage Note Guaranty. In addition, the Mortgage Note
Guaranty is secured by a lien on the Resorts Casino Hotel pursuant to a mortgage
and security agreement with an assignment of rents, and an assignment of leases
and rents (collectively, the "RIH Guaranty Mortgage"). The RIH Guaranty Mortgage
will encumber the Resorts Casino Hotel on a basis pari passu with the RIH
Mortgage. (Article Four)
PAYMENTS OF NET PROCEEDS OF ASSET SALES
None.
COVENANTS
Corporate Existence
Subject to the provisions described under "Limitations on Merger,
Consolidation, Transfer or Lease of Property and Assets", the Mortgage Note
Indenture provides that each of RIHF and RIH will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate existence of each of its Subsidiaries in accordance
with the respective organizational documents of RIHF, RIH and each such
Subsidiary and the rights (charter and statutory), licenses, permits, approvals
and
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<PAGE> 67
governmental franchises of it and each of its Subsidiaries necessary to the
conduct of its and their respective businesses, including without limitation,
all licenses, permits, approvals and franchises necessary to assure the
continued operation of RIH's gaming operations at the Resorts Casino Hotel;
provided, however, that any direct or indirect wholly owned subsidiary of RIH
may consolidate with, merge into or transfer or distribute all or part of its
properties and assets to RIH or RIHF or as otherwise provided in Section 10.01
of the Mortgage Note Indenture. (Section 12.04).
Limitation on Dividends and Restricted Payments
The Mortgage Note Indenture provides that RIHF will not, directly or
indirectly, make, or permit any Subsidiary of RIHF to make, any Restricted
Payment.
The Mortgage Note Indenture also provides that RIH will not, directly or
indirectly make, or permit any Subsidiary of RIH to make, any Restricted
Payment; provided, however, that: (i) if RIH's Consolidated Interest Coverage
Ratio, as certified to the Mortgage Note Trustee by an Officers' Certificate,
calculated at the time of the declaration of the dividend or distribution, is
equal to or exceeds two, then RIH may declare and pay cash dividends or make
cash distributions in respect of any class of capital stock of RIH in an amount
not to exceed in the aggregate with any other such cash dividends or
distributions declared or made from and after the date of the Mortgage Note
Indenture, 50% of RIH's Consolidated Net Income from and after the date of the
Mortgage Note Indenture; and (ii) if (1) RIH's Consolidated Interest Coverage
Ratio, as certified to the Mortgage Note Trustee by an Officer's Certificate,
calculated at the time of the declaration of the dividend or distribution, is
equal to or exceeds two, and (2) RIH has cash in excess of the amount required
to pay interest on the Mortgage Notes and the Junior Mortgage Notes on the next
Interest Payment Date plus $20,000,000, then RIH may declare and pay cash
dividends or make cash distributions in respect of any class of capital stock of
RIH in an amount not to exceed such excess cash amount.
The Mortgage Note Indenture further provides that RIHF and RIH will not,
and will not permit any of their respective Subsidiaries to, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction of
any kind on the ability of any Subsidiary of RIH or RIHF: (i) to pay dividends
or make any other distribution on the capital stock of such Subsidiary that is
owned by RIH, RIHF or a wholly owned Subsidiary of RIHF or RIH, as applicable;
(ii) to pay any Indebtedness owed by such Subsidiary to RIH, RIHF or any wholly
owned Subsidiary of RIHF or RIH, as applicable; (iii) to make loans or advances
to RIH, RIHF or any wholly owned Subsidiary of RIHF or RIH, as applicable; or
(iv) to transfer any of its property or assets to RIHF, RIH or any wholly owned
Subsidiary of RIHF or RIH, as applicable, except (A) any restrictions existing
on or prior to the date of the Mortgage Note Indenture, or in connection with
agreements in effect, or entered into, on the date of the Mortgage Note
Indenture, or any permitted amendments, renewals, refundings, refinancings or
extensions thereof; provided, however, that the terms and conditions of any such
amendments, renewals, refundings, refinancings or extensions are no more
restrictive with respect to the matters set forth in clauses (i) through (iv) of
this paragraph than the agreements being amended, refunded, renewed, refinanced
or extended; (B) any restrictions or encumbrances existing or arising pursuant
to the terms of Indebtedness of a Person outstanding at the time such Person
becomes a Subsidiary of RIHF or RIH and not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary of RIHF or RIH or any
permitted amendments, renewals, refinancings or extensions thereof; provided,
however, that the terms and conditions of any such amendments, renewals,
refundings, refinancings or extensions are no more restrictive with respect to
the matters set forth in clauses (i) through (iv) of this paragraph than the
agreements being amended, renewed, refunded, refinanced or extended; (C)
encumbrances or restrictions existing under or by reason of applicable law or
regulation (including, without limitation, the Casino Control Act) or the
Mortgage Note Indenture; (D) customary provisions restricting assignment of
contracts or subletting or assignment of any lease governing a leasehold
interest of any Subsidiary of RIHF or RIH; or (E) net worth maintenance
requirements imposed by any governmental authority. (Section 12.07).
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Limitation on Additional Indebtedness and Issuance of Notes
The Mortgage Note Indenture provides that RIHF and RIH will not, and will
not permit any of their respective Subsidiaries to, directly or indirectly,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable with respect to, including without limitation through any merger or
consolidation to which RIHF, RIH or any of their respective Subsidiaries is a
party or through any other acquisition of any such Subsidiary (collectively,
"incur"), or have outstanding, any Indebtedness other than, without duplication,
the following:
(i) Indebtedness represented by the Mortgage Notes, the RIH Promissory
Note and the Mortgage Note Guaranty;
(ii) Indebtedness represented by the Junior Mortgage Facility, the RIH
Junior Promissory Note and the Junior Mortgage Note Guaranty;
(iii) Indebtedness represented by the Working Capital Facility, the
Working Capital Facility Guaranty and the RIH Senior Facility Promissory
Note;
(iv) Indebtedness represented by Capitalized Lease Obligations in an
amount not in excess of $5,000,000 in the aggregate at any time
outstanding;
(v) Indebtedness represented by F, F&E Financing Agreements in an
amount not in excess of $10,000,000 in the aggregate at any time
outstanding;
(vi) unsecured Indebtedness in an amount not in excess of $5,000,000
in the aggregate at any time outstanding that is subordinated and junior to
the Junior Mortgage Notes at least to the extent set forth in the
Subordination Provisions attached to the Mortgage Note Indenture as Exhibit
C and which Indebtedness does not have any requirements for amortization
payments, mandatory redemption or sinking fund payments prior to the stated
maturity of the Junior Mortgage Notes and does not provide for the payment
of interest in cash at any time when the most recent installment of
interest on the Junior Mortgage Notes was not paid in cash;
(vii) Non-Recourse Indebtedness in an amount not in excess of
$25,000,000 in the aggregate at any time outstanding;
(viii) After-Acquired Fee Mortgage Debt in an amount not in excess of
$3,000,000 in the aggregate at any time outstanding; and
(ix) Intercompany advances between RIH, RIHF or any of their direct or
indirect Subsidiaries on the one hand, and RII, on the other hand, not in
excess of $1,000,000 in the aggregate at any time outstanding.
The Mortgage Note Indenture also provides that RIHF and RIH will not permit
any of their respective Subsidiaries to issue (other than to RIHF, RIH or a
direct or indirect wholly owned Subsidiary of RIHF or RIH) any capital stock
which has voting rights or has a preference as to any distribution over its
common stock. (Section 12.08).
Limitation on Repayment of Subordinated Indebtedness
The Mortgage Note Indenture provides that neither RIHF nor RIH will, and
neither RIHF nor RIH will permit any Subsidiary to, directly or indirectly,
purchase, redeem, defease (including, but not limited to, in substance or legal
defeasance) or otherwise acquire or retire for value prior to the Stated
Maturity of, or prior to any scheduled mandatory redemption or sinking fund
payment with respect to (collectively, to "repay" or a "repayment"), the
principal of any Indebtedness of RIHF, RIH or any Subsidiary of RIHF or RIH
which is subordinated (whether pursuant to its terms or by operation of law) in
right of payment to the Mortgage Notes; provided, however, that the provisions
of this paragraph shall not apply with respect to the Indebtedness incurred
pursuant to the Junior Mortgage Facility. (Section 12.09).
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Limitation on Certain Transactions
The Mortgage Note Indenture also provides that each of RIHF and RIH will
not, and will not permit any Subsidiary to, repurchase any Mortgage Notes in the
open market if an Event of Default shall have occurred and shall be continuing
under the Mortgage Note Indenture, under the Junior Mortgage Note Indenture or
under the indenture pursuant to which the Senior Facility Notes may be issued
(the "Senior Facility Indenture"). (Section 12.10).
Restriction of Activities
The Mortgage Note Indenture provides that RIH will not, until the date that
is 91 days after the payment in full by RIHF of the principal of (and interest,
if any, on) all Outstanding Mortgage Notes, engage in any business or investment
activities other than those necessary for, incident to, connected with or
arising out of acquiring, financing, owning and operating the Resorts Casino
Hotel or additional hotels or casinos or related or ancillary businesses.
The Mortgage Note Indenture also provides that neither RIHF nor RIH shall
make any loans to any Affiliate or any other Person other than (i) Indebtedness
of the type described in clause (ix) of the covenant described in "Limitation on
Additional Indebtedness and Issuance of Notes", (ii) indebtedness from RIH to
RIHF evidenced by the RIH Senior Facility Promissory Note, the RIH Promissory
Note and the RIH Junior Promissory Note, and (iii) loans to RII from the
proceeds of the Indebtedness represented by the Working Capital Facility;
provided, however, that RIH shall have the right to make loans to employees of
RIH actively involved in the operation of the Resorts Casino Hotel or to engage
in credit transactions in the operation of the Resorts Casino Hotel, if such
loans or credit transactions are in the ordinary course of business of operating
a casino/hotel.
The Mortgage Note Indenture further provides that RIHF will not engage in
any business (and shall not have any Subsidiaries) other than (i) to collect
principal, interest (and any interest on overdue principal and interest) and
other amounts under any intercompany notes or guaranties made to the order of or
otherwise in favor of RIHF, (ii) to preserve its rights under the Mortgage Note
Indenture and the Mortgage Documents and otherwise to comply with its
obligations thereunder and under the Mortgage Notes, (iii) to do or cause to be
done all things necessary or appropriate to protect the Mortgage Note Trust
Estate, (iv) to preserve its rights under the Junior Mortgage Note Indenture and
the Junior Mortgage Documents and otherwise to comply with its obligations
thereunder and under the Junior Mortgage Notes, (v) to issue the Indebtedness
represented by any other Junior Mortgage Facility, (vi) to issue Indebtedness
represented by the Working Capital Facility; (vii) to preserve its rights under
the Working Capital Facility and otherwise comply with its obligations under the
Working Capital Facility, (viii) to incur any other Indebtedness permitted under
the Mortgage Note Indenture, (ix) to do all such acts and deeds necessary in
connection with the Junior Mortgage Facility and the documents and instruments
relating thereto and in connection with the Working Capital Facility and the
documents and instruments relating thereto, (x) to declare, issue and pay
dividends on, or make any redemptions or repurchases of, RIHF's capital stock as
contemplated by its Certificate of Incorporation (to the extent permitted
hereby) and otherwise to comply with and perform the provisions of its
Certificate of Incorporation and By-laws, and (xi) to do such further acts and
deeds to effectuate any of the matters listed in the foregoing clauses of this
paragraph. (Section 12.11).
Limitation on Subsidiaries Consolidated Group
The Mortgage Note Indenture provides that RIHF and RIH will not have any
Subsidiaries except the Subsidiaries existing on the date of the Mortgage Note
Indenture and Subsidiaries acquired by RIHF or RIH in transactions not
prohibited by the other provisions of the Mortgage Note Indenture which are and
shall at all times be wholly owned (directly or indirectly) by RIHF or RIH.
(Section 12.12).
Limitations on Liens
The Mortgage Note Indenture provides that neither RIHF nor RIH will create,
incur, suffer to exist or permit to be created or incurred any mortgage, lien,
charge or encumbrance on or pledge of the Mortgage
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Documents or any of the Mortgage Note Trust Estate, other than (a) Permitted
Encumbrances on the Mortgage Note Trust Estate, (b) liens on the Mortgage Note
Trust Estate in connection with Indebtedness permitted by clauses (i), (ii),
(iii), (iv), or (v) of the first paragraph of the covenant described in
"Limitation on Additional Indebtedness and Issuance of Notes", and (c) a
building contract or notice of intention filed by a mechanic, materialman or
laborer under the New Jersey lien law. Without limiting the generality of the
previous sentence, but notwithstanding the provisions of such sentence, RIH will
not be deemed to have breached such provisions by virtue of the existence of
liens for Impositions (as defined in the RIH Mortgage) or mechanics' liens so
long as RIH is in good faith contesting the validity of such liens in accordance
with the provisions of Section 5.09 of the RIH Mortgage. (Section 12.13).
Compliance with Laws
The Mortgage Note Indenture provides that each of RIHF and RIH will comply,
and will cause each of its Subsidiaries to comply, with the Casino Control Act
and all other applicable statutes (including without limitation ERISA), rules,
regulations, orders and restrictions of the United States of America, states and
municipalities, and of any governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the foregoing in
respect of the conduct of its business and the ownership of its properties and
assets, including without limitation the Mortgage Note Trust Estate, except such
as are being contested in good faith by appropriate proceedings in accordance
with the Mortgage Documents (to the extent applicable) and except for such
noncompliances as will not in the aggregate have a material adverse effect on
the business, properties, operations or financial condition of RIHF, RIH or
their respective Subsidiaries. (Section 12.14).
Payment of Taxes and Other Claims
The Mortgage Note Indenture provides that RIHF or RIH will pay or discharge
or cause to be paid or discharged, before the same shall become delinquent, (a)
all taxes, assessments and governmental charges levied or imposed upon RIHF, RIH
or any of their respective Subsidiaries or upon the Mortgage Note Trust Estate
or any portion thereof or upon the income, profits or property of RIHF, RIH or
any of their respective Subsidiaries, and (b) all lawful claims for labor,
materials and supplies which, if unpaid, will by law become a Lien upon the
Mortgage Note Trust Estate or upon any other property of RIHF, RIH or any of
their respective Subsidiaries; provided, however, that RIHF and RIH shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessments, charge or claim the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings in accordance with the
Mortgage Documents (to the extent applicable) if adequate reserves therefor have
been established in accordance with GAAP. (Section 12.15).
Maintenance of Properties
The Mortgage Note Indenture further provides that each of RIHF and RIH will
cause the Mortgage Note Trust Estate and all other properties (other than
obsolete equipment) owned by or leased to it or any of its Subsidiaries, and
used or useful in the conduct of its business or the business of RIHF, RIH or
such Subsidiary to be maintained and kept in good condition, repair and working
order, except for reasonable wear and use, and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as required by the Mortgage Documents or, to the extent not governed by the
Mortgage Documents, as in the reasonable judgment of the Board of Directors of
RIH may be necessary so that the business carried on in connection therewith may
be properly and advantageously conducted at all times. (Section 12.16).
Insurance
The Mortgage Note Indenture provides that each of RIHF and RIH will
maintain, and will cause each of its Subsidiaries to maintain, with financially
sound and reputable insurers, appropriate insurance on each of their respective
properties and businesses against liabilities, casualties, risks and
contingencies of the type and in amounts required by the Mortgage Documents or,
to the extent not governed by the Mortgage Documents, as customarily maintained
by corporations and other entities engaged in the same or similar businesses and
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similarly situated; provided, however, that any such insurer shall be qualified
to do business in the jurisdiction where the insured property is located.
(Section 12.17).
Waiver of Stay, Extension or Usury Laws
The Mortgage Note Indenture provides that each of RIHF and RIH (to the
extent that it may lawfully do so) will not, and will not cause or permit any of
its Subsidiaries to, at any time insist upon, or plead, or in any manner
whatsoever claim, and will resist any and all efforts to be compelled to take
the benefit or advantage of, any stay or extension law or any usury law or other
law that would prohibit or forgive RIHF or RIH from paying all or any portion of
the principal of, or premium, if any, and interest on the Mortgage Notes or the
RIH Promissory Note or the Mortgage Note Guaranty, wherever and whenever
enacted, or which may affect the covenants or the performance of the Mortgage
Note Indenture or the RIH Promissory Note or the Mortgage Note Guaranty; and (to
the extent that it may lawfully do so) RIHF and RIH will expressly waive all
benefit of advantage or any such law, and covenant that they will not hinder,
delay or impede the execution of any power granted to the Mortgage Note Trustee
in the Mortgage Note Indenture and in the Mortgage Documents, but will suffer
and permit the execution of every such power as though no such law had been
enacted. (Section 12.18).
Transactions with Shareholders and Affiliates
The Mortgage Note Indenture also provides that each of RIHF and RIH will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction (including without limitation the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of RIHF or RIH, unless (a) such transaction is upon
fair and reasonable terms which are no less favorable to RIHF or such
Subsidiary, as the case may be, than would be available in an arm's-length
transaction with an unrelated person and (b) if over $250,000, such transaction
is determined in the good faith judgment of a majority of the members of the
Board of Directors of either (i) RII, so long as RII owns, directly or
indirectly, a majority of the outstanding capital stock of RIH, directly or
indirectly, or (ii) RIH, to be in the best interests of RIHF, RIH or such
Subsidiary as applicable; provided, however, that this provision shall not apply
to (A) any agreements, documents, instruments or transactions entered into in
connection with the RIHF Senior Facility Notes, (B) the Griffin Services
Agreement, (C) the RII Management Contract or (D) the RII Tax Sharing Agreement.
(Section 12.21).
EVENTS OF DEFAULT
The following events constitute "Events of Default" under the Mortgage Note
Indenture:
(a) default in the payment of any interest upon any Mortgage Note when
such interest becomes due and payable and continuance of such default (the
deposit with the Mortgage Note Trustee of funds sufficient to make such
interest payment in full being deemed to cure any such default) for a
period of ten days;
(b) default in the payment of all or any portion of the principal of
any Mortgage Note at its Maturity;
(c) default in the performance or breach of any covenant of RIHF or
RIH in the Mortgage Note Indenture (other than a covenant a default in the
performance or breach of which is specifically dealt with in this paragraph
or one of the other clauses set forth herein), the Assignment Agreement or
any of the Mortgage Documents and continuance of such default or breach for
a period of 30 days (or such shorter or longer cure period, if any, as may
be specified in respect of such default or breach in the Assignment
Agreement or the applicable Mortgage Document, as the case may be), and
(other than with respect to the covenants described in
"Covenants -- Limitation on Dividends and Restricted Payments",
"Covenants -- Limitation on Additional Indebtedness and Issuance of Notes",
"Covenants -- Limitation on Repayment of Subordinated Indebtedness",
"Covenants -- Limitation on Certain Transactions",
"Covenants -- Restriction of Activities", "Covenants -- Limitation on
Subsidiaries; Consolidated Group", "Covenants -- Limitation on Liens" and
"Covenants -- Transactions with Stockholders and
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Affiliates") after there has been given (i) to RIHF by the Mortgage Note
Trustee, or (ii) to RIHF and the Mortgage Note Trustee by the Holders of at
least 25% in Outstanding Amount of the Outstanding Mortgage Notes, a
written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default"; provided,
however, that, if such default or breach is of a covenant set forth in
certain specified provisions of the Mortgage Note Indenture, and if such
default or breach is of such a nature that is curable but is not
susceptible of being cured with due diligence within such 30-day period (or
such shorter or longer cure period) (for reasons other than lack of funds),
then, under certain circumstances, such period shall be extended for such
further period of time (up to a maximum of 60 days) as may reasonably be
required to cure such default or breach;
(d) a proceeding or case shall be commenced, without the application
or consent of RIHF or RIH, in any court of competent jurisdiction, seeking
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of it debts, (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of RIHF or RIH or of all or any
substantial part of its assets, or (iii) similar relief in respect of RIHF
or RIH under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or an order, judgment or decree approving
or ordering any of the foregoing shall be entered and continue unstayed and
in effect, for a period of 60 consecutive days;
(e) the commencement by RIHF or RIH of a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or state law, or
the consent or acquiescence by any of them to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of RIHF or RIH or any substantial part of any of their property,
or the making by any of them of an assignment for the benefit of creditors,
or the taking of action by RIHF or RIH in furtherance of any such action;
(f) the revocation, suspension or involuntary loss of any Permit which
results in the cessation of a substantial portion of the operations of the
Resorts Casino Hotel for a period of more than 90 consecutive days;
(g) (i) a default by RIHF, RIH or any of their Subsidiaries under any
Indebtedness (other than the Working Capital Facility and the Junior
Mortgage Facility), in an aggregate principal amount in excess of
$5,000,000, which default results in the acceleration of the maturity of
any such Indebtedness under the evidence of indebtedness, indenture or
other instrument governing such Indebtedness; provided, however, that, if
such default under such evidence of indebtedness, indenture or other
instrument shall be cured by the obligor, or be waived by the holders of
such Indebtedness, in each case as may be permitted by such evidence of
indebtedness, indenture or other instrument and in each case resulting in
rescission of such acceleration thereunder, then the Event of Default by
reason of such default shall be deemed likewise to have been thereupon
cured or waived; or (ii) a default by RIHF, RIH or any of their
Subsidiaries under any Indebtedness represented by the Working Capital
Facility, or the Junior Mortgage Facility, the effect of which default
(after the expiration of any applicable notice or grace periods) is to
permit the holder or holders of any such Indebtedness represented by the
Working Capital Facility or the Junior Mortgage Facility in an aggregate
principal amount in excess of $5,000,000 (or a trustee or agent on behalf
of such holder or holders) to cause the acceleration of the maturity of
such Indebtedness represented by the Working Capital Facility or the Junior
Mortgage Facility under the evidence of indebtedness, indenture or other
instrument governing such Indebtedness; provided, however, that if such
default under such evidence of indebtedness, indenture or other instrument
shall be cured by the obligor, or be waived by the holders of such evidence
of Indebtedness, indenture or other instrument (and, if such default
resulted in the acceleration of the maturity of such indebtedness, such
acceleration shall have been rescinded thereunder), then the Event of
Default under the Mortgage Note Indenture by reason of such default shall
be deemed likewise to have been thereupon cured or waived; or (iii) the
existence of a final judgment of a court of competent jurisdiction in an
amount in excess of $3,000,000 against RIHF, RIH or the Mortgage Note Trust
Estate, which judgment has not been satisfied or otherwise provided for,
for a period of 30 days (during which execution shall not be effectively
stayed) following the date on which such judgment becomes a lien against
the Mortgage Note Trust Estate or any
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part thereof (unless the lawsuit in question was commenced without
effective service of process upon either RIHF or RIH in which case such
30-day period shall not commence until RIHF or RIH receives notice of such
final judgment); or (iv) the existence of a final judgment of a court of
competent jurisdiction in an amount in excess of $15,000,000 against RIHF,
RIH or the Mortgage Note Trust Estate, which judgment has not been
satisfied or otherwise provided for, for a period of 60 days (during which
execution shall not be effectively stayed) following the date of such final
judgment; or (v) the existence of a final judgment of a court of competent
jurisdiction, regardless of amount, against RIHF, RIH or the Mortgage Note
Trust Estate, which judgment has not been satisfied or otherwise provided
for, for a period of 60 days (during which execution shall not be
effectively stayed) following the date of such final judgment, if such
judgment, by itself or upon recordation or other action of the judgment
creditor, imposes or would impose a lien on the Mortgage Note Trust Estate
or any part thereof senior to the lien of the RIH Mortgage;
(h) default in the performance, or breach, of any covenant of RIHF or
RIH in connection with the restrictions described under "Limitation on
Consolidation, Merger, Conveyance, Transfer or Lease of Property and
Assets";
(i) the existence of a judgment of a court of competent jurisdiction
in an amount in excess of $3,000,000 against RIH regarding the CRDA
Dispute, which judgment has not been stayed, satisfied or otherwise
provided for, for a period of 30 days (during which execution shall not be
effectively stayed) (unless the lawsuit in question was commenced without
effective service of process upon RIH in which case such 30-day period
shall not commence until RIH receives notice of such final judgment); or
(j) if RII fails to pay or discharge or cause to be paid or
discharged, within 30 days before the same shall become delinquent, all
taxes levied or imposed upon RII; provided, however, that no Event of
Default or Default shall be deemed to exist under the Mortgage Note
Indenture with respect to any tax liability not paid or discharged by RII
if and to the extent that the amount, applicability or validity of such tax
liability is being contested in good faith by appropriate proceedings if
adequate reserves therefor have been established in accordance with GAAP;
provided further, however, that this paragraph shall not apply to amounts
due with respect to any period during which neither RIHF, RIH nor any of
their Subsidiaries is included in RII's consolidated group for Federal
income tax purposes. (Section 7.01).
If an Event of Default (other than one referred to in clause (d) or (e)
above) occurs and is continuing, then and in every such case the Mortgage Note
Trustee or the Holders of not less than 25% in Outstanding Amount and all
accrued interest of the Mortgage Notes Outstanding may declare the Outstanding
Amount of all the Mortgage Notes to be due and payable immediately, by a notice
in writing to RIHF (and to the Mortgage Note Trustee, if given by any
Noteholders), and upon any such declaration such Outstanding Amount shall become
immediately due and payable. If an Event of Default referred to in clause (d) or
(e) above occurs, then the Outstanding Amount of all the Mortgage Notes shall
automatically become immediately due and payable without presentment, demand,
protest or other formalities of any kind, all of which will be expressly waived
by RIHF. (Section 7.02).
At any time after such a declaration of acceleration has been made, but
before any judgment or decree for payment of money due on any Mortgage Notes has
been obtained by the Mortgage Note Trustee, the Holders of a majority in
Outstanding Amount of the Mortgage Notes may, by written notice to RIHF and the
Mortgage Note Trustee, rescind and annul such declaration and its consequences
if: (a) RIHF has deposited with the Mortgage Note Trustee a sum sufficient to
pay (1) all overdue installments of interest on all Mortgage Notes, (2) the
principal of any Mortgage Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates prescribed
therefor in the Mortgage Notes, and (3) all sums paid or advanced by the
Mortgage Note Trustee and the reasonable compensation, expenses, disbursements
and advances of the Mortgage Note Trustee, its agents and counsel; and (b) all
Events of Default, other than the non-payment of the Outstanding Amount of the
Mortgage Notes which have become due solely by such declaration of acceleration,
have been cured or have been waived as provided in the Mortgage Note Indenture.
No such rescission and annulment shall affect any subsequent default or impair
any right consequent thereon. (Section 7.02).
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LIMITATION ON CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE OF PROPERTY
AND ASSETS
Neither RIHF nor RIH shall consolidate, combine or merge with or into any
other Person or permit any other Person to consolidate, combine or merge with or
into RIHF or RIH, as the case may be; and neither RIHF with respect to its
assets nor RIH with respect to the Mortgage Note Trust Estate shall sell,
assign, convey or transfer its interest in such assets or the Mortgage Note
Trust Estate, as the case may be, substantially as an entirety (and
notwithstanding anything to the contrary contained in the Mortgage Note
Indenture (including the proviso at the end of this sentence), but subject to
the provisions of the RIH Mortgage regarding dispositions of the Mortgage Note
Trust Estate, neither RIHF with respect to its assets nor RIH with respect to
the Mortgage Note Trust Estate may sell, assign, convey or transfer such assets
or the Mortgage Note Trust Estate, as the case may be, other than substantially
as an entirety) to any other Person or group of Persons in one transaction or a
series of related transactions, or permit any other Person or group of Persons
to convey or transfer all or substantially all of its assets, subject to
liabilities other than de minimis liabilities, to RIHF or RIH; and RIHF and RIH
shall not transfer, convey, sell or otherwise dispose of to any other Person, or
issue to any Person, any equity interest in RIHF or RIH, as the case may be
(each such transaction referred to as a "Combination Transaction"); provided,
however, that (i) RIHF may engage in a Combination Transaction in which the only
other party or parties is RIH or a direct or indirect wholly owned Subsidiary of
RIHF or RIH, and (ii) RIHF or RIH may engage in any other Combination
Transaction (either independently or at the same time as other Combination
Transactions), subject to the following with respect to each such Combination
Transaction: (a) immediately following such Combination Transaction, (1) RIH (or
any successor entity) shall be eligible for and shall meet all relevant Legal
Requirements, including holding all permits, required for the normal operation
of the business of owning and operating the Resorts Casino Hotel, and (2) RIH
(or any successor entity) shall be controlled by a Person that is, or shall
retain to manage the Resorts Casino Hotel one or more Persons that are,
experienced in the operation and management of casino/hotels; (b) in the event
RIHF or RIH shall consolidate, combine or merge with or into another Person or
sell, assign, convey or transfer its interest in its assets or in the Mortgage
Note Trust Estate, as the case may be, substantially as an entirety (but not
less than substantially as an entirety) to another Person in one transaction or
a series of related transactions, the entity which is formed by or survives such
consolidation, combination or merger or the Person to which such assets or the
Mortgage Note Trust Estate are conveyed or transferred, (1) shall be organized
and existing under the laws of the United States of America, any state thereof,
or the District of Columbia; (2) shall expressly assume, by an indenture
supplemental to the Mortgage Note Indenture, executed and delivered to the
Mortgage Note Trustee, the performance and observance of every covenant,
obligation and condition of the Mortgage Note Indenture to be performed or
observed by RIHF or RIH, whichever the case may be; (3) shall expressly assume,
by an instrument executed and delivered to the Mortgage Note Trustee, the
performance of every covenant, obligation and condition of the Mortgage
Documents and the Assignment Agreement to be performed by RIHF or RIH, whichever
the case may be; (4) immediately after and giving effect to such transaction
could incur at least $1.00 of additional Indebtedness under the covenant
described in "Covenants -- Limitation on Additional Indebtedness and Issuance of
Notes"; (c) immediately after giving effect to such transaction, no Event of
Default, or Default under the Mortgage Note Indenture or under the RIH Mortgage,
shall have occurred and be continuing; (d) such Combination Transaction shall be
on such terms as shall not impair the lien and security and priority of the
Mortgage Note Indenture or of the Mortgage Documents or of the Assignment
Agreement and the rights and powers of the Mortgage Note Trustee and the Holders
of the Mortgage Notes thereunder; and (e) RIHF or RIH, as the case may be, shall
have delivered to the Mortgage Note Trustee an Officers' Certificate and an
Opinion of Counsel, each of which shall state that such Combination Transaction
and such supplemental indenture comply with the provisions of Article Ten of the
Mortgage Note Indenture and that all conditions precedent provided for in the
Mortgage Note Indenture relating to such transaction have been complied with.
(Section 10.01).
Except as otherwise expressly permitted by the RIH Mortgage and the
Mortgage Note Indenture, neither RIHF nor RIH shall sell, assign, lease,
hypothecate, pledge, mortgage or otherwise transfer all or any part of the
assets of RIHF or the Mortgage Note Trust Estate or any interest therein
(including without limitation any interest in the Ground Leases). Without
limiting the generality of the foregoing, RIH shall not separate,
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or attempt to separate, its ownership of its interest in the Ground Leases from
the ownership of the buildings constituting the Resorts Casino Hotel or any part
thereof. (Section 10.04).
The foregoing limitations on consolidation, merger, conveyance, transfer or
lease of property and assets shall not apply in connection with an RIH Sale.
(Section 10.05).
DISCHARGE OF MORTGAGE NOTE INDENTURE; DEFEASANCE
RIHF may terminate substantially all obligations under the Mortgage Note
Indenture at any time by delivering all outstanding Mortgage Notes to the
Mortgage Note Trustee for cancellation and paying any other sums payable under
the Mortgage Note Indenture. (Article Five).
The Mortgage Note Indenture also provides that RIHF will be deemed to have
paid and discharged the entire Indebtedness on the Mortgage Notes and the
provisions of the Mortgage Note Indenture (except as to any surviving rights of
transfer or exchange of Mortgage Notes provided for in the Mortgage Note
Indenture or the Mortgage Notes and any right to receive payments of principal
and interest as provided in this paragraph) if: (1) RIHF irrevocably deposits in
trust with the Mortgage Note Trustee, pursuant to an irrevocable trust and
security agreement in form and substance reasonably satisfactory to the Mortgage
Note Trustee, U.S. Legal Tender or direct non-callable obligations of, or
non-callable obligations guaranteed as to timely payment by, the United States
of America for the payment of which obligation or guarantee the full faith and
credit of the United States of America is pledged ("U.S. Government
Obligations") maturing as to principal and interest in such amounts and at such
times as are sufficient, without consideration of the reinvestment of such
interest and after payment of all Federal, state and local taxes or other
charges or assessments in respect thereof payable by the Mortgage Note Trustee,
in the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof (in form and substance reasonably
satisfactory to the Mortgage Note Trustee) delivered to the Mortgage Note
Trustee, to pay reasonable compensation to the Mortgage Note Trustee under
Section 8.07 of the Mortgage Note Indenture and the principal of and interest on
the outstanding Mortgage Notes on the dates on which any such payments are due
and payable in accordance with the terms of the Mortgage Note Indenture and of
the Mortgage Notes; (2) such deposits will not cause the Mortgage Note Trustee
to have a conflicting interest as defined in and for purposes of the TIA; (3)
such deposit will not result in a Default under the Mortgage Note Indenture; (4)
RIHF will deliver to the Mortgage Note Trustee an Opinion of Counsel, or a
private ruling of the Internal Revenue Service, in form and substance
satisfactory to the Mortgage Note Trustee, to the effect that Holders of the
Mortgage Notes will not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and the defeasance contemplated hereby and
will be subject to Federal income tax in the same amounts and in the same manner
and at the same times as would have been the case if such deposit and defeasance
had not occurred; (5) the deposit will not result in RIHF, the Mortgage Note
Trustee or the trust becoming or being deemed to be an "investment company"
under the Investment Company Act of 1940, as amended; (6) the Holders shall have
a perfected security interest under applicable law in the U.S. Legal Tender or
U.S. Government Obligations deposited pursuant to clause (1) above; and (7) RIHF
has delivered to the Mortgage Note Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent specified herein
relating to the defeasance contemplated by this paragraph have been complied
with.
If all or any portion of the Mortgage Notes are to be redeemed through such
irrevocable trust, RIHF must make arrangements satisfactory to the Mortgage Note
Trustee, at the time of such deposit, for the giving of the notice of such
redemption or redemptions by the Mortgage Note Trustee in the name and at the
expense of RIHF.
The Mortgage Note Trustee and each co-trustee and separate trustee, if any,
then acting as such hereunder shall, at the expense of RIHF, execute and deliver
a termination statement and such instruments of satisfaction and discharge as
may be necessary and pay, assign, transfer and deliver to RIHF or upon Company
Order all cash, securities and other personal property then held by it
hereunder, other than pursuant to Section 14.01 of the Mortgage Note Indenture.
(Section 14.01).
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MODIFICATION OF INDENTURE
From time to time, the parties to the Mortgage Note Indenture, without the
consent of the Holders of the Mortgage Notes, may enter into one or more
supplemental indentures for certain specified purposes, including curing
ambiguities, defects or inconsistencies, provided such action does not adversely
affect the interests of any Holder. (Section 11.01). Modifications, changes and
amendments to the Mortgage Note Indenture also may be made by the parties
thereto with the consent of the Holders of not less than 66 2/3% in Outstanding
Amount of the Mortgage Notes then Outstanding, except that, without the consent
of the Holder of each Mortgage Note affected, no such modification or alteration
may (i) change the stated maturity of the principal of, or any installment of
interest on, any Mortgage Note, or reduce the principal amount thereof or the
premium payable upon the redemption thereof, or change any Place of Payment
where, or the coin or currency in which, any Mortgage Note, or the interest
thereon is payable, or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), (ii) reduce the percentage in
Outstanding Amount of the Mortgage Notes, the consent of whose Holders is
required for any amendment, supplement or waiver, (iii) modify or alter the
provisions of the proviso of the definition of the term "Outstanding", (iv)
modify any of the provisions described in this paragraph or, with certain
exceptions, the provisions of the Mortgage Note Indenture regarding waiver of
default, or (v) permit the creation of any lien ranking prior to the lien of the
RIH Mortgage (except for such liens expressly permitted pursuant to the covenant
described under "Covenants -- Limitations on Liens"). (Section 11.02).
TRUSTEE
The Mortgage Note Trustee may require reasonable indemnity before
exercising any of its rights or powers under the Mortgage Note Indenture.
(Section 8.03).
REPORTS TO HOLDERS
RIH will furnish or cause to be furnished to the Mortgage Note Trustee,
within 105 days after each fiscal year of RIH: (i) a copy of annual audited
financial statements of RIH prepared in conformity with GAAP, accompanied by a
report of Ernst & Young or of another firm of independent certified public
accountants of recognized national standing selected by RIH (the "National
Accountants"), together with a certificate from such National Accountants
stating that their audit examination has included a review of the terms of the
Mortgage Note Indenture and that the National Accountants have not become aware
of any Event of Default or that a Default has occurred and is continuing, and if
they have become aware of any such Event of Default or Default, describing it;
provided, however, that the National Accountants will not be liable to any
Person for any failure to discover any Event of Default or Default in connection
with such review; and (ii) a copy of annual unaudited financial statements of
RIH, including notes to such financial statements and corresponding management's
discussion and analysis, in form and substance and comparable to that which
would be required to be filed with the Commission in an Annual Report on Form
10-K under the Exchange Act, prepared in the same manner as the audited
financial statements referred to in clause (i) above, signed by a proper
accounting officer of RIH. Contemporaneously with the furnishing of such audited
financial statements to the Mortgage Note Trustee under clause (i) of this
paragraph, RIH will mail copies of such audited financial statements to the
Holders (which need not include the certificate referred to in clause (i)
above).
RIH also will furnish or cause to be furnished to the Mortgage Note
Trustee, within 60 days after each quarter of each fiscal year of RIH, except
the final quarter of such fiscal year, a copy of unaudited financial statements
of RIH prepared on a consistent basis with the audited financial statements
referred to in clause (i) of the paragraph above, signed by a proper accounting
officer of RIH and consisting of at least a balance sheet as at the close of
such quarter and statements of operations and cash flow for such quarter and for
the period from the beginning of such fiscal year to the close of such quarter,
including notes to such financial statements and corresponding management's
discussion and analysis, in form and substance comparable to that which would be
required to be filed with the Commission in a Quarterly Report on Form 10-Q
under the Exchange Act. Contemporaneously with the furnishing of such unaudited
financial statements to the
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Mortgage Note Trustee, RIH shall mail copies of such unaudited financial
statements to the Holders (which need not be signed by a proper accounting
officer of RIH).
RIH will furnish or cause to be furnished to the Mortgage Note Trustee,
contemporaneously with the furnishing of a copy of the annual financial
statements and of the quarterly financial statements referred to above, an
Officers' Certificate dated the date of such annual financial statement or such
quarterly financial statements to the effect that no Default or Event of Default
has occurred and is continuing, or, if there is any such Default or Event of
Default, describing it and the steps, if any, being taken to cure it.
RIH will furnish or cause to be furnished to the Mortgage Note Trustee,
copies of each filing and report made by RIH or RIHF with the Commission
pursuant to the reporting and filing requirements of Section 13 or 15(d) of the
Exchange Act, within 15 days after RIH or RIHF, as applicable, is required to
file the same.
Pursuant to the Mortgage Note Indenture, if RIH becomes exempt from the
Commission reporting and filing requirements of Section 13 or 15(d) of the
Exchange Act, RIH will prepare such periodic reports as it would otherwise have
been required to file with the Commission and (i) at its own expense, cause all
such periodic reports to be filed with the Commission, the Mortgage Note Trustee
and any exchange upon which the Mortgage Notes then are listed, in each case on
the date when such periodic report would have been required to be filed with the
Commission under Section 13 or 15(d) of the Exchange Act, if either of such
provisions were applicable, and (ii) keep copies of such periodic reports
available at its office and promptly provide any Person who so requests with a
copy of any such periodic report, at RIHF's expense.
Each of RIHF and RIH shall comply with the provisions of sec. 314(a) of the
TIA.
RIHF will deliver to the Mortgage Note Trustee, promptly upon becoming
aware of any Default or Event of Default (but in no event later than five
business days thereafter) in the performance of any covenant or agreement of the
Company contained in the Mortgage Note Indenture or any of the Mortgage
Documents, an Officers' Certificate specifying with particularity such event.
(Section 12.06).
CERTAIN DEFINITIONS
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, and, with respect to any specified natural
Person, any other Person having a relationship by blood, marriage or adoption
not more remote than first cousin with such specified Person. For purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing; provided, however, that, except as may be required
under the TIA, the term "Affiliate" shall not include, with respect to RIHF or
RIH, any of Fidelity Management & Research Company, TCW Special Credits or funds
or accounts managed or advised by either of them.
"After-Acquired Fee Mortgage Debt" means any Indebtedness secured by an
After-Acquired Fee Mortgage.
"After-Acquired Fee Mortgage" has the meaning stated in Section 2.07 of the
RIH Mortgage.
"Assignment Agreement" means the Assignment of Agreements dated as of the
date of the Mortgage Note Indenture, providing for the assignment of the RIH
Promissory Note, the RIH Mortgage and certain of the other Mortgage Documents
securing the RIH Promissory Note to the Mortgage Note Trustee by RIHF, and
acknowledgment thereof by RIH, a copy of which is attached to the Mortgage Note
Indenture as Exhibit B.
"Capitalized Lease Obligation" means, with respect to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee
which, in conformity with GAAP consistently applied, is accounted for as a
capitalized lease on the balance sheet of such Person.
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"Consolidated Cash Flow" means, with respect to any Person for any period,
an amount equal to the sum of (i) the Consolidated Net Income of such Person for
such period determined in accordance with GAAP consistently applied, excluding
interest income, interest expense and gains or losses from extraordinary or
nonrecurring items, plus (ii) all amounts deducted in computing such
Consolidated Net Income in respect of depreciation and amortization, plus (iii)
non-cash charges arising from the reduction of CRDA Deposits to market value,
minus (iv) CRDA Deposits made during such period.
"Consolidated Interest Charges" means, with respect to any Person for any
period, the consolidated interest expense (not including the non-cash
amortization of discount on the original issuance of (a) the RIH Promissory
Note, (b) any intercompany indebtedness of RIH issued in connection with
Indebtedness represented by the Junior Mortgage Facility and (c) any
intercompany indebtedness of RIH issued in connection with Indebtedness
represented by the Working Capital Facility), whether payable in cash or in-kind
(and with respect to RIH, including without limitation the interest paid or
accrued (without duplication) on (i) the RIH Promissory Note, (ii) any
intercompany indebtedness of RIH issued in connection with Indebtedness
represented by the Junior Mortgage Facility and (iii) any intercompany
indebtedness of RIH issued in connection with Indebtedness represented by the
Working Capital Facility), without deduction for interest income (other than
cash interest income received from RII in payment of its interest cost on any
Working Capital Facility), in each case for such Person and its consolidated
Subsidiaries for such period determined in accordance with GAAP consistently
applied.
"Consolidated Interest Coverage Ratio" shall mean, at any date of
calculation thereof, the ratio of (a) Consolidated Cash Flow of RIH and its
consolidated Subsidiaries for the immediately preceding four consecutive fiscal
quarters to (b) Consolidated Interest Charges of RIH and its consolidated
Subsidiaries for such period.
"Consolidated Net Income" means, with respect to any Person for any period,
an amount equal to consolidated net income (or loss) of such Person for such
period determined in accordance with GAAP consistently applied, plus (a)
non-cash charges arising from Federal and state taxes based upon or measured by
income, minus (b) non-cash Federal and state tax benefits based upon or measured
by income.
"CRDA Deposits" means (a) the quarterly deposits made by RIH to the Casino
Reinvestment Development Authority in an amount equal to 1.25% of RIH's gross
revenue in order to satisfy its investment obligation pursuant to the Casino
Control Act, and (b) the amounts invested in qualified investments in lieu of
any of the quarterly deposits (or portion thereof) referred to in clause (a)
above.
"CRDA Dispute" means the dispute existing on the date hereof between RIH
and the New Jersey Casino Reinvestment Development Authority regarding CRDA
Deposits and New Jersey Casino Reinvestment Authority Notes, which dispute
involves an amount of approximately $30,000,000.
"F, F&E Financing Agreement" means a purchase money lien upon any Tangible
Personal Property (as defined in the RIH Mortgage) and other items constituting
Operating Assets (as defined in the RIH Mortgage), such as computer software,
which are financed, purchased or leased by RIH, provided that, with certain
exceptions, the principal amount of the indebtedness secured by such lien shall
not exceed 85% of the cost to RIH of such property at the time of acquisition.
"Guaranty" means the RIH Mortgage Note Guaranty as set forth in Article
Four of the Mortgage Note Indenture.
"Holder" means a Person in whose name a Mortgage Note is registered.
"Indebtedness" means, as applied to any Person, without duplication, any
indebtedness, exclusive of deferred taxes: (a) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof); (b) evidenced by bonds, notes, debentures
or similar instruments or letters of credit; (c) representing the balance
deferred and unpaid of the purchase price of any property, if and to the extent
such indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP (but excluding trade accounts payable
arising in the ordinary course of business that are not overdue by more than 90
days or are being contested by such Person in good faith);
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(d) any Capitalized Lease Obligations (other than, with respect to RIH or RIHF,
the Ground Leases) of such Person; and (e) Indebtedness of others guaranteed by
such Person, including without limitation every obligation of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, (ii) to purchase property,
securities or services for the purpose of assuring the holder of such
Indebtedness of the payment of such Indebtedness, or (iii) to maintain working
capital, equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness; provided, however, that the guaranty by any Person shall not
include endorsements by such Person for collection or deposit, in either case in
the ordinary course of business. The term "Indebtedness" does not include: (1)
any of the types of indebtedness described in clauses (a) through (e) above
(inclusive) owed by RIHF to RIH or any of their Subsidiaries, by RIH to RIHF or
any of their Subsidiaries or by any such Subsidiary to RIH, RIHF or any other
such Subsidiary (including without limitation the RIH Promissory Note and the
RIH Junior Promissory Note); (2) the Mortgage Note Guaranty, the Junior Mortgage
Note Guaranty and any Working Capital Facility Guaranty; (3) matters relating to
the CRDA Dispute, New Jersey Casino Reinvestment Development Authority Notes or
the CRDA Deposits; and (4) any payments required to be made by RIHF or RIH under
the RII Management Agreement, the RII Tax Sharing Agreement or the Services
Agreement.
"Junior Mortgage Documents" means (a) the RIH Junior Mortgage, the RIH
Junior Guaranty Mortgage, the RIH Junior Promissory Note, the Junior Assignment
of Leases and Rents and any other security document to which either RIH or RIHF
is a party relating to the RIH Junior Mortgage Notes, which is executed and
delivered pursuant to or in connection with the RIH Junior Mortgage, the RIH
Junior Guaranty Mortgage or the Junior Assignment Agreement, and (b) any
mortgage, deed of trust, guaranty, promissory note, collateral assignment
agreement, assignment of leases and rents, assignment of operating assets and
any other security document to which either RIH or RIHF is a party relating to
the Junior Mortgage Facility.
"Junior Mortgage Facility" means the Junior Mortgage Notes and any secured
or unsecured facility or facilities entered into by RIH or RIHF providing for
the making of loans to RIH or RIHF on a revolving or term basis, or the issuance
of notes, debentures or bonds by RIH or RIHF, as such agreement, indenture or
instrument may be amended, supplemented or modified from time to time, or any
refinancing thereof, in an aggregate principal amount outstanding at any time up
to $35,000,000 plus additional notes, debentures or bonds issued in payment of
interest accrued on outstanding notes, debentures or bonds; provided, however,
that the lender or lenders thereunder (or any trustee or agent acting on behalf
of such lender or lenders) shall have executed an intercreditor agreement
covering the matters set forth on Exhibit G to the Mortgage Note Indenture. The
liens, if any, securing the Junior Mortgage Facility shall be pari passu with
the lien of the RIH Junior Mortgage and the RIH Junior Guaranty Mortgage. The
term "Junior Mortgage Facility" does not include the Junior Mortgage Note
Guaranty.
"Mortgage Documents" means the RIH Mortgage, the RIH Guaranty Mortgage, the
RIH Promissory Note, an Assignment of Leases and Rents and an Assignment of
Operating Assets each dated as of the date of the Mortgage Note Indenture by RIH
to RIHF and any other security document to which either RIH or RIHF is a party
relating to the Mortgage Notes, which is executed and delivered pursuant to or
in connection with the RIH Mortgage, the RIH Guaranty Mortgage or the Assignment
Agreement.
"Non-Recourse Indebtedness" means indebtedness incurred in connection with
the acquisition, purchase, improvement or development of property or assets
(other than the Mortgage Note Trust Estate) used by RIHF, RIH or any Subsidiary
of RIH or RIHF to engage in the casino business, the hotel business or related
or ancillary business or purpose and which is secured only by such assets and
without recourse to RIH, RIHF or any Subsidiary of RIH or RIHF or the Mortgage
Note Trust Estate for such indebtedness.
"Outstanding" when used with respect to Mortgage Notes means, as of the
date of determination, all Mortgage Notes theretofore authenticated and
delivered under the Mortgage Note Indenture, except:
(a) Mortgage Notes theretofore canceled by the Mortgage Note Trustee
or delivered to the Trustee for cancellation;
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(b) Mortgage Notes for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Mortgage Note
Trustee or any Paying Agent in trust for the Holders of such Mortgage
Notes;
(c) Mortgage Notes in exchange for or in lieu of which other Mortgage
Notes have been authenticated and delivered under the Mortgage Note
Indenture; and
(d) Mortgage Notes alleged to have been destroyed, lost or stolen
which have been paid as provided in Section 3.06 of the Mortgage Note
Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of Mortgage Notes Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Mortgage Notes
owned by RIHF or any other obligor upon the Mortgage Notes or any Affiliate of
RIHF or of such other obligor shall be disregarded and deemed not to be
Outstanding. In determining whether the Mortgage Note Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Mortgage Notes which the Mortgage Note Trustee actually
knows to be so owned shall be so disregarded.
"Outstanding Amount" of any Indebtedness at any time means the principal
amount outstanding of such Indebtedness at such time.
"Restricted Payment" means (a) any declaration or payment of any dividend
or the making of any distribution to holders of capital stock of RIH or RIHF or
any Subsidiary of RIH or RIHF in respect of such capital stock (other than to
RIH or RIHF or a direct or indirect wholly owned Subsidiary of RIH or RIHF), (b)
any purchase, redemption or other acquisition or retirement for value of any
capital stock (or warrants, rights or options to acquire any capital stock or
Indebtedness convertible into or exchangeable for any capital stock) of RIH or
RIHF or any Subsidiary of RIH or RIHF (other than purchases, redemptions,
acquisitions or retirement solely from RIH or RIHF or a direct or indirect
wholly owned Subsidiary of RIH or RIHF); provided, however, that any such
purchase, redemption or other acquisition or retirement that is required by the
Casino Control Commission or under the Casino Control Act shall not constitute a
Restricted Payment. The term "Restricted Payment" also shall not include any
loan or advance to RII of all or any portion of the proceeds of the Indebtedness
represented by the Working Capital Facility.
"RIH Sale" means (a) a consolidation, combination or merger involving RIH
and any other Person, (b) a sale, assignment, conveyance or transfer or RIH's
interest in the Mortgage Note Trust Estate, substantially as an entirety, to any
other Person or group of Persons in one transaction or a series of related
transactions, or (c) any transaction as a result of which RIH ceases to be a
direct or indirect wholly owned Subsidiary of RII; provided, however, that any
of the transactions described in clauses (a), (b) and (c) above shall not
constitute an RIH Sale if the other party or parties to the transaction consists
of only one or more of the following Persons: RIHF or any wholly owned direct or
indirect subsidiary of RIH or RIHF; provided further, however, that
notwithstanding any other provision of this definition, if the primary effect of
any of the aforesaid transactions is the redemption of the Mortgage Notes, then
such transaction shall not be considered to be a RIH Sale.
"RII Management Contract" means the Interim Management Agreement.
"RII Tax Sharing Agreement" means the Tax Sharing Agreement between RII and
RIH pursuant to which (i) RIH will not make any payments to RII or any other
Affiliate in respect of taxes, other than to reimburse RII for any cash payments
actually made by RII in respect of any Federal, state or local income or
alternative minimum taxes arising from the earnings or operations of RIH;
provided, however, that RIH shall not be required to reimburse RII for cash
payments in respect of Federal, state or local income or alternative minimum
taxes that would not have been owed but for the reduction, if any, of the amount
of the consolidated net operating loss carryforwards or consolidated current
losses of the affiliated group of which RII is a common parent which resulted
from the inclusion in the consolidated return filed for such group for any
taxable year ending after the Effective Date of the income of any entity other
than RIH, other than income directly attributable to the consummation of the
Plan, including but not limited to the transfer of the stock of
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RIB and the assets of the U.S. Paradise Island Subsidiaries, and (ii) RIH will
be entitled to any refund (plus the interest thereon) of any taxes for which RIH
is required to reimburse RII.
"Subsidiary" of any Person means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by such
Person or one or more Subsidiaries of such Person.
"Working Capital Facility" means the Senior Facility (and the Senior
Facility Notes issued thereunder) and any other secured or unsecured facility or
facilities entered into by RIH and/or RIHF providing for the making of working
capital loans to RIH or RIHF (with RIH, RII and/or GRI as a guarantor
thereunder) on a revolving or term basis, or the issuance of notes, debentures
or bonds by RIH, RIHF or RII, as such agreement may be amended, supplemented or
modified from time to time, or any refinancing thereof, in an aggregate
principal amount up to $20,000,000; provided, however, that the lender or
lenders thereunder (or any trustee or agent acting on behalf of such lender or
lenders) shall have executed an intercreditor agreement covering the matters set
forth on Exhibit G to the Mortgage Note Indenture. The liens, if any, securing
the Working Capital Facility may be senior to the lien of the RIH Mortgage, the
RIH Guaranty Mortgage, the RIH Junior Mortgage and the RIH Junior Guaranty
Mortgage. The term "Working Capital Facility" does not include the Working
Capital Facility Guaranty.
DESCRIPTION OF JUNIOR MORTGAGE NOTES
The following is a summary of certain provisions of the Junior Mortgage
Notes and the Junior Mortgage Note Indenture. Wherever particular provisions of
the Junior Mortgage Note Indenture or Junior Mortgage Notes are referred to,
such provisions are incorporated by reference herein. References to Sections or
Articles refer to Sections or Articles of the Junior Mortgage Note Indenture.
The definition of certain terms used below are set forth in "Certain
Definitions" below in this section. All other capitalized terms used in this
section but not defined in this Information Statement/Prospectus have the
meanings ascribed thereto in the Junior Mortgage Note Indenture and are
incorporated by reference herein.
GENERAL
The Junior Mortgage Notes were issued pursuant to the Junior Mortgage Note
Indenture, dated May 3, 1994, among RIHF, RIH and U.S. Trust Company of
California, N.A. (the "Junior Mortgage Note Trustee"). A copy of the Junior
Mortgage Note Indenture is filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The terms of the Junior Mortgage Note Indenture
also are governed by certain provisions of the TIA. The Junior Mortgage Notes
are secured obligations of RIHF in the aggregate principal amount of $35,000,000
plus the principal amount of Junior Mortgage Notes that may be issued in payment
of interest as described below. The Junior Mortgage Notes will mature on
December 15, 2004.
RANKING
Although the Junior Mortgage Notes are not contractually subordinated to
the Senior Facility Notes and the Mortgage Notes as to priority of payment, the
lien securing the Junior Mortgage Notes is junior to the liens securing the
Senior Facility Notes and the Mortgage Notes, and the Junior Mortgage Notes
therefore are structurally subordinated to the Senior Facility Notes and the
Mortgage Notes. The lien on the Resorts Casino Hotel securing payment of the RIH
Junior Promissory Note is pari passu with the lien securing the Junior Mortgage
Note Guaranty and subordinated to the liens securing payment of the RIH Senior
Facility Promissory Note, the RIHF Senior Facility Guaranty, any other secured
Working Capital Facility, the RIH Promissory Note and the Mortgage Note
Guaranty. (Section 4.03).
INTEREST
Interest on the Junior Mortgage Notes accrues at a rate of 11.375% per
year. Interest is payable semi-annually on June 15 and December 15 in each year
(commencing December 15, 1994) to Holders of record at the close of business on
the first day of the month in which the interest payment date occurs. RIHF is
required
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to pay interest on overdue principal and, to the extent permitted by law,
overdue interest at the rate of 14.375% per year. (Section 3.10).
RIHF may pay all or any portion of interest accruing on the Junior Mortgage
Notes by issuing additional Units comprised of Junior Mortgage Notes (valued,
for purposes only of determining the principal amount of additional Junior
Mortgage Notes to be issued in respect of interest so paid, at 100% of their
principal amount) and Class B Common Stock in lieu of cash in satisfaction of
interest payments due, provided that on the interest payment date in question,
Consolidated Cash Flow of RIH and its consolidated Subsidiaries for the most
recently completed four fiscal quarters is less than $35,000,000. (Section
3.11).
SINKING FUND REQUIREMENTS
None.
MANDATORY REDEMPTION
In the event of an RIH Sale, all the Junior Mortgage Notes shall be
redeemed by RIHF whether such RIH Sale occurs before, on or after the fifth
anniversary of the Effective Date, at par together with interest, if any,
accrued and unpaid thereon to the Redemption Date; provided, however, that such
obligation of RIHF to redeem the Junior Mortgage Notes in the event of a
proposed RIH Sale shall cease to exist if the Holders of not less than 66 2/3%
in Outstanding Amount of the Outstanding Junior Mortgage Notes have consented to
such proposed RIH Sale. (Section 3.13).
OPTIONAL REDEMPTION
The Junior Mortgage Notes are redeemable at any time in whole, or from time
to time in part, on or after the fifth anniversary of the Effective Date at the
election of RIHF, at a redemption price of 100% of their principal amount plus
accrued and unpaid interest to the Redemption Date. (Section 3.13).
From and after any Redemption Date, if funds for the redemption of any
Junior Mortgage Notes called for redemption shall have been made available, such
Junior Mortgage Notes will cease to bear interest and the only right of the
Holders will be to receive payment of the Redemption Price and all interest
accrued to such Redemption Date. (Section 13.06).
The Junior Mortgage Note Indenture requires that notice of any redemption
of any Junior Mortgage Notes be given to Holders at their addresses, as shown in
the register, not less than 30 nor more than 60 days prior to the Redemption
Date. The notice of redemption must specify, among other things, the Redemption
Date, the Redemption Price, the principal amount of Junior Mortgage Notes to be
redeemed, and, if less than all outstanding Junior Mortgage Notes are to be
redeemed, the identification (and, in the case of partial redemption, the
respective principal amounts) of the Junior Mortgage Notes to be redeemed and
the place or places where the Junior Mortgage Notes to be redeemed are to be
surrendered for payment of the Redemption Price. (Section 13.04).
The Junior Mortgage Note Indenture provides that in the event of redemption
of less than all the outstanding Junior Mortgage Notes, the particular Junior
Mortgage Notes to be redeemed will be selected by the Junior Mortgage Note
Trustee by a random, automated selection process or pro rata, as deemed
appropriate by the Junior Mortgage Note Trustee. (Section 13.03).
LIMITATION ON OPEN-MARKET PURCHASES
The Junior Mortgage Note Indenture provides that RIHF and RIH will not, and
will not permit any of their respective Subsidiaries to, purchase or otherwise
acquire (other than pursuant to a redemption described in Article Thirteen of
the Junior Mortgage Note Indenture) any Junior Mortgage Notes unless all
interest accrued on the Junior Mortgage Notes and payable on the Interest
Payment Date immediately preceding the date of such repurchase was paid solely
in cash and not in Additional Notes. (Section 12.22). In addition, the Junior
Mortgage Note Indenture provides that RIHF and RIH will not, and will not permit
any of their respective subsidiaries to, repurchase any Junior Mortgage Notes in
the open market if an Event of Default
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has occurred and is continuing under the Junior Mortgage Note Indenture, the
Mortgage Note Indenture or the Senior Facility Note Indenture. (Section 12.10).
CASINO CONTROL ACT REGULATION
The Junior Mortgage Notes are subject to the qualification, divestiture and
redemption provisions under the Casino Control Act that are described in
"Description of Business -- Regulation and Gaming Taxes and Fees". (Section
13.08).
INTERCREDITOR AGREEMENT
See "Description of Mortgage Notes -- Intercreditor Agreement".
COLLATERAL
General
The Junior Mortgage Notes are secured by the Junior Mortgage Note Trust
Estate pursuant to the Mortgage Documents described below. (Article Six).
The "Junior Mortgage Note Trust Estate" consists of an assignment by RIHF
to the Junior Mortgage Note Trustee for the benefit of the Holders of the Junior
Mortgage Notes, of the RIH Junior Promissory Note in the original aggregate
principal amount of $35,000,000, payable in amounts and at times necessary to
pay the principal of and interest on the Junior Mortgage Notes, which is secured
by a lien on Resorts Casino Hotel, consisting of RIH's fee and leasehold
interests comprising the Resorts Casino Hotel, the contiguous parking garage and
property, all additions or improvements constructed thereon, all rents, issues
and profits derived therefrom and certain tangible and intangible personal
property located on, or used in connection with, the operation of the Resorts
Casino Hotel (collectively, the "RIH Junior Mortgage"), comprising the trust
estate, encumbered pursuant to the RIH Junior Mortgage between RIH, as
mortgagor, and RIHF, as mortgagee.
The RIH Junior Mortgage
The RIH Junior Mortgage creates a mortgage lien and security interest
(subject to the liens securing the RIH Senior Facility Promissory Note, the RIH
Senior Facility Guaranty, any other secured Working Capital Facility, the RIH
Promissory Note and the RIH Mortgage Note Guaranty) in the Resorts Casino Hotel.
RELEASE OF COLLATERAL
No portion of the Junior Mortgage Trust Estate may be released without the
consent of the Holders of not less than 66 2/3% in Outstanding Amount of the
Junior Mortgage Notes then Outstanding. (Section 11.02). Section 2.02 of the RIH
Junior Mortgage provides that RIH may, unless an Event of Default shall have
occurred and be continuing, sell or dispose of certain elements of the Resorts
Casino Hotel which may have become obsolete or unfit for use or which are no
longer necessary in the conduct of its businesses.
LIMITATIONS ON ABILITY TO REALIZE ON COLLATERAL
General
If there is an Event of Default under the Junior Mortgage Note Indenture or
the RIH Junior Mortgage, the Junior Mortgage Note Trustee, subject to the
requirements of the Casino Control Act, may enforce the rights and remedies
arising under the RIH Junior Mortgage. The net amount realized in any
foreclosure sale for the benefit of Holders of the Junior Mortgage Notes will be
only that amount that exceeds all amounts then due and owing to creditors, if
any, having senior security interests (including the Holders of the RIHF Senior
Facility Notes, the parties to any other secured Working Capital Facility and
the holders of the Mortgage Notes and the related Mortgage Note Guaranty) and
certain costs, taxes and other items.
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Certain Regulatory Considerations
In any foreclosure sale with respect to the Resorts Casino Hotel, the
Junior Mortgage Note Trustee could bid the amount of the outstanding Junior
Mortgage Notes. The Junior Mortgage Note Trustee would be required to comply
with the applicable requirements of the Casino Control Act in any foreclosure
sale, including obtaining a casino license.
Certain Bankruptcy Considerations
In the event of the filing of a petition under the Bankruptcy Code for RIHF
or RIH, applicable provisions of the Bankruptcy Code, including the automatic
stay provisions of section 362 of the Bankruptcy Code, may operate to prevent
the Junior Mortgage Note Trustee from taking action to realize on the Junior
Mortgage Trust Estate if there is an Event of Default.
Ground Leases
A substantial portion of the North Tower of the Resorts Casino Hotel, a
portion of the adjacent parking garage and a small portion of the casino/hotel
are located on land that is owned by unrelated third parties and leased to RIH
under long-term ground leases. The ground leases do not provide certain
mortgagee protections and, in the event of a default thereunder, the Junior
Mortgage Note Trustee may not have the right to cure any such default. However,
the Junior Mortgage Note Trustee has the right under the Junior Mortgage Note
Indenture to tender defaulted ground lease payments to RIH and require RIH to
transmit such funds to the respective ground lessor. If such default is not
cured, the lessor under any ground lease may have the right to terminate the
ground lease. The termination of any or all of such ground leases could result
in the loss of portions of, or rights with respect to, the property subject to
the terminated ground lease.
GUARANTY
RIH has guaranteed payment of principal of and interest on the Junior
Mortgage Notes pursuant to the Junior Mortgage Note Guaranty. In addition, the
Junior Mortgage Note Guaranty is secured by a lien on the Resorts Casino Hotel
pursuant to a mortgage and security agreement with an assignment of rents, and
an assignment of leases and rents (collectively, the "RIH Guaranty Mortgage").
The RIH Junior Guaranty Mortgage will encumber the Resorts Casino Hotel on a
basis pari passu with the RIH Junior Mortgage. (Article Four)
PAYMENTS OF NET PROCEEDS OF ASSET SALES
None.
COVENANTS
Corporate Existence
Subject to the provisions described under "Limitations on Merger,
Consolidation, Transfer or Lease of Property and Assets", the Junior Mortgage
Note Indenture provides that each of RIHF and RIH will do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate existence of each of its Subsidiaries in accordance
with the respective organizational documents of RIHF, RIH and each such
Subsidiary and the rights (charter and statutory), licenses, permits, approvals
and governmental franchises of it and each of its Subsidiaries necessary to the
conduct of its and their respective businesses, including without limitation all
licenses, permits, approvals and franchises necessary to assure the continued
operation of RIH's gaming operations at the Resorts Casino Hotel; provided,
however, any direct or indirect wholly owned subsidiary of RIH may consolidate
with, merge into or transfer or distribute all or part of its properties and
assets to RIH or RIHF or as otherwise provided in Section 10.01 of the Junior
Mortgage Note Indenture. (Section 12.04).
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Limitation on Dividends and Restricted Payments
The Junior Mortgage Note Indenture provides that RIHF will not, directly or
indirectly, make, or permit any Subsidiary of RIHF to make, any Restricted
Payment.
The Junior Mortgage Note Indenture also provides that RIH will not,
directly or indirectly make, or permit any Subsidiary of RIH to make, any
Restricted Payment; provided, however, that: (i) if RIH's Consolidated Interest
Coverage Ratio, as certified to the Junior Mortgage Note Trustee by an Officers'
Certificate calculated at the time of the declaration of the dividend or
distribution, is equal to or exceeds two, then RIH may declare and pay cash
dividends or make cash distributions in respect of any class of capital stock of
RIH in an amount not to exceed in the aggregate with any other such cash
dividends or distributions declared or made from and after the date of the
Junior Mortgage Note Indenture, 50% of RIH's Consolidated Net Income from and
after the Effective Date; and (ii) if (1) RIH's Consolidated Interest Coverage
Ratio, as certified to the Junior Mortgage Note Trustee by an Officer's
Certificate, calculated at the time of the declaration of the dividend or
distribution is equal to or exceeds two; and (2) RIH has cash in excess of the
amount required to pay interest on the Junior Mortgage Notes and the Mortgage
Notes on the next Interest Payment Date plus $20,000,000, then RIH may declare
and pay cash dividends or make cash distributions in respect of any class of
capital stock of RIH in an amount not to exceed such excess cash amount.
The Junior Mortgage Note Indenture further provides that RIHF and RIH will
not, and will not permit any of their respective Subsidiaries to, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction of any kind on the ability of any Subsidiary of RIH or RIHF: (i) to
pay dividends or make any other distribution on the capital stock of such
Subsidiary that is owned by RIH, RIHF or a wholly owned Subsidiary of RIHF or
RIH, as applicable; (ii) to pay any Indebtedness owed by such Subsidiary to RIH,
RIHF or any wholly owned Subsidiary of RIHF or RIH, as applicable; (iii) to make
loans or advances to RIH, RIHF or any wholly owned Subsidiary of RIHF or RIH, as
applicable; or (iv) to transfer any of its property or assets to RIHF, RIH or
any wholly owned Subsidiary of RIHF or RIH, as applicable, except (A) any
restrictions existing on or prior to the date of the Junior Mortgage Note
Indenture, or in connection with agreements in effect, or entered into, on the
date of the Junior Mortgage Note Indenture, or any permitted amendments,
renewals, refundings, refinancings or extensions thereof; provided, however,
that the terms and conditions of any such amendments, renewals, refundings,
refinancings or extensions are no more restrictive with respect to the matters
set forth in clauses (i) through (iv) of this paragraph than the agreements
being amended, refunded, renewed, refinanced or extended; (B) any restrictions
or encumbrances existing or arising pursuant to the terms of Indebtedness of a
Person outstanding at the time such Person becomes a Subsidiary of RIHF or RIH
and not incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary of RIHF or RIH or any permitted amendments, renewals,
refinancings or extensions thereof; provided, however, that the terms and
conditions of any such amendments, renewals, refundings, refinancings or
extensions are no more restrictive with respect to the matters set forth in
clauses (i) through (iv) of this paragraph than the agreements being amended,
renewed, refunded, refinanced or extended; (C) encumbrances or restrictions
existing under or by reason of applicable law or regulation (including, without
limitation, the Casino Control Act) or the Junior Mortgage Note Indenture; (D)
customary provisions restricting assignment of contracts or subletting or
assignment of any lease governing a leasehold interest of any Subsidiary of RIHF
or RIH; or (E) net worth maintenance requirements imposed by any governmental
authority. (Section 12.07).
Limitation on Additional Indebtedness and Issuance of Notes
The Junior Mortgage Note Indenture provides that RIHF and RIH will not, and
will not permit any of their respective Subsidiaries to, directly or indirectly,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable with respect to, including, without limitation, through any merger or
consolidation to which RIHF, RIH or any of their respective Subsidiaries is a
party or through any other acquisition of any
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such Subsidiary (collectively, "incur"), or have outstanding, any Indebtedness
other than, without duplication, the following:
(i) Indebtedness represented by the Mortgage Notes, the RIH Promissory
Note and the Mortgage Note Guaranty;
(ii) Indebtedness represented by the Junior Mortgage Facility, the RIH
Junior Promissory Note and the Junior Mortgage Note Guaranty;
(iii) Indebtedness represented by the Working Capital Facility, the
Working Capital Facility Guaranty and the RIH Senior Facility Promissory
Note;
(iv) Indebtedness represented by Capitalized Lease Obligations in an
amount not in excess of $5,000,000 in the aggregate at any time
outstanding;
(v) Indebtedness represented by F,F&E Financing Agreements in an
amount not in excess of $10,000,000 in the aggregate at any time
outstanding;
(vi) unsecured Indebtedness in an amount not in excess of $5,000,000
in the aggregate at any time outstanding that is subordinated and junior to
the Junior Mortgage Notes at least to the extent set forth in the
Subordination Provisions attached to the Junior Mortgage Note Indenture as
Exhibit C and which Indebtedness does not have any requirements for
amortization payments, mandatory redemption or sinking fund payments prior
to the Stated Maturity of the Junior Mortgage Notes and does not provide
for the payment of interest in cash at any time when the most recent
installment of interest on the Junior Mortgage Notes was not paid in cash;
(vii) Non-Recourse Indebtedness in an amount not in excess of
$25,000,000 in the aggregate at any time outstanding;
(viii) After-Acquired Fee Mortgage Debt in an amount not in excess of
$3,000,000 in the aggregate at any time outstanding; and
(ix) Intercompany advances between RIH, RIHF or any of their direct or
indirect Subsidiaries on the one hand, and RII, on the other hand, not in
excess of $1,000,000 in the aggregate at any time outstanding.
The Junior Mortgage Note Indenture also provides that RIHF and RIH will not
permit any of their respective Subsidiaries to issue (other than to RIHF, RIH or
a direct or indirect wholly owned Subsidiary of RIHF or RIH) any capital stock
which has voting rights or has a preference as to any distribution over its
common stock. (Section 12.08).
Limitation on Repayment of Subordinated Indebtedness
The Junior Mortgage Note Indenture provides that neither RIHF nor RIH will,
and neither RIHF nor RIH will permit any Subsidiary to, directly or indirectly,
purchase, redeem, defease (including, but not limited to, in substance or legal
defeasance) or otherwise acquire or retire for value prior to the Stated
Maturity of, or prior to any scheduled mandatory redemption or sinking fund
payment with respect to (collectively, to "repay" or a "repayment"), the
principal of any Indebtedness of RIHF, RIH or any Subsidiary of RIHF or RIH
which is subordinated (whether pursuant to its terms or by operation of law) in
right of payment to the Junior Mortgage Notes. (Section 12.09).
Limitation on Certain Transactions
The Junior Mortgage Note Indenture also provides that each of RIHF and RIH
will not, and will not permit any Subsidiary to, repurchase any Junior Mortgage
Notes in the open market if an Event of Default shall have occurred and shall be
continuing under the Mortgage Note Indenture, the Junior Mortgage Note Indenture
or under the Senior Facility Indenture. (Section 12.10).
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Restriction of Activities
The Junior Mortgage Note Indenture provides that RIH will not, until the
date that is 91 days after the payment in full by RIHF of the principal of (and
interest, if any, on) all Outstanding Junior Mortgage Notes, engage in any
business or investment activities other than those necessary for, incident to,
connected with or arising out of acquiring, financing, owning and operating the
Resorts Casino Hotel or additional hotels or casinos or related or ancillary
businesses.
The Junior Mortgage Note Indenture also provides that neither RIHF nor RIH
will make any loans to any Affiliate or any other Person other than (i)
Indebtedness of the type described in clause (ix) of the covenant described in
"Limitation on Additional Indebtedness and Issuance of Notes", (ii) indebtedness
from RIH to RIHF evidenced by the RIH Senior Facility Promissory Note, the RIH
Promissory Note and the RIH Junior Promissory Note, and (iii) loans to RII from
the proceeds of the Indebtedness represented by the Working Capital Facility;
provided, however, that RIH shall have the right to make loans to employees of
RIH actively involved in the operation of the Resorts Casino Hotel or to engage
in credit transactions in the operation of the Resorts Casino Hotel, if such
loans or credit transactions are in the ordinary course of business of operating
a casino/hotel.
The Junior Mortgage Note Indenture further provides that RIHF will not
engage in any business (and will not have any Subsidiaries) other than (i) to
collect principal, interest (and any interest on overdue principal and interest)
and other amounts under any intercompany notes or guaranties made to the order
of or otherwise in favor of RIHF, (ii) to preserve its rights under the Junior
Mortgage Note Indenture and the Mortgage Documents and otherwise to comply with
its obligations thereunder and under the Junior Mortgage Notes, (iii) to do or
cause to be done all things necessary or appropriate to protect the Junior
Mortgage Trust Estate, (iv) to preserve its rights under the Mortgage Note
Indenture and the Senior Mortgage Documents and otherwise to comply with its
obligations thereunder and under the Mortgage Notes, (v) to issue Indebtedness
represented by the Working Capital Facility, (vi) to preserve its rights under
the Working Capital Facility and otherwise comply with its obligations under the
Working Capital Facility, (vii) to incur any other Indebtedness permitted under
the Junior Mortgage Note Indenture, (viii) to do all such acts and deeds
necessary in connection with the Junior Mortgage Facility and the documents and
instruments relating thereto and the Working Capital Facility and the documents
and instruments relating thereto, (ix) to declare, issue and pay dividends on,
or make any redemptions or repurchases of, RIHF's capital stock as contemplated
by its Certificate of Incorporation (to the extent permitted by the Junior
Mortgage Note Indenture) and otherwise to comply with and perform the provisions
of its Certificate of Incorporation and By-laws, and (x) to do such further acts
and deeds to effectuate any of the matters listed in the foregoing clauses of
this paragraph. (Section 12.11).
Limitation on Subsidiaries; Consolidated Group
The Junior Mortgage Note Indenture provides that RIHF and RIH will not have
any Subsidiaries except the Subsidiaries existing on the date of the Junior
Mortgage Note Indenture and Subsidiaries acquired by RIHF or RIH in transactions
not prohibited by the other provisions of the Junior Mortgage Note Indenture
which are and shall at all times be wholly owned (directly or indirectly) by
RIHF or RIH. (Section 12.12).
Limitations on Liens
The Junior Mortgage Note Indenture provides that neither RIHF nor RIH will
create, incur, suffer to exist or permit to be created or incurred any mortgage,
lien, charge or encumbrance on or pledge of the Mortgage Documents or any of the
Junior Mortgage Trust Estate, other than (a) Permitted Encumbrances on the
Junior Mortgage Note Trust Estate, (b) liens on the Junior Mortgage Note Trust
Estate in connection with Indebtedness permitted by clauses (i), (ii), (iii),
(iv) or (v) of the first paragraph of the covenant described in "Limitation on
Additional Indebtedness and Issuance of Notes", and (c) a building contract or
notice of intention filed by a mechanic, materialman or laborer under the New
Jersey lien law. Without limiting the generality of the previous sentence, but
notwithstanding the provisions of such sentence, RIH shall not be deemed to have
breached such provisions by virtue of the existence of liens for Impositions (as
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defined in the RIH Junior Mortgage) or mechanics' liens so long as RIH is in
good faith contesting the validity of such liens in accordance with the
provisions of Section 5.09 of the RIH Junior Mortgage. (Section 12.13).
Compliance with Laws
The Junior Mortgage Note Indenture provides that each of RIHF and RIH will
comply, and will cause each of its Subsidiaries to comply, with the Casino
Control Act and all other applicable statutes (including, without limitation,
ERISA), rules, regulations, orders and restrictions of the United States of
America, states and municipalities, and of any governmental department,
commission, board, regulatory authority, bureau, agency and instrumentality of
the foregoing in respect of the conduct of its business and the ownership of its
properties and assets, including, without limitation, the Junior Mortgage Note
Trust Estate, except such as are being contested in good faith by appropriate
proceedings in accordance with the Mortgage Documents (to the extent applicable)
and except for such noncompliances as will not in the aggregate have a material
adverse effect on the business, properties, operations or financial condition of
RIHF, RIH or their respective Subsidiaries. (Section 12.14).
Payment of Taxes and Other Claims
The Junior Mortgage Note Indenture provides that RIHF or RIH will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon RIHF, RIH or any of their respective Subsidiaries or upon the
Junior Mortgage Note Trust Estate or any portion thereof or upon the income,
profits or property of RIHF, RIH or any of their respective Subsidiaries, and
(b) all lawful claims for labor, materials and supplies which, if unpaid, will
by law become a Lien upon the Junior Mortgage Note Trust Estate or upon any
other property of RIHF, RIH or any of their respective Subsidiaries; provided,
however, that RIHF and RIH shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessments, charge or claim the amount,
applicability or validity of which is being contested in good faith by
appropriate proceedings in accordance with the Mortgage Documents (to the extent
applicable) if adequate reserves therefor have been established in accordance
with GAAP. (Section 12.15).
Maintenance of Properties
The Junior Mortgage Note Indenture further provides that each of RIHF and
RIH will cause the Junior Mortgage Trust Estate and all other properties (other
than obsolete equipment) owned by or leased to it or any of its Subsidiaries,
and used or useful in the conduct of its business or the business of RIHF, RIH
or such Subsidiary to be maintained and kept in good condition, repair and
working order, except for reasonable wear and use, and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as required by the Mortgage Documents or, to the extent not governed by the
Mortgage Documents, as in the reasonable judgment of the Board of Directors of
RII may be necessary so that the business carried on in connection therewith may
be properly and advantageously conducted at all times. (Section 12.16).
Insurance
The Junior Mortgage Note Indenture provides that each of RIHF and RIH will
maintain, and will cause each of its Subsidiaries to maintain, with financially
sound and reputable insurers, appropriate insurance on each of their respective
properties and businesses against liabilities, casualties, risks and
contingencies of the type and in amounts required by the Mortgage Documents or,
to the extent not governed by the Mortgage Documents, as customarily maintained
by corporations and other entities engaged in the same or similar businesses and
similarly situated; provided, however, that any such insurer shall be qualified
to do business in the jurisdiction where the insured property is located.
(Section 12.17).
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Waiver of Stay, Extension or Usury Laws
The Junior Mortgage Note Indenture provides that each of RIHF and RIH (to
the extent that it may lawfully do so) will not, and will not cause or permit
any of its Subsidiaries to, at any time insist upon, or plead, or in any manner
whatsoever claim, and will resist any and all efforts to be compelled to take
the benefit or advantage of, any stay or extension law or any usury law or other
law that would prohibit or forgive RIHF or RIH from paying all or any portion of
the principal of, or premium, if any, and interest on the Junior Mortgage Notes
or the RIH Junior Promissory Note or the Junior Mortgage Note Guaranty, wherever
and whenever enacted, or which may affect the covenants or the performance of
the Junior Mortgage Note Indenture or the RIH Junior Promissory Note or the
Junior Mortgage Note Guaranty; and (to the extent that it may lawfully do so)
RIHF and RIH will expressly waive all benefit or advantage of any such law, and
covenant that they will not hinder, delay or impede the execution of any power
granted to the Junior Mortgage Note Trustee in the Junior Mortgage Note
Indenture and in the Mortgage Documents, but will suffer and permit the
execution of every such power as though no such law had been enacted. (Section
12.18).
Transactions with Shareholders and Affiliates
The Junior Mortgage Note Indenture also provides that each of RIHF and RIH
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into or permit to exist any transaction (including without
limitation the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of RIHF or RIH, unless (a) such
transaction is upon fair and reasonable terms which are no less favorable to
RIHF or such Subsidiary, as the case may be, than would be available in an
arm's-length transaction with an unrelated person and (b) if over $250,000, such
transaction is determined in the good faith judgment of a majority of the
members of the Board of Directors of either (i) RII, so long as RII owns
directly or indirectly a majority of the outstanding capital stock of RIH,
directly or indirectly, or (ii) RIH, to be in the best interests of RIHF, RIH or
such Subsidiary as applicable; provided, however, that this provision shall not
apply to (A) any agreements, documents, instruments or transactions entered into
in connection with the RIHF Senior Facility Notes, (B) the Services Agreement,
(C) the RII Management Contract, or (D) the RII Tax Sharing Agreement. (Section
12.21).
EVENTS OF DEFAULT
The following events constitute "Events of Default" under the Junior
Mortgage Note Indenture:
(a) default in the payment of any interest upon any Junior Mortgage
Note when such interest becomes due and payable and continuance of such
default (the deposit with the Junior Mortgage Note Trustee of funds
sufficient to make such interest payment in full being deemed to cure any
such default) for a period of ten days;
(b) default in the payment of all or any portion of the principal of
any Junior Mortgage Note at its Maturity;
(c) default in the performance or breach of any covenant of RIHF or
RIH in the Junior Mortgage Note Indenture (other than a covenant a default
in the performance or breach of which specifically dealt with in this
paragraph or one of the other clauses set forth herein), the Assignment
Agreement or any of the Mortgage Documents and continuance of such default
or breach for a period of 30 days (or such shorter or longer cure period,
if any, as may be specified in respect of such default or breach in the
Assignment Agreement or the applicable Mortgage Document, as the case may
be), and (other than with respect to the covenants described in
"Covenants -- Limitation on Dividends and Restricted Payments",
"Covenants -- Limitation on Additional Indebtedness and Issuance of Notes",
"Covenants -- Limitation on Repayment of Subordinated Indebtedness",
"Covenants -- Limitation on Certain Transactions",
"Covenants -- Restriction of Activities", "Covenants -- Limitations on
Subsidiaries, Consolidated Group", "Covenants -- Limitation on Liens" and
"Covenants -- Transactions with Stockholders and Affiliates") after there
has been given (i) to RIHF by the Junior Mortgage Note Trustee, or (ii) to
RIHF and the Junior Mortgage Note Trustee by the Holders of at least 25% in
Outstanding Amount of the Outstanding Junior Mortgage Notes, a written
notice specifying such default or breach and requiring
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it to be remedied and stating that such notice is a "Notice of Default";
provided, however, that, if such default or breach is of a covenant set
forth in certain specified provisions of the Junior Mortgage Note
Indenture, and if such default or breach is of such a nature that is
curable but is not susceptible of being cured with due diligence within
such 30-day period (or such shorter or longer cure period) (for reasons
other than lack of funds), then, under certain circumstances, such period
shall be extended for such further period of time (up to a maximum of 60
days) as may reasonably be required to cure such default or breach;
(d) a proceeding or case shall be commenced, without the application
or consent of RIHF or RIH, in any court of competent jurisdiction, seeking
(i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of RIHF or RIH or of
all or any substantial part of its assets, or (iii) similar relief in
respect of RIHF or RIH under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 consecutive days;
(e) the commencement by RIHF or RIH of a voluntary case under the
federal bankruptcy laws or any other applicable federal or state law, or
the consent or acquiescence by any of them to the filing of any such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or other similar
official) of RIHF or RIH or any substantial part of any of their property,
or the making by any of them of an assignment for the benefit of creditors,
or the taking of action by RIHF or RIH in furtherance of any such action;
(f) the revocation, suspension or involuntary loss of any Permit which
results in the cessation of a substantial portion of the operations of the
Resorts Casino Hotel for a period of more than 90 consecutive days;
(g) (i) a default by RIHF, RIH or any of their Subsidiaries under any
Indebtedness (other than the Indebtedness represented by the Working
Capital Facility and the Junior Mortgage Facility in an aggregate principal
amount in excess of $5,000,000), which default results in the acceleration
of the maturity of any such Indebtedness under the evidence of
indebtedness, indenture or other instrument governing such Indebtedness;
provided, however, that, if such default under such evidence of
indebtedness, indenture or other instrument shall be cured by the obligor,
or be waived by the holders of such Indebtedness, in each case as may be
permitted by such evidence of indebtedness, indenture or other instrument
and in each case resulting in rescission of such acceleration thereunder,
then the Event of Default under the Junior Mortgage Note Indenture by
reason of such default shall be deemed likewise to have been thereupon
cured or waived; or (ii) a default by RIHF, RIH or any of their
Subsidiaries under any Indebtedness represented by the Working Capital
Facility or the Junior Mortgage Facility, the effect of which default
(after the expiration of any applicable notice or grace periods) is to
permit the holder or holders of any such Indebtedness represented by the
Working Capital Facility or the Junior Mortgage Facility in an aggregate
principal amount in excess of $5,000,000 (or a trustee or agent on behalf
of such holder or holders) to cause the acceleration of the maturity of
such Indebtedness represented by the Working Capital Facility or the Junior
Mortgage Facility under the evidence of indebtedness, indenture or other
instrument governing such Indebtedness; provided, however, that if such
default under such evidence of indebtedness, indenture or other instrument
shall be cured by the obligor, or be waived by the holders of such evidence
of indebtedness, indenture or other instrument (and, if such default
resulted in the acceleration of the maturity of such Indebtedness, such
acceleration shall have been rescinded thereunder), then the Event of
Default under the Junior Mortgage Note Indenture by reason of such default
shall be deemed likewise to have been thereupon cured or waived; or (iii)
the existence of a final judgment of a court of competent jurisdiction in
an amount in excess of $3,000,000 against RIHF, RIH or the Junior Mortgage
Note Trust Estate, which judgment has not been satisfied or otherwise
provided for, for a period of 30 days (during which execution shall not be
effectively stayed) following the date on which such judgment becomes a
lien against the Junior Mortgage Note Trust Estate or any part thereof
(unless the lawsuit in question was commenced without effective service of
process upon either RIHF or
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RIH in which case such 30-day period shall not commence until RIHF or RIH
receives notice of such final judgment); or (iv) the existence of a final
judgment of a court of competent jurisdiction in an amount in excess of
$15,000,000 against RIHF, RIH or the Junior Mortgage Note Trust Estate,
which judgment has not been satisfied or otherwise provided for, for a
period of 60 days (during which execution shall not be effectively stayed)
following the date of such final judgment; or (v) the existence of a final
judgment of a court of competent jurisdiction, regardless of amount,
against RIHF, RIH or the Junior Mortgage Note Trust Estate, which judgment
has not been satisfied or otherwise provided for, for a period of 60 days
(during which execution shall not be effectively stayed) following the date
of such final judgment, if such judgment, by itself or upon recordation or
other action of the judgment creditor, imposes or would impose a lien on
the Junior Mortgage Note Trust Estate or any part thereof senior to the
lien of the RIH Junior Mortgage;
(h) default in the performance, or breach, of any covenant of RIHF or
RIH in connection with the provisions described in "Limitation on
Consolidation, Merger, Conveyance, Transfer or Lease of Property and
Assets";
(i) the existence of a judgment of a court of competent jurisdiction
in an amount in excess of $3,000,000 against RIH regarding the CRDA
Dispute, which judgment has not been stayed, satisfied or otherwise
provided for, for a period of 30 days (during which execution shall not be
effectively stayed) (unless the lawsuit in question was commenced without
effective service of process upon RIH in which case such 30-day period
shall not commence until RIH receives notice of such final judgement); or
(j) if RII fails to pay or discharge or cause to be paid or
discharged, within 30 days before the same shall become delinquent, all
taxes levied or imposed upon RII; provided, however, that no Event of
Default or Default will be deemed to exist under the Junior Mortgage Note
Indenture with respect to any tax liability not paid or discharged by RII
if and to the extent that the amount, applicability or validity of such tax
liability is being contested in good faith by appropriate proceedings if
adequate reserves therefor have been established in accordance with GAAP;
provided, further, however, that this paragraph shall not apply to amounts
due with respect to any period during which neither RIHF, RIH nor any of
their Subsidiaries is included in RII's consolidated group for Federal
income tax purposes. (Section 7.01);
If an Event of Default (other than one referred to in clause (d) or (e)
above) occurs and is continuing, then and in every such case the Junior Mortgage
Note Trustee or the Holders of not less than 25% in Outstanding Amount and all
accrued interest of the Junior Mortgage Notes Outstanding may declare the
Outstanding Amount of all the Junior Mortgage Notes to be due and payable
immediately, by a notice in writing to RIHF (and to the Junior Mortgage Note
Trustee, if given by any Noteholders), and upon any such declaration such
Outstanding Amount shall become immediately due and payable. If an Event of
Default referred to in clause (d) or (e) above occurs, then the Outstanding
Amount of all the Junior Mortgage Notes shall automatically become immediately
due and payable without presentment, demand, protest or other formalities of any
kind, all of which will be expressly waived by RIHF. (Section 7.02).
At any time after such a declaration of acceleration has been made, but
before any judgment or decree for payment of money due on any Junior Mortgage
Notes has been obtained by the Junior Mortgage Note Trustee, the Holders of a
majority in Outstanding Amount of the Junior Mortgage Notes may, by written
notice to RIHF and the Junior Mortgage Note Trustee, rescind and annul such
declaration and its consequences if: (a) RIHF has deposited with the Junior
Mortgage Note Trustee a sum sufficient to pay (1) all overdue installments of
interest on all Junior Mortgage Notes, (2) the principal of any Junior Mortgage
Notes which have become due otherwise than by such declaration of acceleration
and interest thereon at the rate or rates prescribed therefor in the Junior
Mortgage Notes, and (3) all sums paid or advanced by the Junior Mortgage Note
Trustee and the reasonable compensation, expenses, disbursements and advances of
the Junior Mortgage Note Trustee, its agents and counsel; and (b) all Events of
Default, other than the non-payment of the Outstanding Amount of the Junior
Mortgage Notes which have become due solely by such declaration of acceleration,
have been cured or have been waived as provided in the Junior Mortgage Note
Indenture. No such rescission and annulment shall affect any subsequent default
or impair any right consequent thereon. (Section 7.02).
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LIMITATION ON CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE OF PROPERTY
AND ASSETS
Neither RIHF nor RIH shall consolidate, combine or merge with or into any
other Person or permit any other Person to consolidate, combine or merge with or
into RIHF or RIH, as the case may be; and neither RIHF with respect to its
assets nor RIH with respect to the Junior Mortgage Note Trust Estate shall sell,
assign, convey or transfer its interest in such assets or the Junior Mortgage
Note Trust Estate, as the case may be, substantially as an entirety (and
notwithstanding anything to the contrary contained in the Junior Mortgage Note
Indenture (including the proviso at the end of this sentence), but subject to
the provisions of the RIH Junior Mortgage regarding dispositions of the Junior
Mortgage Note Trust Estate, neither RIHF with respect to its assets nor RIH with
respect to the Junior Mortgage Note Trust Estate may sell, assign, convey or
transfer such assets or the Junior Mortgage Trust Estate, as the case may be,
other than substantially as an entirety) to any other Person or group of Persons
in one transaction or a series of related transactions, or permit any other
Person or group of Persons to convey or transfer all or substantially all of its
assets, subject to liabilities other than de minimis liabilities, to RIHF or
RIH; and RIHF and RIH shall not transfer, convey, sell or otherwise dispose of
to any other Person, or issue to any Person, any equity interest in RIHF or RIH,
as the case may be (each such transaction referred to as a "Combination
Transaction"); provided, however, that (i) RIHF may engage in a Combination
Transaction in which the only other party or parties is RIH or a direct or
indirect wholly owned Subsidiary of RIHF or RIH, and (ii) RIHF or RIH may engage
in any other Combination Transaction (either independently or at the same time
as other Combination Transactions), subject to the following with respect to
each such Combination Transaction: (a) immediately following such Combination
Transaction, (1) RIH (or any successor entity) shall be eligible for and shall
meet all relevant Legal Requirements, including holding all permits, required
for the normal operation of the business of owning and operating the Resorts
Casino Hotel, and (2) RIH (or any successor entity) shall be controlled by a
Person that is, or shall retain to manage the Resorts Casino Hotel one or more
Persons that are, experienced in the operation and management of casino hotels;
(b) in the event RIHF or RIH shall consolidate, combine or merge with or into
another Person or sell, assign, convey or transfer its interest in its assets or
in the Junior Mortgage Note Trust Estate, as the case may be, substantially as
an entirety (but not less than substantially as an entirety) to another Person
in one transaction or a series of related transactions, the entity which is
formed by or survives such consolidation, combination or merger or the Person to
which such assets or the Junior Mortgage Note Trust Estate are conveyed or
transferred, (1) shall be organized and existing under the laws of the United
States of America, any state thereof, or the District of Columbia; (2) shall
expressly assume, by an indenture supplemental to the Junior Mortgage Note
Indenture, executed and delivered to the Junior Mortgage Note Trustee, the
performance and observance of every covenant, obligation and condition of the
Junior Mortgage Note Indenture to be performed or observed by RIHF or RIH,
whichever the case may be; (3) shall expressly assume, by an instrument executed
and delivered to the Junior Mortgage Note Trustee, the performance of every
covenant, obligation and condition of the Mortgage Documents and the Assignment
Agreement to be performed by RIHF or RIH, whichever the case may be; (4)
immediately after giving effect to such transaction could incur at least $1.00
of additional Indebtedness under the covenant described in
"Covenants -- Limitation on Additional Indebtedness and Issuance of Notes"; (c)
immediately after giving effect to such transaction, no Event of Default, or
Default under the Junior Mortgage Note Indenture or under the RIH Junior
Mortgage, shall have occurred and be continuing; (d) such Combination
Transaction shall be on such terms as shall not impair the lien and security and
priority of the Junior Mortgage Note Indenture or of the Mortgage Documents or
of the Assignment Agreement and the rights and powers of the Junior Mortgage
Note Trustee and the Holders of the Junior Mortgage Notes thereunder; and (e)
RIHF or RIH, as the case may be, shall have delivered to the Junior Mortgage
Note Trustee an Officers' Certificate and an Opinion of Counsel, each of which
shall state that such Combination Transaction and such supplemental indenture
comply with the provisions of Article Ten of the Junior Mortgage Note Indenture
and that all conditions precedent provided for in the Junior Mortgage Note
Indenture relating to such transaction have been complied with. (Section 10.01).
Except as otherwise expressly permitted by the RIH Junior Mortgage and the
Junior Mortgage Note Indenture, neither RIHF nor RIH shall sell, assign, lease,
hypothecate, pledge, mortgage or otherwise transfer all or any part of the
assets of RIHF or the Junior Mortgage Note Trust Estate or any interest therein
(including without limitation any interest in the Ground Leases). Without
limiting the generality of the
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foregoing, RIH shall not separate, or attempt to separate, its ownership of its
interest in the Ground Leases from the ownership of the buildings constituting
the Resorts Casino Hotel or any part thereof. (Section 10.04).
The foregoing limitations on consolidation, merger, conveyance, transfer or
lease of property and assets shall not apply in connection with an RIH Sale.
(Section 10.05).
DISCHARGE OF JUNIOR MORTGAGE NOTE INDENTURE
RIHF may terminate substantially all obligations under the Junior Mortgage
Note Indenture at any time by delivering all outstanding Junior Mortgage Notes
to the Junior Mortgage Note Trustee for cancellation and paying any other sums
payable under the Junior Mortgage Note Indenture. (Article Five).
MODIFICATION OF INDENTURE
From time to time, the parties to the Junior Mortgage Note Indenture,
without the consent of the Holders of the Junior Mortgage Notes, may enter into
one or more supplemental indentures for certain specified purposes, including
curing ambiguities, defects or inconsistencies, provided such action does not
adversely affect the interests of any Holder. (Section 11.01). Modifications,
changes and amendments to the Junior Mortgage Note Indenture also may be made by
the parties thereto with the consent of the Holders of not less than 66 2/3% in
Outstanding Amount of the Junior Mortgage Notes then Outstanding, except that
without the consent of the Holder of each Junior Mortgage Note affected, no such
modification or alteration may (i) change the Stated Maturity of the principal
of, or any installment of interest on, any Junior Mortgage Note, or reduce the
principal amount thereof or the premium payable upon the redemption thereof, or
change any Place of Payment where, or the coin or currency in which, any Junior
Mortgage Note, or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), (ii) reduce the percentage in Outstanding Amount of the Junior Mortgage
Notes, the consent of whose Holders is required for any amendment, supplement or
waiver, (iii) modify or alter the provisions of the proviso of the definition of
the term "Outstanding", (iv) modify any of the provisions described in this
paragraph or, with certain exceptions, the provisions of the Junior Mortgage
Indenture regarding waiver of default, or (v) permit the creation of any lien
ranking prior to the lien of the RIH Junior Mortgage (except for such liens
expressly permitted pursuant to the covenant described under
"Covenants -- Limitations on Liens"). In addition, the Holders of 66 2/3% in
aggregate principal amount of the Mortgage Notes must consent to any amendment
of the Junior Mortgage Note Indenture allowing for the redemption of the Junior
Mortgage Notes prior to the fifth anniversary of the Effective Date unless such
redemption is in connection with an RIH Sale. (Section 11.02).
TRUSTEE
The Junior Mortgage Note Trustee may require reasonable indemnity before
exercising any of its rights or powers under the Junior Mortgage Note Indenture.
(Section 8.03).
REPORTS TO HOLDERS
RIH will furnish or cause to be furnished to the Junior Mortgage Note
Trustee, within 105 days after each fiscal year of RIH: (i) a copy of annual
audited financial statements of RIH prepared in conformity with GAAP,
accompanied by a report of Ernst & Young or of another firm of independent
certified public accountants of recognized national standing selected by RIH
(the "National Accountants"), together with a certificate from such National
Accountants stating that their audit examination has included a review of the
terms of the Junior Mortgage Note Indenture and that the National Accountants
have not become aware of any Event of Default or that a Default has occurred and
is continuing, and if they have become aware of any such Event of Default or
Default, describing it; provided, however, that the National Accountants will
not be liable to any Person for any failure to discover any Event of Default in
connection with such review; and (ii) a copy of annual unaudited financial
statements of RIH, including notes to such financial statements and
corresponding management's discussion and analysis, in form and substance
comparable to that which would
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be required to be filed with the Commission in an Annual Report on Form 10-K
under the Exchange Act, prepared in the same manner as the audited financial
statements referred to in clause (i) above, signed by a proper accounting
officer of RIH. Contemporaneously with the furnishing of such audited financial
statements to the Junior Mortgage Note Trustee under clause (i) of this
paragraph, RIH will mail copies of such audited financial statements to the
Holders (which need not include the certificate referred to in clause (i)
above).
RIH also will furnish or cause to be furnished to the Junior Mortgage Note
Trustee, within 60 days after each quarter of each fiscal year of RIH, except
the final quarter of such fiscal year, a copy of unaudited financial statements
of RIH prepared on a consistent basis with the audited financial statements
referred to in clause (i) of the paragraph above, signed by a proper accounting
officer of RIH and consisting of at least a balance sheet as at the close of
such quarter and statements of operations and cash flow for such quarter and for
the period from the beginning of such fiscal year to the close of such quarter,
including notes to such financial statements and corresponding management's
discussion and analysis, in form and substance comparable to that which would be
required to be filed with the Commission in a Quarterly Report on Form 10-Q
under the Exchange Act. Contemporaneously with the furnishing of such unaudited
financial statements to the Mortgage Note Trustee, RIH shall mail copies of such
unaudited financial statements to the Holders (which need not be signed by a
proper accounting officer of RIH).
RIH will furnish or cause to be furnished to the Junior Mortgage Note
Trustee, contemporaneously with the furnishing of a copy of the annual financial
statements and of the quarterly financial statements referred to above, an
Officers' Certificate dated the date of such annual financial statement or such
quarterly financial statements to the effect that no Default or Event of Default
has occurred and is continuing, or, if there is any such Default or Event of
Default, describing it and the steps, if any, being taken to cure it.
RIH will furnish or cause to be furnished to the Junior Mortgage Note
Trustee, copies of each filing and report made by RIH or RIHF with the
Commission pursuant to the reporting and filing requirements of Section 13 or
15(d) or the Exchange Act, within 15 days after RIH or RIHF, as applicable, is
required to file the same.
Pursuant to the Junior Mortgage Note Indenture, if RIH becomes exempt from
the Commission reporting and filing requirements of Section 13 or 15(d) of the
Exchange Act, RIH will prepare such periodic reports as it would otherwise have
been required to file with the Commission and (i) at its own expense, cause all
such periodic reports to be filed with the Commission, the Junior Mortgage Note
Trustee and any exchange upon which the Junior Mortgage Notes then are listed,
in each case on the date when such periodic report would have been required to
be filed with the Commission under Section 13 or 15(d) of the Exchange Act, if
either or such provisions were applicable, and (ii) keep copies of such periodic
reports available at its office and promptly provide any Person who so requests
with a copy of any such periodic report, at RIHF's expense.
Each of RIHF and RIH shall comply with the provisions of sec. 314(a) of the
TIA.
RIHF will deliver to the Trustee, promptly upon becoming aware of any
Default or Event of Default (but in no event later than five business days
thereafter) in the performance of any covenant or agreement of RIHF contained in
the Junior Mortgage Note Indenture or any of the Mortgage Documents, an
Officers' Certificate specifying with particularity such event. (Section 12.06).
CERTAIN DEFINITIONS
"Additional Junior Mortgage Notes" means additional Junior Mortgage Notes
issued in payment of interest accrued on outstanding Junior Mortgage Notes
pursuant to Section 3.11 of the Junior Mortgage Note Indenture.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, and, with respect to any specified natural
Person, any other Person having a relationship by blood, marriage or adoption
not more remote than first cousin with such specified Person. For purposes of
this definition, "control" when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and
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"controlled" have meanings correlative to the foregoing; provided, however,
that, except as may be required under the TIA, the term "Affiliate" shall not
include, with respect to RIHF or RIH, any of Fidelity Management & Research
Company, TCW Special Credits or funds or accounts managed or advised by either
of them.
"After-Acquired Fee Mortgage Debt" means any Indebtedness secured by an
After-Acquired Fee Mortgage.
"After-Acquired Fee Mortgage" has the meaning stated in Section 2.07 of the
RIH Junior Mortgage.
"Assignment Agreement" means the Assignment of Agreements providing for the
assignment of the RIH Junior Promissory Note, the RIH Junior Mortgage and
certain of the other Mortgage Documents securing the RIH Junior Promissory Note
to the Junior Mortgage Note Trustee by RIHF, and acknowledgment thereof by RIH,
a copy of which is attached to the Junior Mortgage Note Indenture as Exhibit B.
"Capitalized Lease Obligation" means, with respect to any Person, any lease
of any property (whether real, personal or mixed) by such Person as lessee
which, in conformity with GAAP consistently applied, is accounted for as a
capitalized lease on the balance sheet of such Person.
"Consolidated Cash Flow" means, with respect to any Person for any period,
an amount equal to the sum of (i) the Consolidated Net Income of such Person for
such period determined in accordance with GAAP consistently applied, excluding
interest income, interest expense and gains or losses from extraordinary or
nonrecurring items, plus (ii) all amounts deducted in computing such
Consolidated Net Income in respect of depreciation and amortization, plus (iii)
non-cash charges arising from the reduction of CRDA Deposits to market value,
minus (iv) CRDA Deposits made during such period.
"Consolidated Interest Charges" means, with respect to any Person for any
period, the consolidated interest expense (not including the non-cash
amortization of discount on the original issuance of (a) the RIH Promissory
Note, (b) any intercompany indebtedness of RIH issued in connection with
Indebtedness represented by the Junior Mortgage Facility and (c) any
intercompany indebtedness of RIH issued in connection with Indebtedness
represented by the Working Capital Facility), whether payable in cash or in-kind
(and with respect to RIH, including, without limitation, the interest paid or
accrued (without duplication) on (i) the RIH Promissory Note, (ii) any
intercompany indebtedness of RIH issued in connection with Indebtedness
represented by the Junior Mortgage Facility and (iii) any intercompany
indebtedness of RIH issued in connection with Indebtedness represented by the
Working Capital Facility), without deduction for interest income (other than
cash interest income received from RII in payment of its interest cost on any
Working Capital Facility), in each case for such Person and its consolidated
Subsidiaries for such period determined in accordance with GAAP consistently
applied.
"Consolidated Interest Coverage Ratio" shall mean, at any date of
calculation thereof, the ratio of (a) Consolidated Cash Flow of RIH and its
consolidated Subsidiaries for the immediately preceding four consecutive fiscal
quarters to (b) Consolidated Interest Charges of RIH and its consolidated
Subsidiaries for such period.
"Consolidated Net Income" means, with respect to any Person for any period,
an amount equal to consolidated net income (or loss) of such Person for such
period determined in accordance with GAAP consistently applied, plus (a)
non-cash charges arising from Federal and state taxes based upon or measured by
income, minus (b) non-cash Federal and state tax benefits based upon or measured
by income.
"CRDA Deposits" means (a) the quarterly deposits made by RIH to the Casino
Reinvestment Development Authority in an amount equal to 1.25% of RIH's gross
revenue in order to satisfy its investment obligation pursuant to the Casino
Control Act, and (b) the amounts invested in qualified investments in lieu of
any of the quarterly deposits (or portion thereof) referred to in clause (a)
above.
"CRDA Dispute" means the dispute existing on the date hereof between RIH
and the New Jersey Casino Reinvestment Development Authority regarding CRDA
Deposits and New Jersey Casino Reinvestment Authority Notes, which dispute
involves an amount of approximately $30,000,000.
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"Default" means the occurrence and continuance of an Event of Default or an
event which, after notice or lapse of time or both, would become an Event of
Default.
"F, F&E Financing Agreement" means a purchase money lien upon any Tangible
Personal Property (as defined in the RIH Junior Mortgage) and other items
constituting Operating Assets (as defined in the RIH Junior Mortgage), such as
computer software, which are financed, purchased or leased by RIH, provided
that, with certain exceptions, the principal amount of the indebtedness secured
by such lien shall not exceed 85% of the cost to RIH of such property at the
time of acquisition.
"Guaranty" means the RIH Junior Mortgage Note Guaranty as set forth in
Article Four of the Junior Mortgage Note Indenture.
"Holder" means a Person in whose name a Junior Mortgage Note is registered.
"Indebtedness" means, as applied to any Person, without duplication, any
indebtedness, exclusive of deferred taxes: (a) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof); (b) evidenced by bonds, notes, debentures
or similar instruments or letters of credit; (c) representing the balance
deferred and unpaid of the purchase price of any property, if and to the extent
such indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP (but excluding trade accounts payable
arising in the ordinary course of business that are not overdue by more than 90
days or are being contested by such Person in good faith); (d) any Capitalized
Lease Obligations (other than, with respect to RIH or RIHF, the Ground Leases)
of such Person; and (e) Indebtedness of others guaranteed by such Person,
including without limitation every obligation of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Indebtedness, (ii) to purchase property,
securities or services for the purpose of assuring the Holder of such
Indebtedness of the payment of such Indebtedness, or (iii) to maintain working
capital, equity capital or other financial statement condition or liquidity of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness; provided, however, that the guaranty by any Person shall not
include endorsements by such Person for collection or deposit, in either case in
the ordinary course of business. The term "Indebtedness" does not include: (1)
any of the types of indebtedness described in clauses (a) through (e) above
(inclusive) owed by RIHF to RIH or any of their Subsidiaries, by RIH to RIHF or
any of their Subsidiaries or by any such Subsidiary to RIH, RIHF or any other
such Subsidiary (including without limitation the RIH Promissory Note and the
RIH Junior Promissory Note); (2) the Mortgage Note Guaranty, the Junior Mortgage
Note Guaranty, and any Working Capital Facility Guaranty; (3) matters relating
to the CRDA Dispute, New Jersey Casino Reinvestment Development Authority Notes
or the CRDA Deposits; and (4) any payments required to be made by RIHF or RIH
under the RII Management Agreement, the RII Tax Sharing Agreement or the
Services Agreement.
"Junior Mortgage Facility" means the Junior Mortgage Notes and any secured
or unsecured facility or facilities entered into by RIH or RIHF providing for
the making of loans to RIH or RIHF on a revolving or term basis, or the issuance
of notes, debentures or bonds by RIH or RIHF, as such agreement, indenture or
instrument may be amended, supplemented or modified from time to time, or any
refinancing thereof, in an aggregate principal amount outstanding at any time up
to $35,000,000 plus additional notes, debentures or bonds issued in payment of
interest accrued on outstanding notes, debentures or bonds; provided, however,
that the lender or lenders thereunder (or any trustee or agent acting on behalf
of such lender or lenders) shall have executed an intercreditor agreement
covering the matters set forth on Exhibit G to the Junior Mortgage Note
Indenture. The liens, if any, securing the Junior Mortgage Facility shall be
pari passu with the lien of the RIH Junior Mortgage and the RIH Junior Guaranty
Mortgage. The term "Junior Mortgage Facility" does not include the Junior
Mortgage Note Guaranty.
"Mortgage Documents" means (a) the RIH Junior Mortgage, the RIH Junior
Guaranty Mortgage, the RIH Junior Promissory Note, an Assignment of Leases and
Rents and an Assignment of Operating Assets each dated as of the date of the
Junior Mortgage Note Indenture and any other security document to which either
RIH or RIHF is a party relating to the Junior Mortgage Notes, which is executed
and delivered pursuant to or in connection with the RIH Junior Mortgage, the RIH
Junior Guaranty Mortgage or the
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Assignment Agreement, and (b) any mortgage, deed of trust, guaranty, promissory
note, collateral assignment agreement, assignment of leases and rents,
assignment of operating assets and any other security document to which either
RIH or RIHF is a party relating to the Junior Mortgage Facility.
"Non-Recourse Indebtedness" means indebtedness incurred in connection with
the acquisition, purchase, improvement or development of property or assets
(other than the Junior Mortgage Note Trust Estate) used by RIHF, RIH or any
Subsidiary of RIH or RIHF to engage in the casino business, the hotel business
or related or ancillary business or purpose and which is secured only by such
assets and without recourse to RIH, RIHF or any Subsidiary of RIH or RIHF or the
Junior Mortgage Note Trust Estate for such indebtedness.
"Outstanding" when used with respect to Junior Mortgage Notes means, as of
the date of determination, all Junior Mortgage Notes theretofore authenticated
and delivered under this Indenture, except:
(a) Junior Mortgage Notes theretofore canceled by the Junior Mortgage
Note Trustee or delivered to the Junior Mortgage Note Trustee for
cancellation;
(b) Junior Mortgage Notes for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Junior Mortgage
Note Trustee or any Paying Agent in trust for the Holders of such Junior
Mortgage Notes;
(c) Junior Mortgage Notes in exchange for or in lieu of which other
Junior Mortgage Notes have been authenticated and delivered under the
Junior Mortgage Note Indenture; and
(d) Junior Mortgage Notes alleged to have been destroyed, lost or
stolen which have been paid as provided in Section 3.06 of the Junior
Mortgage Note Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of Junior Mortgage Notes Outstanding have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Junior
Mortgage Notes owned by RIHF or any other obligor upon the Junior Mortgage Notes
or any Affiliate of RIHF or of such other obligor shall be disregarded and
deemed not to be Outstanding. In determining whether the Junior Mortgage Note
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Junior Mortgage Notes
which the Junior Mortgage Note Trustee actually knows to be so owned shall be so
disregarded.
"Outstanding Amount" of any Indebtedness at any time means the principal
amount outstanding of such Indebtedness at such time.
"Restricted Payment" means (a) any declaration or payment of any dividend
or the making of any distribution to Holders of capital stock of RIH or RIHF or
any Subsidiary of RIH or RIHF in respect of such capital stock (other than to
RIH or RIHF or a direct or indirect wholly owned Subsidiary of RIH or RIHF), (b)
any purchase, redemption or other acquisition or retirement for value of any
capital stock (or warrants, rights or options to acquire any capital stock or
Indebtedness convertible into or exchangeable for any capital stock) of RIH or
RIHF or any Subsidiary of RIH or RIHF (other than purchases, redemptions,
acquisitions or retirement solely from RIH or RIHF or a direct or indirect
wholly owned Subsidiary of RIH or RIHF); provided, however, that any such
purchase, redemption or other acquisition or retirement that is required by the
Casino Control Commission or under the Casino Control Act shall not constitute a
Restricted Payment. The term "Restricted Payment" also shall not include any
loan or advance to RII of all or any portion of the proceeds of the Indebtedness
represented by the Working Capital Facility.
"RIH Sale" means (a) a consolidation, combination or merger involving RIH
and any other Person, (b) a sale, assignment, conveyance or transfer or RIH's
interest in the Junior Mortgage Note Trust Estate, substantially as an entirety,
to any other Person or group of Persons in one transaction or a series of
related transactions, or (c) any transaction as a result of which RIH ceases to
be a direct or indirect wholly owned Subsidiary of RII; provided, however, that
any of the transactions described in clauses (a), (b) and (c) above shall not
constitute an RIH Sale if the other party or parties to the transaction consists
of only one or more of the following Persons: RIHF or any wholly owned direct or
indirect subsidiary of RIH or RIHF; and provided, further, however, that
notwithstanding any other provision of this definition, if the primary effect of
any of the
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aforesaid transactions is the redemption of the Junior Mortgage Notes, then such
transaction shall not be considered to be a RIH Sale.
"RII Management Contract" means the Interim Management Agreement.
"RII Tax Sharing Agreement" means the Tax Sharing Agreement between RII and
RIH pursuant to which (i) RIH will not make any payments to RII or any other
Affiliate in respect of taxes, other than to reimburse RII for any cash payments
actually made by RII in respect of any Federal, state or local income or
alternative minimum taxes arising from the earnings or operations of RIH;
provided, however, that RIH shall not be required to reimburse RII for cash
payments in respect of Federal, state or local income or alternative minimum
taxes that would not have been owed but for the reduction, if any, of the amount
of the consolidated net operating loss carryforwards or consolidated current
losses of the affiliated group of which RII is a common parent which resulted
from the inclusion in the consolidated return filed for such group for any
taxable year ending after the Effective Date of the income of any entity other
than RIH, other than income directly attributable to the consummation of the
Plan, including but not limited to the transfer of the stock of RIB and the
assets of the U.S. Paradise Island Subsidiaries, and (ii) RIH will be entitled
to any refund (plus the interest thereon) of any taxes for which RIH is required
to reimburse RII.
"Senior Mortgage Documents" means the RIH Mortgage, the RIH Guaranty
Mortgage, the RIH Promissory Note, the Senior Assignment of Leases and Rents and
any other security document to which either RIH or RIHF is a party relating to
the Mortgage Notes, which is executed and delivered pursuant to or in connection
with the RIH Mortgage, the RIH Guaranty Mortgage or the Senior Assignment
Agreement.
"Subsidiary" of any Person means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or indirectly, by such
Person or one or more Subsidiaries of such Person.
"Working Capital Facility" means the RIHF Senior Facility (and the RIHF
Senior Facility Notes issued thereunder) and any other secured or unsecured
facility or facilities entered into by RIH and/or RIHF providing for the making
of working capital loans to RIH or RIHF (with RIH, RII and/or GRI as a guarantor
thereunder) on a revolving or term basis, or the issuance of notes, debentures
or bonds by RIH, RIHF or RII, as such agreement may be amended, supplemented or
modified from time to time, or any refinancing thereof, in an aggregate
principal amount up to $20,000,000; provided, however, that the lender or
lenders thereunder (or any trustee or agent acting on behalf of such lender or
lenders) shall have executed an intercreditor agreement covering the matters set
forth on Exhibit G to the Junior Mortgage Note Indenture. The liens, if any,
securing the Working Capital Facility may be senior to the lien of the RIH
Junior Mortgage, the RIH Junior Guaranty Mortgage, the RIH Senior Mortgage and
the RIH Senior Guaranty Mortgage. The term "Working Capital Facility" does not
include the Working Capital Facility Guaranty.
DESCRIPTION OF COMMON STOCK AND CLASS B COMMON STOCK
GENERAL
RII is a Delaware corporation that has two classes of authorized and
outstanding common stock; the Common Stock and the Class B Common Stock. The
Class B Common Stock may only be issued as part of the Units and is essentially
a non-participating stock that entitles its holders to elect two directors (the
"Class B Directors") to the RII Board of Directors. THE CLASS B COMMON STOCK MAY
NOT BE TRANSFERRED SEPARATELY FROM THE RELATED JUNIOR MORTGAGE NOTES. All the
outstanding shares of Common Stock and Class B Common Stock are validly issued,
fully paid and non-assessable.
CASINO CONTROL ACT REGULATION
The Common Stock and the Class B Common Stock are subject to the
qualification, divestiture and redemption provisions under the Casino Control
Act that are described in "Description of Business -- Regulation and Gaming
Taxes and Fees".
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DESCRIPTION OF COMMON STOCK
Number of Shares Authorized. Up to 100,000,000 shares of Common Stock are
authorized.
Dividends. Holders of Common Stock are entitled to share ratably in such
dividends as may be declared by RII's Board of Directors and paid by RII out of
funds legally available therefor.
Redemption. The Common Stock is subject to redemption if a holder is
required to qualify under the Casino Control Act and refuses or fails to so
qualify and subsequently fails to divest itself of such Common Stock.
Liquidation Rights. In the event of a dissolution, liquidation or winding
up of RII, the holders of Common Stock are entitled to share ratably with the
holders of Class B Common Stock in all assets remaining after payment of
liabilities and liquidation preferences, if any, to the extent of the $.01 par
value per share of each such class, with the balance of such proceeds payable
pro rata to the holders of the Common Stock.
Election of Directors. Holders of the Common Stock are entitled to elect
two-thirds of the RII Board of Directors (or one less than half of the RII Board
of Directors if on more than six occasions, which need not be consecutive, RIHF
either (i) makes Payments-In-Kind in respect of the Junior Mortgage Notes or
(ii) fails to make interest payments in respect of the Junior Mortgage
Notes -- a "Class B Triggering Event"). The directors are to be divided into
three classes of directors serving staggered three-year terms. Upon redemption
or cancellation of all the outstanding Class B Common Stock, holders of the
Common Stock are entitled to elect the RII Board of Directors. The classified
board provision could have the effect of making the removal of incumbent
directors more difficult, and therefore of discouraging a third party from
attempting to obtain control of RII, even though such attempt might be
beneficial to RII and its stockholders.
Voting Rights. The holders of Common Stock are entitled to one vote per
share on all matters on which stockholders are entitled to vote, other than the
election of directors by the holders of the Class B Common Stock.
Preemptive Rights. None.
DESCRIPTION OF CLASS B COMMON STOCK
Number of Shares Authorized. Up to 120,000 shares of Class B Common Stock
are authorized. Authorized and unissued shares of Class B Common Stock will be
issued only as part of Units that are issuable if Payments-In-Kind are made with
respect to the Junior Mortgage Notes.
Dividends. The holders of Class B Common Stock are not entitled to
participate in any dividends which may be declared by RII's Board of Directors.
Redemption. Upon the redemption, or cancellation following the purchase
thereof, of each $1,000 principal amount of Junior Mortgage Notes, RII will
redeem, at a price of $.01 per share, the share of Class B Common Stock issued
as a Unit with each $1,000 principal amount of Junior Mortgage Notes. The Class
B Common Stock also is subject to redemption if a holder is required to qualify
under the Casino Control Act and refuses or fails to so qualify and subsequently
fails to divest itself of such Class B Common Stock.
Liquidation Rights. In the event of a dissolution, liquidation or winding
up of RII, the holders of Class B Common Stock are entitled to share ratably
with the holders of the Common Stock in all assets remaining after payment of
liabilities and liquidation preferences, if any, to the extent of the $.01 par
value per share of each such class.
Restrictions of Transfer. Each share of Class B Common Stock will be
issued as part of a Unit with each $1,000 principal amount of Junior Mortgage
Notes and may not be transferred separately from such Junior Mortgage Note.
Election of Directors. Holders of the Class B Common Stock are entitled to
elect one-third of the entire RII Board of Directors (or following the Class B
Triggering Event in connection with the Junior Mortgage Notes, a majority of the
entire RII Board of Directors).
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Voting Rights. The holders of Class B Common Stock are not entitled to any
voting rights, except (i) in the election of directors by the holders of the
Class B Common Stock as described above, (ii) to the extent required under the
Delaware General Corporation Law, and (iii) with respect to certain amendments
to the Amended and Restated Certificate of Incorporation or the Amended and
Restated By-laws of RII that would affect the Class B Common Stock.
Preemptive Rights. None.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes all of the material Federal income tax
consequences of acquiring, holding and disposing of the Mortgage Notes, Units
consisting of Junior Mortgage Notes and Class B Common Stock (collectively, the
"Debt Securities") and the Common Stock and, to the extent that it relates to
matters of law and subject to the qualifications, assumptions and limitations
stated herein, constitutes the opinion of Gibson, Dunn & Crutcher, special tax
counsel to the Company ("Counsel"). The following discussion does not include
all matters that may be relevant to any particular holder in light of such
holder's particular facts and circumstances. Certain holders, including
financial institutions, broker-dealers, tax-exempt entities, insurance
companies, foreign persons and stockholders who acquired their stock through the
exercise of an employee stock option or otherwise as compensation, may be
subject to special rules not discussed below. The discussion assumes that
holders hold their Debt Securities or Common Stock as "capital assets"
(generally property held for investments) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Tax Code").
The discussion and opinions set forth in this section "Certain Federal
Income Tax Considerations" are based upon the provisions of the Tax Code, final,
temporary and proposed U.S. Treasury regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as in effect as of the
date hereof and all of which are subject to change (possibly on a retroactive
basis) by legislation, administrative action or judicial decision. No rulings
from the Internal Revenue Service (the "Service") have been or will be requested
with respect to any of the tax issues discussed herein.
EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISER CONCERNING THE
SPECIFIC TAX CONSEQUENCES TO SUCH INVESTORS OF ACQUIRING, HOLDING AND DISPOSING
OF THE DEBT SECURITIES AND THE COMMON STOCK, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL, FOREIGN OR OTHER TAX LAWS.
TREATMENT OF THE DEBT SECURITIES AS DEBT OF RIH FOR FEDERAL INCOME TAX PURPOSES
Whether the formal, or nominal, obligor of any given instrument will be
treated as the obligor of the instrument for Federal income tax purposes depends
upon all of the facts and circumstances, and no single characteristic or factor
is determinative. Where the nominal obligor exists solely to be the nominal
issuer of the instrument and the instrument is "mirrored" by an instrument with
virtually identical terms issued by a related party, the Service will closely
scrutinize the reality of the nominal obligor's "obligation." In addition, there
is substantial authority in the law for the position that, where a person issues
a debt obligation to a third party pursuant to a disclosed nominee arrangement
with a related person, the debt can be deemed to be indebtedness of the related
person for Federal income tax purposes, provided that certain formalities are
observed. The substantial authority standard is an objective standard involving
an analysis of the law and the application of the law to the relevant facts, and
is less stringent than the more likely than not standard. There is substantial
authority for the tax treatment of an item only if the weight of the authority
supporting the treatment is substantial in relation to the weight of authority
supporting contrary treatment, taking all relevant authorities into account.
There may be substantial authority for more than one position.
With respect to the Debt Securities, a conclusion that RIHF rather than RIH
is the true obligor for Federal income tax purposes would disregard totally the
economic substance of the transaction and would elevate "empty forms" over
substance, something the courts generally have not done. Counsel does note,
however, that generally a validly formed and maintained corporate entity will
not be ignored for Federal
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income tax purposes, and the courts have held taxpayers to strict standards when
such taxpayers have sought to disregard the form of the transaction chosen by
them. Accordingly, although the issue is not free from doubt, based upon the
foregoing factors, the issuance of the RIH Mortgage and the RIH Junior Mortgage
to support the Debt Securities, the identical terms (when combined with the RIH
Mortgages) of the RIH Promissory Note and the RIHF Mortgage Notes, and of the
RIH Junior Promissory Note and the RIHF Junior Mortgage Notes, the existence of
the Nominee Agreement between RIHF and RIH and the fact that at all times the
assets of RIH will be the ultimate and only source of payment on the Debt
Securities, the Company intends to take the position for Federal income tax
purposes that the Debt Securities are to be treated as obligations of RIH for
Federal income tax purposes, and the following discussion assumes such
treatment.
If, however, the Service were to treat RIHF, the formal obligor of the Debt
Securities, as the obligor for Federal income tax purposes, such treatment
should not materially adversely affect the treatment of the Mortgage Notes or
the Junior Mortgage Notes as debt for Federal income tax purposes, as discussed
below (see "-- Classification of Debt Securities as Debt Rather than Equity").
CLASSIFICATION OF DEBT SECURITIES AS DEBT RATHER THAN EQUITY
Whether an instrument constitutes debt or equity for Federal income tax
purposes is an inherently factual question, and no single characteristic is
determinative. Based upon an analysis of the applicable legal authorities, it is
more likely than not that the Mortgage Notes will be treated as debt, and there
is substantial authority that the Junior Mortgage Notes will be treated as debt
obligations for Federal income tax purposes, and the following discussion
assumes such treatment in both such cases.
Due to the factual nature of the determination as to the treatment of
instruments such as the Debt Securities, however, there can be no assurance that
in either of such cases the Service would not challenge such treatment of the
Debt Securities as indebtedness, or that a court would not sustain such a
challenge. If it were determined that any of the Debt Securities constitute
equity for Federal income tax purposes, then (a) payments of interest on such
Debt Securities would not be deductible by the Company and could be taxed as
dividend income to the holders; (b) payments of principal on such Debt
Securities would be treated as redemption distributions under Section 302 of the
Tax Code, which could result in either gain or dividend income to the holders;
and (c) certain corporate holders may be entitled to a dividends-received
deduction with respect to payments of principal or interest that are taxed as
dividends. The loss of the interest deduction with respect to all or a portion
of the Debt Securities also would increase the Company's taxable income,
resulting in a greater utilization of the Company's net operating loss ("NOL")
carryovers and, ultimately, potentially substantially increasing the Company's
Federal income tax liability sooner than currently anticipated.
OID WITH RESPECT TO THE NEW DEBT SECURITIES
On February 2, 1994, the Service issued regulations (the "Regulations")
relating to the determination and treatment of OID with respect to debt
instruments. The regulations are effective for debt obligations issued on or
after April 3, 1994.
In general, subject to a de minimis rule, a debt obligation will be treated
as being issued with OID if there exists a difference between the "stated
redemption price at maturity" of the instrument and such instrument's "issue
price."
The stated redemption price at maturity of a debt obligation is the
aggregate of all payments due to the holder under such debt obligation at or
prior to its maturity date, other than interest that is actually and
unconditionally payable in cash or property at a single fixed (or a qualified
floating) rate (or a permitted combination of the two) at least annually
(qualified stated interest payments or "QSIPs"). Interest is payable at a single
fixed rate only if the rate appropriately takes into account the length of the
interval between payments. QSIPs are included in income at the time they are
accrued or received, in accordance with the holder's usual method of accounting
for Federal income tax purposes.
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Pursuant to Section 1273(a)(3) of the Tax Code and the Regulations
promulgated thereunder, if the OID with respect to an obligation is de minimis,
i.e., less than .25% of the obligation's stated redemption price at maturity
multiplied by the number of complete years from the issue date to the maturity
date, the amount of OID with respect to such obligation is considered to be
zero.
Under the Regulations, the determination of the issue price of a debt
obligation will depend, in part, on whether such obligation, or the property for
which the debt obligation is exchanged, is treated as "traded on an established
market" at any time during the 60-day period ending 30 days after the issue date
(the "Trading Testing Period"). If the debt obligation is listed on an
established exchange, or such debt obligation is otherwise traded on an
established market, the issue price of the debt obligation will be the fair
market value of such obligation as of the issue date (i.e., the trading price).
If the debt obligation is not treated as "traded on an established market" the
issue price will equal the fair market value, as of the issue date, of the
portion of the property deemed to be exchanged therefor, assuming such property
is listed or deemed to be so traded.
In the case of the Mortgage Notes, interest will be payable in cash on a
semi-annual basis, commencing on September 15, 1994. Such semi-annual interest
payments on the Mortgage Notes should qualify as QSIPs. Therefore, assuming that
the Mortgage Notes are, as expected, listed on the AMEX, whether the Mortgage
Notes will be treated as being issued with OID will depend upon whether the
trading price of such notes on the date the Mortgage Notes originally are issued
and traded is less than, equal to, or in excess of, the stated redemption price
at maturity of such notes. Moreover, the Mortgage Notes will be treated as
issued with OID only if the issue price is less than their face amount by more
than the statutory de minimis amount. Thus, assuming that the maturity date of
the Mortgage Notes is at least nine (but less than ten) years from their issue
date, the Mortgage Notes will be treated as issued without OID if their issue
price exceeds 97.75% of their stated redemption price at maturity.
However, in the case of the Junior Mortgage Notes, interest is payable on a
semi-annual basis commencing on December 15, 1994 in cash, or, under certain
circumstances, in kind. Because interest on such notes may, under certain
circumstances, be paid through the issuance of additional Payment-In-Kind notes
and the rate of interest of such Payment-In-Kind notes will be the same as the
rate of interest on the Junior Mortgage Notes, none of the interest payments on
the Junior Mortgage Notes will qualify as QSIPs, and such notes, therefore, will
be treated as issued with OID without regard to the initial trading price of
such notes.
Although the issue is not free from doubt, the Company also intends to take
the position that the provisions of Section 1273(c)(2) of the Tax Code (relating
to debt instruments issued as part of an "investment unit") do not apply in
determining the issue price of the Debt Securities. If, however, the provisions
of Section 1273(c)(2) of the Tax Code were held to apply to any of the Debt
Securities, and the Debt Securities were found to have been issued as part of an
investment unit, under the Regulations the issue price of an investment unit is
to be allocated between (or among) the unit's components based on their relative
fair market values. The issuer's allocation of the issue price of the investment
unit is binding on all holders of the investment unit except for the holder who
explicitly discloses (on such holder's Federal income tax return for the year in
which the investment unit is acquired) that such holder's allocation of the
issue price of the investment unit is different from the issuer's allocation.
(Because the Company intends to take the position that none of the Debt
Securities should be treated as having been issued as part of a investment unit
for purposes of Section 1273(c)(2) of the Tax Code and calculate and report OID
with respect to the Debt Securities accordingly, a holder wishing to take a
different position should consult such holder's own tax advisor.)
CONSEQUENCES IF THE DEBT SECURITIES ARE ISSUED WITH OID
If a Debt Security is issued with OID, a holder, subject to the adjustments
discussed below, must include in gross income for Federal income tax purposes
the sum of the daily portions of OID for each day during the taxable year or
portion thereof during which the holder holds the Debt Security, whether or not
the holder actually receives a payment relating to OID in such years. The daily
portion is determined by allocating to each day of the relevant "accrual period"
a pro rata portion of an amount equal to (a) the product of (i) the "adjusted
issue price" of the Debt Securities at the beginning of each accrual period,
multiplied by (ii) the
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yield to maturity of the Debt Security (determined by semi-annual compounding)
less (b) the sum of any QSIPs during the accrual period. The adjusted issue
price of a Debt Security at the beginning of any accrual period is its issue
price increased by all accrued OID for prior accrual periods and decreased by
the amount of any payment previously made on the Debt Security other than a
QSIP. The accrual period for a Debt Security (except for any initial short
period) is each six-month period which ends on the date in each calendar year
corresponding to the maturity date of the Debt Securities or the date six months
before such maturity date.
Therefore, prospective holders of the Debt Securities should be aware that
a holder will be required to include OID in income as such OID accrues,
regardless of the holders' method of accounting and regardless of when such
holder receives cash payments relating to the OID. A holder's tax basis in a
Debt Security will be increased by the amount of OID included in the holder's
income and reduced by the amount of all interest payments on the Debt Security
that are not QSIPs.
Under the Regulations, the issuance of Payment-In-Kind notes in lieu of a
cash payment does not constitute payment. (As discussed in the preceding
paragraphs, a cash payment (other than a payment that is QSIP) is not treated as
interest but rather reduces the adjusted issue price of the instrument).
Accordingly, the Company intends to treat, for Federal income tax purposes, the
issuance of any Payment-In-Kind notes in lieu of a cash payment of interest as
not constituting a payment of interest with respect to the Junior Mortgage
Notes. Moreover, since each holder of a Junior Mortgage Note will recognize, as
ordinary income, through the accrual of OID, the full amount of interest with
respect to the Junior Mortgage Notes (as well as with respect to any
Payment-In-Kind notes issued in payment of interest with respect to such Notes),
such holder generally should not also recognize additional ordinary income upon
receipt of a Payment-In-Kind note or a cash payment of stated interest.
Further, the Regulations treat a Junior Mortgage Note and any additional
debt instrument issued with respect thereto (such as a Payment-In-Kind note) as
part of the same debt issue. Accordingly, the adjusted basis and adjusted issue
price of a Junior Mortgage Note would be allocated between such Junior Mortgage
Note and any Payment-In-Kind notes received with respect thereto, based on their
respective principal amounts. The Regulations treat payments made with respect
to Payment-In-Kind notes as payments made on the Junior Mortgage Note.
A subsequent purchaser of a Debt Security issued with OID who purchases the
note at a cost less than the remaining stated redemption price at maturity but
greater than its adjusted issue price immediately before such purchase (a
purchase of an "acquisition premium") also will be required to include in gross
income the sum of the daily portions of OID on that Debt Security. In computing
the daily portions of OID for such a purchaser, however, the daily portion is
reduced by the amount that would be the daily portion for such day (computed in
accordance with the rules set forth above) multiplied by a fraction, the
numerator of which is the amount, if any, by which the holder's basis in the
Debt Security on the date of purchase exceeds the adjusted issue price of the
Debt Security at that time, and the denominator of which is the sum of the daily
portions for that Debt Security for all days beginning on the date after the
purchase date and ending on the maturity date.
A purchaser of a Debt Security who purchases the Debt Security at a cost
greater than its remaining stated redemption price at maturity will be
considered to have purchased the Debt Security at a premium, and may elect to
amortize such premium under a constant yield method. Such an election would
apply to all taxable bonds held at or acquired after the beginning of the
holder's taxable year as to which the election is made, and may be revoked only
with the consent of the Service. The Tax Code provides that amortizable premium
will be treated (except as provided in U.S. Treasury regulations) as an offset
to interest income for all purposes rather than as a separate interest deduction
item.
The Company will be required to furnish annually to the Service and to each
holder information regarding the amount of OID attributable to that year.
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SALE, EXCHANGE OR REDEMPTION
Upon the sale, exchange or redemption of a Debt Security or a share of
Common Stock for cash, a holder generally will recognize gain or loss in an
amount equal to the difference between the amount of cash received and the
holder's adjusted basis in such property (except to the extent that (i) the
amount realized is attributable to accrued interest, OID or taxable dividends
not previously included in income, which amount will be taxed as ordinary income
or (ii) in the case of a redemption of Common Stock, the holder disposes of less
than all of such holder's stock, in which case the redemption proceeds may be
treated as a dividend, which, if so treated, will be taxed as ordinary income).
Assuming that the holder holds the property as a capital asset, such gain or
loss will be capital gain or loss except (in the case of a Debt Security) to the
extent of any accrued market discount (see "Market Discount" below), and will be
long-term capital gain or loss if the property has been held for more than one
year at the time of the sale, exchange or redemption.
Under the Regulations, an unscheduled payment made on a debt instrument
such as a Debt Security prior to maturity that results in a substantial pro rata
reduction of each payment of principal and interest remaining on the instrument
is treated as a payment in retirement of a portion of the instrument, which may
result in gain or loss to the holder. The gain or loss is calculated by treating
the debt obligation as consisting of two instruments, one that is retired and
one that remains outstanding, and by allocating the adjusted issue price, the
holder's adjusted basis and the accrued but unpaid qualified stated interest
between the two instruments based upon the portion of the obligation that is
treated as retired by the pro rata prepayment.
MARKET DISCOUNT
A holder of a Debt Security generally will be required to treat any gain
recognized on the sale, exchange, redemption or other disposition of the Debt
Security as ordinary income to the extent of any accrued market discount. The
market discount rules also provide that a holder who acquires a Debt Security at
a market discount may be required to defer a portion of any interest expense
that may otherwise be deductible on any indebtedness incurred or maintained to
purchase or carry such Debt Security until the holder disposes of the Debt
Security in a taxable transaction.
"Market discount" can be defined generally as the excess of the stated
redemption price at maturity of a Debt Security (adjusted to exclude any
unaccrued OID) over the holder's tax basis in the Debt Security immediately
after its acquisition. In addition, under a de minimis exception, the amount of
market discount is considered to be zero if it is less than the product of .25%
of the stated redemption price of the Debt Security at maturity (possibly
adjusted to exclude unaccrued OID) multiplied by the number of complete years
from acquisition to maturity. Market discount generally will accrue ratably
during the period from the date of acquisition to the maturity date of the Debt
Security, unless the holder elects to accrue such discount on the basis of the
constant yield method.
A holder of a Debt Security acquired at a market discount may elect to
include the market discount in income as interest as it accrues, in which case
the foregoing rules would not apply. This election would apply to all Debt
Securities with market discount acquired by the electing holder on or after the
first day of the first taxable year to which the election applies. The election
may be revoked only with the consent of the Service.
POTENTIAL APPLICATION OF HIGH YIELD DEBT OBLIGATION RULES
As noted above, the Junior Mortgage Notes will be, and the Mortgage Notes
may be issued with original issue discount for Federal income tax purposes.
Under the "AHYDO" rules contained in Sections 163(e) and (i) of the Tax Code, if
a debt obligation with a term of more than five years has "significant" OID, and
has a yield to maturity of five percentage points or more in excess of a
specified rate (generally the U.S. Treasury note rate for instruments of similar
maturities), interest deductions with respect to OID accruing on such instrument
may be deferred until such OID is paid in cash, or, if the yield to maturity
exceeds six percentage points above the specified rate, the deduction for such
excess may be denied completely and the OID may be treated as dividend income
for purposes of the dividend received deduction, rather than interest income, to
the holder (provided the issuer has adequate earnings and profits to support
such a dividend). The Junior Mortgage Notes will be issued with significant OID.
Accordingly, depending on the applicable federal rate in
102
<PAGE> 105
effect on the date the Debt Securities are issued, it is possible that the AHYDO
rules will apply to accruals of OID on the Junior Mortgage Notes.
BACKUP WITHHOLDING
Under the Tax Code, a holder of a Debt Security may be subject, under
certain circumstances, to "backup withholding" at a rate of 31% with respect to
payments in respect of interest and OID thereon or the gross proceeds from the
disposition thereof. This withholding generally applies only if the holder (i)
fails to furnish his or her social security or other taxpayer identification
number ("TIN"), (ii) furnishes an incorrect TIN, (iii) is notified by the
Service that he or she has failed to report properly payments of interest and
dividends and the Service has notified the Company that he or she is subject to
backup withholding, or (iv) fails, under certain circumstances, to provide a
certified statement, signed under penalty of perjury, that the TIN provided in
its correct number and that it is not subject to backup withholding. Any amount
withheld from a payment to a holder under the backup withholding rules does not
constitute additional tax, and is allowable as a credit against such holder's
Federal income tax liability, provided that the required information is
furnished to the Service. Holders of Debt Securities should consult their tax
advisers as to their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption.
LITIGATION
NEW YORK SUPREME COURT -- FRIEDMAN DERIVATIVE ACTION
RII has been named as the nominal defendant in an action (Arthur M.
Friedman suing derivatively on behalf of RII v. Merv Griffin et al. and RII,
Nominal Defendant) brought derivatively on its behalf by a shareholder, Arthur
Friedman. The complaint was filed in the Supreme Court of the State of New York,
New York County on January 27, 1994 and was amended in February 1994. The
defendants in the action, as amended, are Merv Griffin, Griffin Group, Thomas E.
Gallagher, David P. Hanlon, who was President, Chief Executive Officer and a
director of RII through October 31, 1993, and four former directors of RII. The
complaint seeks to recover for the Company an unspecified sum of money as
compensatory damages for allegedly wrongful acts by the defendants. The
allegations include that the defendants improperly (i) permitted defendant
Griffin not to repay money he allegedly owed to the Company and (ii) paid
defendant Hanlon excessive compensation.
U.S. DISTRICT COURT ACTION -- RII V. LOWENSCHUSS
In October 1989 RII filed an action in the U.S. District Courts for the
Eastern District of Pennsylvania to recover certain sums paid to the defendant,
as trustee for two Individual Retirement Accounts, for RII stock in the 1988
merger, in which RII was acquired by Merv Griffin. This action was transferred
to the Bankruptcy Court for the District of New Jersey (the "New Jersey District
Court"). After the transfer, the New Jersey District Court granted RII's motion
to amend its complaint to allege two new claims for fraudulent conveyance
against the defendant.
In the New Jersey District Court, RII filed a motion for summary judgment
and the defendant filed a motion to dismiss. That Court issued an opinion in
February 1992 denying both parties' motions. In August 1992, the defendant filed
a petition in the Bankruptcy Court for the District of Nevada (the "Nevada
District Court"), thus staying RII's action in New Jersey. The Nevada District
Court confirmed Lowenschuss' plan of reorganization in October 1993. RII is
currently appealing the confirmation order and other orders of the Nevada
District Court.
SELLING SECURITYHOLDERS
This Prospectus covers resales of Mortgage Notes, Units and Common Stock
received in the Restructuring by the Selling Securityholders named below who may
be deemed to be underwriters of such securities within the meaning of the
Securities Act. The table below provides certain information as of the date of
this
103
<PAGE> 106
Prospectus with respect to those holders of Mortgage Notes, Units and Common
Stock presently known by the Company to be Selling Securityholders for whose
accounts Mortgage Notes, Units or Common Stock may be sold pursuant to this
Prospectus. The information presented in the table is based on information
furnished to the Company by the Selling Securityholders and other sources that
the Company has not verified. Because the Selling Securityholders may sell all
or some part of the Mortgage Notes, Units or Common Stock that they hold
pursuant to this Prospectus, no estimate can be given as to the amount of
Mortgage Notes, Units or Common Stock that will be held by the Selling
Securityholders at any time subsequent to the date of this Prospectus. See "Plan
of Distribution." The Selling Securityholders listed below are funds and
accounts advised or managed by either Fidelity (or an affiliate thereof) or TCW.
For information relating to the prior ownership of Series Notes by such funds
and accounts, the participation of Fidelity and TCW in the negotiations relating
to the Restructuring of the Series Notes pursuant to the Plan, including certain
reimbursements in connection therewith, and the extension of the Senior Facility
to RIHF by the funds and accounts managed by Fidelity, see "Restructuring of
Series Notes." Other than relationships arising in connection with such matters,
none of the Selling Securityholders has had a material relationship within the
past three years with the Company.
SECURITIES OFFERED
<TABLE>
<CAPTION>
UNITS
MORTGAGE NOTES ------------------------------------------ COMMON STOCK
-------------------------- CLASS B PRINCIPAL ------------------------
PRINCIPAL PERCENT OF COMMON STOCK AMOUNT OF PERCENT OF PERCENT OF
NAME AMOUNT OUTSTANDING* SHARES JUNIOR NOTES OUTSTANDING* SHARES OUTSTANDING*
- ------------------------ ----------- ------------ ------------ ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fidelity Funds and
Accounts
Fidelity Charles Street
Trust: Fidelity Asset
Manager............... $ 480,000 0.39% 134 $ 134,000 0.39% 65,621 0.17%
Fidelity Summer Street
Trust: Fidelity
Capital & Income
Fund.................. 29,028,000 23.34 8,127 8,127,000 23.34 3,964,360 10.50
Fidelity Advisor Series
II: Fidelity Advisor
High Yield Fund....... 440,000 0.35 123 123,000 0.35 60,098 0.16
Fidelity Puritan Trust:
Fidelity Puritan
Fund.................. 2,444,000 1.96 684 684,000 1.96 333,839 0.88
Fidelity Fixed-Income
Trust: Spartan High
Income Fund........... 2,317,000 1.86 648 648,000 1.86 316,453 0.84
Variable Insurance
Products Funds: High
Income
Portfolio............. 955,000 0.77 267 267,000 0.77 130,483 0.35
Variable Insurance
Products Funds II:
Asset Manager
Portfolio............. 160,000 0.13 44 44,000 0.13 21,851 0.06
Fidelity Magellan
Fund.................. 2,043,000 1.64 572 572,000 1.64 279,028 0.74
Fidelity Management
Trust Company on
behalf of various
private investment
accounts managed by
it.................... 11,030,000 8.87 3,088 3,088,000 8.87 1,506,424 3.99
</TABLE>
104
<PAGE> 107
<TABLE>
<CAPTION>
UNITS
MORTGAGE NOTES ------------------------------------------ COMMON STOCK
-------------------------- CLASS B PRINCIPAL ------------------------
PRINCIPAL PERCENT OF COMMON STOCK AMOUNT OF PERCENT OF PERCENT OF
NAME AMOUNT OUTSTANDING* SHARES JUNIOR NOTES OUTSTANDING* SHARES OUTSTANDING*
- ------------------------ ----------- ------------ ------------ ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
TCW Funds and Accounts
TCW Special Credits
Fund II................ 4,382,000 3.52 1,227 1,227,000 3.52 598,574 1.59
TCW Special Credits
Fund IIb.............. 3,997,000 3.21 1,119 1,119,000 3.21 545,929 1.45
TCW Special Credits
Fund III.............. 7,004,000 5.63 1,961 1,961,000 5.63 956,658 2.53
TCW Special Credits as
investment manager on
behalf of the Common
Fund for Bond
Investments........... 709,000 0.57 198 198,000 0.57 96,947 0.26
TCW Special Credits as
investment manager on
behalf of the Inland
Steel Industries, Inc.
Pension Fund.......... 949,000 0.76 265 265,000 0.76 129,710 0.34
TCW Special Credits as
investment manager on
behalf of the
Weyerhaeuser Company
Master Retirement
Trust................. 1,758,000 1.41 492 492,000 1.41 240,149 0.64
----------- ------ ------------ ------------ ------ ---------- ------
Total.......... $67,696,000 54.41% 18,949 $ 18,949,000 54.41% 9,246,124 24.50%
----------- ------ ------------ ------------ ------ ---------- ------
----------- ------ ------------ ------------ ------ ---------- ------
</TABLE>
- ---------------
* Certain securities which are reserved for issuance upon settlement of certain
claims against the Company, which were outstanding when the Company entered
bankruptcy proceedings in 1989, are not considered outstanding for purposes of
calculating the percentage of outstanding of each class.
PLAN OF DISTRIBUTION
GENERAL
The Company will not receive any of the proceeds from the sale by the
Selling Securityholders of the Mortgage Notes, Units or Common Stock offered
hereby. Such securities, which are listed on the AMEX, may be sold by the
Selling Securityholders in ordinary brokerage transactions on the AMEX or
otherwise at prices prevailing at the time of sale or at such other prices as
may be negotiated among the parties. Any or all of the Mortgage Notes, Units or
Common Stock may be sold from time to time to purchasers directly by any of the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer their Mortgage Notes, Units or Common Stock through dealers
or agents who may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholders and/or the purchasers of the
Mortgage Notes, Units or Common Stock for whom they act as agents. The Selling
Securityholders and any such dealers or agents that participate in the
distribution of the Mortgage Notes, Units or Common Stock may be deemed to be
underwriters within the meaning of the Securities Act, and any profit on the
sale of the Mortgage Notes, Units or Common Stock by them and any discounts,
commissions or concessions received by them may be deemed to be underwriting
discounts and commissions under the Securities Act. The Mortgage Notes, Units
and Common Stock may be sold from time to time in one or more transactions at a
fixed offering price, which may be changed, or at varying prices determined at
the time of sale or at negotiated prices. Such prices will be determined by the
Selling Securityholders or by an agreement between the Selling Securityholders
and dealers. Brokers or dealers acting in connection with the sale of the
Mortgage Notes, Units or Common Stock contemplated by this Prospectus may
receive fees or commissions in connection therewith.
105
<PAGE> 108
At the time a particular offer of Mortgage Notes, Units or Common Stock is
made, to the extent required, a supplement to this Prospectus will be prepared
which will identify and set forth the terms of the offering, including the name
or names of any dealers or agents, the purchase price paid for Mortgage Notes,
Units or Common Stock, as the case may be, purchased from the Selling
Securityholders, any discounts, commissions and other items constituting
compensation from the Selling Securityholders, and any discounts, commissions or
concessions allowed or reallowed or paid to dealers, including the proposed
selling price to the public. Such supplement to this Prospectus and, if
necessary, a post-effective amendment to the Registration Statement of which
this Prospectus is a part, will be filed with the Commission to reflect the
disclosure of additional information with respect to the distribution of the
Mortgage Notes, Units and Common Stock.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Mortgage Notes, Units or Common Stock may not
simultaneously engage in market making activities with respect to the Mortgage
Notes, Units or Common Stock, as the case may be, for a period of nine business
days prior to the commencement of such distribution. In addition and without
limiting the foregoing, the Selling Securityholders and any person participating
in the distribution of the Mortgage Notes, Units or Common Stock will be subject
to applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-6 and 10b-7, which provisions
may limit the timing of purchases and sales of the Mortgage Notes, Units or
Common Stock by the Selling Securityholders or any other person.
In order to comply with certain states' securities laws, if applicable, the
Mortgage Notes, Units or Common Stock will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In certain states the
Mortgage Notes, Units and Common Stock may not be sold unless they have been
registered or qualified for sale in such state, or unless an exemption from
registration or qualification is available.
REGISTRATION RIGHTS AGREEMENT
Pursuant to a Registration Rights Agreement, dated as of April 29, 1994,
among RIHF, RII and RIH, and Fidelity and TCW (the "Registration Rights
Agreement"), the Company agreed to file the Registration Statement, of which
this Prospectus is a part, with the Commission and use its best efforts to have
it declared effective. Under the terms of the Registration Rights Agreement,
substantially all of the expenses of the offering will be paid by the Company.
Furthermore, the Company has agreed to keep the Registration Statement
continuously effective, subject to certain blackout periods, for a period of up
to two years following the Effective Date. In addition, the Company and the
Selling Securityholders are obligated to indemnify each other against certain
liabilities, including liabilities arising under the Securities Act.
LEGAL MATTERS
The validity of the Mortgage Notes, the Junior Mortgage Notes, the Common
Stock and the Class B Common Stock will be passed upon for the Company by
Gibson, Dunn & Crutcher. The validity of the Mortgage Note Guaranty and the
Junior Mortgage Note Guaranty under New Jersey law will be passed upon for RIH
by Ravin, Sarasohn, Cook, Baumgarten, Fisch & Baime, a Professional Corporation.
EXPERTS
The consolidated financial statements and schedules of RII and RIH at
December 31, 1993 and 1992, and for each of the three years in the period ended
December 31, 1993, and the balance sheet of RIHF at December 31, 1993, appearing
in this Prospectus and Registration Statement have been audited by Ernst &
Young, independent auditors, as set forth in their reports thereon appearing
elsewhere herein and in the Registration Statement, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
106
<PAGE> 109
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS OF
RESORTS INTERNATIONAL, INC.:
Report of Independent Auditors.................................................. F-2
Consolidated Balance Sheets at December 31, 1992 and 1993....................... F-3
Consolidated Statements of Operations for the years ended December 31, 1991,
1992 and 1993.................................................................. F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1991,
1992 and 1993.................................................................. F-5
Consolidated Statements of Changes in Shareholders' Equity (Deficit) for the
years ended December 31, 1991, 1992 and 1993................................... F-6
Notes to Consolidated Financial Statements...................................... F-7
CONSOLIDATED FINANCIAL STATEMENTS OF
RESORTS INTERNATIONAL HOTEL, INC.:
Report of Independent Auditors.................................................. F-23
Consolidated Balance Sheets at December 31, 1992 and 1993....................... F-24
Consolidated Statements of Operations and Changes in Retained Earnings for the
years ended December 31, 1991, 1992 and 1993................................... F-25
Consolidated Statements of Cash Flows for the years ended December 31, 1991,
1992 and 1993.................................................................. F-26
Notes to Consolidated Financial Statements...................................... F-27
FINANCIAL STATEMENT OF
RESORTS INTERNATIONAL HOTEL FINANCING, INC.:
Report of Independent Auditors.................................................. F-36
Balance Sheet at December 31, 1993.............................................. F-37
Notes to Balance Sheet.......................................................... F-38
SUPPLEMENTARY DATA
Consolidated Selected Quarterly Financial Data for
Resorts International, Inc. (unaudited)....................................... F-39
Consolidated Selected Quarterly Financial Data for
Resorts International Hotel, Inc. (unaudited)................................. F-40
</TABLE>
F-1
<PAGE> 110
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Resorts International, Inc.
We have audited the accompanying consolidated balance sheets of Resorts
International, Inc. as of December 31, 1993 and 1992, and the related
consolidated statements of operations, changes in shareholders' equity
(deficit), and cash flows for each of the three years in the period ended
December 31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Resorts International, Inc. at December 31, 1993 and 1992, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1993, in conformity with generally accepted accounting
principles.
As explained in Notes 1 and 7, the Series Notes become due and payable in
April 1994. It presently appears unlikely the Company has the ability to redeem
the Series Notes at maturity. In addition, the Company is not in compliance with
a covenant contained in the indenture for the Series Notes and therefore an
event of default has occurred. As a result of such default the trustee may
accelerate the maturity of the Series Notes or may allow foreclosure upon the
collateral securing the Series Notes. The Company proposes to restructure the
Series Notes and anticipates filing a prepackaged bankruptcy plan of
reorganization as part of such restructuring. Consummation of the plan of
reorganization would be subject to a number of conditions including regulatory
and governmental approvals and confirmation by the bankruptcy court. There can
be no assurance as to whether or when the restructuring will be effected. These
conditions and events raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
ERNST & YOUNG
Philadelphia, Pennsylvania
February 18, 1994 except for
paragraph 8 of Note 1, as to
which the date is March 17, 1994
F-2
<PAGE> 111
RESORTS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1992 1993
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash (including cash equivalents of $36,344 and $41,273)......... $ 56,818 $ 62,546
Restricted cash equivalents...................................... 10,069 14,248
Receivables, net................................................. 25,457 19,297
Inventories...................................................... 8,531 8,664
Prepaid expenses................................................. 7,062 10,664
--------- ---------
Total current assets........................................ 107,937 115,419
--------- ---------
Property and equipment:
Land and land rights, including land held for investment,
development and resale.......................................... 243,900 243,336
Land improvements and utilities.................................. 22,519 22,891
Hotels and other buildings....................................... 170,250 182,011
Furniture, machinery and equipment............................... 67,693 80,424
Construction in progress......................................... 1,215 1,277
--------- ---------
505,577 529,939
Less accumulated depreciation.................................... (54,761) (82,099)
--------- ---------
Net property and equipment.................................. 450,816 447,840
Deferred charges and other assets..................................... 10,197 12,526
--------- ---------
$ 568,950 $ 575,785
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt, net of unamortized
discount........................................................ $ 828 $ 466,336
Accounts payable and accrued liabilities......................... 71,672 84,164
--------- ---------
Total current liabilities................................... 72,500 550,500
--------- ---------
Long-term debt, net of unamortized discount........................... 460,712 85,029
--------- ---------
Deferred income taxes................................................. 53,000 54,000
--------- ---------
Commitments and contingencies (Note 15)
Shareholders' deficit:
Common stock -- 20,157,234 shares outstanding -- $.01 par
value........................................................... 202 202
Capital in excess of par......................................... 102,092 102,092
Accumulated deficit.............................................. (108,556) (210,720)
--------- ---------
(6,262) (108,426)
Note receivable from related party............................... (11,000) (5,318)
--------- ---------
Total shareholders' deficit................................. (17,262) (113,744)
--------- ---------
$ 568,950 $ 575,785
--------- ---------
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements of RII.
F-3
<PAGE> 112
RESORTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
1991 1992 1993
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Casino.................................................. $279,884 $299,900 $ 307,059
Rooms................................................... 41,247 39,001 35,708
Food and beverage....................................... 52,459 48,907 46,843
Other casino/hotel revenues............................. 21,676 22,028 23,330
Other operating revenues................................ 15,435 19,072 18,122
Real estate related..................................... 7,542 8,026 8,502
-------- -------- ---------
418,243 436,934 439,564
-------- -------- ---------
Expenses:
Casino.................................................. 166,133 176,119 189,304
Rooms................................................... 12,112 11,799 10,906
Food and beverage....................................... 45,508 42,819 41,859
Other casino/hotel operating expenses................... 64,054 64,654 69,918
Other operating expenses................................ 12,055 15,549 14,697
Selling, general and administrative..................... 71,732 73,262 71,700
Provision for doubtful receivables...................... 6,373 4,047 2,889
Depreciation............................................ 23,814 25,322 27,924
Real estate related..................................... 1,612 1,599 1,605
Unallocated corporate expense........................... (1,186) 262 (4,136)
-------- -------- ---------
402,207 415,432 426,666
-------- -------- ---------
Earnings from operations..................................... 16,036 21,502 12,898
Other income (deductions):
Interest income......................................... 4,824 4,969 3,174
Interest expense........................................ (31,157) (40,856) (57,244)
Amortization of debt discount........................... (32,105) (37,569) (51,203)
Recapitalization costs.................................. (2,848) (8,789)
-------- -------- ---------
Loss before income taxes..................................... (42,402) (54,802) (101,164)
Income tax benefit (expense)................................. 831 1,348 (1,000)
-------- -------- ---------
Net loss..................................................... $(41,571) $(53,454) $(102,164)
-------- -------- ---------
-------- -------- ---------
Net loss per share of common stock........................... $ (2.07) $ (2.65) $ (5.07)
-------- -------- ---------
-------- -------- ---------
Weighted average number of shares outstanding................ 20,092 20,146 20,157
-------- -------- ---------
-------- -------- ---------
</TABLE>
See Notes to Consolidated Financial Statements of RII.
F-4
<PAGE> 113
RESORTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1991 1992 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers.......................... $ 411,456 $ 432,212 $ 441,354
Cash paid to suppliers and employees.................. (378,312) (390,012) (393,013)
--------- --------- ---------
Cash flow from operations before interest and
income taxes................................... 33,144 42,200 48,341
Interest received..................................... 4,014 5,211 3,809
Interest paid......................................... (9,228) (8,463) (8,440)
Income taxes refunded, net of payments................ 729 1,484 306
--------- --------- ---------
Net cash provided by operating activities........ 28,659 40,432 44,016
--------- --------- ---------
Cash flows from investing activities:
Payments for property and equipment................... (25,587) (19,832) (25,308)
Proceeds from sales of property and equipment......... 147 213 445
Proceeds from prior year sales of property and
equipment........................................... 1,676 2,484
CRDA deposits and bond purchases...................... (2,689) (2,871) (3,025)
Proceeds from sales of short-term money market
securities with maturities greater than three
months.............................................. 2,083 1,377
Purchases of short-term money market securities with
maturities greater than three months................ (1,768) (492)
--------- --------- ---------
Net cash used in investing activities............ (26,453) (19,691) (27,003)
--------- --------- ---------
Cash flows from financing activities:
Collection on note receivable from shareholder........ 3,477
Payments of recapitalization costs.................... (5,883) (5,414) (8,332)
Repayments of non-public debt......................... (2,064) (1,619) (2,251)
--------- --------- ---------
Net cash used in financing activities............ (7,947) (7,033) (7,106)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents....... (5,741) 13,708 9,907
Cash and cash equivalents at beginning of period........... 58,920 53,179 66,887
--------- --------- ---------
Cash and cash equivalents at end of period................. $ 53,179 $ 66,887 $ 76,794
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements of RII.
F-5
<PAGE> 114
RESORTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CAPITAL
IN
COMMON EXCESS ACCUMULATED NOTE
STOCK OF PAR DEFICIT RECEIVABLE
------ -------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1990........................ $200 $101,372 $ (13,531) $ (11,000)
Settlement of Other Class 3C Claims................. 1 594
Stock awards........................................ 34
Net loss for year 1991.............................. (41,571)
------ -------- ----------- -----------
Balance at December 31, 1991........................ 201 102,000 (55,102) (11,000)
Settlement of Other Class 3C Claims................. 1 92
Net loss for year 1992.............................. (53,454)
------ -------- ----------- -----------
Balance at December 31, 1992........................ 202 102,092 (108,556) (11,000)
Collection on note receivable from shareholder...... 3,477
Cancellation of note receivable from shareholder.... 7,523
Issuance of note receivable from Griffin Group...... (7,523)
Reduction of note receivable from Griffin Group
applied to prepaid services....................... 2,205
Net loss for year 1993.............................. (102,164)
------ -------- ----------- -----------
Balance at December 31, 1993........................ $202 $102,092 $(210,720) $ (5,318)
------ -------- ----------- -----------
------ -------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements of RII.
F-6
<PAGE> 115
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- RESTRUCTURING OF SERIES NOTES
The term "Company" as used herein includes Resorts International, Inc.
("RII") and/or one or more of its subsidiaries, as the context may require.
The outstanding principal amount of RII's Senior Secured Redeemable Notes
due April 15, 1994 (the "Series Notes") is $481,907,000. Including the interest
due on the maturity date of approximately $36,000,000, RII's total obligation at
maturity will amount to approximately $518,000,000. Sources of repayment or
refinancing at maturity have been uncertain for some time; the Company has been
working with its financial advisers on developing and analyzing financial
alternatives, as well as developing a long-term financial plan, since late 1991.
In this connection, management of the Company, with the assistance of its
legal and financial advisers, engaged in discussions with representatives
("Fidelity" and "TCW") of major holders of Series Notes in an effort to reach an
agreement as to the terms of a possible restructuring of the Series Notes.
Further negotiations were conducted among the Company, Fidelity, TCW and an
unrelated party ("SIIL") regarding SIIL's acquisition of a 60% interest in the
Company's Paradise Island assets (the "SIHL Sale") through a subsidiary of SIIL
("SIHL") formed for that purpose. This process resulted in the filing by RII and
certain of its subsidiaries on October 25, 1993 of a Form S-4 Registration
Statement with the Securities and Exchange Commission. That Registration
Statement describes in detail the restructuring (the "Restructuring") which RII
and GGRI, Inc. ("GGRI"), RII's subsidiary which guaranteed the Series Notes,
propose to accomplish through a prepackaged bankruptcy joint plan of
reorganization (the "Plan"). On February 1, 1994, after certain amendments, the
Registration Statement was declared effective. On February 5, 1994 the
solicitation of acceptances of the Plan commenced with the mailing of the
Information Statement/Prospectus for Solicitation of Votes on Prepackaged Plan
of Reorganization, ballots and other materials to holders of Series Notes and
equity interests in RII.
The Restructuring contemplates, among other things, the exchange of the
Series Notes for: (i) $125,000,000 principal amount of 11% Mortgage Notes due
2003 (the "Mortgage Notes") to be issued by Resorts International Hotel
Financing, Inc. ("RIHF"), a newly formed subsidiary of RII, and guaranteed by
Resorts International Hotel, Inc. ("RIH"), RII's subsidiary that owns and
operates Merv Griffin's Resorts Casino Hotel in Atlantic City (the "Resorts
Casino Hotel"); (ii) $35,000,000 principal amount of 11.375% Junior Mortgage
Notes due 2004 (the "Junior Mortgage Notes") to be issued by RIHF and guaranteed
by RIH; (iii) 40% of RII's common stock on a fully diluted basis (excluding
certain stock options); (iv) either (a) $65,000,000 in cash, plus interest at an
annual rate of 7.5% from January 1, 1994 through the closing date of the SIHL
Sale, plus 40% of the capital stock of SIHL, representing the consideration to
be received from the proposed SIHL Sale, or, if the SIHL Sale is not
consummated, (b) 100% of the equity of P.I. Resorts Limited ("PIRL"), a
subsidiary of RII which was recently formed to be a holding company in the event
of the spin-off (the "PIRL Spin-Off") of 100% of the equity of RII's Bahamian
subsidiaries and, through subsidiaries, the assets of RII and certain of its
domestic subsidiaries which support the Company's Bahamian operations, and
related liabilities; (v) the Company's Excess Cash, as defined in the Plan,
which is estimated to be at least $30,000,000 and (vi) rights to receive
distributions in respect of units of beneficial interest owned by RII in a
litigation trust (the "Litigation Trust") established pursuant to RII's 1990
plan of reorganization.
The Restructuring also provides for certain funds or accounts managed by
Fidelity to enter into a senior credit facility with RIHF (the "Senior
Facility") which will allow RIHF to borrow up to $20,000,000 through the
issuance of notes. The Senior Facility is to be available for a single borrowing
during the one-year period from the date the Plan becomes effective. Notes
issued pursuant to the Senior Facility will bear interest at 11% per year and
mature in 2002.
F-7
<PAGE> 116
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consummation of the Plan is subject to a number of conditions including,
but not limited to, confirmation by the Bankruptcy Court and receipt of required
regulatory approvals of the New Jersey Casino Control Commission (the "Casino
Control Commission") and the Government of The Bahamas.
For the Plan to be confirmed by the Bankruptcy Court, the Plan must comply
with various requirements of the Bankruptcy Code. Also, to confirm the Plan on a
consensual basis, acceptances must be received from (i) holders of Series Notes
constituting at least 66 2/3% in principal amount and more than 50% in number of
those voting and (ii) at least 66 2/3% each of RII's common stock and
outstanding stock options voted. In addition to the vote required by the
Bankruptcy Code, a condition to confirmation of the Plan is the entry of an
order declaring that certain security documents (the "Security Documents") under
which the liens on the property securing the Series Notes were granted or
created shall be deemed released and terminated. To effectuate such termination
and release consensually, the record holders of at least 66 2/3% in aggregate
principal amount of the outstanding Series Notes and the record holders of at
least a majority in aggregate principal amount of each series of the Series
Notes must consent to the termination of the Security Documents. There are
several other conditions to confirmation of the Plan which, subject to the
approval of Fidelity and TCW (in certain circumstances), may be waived by RII
and GGRI.
The solicitation period ended on March 15, 1994. The solicitation agent has
advised the Company that it has received the requisite acceptances for
confirmation of the Plan and sufficient consents to release the Security
Documents. The Company intends to proceed with the filing of its prepackaged
bankruptcy cases; however, there can be no assurance as to whether or when the
Restructuring will be effected, or that any restructuring that may ultimately be
consummated will be on terms similar to those of the Restructuring.
For information as to revenues and contribution to consolidated loss before
income taxes of the operations to be disposed of pursuant to the Restructuring
(through either the SIHL Sale or the PIRL Spin-Off) see the segment tables
included in "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Operations to be disposed of include the Paradise Island
portion of the casino/hotel segment, the Paradise Island portion of the real
estate related segment and the airline segment.
Recapitalization costs in 1992 and 1993 include costs of financial advisers
retained to assist in the development and analysis of financial alternatives
which would enable the Company to reduce its future debt service requirements
and other legal and advisory fees incurred in connection with the currently
proposed Restructuring.
Event of Default
As of September 30, 1993, RII was not in compliance with its covenant
contained in the indenture for the Series Notes (the "Series Note Indenture") to
maintain a Tangible Net Worth, as defined in the Series Note Indenture, of at
least $50,000,000. Since that date RII's Tangible Net Worth has continued to
decline. On February 2, 1994, 30 days after receiving notice of such default
from the trustee for the Series Notes (the "Series Note Trustee"), this default
became an Event of Default. Upon the occurrence of an Event of Default, the
Series Note Trustee may accelerate the maturity of the Series Notes by declaring
all unpaid principal of and accrued interest on the Series Notes due and payable
or may foreclose upon the collateral securing the Series Notes (the
"Collateral"). (See Note 7 for a description of the Collateral.) In addition,
the holders of 40% in principal amount of the Series Notes then outstanding may
require the Series Note Trustee to accelerate the maturity of the Series Notes.
If the Series Note Trustee accelerates the maturity of the Series Notes or
forecloses upon the Collateral, RII and GGRI, as guarantor of the Series Notes,
and certain of their subsidiaries whose assets are pledged to secure the Series
Notes (including RIH and Resorts International (Bahamas) 1984 Limited ("RIB"),
RII's indirect subsidiary, which together with its subsidiaries owns and
operates the Company's Bahamian properties) would be forced to seek immediate
protection under chapter 11 of title 11 of the United States
F-8
<PAGE> 117
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Code (the "Bankruptcy Code"). If such events occur, there can be no assurance
that the Restructuring would be implemented, that a reorganization of RII and
GGRI rather than a liquidation would occur or that any reorganization that might
occur would be on terms as favorable to the holders of Series Notes and holders
of RII's common stock as the terms of the Plan.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of RII and all
significant subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation. The accounts of foreign subsidiaries are
maintained in U.S. dollars.
Revenue Recognition
The Company records as revenue the win from casino gaming activities which
represents the difference between amounts wagered and amounts won by patrons.
Revenues from hotel and related services and from theatre ticket sales are
recognized at the time the related service is performed.
Complimentary Services
The Consolidated Statements of Operations reflect each category of
operating revenues excluding the retail value of complimentary services provided
to casino patrons without charge. The rooms, food and beverage, and other
casino/hotel operations departments allocate a percentage of their total
operating expenses to the casino department for complimentary services provided
to casino patrons. These allocations do not necessarily represent the
incremental cost of providing such complimentary services to casino patrons.
Amounts allocated to the casino department from the other operating departments
were as follows:
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Rooms..................................................... $ 3,563 $ 3,738 $ 4,470
Food and beverage......................................... 19,254 20,805 20,353
Other casino/hotel operations............................. 5,839 6,408 7,412
------- ------- -------
Total allocated to casino................................. $28,656 $30,951 $32,235
------- ------- -------
------- ------- -------
</TABLE>
Cash Equivalents
The Company considers all of its short-term money market securities
purchased with maturities of three months or less to be cash equivalents. The
carrying value of cash equivalents approximates fair value due to the short
maturity of these instruments.
Inventories
Inventories of provisions, supplies and spare parts are carried at the
lower of cost (first-in, first-out) or market.
Property and Equipment
Property and equipment are depreciated over their estimated useful lives
using the straight-line method for financial reporting purposes.
F-9
<PAGE> 118
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Casino Reinvestment Development Authority ("CRDA") Obligations
Under the New Jersey Casino Control Act ("Casino Control Act"), the Company
is obligated to purchase CRDA bonds, which will bear a below-market interest
rate, or make an alternative qualifying investment. The Company charges to
expense an estimated discount related to CRDA investment obligations as of the
date the obligation arises based on fair market interest rates of similar
quality bonds in existence as of that date. On the date the Company actually
purchases the CRDA bond, the estimated discount previously recorded is adjusted
to reflect the actual terms of the bonds issued and the then existing fair
market interest rate for similar quality bonds.
The discount on CRDA bonds purchased is amortized to interest income over
the life of the bonds using the effective interest rate method.
Payment-In-Kind ("PIK") Interest Accrual
When the Company elects to satisfy its interest obligations through PIK
instead of cash interest payments, for financial statement purposes, such
interest is accrued at the estimated market value of the notes to be issued. The
discount resulting from the difference between face value and estimated market
value of the additional notes decreases interest expense of the current period
and is amortized to expense over the remaining life of the issue.
Income Taxes
RII and all of its domestic subsidiaries file consolidated U.S. federal
income tax returns.
For the years 1991 and 1992, the Company accounted for income taxes under
the liability method prescribed by Statement of Financial Accounting Standards
No. 96 ("SFAS 96"), "Accounting for Income Taxes." Under this method, the
deferred tax liability is determined based on the difference between the
financial reporting and tax bases of assets and liabilities and enacted tax
rates which will be in effect for the years in which the differences are
expected to reverse. The deferred tax liability is reduced by cumulative tax
credits and losses being carried forward for tax purposes, subject to applicable
limitations.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." SFAS
109 supersedes SFAS 96 but retains the liability method of accounting for income
taxes. Among other changes, SFAS 109 changed the recognition and measurement
criteria for deferred tax assets included in SFAS 96.
There are no income taxes in The Bahamas and the income of RII's
subsidiaries in The Bahamas is generally not subject to U.S. federal income
taxation until it is distributed to a U.S. parent. Deferred federal income taxes
are provided on the undistributed earnings of Bahamian subsidiaries.
Per Share Data
Per share data was computed using the weighted average number of shares of
common stock outstanding.
NOTE 3 -- CASH EQUIVALENTS
Cash equivalents and restricted cash equivalents at December 31, 1993
included reverse repurchase agreements (federal government securities purchased
under agreements to resell those securities) with the institutions listed in the
following table under which the Company had not taken delivery of the underlying
F-10
<PAGE> 119
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
securities. These agreements matured January 3, 1994 except for $596,000 with
City National Bank of Florida which matured January 31, 1994.
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS)
<S> <C>
City National Bank of Florida................................... $14,634
National Westminster Bank NJ.................................... $ 5,945
First Fidelity Bank N.A., South Jersey.......................... $ 4,780
Summit Trust Company............................................ $ 4,278
</TABLE>
The Company's cash equivalents at December 31, 1993 also included U.S.
Treasury Bills and bank time deposits.
NOTE 4 -- RESTRICTED CASH EQUIVALENTS
Components of restricted cash equivalents at December 31 were as follows:
<TABLE>
<CAPTION>
1992 1993
------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Amount, including interest earned, on deposit with trustee for
Litigation Trust............................................ $ 4,969 $ 4,278
Escrow for the SIHL Sale...................................... 4,000
Showboat Lease payments and interest earned thereon held by
trustee (see Note 11)....................................... 3,303 3,405
Collateral account for Series Notes........................... 1,183 1,220
Cash equivalents securing letters of credit and other
guarantees.................................................. 614 1,345
------- -------
$10,069 $14,248
------- -------
------- -------
</TABLE>
If the agreement for the SIHL Sale is terminated, under certain
circumstances RII may be required to reimburse certain of SIHL's expenses.
Escrow for the SIHL Sale represents funds set aside for that purpose pursuant to
a related escrow agreement.
F-11
<PAGE> 120
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- RECEIVABLES
Components of receivables at December 31 were as follows:
<TABLE>
<CAPTION>
1992 1993
------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Gaming........................................................ $19,476 $15,566
Less allowance for doubtful accounts..................... (6,952) (6,598)
------- -------
12,524 8,968
------- -------
Non-gaming:
Hotel and related........................................ 5,850 6,131
Other trade.............................................. 2,970 2,560
Interest on note receivable from related party........... 927 271
Contracts and notes...................................... 211 212
Bahamian duty refunds receivable......................... 719 48
Refundable state income taxes............................ 499 36
Other.................................................... 2,969 2,347
------- -------
14,145 11,605
Less allowance for doubtful accounts..................... (1,212) (1,276)
------- -------
12,933 10,329
------- -------
$25,457 $19,297
------- -------
------- -------
</TABLE>
NOTE 6 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Components of accounts payable and accrued liabilities at December 31 were
as follows:
<TABLE>
<CAPTION>
1992 1993
------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Accrued interest.............................................. $ 9,928 $18,464
Accrued payroll and related taxes and benefits................ 16,178 16,277
Customer deposits and unearned revenues....................... 7,976 9,768
Trade payables................................................ 6,701 8,524
Accrued gaming taxes, fees and related assessments............ 8,166 7,719
Litigation Trust and related expenses......................... 4,327 3,513
Accrued costs of recapitalization............................. 2,372 3,510
Other accrued liabilities..................................... 16,024 16,389
------- -------
$71,672 $84,164
------- -------
------- -------
</TABLE>
NOTE 7 -- LONG-TERM DEBT
Pursuant to the Company's 1990 plan of reorganization, RII issued the
Series Notes, consisting of the Series A Notes and the Series B Notes, and the
First Mortgage Non-Recourse Pass-Through Notes due June 30, 2000 (the "Showboat
Notes").
F-12
<PAGE> 121
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying value and fair value by component of long-term debt at
December 31 were as follows:
<TABLE>
<CAPTION>
1992 1993
---------------------- ----------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
--------- --------- --------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Series A Notes....................... $230,410 $131,334 $ 262,531 $ 176,552
Less unamortized discount....... (24,636 ) (8,331)
--------- ---------
205,774 254,200
--------- ---------
Series B Notes....................... 190,182 107,453 219,376 147,530
Less unamortized discount....... (19,265 ) (7,447)
--------- ---------
170,917 211,929
--------- ---------
Showboat Notes....................... 105,333 88,480 105,333 94,800
Less unamortized discount....... (22,485 ) (20,452)
--------- ---------
82,848 84,881
Capitalized leases................... 2,001 2,001 355 355
--------- --------- --------- ---------
461,540 329,268 551,365 419,237
Less due within one year............. (828 ) (828 ) (466,336) (324,289)
--------- --------- --------- ---------
$460,712 $328,440 $ 85,029 $ 94,948
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The fair value presented above for the Company's long-term debt is based on
December 31 closing market prices for publicly traded debt and carrying value
for capitalized leases, because capitalized leases are not considered material
to the total.
The Series Notes are guaranteed as to payment of principal and interest by
GGRI, the subsidiary of RII which, through its Bahamian subsidiaries, owns and
operates the Company's Bahamian properties, and are secured by the Collateral
described below. The Series A Notes and the Series B Notes will rank pari passu
with respect to amounts realized upon any sale or other disposition of the
Collateral.
The Collateral consists of:
(i) RII's fee and leasehold interests in substantially all of its real
properties other than the 99-year net lease of a 10 acre site underlying
the Showboat Casino Hotel in Atlantic City (the "Showboat Lease") and the
real property that is subject to the Showboat Lease;
(ii) the fee and leasehold interests in the real and personal property
of Resorts Casino Hotel and the contiguous parking garage which interests
are owned by RIH;
(iii) all of the outstanding capital stock of RIH and GGRI and all of
RII's other direct and indirect domestic subsidiaries;
(iv) promissory notes made by RIH in the aggregate principal amount of
$325,000,000;
(v) 66% of the outstanding voting stock and 100% of the non-voting
stock of RIB, the Bahamian subsidiary of GGRI which together with its
subsidiaries owns and operates the Company's Bahamian properties; and
(vi) a $50,000,000 promissory note made by RIB and guarantees thereof
by certain of RIB's subsidiaries.
The Collateral described above consists of substantially all of the assets
of the Company other than the Showboat Lease and the real property that is
subject to the Showboat Lease.
F-13
<PAGE> 122
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Series Notes bear interest as follows:
<TABLE>
<CAPTION>
SERIES A SERIES B
-------- --------
<S> <C> <C>
April 11, 1990 through April 15, 1991............................... 6%
May 8, 1990 through April 15, 1991.................................. 11%
Year ended April 15, 1992........................................... 9% 15%
Year ended April 15, 1993........................................... 12% 15%
Year ending April 15, 1994.......................................... 15% 15%
</TABLE>
Interest on the Series Notes is payable semi-annually on April 15 and
October 15 in each year. The Series Note Indenture allowed RII to satisfy all or
any portion of interest accruing on the Series Notes to date by making PIK
payments.
On each interest payment date through October 15, 1993, the Company elected
to make PIK payments. The cumulative principal amounts of Series A and Series B
Notes issued to satisfy such interest obligations were $75,031,000 and
$80,626,000, respectively.
In accordance with the Company's 1990 plan of reorganization, $1,250,000
principal amount of Series B Notes were issued through December 31, 1993 in
settlement of certain claims ("Other Class 3C Claims") against RII and certain
of its subsidiaries which were outstanding as of the date the Company filed for
relief under the Bankruptcy Code. Additional Series B Notes may be issued in the
future in settlement of Other Class 3C Claims.
The Series Note Indenture contains certain restrictive covenants on the
part of RII, including restrictions on (i) the payment of cash dividends or
redemptions of capital stock by RII; (ii) the repurchase of any Series Notes
other than at par, unless certain conditions are met; (iii) the incurrence of
additional indebtedness, with certain exceptions; (iv) mergers and
consolidations with entities other than affiliates of RII; and (v) the ability
of RII and its subsidiaries to sell their assets.
As discussed in Note 1, an Event of Default has occurred with respect to
the Series Notes. Also as discussed in Note 1, the Company intends to
restructure the Series Notes as proposed in the Restructuring; however, there
can be no assurance as to whether or when such Restructuring will be effected.
The Showboat Notes are non-recourse notes, secured by a mortgage
encumbering the real property which is subject to the Showboat Lease, by a
collateral assignment of the Showboat Lease, and by a pledge of any proceeds of
the sale of such mortgage and collateral assignment.
Interest on the Showboat Notes consists of a pass-through (subject to
certain adjustments) of the lease payments received under the Showboat Lease.
See Note 11 for a description of the Showboat Lease. Interest is payable
semi-annually on January 15 and July 15.
The weighted average effective interest rates on RII's publicly held debt
at December 31, 1993 were as follows: Series A Notes -- 27.7%; Series B
Notes -- 28.7%; and Showboat Notes -- 11.1%.
Minimum principal payments of long-term debt outstanding as of December 31,
1993, for the five years thereafter are as follows: 1994 -- $482,114,000;
1995 -- $140,000; 1996 -- $8,000; 1997 -- None; 1998 -- None.
NOTE 8 -- SHAREHOLDERS' DEFICIT
RII is authorized to issue 50,000,000 shares of common stock. Of the
20,157,234 outstanding at December 31, 1993, 20,000,000 were issued in 1990 as
the Company emerged from bankruptcy proceedings, 20,000 were awarded to certain
members of RII's Board of Directors in 1991, and 137,234 were issued in
F-14
<PAGE> 123
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
settlement of Other Class 3C Claims. Additional shares of RII's common stock may
be issued in the future in settlement of Other Class 3C Claims.
See Note 10 for a description of notes receivable from related parties.
NOTE 9 -- STOCK OPTION PLAN
The Resorts International, Inc. Senior Management Stock Option Plan (the
"1990 Stock Option Plan") authorizes the grant of stock options to members of
the Company's management. The number of shares which may be granted under the
1990 Stock Option Plan may not exceed 10% of the shares of Common Stock
Outstanding, as defined in the 1990 Stock Option Plan, subject to adjustment.
Pursuant to the 1990 Stock Option Plan, options to purchase up to 5% of the
shares of Common Stock Outstanding could be granted to David P. Hanlon, who was
the President and Chief Executive Officer of RII until October 31, 1993; the
remaining options could be granted to other eligible employees at the discretion
of a committee appointed by the Board of Directors of RII.
In 1991 the Company granted an option to Mr. Hanlon to purchase 5% of the
Common Stock Outstanding at an exercise price of $1.875 per share, the fair
market value on the date of grant. Although Mr. Hanlon's employment with the
Company terminated effective October 31, 1993, pursuant to an agreement dated
September 27, 1993 between RII and Mr. Hanlon, Mr. Hanlon is to retain his
option until its expiration on October 31, 1997. This option was fully
exercisable at December 31, 1993.
In addition to Mr. Hanlon's option, options to purchase the following
shares of RII's common stock were outstanding at December 31, 1993:
<TABLE>
<CAPTION>
EXERCISE OPTIONS OPTIONS
PRICE OUTSTANDING EXERCISABLE
- -------- ----------- -----------
<S> <C> <C>
$1.875 634,000 627,000
$1.75 30,000 10,000
----------- -----------
664,000 637,000
----------- -----------
----------- -----------
</TABLE>
No shares were issued in connection with the exercise of stock options
during 1991, 1992 or 1993.
NOTE 10 -- RELATED PARTY TRANSACTIONS
License and Services Agreements
Pursuant to the Company's 1990 plan of reorganization, Merv Griffin,
Chairman of RII's Board of Directors, The Griffin Group, Inc. (the "Griffin
Group"), a corporation controlled by Mr. Griffin, and RII entered into a License
and Services Agreement. Pursuant to this agreement, for the two years ended
September 16, 1992, RII was granted a non-exclusive license to use Mr. Griffin's
name and likeness to promote its facilities and operations and Mr. Griffin
agreed to act as Chairman of the Board of RII and to provide certain other
services without compensation, subject to certain conditions relating
principally to the continuation of his control of the Company.
In April 1993, RII, RIH and Griffin Group entered into a License and
Services Agreement (the "Griffin Services Agreement") effective as of September
17, 1992. Pursuant to this agreement, Griffin Group granted RII and RIH a
non-exclusive license to use the name and likeness of Merv Griffin to advertise
and promote the Company's facilities and operations. Also pursuant to the
Griffin Services Agreement, Mr. Griffin is to provide certain services to the
Company, including serving as Chairman of the Board of RII and as a host,
producer and featured performer in various shows to be presented in Resorts
Casino Hotel, and furnishing marketing and consulting services.
F-15
<PAGE> 124
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Griffin Services Agreement is to continue until the later of September
17, 1996 or the fourth anniversary of the consummation of a Reorganization (as
defined, which would include a restructuring such as that discussed in Note 1)
of RII; but in no event shall the term extend beyond September 17, 1997. If a
Reorganization has not been consummated by September 17, 1996, the Griffin
Services Agreement shall terminate on that date. The Griffin Services Agreement
provides for earlier termination under certain circumstances including, among
others, a change of control (as defined) of the Company and Mr. Griffin ceasing
to serve as Chairman of the Board of RII. The Restructuring described in Note 1
contemplates that the Griffin Services Agreement will remain in place.
The Griffin Services Agreement provides for compensation to Griffin Group
in the amount of $2,000,000 for the year ended September 16, 1993, and in
specified amounts for each of the following years, which increase at
approximately 5% per year. In accordance with the Griffin Services Agreement,
upon signing, the Company paid Griffin Group $4,100,000, representing
compensation for the first two years. Thereafter, the Griffin Services Agreement
calls for annual payments on September 17, each representing a prepayment for
the year ending two years hence. In lieu of paying in cash, at the Company's
option, it may satisfy its obligation to make any of the payments required under
the Griffin Services Agreement by reducing the amount of the Group Note
described below. In September 1993 the Company notified Griffin Group that it
would satisfy its obligation to make the $2,205,000 payment for the year ending
September 16, 1995 by reducing the Group Note by that amount. In the event of an
early termination of the Griffin Services Agreement, and depending on the
circumstances of such early termination, all or a portion of the compensation
paid to Griffin Group in respect of the period subsequent to the date of
termination may be required to be repaid to the Company.
The Griffin Services Agreement also provides for the issuance to Griffin
Group, on the effective date of a Reorganization of RII, of warrants (the
"Griffin Warrants") to purchase 10% of the common stock of the reorganized
entity on a fully diluted basis. In connection with the events described in Note
1, RII's Board of Directors subsequently approved certain revisions to the
exercise price of the Griffin Warrants. The Griffin Warrants are to be
exercisable at the lesser of (i) the average market price of RII's common stock
for the 20 trading days following the effective date of a Reorganization and
(ii) $1.875.
The Company agreed to indemnify, defend and hold harmless Griffin Group and
Mr. Griffin against certain claims, losses and costs, and to maintain certain
insurance coverage with Mr. Griffin and Griffin Group as named insureds.
Notes Receivable from Related Parties
Pursuant to the Company's 1990 plan of reorganization, in September 1990
RII received $12,345,000 in cash and an $11,000,000 promissory note (the
"Griffin Note") from Merv Griffin for certain shares of RII common stock
purchased by him. In April 1993, in accordance with the Griffin Services
Agreement, Mr. Griffin made a partial payment of $4,100,000 on this note
comprised of $3,477,000 principal and $623,000 accrued interest. The Griffin
Note, which then had a remaining balance of $7,523,000, was cancelled and a new
note from Griffin Group (the "Group Note") in the amount of $7,523,000 was
substituted therefor. As noted above, in September 1993 the balance of the Group
Note was reduced by $2,205,000. The Group Note, which is unconditionally
guaranteed as to principal and interest by Mr. Griffin, due on demand and bears
interest at the rate of 3% per annum, comprises the note receivable from related
party reflected on the accompanying Consolidated Balance Sheet as of December
31, 1993.
Other
The Company reimbursed Griffin Group $358,000, $396,000, and $181,000 for
charter air services related to Company business rendered in 1991, 1992 and
1993, respectively.
F-16
<PAGE> 125
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1991, 1992 and 1993 the Company did business with various subsidiaries
of January Enterprises, Inc. ("January Enterprises"), of which Merv Griffin is
Chief Executive Officer. In 1991 the Company paid $235,000 and provided certain
facilities and personnel for the production of the "Ruckus Game Show" at Resorts
Casino Hotel. Also in 1991, the Company provided facilities, labor and
accommodations relative to the production of "Merv Griffin's 1991 New Year's Eve
Special" which was broadcast live from Resorts Casino Hotel. In each of 1992 and
1993 the Company agreed to pay $100,000 and provided certain facilities, labor
and accommodations in connection with the production of the live television
broadcast of "Merv Griffin's New Year's Eve Special" from Resorts Casino Hotel.
The Company received certain promotional considerations in connection with the
television broadcast of these shows.
Antonio C. Alvarez II, a shareholder of Alvarez & Marsal, Inc., has been a
member of the Board of Directors of RII since September 1990. The Company paid
Alvarez & Marsal, Inc. $241,000 and $300,000 for financial advisory services
rendered in 1991 and 1992, respectively.
Warren Cowan, who was Chairman of Rogers & Cowan, Inc. until July 1992, has
been a member of the Board of Directors of RII since September 1990. The Company
paid Rogers & Cowan, Inc. $147,000 and $128,000 for public relations services
rendered for the Company's Atlantic City and Paradise Island properties in 1991
and 1992, respectively.
NOTE 11 -- SHOWBOAT LEASE
The Company leases to a subsidiary ("ACS") of Showboat, Inc., a resort and
casino operator, approximately 10 acres of land adjacent to the Boardwalk in
Atlantic City. Under the 99-year net lease, lease payments are payable in equal
monthly installments on the first day of each month. The annual lease payment
for the lease year ending March 31, 1994, is $8,118,000. The lease payment is to
be adjusted annually, as of April 1, for changes in the consumer price index.
Pursuant to the lease agreement, the Company is unable to transfer its
interest in the lease, other than to an affiliate, without giving ACS the
opportunity to purchase such interest at terms no less favorable than agreed to
by any other party.
As described in Note 7, the Showboat Notes are secured by a mortgage
encumbering the real property which is subject to the Showboat Lease, by a
collateral assignment of the Showboat Lease, and by a pledge of any proceeds of
the sale of such mortgage and collateral assignment. Lease payments under the
Showboat Lease are required to be passed-through to holders of the Showboat
Notes.
NOTE 12 -- RETIREMENT PLANS
RII and certain of its subsidiaries participate in a defined contribution
plan covering substantially all of their non-union, full-time employees. The
Company makes contributions to this plan based on a percentage of eligible
employee contributions. Total pension expense for this plan was $740,000,
$767,000 and $804,000 in 1991, 1992 and 1993, respectively.
In 1991 the Company recorded a gain of $344,000 resulting from the
settlement of a defined benefit plan which was terminated in 1989. Net periodic
pension income for this plan for 1991 amounted to $121,000.
In addition to the plans described above, union and certain other employees
of several subsidiary companies are covered by multi-employer defined benefit
pension plans to which subsidiaries make contributions. Such contributions
totalled $2,404,000, $1,403,000 and $1,392,000 in 1991, 1992 and 1993,
respectively.
F-17
<PAGE> 126
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- INCOME TAXES
As discussed in Note 2, the Company adopted SFAS 109 effective January 1,
1993. There was no effect on the accompanying Consolidated Statements of
Operations nor was there a cumulative effect of adopting SFAS 109.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1993 were
as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS)
<S> <C>
Deferred tax liabilities:
Basis differences on property and equipment.................. $ (85,200)
Other........................................................ (3,100)
------------
Total deferred tax liabilities....................... (88,300)
------------
------------
Deferred tax assets:
Net operating loss carryforwards............................. 259,900
Basis differences on debt.................................... 15,100
Book reserves not yet deductible for tax..................... 17,100
Tax credit carryforwards..................................... 2,900
Other........................................................ 5,300
------------
Total deferred tax assets............................ 300,300
Valuation allowance for deferred tax assets.................. (266,000)
------------
Deferred tax assets, net of valuation allowance...... 34,300
------------
Net deferred tax liabilities................................... $ (54,000)
------------
------------
</TABLE>
During 1991 the Company received a federal income tax refund of $831,000.
The refund related to the carryback of certain 1983 credits to 1980 and was
issued when the examination of the Company's 1983 tax return was waived. Such
amount was recorded as a federal income tax benefit in 1991. During 1992 the
Company received federal income tax refunds of $1,348,000 when the audit of the
Company's 1981 and 1982 tax returns was completed. Such amount was recorded as a
federal income tax benefit in 1992.
In August 1993 tax law changes were enacted which resulted in an increase
in the Company's federal income tax rate. The increase resulted in a $1,000,000
increase in the Company's deferred income tax liability and a deferred income
tax provision of the same amount.
Net operating losses were generated for federal tax purposes in 1991, 1992
and 1993, so no current federal tax provision was recorded in those years. No
state tax provision was recorded in those years due to the utilization of state
net operating loss carryforwards in states where the Company generated taxable
income.
F-18
<PAGE> 127
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effective income tax rate on the loss before income taxes varies from
the statutory federal income tax rate as a result of the following factors:
<TABLE>
<CAPTION>
1991 1992 1993
------ ------ ------
<S> <C> <C> <C>
Statutory federal income tax rate...................... (34.0)% (34.0)% (35.0)%
Net operating losses for which no tax benefit was
recognized........................................... 33.4% 33.6% 34.7%
Income taxes refunded.................................. (2.0)% (2.5)%
Other, including impact of increase in tax rate in
1993................................................. .6% .4% 1.3%
------ ------ ------
Effective tax expense (benefit) rate................... (2.0)% (2.5)% 1.0%
------ ------ ------
------ ------ ------
</TABLE>
The Company provides deferred taxes on the unremitted earnings of its
Bahamian subsidiaries by allowing for the sale of the Bahamian assets in the
SFAS 109/SFAS 96 computations as it is the intention of the Company to sell its
Bahamian assets. The Company anticipates that taxes on any such sale will be
offset by net operating loss carryforwards under the provisions of the Internal
Revenue Code for gains existing as of the date of change in ownership.
For federal tax purposes the Company had net operating loss carryforwards
of approximately $742,000,000 at December 31, 1993. Of this amount,
approximately $260,000,000 is not limited as to use and expires from 2005
through 2008. Due to a change of ownership of RII in 1990, the balance of the
tax loss carryforward which expires from 1999 through 2005 is limited in its
availability to offset future taxable income of the Company. Though otherwise
limited, such loss carryforwards would be available to offset gains on sales of
assets owned at the date of change in ownership of the Company which are sold
within five years of that date.
At December 31, 1993 RII and its subsidiaries had significant net operating
loss carryforwards in New Jersey, which expire from 1994 through 2000, and in
Florida, which expire from 1994 through 2008.
Also, for federal tax purposes, the Company had tax credit carryforwards of
$2,900,000 at December 31, 1993 which expire from 1998 through 2008.
The source of loss before income taxes was as follows:
<TABLE>
<CAPTION>
1991 1992 1993
-------- -------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
U.S. source loss..................................... $(30,095) $(41,526) $ (81,542)
Foreign source loss.................................. (12,307) (13,276) (19,622)
-------- -------- ---------
Loss before income taxes............................. $(42,402) $(54,802) $(101,164)
-------- -------- ---------
-------- -------- ---------
</TABLE>
F-19
<PAGE> 128
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- STATEMENTS OF CASH FLOWS
Supplemental disclosures required by Statement of Financial Accounting
Standards No. 95 "Statement of Cash Flows" are presented below.
<TABLE>
<CAPTION>
1991 1992 1993
--------- -------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Reconciliation of net loss to net cash provided by operating
activities:
Net loss.................................................. $ (41,571) $(53,454) $(102,164)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation......................................... 23,814 25,322 27,924
Amortization (principally debt discount)............. 32,415 37,565 51,251
Interest expense settled by issuance of long-term
debt.............................................. 19,584 31,165 40,268
Provision for doubtful receivables................... 6,373 4,047 2,889
Provision for discount on CRDA obligations........... 1,574 1,451 1,541
Deferred tax provision............................... 1,000
Recapitalization costs............................... 2,848 8,789
Stock awards......................................... 34
Net loss on sales of property and equipment.......... 533 113 220
Net (increase) decrease in accounts receivable....... (9,719) 2,744 2,236
Net (increase) decrease in inventories and
prepaids.......................................... (433) 429 (849)
Net (increase) decrease in deferred charges and other
assets............................................ 296 (1,499) (416)
Net increase (decrease) in accounts payable and
accrued liabilities............................... (4,241) (10,299) 11,327
--------- -------- ---------
Net cash provided by operating activities............ $ 28,659 $ 40,432 $ 44,016
--------- -------- ---------
--------- -------- ---------
Non-cash investing and financing transactions:
Exchange of note receivable from shareholder for note
receivable from Griffin Group........................ $ 7,523
Reduction in note receivable from Griffin Group applied
to prepaid services.................................. $ 2,205
Increase in liabilities for additions to property and
equipment and other assets........................... $ 1,180 $ 112 $ 632
Reclassifications to other assets from receivables and
property and equipment............................... $ 674 $ 337 $ 450
Other Class 3C Claims settled for common stock and
Series B Notes....................................... $ 1,448 $ 227
</TABLE>
NOTE 15 -- COMMITMENTS AND CONTINGENCIES
CRDA
The Casino Control Act, as originally adopted, required a licensee to make
investments equal to 2% of the licensee's gross revenue (as defined under the
Casino Control Act) (the "investment obligation") for each calendar year,
commencing in 1979, in which such gross revenue exceeded its "cumulative
investments" (as defined in the Casino Control Act). A licensee had five years
from the end of each calendar year to satisfy this investment obligation or
become liable for an "alternative tax" in the same amount. In 1984 the New
Jersey legislature amended the Casino Control Act so that these provisions now
apply only to investment obligations for the years 1979 through 1983.
F-20
<PAGE> 129
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Effective for 1984 and subsequent years, the amended Casino Control Act
requires a licensee to satisfy its investment obligation by purchasing bonds to
be issued by the CRDA, or by making other investments authorized by the CRDA, in
an amount equal to 1.25% of a licensee's gross revenue. If the investment
obligation is not satisfied, then the licensee will be subject to an investment
alternative tax of 2.5% of gross revenue. Since 1985, a licensee has been
required to make quarterly deposits with the CRDA against its current year
investment obligation.
An analysis of RIH's investment obligations under the Casino Control Act
and RIH's means of settlement since 1979 follows:
<TABLE>
<CAPTION>
1979-1983 1984-1993 TOTAL
-------- -------- --------
(IN THOUSAND OF DOLLARS)
<S> <C> <C> <C>
Investment obligations................................ $(21,637) $(29,172) $(50,809)
Means of settlement:
Housing related investments under audit.......... 13,104 13,104
Housing related investments previously
approved....................................... 1,000 1,000
CRDA deposits/bond purchases..................... 7,533 28,479 36,012
-------- -------- --------
Remaining investment obligation at December 31, 1993,
which was deposited in January 1994................. $ 0 $ (693) $ (693)
-------- -------- --------
-------- -------- --------
</TABLE>
With regard to the housing related investments under audit, in January 1988
the CRDA notified the Company of its interpretation as to the periods of time
during which expenditures could be made to satisfy investment obligations.
CRDA's interpretation differs from RIH's and if found to be correct would
decrease the amount of RIH's qualifying expenditures by approximately $5,000,000
to $6,000,000. RIH believes that its interpretation is correct and intends to
contest this issue.
RIH also received a letter dated November 9, 1989, from the State of New
Jersey Department of the Treasury (the "Treasury") stating that the housing
related investments made by RIH were not sufficient to meet its investment
obligation for the years 1979 through 1983. The letter also stated that
alternative tax in the amount of $21,637,000 was due for those years, in
addition to penalties and interest thereon which amounted to $12,514,000 as of
the date of the letter. As set forth in the table above, the Company believes
that $8,533,000 of such obligations have been settled; $7,533,000 in cash and
$1,000,000 by previously approved housing related investments. Also, the Company
has received audit reports issued by an agency acting on behalf of the Treasury
identifying $10,165,000 of project development costs available for investment
credit towards the investment obligation. This leaves a total of $2,939,000 of
housing related investments under audit in question. The Company has notified
the Treasury that it takes exception to the Treasury's computation of amounts
due. Further, the Company believes that the $2,939,000 of housing related
investments in question will be found, under further audit, to have been
satisfied.
Although these matters have been dormant for some time, the Company was
recently verbally contacted by the Treasury and expects further communication
regarding the Treasury's proposal for a resolution of these matters in the near
future. If the CRDA's interpretation as to the periods of time during which
qualifying expenditures can be made is found to be correct, or if the Treasury's
issue is determined adversely, RIH could be required to pay the relevant amount
in cash to the CRDA. In the opinion of management, based upon advice of counsel,
the aggregate liability, if any, arising from these issues will not have a
material adverse effect on the accompanying consolidated financial statements.
As reflected in the table above, through December 31, 1993, RIH had made
CRDA deposits/bond purchases totalling $36,012,000. However, in August 1989 RIH
donated $12,048,000 to the CRDA in exchange for which RIH was relieved of its
obligation to purchase CRDA bonds of $18,193,000. Because RIH already had the
$18,193,000 for bond purchases on deposit with the CRDA, the difference between
this
F-21
<PAGE> 130
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
amount and the amount of the donation, or $6,145,000, was refunded to RIH in
August 1989. Thus, at December 31, 1993, RIH had a remaining balance of
$4,873,000 face value of bonds issued by the CRDA and had $12,946,000 on deposit
with the CRDA. These bonds and deposits, net of an estimated discount charged to
expense to reflect the below-market interest rate payable on the bonds, were
recorded as other assets in the Company's Consolidated Balance Sheets.
RIH records charges to expense to reflect the below-market interest rate
payable on the bonds it may have to purchase to fulfill its investment
obligation at the date the obligation arises. The charges in 1991, 1992 and 1993
for discounts on obligations arising in those years were $1,574,000, $1,451,000
and $1,541,000, respectively.
Litigation
RII and certain of its subsidiaries are defendants in certain litigation.
In the opinion of management, based upon advice of counsel, the aggregate
liability, if any, arising from such litigation will not have a material adverse
effect on the accompanying consolidated financial statements.
NOTE 16 -- GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION
Schedules of geographic and business segment information relating to (i)
revenues, (ii) contribution to consolidated loss before income taxes and (iii)
identifiable assets, depreciation and capital additions are included in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
F-22
<PAGE> 131
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Resorts International Hotel, Inc.
We have audited the accompanying consolidated balance sheets of Resorts
International Hotel, Inc. as of December 31, 1993 and 1992, and the related
consolidated statements of operations and changes in retained earnings and cash
flows for each of the three years in the period ended December 31, 1993. Resorts
International Hotel, Inc. (RIH) is a wholly-owned subsidiary of Resorts
International, Inc. (RII). These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Resorts International Hotel, Inc. at December 31, 1993 and 1992, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As noted above, RIH is a wholly-owned subsidiary of RII, and as disclosed
in the financial statements and related notes, has extensive intercompany
relationships with RII and its affiliates. RII has significant debt (the Series
Notes) which becomes due and payable in April, 1994. It presently appears
unlikely that RII has the ability to redeem these Series Notes at maturity. In
addition, RII is not in compliance with a covenant contained in the indenture
for the Series Notes and therefore an event of default has occurred. As a result
of such default the trustee may accelerate the maturity of the Series Notes or
may allow foreclosure upon the collateral securing the Series Notes. RII
proposes to restructure the Series Notes and anticipates filing a prepackaged
bankruptcy plan of reorganization as part of such restructuring. Consummation of
the plan of reorganization would be subject to a number of conditions including
regulatory and governmental approvals and confirmation by the bankruptcy court.
There can be no assurance as to whether or when the restructuring will be
effected. These conditions and events raise substantial doubt about RII's
ability to continue as a going concern. Because of the aforementioned conditions
relating to RII, there is also substantial doubt about the ability of RIH, as
RII's principal operating subsidiary, to continue as a going concern. The
financial statements of RIH do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.
ERNST & YOUNG
Philadelphia, Pennsylvania
February 18, 1994, except for
paragraph 14 of Note 12, as to
which the date is March 17, 1994
F-23
<PAGE> 132
RESORTS INTERNATIONAL HOTEL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1992 1993
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash (including cash equivalents of $9,728 and $11,446)............ $ 22,643 $ 25,947
Receivables, net................................................... 5,406 5,114
Interest receivable from affiliate................................. 4,500 1,125
Note receivable from affiliate..................................... 50,000 50,000
Inventories........................................................ 1,542 1,754
Prepaid expenses................................................... 1,862 5,642
-------- --------
Total current assets.......................................... 85,953 89,582
Property and equipment, net of accumulated depreciation................. 155,689 163,320
Deferred charges and other assets....................................... 8,994 11,262
-------- --------
$250,636 $264,164
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Current maturities of long-term debt............................... $ 643 $ 74
Accounts payable and accrued liabilities........................... 26,073 24,813
Notes payable to affiliate......................................... 325,000
Due to parent company.............................................. 62,374 42,859
-------- --------
Total current liabilities..................................... 89,090 392,746
-------- --------
Long-term debt:
Notes payable to affiliate......................................... 325,000
Other.............................................................. 904 13
-------- --------
325,904 13
-------- --------
Deferred income taxes................................................... 19,400
--------
Commitments and contingencies (Notes 6 and 12)
Shareholder's deficit:
Common stock -- $1 par value
100 shares issued and outstanding
Excess of liabilities over assets at August 31, 1990
reorganization.................................................... (198,829) (198,829)
Retained earnings.................................................. 34,471 50,834
-------- --------
Total shareholder's deficit................................... (164,358) (147,995)
-------- --------
$250,636 $264,164
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements of RIH.
F-24
<PAGE> 133
RESORTS INTERNATIONAL HOTEL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND CHANGES IN RETAINED EARNINGS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1991 1992 1993
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Casino................................................... $218,881 $233,780 $244,116
Rooms.................................................... 8,074 8,766 6,974
Food and beverage........................................ 16,406 16,056 15,926
Other casino/hotel revenues.............................. 4,113 4,138 4,463
-------- -------- --------
247,474 262,740 271,479
-------- -------- --------
Expenses:
Casino................................................... 123,523 127,847 141,608
Rooms.................................................... 3,367 3,582 3,402
Food and beverage........................................ 17,679 17,658 17,710
Other casino/hotel operating expenses.................... 31,499 33,281 34,764
Selling, general and administrative...................... 44,023 46,507 47,362
Provision for doubtful receivables....................... 3,480 1,414 901
Depreciation............................................. 9,084 11,402 13,664
-------- -------- --------
232,655 241,691 259,411
-------- -------- --------
Earnings from operations...................................... 14,819 21,049 12,068
Other income (deductions):
Interest income.......................................... 7,505 7,576 7,615
Interest expense......................................... (563) (395) (193)
Recapitalization costs................................... (874) (2,727)
-------- -------- --------
Earnings before income taxes.................................. 21,761 27,356 16,763
Income tax expense............................................ (8,704) (10,942) (400)
-------- -------- --------
Net earnings.................................................. 13,057 16,414 16,363
Retained earnings at beginning of period...................... 5,000 18,057 34,471
-------- -------- --------
Retained earnings at end of period............................ $ 18,057 $ 34,471 $ 50,834
-------- -------- --------
-------- -------- --------
</TABLE>
See Notes to Consolidated Financial Statements of RIH.
F-25
<PAGE> 134
RESORTS INTERNATIONAL HOTEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------
1991 1992 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers.......................... $ 244,825 $ 261,462 $ 272,150
Cash paid to suppliers and employees.................. (216,805) (229,911) (250,281)
--------- --------- ---------
Cash flow from operations before interest
and income taxes............................... 28,020 31,551 21,869
Interest received..................................... 7,526 4,204 10,973
Interest paid......................................... (563) (395) (193)
Income taxes paid to parent........................... (8,704) (10,942)
--------- --------- ---------
Net cash provided by operating activities........ 26,279 24,418 32,649
--------- --------- ---------
Cash flows from investing activities:
Payments for property and equipment................... (21,570) (15,495) (21,013)
Proceeds from sale of property and equipment.......... 67
CRDA deposits and bond purchases...................... (2,689) (2,871) (3,025)
--------- --------- ---------
Net cash used in investing activities............ (24,192) (18,366) (24,038)
--------- --------- ---------
Cash flows from financing activities:
Advances from (repayments to) parent company and
affiliates.......................................... 2,200 1,582 (515)
Recapitalization costs paid to parent................. (874) (2,727)
Repayments of debt.................................... (1,498) (1,003) (2,065)
--------- --------- ---------
Net cash provided by (used in) financing
activities..................................... 702 (295) (5,307)
--------- --------- ---------
Net increase in cash and cash equivalents.................. 2,789 5,757 3,304
Cash and cash equivalents at beginning of period........... 14,097 16,886 22,643
--------- --------- ---------
Cash and cash equivalents at end of period................. $ 16,886 $ 22,643 $ 25,947
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements of RIH.
F-26
<PAGE> 135
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Resorts International Hotel, Inc. ("RIH"), a wholly owned subsidiary of
Resorts International, Inc. ("RII"), owns and operates Merv Griffin's Resorts
Casino Hotel ("Resorts Casino Hotel"), a casino/hotel complex located in
Atlantic City, New Jersey.
Principles of Consolidation
The consolidated financial statements include the accounts of RIH and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
Revenue Recognition
RIH records as revenue the win from gaming activities which represents the
difference between amounts wagered and amounts won by patrons. Revenues from
hotel and related services and from theatre ticket sales are recognized at the
time the related service is performed.
Complimentary Services
The consolidated statements of operations reflect each category of
operating revenues excluding the retail value of complimentary services provided
to casino patrons without charge. The rooms, food and beverage, and other
casino/hotel operations departments allocate a percentage of their total
operating expenses to the casino department for complimentary services provided
to casino patrons. These allocations do not necessarily represent the
incremental cost of providing such complimentary services to casino patrons.
Amounts allocated to the casino department from the other operating
departments were as follows for the years ended December 31:
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Rooms.................................................... $ 2,949 $ 3,010 $ 3,728
Food and beverage........................................ 15,963 16,709 16,250
Other casino/hotel operations............................ 5,699 6,174 7,216
------- ------- -------
Total allocated to casino...................... $24,611 $25,893 $27,194
------- ------- -------
------- ------- -------
</TABLE>
Cash Equivalents
RIH considers all of its short-term money market securities purchased with
maturities of three months or less to be cash equivalents. The carrying value of
cash equivalents approximates fair value due to the short maturity of these
instruments.
Inventories
Inventories of provisions, supplies and spare parts are carried at the
lower of cost (first-in, first-out) or market.
Property and Equipment
Property and equipment are depreciated over their estimated useful lives
using the straight-line method for financial reporting purposes.
F-27
<PAGE> 136
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Casino Reinvestment Development Authority ("CRDA") Obligations
Under the New Jersey Casino Control Act ("Casino Control Act"), RIH is
obligated to purchase CRDA bonds, which will bear a below-market interest rate,
or make an alternative qualifying investment. RIH charges to expense an
estimated discount related to CRDA investment obligations as of the date the
obligation arises based on fair market interest rates of similar quality bonds
in existence as of that date. On the date RIH actually purchases the CRDA bond,
the estimated discount previously recorded is adjusted to reflect the actual
terms of the bonds issued and the then existing fair market interest rate for
similar quality bonds. The discount on CRDA bonds purchased is amortized to
interest income over the life of the bonds using the effective interest rate
method.
Income Taxes
RIH and RII's other domestic subsidiaries file consolidated federal income
tax returns with RII.
Effective January 1, 1993 RIH adopted the liability method of accounting
prescribed by Statement of Financial Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes." Although RIH is a member of a consolidated group
for federal income tax purposes, RIH applies SFAS 109 on a separate return basis
for financial reporting purposes.
Prior to the adoption of SFAS 109 RIH had agreed with RII to provide for
U.S. federal and state income taxes using a combined rate of 40%. Material
transactions which would have been subject to combined tax rates significantly
different from the 40% rate were to be separately tax effected. The resulting
liability was settled on a current basis.
NOTE 2 -- RECEIVABLES
Components of receivables at December 31 were as follows:
<TABLE>
<CAPTION>
1992 1993
------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Gaming....................................................... $ 8,703 $ 8,116
Less allowance for doubtful accounts.................... (4,200) (4,498)
------- -------
4,503 3,618
------- -------
Non-gaming:
Hotel and related....................................... 450 534
Other................................................... 501 1,002
------- -------
951 1,536
Less allowance for doubtful accounts.................... (48) (40)
------- -------
903 1,496
------- -------
$ 5,406 $ 5,114
------- -------
------- -------
</TABLE>
NOTE 3 -- NOTE RECEIVABLE FROM AFFILIATE
In 1988, RIH loaned $50,000,000 pursuant to a pre-arranged back-to-back
loan to Resorts International (Bahamas) 1984 Limited ("RIB"), an indirect wholly
owned subsidiary of RII, in exchange for a promissory note (the "RIB Note").
Such note is payable on demand and bears interest at 13 1/2% per annum, with
interest payments due each May 1 and November 1. The note is guaranteed by
certain of RIB's subsidiaries. The guarantees are secured by mortgages on the
Paradise Island Resort & Casino, the Ocean Club Golf & Tennis Resort, and the
Paradise Paradise Beach Resort on Paradise Island in The Bahamas, and all
furniture, machinery and equipment used in connection therewith. The RIB Note
and the mortgages securing payment
F-28
<PAGE> 137
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
thereof have been assigned as part of the collateral for the Senior Secured
Redeemable Notes due April 15, 1994 issued by RII (the "Series Notes"). See
Notes 6 and 12.
NOTE 4 -- PROPERTY AND EQUIPMENT
Components of property and equipment at December 31 were as follows:
<TABLE>
<CAPTION>
1992 1993
-------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Land and land rights....................................... $ 53,250 $ 53,250
Land improvements.......................................... 130 158
Hotel and other buildings.................................. 93,235 104,475
Furniture, machinery and equipment......................... 31,168 40,456
Construction in progress................................... 326 802
-------- --------
178,109 199,141
Less accumulated depreciation......................... (22,420) (35,821)
-------- --------
$155,689 $163,320
-------- --------
-------- --------
</TABLE>
Substantially all of RIH's property and equipment has been pledged as
collateral for the Series Notes issued by RII. See Note 6.
NOTE 5 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Components of accounts payable and accrued liabilities at December 31 were
as follows:
<TABLE>
<CAPTION>
1992 1993
------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
Accrued payroll and related taxes and benefits............... $10,530 $ 9,159
Accrued gaming taxes, fees and related assessments........... 6,556 6,620
Customer deposits and unearned revenues...................... 2,294 3,363
Trade payables............................................... 1,528 1,847
Other accrued liabilities.................................... 5,165 3,824
------- -------
$26,073 $24,813
------- -------
------- -------
</TABLE>
NOTE 6 -- NOTES PAYABLE TO AFFILIATE
In 1988, GGRI, Inc. ("GGRI"), a subsidiary of RII, issued $325,000,000
principal amount of publicly traded notes. GGRI loaned the proceeds of the notes
to RIH in exchange for (i) two promissory notes payable to GGRI (the "RIH-GGRI
Notes"); (ii) a first mortgage on the Resorts Casino Hotel and the other
properties owned by RIH, and a first priority security interest in the personal
property of RIH; and (iii) the assignment of the RIB Note for $50,000,000 and
mortgage securing such note. See Note 3.
In 1990 the terms of the RIH-GGRI Notes were modified and such amended
notes were pledged as collateral for the Series Notes issued by RII. In 1992 the
notes were further amended (the "Second Amended RIH-GGRI Notes").
The sole purpose of the Second Amended RIH-GGRI Notes is to collateralize
RII's Series Notes. The Second Amended RIH-GGRI Notes are payable on demand
after April 15, 1994 and are non-interest bearing, but the principal due on
demand by GGRI accretes according to a schedule. As of April 15, 1994, the
principal amount of the notes would accrete to $446,150,000. However, GGRI and
RIH have entered into an intercompany agreement whereby GGRI will not require
payment of the amount in excess of the original
F-29
<PAGE> 138
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$325,000,000 principal amount of the notes unless GGRI is instructed to do so by
the Indenture Trustee or other collateral pledgee of the Series Notes. At
December 31, 1993 the accretion in principal amount of these notes in excess of
$325,000,000 amounted to $109,943,000.
The Second Amended RIH-GGRI Notes and the RIB Note described in Note 3
relate to intercompany loans which are not anticipated to be repaid in the
ordinary course of business. Also, RII has proposed a restructuring of the
Series Notes (see Note 12), which may also affect these and other intercompany
relationships among RII's subsidiaries. Thus, it is not practicable at this time
to estimate the fair value of RIH's intercompany notes without incurring
excessive costs. RIH's assets were restated to their estimated fair values at
August 31, 1990. See Note 4 for a summary of RIH's property and equipment
balances.
The indenture for RII's Series Notes restrict RIH from the incurrence of
additional indebtedness, with certain exceptions.
NOTE 7 -- OTHER LONG-TERM DEBT
The other long-term debt consists of capitalized lease obligations under
which RIH is the lessee of certain equipment. These leases expire through 1996
and bear interest rates from 15.1% to 21.0%.
NOTE 8 -- RELATED PARTY TRANSACTIONS
RIH recorded the following income and expenses from RII and other
affiliates:
<TABLE>
<CAPTION>
1991 1992 1993
------ ------ ------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Income -- RIB
Interest............................................... $6,750 $6,750 $6,750
------ ------ ------
------ ------ ------
Expenses -- RII
Parent services fee.................................... $8,154 $8,629 $8,911
Property rentals....................................... 325 325 325
------ ------ ------
$8,479 $8,954 $9,236
------ ------ ------
------ ------ ------
</TABLE>
RII charges RIH a fee of three percent of gross revenues for administrative
and other services. Also, recapitalization costs reflected on the consolidated
statements of operations represent RIH's allocated portion, approximately
one-third, of RII's consolidated recapitalization costs.
In addition to the above, charges for insurance costs are allocated to RIH
based on relative amounts of operating revenue, payroll, property value, or
other appropriate measures.
License and Services Agreement
In April 1993, RII, RIH and The Griffin Group, Inc. (the "Griffin Group"),
a corporation controlled by Merv Griffin, Chairman of the Board of RII, entered
into a license and services agreement (the "Griffin Services Agreement")
effective as of September 17, 1992, upon the expiration of the previous license
and services agreement.
Pursuant to the Griffin Services Agreement, Griffin Group granted RII and
RIH a non-exclusive license to use the name and likeness of Merv Griffin to
advertise and promote the facilities and operations of RII and its subsidiaries.
Also pursuant to the Griffin Services Agreement, Mr. Griffin is to provide
certain services to RII and RIH, including serving as Chairman of the Board of
RII and as a host, producer and featured performer in various shows to be
presented in Resorts Casino Hotel, and furnishing marketing and consulting
services.
F-30
<PAGE> 139
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Griffin Services Agreement is to continue until the later of September
17, 1996 or the fourth anniversary of the consummation of a Reorganization (as
defined, which would include a restructuring such as that discussed in Note 12)
of RII; but in no event shall the term extend beyond September 17, 1997. If a
Reorganization has not been consummated by September 17, 1996, then the Griffin
Services Agreement shall terminate on that date. The Griffin Services Agreement
provides for earlier termination under certain circumstances including, among
others, a change of control (as defined) of RII and RIH and Mr. Griffin ceasing
to serve as Chairman of the Board of RII.
The Griffin Services Agreement provides for compensation to Griffin Group
in the amount of $2,000,000 for the year ended September 16, 1993, and in
specified amounts for each of the following years, which increase at
approximately 5% per year. In accordance with the Griffin Services Agreement,
upon signing RIH paid Griffin Group $4,100,000, representing compensation for
the first two years. Thereafter, the Griffin Services Agreement calls for annual
payments on September 17, each representing a prepayment for the year ending two
years hence. In the event of an early termination of the Griffin Services
Agreement, and depending on the circumstances of such early termination, all or
a portion of the compensation paid to Griffin Group in respect of the period
subsequent to the date of termination may be required to be repaid to RII and
RIH.
RII and RIH agreed to indemnify, defend and hold harmless Griffin Group and
Mr. Griffin against certain claims, losses and costs, and to maintain certain
insurance coverage with Mr. Griffin and Griffin Group as named insureds.
NOTE 9 -- RETIREMENT PLANS
RIH has a defined contribution plan (the "Savings Plan"), in which
substantially all non-union employees are eligible to participate. Employees of
certain other affiliated companies are also eligible to participate in the
Savings Plan. Under the Savings Plan, eligible participating employees may
contribute up to a total of 4% of their annual cash compensation as a basic
contribution and may also elect to contribute up to an additional 10% as a
voluntary contribution. RIH and other subsidiaries of RII contribute an amount
equal to 50% of their employees' basic contributions and, on a discretionary
basis, may make additional contributions. RIH's contributions under the Savings
Plan were $654,000, $665,000 and $681,000 for the years 1991, 1992 and 1993,
respectively.
Union employees are covered by various multi-employer pension plans to
which contributions are made by RIH and other unrelated employers. Contributions
by RIH were $745,000, $827,000 and $844,000 for the years 1991, 1992 and 1993,
respectively.
NOTE 10 -- INCOME TAXES
As discussed in Note 1 RIH adopted SFAS 109 effective January 1, 1993. In
connection with the adoption of SFAS 109 RIH's deferred tax liability of
$19,000,000 as of January 1, 1993 was transferred to RIH from RII. There were no
other effects on the accompanying consolidated financial statements.
F-31
<PAGE> 140
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
RIH's deferred tax liabilities and assets as of December 31, 1993 were as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS OF DOLLARS)
<S> <C>
Deferred tax liabilities:
Basis differences on land............................. $ (19,300)
Other................................................. (1,300)
-----------
Total deferred tax liabilities................... (20,600)
-----------
Deferred tax assets:
Net operating loss carryforwards...................... 65,800
Basis differences on property and equipment, excluding
land................................................ 3,500
Book reserves not yet deductible for tax.............. 13,900
Tax credit carryforwards.............................. 2,000
Other................................................. 100
-----------
Total deferred tax assets........................ 85,300
Valuation allowance for deferred tax assets........... (84,100)
-----------
Deferred tax assets, net of valuation
allowance...................................... 1,200
-----------
Net deferred tax liabilities............................... $ (19,400)
-----------
-----------
</TABLE>
In August 1993 tax law changes were enacted which resulted in an increase
in RIH's federal income tax rate. The increase resulted in a $400,000 increase
in RIH's deferred income tax liability and a deferred income tax provision of
the same amount. The provision for income taxes in 1993 also includes a current
federal provision of $2,600,000 related to federal taxable income generated in
1993, which is offset by a deferred federal benefit of $2,600,000 resulting from
the recognition of the carryback of future deductible amounts.
The effective income tax rate on earnings before income taxes varies from
the statutory federal income tax rate as a result of the following factors:
<TABLE>
<CAPTION>
1993
------
<S> <C>
Statutory federal income tax rate........................................... (35.0)%
Deferred income tax benefit based on carryback of temporary differences..... 15.7%
Net operating loss utilization.............................................. 16.3%
Other, including impact of increase in tax rate............................. .6%
------
Effective tax rate.......................................................... (2.4)%
------
------
</TABLE>
As described in Note 1, prior to the adoption of SFAS 109, RIH had an
agreement with RII to provide for federal and state income taxes at a combined
rate of 40%. In 1991 and 1992 this resulted in income tax expense of $8,704,000
and $10,942,000, respectively.
For federal tax purposes RIH had net operating loss carryforwards of
approximately $188,000,000 at December 31, 1993 which expire from 2003 through
2005. These loss carryforwards were produced in periods prior to a change in
ownership of the consolidated group of which RIH is a part; therefore, these
loss carryforwards are limited in their availability to offset future taxable
income.
At December 31, 1993, RIH had net operating loss carryforwards in New
Jersey of approximately $156,000,000, which expire from 1994 through 1997.
F-32
<PAGE> 141
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Also, for federal tax purposes, RIH had tax credit carryforwards of
$2,000,000 at December 31, 1993 which expire from 1998 through 2008.
NOTE 11 -- STATEMENTS OF CASH FLOWS
Supplemental disclosure required by Statement of Financial Accounting
Standards No. 95, "Statement of Cash Flows," is presented below for the periods
indicated.
<TABLE>
<CAPTION>
1991 1992 1993
------- ------- -------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Reconciliation of net earnings to net cash provided by operating
activities:
Net earnings................................................... $13,057 $16,414 $16,363
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Recapitalization costs................................. 874 2,727
Depreciation........................................... 9,084 11,402 13,664
Provision for doubtful receivables..................... 3,480 1,414 901
Net loss on sale of property........................... 268 8 323
Deferred tax provision................................. 400
Provision for discount on CRDA obligations, net of
amortization......................................... 1,574 1,447 1,538
Net increase in receivables............................ (2,199) (346) (609)
Net (increase) decrease in interest receivable from
affiliate............................................ (3,375) 3,375
Net (increase) decrease in inventories and prepaid
expenses............................................. 1,724 (580) (3,992)
Net (increase) decrease in deferred charges and other
assets............................................... 189 (1,309) (754)
Net decrease in accounts payable and accrued
liabilities.......................................... (898) (1,531) (1,287)
------- ------- -------
Net cash provided by operating activities...................... $26,279 $24,418 $32,649
------- ------- -------
------- ------- -------
Non-cash investing and financing transactions:
Increase in liabilities for additions to property and
equipment and other assets................................ $ 1,180 $ 112 $ 632
------- ------- -------
------- ------- -------
</TABLE>
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
CRDA
The Casino Control Act, as originally adopted, required a licensee to make
investments equal to 2% of the licensee's gross revenue (as defined under the
Casino Control Act) (the "investment obligation") for each calendar year,
commencing in 1979, in which such gross revenue exceeded its "cumulative
investments" (as defined in the Casino Control Act). A licensee had five years
from the end of each calendar year to satisfy this investment obligation or
become liable for an "alternative tax" in the same amount. In 1984, the New
Jersey legislature amended the Casino Control Act so that these provisions now
apply only to investment obligations for the years 1979 through 1983.
Effective for 1984 and subsequent years, the amended Casino Control Act
requires a licensee to satisfy its investment obligation by purchasing bonds to
be issued by the CRDA, or by making other investments authorized by the CRDA, in
an amount equal to 1.25% of a licensee's gross revenue. If the investment
obligation is not satisfied, then the licensee will be subject to an investment
alternative tax of 2.5% of gross revenue. Since 1985, a licensee has been
required to make quarterly deposits with the CRDA against its current year
investment obligation.
F-33
<PAGE> 142
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
An analysis of RIH's investment obligations under the Casino Control Act
and RIH's means of settlement since 1979 follows:
<TABLE>
<CAPTION>
1979-1983 1984-1993 TOTAL
-------- -------- --------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Investment obligations................................ $(21,637) $(29,172) $(50,809)
Means of settlement:
Housing related investments under audit.......... 13,104 13,104
Housing related investments previously
approved....................................... 1,000 1,000
CRDA deposits/bond purchases..................... 7,533 28,479 36,012
-------- -------- --------
Remaining investment obligation at December 31, 1993,
which was deposited in January 1994................. $ 0 $ (693) $ (693)
-------- -------- --------
-------- -------- --------
</TABLE>
With regard to the housing related investments under audit, in January
1988, the CRDA notified RIH of its interpretation as to the periods of time
during which expenditures could be made to satisfy investment obligations.
CRDA's interpretation differs from RIH's and if found to be correct would
decrease the amount of RIH's qualifying expenditures by approximately $5,000,000
to $6,000,000. RIH believes that its interpretation is correct and intends to
contest this issue.
RIH also received a letter dated November 9, 1989, from the State of New
Jersey Department of the Treasury (the "Treasury") stating that the housing
related investments made by RIH were not sufficient to meet its investment
obligation for the years 1979 through 1983. The letter also stated that
alternative tax in the amount of $21,637,000 was due for those years, in
addition to penalties and interest thereon which amounted to $12,514,000 as of
the date of the letter. As set forth in the table above, RIH believes that
$8,533,000 of such obligations have been settled; $7,533,000 in cash and
$1,000,000 by previously approved housing related investments. Also, RIH has
received audit reports issued by an agency acting on behalf of the Treasury
identifying $10,165,000 of project development costs available for investment
credit towards the investment obligation. This leaves a total of $2,939,000 of
housing related investments under audit in question. RIH has notified the
Treasury that it takes exception to the Treasury's computation of amounts due.
Further, RIH believes that the $2,939,000 of housing related investments in
question will be found, under further audit, to have been satisfied.
Although these matters have been dormant for some time, RIH was recently
verbally contacted by the Treasury and expects further communication regarding
the Treasury's proposal for a resolution of these matters in the near future. If
the CRDA's interpretation as to the periods of time during which qualifying
expenditures can be made is found to be correct, or if the Treasury's issue is
determined adversely, RIH could be required to pay the relevant amount in cash
to the CRDA. In the opinion of management, based upon advice of counsel, the
aggregate liability, if any, arising from these issues will not have a material
adverse effect on the accompanying consolidated financial statements.
As reflected in the table above, through December 31, 1993, RIH had made
CRDA deposits/bond purchases totalling $36,012,000. However, in August 1989 RIH
donated $12,048,000 to the CRDA in exchange for which RIH was relieved of its
obligation to purchase CRDA bonds of $18,193,000. Because RIH already had the
$18,193,000 for bond purchases on deposit with the CRDA, the difference between
this amount and the amount of the donation, or $6,145,000, was refunded to RIH
in August 1989. Thus, at December 31, 1993, RIH had a remaining balance of
$4,873,000 face value of bonds issued by the CRDA and had $12,946,000 on deposit
with the CRDA. These bonds and deposits, net of an estimated discount charged to
expense to reflect the below-market interest rate payable on the bonds, were
recorded as other assets in RIH's Consolidated Balance Sheets.
F-34
<PAGE> 143
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RIH records charges to expense to reflect the below-market interest rate
payable on the bonds it may have to purchase to fulfill its investment
obligation at the date the obligation arises. The charges in 1991, 1992 and 1993
for discounts on obligations arising in those years were $1,574,000, $1,451,000
and $1,541,000, respectively.
Proposed Restructuring of Series Notes
On October 25, 1993 RII and certain of its subsidiaries, including RIH,
filed a Form S-4 Registration Statement with the Securities and Exchange
Commission describing in detail a restructuring (the "Restructuring") of the
Series Notes which RII and GGRI, the guarantor of the Series Notes, propose to
accomplish through a prepackaged bankruptcy joint plan of reorganization (the
"Plan"). On February 1, 1994, after certain amendments, the Registration
Statement was declared effective. On February 5, 1994 the solicitation of
acceptances of the Plan from holders of the Series Notes and equity interests in
RII commenced.
The Restructuring contemplates the exchange of the Series Notes for, among
other things, $125,000,000 principal amount of 11% mortgage notes due 2003 (the
"Mortgage Notes") to be issued by Resorts International Hotel Financing, Inc.
("RIHF"), a newly formed subsidiary of RII, and to be secured by a mortgage on
Merv Griffin's Resorts Casino Hotel in Atlantic City (the "Resorts Casino
Hotel") and guaranteed by Resorts International Hotel, Inc. ("RIH"), RII's
subsidiary that owns and operates Resorts Casino Hotel, and $35,000,000
principal amount of 11.375% junior mortgage notes due 2004 (the "Junior Mortgage
Notes") to be issued by RIHF and to be secured by a junior mortgage on the
Resorts Casino Hotel and guaranteed by RIH.
The Restructuring also provides for a senior credit facility (the "Senior
Facility") which will allow RIHF to borrow up to $20,000,000 through the
issuance of notes (the "Senior Facility Notes"). The Senior Facility is to be
available for a single borrowing during the one-year period from the date the
Plan becomes effective. The Senior Facility Notes will be guaranteed by RIH,
bear interest at 11% per year and mature in 2002.
The Restructuring contemplates that, in order to meet RIHF's debt service
requirements, RIH will issue intercompany notes payable to RIHF whose amounts
and terms will mirror those of the Mortgage Notes, the Junior Mortgage Notes
and, to the extent issued, the Senior Facility Notes. Various intercompany
transactions are proposed in connection with RIH's issuance of such notes
payable to RIHF which, if effected, would result in, among other things, (i) the
cancellation of the $325,000,000 Second Amended RIH-GGRI Notes, (ii) the
cancellation of the $50,000,000 RIB Note and (iii) RIH becoming a wholly owned
subsidiary of GGRI.
Consummation of the Plan is subject to a number of conditions including,
but not limited to, confirmation by the Bankruptcy Court and receipt of required
regulatory approvals of the Casino Control Commission and the Government of The
Bahamas.
The solicitation period ended on March 15, 1994. The solicitation agent has
advised RII and GGRI that they have received the requisite acceptances for
confirmation of the Plan. They intend to proceed with the filing of their
prepackaged bankruptcy cases; however, there can be no assurance as to whether
or when the Restructuring will be effected, or that any restructuring that may
ultimately be consummated will be on terms similar to those of the
Restructuring.
Litigation
RIH is a defendant in certain litigation. In the opinion of management,
based upon the advice of counsel, the aggregate liability, if any, arising from
such litigation will not have a material adverse effect on the accompanying
consolidated financial statements.
F-35
<PAGE> 144
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Resorts International, Inc.
Resorts International Hotel Financing, Inc.
We have audited the accompanying balance sheet of Resorts International
Hotel Financing, Inc. ("RIHF") as of December 31, 1993. RIHF, a company formed
by Resorts International, Inc. ("RII"), was organized for the purpose of issuing
public debt securities in connection with a plan of reorganization of RII. RIHF
is a wholly owned subsidiary of RII. This balance sheet is the responsibility of
RIHF's management. Our responsibility is to express an opinion on this balance
sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of RIHF at December 31, 1993, in
conformity with generally accepted accounting principles.
ERNST & YOUNG
Philadelphia, Pennsylvania
March 17, 1994
F-36
<PAGE> 145
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------
<S> <C>
ASSETS
Due from RII................................................................ $10
---
---
SHAREHOLDER'S EQUITY
Shareholder's equity -- Capital in excess of par............................ $10
---
---
</TABLE>
See Notes to Balance Sheet of RIHF.
F-37
<PAGE> 146
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
NOTES TO BALANCE SHEET
NOTE 1 -- ORGANIZATION AND OPERATIONS
Resorts International Hotel Financing, Inc. ("RIHF") was incorporated under
the laws of the State of Delaware in June 1993 and has had no operations to
date. RIHF, a wholly owned subsidiary of Resorts International, Inc. ("RII"),
was organized for the purpose of issuing public debt securities in connection
with a plan of reorganization of RII. RIHF is authorized to issue 1,000 shares
with a par value of $.01 per share. One share was issued to RII for $10 in
October 1993.
NOTE 2 -- PROPOSED ISSUANCE OF NOTES
On October 25, 1993, RII and certain of its subsidiaries, including RIHF,
filed a Form S-4 Registration Statement with the Securities and Exchange
Commission describing in detail a restructuring (the "Restructuring") of the
Senior Secured Redeemable Notes due April 15, 1994 (the "Series Notes") which
RII and GGRI, Inc. ("GGRI"), a subsidiary of RII and the guarantor of the Series
Notes, propose to accomplish through a prepackaged bankruptcy joint plan of
reorganization (the "Plan"). On February 1, 1994, after certain amendments, the
Registration Statement was declared effective. On February 5, 1994 the
solicitation of acceptances of the Plan from holders of the Series Notes and
equity interests in RII commenced.
The Restructuring contemplates the exchange of the Series Notes for, among
other things, $125,000,000 principal amount of 11% mortgage notes due 2003 (the
"Mortgage Notes") to be issued by RIHF and to be secured by a mortgage on Merv
Griffin's Resorts Casino Hotel in Atlantic City (the "Resorts Casino Hotel") and
guaranteed by Resorts International Hotel, Inc.("RIH"), RII's subsidiary that
owns and operates Resorts Casino Hotel, and $35,000,000 principal amount of
11.375% junior mortgage notes due 2004 (the "Junior Mortgage Notes") to be
issued by RIHF and to be secured by a junior mortgage on the Resorts Casino
Hotel and guaranteed by RIH.
The Restructuring also provides for a senior credit facility (the "Senior
Facility") which will allow RIHF to borrow up to $20,000,000 through the
issuance of notes (the "Senior Facility Notes"). The Senior Facility is to be
available for a single borrowing during the one-year period from the date the
Plan becomes effective. The Senior Facility Notes will be guaranteed by RIH,
bear interest at 11% per year and mature in 2002.
The Restructuring contemplates that, in order to meet RIHF's debt service
requirements, RIH will issue intercompany notes payable to RIHF whose amounts
and terms will mirror those of the Mortgage Notes, the Junior Mortgage Notes
and, to the extent issued, the Senior Facility Notes.
Consummation of the Plan is subject to a number of conditions including,
but not limited to, confirmation by the Bankruptcy Court and receipt of required
regulatory approvals of the Casino Control Commission and the Government of The
Bahamas.
The solicitation period ended on March 15, 1994. The solicitation agent has
advised RII and GGRI that they have received the requisite acceptances for
confirmation of the Plan. They intend to proceed with the filing of their
prepackaged bankruptcy cases; however, there can be no assurance as to whether
or when the Restructuring will be effected, or that any restructuring that may
ultimately be consummated will be on terms similar to those of the
Restructuring.
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<PAGE> 147
RESORTS INTERNATIONAL, INC.
CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
The table below reflects selected quarterly financial data for the years
1992 and 1993.
<TABLE>
<CAPTION>
1992 1993
----------------------------------------- -----------------------------------------
FOR THE QUARTER FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
- ------------------------------------------ -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues........................ $111,631 $106,246 $112,377 $106,680 $114,154 $106,697 $117,007 $101,706
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Earnings (loss) from operations........... $ 5,789 $ 4,847 $ 9,471 $ 1,395 $ 9,106 $ 1,791 $ 9,783 $ (7,782)
Recapitalization costs.................... (300) (1,043) (994) (511) (593) (1,156) (3,130) (3,910)
Other income (deductions), net (A)........ (18,501) (18,748) (17,744) (18,463) (21,411) (26,003) (25,757) (32,102)
-------- -------- -------- -------- -------- -------- -------- --------
Loss before income taxes.................. (13,012) (14,944) (9,267) (17,579) (12,898) (25,368) (19,104) (43,794)
Income tax benefit (expense).............. 1,348 (1,000)
-------- -------- -------- -------- -------- -------- -------- --------
Net loss.................................. $(13,012) $(14,944) $ (9,267) $(16,231) $(12,898) $(25,368) $(20,104) $(43,794)
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
Net loss per share of common stock........ $ (.65) $ (.74) $ (.46) $ (.80) $ (.64) $ (1.26) $ (1.00) $ (2.17)
-------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- --------
</TABLE>
- ------------------
(A) Includes interest income, interest expense and amortization of debt
discount.
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<PAGE> 148
RESORTS INTERNATIONAL HOTEL, INC.
CONSOLIDATED SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
The table below reflects selected quarterly financial data for the years
1992 and 1993.
<TABLE>
<CAPTION>
1992 1993
---------------------------------------- ----------------------------------------
FOR THE QUARTER FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
- ------------------------------------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues........................ $61,587 $65,907 $75,586 $59,660 $60,336 $67,678 $80,800 $62,665
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) from operations........... $ 2,159 $ 5,287 $11,975 $ 1,628 $ 2,444 $ 2,565 $10,796 $(3,737)
Recapitalization costs.................... (75) (335) (294) (170) (198) (317) (1,065) (1,147)
Other income (deductions), net (A)........ 1,735 1,754 1,842 1,850 1,796 1,763 1,882 1,981
------- ------- ------- ------- ------- ------- ------- -------
Earnings (loss) before income taxes....... 3,819 6,706 13,523 3,308 4,042 4,011 11,613 (2,903)
Income tax expense........................ (1,529) (2,681) (5,410) (1,322) (400)
------- ------- ------- ------- ------- ------- ------- -------
Net earnings (loss)....................... $ 2,290 $ 4,025 $ 8,113 $ 1,986 $ 4,042 $ 4,011 $11,213 $(2,903)
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
- ---------------
(A) Includes interest income and interest expense.
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<PAGE> 149
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Company in connection with the sale of the Mortgage Notes, Units and Common
Stock being registered. All items are estimated except the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 44,393
Printing.......................................................... 65,000
Legal fees and expenses........................................... 215,000
Accounting fees and expenses...................................... 10,000
Transfer agent fees............................................... 40,200
Miscellaneous..................................................... 25,407
--------
Total................................................... $400,000
--------
--------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
RII and RIHF are Delaware corporations. Section 145 ("Section 145") of the
Delaware General Corporation Law ("DGCL") provides a Delaware corporation with
broad powers to indemnify its officers and directors in certain circumstances.
Additionally, Section 102(b)(7) of the DGCL permits Delaware corporations
to include a provision in their certificates of incorporation eliminating or
limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provisions shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
section 174 of the DGCL, or (iv) for any transaction from which the director
derived an improper personal benefit.
RII. As permitted under the DGCL, Article Fifth of RII's Restated
Certificate of Incorporation ("Article Fifth") provides that:
(1) A director of RII shall not be personally liable to RII or its
shareholders for monetary damages for breach of fiduciary duty as a
director except for liability (i) for any breach of the director's duty of
loyalty to RII or its shareholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from
which the director derived an improper personal benefit. If the DGCL is
amended after approval by the shareholders of this Article Fifth to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of RII shall be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended. Any repeal or modification of this Section by the shareholders of
RII shall be prospective only and shall not adversely affect any right or
protection of a director of RII existing at the time of such repeal or
modification.
(2) RII shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal administrative or
investigative (other than an action by or in the right of RII) by reason of
the fact that he is or was or has agreed to become a director or officer of
RII, or is or was serving or has agreed to serve at the request of RII as a
director or officer of another corporation, partnership, joint venture,
trust or other enterprise, or by reason of any action alleged to have been
taken or omitted in such capacity, against costs, charges, expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom,
if he acted in good faith and in a manner he reasonably believed to be in
or not opposed
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<PAGE> 150
to the best interests of RII. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of
RII.
(3) RII shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of RII to procure a judgment in its favor
by reason of the fact that he is or was or has agreed to become a director
or officer of RII, or is or was serving or has agreed to serve at the
request of RII as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, against
costs, charges and expenses (including attorneys' fees) actually and
reasonably incurred by him or on his behalf in connection with the defense
or settlement of such action or suit and any appeal therefrom, if he acted
in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of RII except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to RII unless and only to the extent
that the Court of Chancery of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of such liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
costs, charges and expenses which the Court of Chancery or such other court
shall deem proper.
(4) Notwithstanding the other provisions of Article Fifth, to the
extent that a director or officer of RII has been successful on the merits
or otherwise, including, without limitation, the dismissal of an action
without prejudice, in defense of any action, suit or proceeding referred to
in Sections 1 and 2 above, or in defense of any claim, issue or matter
therein, he shall be indemnified against all costs, charges and expenses
(including attorneys' fees) actually and reasonably incurred by him or on
his behalf in connection therewith.
(5) Any indemnification under Sections 1 and 2 above (unless ordered
by a court), shall be paid by RII unless a determination is made (i) by a
majority of the members of the Board of Directors who were not parties to
such action, suit or proceeding even if less than a quorum, or (ii) if such
a majority of the disinterested members of the Board of Directors so
direct, by independent legal counsel in a written opinion, or (iii) by the
stockholders, that indemnification of the director or officer is not proper
in the circumstances because he has not met the applicable standard of
conduct set forth in Sections 1 and 2 of Article Fifth.
(6) Costs, charges and expenses (including attorneys' fees) incurred
by a person referred to in Sections 1 and 2 above in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall
be paid by RII in advance of the final disposition of such action, suit or
proceeding, provided, however, that the payment of such costs, charges and
expenses (including attorneys' fees) incurred by a director or officer in
his capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such person while a director or
officer) in advance of the final disposition of such action, suit or
proceeding shall be made only upon receipt of an undertaking by or on
behalf of the director or officer to repay all amounts so advanced in the
event that it shall ultimately be determined that such director or officer
is not entitled to be indemnified by RII as authorized in Article Fifth.
Such costs, charges and expenses (including attorneys' fees) incurred by
other employees and agents may be so paid upon such terms and conditions,
if any, as the majority of the Board of Directors deems appropriate. The
majority of the Board of Directors may, in the manner set forth above, and
upon approval of such director, officer, employer, employee or agent of
RII, authorize RII's counsel to represent such person, in any action, suit
or proceeding, whether or not RII is a party to such action, suit or
proceeding.
(7) The indemnification provided by Article Fifth shall not be deemed
exclusive of any other rights to which any director, officer, employee or
agent seeking indemnification may be entitled under any law (common or
statutory), agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and so as to action
in another capacity while holding office or while
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<PAGE> 151
employed by or acting as agent for RII, and shall continue as to a person
who has ceased to be a director, officer, employee or agent, and shall
inure to the benefit of the estate, heirs, executors and administrators of
such person. All rights to indemnification under Article Fifth shall be
deemed to be a contract between RII and each director, officer, employee or
agent of RII who serves or served in such capacity at any time while
Article Fifth is in effect. Any repeal or modification of Article Fifth or
any repeal or modification of relevant provisions of the DGCL or any other
applicable laws shall not in any way diminish any rights to indemnification
of such director, officer, employee or agent or the obligations of RII
arising hereunder. Article Fifth shall be binding upon any successor
corporation of this Company, whether by way of acquisition, merger,
consolidation or otherwise.
(8) RII shall purchase and maintain insurance on behalf of any person
who is or was or has agreed to become a director, officer, employee or
agent of RII, or is or was serving at the request of RII as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising
out of his status as such, whether or not the corporation would have the
power to indemnify him against such liability under the provisions of
Article Fifth; provided, however, that such insurance is available on
acceptable terms, which determination shall be made by a vote of a majority
of the Board of Directors.
As permitted under the DGCL, Article V of RII's proposed Amended and
Restated Certificate of Incorporation provides that:
A. Elimination of Certain Liability of Directors. A director of RII
shall not be personally liable to RII or its stockholders for monetary
damages for breach of fiduciary duty as a director except for liability (i)
for any breach of the director's duty of loyalty to RII or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section
174 of the DGCL Law, or (iv) for any transaction from which the director
derived an improper personal benefit. If the DGCL is amended after the
Effective Date to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a
director of RII shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended. Any repeal or modification of this
Section by the stockholders of RII shall be prospective only and shall not
adversely affect any right or protection of a director of RII existing at
the time of such repeal or modification.
B. Actions, Suits or Proceedings Other than by or in the Right of
RII. RII shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of RII) by reason of the fact that he is
or was or has agreed to become a director or officer of RII, or is or was
serving or has agreed to serve at the request of RII as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges, expenses (including
attorneys fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of RII. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere
or its equivalent shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of RII.
C. Actions or Suits by or in the Right of RII. RII shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of RII
to procure a judgment in its favor by reason of the fact that he is or was
or has agreed to become a director or officer of RII, or is or was serving
or has agreed to serve at the request of RII as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
or by reason of any action alleged to have been taken or omitted in such
capacity, against costs, charges and expenses (including attorneys' fees)
actually and reasonably incurred by him or on his behalf in connection with
the defense or settlement of such action or suit and any appeal therefrom,
if he acted in good faith and in
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<PAGE> 152
a manner he reasonably believed to be in or not opposed to the best
interests of RII except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged
to be liable to RII unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of such
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnify for such costs, charges and
expenses which the Court of Chancery or such other court shall deem proper.
D. Indemnification for Costs, Charges and Expenses of Successful
Party. Notwithstanding the other provisions of this Article V, to the
extent that a director or officer of RII has been successful on the merits
or otherwise, including, without limitation, the dismissal of an action
without prejudice, in defense of any action, suit or proceeding referred to
in Sections A and B of this Article V, or in defense of any claim, issue or
matter therein, he shall be indemnified against all costs, charges and
expenses (including attorneys' fees) actually and reasonably incurred by
him or on his behalf in connection therewith.
E. Determination of Right to Indemnification. Any indemnification
under Sections A and B of this Article V (unless ordered by a court) shall
be paid by RII unless a determination is made (i) by a majority of the
members of the Board of Directors who were not parties to such action, suit
or proceeding even if less than a quorum, or (ii) if such a majority of the
disinterested members of the Board of Directors so direct, by independent
legal counsel in a written opinion, or (iii) by the stockholders, that
indemnification of the director or officer is not proper in the
circumstances because he has not met the applicable standard of conduct set
forth in Sections A and B of this Article V.
F. Advance of Costs, Charges and Expenses. Costs, charges and
expenses (including attorneys' fees) incurred by a person referred to in
Sections A and B of this Article V in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by
RII in advance of the final disposition of such action, suit or proceeding;
provided, however, that the payment of such costs, charges and expenses
(including attorneys' fees) incurred by a director or officer in advance of
the final disposition of such action, suit or proceeding shall be made only
upon receipt of an undertaking by or on behalf of the director or officer
to repay all amounts so advanced in the event that it shall ultimately be
determined that such director or officer is not entitled to be indemnified
by RII as authorized in this Article V. Such costs, charges and expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the majority of the
Board of Directors deems appropriate. The majority of the Board of
Directors may, in the manner set forth above, and upon approval of such
director, officer, employer, employee or agent of RII, authorize RII's
counsel to represent such person, in any action, suit or proceeding,
whether or not RII is a party to such action, suit or proceeding.
G. Procedure for Indemnification. Any indemnification under Sections
B, C and D, or advance of costs, charges or expenses (including attorneys'
fees) under Section F of this Article V, shall be made promptly, and in any
event within 60 days, upon the written request of the director or officer.
The right to indemnification or advances as granted by this Article V shall
be enforceable by the director or officer in any court of competent
jurisdiction, if RII denies such request, in whole or in part, or if no
disposition thereof is made within 60 days. Such person's costs and
expenses (including attorneys' fees) incurred in connection with
successfully establishing his right to indemnification, in whole or in
part, in any such action shall also be indemnified by RII. It shall be a
defense to any such action that the claimant has not met the standard of
conduct set forth in Sections B or C of this Article V, but the burden of
proving such defense shall be on RII. Neither the failure of RII (including
its Board of Directors, its independent legal counsel and its stockholders)
to have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections B or C of
this Article V, nor the act that there has been an actual determination by
RII (including its Board of Directors, its independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
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<PAGE> 153
H. Other Rights; Continuation of Right to Indemnification. The
indemnification provided by this Article V shall not be deemed exclusive of
any other rights to which any director, officer, employee or agent seeking
indemnification may be entitled under any law (common or statutory),
agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another
capacity while holding office or while employed by or acting as agent for
RII, and shall continue as to a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of the estate,
heirs, executors and administrators of such person. All rights to
indemnification under this Article V shall be deemed to be a contract
between RII and each director, officer, employee or agent of RII who serves
or served in such capacity at any time while this Article V is in effect.
Any repeal or modification of this Article V or any repeal or modification
of relevant provisions of the DGCL or any other applicable laws shall not
in any way diminish any rights to indemnification of such director,
officer, employee or agent or the obligations of RII arising hereunder.
This Article V shall be binding upon any successor corporation to RII,
whether by way of acquisition, merger, consolidation or otherwise.
I. Insurance. RII shall purchase and maintain insurance on behalf of
any person who is or was or has agreed to become a director, officer,
employee or agent of RII, or is or was serving at the request of RII as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him or on his behalf in any such capacity, or
arising out of his status as such, whether or not the corporation would
have the power to indemnify him against such liability under the provisions
of this Article V, provided, however, that such insurance is available on
reasonable and acceptable terms, which determination shall be made by a
vote of a majority of the Board of Directors.
J. Savings Clause. If this Article V or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then RII
(i) shall nevertheless indemnify each director and officer of RII, and (ii)
may nevertheless indemnify each employee and agent of RII, as to costs,
charges and expenses (including attorneys' fees), judgments, fine and
amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative, including an
action by or in the right of RII, to the full extent permitted by any
applicable portion of this Article V that shall not have been invalidated
and to the full extent permitted by applicable law.
K. Subsequent Amendment. No amendment, modification or repeal of
this Article V shall affect or impair in any way the rights of any director
or officer of RII to indemnification under the provisions hereof with
respect to any action, suit or proceeding arising out of, or relating to,
any actions, transactions or facts occurring prior to the final adoption of
such amendment, termination or appeal.
L. Subsequent Legislation. If the DGCL is amended to further expand
the indemnification permitted to directors, officers, employees or agents
of RII, then RII shall indemnify such persons to the fullest extent
permitted by the DGCA, as so amended.
RIHF. As permitted under DGCL, Article IX of RIHF's By-laws ("Article
Ninth") provides that:
(1) RIHF shall indemnify any person who shall be or shall have been a
party or shall be threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
RIHF) by reason of the fact that he shall be or shall have been a director,
officer, employee or agent of RIHF, or shall be or shall have been serving
at the request of RIHF as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he shall have acted in good faith and in a
manner he reasonably shall have believed to be in or not opposed to the
best interests of RIHF, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct shall have been
unlawful. The termination of any action, suit or proceedings by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
shall not have acted in good faith and in a manner which he reasonably
shall have believed to be in or not
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<PAGE> 154
opposed to the best interests of RIHF, and, with respect to any criminal
action or proceeding, that he shall have had reasonable cause to believe
that his conduct shall have been unlawful.
(2) RIHF shall indemnify any person who shall be or shall have been a
party or shall be threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of RIHF to procure a
judgment in its favor by reason of the fact that he shall be or shall have
been a director, officer, employee or agent of RIHF, or shall be or shall
have been serving at the request of RIHF as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of
such action or suit if he shall have acted in good faith and in a manner he
reasonably shall have believed to be in or not opposed to the best
interests of RIHF, except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been
adjudged to be liable to RIHF unless and only to the extent that the court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person shall be fairly
and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
(3) Any indemnification under Section 1 or 2 above (unless ordered by
a court) shall be made by RIHF only as authorized in the specific case upon
a determination that indemnification of the director, officer, employee or
agent shall be proper in the circumstances because he shall have met the
applicable standard of conduct set forth in Section 1 or 2 above. Such
determination shall be made (i) by the Board by a majority vote of a quorum
consisting of directors who shall not have been parties to such action,
suit or proceeding, (ii) if such a quorum shall not be obtainable, or, even
if obtainable, if a quorum of disinterested directors shall so direct, by
independent legal counsel in a written opinion, or (iii) by the
stockholders.
(4) Notwithstanding the other provisions of Article Ninth, to the
extent that a director, officer, employee or agent of RIHF shall be
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1 or 2 above, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(5) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by RIHF in advance of the final
disposition of such action, suit or proceeding as authorized by the Board
in the specific case upon receipt of an undertaking by or on behalf of such
officer or director to repay such amount if it shall ultimately be
determined that he shall not be entitled to be indemnified by RIHF as
authorized in this Article. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board deems appropriate.
(6) The indemnification provided by Article Ninth shall not be deemed
exclusive of any other rights to which a person seeking indemnification may
be entitled by law or under any agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(7) Upon resolution passed by the Board, RIHF may purchase and
maintain insurance on behalf of any person who shall be or shall have been
a director, officer, employee or agent of RIHF, or shall be or shall have
been serving at the request of RIHF as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not
RIHF would have the power to indemnify him against such liability under the
provisions of Article Ninth.
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<PAGE> 155
RIH. RIH is a New Jersey corporation. Section 14A:3-5 of the New Jersey
Business Corporation Act ("NJBCA") grants a corporation broad powers to
indemnify officers and directors of the corporation, in certain situations. As
permitted under the NJBCA, Article VIII of RIH's By-Laws provides that RIH shall
indemnify each present and future director and officer of the corporation
against, and each such director and officer shall be entitled without further
act on his part to indemnity from RIH for, all expenses (including the amount of
judgments and the amount of reasonable settlements made with a view to the
curtailment of costs of litigation, other than amounts paid to RIH itself)
reasonably incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved by reason of his being or having been
a director or officer of the corporation which he serves as a director or
officer at the request of RIH, whether or not he continues to be such director
or officer at the time of incurring such expenses; provided, however, that such
indemnity shall not include any expenses incurred by any such director or
officer (a) in respect of matters as to which he shall be finally adjudged in
any such action, suit or proceeding to have been derelict in the performance of
his duties as such director or officer or (b) in respect of any matter in which
any settlement is effected, to any amount in excess of the amount of expenses
which might reasonably have been incurred by such director or officer in
conducting such litigation to a final conclusion; provided, further, that in no
event shall anything herein contained be so construed as to protect, or to
authorize the corporation to indemnify, such director, or officer against any
liability to RIH or to its security holders to which he would otherwise be
subject by reason of his willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office as such
director or officer.
The foregoing right of indemnification shall inure to the benefit of the
heirs, executors or administrators of each such director or officer and shall be
in addition to all other rights to which such director or officer may be
entitled as a matter of law.
Registration Rights Agreement. Pursuant to Section 5 of the Registration
Rights Agreement, dated as of April 29, 1994, among RIHF, RII and RIH, and
Fidelity and TCW, on behalf of various funds and accounts (the "Holders" or a
"Holder," or the "Sellers" or a "Seller") that Fidelity and TCW advise or
manage,and which are to own, on the Effective Date, securities being registered
under this Registration Statement (the "Registrable Securities"), the Company
and the Holders of the Registrable Securities are subject to certain
indemnification provisions, including the following:
(a) Indemnification by the Company. The Company agrees to indemnify,
to the full extent permitted by law, each participating Holder of
Registrable Securities, its officers, directors, partners, employees and
agents and each person or entity that controls such Holder (within the
meaning of the [Securities] Act), and any investment advisor thereof or
agent therefor against all losses, claims, damages, liabilities and
expenses (including reasonable out-of-pocket costs of investigation and
reasonable legal expenses) arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in the Registration
Statement or prospectus or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a prospectus, in light of the
circumstances under which they are made) not misleading, except insofar as
the same arise out of or are based upon any information with respect to
such Seller furnished in writing to the Company by such Seller. The Company
will also indemnify any selling brokers, dealer managers and similar
securities industry professionals participating in the distribution and
their officers and directors and each person who controls such persons or
entities (within the meaning of the [Securities] Act) to the same extent as
provided above with respect to the indemnification of the Holders of
Registrable Securities.
(b) Indemnification by Holders of Registrable Securities. In
connection with the Registration Statement in which a Holder of Registrable
Securities is participating, each such Holder will furnish to the Company,
in writing, such information and affidavits with respect to such Holder as
the Company reasonably requests for use in connection with such
Registration Statement or any prospectus included therein and agrees to
indemnify, to the extent permitted by law, the Company, its directors,
officers, employees and agents and each person or entity that controls the
Company (within the meaning of the [Securities] Act), and any investment
advisor thereof or agent therefor against any losses, claims, damages,
liabilities and expenses (including reasonable out-of-pocket costs of
investigation and reasona-
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<PAGE> 156
ble legal expenses) arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in the Registration Statement
or prospectus or any omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances
under which they were made) not misleading, to the extent, but only to the
extent, that such untrue statement or omission is contained in or should
have been contained in any information or affidavit with respect to such
Holder so furnished in writing by such Holder expressly for inclusion in
such Registration Statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Within the past three years, RII has issued the following unregistered
securities in reliance upon the exemption provided by Section 1145 of the
Bankruptcy Code:
The indenture for the Series Notes issued pursuant to the Old Plan
allowed RII to satisfy all or any portion of interest accruing on the
Series Notes by making Payment-In-Kind payments in lieu of making cash
interest payments. On five semi-annual interest payment dates in the past
three years, RII issued an aggregate of approximately $63,500,000 principal
amount of Series A Notes and approximately $66,300,000 principal amount of
Series B Notes as Payment-In-Kind interest payments on the Series Notes to
holders of record on the record dates for the respective interest payments.
The Old Plan provided for the settlement of certain claims ("Other
Class 3C Claims") against RII and certain of its subsidiaries which were
outstanding as of the date the Company filed for relief under the
Bankruptcy Code through the issuance of Series B Notes and shares of RII's
Common Stock. At various dates during the past three years Other Class 3C
Claims of approximately $2,130,000 were settled through the issuance of
$457,000 principal amount of Series B Notes and 50,210 shares of Common
Stock to holders of Other Class 3C Claims.
Within the past three years, RII has issued the following unregistered
securities in reliance upon the exemption provided by Section 4(2) of the
Securities Act:
On June 21, 1991, RII awarded 5,000 shares of RII's Common Stock to
each of four members then serving on its Board of Directors (i.e., Antonio
C. Alvarez, J. Louis Binder, Warren Cowan and Paul C. Sheeline) in
recognition of their service to the Company. On June 21, 1991, the value of
these shares was $35,000 based upon the closing price of $1.75 per share on
the AMEX on that date. These 20,000 shares were issued on August 15, 1991.
Pursuant to an agreement dated March 1, 1992 (and amended on September
14, 1992) between Alvarez & Marsal, Inc. ("Alvarez & Marsal") and RII,
Alvarez & Marsal provided financial advisory services to the Company in
exchange for various cash fees and the issuance of 112,500 shares of RII's
Common Stock. According to the agreement, the shares were to be earned upon
receipt of the number and amount of consents sufficient to confirm a
"prepackaged" plan of reorganization under chapter 11 of the Bankruptcy
Code. The value of these shares on March 15, 1994, which was the date the
solicitation period for the Company's Plan ended and the requisite number
and amount of consents were received, was $155,000 based upon the closing
price of $1.375 per share on the AMEX on that date. These 112,500 shares
are to be issued as of a date prior to the Effective Date of the
Restructuring.
RII engaged Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") as of February 12, 1992 to provide financial advisory services to
the Company in exchange for various cash fees and shares of RII's Common
Stock. A total of 500,000 shares were earned during the period in which DLJ
provided services to the Company (between February 1992 and April 1993).
The value of these shares totalled $710,000 based upon the closing prices
on the AMEX during the period in which shares were earned. These 500,000
shares are to be issued as of a date prior to the Effective Date of the
Restructuring.
Within the past three years, RIHF has issued the following unregistered
securities in reliance upon the exemption provided by Section 4(2) of the
Securities Act:
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<PAGE> 157
In October 1993, in connection with its incorporation, RIHF issued one
share of its Common Stock to RII for $10.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. Exhibits
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2.01 Plan of Reorganization. (Incorporated by reference to Appendix A of the
Information Statement/Prospectus included in Form S-4 Registration Statement
No. 33-50733.)
3.01 Form of Amended and Restated Certificate of Incorporation of RII (as to be
in effect on the Effective Date of the Plan).
3.02 Form of Amended and Restated By-Laws of RII (as to be in effect on the
Effective Date of the Plan).
3.03 Restated Certificate of Incorporation of RII. (Incorporated by reference to
Exhibit (3)(a) to RII's Form 10-K Annual Report for the fiscal year ended
December 31, 1990, in File No. 1-4748.)
3.04 By-laws, as amended, of RII. (Incorporated by reference to Exhibit (4)(d) to
RII's Form 10-Q Quarterly Report for the quarter ended September 30, 1990,
in File No. 1-4748.)
3.05 Certificate of Incorporation of RIH.*
3.05(a) Form of Certificate of Amendment of Certificate of Incorporation of RIH.
3.06 By-laws of RIH.*
3.07 Certificate of Incorporation of RIHF.*
3.08 By-laws of RIHF.*
4.01 See Exhibits 3.01 and 3.02 as to the rights of holders of RII Common Stock
and RII Class B Common Stock after giving effect to the Restructuring.
4.02 See Exhibits 3.03 and 3.04 as to the rights of holders of RII Common Stock
prior to giving effect to the Restructuring.
4.03 [Not used].
4.04 Form of Indenture among RIHF, as issuer, RIH, as guarantor, and State Street
Bank and Trust Company of Connecticut, National Association, as trustee,
with respect to RIHF 11% Mortgage Notes due 2003.*
4.05 Form of Indenture between RIHF, as issuer, RIH, as guarantor, and U.S. Trust
Company of California, N.A., as trustee, with respect to RIHF 11.375% Junior
Mortgage Notes due 2004.*
4.06 Indenture dated as of September 14, 1990, between RII and Chemical Bank
(successor to Manufacturers Hanover Trust Company), as Trustee, with respect
to RII's Senior Secured Redeemable Notes due April 15, 1994, with Exhibits
as executed. (Incorporated by reference to Exhibit (4)(a)(1) to RII's Form
10-Q Quarterly Report for the quarter ended September 30, 1990, in File No.
1-4748.)
4.07 Amended and Restated RIH $200,000,000 Senior Note. (Incorporated by
reference to Exhibit (4)(a)(2) to RII's 10-Q Quarterly Report for the
quarter ended September 30, 1990, in File No. 1-4748.)
4.08 Amended and Restated RIH $125,000,000 Senior Note. (Incorporated by
reference to Exhibit (4)(a)(3) to RII's 10-Q Quarterly Report for the
quarter ended September 30, 1990, in File No. 1-4748.)
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4.09 RII Pledge Agreement. (Incorporated by reference to Exhibit Q to RII's Form
8-A Registration Statement dated July 19, 1990, in File No. 1-4748.)
4.10 Assignment of Leases and Rents, RII as Assignor. (Incorporated by reference
to Exhibit U to RII's Form 8-A Registration Statement dated July 19, 1990,
in File No. 1-4748.)
4.11 Resorts International (Bahamas) 1984 Limited ("RIB") $50,000,000 Promissory
Note to RIH. (Incorporated by reference to Exhibit V to RII's Form 8-A
Registration Statement dated July 19, 1990, in File No. 1-4748.)
4.12 Indenture of Mortgage from Paradise Island Limited. (Incorporated by
reference to Exhibit W to RII's Form 8-A Registration Statement dated July
19, 1990, in File No. 1-4748.)
4.13 Indenture of Mortgage from Paradise Beach Inn Limited. (Incorporated by
reference to Exhibit X to RII's Form 8-A Registration Statement dated July
19, 1990, in File No. 1-4748.)
4.14 Guaranty by Paradise Beach Inn Limited (Incorporated by reference to Exhibit
Z to RII's Form 8-A Registration Statement dated July 19, 1990, in File No.
1-4748.)
4.15 Indenture of Mortgage from Island Hotel Company Limited. (Incorporated by
reference to Exhibit AA to RII's Form 8-A Registration Statement dated July
19, 1990, in File No. 1-4748.)
4.16 Guaranty by Island Hotel Company Limited (Incorporated by reference to
Exhibit BB to RII's Form 8-A Registration Statement dated July 19, 1990, in
File No. 1-4748.)
4.17 RIB Collateral Assignment Agreement among RIH, GRI, RIB, Paradise Island
Limited, Island Hotel Company Limited, Paradise Beach Inn Limited and the
Bank of New York. (Incorporated by reference to Exhibit CC to RII's Form 8-A
Registration Statement dated July 19, 1990, in File No. 1-4748.)
4.18 RII Security Agreement. (Incorporated by reference to Exhibit P to RII's
Form 8-A Registration Statement dated July 19, 1990, in File No. 1-4748.)
4.19 Indenture dated as of September 14, 1990, between RII and The Bank of New
York as Trustee, with respect to RII's Mortgage Non-Recourse Pass-Through
Notes due June 30, 2000, with Exhibits as executed. (Incorporated by
reference to Exhibit (4)(b) to RII's 10-Q Quarterly Report for the quarter
ended September 30, 1990, in File No. 1-4748.)
4.20 RII Senior Management 1990 Stock Option Plan. (Incorporated by reference to
Exhibit 8.5 to Exhibit 35 to RII's Form 8 Amendment No. 1 to RII's 8-K
Current Report dated August 30, 1990, in File No. 1-4748.)
4.21 Griffin Group Warrant.*
4.22 Form of Mortgage between RIH and State Street Bank and Trust Company of
Connecticut, National Association, securing Guaranty of RIHF Mortgage
Notes.*
4.23 Form of Mortgage between RIH and RIHF, securing RIH Promissory Note.*
4.24 Form of Assignment of Agreements made by RIHF, as Assignor, to State Street
Bank and Trust Company of Connecticut, National Association, as Assignee,
regarding RIH Promissory Note.*
4.25 Form of Assignment of Leases and Rents made by RIH, as Assignor, to RIHF, as
Assignee, regarding RIH Promissory Note.*
4.26 Form of Assignment of Leases and Rents made by RIH, as Assignor, to State
Street Bank and Trust Company of Connecticut, National Association, as
Assignee, regarding Guaranty of RIHF Mortgage Notes.*
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4.27 Form of Assignment of Operating Assets made by RIH, as Assignor, to RIHF, as
Assignee, regarding RIH Junior Promissory Note.*
4.28 Form of Assignment of Operating Assets made by RIH, as Assignor, to State
Street Bank and Trust Company of Connecticut, National Association, as
Assignee, regarding Guaranty of RIHF Mortgage Notes.*
4.29 Form of Mortgage between RIH and U.S. Trust Company of California, N.A.,
securing Guaranty of RIHF Junior Mortgage Notes.*
4.30 Form of Mortgage between RIH and RIHF, securing RIH Junior Promissory Note.*
4.31 Form of Assignment of Agreements made by RIHF, as Assignor, to, U.S. Trust
Company of California, N.A., as Assignee, regarding RIH Junior Promissory
Note.*
4.32 Form of Assignment of Leases and Rents made by RIH, as Assignor, to RIHF, as
Assignee, regarding RIH Junior Promissory Note.*
4.33 Form of Assignment of Leases and Rents made by RIH, as Assignor, to U.S.
Trust Company of California, N.A., as Assignee, regarding Guaranty of RIHF
Junior Mortgage Notes.*
4.34 Form of Assignment of Operating Assets made by RIH, as Assignor, to RIHF, as
Assignee, regarding RIH Promissory Note.*
4.35 Form of Assignment of Operating Assets made by RIH, as Assignor, to U.S.
Trust Company of California, N.A., as Assignee, regarding the Guaranty of
the RIHF Junior Mortgage Notes.*
4.36 Form of Amended and Restated $125,000,000 RIH Promissory Note (Incorporated
by reference to Exhibit A to Exhibit 4.04 hereto.)
4.37 Form of Amended and Restated $35,000,000 RIH Junior Promissory Note
(Incorporated by reference to Exhibit A to Exhibit 4.05.)
4.38 Form of RII 1994 Stock Option Plan. (Incorporated by reference to Exhibit C
to Exhibit 2.01.)
5.01 Opinion of Gibson, Dunn & Crutcher.
5.02 Opinion of Ravin, Sarasohn, Cook, Baumgarten, Fisch & Baime, a Professional
Corporation.
8.01 Opinion of Gibson, Dunn & Crutcher regarding tax matters.
10.01- [Not used.]
10.10
10.11 Lease Agreement, dated October 26, 1983, between RII and Ocean Showboat,
Inc. (Incorporated by reference to Exhibit (10)(c)(i) to RII's 10-K Annual
Report for the fiscal year ended December 31, 1986, in File No. 1-4748.)
10.12 First Amendment, dated January 15, 1985, to Lease Agreement, dated October
26, 1983, between RII and Atlantic City Showboat, Inc. (assignee from
affiliate D Ocean Showboat, Inc.). (Incorporated by reference to Exhibit
(10)(c)(ii) to RII's 10-K Annual Report for the fiscal year ended December
31, 1984, in File No. 1-4748.)
10.13 Second and Third Amendments, dated July 5 and October 28, 1985,
respectively, to Lease Agreement, dated October 26, 1983, between RII and
Atlantic City Showboat, Inc. (Incorporated by reference to Exhibit
(10)(c)(iii) to RII's 10-K Annual Report for the fiscal year ended December
31, 1985, in File No. 1-4748.)
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10.14 Restated Third Amendment, dated August 28, 1986, to Lease Agreement, dated
October 26, 1983, between RII and Atlantic City Showboat, Inc. (Incorporated
by reference to Exhibit (10)(c)(iv) to RII's 10-K Annual Report for the
fiscal year ended December 31, 1986, in File No. 1-4748.)
10.15 Fourth Amendment, dated December 16, 1986, to Lease Agreement, dated October
26, 1983, between RII and Atlantic City Showboat, Inc. (Incorporated by
reference to Exhibit (10)(c)(v) to RII's 10-K Annual Report for the fiscal
year ended December 31, 1986, in File No. 1-4748.)
10.16 Fifth Amendment, dated February 1987, to Lease Agreement, dated October 26,
1983, between RII and Atlantic City Showboat, Inc. (Incorporated by
reference to Exhibit (10)(c)(vi) to RII's 10-K Annual Report for the fiscal
year ended December 31, 1986, in File No. 1-4748.)
10.16(a) Sixth Amendment, dated March 13, 1987, to Lease Agreement, dated October 26,
1983, between RII and Atlantic City Showboat, Inc. (Incorporated by
reference to Exhibit (10)(c)(vii) to RII's Form 10-K Annual Report for the
fiscal year ended December 31, 1986, in File No. 1-4748.)
10.17 Seventh Amendment, dated October 18, 1988, to Lease Agreement, dated October
26, 1983, between RII and Atlantic City Showboat, Inc. (Incorporated by
reference to Exhibit (10)(c)(viii) to RII's 10-K Annual Report for the
fiscal year ended December 31, 1988, in File No. 1-4748.)
10.18 RII Executive Health Plan (Incorporated by reference to Exhibit 10(c)(1) to
RII's 10-K Annual Report for the fiscal year ended December 31, 1992, in
File No. 1-4748.)
10.19 Resorts Retirement Savings Plan. (Incorporated by reference to Exhibit
(10)(c)(2) to RII's 10-K Annual Report for the fiscal year ended December
31, 1991, in File No. 1-4748.)
10.20 Employment Agreement, dated as of September 17, 1990, between RII and David
P. Hanlon. (Incorporated by reference to Exhibit 9.3A to Exhibit 35 to the
Form 8 Amendment dated November 16, 1990, to RII's 8-K Current Report dated
August 30, 1990, in File No. 1-4748.)
10.21 Employment Agreement, dated May 3, 1991, between the RII and Christopher D.
Whitney. (Incorporated by reference to Exhibit (10(d)(2) to RII's 10-K
Annual Report for the fiscal year ended December 31, 1991, in File No.
1-4748.)
10.22 Amendment to Employment Agreement, dated as of December 3, 1992, between RII
and Christopher D. Whitney.*
10.23 Employment Agreement, dated May 3, 1991, between RII and Matthew B. Kearney.
(Incorporated by reference to Exhibit (10)(d)(3) to RII's 10-K Annual Report
for the fiscal year ended December 31, 1991, in File No. 1-4748.)
10.24 Amendment to Employment Agreement, dated December 3, 1992, between RII and
Matthew B. Kearney.*
10.25 Second Amendment to Employment Agreement, dated September 24, 1993, between
RII and Matthew B. Kearney.*
10.26 Employment Agreement, dated as of September 17, 1992, between RII and David
P. Hanlon. (Incorporated by reference to Exhibit 10(d)(4) to RII's 10-K
Annual Report for the fiscal year ended December 31, 1992, in File No.
1-4748.)
10.27 Termination Agreement, dated as of September 27, 1993, between RII and David
P. Hanlon.*
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10.28 Stock Option Agreement, dated as of May 3, 1991, between RII and David P.
Hanlon. (Incorporated by reference to Exhibit (10)(e)(1) to RII's 10-K
Annual Report for the fiscal year ended December 31, 1991, in File No.
1-4748.)
10.29 Stock Option Agreement, dated as of May 3, 1991, between RII and Christopher
D. Whitney. (Incorporated by reference to Exhibit (10)(e)(2) to RII's 10-K
Annual Report for the fiscal year ended December 31, 1991, in File No.
1-4748.)
10.30 Stock Option Agreement, dated as of May 3, 1991, between RII and Matthew B.
Kearney. (Incorporated by reference to Exhibit (10)(e)(5) to RII's 10-K
Annual Report for the fiscal year ended December 31, 1991, in File No.
1-4748.)
10.31 Stock Option Agreement, dated as of May 3, 1991, between RII and David G.
Bowden. (Incorporated by reference to Exhibit (10)(e)(5) to RII's 10-K
Annual Report for the fiscal year ended December 31, 1991, in File No.
1-4748.)
10.32 [Not used.]
10.33 Amendment No. 1, dated as of September 17, 1992, to Exhibit 10.30
(Incorporated by reference to Exhibit 10(e)(6) to RII's 10-K Annual Report
for the fiscal year ended December 31, 1992, in File No. 1-4748.)
10.34(a) License and Services Agreement, dated as of September 17, 1992, among the
Griffin Group, RII and RIH.*
10.34(b) Form of Amendment to License and Service Agreement, dated as of September
17, 1992 among the Griffin Group Inc., RII and RIH.*
10.35 License and Services Agreement, dated as of September 17, 1990, among Merv
Griffin, the Griffin Group and RII. (Incorporated by reference to Exhibit
1.46 to Exhibit 35 to the Form 8 Amendment dated November 16, 1990, to the
registrant's 8-K Current Report dated August 30, 1990, in File No. 1-4748.)
10.36 Litigation Trust Agreement, dated as of September 17, 1990, among RII, RIFI,
GRH, and GRI. (Incorporated by reference to Exhibit 1.46 to Exhibit 35 to
the Form 8 Amendment dated November 16, 1990, to the registrant's 8-K
Current Report dated August 30, 1990, in File No. 1-4748.)
10.37(a) Promissory Note, dated September 28, 1990, between Merv Griffin and RII.
(Incorporated by reference to Exhibit 9.1B to Exhibit 35 to the Form 8
Amendment dated November 16, 1990, to the registrant's 8-K Current Report
dated August 30, 1990, in File No. 1-4748.)
10.37(b) Griffin Group Note. (Incorporated by reference to Exhibit 1 to Exhibit
10.34(a) to Form S-4 Registration Statement No. 33-50733.)
10.37(c) Guaranty dated September 17, 1992 by Mervyn E. Griffin in favor of RII
(Incorporated by reference to Exhibit 2 to Exhibit 10.34(a) to Form S-4
Registration Statement No. 33-50733.)
10.38 Letter of Credit, dated October 1, 1990, by Morgan Guaranty Trust Company of
New York. (Incorporated by reference to Exhibit 9.1B to Exhibit 35 to the
Form 8 Amendment dated November 16, 1990, to RII's 8-K Current Report dated
August 30, 1990, in File No. 1-4748.)
10.39 Letters extending the termination date of Exhibit 10.38 (Incorporated by
reference to Exhibit 10(i)(2) to RII's 10-K Annual Report for the fiscal
year ended December 31, 1992 in File No. 1-4748.
10.40 Indemnity Agreement, executed on September 19, 1990, between Merv Griffin
and RII. (Incorporated by reference to Exhibit 9.6 to Exhibit 35 to the Form
8 Amendment dated November 16, 1990, to RII's Form 8-K Current Report dated
August 30, 1990, in File No. 1-4748.)
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10.41 [Not used.]
10.42 Service contract between Rogers & Cowan, Inc. and RII, effective July 1,
1991. (Incorporated by reference to Exhibit (10)(m) to RII's 10-K Annual
Report for the fiscal year ended December 31, 1988, in File No. 1-4748.)
10.43 Consulting agreement between Alvarez & Marsal, Inc. and RII, effective March
1, 1992. (Incorporated by reference to Exhibit 10(m)(l) to RII's 10-K Annual
Report for the fiscal year ended December 31, 1992, in File No. 1-4748.)
10.44 Amendment, dated September 14, 1992, to the consulting agreement between
Alvarez & Marsal, Inc. and RII (Incorporated by reference to Exhibit
10(m)(2) to RII's 10-K Annual Report for the fiscal year ended December 31,
1992, in File No. 1-4748.)
10.45- [Not used.]
10.51
10.52 Bondholders Support Agreement dated October 11, 1993 among RII, GRI, Sun
International Investments, Ltd., Sun International Hotels Limited, TCW
Special Credits and Fidelity Management and Research Company, concerning
bondholders support.*
10.52(a) Form of Amendment to Bondholders Support Agreement dated October 11, 1993
among RII, GRI, Sun International Investments, Ltd., Sun International
Hotels Limited, TCW Special Credits and Fidelity Management and Research
Company, concerning bondholders support.*
10.53 Letter Agreement dated October 11, 1993 among Fidelity Management and
Research Company, TCW Special Credits, RII and Sun International Hotels
Limited concerning consent rights of holders of Old Series Notes.*
10.54 Revised term Sheet for 11.0% Senior Secured Loan due 2002 with RIHF as
issuer.*
10.55 Paradise Island Purchase Agreement dated October 11, 1993 between RII and
Sun International Hotels Limited, with Exhibits and Schedules.*
10.55(a) Amendment dated as of November 30, 1993 to the Paradise Island Purchase
Agreement dated October 11, 1993 between RII and Sun International Hotels
Limited concerning Bahamas Developers Limited.*
10.55(b) Amendment dated as of November 30, 1993 to the Paradise Island Purchase
Agreement dated October 11, 1993 between RII and Sun International Hotels
Limited.*
10.55(c) Form of Amendment to the Paradise Island Purchase Agreement dated October
11, 1993 between RII and Sun International Hotels Limited.*
10.56 Letter Agreement dated October 19, 1993 among RII, Fidelity Management, TCW
Special Credits, Sun International Hotels Limited, Sun International
Investments Ltd. and GGRI regarding GGRI, Inc.*
10.57 Form of Nominee Agreement between RIHF and RIH dated May , 1994.
10.58 Letter Agreement dated October 15, 1993, among RII, Fidelity Management, TCW
Special Credits and Sun International Hotels Limited regarding P.I. Resorts
Limited.*
10.59- [Not used.]
10.63
10.64 Form of Intercreditor Agreement by and among RIHF, RIH, RII, GGRI, State
Street Bank and Trust Company of Connecticut, National Association, U.S.
Trust Company of California, N.A. and any lenders which provide additional
facilities.*
10.65 Form of Note Purchase Agreement dated May 3, 1994, among RIHF, RII and RIH,
and certain funds advised or managed by Fidelity with respect to issuance of
Senior Facility Notes.
</TABLE>
II-14
<PAGE> 163
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS EXHIBIT PAGE+
- -------- ---------------------------------------------------------------------------- ----
<C> <S> <C>
10.66 Form of Registration Rights Agreement dated as of April 29, 1994, among RII,
RIHF, RIH, Fidelity and TCW.
12.01 RII Computation of Ratio of Earnings to Fixed Charges.
12.02 RIH Computation of Ratio of Earnings to Fixed Charges.
12.03 RII Computation of Pro Forma Ratio of Earnings to Fixed Charges.
12.04 RIH Computation of Pro Forma Ratio of Earnings to Fixed Charges.
21.01 List of the Subsidiaries of RII.
23.01 Consent of Ernst & Young.
23.02 Consent of Gibson, Dunn & Crutcher (Incorporated by reference to exhibit
5.01 and exhibit 8.01).
23.03 Consent of Ravin, Sarasohn, Cook, Baumgarten, Fisch & Baime, a Professional
Corporation. (Incorporated by reference to exhibit 5.02).
23.04- [Not used].
23.05
23.06 Consent of Charles Masson as nominee director.
23.07 Consent of William Fallon as nominee director.
23.08 Consent of Vincent J. Naimoli as nominee director.
23.09 Consent of Jay M. Green as nominee director.
</TABLE>
- ---------------
+ Page numbers in manually signed copy only.
* Incorporated by reference to the same exhibit number in Form S-4 Registration
Statement No. 33-50733.
B. Financial Statement Schedules
FINANCIAL STATEMENT SCHEDULES FOR RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Report of Independent Auditors
<S> <C> <C>
Schedule II -- Amounts Receivable from Related Parties
Schedule V -- Property and Equipment
Schedule VI -- Accumulated Depreciation of Property and Equipment
Schedule VIII -- Valuation Accounts
Schedule X -- Supplementary Statements of Operations Information
</TABLE>
FINANCIAL STATEMENT SCHEDULES FOR RESORTS INTERNATIONAL HOTEL, INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
Report of Independent Auditors
<S> <C> <C>
Schedule V -- Property and Equipment
Schedule VI -- Accumulated Depreciation of Property and Equipment
Schedule VIII -- Valuation Accounts
Schedule X -- Supplementary Statements of Operations Information
</TABLE>
Financial statement schedules not included have been omitted because they
are either not applicable or the required information is shown in the
consolidated financial statements or notes thereto.
II-15
<PAGE> 164
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrants pursuant to the foregoing
provisions, the registrants have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrants of expenses incurred or paid by a director,
officer or controlling person of the registrants in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-16
<PAGE> 165
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANTS
HAVE DULY CAUSED THIS REGISTRATION STATEMENT OR AMENDMENT THERETO TO BE SIGNED
ON THEIR BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTIC CITY, STATE OF NEW JERSEY, ON APRIL 27, 1994.
RESORTS INTERNATIONAL, INC.
By /s/ CHRISTOPHER D. WHITNEY
------------------------------------
CHRISTOPHER D. WHITNEY
EXECUTIVE VICE PRESIDENT AND CHIEF
OF STAFF
RESORTS INTERNATIONAL HOTEL, INC.
By /s/ CHRISTOPHER D. WHITNEY
------------------------------------
CHRISTOPHER D. WHITNEY
EXECUTIVE VICE PRESIDENT AND CHIEF
OF STAFF
RESORTS INTERNATIONAL HOTEL
FINANCING, INC.
By /s/ CHRISTOPHER D. WHITNEY
------------------------------------
CHRISTOPHER D. WHITNEY
PRESIDENT
II-17
<PAGE> 166
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT OR AMENDMENT THERETO HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED ON APRIL 27, 1994.
RESORTS INTERNATIONAL, INC.
<TABLE>
<S> <C>
By /s/ MERV GRIFFIN Chairman of the Board
-----------------------------------
Merv Griffin
By /s/ THOMAS E. GALLAGHER Director
-----------------------------------
Thomas E. Gallagher
By /s/ ANTONIO C. ALVAREZ II Director
-----------------------------------
Antonio C. Alvarez II
By /s/ WARREN COWAN Director
-----------------------------------
Warren Cowan
By /s/ JOSEPH G. KORDSMEIER Director
-----------------------------------
Joseph G. Kordsmeier
By /s/ PAUL C. SHEELINE Director
-----------------------------------
Paul C. Sheeline
By /s/ CHRISTOPHER D. WHITNEY Executive Vice President and Chief of Staff
----------------------------------- (Principal Executive Officer)
Christopher D. Whitney
By /s/ MATTHEW B. KEARNEY Executive Vice President -- Finance and Chief
----------------------------------- Financial Officer (Principal Executive and
Matthew B. Kearney Financial Officer)
By /s/ DAVID G. BOWDEN Vice President -- Controller, Chief Accounting
----------------------------------- Officer and Assistant Secretary (Principal
David G. Bowden Accounting Officer)
</TABLE>
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
<TABLE>
<S> <C>
By /s/ CHRISTOPHER D. WHITNEY Director and President (Principal Executive
----------------------------------- Officer)
Christopher D. Whitney
By /s/ MATTHEW B. KEARNEY Director, Executive Vice President -- Finance and
----------------------------------- Chief Financial Officer (Principal Financial and
Matthew B. Kearney Accounting Officer)
</TABLE>
II-18
<PAGE> 167
RESORTS INTERNATIONAL HOTEL, INC.
<TABLE>
<S> <C>
By /s/ CHRISTOPHER D. WHITNEY Director, Executive Vice President and Chief of
----------------------------------- Staff (Principal Executive Officer)
Christopher D. Whitney
By /s/ MATTHEW B. KEARNEY Director, Vice President and Chief Financial
----------------------------------- Officer (Principal Executive, Financial and
Matthew B. Kearney Accounting Officer)
</TABLE>
II-19
<PAGE> 168
REPORT OF INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Shareholders
Resorts International, Inc.
We have audited the consolidated financial statements of Resorts
International, Inc. as of December 31, 1993 and 1992, and for each of the three
years in the period ended December 31, 1993, and have issued our report thereon
dated February 18, 1994 except for paragraph 8 of Note 1, as to which the date
is March 17, 1994, included elsewhere in this Registration Statement. Our audits
also included the financial statement schedules listed in Item 16B of this
Registration Statement. These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein. The
financial statement schedules do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
ERNST & YOUNG
Philadelphia, Pennsylvania
February 18, 1994
S-1
<PAGE> 169
SCHEDULE II
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DEDUCTIONS
BALANCE AT ---------------------- BALANCE AT END OF PERIOD
BEGINNING OF AMOUNTS ------------------------
PERIOD ADDITIONS COLLECTED OTHER CURRENT NOT CURRENT
------------ --------- --------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
For the year ended
December 31, 1993:
Merv Griffin (A)............. $ 11,000 $ (3,477) $ (7,523) $ 0
Griffin Group (B)............ $ 7,523 $ (2,205) $ 5,318
For the year ended
December 31, 1992:
Merv Griffin (A)............. $ 11,000 $11,000
For the year ended
December 31, 1991:
Merv Griffin (A)............. $ 11,000 $11,000
</TABLE>
- ---------------
(A) Pursuant to the Old Plan, the Company received cash and this promissory note
from Merv Griffin for the purchase of Common Stock. This note was due on
demand after September 17, 1991 and bore interest at the rate of 8% per
annum. In April 1993, the Company received a payment from Mr. Griffin which
reduced the principal balance by $3,477,000. The remaining principal balance
of $7,523,000 was cancelled and a new promissory note for this amount from
the Griffin Group was substituted therefor. See (B) below.
(B) This promissory note from Griffin Group was dated as of September 17, 1992,
is unconditionally guaranteed as to principal and interest by Merv Griffin,
is due on demand and bears interest at the rate of 3% per annum. In
September 1993, this note was reduced by $2,205,000 as this amount was
applied towards prepaid services pursuant to the Griffin Services Agreement.
S-2
<PAGE> 170
SCHEDULE V
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF ADDITIONS RETIREMENTS END OF
PERIOD AT COST OR SALES OTHER PERIOD
------------ --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1993:
Land and land rights............. $243,900 $ (564) $ 243,336
Land improvements and
utilities...................... 22,519 $ 14 $ 358(A) 22,891
Hotels and other buildings....... 170,250 768 (368) 11,361(A) 182,011
Furniture, machinery and
equipment...................... 67,693 4,328 (619) 9,022(A) 80,424
Construction in progress......... 1,215 20,803 (20,741)(A) 1,277
------------ --------- ----------- -------- ----------
$505,577 $25,913 $(1,551) $ 0 $ 529,939
------------ --------- ----------- -------- ----------
------------ --------- ----------- -------- ----------
For the year ended December 31, 1992:
Land and land rights............. $246,520 $ (136) $ (2,484)(B) $ 243,900
Land improvements and
utilities...................... 21,942 $ 240 (94) 431(A) 22,519
Hotels and other buildings....... 157,312 3,892 (8) 9,084(A) 170,250
(30)(C)
Furniture, machinery and
equipment...................... 60,700 4,315 (451) 3,436(A) 67,693
(307)(C)
Construction in progress......... 2,796 11,438 (12,951)(A) 1,215
(68)(C)
------------ --------- ----------- -------- ----------
$489,270 $19,885 $ (689) $ (2,889) $ 505,577
------------ --------- ----------- -------- ----------
------------ --------- ----------- -------- ----------
For the year ended December 31, 1991:
Land and land rights............. $246,610 $ (90) $ 246,520
Land improvements and
utilities...................... 21,467 $ 15 $ 460(A) 21,942
Hotels and other buildings....... 146,309 4,382 (486) 7,129(A) 157,312
(22)(C)
Furniture, machinery and
equipment...................... 43,224 8,190 (206) 10,144(A) 60,700
(652)(C)
Construction in progress......... 6,366 14,163 (17,733)(A) 2,796
------------ --------- ----------- -------- ----------
$463,976 $26,750 $ (782) $ (674) $ 489,270
------------ --------- ----------- -------- ----------
------------ --------- ----------- -------- ----------
</TABLE>
- ---------------
(A) Transfer of completed projects out of construction in progress.
(B) Basis adjustment.
(C) Reclassification out of property and equipment.
S-3
<PAGE> 171
SCHEDULE VI
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED BALANCE AT
BEGINNING OF TO RETIREMENTS END OF
PERIOD EXPENSES OR SALES PERIOD
------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
For the year ended December 31, 1993:
Land improvements and utilities............... $ 4,543 $ 1,867 $ 6,410
Hotels and other buildings.................... 20,719 9,895 $ (57) 30,557
Furniture, machinery and equipment............ 29,499 16,162 (529) 45,132
------------ --------- ----------- ----------
$ 54,761 $27,924 $(586) $ 82,099
------------ --------- ----------- ----------
------------ --------- ----------- ----------
For the year ended December 31, 1992:
Land improvements and utilities............... $ 2,746 $ 1,797 $ 4,543
Hotels and other buildings.................... 11,448 9,271 20,719
Furniture, machinery and equipment............ 15,676 14,254 $(431) 29,499
------------ --------- ----------- ----------
$ 29,870 $25,322 $(431) $ 54,761
------------ --------- ----------- ----------
------------ --------- ----------- ----------
For the year ended December 31, 1991:
Land improvements and utilities............... $ 651 $ 2,095 $ 2,746
Hotels and other buildings.................... 2,561 8,898 $ (11) 11,448
Furniture, machinery and equipment............ 2,946 12,821 (91) 15,676
------------ --------- ----------- ----------
$ 6,158 $23,814 $(102) $ 29,870
------------ --------- ----------- ----------
------------ --------- ----------- ----------
</TABLE>
S-4
<PAGE> 172
SCHEDULE VIII
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
VALUATION ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING OF CHARGED END OF
PERIOD TO EXPENSES DEDUCTIONS (A) PERIOD
------------ ----------- -------------- ----------
<S> <C> <C> <C> <C>
For the year ended December 31, 1993:
Allowance for doubtful receivables:....... $ 6,952 $ 2,336 $ (2,690) $6,598
Gaming............................... 1,212 553 (489) 1,276
------------ ----------- -------------- ----------
Other................................ $ 8,164 $ 2,889 $ (3,179) $7,874
------------ ----------- -------------- ----------
------------ ----------- -------------- ----------
For the year ended December 31, 1992:
Allowance for doubtful receivables:....... $ 8,169 $ 3,098 $ (4,315) $6,952
Gaming............................... 1,709 949 (1,446) 1,212
------------ ----------- -------------- ----------
Other................................ $ 9,878 $ 4,047 $ (5,761) $8,164
------------ ----------- -------------- ----------
------------ ----------- -------------- ----------
For the year ended December 31, 1991:
Allowance for doubtful receivables:....... $ 8,397 $ 5,397 $ (5,625) $8,169
Gaming............................... 1,881 976 (1,148) 1,709
------------ ----------- -------------- ----------
Other................................ $ 10,278 $ 6,373 $ (6,773) $9,878
------------ ----------- -------------- ----------
------------ ----------- -------------- ----------
</TABLE>
- ---------------
(A) Write-off of uncollectible accounts, net of recoveries.
S-5
<PAGE> 173
SCHEDULE X
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
SUPPLEMENTARY STATEMENTS OF OPERATIONS INFORMATION
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs....................................... $18,845 $20,843 $23,439
Gaming taxes.................................................. $24,376 $26,053 $26,704
Property taxes................................................ $ 9,193 $ 9,279 $ 9,392
Advertising................................................... $11,370 $10,086 $ 8,900
</TABLE>
S-6
<PAGE> 174
REPORT OF INDEPENDENT AUDITORS ON
FINANCIAL STATEMENT SCHEDULES
The Board of Directors and Shareholder
Resorts International Hotel, Inc.
We have audited the consolidated financial statements of Resorts
International Hotel, Inc. as of December 31, 1993 and 1992, and for each of the
three years in the period ended December 31, 1993, and have issued our report
thereon dated February 18, 1994 except for paragraph 14 of Note 12, as to which
the date is March 17, 1994, included elsewhere in this Registration Statement.
Our audits also included the financial statement schedules listed in Item 16B of
this Registration Statement. These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein. The
financial statement schedules do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
ERNST & YOUNG
Philadelphia, Pennsylvania
February 18, 1994
S-7
<PAGE> 175
SCHEDULE V
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
PROPERTY AND EQUIPMENT
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING ADDITIONS RETIREMENTS END OF
OF PERIOD AT COST OR SALES OTHER(A) PERIOD
---------- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1993:
Land and land rights................. $ 53,250 $ 53,250
Land improvements.................... 130 $ 14 $ 14 158
Hotel and other buildings............ 93,235 743 $(294) 10,791 104,475
Furniture, machinery and equipment... 31,168 4,227 (292) 5,353 40,456
Construction in progress............. 326 16,634 (16,158) 802
---------- --------- ----------- -------- ----------
$ 178,109 $21,618 $(586) $ 0 $ 199,141
---------- --------- ----------- -------- ----------
---------- --------- ----------- -------- ----------
For the year ended December 31, 1992:
Land and land rights................. $ 53,250 $ 53,250
Land improvements.................... 97 $ 33 130
Hotel and other buildings............ 80,718 3,794 $ (8) $ 8,731 93,235
Furniture, machinery and equipment... 26,665 4,203 (9) 309 31,168
Construction in progress............. 1,848 7,518 (9,040) 326
---------- --------- ----------- -------- ----------
$ 162,578 $15,548 $ (17) $ 0 $ 178,109
---------- --------- ----------- -------- ----------
---------- --------- ----------- -------- ----------
For the year ended December 31, 1991:
Land and land rights................. $ 53,250 $ 53,250
Land improvements.................... 82 $ 15 97
Hotel and other buildings............ 70,643 4,356 $(346) $ 6,065 80,718
Furniture, machinery and equipment... 14,135 8,175 4,355 26,665
Construction in progress............. 2,080 10,188 (10,420) 1,848
---------- --------- ----------- -------- ----------
$ 140,190 $22,734 $(346) $ 0 $ 162,578
---------- --------- ----------- -------- ----------
---------- --------- ----------- -------- ----------
</TABLE>
- ---------------
(A) Transfer of completed projects out of construction in progress.
S-8
<PAGE> 176
SCHEDULE VI
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED RETIREMENTS END OF
OF PERIOD TO EXPENSES OR SALES PERIOD
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
For the year ended December 31, 1993:
Land improvements............................. $ 24 $ 14 $ 38
Hotel and other buildings..................... 9,695 5,292 $ (32) 14,955
Furniture, machinery and equipment............ 12,701 8,358 (231) 20,828
---------- ----------- ----------- ----------
$ 22,420 $13,664 $(263) $ 35,821
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
For the year ended December 31, 1992:
Land improvements............................. $ 11 $ 13 $ 24
Hotel and other buildings..................... 5,059 4,636 9,695
Furniture, machinery and equipment............ 5,957 6,753 $ (9) 12,701
---------- ----------- ----------- ----------
$ 11,027 $11,402 $ (9) $ 22,420
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
For the year ended December 31, 1991:
Land improvements............................. $ 3 $ 8 $ 11
Hotel and other buildings..................... 1,021 4,049 $ (11) 5,059
Furniture, machinery and equipment............ 930 5,027 5,957
---------- ----------- ----------- ----------
$ 1,954 $ 9,084 $ (11) $ 11,027
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>
S-9
<PAGE> 177
SCHEDULE VIII
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
VALUATION ACCOUNTS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED TO END OF
OF PERIOD EXPENSES DEDUCTIONS(A) PERIOD
---------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
For the year ended December 31, 1993:
Allowance for doubtful receivables:
Gaming....................................... $4,200 $ 901 $ (603) $4,498
Other........................................ 48 (8) 40
---------- ---------- ------------- ----------
$4,248 $ 901 $ (611) $4,538
---------- ---------- ------------- ----------
---------- ---------- ------------- ----------
For the year ended December 31, 1992:
Allowance for doubtful receivables:
Gaming....................................... $5,326 $1,334 $(2,460) $4,200
Other........................................ 327 80 (359) 48
---------- ---------- ------------- ----------
$5,653 $1,414 $(2,819) $4,248
---------- ---------- ------------- ----------
---------- ---------- ------------- ----------
For the year ended December 31, 1991:
Allowance for doubtful receivables:
Gaming....................................... $5,496 $3,328 $(3,498) $5,326
Other........................................ 221 152 (46) 327
---------- ---------- ------------- ----------
$5,717 $3,480 $(3,544) $5,653
---------- ---------- ------------- ----------
---------- ---------- ------------- ----------
</TABLE>
- ---------------
(A) Write-off of uncollectible accounts, net of recoveries.
S-10
<PAGE> 178
SCHEDULE X
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
SUPPLEMENTARY STATEMENTS OF OPERATIONS INFORMATION
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
Maintenance and repairs........................................ $ 8,585 $ 9,480 $ 9,651
Gaming taxes................................................... $18,223 $19,642 $20,467
Property taxes................................................. $ 5,966 $ 6,113 $ 6,237
Advertising.................................................... $ 6,963 $ 6,054 $ 5,755
</TABLE>
S-11
<PAGE> 1
EXHIBIT 3.01
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RESORTS INTERNATIONAL, INC.
We, Christopher D. Whitney, Executive Vice President and
Secretary, and Matthew B. Kearney, Executive Vice President and Treasurer, of
Resorts International, Inc., a corporation existing under the laws of the State
of Delaware (the "Corporation"), do hereby certify that:
ONE: The name of the Corporation is "Resorts International,
Inc.", which was formed under the name "Mary Carter Paint Co.".
TWO: The original Certificate of Incorporation of the
Corporation was filed in the office of the Secretary of State of the State of
Delaware on the 24th day of October, 1958.
THREE: Provision for the making of this Amended and Restated
Certificate of Incorporation is contained in an order of the United States
Bankruptcy Court for the District of Delaware (the "Court") in In Re Resorts
International, Inc., et al. Case Nos. 94-259 and 94-260.
FOUR: This Amended and Restated Certificate of Incorporation
has been duly executed and acknowledged by the officers of the Corporation so
designated in such order of the Court in accordance with Sections 242, 245 and
303 of the General Corporation Law of the State of Delaware.
FIVE: The text of the Certificate of Incorporation of the
Corporation is hereby amended and restated, in its entirety, to read as
follows:
ARTICLE I
NAME
The name of the Corporation is "Resorts International, Inc.".
ARTICLE II
ADDRESS
The address of the Corporation's registered office in the
State of Delaware is 229 South State Street, City of
<PAGE> 2
Dover, County of Kent, and the name of its registered agent at such
address is United States Corporation Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV
CAPITALIZATION
A. Authorization; Transfer Restrictions. The total
number of shares of capital stock of all classifications which the Corporation
shall have authority to issue is, 110,120,000 consisting of (i) 10,000,000
shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"),
and (ii) 100,120,000 shares of common stock, consisting of 100,000,000 shares
of Common Stock, par value $.01 per share (the "Common Stock"), and 120,000
shares of Class B Common Stock, par value $.01 per share (the "Class B Stock",
and collectively with the Common Stock, the "RII Common Stock"). Each share of
Class B Stock shall be issued in connection with and upon the issuance of each
$1,000 in principal amount of Junior Notes (as defined in Article IX hereof),
whether upon original issuance of the Junior Notes or upon surrender for
transfer or exchange of any outstanding Junior Notes or pursuant to the
interest payment provisions thereof, and may not be transferred separately from
such principal amount of Junior Notes.
The shares of Preferred Stock may be issued from time to time
in one or more series. The Board of Directors hereby is vested with authority
from time to time to issue the Preferred Stock as Preferred Stock of any
series. In connection with the creation of each such series of Preferred
Stock, the Board of Directors hereby is vested with authority to fix by
resolution or resolutions the designations and the powers, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of such series, to the full extent now or
hereafter permitted by the laws of the State of Delaware, including without
limitation the dividend rate, conversion or exchange rights, redemption price
and liquidating preference of any series of Preferred Stock, and to fix the
number of shares constituting any such series, and to increase or decrease the
number of shares of any such series (but not below the number of shares thereof
outstanding); provided, however, that no shares of Preferred Stock may be
designated
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or issued with any rights to vote together with the holders of the
Class B Stock for any purpose. In case the number of shares of any such series
shall be so decreased, the shares constituting such decrease shall resume the
status which they had prior to the adoption of the resolution or resolutions
originally fixing the number of shares of such series.
B. Voting and Quorum.
1. Each holder of RII Common Stock entitled to
vote shall have one vote for each share thereof held. Except for the election
of Class B Directors (as defined in Article IX hereof), the holders of the
Common Stock shall be entitled to vote on all matters on which stockholders are
entitled to vote. Except as may be prescribed by Delaware law, the holders of
the Class B Stock shall not be entitled to vote on any matter except that the
holders of the Class B Stock are entitled to vote separately as a class on the
following matters: (a) the election of Class B Directors; (b) to the extent
required under Delaware law, any amendment to the last sentence of the first
paragraph of Paragraph (A) of Article IV hereof; the proviso in the second
paragraph of Paragraph (A) of Article IV hereof; Paragraphs (B)(1), (C)(2), (D)
or (E) of Article IV hereof; Paragraphs (A), (B)(3), (B)(4), (B)(6) or (E)(2)
of Article VII hereof; or Paragraph (A) of Article IX hereof; (c) any amendment
to the last sentence of Section 3 of Article II of the By-Laws of the
Corporation; (d) any amendment to the second sentence of Section 7 of Article
III of the By-Laws of the Corporation; or (e) any amendment to the last
sentence of Section 8 of Article III of the By-Laws of the Corporation.
2. At any meeting of the stockholders of the
Corporation at which the holders of any class of RII Common Stock are entitled
to vote, the presence, in person or by proxy, of the holders of a majority of
the outstanding shares of such class shall constitute a quorum of the class
entitled to vote of such class. No action may be taken by any class of RII
Common Stock at a meeting at which a quorum of such class is not present,
except a vote to adjourn such meeting.
C. Dividends.
1. The Board of Directors of the Corporation may
cause dividends to be paid to the holders of shares of Common Stock from time
to time out of funds legally available therefor. When and as dividends are
declared, they may be payable in cash, in property or in shares of Common
Stock.
2. Holders of Class B Stock are not entitled to
the payment of dividends, except that in the event of an interest payment on
the Junior Notes which is paid in
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Additional Junior Notes (as defined in Article IX hereof), holders shall be
entitled to, and there shall be declared and paid, a stock dividend such that
one share of Class B Stock shall be issued in respect of each $1,000 in
principal amount of Additional Junior Notes.
D. Mandatory Redemption of Class B Stock. Upon the
payment in full of any Junior Note, or the redemption, or cancellation
following purchase thereof, of each $1,000 principal amount of Junior Notes,
the Corporation shall redeem the share of Class B Stock issued in respect of
such Junior Note at a redemption price of $.01 per share (adjusted to reflect
stock splits and stock combinations since the original date of issuance).
E. Liquidation. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of RII Common Stock then outstanding shall be entitled
to receive ratably, in accordance with the number of shares held by each
holder, out of the assets of the Corporation legally available for distribution
to its stockholders, $.01 per share (adjusted to reflect stock splits and stock
combinations since the original date of issuance). After the payment in full
of the amount described in the immediately preceding sentence to the holders of
RII Common Stock, the holders of Common Stock shall be entitled to share
ratably, in accordance with the number of shares held by each holder, in all
the remaining assets of the Corporation available for distribution and the
holders of Class B Stock shall not be entitled to share in the distribution of
such remaining assets.
F. No Nonvoting Stock. No nonvoting equity securities
of the Corporation shall be issued. This provision is included in this Amended
and Restated Certificate of Incorporation in compliance with section l123 of
the United States Bankruptcy Code, 11 U.S.C. Section 1123, and shall have no
further force and effect beyond that required by said section and for so long
as said section is in effect and applicable to the Corporation.
ARTICLE V
INDEMNIFICATION
A. Elimination of Certain Liability of Directors. A
director of the Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional
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misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived an improper personal benefit. If the Delaware General
Corporation Law is amended after the Effective Date (as defined in Article IX
hereof) to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. Any repeal or
modification of this Section by the stockholders of the Corporation shall be
prospective only and shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification.
B. Actions, Suits or Proceedings Other than by or in the
Right of the Corporation. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that he is or was or has agreed to become a director or
officer of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or by reason of any
action alleged to have been taken or omitted in such capacity, against costs,
charges, expenses (including attorneys fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation.
C. Actions or Suits by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was or has agreed to become a
director or officer of the Corporation, or is or was serving or has agreed to
serve at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, or by
reason of any action
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alleged to have been taken or omitted in such capacity, against costs, charges
and expenses (including attorneys' fees) actually and reasonably incurred by
him or on his behalf in connection with the defense or settlement of such
action or suit and any appeal therefrom, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of such
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such costs, charges and
expenses which the Court of Chancery or such other court shall deem proper.
D. Indemnification for Costs, Charges and Expenses of
Successful Party. Notwithstanding the other provisions of this Article V, to
the extent that a director or officer of the Corporation has been successful on
the merits or otherwise, including, without limitation, the dismissal of an
action without prejudice, in defense of any action, suit or proceeding referred
to in Sections A and B of this Article V, or in defense of any claim, issue or
matter therein, he shall be indemnified against all costs, charges and expenses
(including attorneys' fees) actually and reasonably incurred by him or on his
behalf in connection therewith.
E. Determination of Right to Indemnification. Any
indemnification under Sections A and B of this Article V (unless ordered by a
court) shall be paid by the Corporation unless a determination is made (i) by a
majority of the members of the Board of Directors who were not parties to such
action, suit or proceeding even if less than a quorum, or (ii) if such a
majority of the disinterested members of the Board of Directors so direct, by
independent legal counsel in a written opinion, or (iii) by the stockholders,
that indemnification of the director or officer is not proper in the
circumstances because he has not met the applicable standard of conduct set
forth in Sections A and B of this Article V.
F. Advance of Costs, Charges and Expenses. Costs,
charges and expenses (including attorneys' fees) incurred by a person referred
to in Sections A or B of this Article V in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding; provided, however, that the payment of such costs, charges and
expenses (including attorneys' fees) incurred by a
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director or officer in advance of the final disposition of such action, suit or
proceeding shall be made only upon receipt of an undertaking by or on behalf of
the director or officer to repay all amounts so advanced in the event that it
shall ultimately be determined that such director or officer is not entitled to
be indemnified by the Corporation as authorized in this Article V. Such costs,
charges and expenses (including attorneys fees) incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the majority
of the Board of Directors deems appropriate. The majority of the Board of
Directors may, in the manner set forth above, and upon approval of such
director, officer, employer, employee or agent of the Corporation, authorize
the Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
G. Procedure for Indemnification. Any indemnification
under Sections B, C and D, or advance of costs, charges and expenses (including
attorneys' fees) under Section F of this Article V, shall be made promptly, and
in any event within 60 days, upon the written request of the director or
officer. The right to indemnification or advances as granted by this Article
Fifth shall be enforceable by the director or officer in any court of competent
jurisdiction, if the Corporation denies such request, in whole or in part, or
if no disposition thereof is made within 60 days. Such person's costs and
expenses (including attorneys' fees) incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
action shall also be indemnified by the Corporation. It shall be a defense to
any such action that the claimant has not met the standard of conduct set forth
in Sections B or C of this Article V, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors, its independent legal counsel and its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in Sections B or C of this
Article V, nor the fact that there has been an actual determination by the
Corporation (including its Board of Directors, its independent legal counsel
and its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
H. Other Rights: Continuation of Right to
Indemnification. The indemnification provided by this Article V shall not be
deemed exclusive of any other rights to which any director, officer, employee
or agent seeking
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indemnification may be entitled under any law (common or statutory), agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
office or while employed by or acting as agent for the Corporation, and shall
continue as to a person who has ceased to be a director, officer, employee or
agent, and shall inure to the benefit of the estate, heirs, executors and
administrators of such person. All rights to indemnification under this
Article V shall be deemed to be a contract between the Corporation and each
director, officer, employee or agent of the Corporation who serves or served in
such capacity at any time while this Article V is in effect. Any repeal or
modification of this Article V or any repeal or modification of relevant
provisions of the General Corporation Law of the State of Delaware or any other
applicable laws shall not in any way diminish any rights to indemnification of
such director, officer, employee or agent or the obligations of the Corporation
arising hereunder. This Article V shall be binding upon any successor
corporation to this Corporation, whether by way of acquisition, merger,
consolidation or otherwise.
I. Insurance. The Corporation shall purchase and
maintain insurance on behalf of any person who is or was or has agreed to
become a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him or on
his behalf in any such capacity, or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against such
liability under the provisions of this Article V, provided, however, that such
insurance is available on reasonable and acceptable terms, which determination
shall be made by a vote of a majority of the Board of Directors.
J. Savings Clause. If this Article V or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation (i) shall nevertheless indemnify each
director and officer of the Corporation, and (ii) may nevertheless indemnify
each employee and agent of the Corporation, as to costs, charges and expenses
(including attorneys' fees), judgments, fine and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, including an action by or in the right of the
Corporation, to the full extent permitted by any applicable portion of this
Article V that shall not have been invalidated and to the full extent permitted
by applicable law.
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K. Subsequent Amendment. No amendment, modification or
repeal of this Article V shall affect or impair in any way the rights of any
director or officer of the Corporation to indemnification under the provisions
hereof with respect to any action, suit or proceeding arising out of, or
relating to, any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or appeal.
L. Subsequent Legislation. If the General Corporation
Law of the State of Delaware is amended to further expand the indemnification
permitted to directors, officers, employees or agents of the Corporation, then
the Corporation shall indemnify such persons to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.
ARTICLE VI
NEW JERSEY CASINO CONTROL ACT
This Certificate of Incorporation shall be subject to the New
Jersey Casino Control Act, N.J.S.A. 5:12-1et seq., and the rules and
regulations of the New Jersey Casino Control Commission (the "Commission") as
they currently exist or as they hereinafter may be amended (the "Act"),
including without limitation the following:
A. The securities of the Corporation shall always be
subject to redemption by the Corporation, by action of the Board of Directors,
if, in the judgment of the Board of Directors, such action should be taken,
pursuant to Section l51(b) of the General Corporation Law of Delaware or any
other applicable provision of law, to the extent necessary to prevent the loss
or secure the reinstatement of any government-issued license or franchise held
by the Corporation or any Subsidiary (as defined in Paragraph E of this Article
VI) to conduct any portion of the business of the Corporation or such
Subsidiary, which license or franchise is conditioned upon some or all of the
holders of the Corporation's securities possessing prescribed qualifications.
In the event a holder of the Corporation's securities is found not to possess
such prescribed qualifications by the Commission pursuant to the Act (a
"Disqualified Holder"), such Disqualified Holder shall indemnify the
Corporation for any and all direct or indirect costs, including attorneys'
fees, incurred by the Corporation as a result of such holder's continuing
ownership or failure to divest promptly.
B. Except as is otherwise expressly provided in
instruments containing the terms of the Corporation's securities, which
instruments have been approved by the
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Commission, so long as the Corporation shall remain a publicly traded holding
company as defined in the Act, in accordance with N.J.S.A. 5:12- 82(d)(7) and
(9), all securities of the Corporation shall be held subject to the condition
that if a holder thereof is found to be a Disqualified Holder, such holder
shall dispose of his interest in the Corporation within 120 days following the
Corporation's receipt of notice (the "Notice Date") of the holder's
disqualification. Promptly following its receipt of notice from the Commission
that a holder of securities of the Corporation has been found disqualified, the
Corporation shall either deliver such written notice personally to the
Disqualified Holder, mail it to such Disqualified Holder at the address shown
on the Corporation's books and records, or use any other reasonable means.
Failure of the Corporation to provide notice to a Disqualified Holder after
making reasonable efforts to do so shall not preclude the Corporation from
exercising its rights.
If any Disqualified Holder fails to dispose of his securities
within 120 days following receipt by the Corporation of notice that such holder
has been found disqualified, the Corporation may redeem such securities at the
lesser of (i) the lowest closing sale price of such securities between the
Notice Date and the date l20 days after the Notice Date, or (ii) such holder's
original purchase price.
C. If the Corporation shall become, and so long as it
shall remain, a privately-held holding company as defined in the Act, in
accordance with N.J.S.A. 5:12-82(d)(7), (8) and (10), the Commission shall have
the right of prior approval with regard to transfers of securities, shares, and
other interests in the Corporation and the Corporation shall have the absolute
right to redeem at the market price or purchase price, whichever is the lesser,
any security, share or other interest in the Corporation in accordance with the
Act.
D. So long as the Corporation shall remain a holding
company as defined in the Act, in accordance with N.J.S.A. 5:12- 105(e),
commencing on the date the Commission serves notice on the Corporation that a
security holder has been found disqualified, it shall be unlawful for the
Disqualified Holder to (i) receive any dividends or interest upon any such
securities of the Corporation held by such holder; (ii) exercise, directly or
through any trustee or nominee, any right conferred by such securities; or
(iii) receive any remuneration in any form, for services rendered or otherwise,
from any subsidiary of the Corporation that holds a casino license.
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E. For purpose of this Article VI, the term "Subsidiary"
shall be defined in accordance with N.J.S.A. 5:12-47.
ARTICLE VII
BOARD OF DIRECTORS
A. Number and Designations of Directors. Until such
time as a Class B Triggering Event (as defined in Article IX hereof) shall have
occurred, the number of directors which shall constitute the Board as of the
Effective Date (as defined in Article IX hereof) shall be six, consisting of
four Common Stock Directors (as defined in Article IX hereof) and two Class B
Directors (but subject to Paragraph F below). After the Effective Date, the
number of directors which shall constitute the whole Board may be increased or
decreased to such other number as from time to time shall be fixed by
resolution of the Board; provided, however, that at all times the number of
Class B Directors prior to the occurrence of a Class B Triggering Event shall
be one-third (rounded up to the nearest whole number) of the number of
directors which constitutes the entire Board (but subject to Paragraph F
below). Upon the occurrence of a Class B Triggering Event, the number of
directors which shall constitute the Board shall be increased, with such
vacancies created thereby filled by the vote of a majority of the Class B
Directors then in office, such that the number of Class B Directors equals a
majority of the number of directors which constitutes the entire Board after
giving effect to the creation of such vacancies (but subject to Paragraph F
below).
B. Election of Directors.
1. Election of directors need not be by written
ballot unless the By-Laws so provide.
2. The Board of Directors shall be divided into
three classes: Class I, Class II, and Class III. Such Classes shall be as
nearly equal in number of directors as possible. Each director shall serve for
a term ending at the third annual stockholders' meeting following the annual
meeting at which such director was elected; provided, however, that the
directors first appointed to Class I shall serve for a term ending at the
annual meeting to be held in 1995, the directors first appointed to Class II
shall serve for a term ending at the annual meeting to be held in 1996, and the
directors first appointed to Class III shall serve for a term ending at the
annual meeting to be held in 1997. Notwithstanding any of the foregoing
provisions of this Article VII and subject to Paragraph F below, each director
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shall serve until his successor is elected and qualified or until his earlier
death, resignation or removal.
3. At each annual meeting of stockholders (which
shall be held on such date as shall be determined pursuant to the By-Laws of
the Corporation), or at any duly called special meeting of stockholders, the
Common Stock Directors to be elected shall be elected by the holders of the
Common Stock voting as a separate class and the Class B Director(s) to be
elected shall be elected by the holders of the Class B Stock voting as a
separate class.
4. At each annual election, the directors chosen
to succeed those whose terms then expire shall be identified as being the same
Class as the directors they succeed, unless, by reason of any intervening
changes in the authorized number of directors, the Board of Directors shall
designate one or more directorships whose term then expires as directorships of
another Class in order to more nearly achieve equality in the number of
directors among the Classes. When the directors fill a vacancy resulting from
the death, resignation or removal of a director in accordance with paragraph E
below, the director chosen to fill that vacancy shall be of the same Class as
the director he succeeds.
5. Notwithstanding the rule that the three
Classes shall be as nearly equal in number of directors as possible, in the
event of any change in the authorized number of directors, each Common Stock
Director and each Class B director then continuing to serve as such will
nevertheless continue as a director of the Class of which such director is a
member until the expiration of his current term or his earlier death,
resignation or removal.
C. Effective Date Board. As of the Effective Date, the
Board of Directors of the Corporation shall be reconstituted to consist of the
following persons in the Classes and of the designations indicated:
<TABLE>
<CAPTION>
Director Class Designation
-------- ----- -----------
<S> <C> <C>
Thomas E. Gallagher I Common Stock Director
Jay M. Green I Common Stock Director
William Fallon II Common Stock Director
Vincent J. Naimoli II Class B Director
Merv Griffin III Common Stock Director
Charles Masson III Class B Director
</TABLE>
D. Removal of Directors. Subject to Paragraph F below,
any director, may be removed from office at any time,
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but only (i) for cause, and (ii) by the affirmative vote of the holders of 80%
of the voting power of all the shares of the class of stock which elected such
director.
E. Filling of Vacancies.
1. Any vacancy among the Common Stock Directors,
occurring from any cause whatsoever, may be filled by a majority of the
remaining Common Stock Directors, even if such remaining Common Stock Directors
do not constitute a quorum; provided, however, that the holders of the Common
Stock removing any Common Stock Director may at the same meeting fill the
vacancy caused by such removal; provided further, however, that if the
remaining Common Stock Directors fail to fill any such vacancy, the holders of
the Common Stock entitled to vote thereon may fill such vacancy at any special
meeting of stockholders called for that purpose. Any person elected or
appointed to fill a vacancy shall hold office, subject to the right of removal
as herein before provided, until the next election for such Class of directors
and until his successor is elected and qualifies.
2. Subject to Paragraph F below, any vacancy
among the Class B Directors, occurring from any cause whatsoever (including (i)
as a result of an increase in the number of directors which shall constitute
the entire Board, or (ii) as a result of the occurrence of a Class B Triggering
Event), may be filled only by a majority of the remaining Class B Directors,
even if such remaining Class B Directors do not constitute a quorum; provided,
however, that the holders of the Class B Stock removing any Class B Director
may at the same meeting fill the vacancy caused by such removal; provided
further, however, that if the remaining Class B Directors fail to fill any such
vacancy, the holders of the Class B Stock entitled to vote thereon may fill
such vacancy at any special meeting of stockholders called for that purpose.
Any person elected or appointed to fill a vacancy shall hold office, subject to
the right of removal as herein before provided, until the next election for
such Class of directors and until his successor is elected and qualifies.
F. Final Payment Date. After the Final Payment Date (as
defined in Article IX hereof), (i) all the Class B Directors then in office
shall resign and if such Class B Directors fail to resign, a majority of the
Common Stock Directors shall be entitled to remove, without cause, such Class B
Directors then in office, and (ii) the number of directors constituting the
Board shall be decreased to six directors, who shall be elected by the holders
of Common Stock.
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ARTICLE VIII
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BY-LAWS
A. In addition to any affirmative vote required by
applicable law, any alteration, amendment, repeal or rescission of any
provision of this Amended and Restated Certificate of Incorporation must be
approved by a majority of the directors of the Corporation then in office and
by the affirmative vote of the holders of a majority of the outstanding shares
of the Common Stock.
B. Except as provided in Paragraph (B)(1) of Article IV
hereof, the Board of Directors shall have the power without the assent or vote
of the stockholders to make, alter, amend, change, add to or repeal the By-Laws
of the Corporation.
ARTICLE IX
DEFINITIONS
A. As used in this Amended and Restated Certificate of
Incorporation, the following terms shall have the meanings indicated below:
"Additional Junior Notes" shall mean Junior Notes issued by
RIHF in payment of interest on outstanding Junior Notes, in accordance with the
terms of the Junior Notes and the New RIHF Second Mortgage Junior Note
Indenture.
"Class B Directors" shall mean the directors of the
Corporation elected by the holders of the Class B Stock.
"Class B Triggering Event" shall mean either (i) the payment
on any Interest Payment Date by RIHF of interest on the Junior Notes in the
form of Additional Junior Notes or (ii) the failure on any Interest Payment
Date by RIHF to pay interest in full on the Junior Mortgage Notes, if, in
either case, on any prior six Interest Payment Dates (whether consecutive or
non-consecutive), interest on the Junior Notes either has been paid in
Additional Junior Notes or has not been paid in full.
"Final Payment Date" means the date on which all the Junior
Notes are retired, redeemed or paid in full.
"Interest Payment Date" shall mean each date on which interest
is due and payable on the Junior Notes, in accordance with the New RIHF Second
Mortgage Junior Note Indenture.
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"Junior Notes" shall mean the 11.375% Junior Mortgage Junior
Notes due 2004 of RIHF, including the Additional Junior Notes.
"New RIHF Second Mortgage Junior Note Indenture" shall mean
the Indenture dated as of May 3, 1994, between RIHF and U.S. Trust Company of
California, N.A., as Trustee, under which the Junior Notes have been or will be
issued.
"RIHF" shall mean Resorts International Hotel Finance, Inc., a
Delaware Corporation.
B. As used in this Amended and Restated Certificate of
Incorporation, the following terms shall have the meanings indicated below:
"Common Stock Directors" shall mean the directors of the
Corporation elected by the holders of the Common Stock.
"Effective Date" shall mean May 3, 1994.
"Plan" shall mean the Plan of Reorganization of the
Corporation, dated March 21, 1994.
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IN WITNESS WHEREOF, the undersigned have signed this
Certificate of Incorporation, under penalties of perjury, and caused the
corporate seal of the Corporation to be hereunto affixed this --- day of
- ------------, 1994.
By:
---------------------------
Christopher D. Whitney
Executive Vice President
and Secretary
By:
---------------------------
Matthew B. Kearney
Executive Vice President-Finance
and Treasurer
[Corporate Seal]
Attest:
By:
------------------------------
Christopher D. Whitney
Secretary
16
<PAGE> 1
EXHIBIT 3.02
AMENDED AND RESTATED BY-LAWS
OF
RESORTS INTERNATIONAL, INC.
ARTICLE I
OFFICES
SECTION 1. Principal Office. The principal office of Resorts
International, Inc. (the "Corporation") in the State of Delaware shall be
established and maintained at the office of the United States Corporation
Company in the City of Dover, County of Kent, and said corporation shall be the
resident agent of this Corporation in charge thereof.
SECTION 2. Other Offices. The Corporation may also have an office or
offices and keep the books and records of the Corporation, except as may
otherwise be required by the laws of the State of Delaware, at such other place
or places either within or without the State of Delaware as the Board of
Directors of the Corporation (the "Board") may from time to time determine or
the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place of Meetings. All meetings of the stockholders shall
be held at such place, within or without the State of Delaware, as may from
time to time be fixed by the Board or as shall be specified or fixed in the
respective notices or waivers of notice thereof.
SECTION 2. Annual Meetings. The annual meeting of the stockholders
of the Corporation for the election of directors and for the transaction of
such other business as may properly come before the meeting shall be held on a
date and at a time and place as designated by resolution of the Board of
Directors of the Corporation.
SECTION 3. Special Meetings. Special meetings of the stockholders,
unless otherwise provided by law, may be called at any time by the Chairman of
the Boa111rd or by a majority of the Board of Directors. Special meetings of
the holders of Class B Common Stock (as such term is defined in the Certificate
of Incorporation) may be called at any time by the Chairman of the Board or by
a majority of the Class B Directors (as such term is defined in the Certificate
of Incorporation).
SECTION 4. Notice of Meetings. Except as otherwise expressly
required by law or the Certificate of Incorporation of the Corporation, written
notice stating the place and time of the meeting and, in the case of a special
meeting, the purpose or purposes of such meeting, shall be given by the
Secretary to each stockholder entitled to vote thereat at the last known post
office address not less than ten nor more than sixty days prior to the date of
meeting. No business other than that stated in the notice shall be transacted
at any special meeting. Notice of any meeting of stockholders shall not be
required to be given to any stockholder who shall attend such meeting in person
or by proxy; and if any stockholder shall, in person or by attorney thereunto
duly authorized, in writing or by telegraph, cable
1
<PAGE> 2
or wireless, waive notice of any meeting, whether before or after such
meeting be held, the notice thereof need not be given to him. Notice of any
adjourned meeting of stockholders need not be given except as provided in
SECTION 7 of this ARTICLE II.
SECTION 5. List of Stockholders. It shall be the duty of the
Secretary or other officer who shall have charge of the stock ledger of the
Corporation, either directly or through a transfer agent appointed by the
Board, to prepare and make, at least 10 days before every election of
directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open for said 10 days to the examination of
any stockholder in the place where said election is to be held and shall be
produced and kept at the time and place of the election for the whole time
thereof, and subject to the inspection of any stockholder who may be present.
The original or a duplicate stock ledger shall be the only evidence as to who
are the stockholders entitled to examine such list or the books of the
Corporation or to vote in person or by proxy at such election.
SECTION 6. Quorum. At any meeting of the stockholders of the
Corporation, the presence, in person or by proxy, of stockholders then entitled
to cast a majority in number of votes upon a question to be considered at the
meeting shall constitute a quorum for the consideration of such question.
SECTION 7. Adjournments. In the absence of a quorum at any annual or
special meeting of stockholders, a majority in interest of those present in
person or by proxy and entitled to vote may adjourn the meeting from time to
time without further notice, other than by announcement at the meeting at which
such adjournment shall be taken, until a quorum shall be present; provided,
however, that if an adjournment is for more than thirty days, a notice of the
adjourned meeting shall be given to each stockholder of record entitled to
vote. At any such adjourned meeting at which a quorum may be present any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 8. Order of Business. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting, but
the order of business to be followed at any meeting at which a quorum shall be
present may be changed by a vote of the stockholders present in person or by
proxy at the meeting and holding a majority of the shares entitled to vote
thereat.
SECTION 9. Voting. Except as otherwise provided by the General
Corporation Law of the State of Delaware or in the Certificate of
Incorporation, each stockholder shall at each meeting of the stockholders be
entitled to one vote in person or by proxy for each share entitled to be voted
thereat and held by him and registered in his name on the books of the
Corporation:
(a) On such date as may be fixed pursuant to SECTION 3 of
ARTICLE VI of these By-Laws as the record date for the determination
of stockholders entitled to notice of and to vote at such meeting; or
(b) In the event that no record date shall have been so
fixed, the record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
Shares of stock belonging to the Corporation shall not be voted directly or
indirectly. Persons holding stock having voting power in a fiduciary capacity
shall be entitled to vote the shares so held, and persons whose stock having
voting power is pledged shall be entitled to vote, unless in the transfer by
the pledgor on the books of the Corporation he shall have expressly empowered
the pledgee to vote
2
<PAGE> 3
thereon, in which case only the pledgee, or his proxy, may represent such stock
and vote thereon. Any vote on stock may be given at any meeting of the
stockholders by the stockholder entitled thereto in person or by his proxy
appointed by an instrument in writing, subscribed by such stockholder or by his
attorney thereunto duly authorized and delivered to the secretary of the
meeting; provided, however, that no proxy shall be voted on after three years
from its date, unless said proxy provides for a longer period. At all meetings
of the stockholders all matters, except those the manner of deciding upon which
is otherwise expressly regulated by statute or by the Certificate of
Incorporation or by these By-Laws, shall be decided by the vote of the
stockholders holding a majority of the shares present in person or by proxy and
entitled to vote on such matters. Unless demanded by a stockholder present in
person or by proxy at such meeting and entitled to vote thereat or determined
by the chairman of the meeting to be advisable, the vote on any matter need not
be by written ballot.
SECTION 10. Inspectors of Election or Judges. Before, or at, each
meeting of the stockholders at which a vote by ballot is to be taken, the
Board, or the chairman of such meeting, shall appoint two Inspectors of
Election or judges to act thereat. Each Inspector of Election or Judge so
appointed shall first subscribe an oath or affirmation faithfully to execute
the duties of an Inspector of Election or Judge at such meeting with strict
impartiality and according to the best of his ability. Such Inspectors of
Election or Judges shall take charge of the ballots at such meeting and after
the balloting thereat on any question shall count the ballots cast thereon and
shall make a report in writing to the secretary of such meeting of the results
thereof. The Inspectors of Election or Judges need not be stockholders; and
any officer or director may be an Inspector of Election or Judge on any
question other than a vote for or against his election to any position with the
Corporation or on any other question in which he may be directly interested.
ARTICLE III
DIRECTORS
SECTION 1. General Powers. The Board shall manage the business and
affairs of the Corporation and may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not by law, the
Certificate of Incorporation or these By-Laws directed or required to be
exercised or done by the stockholders.
SECTION 2. Number, Qualification and Term of Office. The number of
directors of the Corporation shall be as set forth in the Certificate of
Incorporation. Directors need not be stockholders. The Certificate of
Incorporation of the Corporation provides for a classified Board, wherein each
director shall serve for a term as provided therein. The Certificate of
Incorporation also provides for two designations of directors, elected by the
holders of the Common Stock and the Class B Stock (as such terms are defined in
the Certificate of Incorporation), respectively.
SECTION 3. Election of Directors. At each meeting of the
stockholders for the election of a director or directors, the person or persons
receiving the greater number of votes, up to the number of directors then to be
elected, cast by the stockholders present in person or by proxy and entitled to
vote for such director or directors shall be the director or directors elected
by such stockholders. The election of directors is subject to any provisions
contained in the Certificate of Incorporation relating thereto, including any
provisions for a classified Board and any provisions relating to the election
of Common Stock Directors (as such term is defined in the Certificate of
Incorporation) and Class B Directors, respectively.
SECTION 4. Quorum. At all meetings of the Board the presence of a
majority of the whole Board shall be necessary to constitute a quorum for the
transaction of business at such meeting. Any
3
<PAGE> 4
act of a majority present at a meeting at which there is a quorum shall be the
act of the Board, except as may be otherwise specifically provided by statute
or by the Certificate of Incorporation or by these By-Laws. In the absence of
a quorum, a majority of the directors present may adjourn any meeting from time
to time until a quorum shall be present. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called. Notice of any adjourned
meeting need not be given.
SECTION 5. Place of Meeting. The Board may hold its meetings at such
place or places within or without the State of Delaware as it may from time to
time by resolution determine or as shall be fixed or specified in the
respective notices or waivers of notice thereof. Members of the Board, or any
committee thereof, may participate in a meeting of such Board or committee by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear and communicate with
each other.
SECTION 6. Regular Meetings. Regular meetings of the Board may be
held without notice at such places and times as may be fixed from time to time
by resolution of the Board.
SECTION 7. Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board. Special meetings of the Class B Directors
with respect to matters to be detetermined by the Class B Directors only may be
called by any Class B Director. At least twenty-four hours' written or
telegraphic notice of each special meeting shall be given to each director.
The notice of any meeting, or any waiver thereof, need not state the purpose or
purposes of such meeting.
SECTION 8. Action by Consent. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting, if prior to such action a written consent thereto is signed
by all members of the Board or all members of such committee, as the case may
be, and such written consent is filed with the minutes of proceedings of the
Board or committee. Any action required or permitted to be taken at any
meeting of the Class B Directors may be taken without a meeting, if prior to
such action a written consent thereto is signed by all Class B Directors, and
such written consent is filed with the minutes of proceedings of the Board.
SECTION 9. Resignations; Removal. Any director may resign at any
time by giving written notice to the Chairman of the Board or the Secretary.
Such resignation shall take effect at the time specified therein or, if no time
is specified, upon receipt of such notice. The acceptance of a resignation
shall not be necessary to make it effective. Directors may only be removed in
accordance with the Certificate of Incorporation.
SECTION 10. Vacancies. A vacancy in the Board caused by death,
resignation or removal may only be filled in accordance with the Certificate of
Incorporation. Each director so chosen to fill a vacancy shall, unless
otherwise provided or as provided in the Certificate of Incorporation, hold
office until his successor shall have been elected and shall qualify or until
he shall resign or shall have been removed.
SECTION 11. Compensation. Each director, in consideration of his or
her serving as such, shall be entitled to receive from the Corporation such
amount per annum or such fees for attendance at directors' meetings, or both,
as the Board shall from time to time determine, together with reimbursement for
the reasonable expenses incurred by him in connection with the performance of
his duties. Each director who shall serve as a member of the Executive
Committee or any other committee of the Board in consideration of his serving
as such, shall be entitled to such additional amount per annum or such fees for
attendance at committee meetings, or both, as the Board shall from time to time
determine. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
proper compensation therefor.
4
<PAGE> 5
ARTICLE IV
COMMITTEES
SECTION 1. Designation and Powers of Committees. The Board may, by
resolution or resolutions passed by a majority of the whole Board, designate
two or more of its members to constitute an Executive Committee, which, during
the intervals between the meetings of the Board, shall have, and may exercise,
all the powers of the Board in the management of the business, affairs, and
property of the Corporation, to the extent permitted by Delaware law. The
Board, by resolution passed by a majority of the whole Board, may designate
members of the Board to constitute other committees, including an Audit
Committee and a Compensation Committee, which shall consist of such numbers of
directors and shall have, and may exercise, such powers as the Board may
determine and specify in the respective resolutions appointing them, to the
extent permitted by Delaware law. The Board shall have power at any time to
change the members of the Executive Committee or any such other committee, to
fill vacancies and to discharge the Executive Committee or any such other
committee.
ARTICLE V
OFFICERS
SECTION 1. Election and Number. The principal officers of the
Corporation shall be a Chairman of the Board, a President, one or more Vice
Presidents, a Treasurer and a Secretary, all of whom shall be chosen by the
Board, and such other officers as may be appointed in accordance with the
provisions of SECTION 3 of this ARTICLE V. One person may hold the office and
perform the duties of any two or more of said officers other than those of
President and Secretary.
SECTION 2. Term of Office and Qualifications. Each officer, except
such as may be appointed in accordance with the provisions of SECTION 3 of this
ARTICLE V, shall hold office until the next annual election of officers and
until his successor shall have been chosen and shall qualify or until his death
or until he shall have resigned or until he shall have been removed in the
manner provided in SECTION 4 of this ARTICLE V.
SECTION 3. Appointive Officers. The Chairman of the Board or the
Board may from time to time appoint such other officers as they may deem
necessary, including one or more Assistant Treasurers, one or more Assistant
Secretaries and such other agents and employees of the Corporation as they may
deem proper. Such officers and agents and employees shall hold office for such
period, have such authority and perform such duties, subject to the control of
the Board, as the Chairman of the Board or the Board may from time to time
prescribe.
SECTION 4. Removal. Any elected officer may be removed, either with
or without cause, at any time, by the vote of a majority of the whole Board at
any meeting of the Board, and any appointive officer may be removed, either
with or without cause, at any time by the Chairman of the Board.
SECTION 5. Resignations. Any officer may resign at any time by
giving written notice to the Board or to the President or to the Secretary.
Such resignation shall take effect upon receipt of such notice or at any later
time specified therein; and, unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.
5
<PAGE> 6
SECTION 6. Vacancies. A vacancy in any office because of death,
resignation, removal or any other cause shall be filled for the unexpired
portion of the term in the manner prescribed in SECTIONS 2 and 3 of this
ARTICLE V for election or appointment, respectively, to such office.
SECTION 7. Chairman of the Board. The Chairman of the Board if
present shall preside at all meetings of stockholders and at all meetings of
the Board and shall have such other powers and duties as from time to time
maybe assigned to him by the Board or these By-Laws.
SECTION 8. President. The President shall be the chief executive
officer of the Corporation, and shall have general supervision over the
business of the Corporation, subject to the control of the Board. In general,
he shall perform all duties incident to the office of President and have such
other powers and duties as from time to time may be assigned to him by the
Board.
SECTION 9. Vice President. Each Vice President shall have such
powers and shall perform such duties as from time to time may be assigned to
him by the Board. The Board may elect, or designate, one or more of the Vice
Presidents as an Executive Vice President. At the request of the President, or
in the case of his absence or inability to act, the Executive Vice President
or, if there shall be more than one Executive Vice President, an Executive Vice
President designated by the Board, or if the Board shall have not have elected
or designated an Executive Vice President then one of the Vice Presidents who
shall be designated for the purpose by the Board, shall perform the duties of
the President, and, when so acting, shall have all the powers of the President.
SECTION 10. Secretary. The Secretary shall keep or cause to be kept
in books provided for this purpose the minutes of all meetings of the
stockholders and of the Board; shall see that all notices are duly given in
accordance with the provisions of these By-Laws and as required by law; shall
be the custodian of the seal of the Corporation and shall affix the seal or
cause it to be affixed to all certificates of stock of the Corporation and to
all documents the execution of which on behalf of the Corporation under its
seal shall be duly authorized in accordance with the provisions of these
By-Laws; shall have charge of the stock records of the Corporation; shall see
that all reports, statements and other documents required by law are properly
kept and filed; may sign, with any other proper officer of the Corporation
thereunto authorized, certificates for stock of the Corporation; and, in
general, shall perform all the duties incident to the office of Secretary, and
such other duties as from time to time may be assigned to him by the Board.
SECTION 11. Assistant Secretaries. The Assistant Secretaries shall
have such powers and duties as from time to time may be assigned to them by the
Board. At the request of the Secretary or in case of his absence or inability
to act, any Assistant Secretary may act in his place.
SECTION 12. Treasurer. The Treasurer shall have charge and custody
of, and be responsible for, all funds, securities, evidences of indebtedness
and other valuable documents of the Corporation; shall deposit all such funds
in the name of the Corporation in such banks or other depositaries as shall be
selected by the Board; shall receive, and give or cause to be given receipts
and acquittances for, moneys paid in on account of the Corporation and shall
pay out of the funds on hand all just debts of the Corporation of whatever
nature upon maturity of the same; shall enter or cause to be entered in books
of the Corporation to be kept for that purpose full and accurate accounts of
all moneys received and paid out on account of the Corporation, and whenever
required by the Board, shall render a statement of his cash accounts; shall
keep or cause to be kept such other books as will show the true record of the
expenses, losses, gains, asset and liabilities of the Corporation; and in
general shall perform all duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the Board.
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<PAGE> 7
SECTION 13. Assistant Treasurers. The Assistant Treasurers shall
have such powers and duties as from time to time may be assigned to them by the
Board. At the request of the Treasurer, or in case of his absence or inability
to act, any Assistant Treasurer may act in his place.
SECTION 14. Salaries. The salaries of the elective officers and any
appointive officers of the Corporation shall be fixed from time to time by the
Board. An officer shall not be prevented from receiving such salary by reason
of the fact that he is also a director of the Corporation or a member of any
committee contemplated by the By-Laws.
ARTICLE VI
CAPITAL STOCK
SECTION 1. Certificate for Stock. Every holder of shares of stock
shall be entitled to have a certificate, in such form as the Board shall
prescribe, certifying the number and class of shares of stock of the
Corporation owned by him. Each such certificate shall be signed in the name of
the Corporation by the President or a Vice President and the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary; provided,
however, that where such certificate is signed by a transfer agent or an
assistant transfer agent or by a transfer clerk acting on behalf of the
Corporation and a registrar, the signature of any such officer may be a
facsimile.
SECTION 2. Transfer of Shares. The shares of stock of the
Corporation shall be transferable only upon its books by the registered holders
thereof or by their duly authorized attorneys or legal representatives, and
upon such transfer the old certificates shall be surrendered to the Corporation
by the delivery thereof to the Secretary or to such other person as the Board
may designate, by whom such old certificates shall be cancelled and new
certificates shall thereupon be issued. A record shall be made of each
transfer. Each share of Class B Stock shall be issued in connection with and
upon the issuance of each $1,000 in principal amount of Junior Notes (as such
term is defined in the Certificate of Incorporation), and may not be
transferred separately from such principal amount of Junior Notes.
SECTION 3. Fixing Date for Determination of Stockholders of Record.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board
of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board
of Directors and which record date: (l) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall not be more than sixty nor less than ten days before the date of
such meeting; (2) in the case of determination of stockholders entitled to
express consent to corporate action in writing without a meeting, shall not be
more than ten days from the date upon which the resolution fixing the record
date is adopted by the Board of Directors; and (3) in the case of any other
action shall not be more than sixty days prior to such other action. If no
record date is fixed: (l) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held; (2) the record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting when no prior action of the Board of Directors is required by law,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation in
accordance with applicable law, or, if prior action by the Board of Directors
is required by law, shall be at the close of business on the day on
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<PAGE> 8
which the Board of Directors adopts the resolution taking such prior action;
and (3) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
SECTION 4. Lost or Destroyed Certificates. The Board may determine
the conditions upon which a new certificate of stock will be issued in place of
a certificate which is alleged to have been lost or destroyed, and may, in its
discretion, require the owner of such certificate or his legal representative
to give bond, with sufficient surety to the Corporation to indemnify it against
any and all losses or claims which may arise by reason of the issue of a new
certificate in the place of the one so lost or destroyed.
SECTION 5. Condition Requiring Disposition. Any and all equity
securities of the Corporation are held subject to the condition that if a
holder thereof is found to be "disqualified" by the New Jersey Gaming
Commission pursuant to the provisions of the New Jersey Casino Control Act
(P.L. 1977 c. 110) then such holder shall dispose of his interest in the
Corporation's equity securities within 120 days after receipt of notice of such
finding.
ARTICLE VII
CORPORATE SEAL
The seal of the Corporation shall be in the form of a circle and shall
bear the full name of the Corporation, the year of its incorporation and the
words "CORPORATE SEAL DELAWARE".
ARTICLE VIII
SIGNATURES
All checks, bonds, notes, contracts, agreements or other obligations
or instruments of the Corporation shall be signed by such officer or officers
as the Board may from time to time designate.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 1. Waiver of Notice. Whenever any notice whatever is
required to be given by these By-Laws or by statute, the person entitled
thereto may in person, or in the case of a stockholder by his attorney
thereunto duly authorized, waive such notice in writing (including telegraph,
cable, radio or wireless), whether before or after the meeting or other matter
with respect of which such notice is to be given, and in such event such notice
need not be given to such person and such waiver shall be equivalent to such
notice, and any action to be taken after such notice or after the lapse of a
prescribed period of time may be taken without such notice and without the
lapse of any period of time.
SECTION 2. Employment Contracts. No contract of employment shall be
entered into for or on behalf of the Corporation for a period of more than one
year without prior approval of the Board.
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<PAGE> 9
ARTICLE X
AMENDMENTS
Except as otherwise may be provided herein or in the Certificate of
Incorporation, these By-Laws, or any of them, may be amended, modified or
repealed, or new By-Laws may be adopted, either by vote of a majority of the
directors present at any annual, regular or special meeting, or by a vote
constituting a majority in number of the votes cast by stockholders present in
person or represented by proxy and entitled to vote at any annual or special
meeting.
9
<PAGE> 1
EXHIBIT 3.05(a)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
RESORTS INTERNATIONAL HOTEL, INC.
To: The Secretary of State
State of New Jersey
Pursuant to Section 14A:9-2(4) and Section 14A:9-4(3),
Corporations, General, of the New Jersey Statutes, the undersigned corporation
executes the following Certificate of Amendment to its Certificate of
Incorporation:
1. The name of the corporation is Resorts International
Hotel, Inc.
2. The following amendment to the Certificate of
Incorporation was approved by the directors and thereafter duly approved by the
sole shareholder of the corporation on the 28th day of April, 1994.
Resolved, that Article Fourth is hereby deleted and that the
new Article Fourth is inserted into the Certificate of Incorporation as
follows:
"FOURTH: The aggregated number of shares which the
corporation is authorized to issue is five million (5,000,000)
shares of common stock, par value one dollar ($1.00) per
share."
3. The number of shares outstanding at the time of the
adoption of the amendment was 100. The total number of shares entitled to vote
thereon was 100.
4. The number of shares voting for and against such
amendment was as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES VOTING NUMBER OF SHARES VOTING
FOR AMENDMENT AGAINST AMENDMENT
<S> <C>
100 0
- ------------------------ --------------------------
</TABLE>
<PAGE> 2
5. The effective date of this Amendment to the
Certificate of Incorporation shall be April 28, 1994.
Dated this ----- day of -------------, 1994
ATTEST: RESORTS INTERNATIONAL HOTEL, INC
- ---------------------------- By:
William C. Murtha -------------------------
Secretary Christopher D. Whitney
Executive Vice President
<PAGE> 3
STATE OF NEW YORK, COUNTY OF -------------- SS:
I CERTIFY that on April 28, 1994, William C. Murtha personally
came before me and this person acknowledged under oath, to my satisfaction,
that:
(a) this person is the assistant secretary of Resorts
International Hotel, Inc., the corporation named in this document;
(b) this person is the attesting witness to the signing
of this document by the proper corporate officer who is Christopher D. Whitney,
the Executive Vice President of the corporation;
(c) this document was signed and delivered by the
corporation as its voluntary act duly authorized by a proper resolution of its
Board of Directors;
(d) this person knows the proper seal of the corporation
which was affixed to this document; and
(e) this person signed this proof to attest to the truth
of these facts.
Signed and sworn to before
me on April 28, 1994
- ----------------------------- ------------------------
William C. Murtha
<PAGE> 1
EXHIBIT 5.01
[LETTERHEAD OF GIBSON, DUNN & CRUTCHER]
April 28, 1994
(212) 351-4000 C 75259-00054
Resorts International, Inc.
Resorts International Hotel Finance, Inc.
1133 Boardwalk
Atlantic City, New Jersey 08401
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-1 (the "Registration Statement") of Resorts International, Inc., a Delaware
corporation ("RII"), Resorts International Hotel, Inc., a New Jersey
corporation ("RIH"), and Resorts International Hotel Financing, Inc., a
Delaware corporation ("RIHF"), to be filed in connection with the registration
under the Securities Act of 1933, as amended (the "Securities Act"), of (i) up
to $125,000,000 aggregate principal amount of RIHF's 11% Mortgage Notes due
2003 (the "Mortgage Notes"); (ii) the guarantees of RIH relating to the
Mortgage Notes; (iii) up to $35,000,000 aggregate principal amount of RIHF's
11.375% Junior Mortgage Notes due 2004 (the "Junior Notes", together with the
Mortgage Notes, the "Notes") issued as units with up to 35,000 shares of RII's
Class B Redeemable Common Stock, par value $.01 per share (the "Class B Common
Stock"); (iv) the guarantees of RIH relating to the Junior Notes; and (v) up to
17,000,000 shares of RII's Common Stock, par value $.01 per share (the "RII
Common Stock", together with the Class B Common Stock, the "Common Stock").
The Notes and the Common Stock, along with certain additional
consideration, originally will be issued in exchange for a portion of RII's
outstanding Senior Secured Redeemable Notes that were due April 15, 1994,
issued in two series,
<PAGE> 2
Resorts International, Inc.
Resorts International Hotel Financing, Inc.
April 28, 1994
Page 2
pursuant to that certain Joint Plan of Reorganization (the "Plan") under
chapter 11 of title 11 of the United States Code (the "Bankruptcy Code")
proposed by RII, RIH, RIHF, PIRL and GGRI, Inc., a Delaware corporation
("GRI"), for the restructuring of the debt and equity capitalization of RII and
GRI.
RIHF will issue the Mortgage Notes pursuant to the terms of an
Indenture (the "Mortgage Note Indenture") to be entered into among RIHF, RIH
and State Street Bank and Trust Company of Connecticut, National Association,
as Trustee (the "Mortgage Note Trustee"). RIHF will issue the Junior Notes
pursuant to an Indenture (the "Junior Note Indenture") to be entered into among
RIHF, RIH and U.S. Trust Company of California, N.A., as Trustee (the "Junior
Note Trustee"). Forms of the Mortgage Note Indenture and the Junior Note
Indenture are included as exhibits to the Registration Statement.
We have examined the proceedings taken or proposed to be taken in
connection with the issuance of the Notes and the Common Stock, including,
without limitation, the proceedings pursuant to the Bankruptcy Code. In
arriving at the following opinion, we have relied, among other things, upon our
examination of such corporate records of RII, RIH and RIHF and certificates of
officers of RII, RIH and RIHF and of public officials as we have deemed
appropriate. Based upon the foregoing examination and in reliance thereon, and
subject to the completion, prior to the issuance of the Notes and the Common
Stock, of said proceedings now contemplated, and subject to receipt from the
Securities and Exchange Commission of an order declaring the Registration
Statement effective, it is our opinion that:
1. The Mortgage Notes, when issued in accordance with the terms
of the Mortgage Note Indenture (assuming due execution and delivery of the
Mortgage Note Indenture by the parties thereto and due execution,
authentication and delivery of the Mortgage Notes), will be binding obligations
of RIHF.
2. The Junior Notes, when issued in accordance with the terms of
the Junior Note Indenture (assuming due execution and delivery of the Junior
Note Indenture by the parties thereto and due execution, authentication and
delivery of the Junior Notes), will be binding obligations of RIHF.
3. The shares of Class B Common Stock, when issued pursuant to
the Plan, will be validly issued, fully paid and non-assessable.
<PAGE> 3
Resorts International, Inc.
Resorts International Hotel Financing, Inc.
April 28, 1994
Page 3
4. The shares of RII Common Stock, when issued pursuant to the
Plan, will be validly issued, fully paid and non-assessable.
Our opinion is subject to (i) the effect of applicable bankruptcy,
reorganization, insolvency, moratorium, arrangement and other laws affecting
creditor's rights, including, without limitation, the effect of statutory or
other laws regarding fraudulent conveyances, fraudulent transfers and
preferential transfers; (ii) the limitations imposed by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity); and (iii) our assumption that there exist no agreements,
understandings or negotiations among the parties to the Plan that would modify
the terms of the Plan or of the documents and instruments referred to therein
or the respective rights or obligations of the parties under the Plan or under
the documents and instruments referred to therein.
We render no opinion herein as to matters involving the laws of any
jurisdiction other than the laws of the United States of America and the State
of New York and the General Corporation Law of the State of Delaware. In
rendering this opinion, we assume no obligation to revise or supplement this
opinion should the present laws, or the interpretations thereof, be changed.
We consent to the use of this opinion as an exhibit to the
Registration Statement, and we further consent to the use of our name under the
caption "Legal Matters" in the Registration Statement and the Prospectus which
forms a part thereof. In giving this consent, we do not thereby admit that we
are within the category of persons whose consent is required under Section 7 of
the Securities Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER
<PAGE> 1
EXHIBIT 5.02
[LETTERHEAD OF RAVIN, SARASOHN, COOK, BAUMGARTEN, FISCH & BAIME]
April 28, 1994
Resorts International Hotel, Inc.
1133 Boardwalk
Atlantic City, New Jersey 08401
Ladies and Gentlemen:
At your request, we have examined the form of Registration Statement on
Form S-1 to be filed with the Securities and Exchange Commission (the
"Registration Statement") by Resorts International, Inc., a Delaware corporation
("RII"), Resorts International Hotel, Inc., a New Jersey corporation ("RIH"),
and Resorts International Hotel Financing, Inc., a Delaware corporation
("RIHF"), in connection with the registration under the Securities Act of 1933,
as amended (the "Securities Act"), of (i) up to $125 million aggregate
principal amount of RIHF's 11 percent Mortgage Notes due 2003 (the "11%
Mortgage Notes"); (ii) the guarantees of RIH relating to the 11% Mortgage Notes
(the "11% Mortgage Note Guarantees"); (iii) up to $35 million aggregate
principal amount of RIHF's 11.375 percent Junior Mortgage Notes principal
amount due 2004 (the "Junior Notes" and, together with the 11% Mortgage Notes,
the "Notes") to be issued as units with RII's Class B Redeemable Common
Stock, par value $.01 per share (the "Class B Common Stock"); (iv) the
guarantees of RIH relating to the Junior Notes (the "Junior Note Guarantees");
and (v) shares of RII's Common Stock, par value $.01 per share (the "RII Common
Stock" and, together with the Class B Common stock, the "Common Stock").
The Notes, the Common Stock and certain additional consideration, will
be issued in exchange for a portion of RII's outstanding Senior Secured
Redeemable Notes that were due April 15, 1994, issued in two series, pursuant
to that certain Joint Plan of Reorganization (the "Plan") under Chapter 11 of
Title 11 of the United States Code (the "Bankruptcy Code") proposed by RII,
RIH, RIHF, P.I. Resorts Limited ("PIRL") and GGRI, Inc., a Delaware corporation
("GRI"), for the restructuring of the debt and equity capitalization of RII and
GRI.
<PAGE> 2
April 28, 1994
Page 2
RIH will issue the 11% Mortgage Note Guarantees pursuant to the terms
of an Indenture (the "11% Mortgage Note Indenture") to be entered into among
RIHF, RIH and State Street Bank and Trust Company of Connecticut, National
Association, as Trustee (the "11% Mortgage Note Trustee"). RIH will issue the
Junior Note Guarantees pursuant to an Indenture (the "Junior Note Indenture")
to be entered into among RIHF, RIH and U.S. Trust Company of California,
N.A., as Trustee (the "Junior Note Trustee"). Forms of the 11% Mortgage Note
Indenture and the Junior Note Indenture are included as exhibits to the
Registration Statement.
In arriving at the following opinion, we have relied, among other
things, upon our examination of such corporate records, certificates of
officers of RIH and such other materials as we have deemed appropriate. In all
such examinations, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as certified or
conformed copies or photocopies or facsimiles.
Based upon the foregoing examination and in reliance thereon, and
subject to the completion, prior to the issuance of the 11% Mortgage Note
Guarantees and the Junior Note Guarantees, of all proceedings relating to the
Plan, and subject to receipt from the Securities and Exchange Commission of an
order declaring the Registration Statement effective and to such other matters
discussed herein, it is our opinion that:
1. The 11% Mortgage Note Guarantees, when issued in accordance with
the terms of the 11% Mortgage Note Indenture (assuming due execution and
delivery of the 11% Mortgage Note Indenture by the parties thereto and due
authentication of the 11% Mortgage Notes and the 11% Mortgage Note Guarantees
by the 11% Mortgage Note Trustee), will be binding obligations of RIH.
2. The Junior Note Guarantees, when issued in accordance with the
terms of the Junior Note Indenture (assuming due execution and delivery of the
Junior Note Indenture by the parties thereto and due authentication of the
Junior Notes and Junior Note Guarantees by the Junior Note Trustee), will be
binding obligations of RIH.
Our opinion is subject to (i) the effect of applicable bankruptcy,
reorganization, insolvency, moratorium, arrangement and other laws affecting
creditors' rights, including, without limitation, the effect of statutory or
other laws regarding fraudulent conveyances, fradulent transfers and
preferential
<PAGE> 3
April 28, 1994
Page 3
transfers; (ii) the limitations imposed by general principles of equity
(regardless of whether such enforceability is considered in a proceeding at law
or in equity) and public policy; (iii) our assumption that (a) there exist no
agreements, understandings or negotiations among the parties to the 11% Mortgage
Note Indenture of Junior Note Indenture that would modify the terms of such
Indentures or of the documents and instruments referred to therein or herein
or the respective rights or obligations of the parties thereunder or under the
documents and instruments referred to therein or herein, including, without
limitation, the 11% Mortgage Note Guarantees or the Junior Note Guarantees; (b)
the obligations of the parties to the 11% Mortgage Note Indenture and Junior
Note Indenture thereto, other than RIH, are binding and enforceable; and (c)
there is adequate consideration to support the 11% Mortgage Note Guarantees and
Junior Note Guarantees. We render no opinion regarding any collateralization
of the 11% Mortgage Note Guarantees and Junior Note Guarantees or compliance
with federal or state securities laws.
We render no opinion herein as to matters involving the laws of any
jurisdiction other than the laws of the United States of America and the State
of New Jersey. We note that the 11% Mortgage Note Indenture and Junior Note
Indenture and the 11% Mortgage Note Guarantees and Junior Note Guarantees being
issued, respectively, thereunder, are governed by the laws of the State of New
York and that we have assumed for purposes of this opinion that the laws of the
State of New York are in conformity with the laws of the State of New Jersey.
In rendering this opinion, we assume no obligation to revise or supplement the
opinion should the law, or the interpretations thereof, be changed. Further,
this firm has been retained as special counsel to RIH in connection with the
matters covered hereby and has not participated in the proceedings relating to
the Plan or the preparation of the Registration Statement.
We consent to the use of this opinion as an exhibit to the Registration
Statement and we further consent to the use of our name under the caption
"Legal Matters" in the Registration Statement which forms a part thereof. In
giving this consent, we do not thereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations promulgated thereunder. This opinion is solely for the
benefit of the addressee hereof.
Very truly yours,
/s/ RAVIN, SARASOHN, COOK, BAUMGARTEN,
FISCH & BAIME, P.C.
<PAGE> 1
EXHIBIT 8.01
[LETTERHEAD OF GIBSON, DUNN & CRUTCHER]
April 28, 1994
(212) 351-4000 C 75259-00048
Resorts International, Inc.
1133 Boardwalk
Atlantic City, NJ 08401
Re: Resorts International, Inc. ("RII"), Resorts
International Hotel Financing, Inc. ("RIHF")
and Resorts International Hotel, Inc. (RIH")
Gentlemen:
We have acted as special tax counsel to RII, a
Delaware corporation, RIHF, a Delaware corporation and RIH, a New
Jersey corporation (collectively, the "Registrants") in connection
with the registration under the Securities Act of 1933 of up to
$125,000,000 of 11% Mortgage Notes due 2003 to be issued by RIHF (the
"Mortgage Notes"), up to $35,000,000 of 11.375% Junior Mortgage Notes
due 2004 to be issued by RIHF (the "Junior Mortgage Notes"), up to
17,000,000 shares of Common Stock to be issued by RII, par value $.01
per share (the "Common Stock") and up to 35,000 shares of Class B
Redeemable Common Stock to be issued by RII, par value $.01 per share
(the "Class B Common Stock") (the Mortgage Notes, Junior Mortgage
Notes, Common Stock and Class B Common Stock collectively are
referred to as the "Registered Securities"). The Registered
Securities are proposed to be offered for public resale by certain
Selling Securityholders. At your request we have examined the
Registration Statement on Form S-1 to be filed with the Securities
and Exchange Commission (the "Registration Statement") in connection
with the registration of the Registered Securities. The Registered
Securities are
<PAGE> 2
Resorts International, Inc.
April 28, 1994
Page 2
to be offered in the manner described in the Registration Statement.
We hereby confirm our opinions set forth under the
caption "Certain Federal Income Tax Considerations" in the
Registration Statement.
We consent to the use of this opinion as an exhibit
to the Registration Statement, and further consent to the use of our
name under the caption "Certain Federal Income Tax Considerations" in
the Registration Statement and the Prospectus which forms a part
thereof.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER
DBR/CFF
<PAGE> 1
EXHIBIT 10.57
NOMINEE AGREEMENT
THIS AGREEMENT dated as of May --, 1994, between Resorts International
Hotel Financing, Inc., a Delaware corporation ("Nominee"), and Resorts
International Hotel, Inc., a New Jersey corporation ("RIH").
W I T N E S S E T H:
WHEREAS, RIH expects to cause the issuance by Nominee of mortgage notes
in the principal amount of up to $125,000,000 (the "New RIHF Mortgage Notes")
and junior mortgage notes in the principal amount of up to $35,000,000 (the
"New RIHF Junior Mortgage Notes") (the New RIHF Mortgage Notes and the New RIHF
Junior Mortgage Notes are collectively referred to hereinafter as the "Nominee
Notes");
WHEREAS, Nominee and RIH are direct or indirect wholly owned
subsidiaries of Resorts International, Inc., a Delaware corporation ("RII");
WHEREAS, the Nominee Notes will be issued under indentures of even date
herewith in partial exchange for the outstanding Senior Secured Redeemable
Notes due April 15, 1994 issued by RII (the "Old Series Notes"), pursuant to
the plan of reorganization of RII and GGRI, Inc. under chapter 11 of the
Bankruptcy Code (the "Plan");
WHEREAS, in repayment of certain intercompany debt owed by RIH to RII,
and as a distribution to RII, RIH will issue and distribute to RII, (i) a
promissory note (the "RIH Promissory Note") in the same aggregate principal
amount as the New RIHF Mortgage Notes, and (ii) a promissory note (the "RIH
Junior Promissory Note") in the same aggregate principal amount as the New RIHF
Junior Mortgage Notes (the RIH Promissory Note and the RIH Junior Promissory
Note are collectively referred to hereinafter as the "RIH Notes");
WHEREAS, the essential payment and other economic terms of the RIH
Promissory Note and the RIH Junior Promissory Note will mirror those terms
included in the New RIHF Mortgage Notes and the New RIHF Junior Mortgage Notes,
respectively, except that the RIH Notes will be secured by mortgages which will
encumber certain real property owned or leased by RIH together with all
buildings and improvements erected thereon;
WHEREAS, RII will transfer the RIH Notes, and the mortgages and any
other collateral securing the RIH Notes, to Nominee in exchange for the Nominee
Notes;
WHEREAS, Nominee has not advanced and will not have the funds to
advance any of the monies necessary to acquire, hold, make payments of interest
on and repay the principal amount of, at maturity or otherwise, any of the
Nominee Notes, except to the extent of RIH's payments on the RIH Notes to
Nominee;
WHEREAS, RIH will issue a guaranty of payment of principal and interest
on the Nominee Notes;
WHEREAS, Nominee is solely engaged in the business of holding and
issuing debt exclusively as a nominal debtor, lender and issuer, and not as a
true debtor, lender or issuer on its own behalf; and
WHEREAS, RIH will pay any and all costs of Nominee relating to its
role as a nominal debtor, lender and issuer on
<PAGE> 2
behalf of RIH (including without limitation all expenses for Nominee's
acquisition of the RIH Notes and Nominee's issuance of the Nominee Notes);
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein set forth, the parties hereto agree as follows:
SECTION 1. Nominee shall hold title to the RIH Notes solely as a
nominal holder of debt securities and payments on the RIH Notes will be used
exclusively to make payments on the Nominee Notes.
SECTION 2. Nominee shall be the nominal debtor on the Nominee Notes
and the Nominee Notes will be issued solely in Nominee's capacity as a nominal
issuer and debtor. RIH shall be the sole true and ultimate debtor and issuer.
SECTION 3. RIH and its successors and assigns will pay Nominee a fee
of $100 per year for acting as a nominal debtor, lender and issuer, plus such
additional fees as may be required from time to time for the purpose of
reimbursing Nominee for expenses incurred that relate to the RIH Notes and the
associated Nominee Notes.
SECTION 4. Nominee will fully disclose to all parties that it acts
exclusively as a nominal debtor, lender and issuer for RIH and that RIH is the
true and ultimate debtor and issuer.
SECTION 5. Nominee and RIH hereby confirm their relationship as
nominal and true debtor, respectively, and agree that Nominee shall act in
respect of any matters not described above only as directed by RIH.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
RESORTS INTERNATIONAL HOTEL
FINANCING, INC.
By . . . . . . . . . . . . . . . . . . . . . .
Name:
Title:
RESORTS INTERNATIONAL HOTEL, INC.
By . . . . . . . . . . . . . . . . . . . . . .
Name:
Title:
2
<PAGE> 1
EXHIBIT 10.65
======================================================
RESORTS INTERNATIONAL
HOTEL FINANCING INC.
======================================================
UP TO $20,000,000 AGGREGATE PRINCIPAL AMOUNT OF
11% SENIOR SECURED NOTES DUE JULY 15, 2002
======================================================
NOTE PURCHASE AGREEMENT
======================================================
Dated May 3, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. PURCHASE AND SALE OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Issue of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Sale and Purchase of the Securities; the Closing . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Purchaser's Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Failure to Deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Expenses and Attorney's Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Indemnification and Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.7 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.8 Covenant to Maintain Effective Registration
Statement and Issue Unlegended Securities . . . . . . . . . . . . . . . . . . . . . . . . 9
1.9 Effectiveness of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Conditions to Your Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1.1 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.2 Representations and Warranties True; No Default
or Event of Default; Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.3 Compliance With This Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1.4 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.5 Effective Registration Statement; Public Resale . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.6 The Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.7 Completion of Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.1.8 Proceedings Satisfactory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.9 Consents - Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.10 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.11 Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.1.12 Organizational Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.13 Security Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.1.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.15 Expenses and Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.1.16 Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.1.17 Lien Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2 Conditions to Company's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.2.1 Purchaser's Representations and Warranties True . . . . . . . . . . . . . . . . . . . . . . . 15
2.2.2 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.1 Organization, Standing and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.3 Authorization of Agreement and Other Documents . . . . . . . . . . . . . . . . . . . . . . . . 18
3.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.6 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
3.7 Outstanding Indebtedness - Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 21
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.9 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.10 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.11 No Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.13 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.14 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.15 Burdensome Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.16 Certain Governmental Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.17 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.18 No Violation of Regulations of Board of Governors
of Federal Reserve System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.19 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.20 Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.21 Margin Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.22 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.23 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.24 Environmental Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 4. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 5. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.3 Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.5 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.9 The Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.10 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.11 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.12 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
ANNEX A INDENTURE
ANNEX B OPINION OF COUNSEL TO THE COMPANY
SCHEDULE I PURCHASERS
ii
<PAGE> 4
RESORTS INTERNATIONAL HOTEL FINANCING INC.
1133 Boardwalk
Atlantic City, New Jersey 08401
-----------------------
NOTE PURCHASE AGREEMENT
-----------------------
May 3, 1994
The Funds and Accounts Listed
on Schedule I hereto
c/o Fidelity Management & Research Company
82 Devonshire Street
Boston, Massachusetts 02109
Gentlemen:
Resorts International Hotel Financing, Inc., a Delaware corporation
(the "Company") which is a wholly-owned subsidiary of Resorts International,
Inc., a Delaware corporation ("RII"), hereby agrees with each of you as
follows:
SECTION 1. PURCHASE AND SALE OF SECURITIES
1.1 Issue of Securities
The Company has authorized the issuance of its 11% Senior Secured
Notes due July 15, 2002 (the "Senior Notes" or the "Securities"), in an
aggregate principal amount of up to $20,000,000, to be issued pursuant to the
Indenture attached hereto as Annex A (herein, together with all amendments and
modifications thereto from time to time, collectively called the "Indenture").
The Joint Plan of Reorganization of RII and GGRI (the "Plan") provides for the
execution and delivery of this Agreement on the "Effective Date" (as defined
therein).
Capitalized terms used herein without definition shall have the
meanings specified in Section 4 hereof.
Each Senior Note will be in the amount of $1,000 or any integral
multiple of $1,000; each Senior Note will be dated as provided in Section 1.2
hereof; and each Senior Note will otherwise be in the form of the Senior Note
set out in Section 2.02 of the Indenture.
<PAGE> 5
1.2 Sale and Purchase of the Securities; the Closing
In reliance upon the representations and warranties of the Company
contained herein and in the other Documents (as herein defined), and upon the
terms and conditions set forth herein and therein, you hereby agree, upon
request therefor made by the Company in writing upon at least thirty days
notice (which notice shall be delivered at any time after the date hereof and
prior to the date that is 30 days prior to the first anniversary of the date
hereof), to purchase your Applicable Percentage of the Securities, or your
Applicable Percentage of such portion of the Securities as shall be designated
by the Company, from the Company at the Time of Purchase, subject to the
satisfaction or waiver of the conditions set forth in Section 2.1.
The purchase price for the Senior Notes purchased and sold hereunder
shall be 100% of the principal amount of each Senior Note.
The sale and purchase of Securities hereunder shall take place prior
to the first anniversary of the date hereof at the closing (the "Closing") at
the offices of Weil, Gotshal & Manges, 767 Fifth Avenue, New York, New York, or
such other place in New York, New York as may be mutually agreed upon by you
and the Company at such time and on such date as shall reasonably be designated
by the Company on at least thirty business days written notice. The Company
will deliver to you the Securities to be purchased by you at such Closing in
the aggregate amount of up to $20,000,000 (in such permitted denomination or
denominations and registered in your name or the name of such nominee or
nominees as you may request), dated the date of such Closing against payment of
the purchase price therefor by wire transfer of immediately available funds or
by federal funds check. The date and time at which the Closing is to be
concluded is referred to herein as the "Time of Purchase." The Company shall
not be obligated to designate a Time of Purchase. If no Time of Purchase is
designated, no Closing shall occur hereunder. Once a Time of Purchase shall be
designated by the Company, the Company shall be obligated to sell the
Securities hereunder on the date so designated, subject to satisfaction or
waiver of the conditions set forth herein.
1.3 Purchaser's Representations
(a) Each of you, severally and not jointly, represents to the Company
that you are purchasing the Securities to be purchased by you solely for your
own account and with no current intention of distributing or reselling said
Securities or any
2
<PAGE> 6
part thereof, or interest therein, in any transaction which would be in
violation of the securities laws of the United States of America or any state
thereof, without prejudice, however, to your right at all times to sell or
otherwise dispose of all or any part of said Securities under a registration
under the Securities Act or under an exemption from such registration available
under the Securities Act, and subject, nevertheless, to the disposition of your
property being at all times within your control. You understand that the
Securities being acquired by you hereunder have not been registered under the
Securities Act by reason of their contemplated issuance in transactions exempt
from the registration and prospectus delivery requirements of the Securities
Act pursuant to Sections 4(1) and 4(2) thereof, and that the reliance of the
Company and any other purchaser of Securities is predicated in part on your
representations and warranties hereunder.
(b) You are an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act and you have such
knowledge and experience in financial and business matters that you are capable
of evaluating the merits and risks of the investment to be made by you
hereunder.
(c) Your execution, delivery and performance of this Agreement will
not result in a violation of any Federal or state law, rule or regulation or
any material agreement or instrument to which you are a party or by which you
or your assets are bound. You have the corporate or partnership power to enter
into and perform this Agreement and the other instruments to which you are a
party. You have taken all requisite corporate or partnership action to
authorize your execution and performance of this Agreement and such other
instruments. If acting in a fiduciary capacity, you are duly authorized so to
act. This Agreement is your legal, valid and binding agreement, enforceable
against you in accordance with its terms.
1.4 Failure to Deliver
If, at the Closing, any of the conditions to such Closing specified in
this Agreement shall not have been fulfilled to your reasonable satisfaction,
at your election and notwithstanding anything to the contrary in this
Agreement, you shall be relieved of all obligations to proceed with such
Closing until such time as such conditions, shall have been fulfilled to your
reasonable satisfaction (but, in any case, not beyond the first anniversary of
the date hereof.)
3
<PAGE> 7
1.5 Expenses and Attorney's Fees
(a) Whether or not the Securities are sold, the Company will pay all
of its costs and expenses and your reasonable out-of-pocket expenses relating
to this Agreement, including but not limited to:
(i) the cost of issuance of the Securities and the
preparation, execution and delivery of this Agreement and the other
Documents;
(ii) your reasonable out-of-pocket expenses incurred in
connection with this Agreement and the other documents referred to in
clause (i) above;
(iii) the reasonable fees and disbursements of Weil, Gotshal &
Manges (your counsel in connection herewith) as well as any local counsel
engaged by Fidelity or such counsel in connection herewith;
(iv) the cost of delivering to your home office or the office
of your designee, insured to your reasonable satisfaction, the Securities
purchased by you at the Time of Purchase;
(v) all reasonable out-of-pocket expenses relating to any
amendment, or modification of, or any waiver, or consent or preservation
of rights under, this Agreement and the other Documents;
(vi) all expenses incident to the Company's performance of or
compliance with Section 2.1.5 and Section 5.9 of this Agreement including
without limitation all registration and filing fees, all fees and
expenses associated with filings required to be made with the NASD as may
be required by the rules and regulations of the NASD, fees and expenses
of compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Securities), messenger and delivery expenses, the
Company's internal expenses (including, without limitation, all salaries
and expenses of their officers and employees performing legal or
accounting duties), printing costs, fees and expenses of counsel for the
Company and its independent certified public accountants (including the
expenses of any special audit required by or incident to such
performance), reasonable fees and expenses of Weil, Gotshal & Manges and
any local counsel engaged by Fidelity or Weil, Gotshal &
4
<PAGE> 8
Manges in connection with such performance or compliance and the fees and
expenses of any special experts retained by the Company in connection
with the Registration Statement; provided, however, that in no event
shall such registration expenses include any underwriting discounts,
commissions or fees attributable to the sale of the Securities; and
(vii) all other expenses, including without limitation
counsel's fees in accordance with Section 5.9, incurred by the Company or
you in connection with the transactions contemplated by this Agreement
and the other Documents.
(b) If, at any time or times, regardless of the existence of an Event
of Default (except with respect to paragraphs (iii) and (iv) below, which shall
be subject to an Event of Default having occurred and be continuing), Fidelity
(or in the case of paragraphs (iii) and (iv) below, any Trustee) employs
counsel or other advisors for advice or other representation and incurs
reasonable legal or other costs and expenses in connection with:
(i) any amendment, modification or waiver, or consent with
respect to, any of the Documents or the Registration Statement or advice
in connection with the administration of any purchase made pursuant
hereto or the rights of the purchasers hereunder or thereunder;
(ii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by you, the Company or any other Person) in
any way relating to the Collateral or any of the Documents;
(iii) any attempt to enforce any of the rights of the
purchasers hereunder or under the other Documents or any rights of the
Trustee hereunder or under the other Documents;
(iv) any attempt to verify, protect, collect, sell, liquidate
or otherwise dispose of any of the Collateral;
then, and in any such event, the reasonable attorneys' and other parties' fees
arising from such services, including those of any appellate proceedings, and
all expenses, costs, charges and other fees incurred by such counsel and others
in connection with or relating to any of the events or actions described in
this Section that you shall incur in your capacity as the purchaser or
5
<PAGE> 9
a holder of the Securities shall be payable, on demand, by the Company to you
or such Trustee and shall be additional obligations secured under this
Agreement and the other Documents.
1.6 Indemnification and Contribution
(a) In addition to (but without duplication of) any and all
obligations of the Company to indemnify you pursuant to any of the other
Documents, the Company shall, without limitation as to time, indemnify you and
your Agents against, and hold each of you and them harmless from, all losses,
claims, damages, liabilities, costs (including the costs of preparation and
reasonable attorneys' fees) and expenses (collectively, "Losses") incurred by
each of you or them relating to or arising out of or in connection with this
Agreement or the other Documents, whether or not the transactions contemplated
by this Agreement are consummated, other than any Losses resulting from action
on the part of you or your Agents which is determined by a final judgment of a
court of competent jurisdiction to be the result of your or your Agents'
willful misconduct or gross negligence. The Company agrees to reimburse each
of you and your Agents promptly for all such Losses as they are incurred by you
or your Agents. The obligations of the Company to you and each of your Agents
hereunder shall be separate obligations and the Company's liability to you or
any of your Agents hereunder shall not be extinguished solely because any of
your Agents or you are not entitled to indemnity hereunder. The obligations of
the Company under this Section 1.6(a) shall survive the payment or prepayment
of the Securities, at maturity, upon redemption or otherwise, any transfer of
the Securities by you and the termination of this Agreement and the other
Documents. The provisions of this Section 1.5(a) shall not apply to any
Losses: (i) arising out of or based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement or
Prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
the case of a Prospectus, in light of the circumstances under which they are
made) not misleading; or (ii) that are expressly indemnified, regardless of
whether such indemnification is subject to certain conditions or limitations,
under the provisions of the Purchase Agreement, dated as of October 11, 1993,
between RII and Sun International Hotels Limited ("SIHL"), the letter
agreement, dated October 11, 1993, among Fidelity Management & Research
Company, TCW Special Credits, RII, GGRI, SIHL and Sun International Investments
Ltd. or the Standby Distribution Agreement, dated as of October 15, 1993
between RII and P.I. Resorts Limited; or (iii) any other agreement or
instrument which is not a Document.
6
<PAGE> 10
(b) The Company further agrees to indemnify, to the full extent
permitted by law, each of you, your officers, directors, partners, employees
and Agents and each Person that controls you (within the meaning of the
Securities Act), and any investment advisor thereof or Agent therefor, against
all Losses arising out of or based upon any untrue or alleged untrue statement
of a material fact contained in the Registration Statement or Prospectus or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
Prospectus, in light of the circumstances under which they are made) not
misleading, except insofar as the same arise out of or are based upon any
information with respect to you furnished in writing to the Company by you.
The Company will also indemnify any underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution and their officers and directors and each person who controls such
persons or entities (within the meaning of the Securities Act) to the same
extent as provided above with respect to the indemnification of you. The
obligations of the Company under this Section 1.6(b) shall survive the payment
or prepayment of the Securities, at maturity, upon redemption or otherwise, any
transfer of the Securities by you and the termination of this Agreement and the
other Documents.
(c) Any person or entity entitled to indemnification under this
Agreement agrees to give prompt written notice to the indemnifying party after
the receipt by such person or entity of any written notice of the commencement
of any action, suit or proceeding against such person or entity or
investigation thereof for which such person or entity will claim
indemnification or contribution pursuant to this Agreement and, unless in the
reasonable judgment of such indemnified party a conflict of interest exists
between such indemnified party and the indemnifying party with respect to such
claim, permit the indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to such indemnified party. If the indemnifying
party is not entitled to, or elects not to, assume the defense of a claim, it
will not be obligated to pay the fees and expenses of more than one lead
counsel with respect to such claim, (plus local counsel fees, if required)
unless in the reasonable judgment of counsel to such indemnified party a
conflict of interest exists between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels. The indemnifying party will not be subject to
any liability for any settlement made without its consent, which consent shall
not be
7
<PAGE> 11
unreasonably withheld. No failure by an indemnified party to give notice as
required by this Section 1.6 shall relieve any indemnifying party of its
indemnification obligations under this Agreement, except to the extent that
such indemnifying party has actually been prejudiced by such failure.
(d) If the indemnification provided for in Section 1.6(b) from the
indemnifying party is unavailable to an indemnified party hereunder in respect
of any Losses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses in such proportion
as is appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions or inactions which resulted
in such Losses, as well as any other relevant equitable considerations. If a
claim for indemnification relates to the Registration Statement, the relative
fault of such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph (d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) In the event that any provision of an indemnification clause in
an underwriting agreement executed by or on behalf you differs from a provision
in this Section 1.6, such provision in the underwriting agreement shall
determine your rights in respect thereof.
1.7 Further Action
During the period from the date hereof to the Time of Purchase the
Company shall use its best efforts and take all action reasonably necessary or
appropriate to cause its representations and warranties contained in Section 3
to be true as of
8
<PAGE> 12
the date and time of the Closing, after giving effect to the transactions
contemplated by this Agreement, as if made on and as of such date.
1.8 Covenant to Maintain Effective Registration Statement
and Issue Unlegended Securities
(a) The Company agrees that it shall take, or cause its Affiliates
to take, such action as may be necessary to ensure that the Registration
Statement (as defined in Section 2.1.5) shall remain effective from and after
the Time of Purchase, continuously, until the earlier of (i) the [third]
anniversary of the Time of Purchase or (ii) such earlier date as you shall have
disposed of all of the Securities (the earlier of such events being referred to
herein as the "Effectiveness Termination Date"), as more particularly set forth
in Section 5.9.
(b) On the Effectiveness Termination Date, upon your request and, if
requested by the Company, upon your delivery of a certificate to the effect
that you are not an "affiliate" of the Company for purposes of the Exchange
Act, the Company promptly will prepare and deliver to you, against your return
and exchange of the Securities issued to you at the Time of Purchase,
Securities which are identical in every respect to the Securities so returned
and exchanged by you except that such Securities shall not bear any restrictive
legends or other marks that would cause such Securities to be ineligible for
resale by you in customary brokerage transactions.
1.9 Effectiveness of Provisions
Notwithstanding anything to the contrary contained herein, the
provisions of Section 1.8 shall have no effect until such time as the
Securities shall have been purchased by you pursuant to the provisions of this
Agreement.
SECTION 2. CLOSING CONDITIONS
2.1 Conditions to Your Obligations
With respect to each of you, your obligation to purchase and pay for
the Securities to be delivered to you at the Closing shall be subject to the
satisfaction or waiver by you of the following conditions on or before the Time
of Purchase:
9
<PAGE> 13
2.1.1 Opinions of Counsel
You shall have received:
(a) a favorable opinion, dated the Time of Purchase and addressed to
you, from counsel for the Company (which counsel shall be reasonably acceptable
to you), in form and substance reasonably satisfactory to you, as to the
matters set forth on Annex B to this Agreement; and
(b) such other opinions of counsel covering matters incidental to the
transactions contemplated by this Agreement as you may reasonably request.
In rendering each of the foregoing opinions, such counsel may rely as
to factual matters upon certificates or other documents furnished by officers
and directors of the Company (copies of which shall be delivered to you) and by
government officials, and upon such other documents as such counsel deem
appropriate as a basis for their opinion. Each such counsel may specify the
jurisdictions in which they are admitted to practice and will limit their
opinions to such jurisdictions.
2.1.2 Representations and Warranties True; No Default
or Event of Default; Certificate
The Company's representations and warranties contained in Section 3
hereof shall be true and correct in all respects at and as of the date hereof
and at and as of the Time of Purchase after giving effect to the transactions
contemplated by this Agreement, as if made on and as of such date, and you
shall have received an officer's certificate executed by the Chairman of the
Board, the President or any Vice President of RII to such effect. There shall
exist at and as of the Time of Purchase (after giving effect to the
transactions contemplated by this Agreement), no Default or Event of Default
hereunder.
2.1.3 Compliance With This Agreement
The Company shall have performed and complied in all respects with all
agreements, covenants and conditions contained herein, in the other Documents
and any other document contemplated hereby or thereby which are required to be
performed or complied with by the Company on or before the Time of Purchase.
10
<PAGE> 14
2.1.4 Officers' Certificate
You shall have received a certificate, dated the Time of Purchase and
signed by the Chairman of the Board, the President or any Vice- President of
the Company, (a) certifying that the conditions set forth herein are satisfied
on and as of such date and (b) further certifying as to such other matters as
you may reasonably request.
2.1.5 Effective Registration Statement; Public Resale
(a) At or prior to the Closing, a registration statement on Form S-1
(or any other form which the Company shall be entitled to use with respect to
the transactions contemplated hereby) in respect of the Senior Notes (the
"Registration Statement") shall have been declared effective by the SEC, and
such Registration Statement shall provide for the resale of such Senior Notes
by you on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act; at the Time of Purchase no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the SEC;
at the Time of Purchase all reports of the Company required to be filed under
the Exchange Act, through and including the Time of Purchase shall have been
timely filed with the SEC; and the Company, RII, GGRI and RIH shall have taken
such other actions as may be necessary to ensure that all of the Securities may
be re-sold publicly by you, without restriction under the Securities Act,
immediately following the issuance thereof in accordance with Section 1.8(a).
2.1.6 The Indenture
The Company and a bank or trust company with capital and surplus of
not less than $100,000,000, and otherwise satisfactory to you, shall have duly
entered into the Indenture, as trustee, and you shall have received
counterparts, conformed as executed, of the Indenture.
2.1.7 Completion of Other Transactions
Prior to or simultaneously with the sale to you of the Securities to
be purchased by you at the Closing the Company shall have consummated, pursuant
to an order of the United States Bankruptcy Court for the District of Delaware,
all transactions described in the Information Statement/ Prospectus included in
the Company's Registration Statement on Form S-4, as amended (File No.
33-50733) (the "Form S-4"), and necessary for the
11
<PAGE> 15
occurrence of the "Effective Date," as defined therein (the "Other
Transactions").
2.1.8 Proceedings Satisfactory
All proceedings taken in connection with the issuance of the
Securities, the sale of the Securities to you, your resale of the Securities
and the other transactions contemplated by hereby, and all documents and papers
relating thereto, shall be reasonably satisfactory to you and your counsel.
You and your counsel shall have received copies of such documents and papers as
you or they may reasonably request in connection therewith, including without
limitation any documents you or such counsel reasonably may request regarding
the business or affairs of RII and any of its Subsidiaries, all in form and
substance reasonably satisfactory to you. Any Document, any document annexed
to this Agreement and any other document contemplated by this Agreement, not
approved by you in writing as to form and substance on the date this Agreement
is executed, shall be reasonably satisfactory in form and substance to you.
2.1.9 Consents - Permits
The Company shall have received all material consents, permits and
other authorizations, and made all such filings and declarations, as may be
required from any Person pursuant to any law, statute, regulation or rule
(federal, state, local and foreign), or pursuant to any agreement, order or
decree to which the Company is a party or to which it is subject, in connection
with the transactions contemplated by this Agreement, the sale of the
Securities to you or the Other Transactions.
2.1.10 Defaults
There shall not have occurred and be continuing any "Default" or
"Event of Default" under any of (a) the Mortgage Note Indenture (as defined in
the Indenture), (b) the Junior Mortgage Note Indenture (as defined in the
Indenture), or (c) the Indenture (as if it were in full force and effect).
2.1.11 Resolutions
You shall have received certified copies of resolutions of the board
of directors of each of the Company, RII, RIH and GGRI, each certified by the
Secretary or Assistant Secretary of such entity in each case as of the Time of
Purchase, to be duly adopted and in full force and effect on such date,
authorizing
12
<PAGE> 16
the execution, delivery and performance by such company of the Documents to
which such entity is a party.
2.1.12 Organizational Documents
You shall have received (a) certified copies of the organizational
charter and all amendments thereto of each of the Company, RII, RIH and GGRI,
certified as of a recent date by the Secretary of State of the jurisdiction of
its organization, and copies of such entity's by-laws, certified by the
Secretary or Assistant Secretary of such entity as true and correct as of the
Time of Purchase, (b) with respect to each of the Company, RII, RIH and GGRI,
long-form good standing certificates, dated as of the business day immediately
prior to the Time of Purchase, issued by the Secretary of State of such
corporation's jurisdiction of incorporation and (c) with respect to each of the
Company, RII, RIH and GGRI, certificates of good standing, dated not more than
five days prior to the Closing, issued by the Secretary of State of each
jurisdiction in which such corporation's failure to qualify to do business as a
foreign corporation would have a Material Adverse Effect.
2.1.13 Security Documents
Each of the Security Documents shall have been duly executed and
delivered by the Company, RII, RIH, or GGRI, as applicable, together with:
(a) acknowledgement copies of proper financing statements (Form
UCC-1) duly filed under the Uniform Commercial Code of each jurisdiction
as may be necessary or, in your opinion, desirable to perfect the
security interests created by the Security Documents,
(b) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing the Financing Statements referred
to in paragraph (a) above and all other effective financing statements
which name the Company, RII, RIH or GGRI or any of their Material
Subsidiaries (under a present name and any previous name(s)) as debtor
and which are filed in the jurisdictions referred to in said paragraph
(a), together with copies of such other financing statements (none of
which shall cover the Collateral purported to be covered by the Security
Documents),
(c) evidence of the completion of all recordings and filings of the
Security Documents as may be necessary or, in your opinion, desirable to
perfect the security interests
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<PAGE> 17
and liens created by the Security Documents (including without limitation
the Mortgages),
(d) evidence of delivery to the Trustee of certificates representing
the pledged securities of the Company, RIH and GGRI referred to in each
of the RII Stock Pledge Agreement and the GGRI Stock Pledge Agreement,
both of which are among the various Security Documents, and undated stock
powers for such certificates executed in blank,
(e) evidence that the Intercreditor Agreement has been executed by
each of the requisite parties thereto, has been recorded or filed as
required by its terms, and remains in full force and effect, and
(f) evidence that all other actions necessary or, in your opinion,
desirable to perfect and protect the security interests created by the
Security Documents have been taken.
2.1.14 Insurance
You shall have received satisfactory evidence that the insurance
policies provided for in the Security Documents are in full force and effect,
certified by the insurer thereof, together with appropriate evidence showing a
loss payable clause in favor of the Trustee for the benefit of the holders of
the Securities. You shall also have received, with respect to all real
property included in the Collateral, an ALTA- form title insurance policy
naming the Trustee as insured mortgagee, issued by a title insurance company
acceptable to you, in an amount not less than the aggregate principal amount of
the Securities to be purchased by you hereunder, insuring that the Trustee has
a first mortgage, with such endorsements as may be reasonably required by you
and with no exceptions or exclusions other than as may be approved by you.
2.1.15 Expenses and Attorneys' Fees
The Company shall have tendered payment of all reasonable fees and
expenses of (i) your outside counsel, Weil, Gotshal & Manges and (ii) all
special local counsel retained by Fidelity or such outside counsel, and all
other fees or expenses owed to you pursuant to Section 1.5, in each case in
connection with any of the Documents, the Registration Statement and the
transactions contemplated thereby.
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2.1.16 Surveys
You shall have received current ALTA survey and surveyor's
certification satisfactory in form and substance to you as to all real property
included in the Collateral.
2.1.17 Lien Searches
You shall have received evidence satisfactory to you, including copies
of Form UCC-11, that the assets and properties owned by RII and its
Subsidiaries are free and clear of Liens other than those that are permitted
hereunder or created pursuant to the Security Documents.
2.2 Conditions to Company's Obligations
The Company's obligation to sell the Securities to be delivered to you
at the Closing shall be subject to the satisfaction of the following
conditions:
2.2.1 Purchaser's Representations and Warranties True
Your representations and warranties contained in Section 1.3 hereof
shall be true in all respects at and as of the Time of Purchase after giving
effect to the transactions contemplated by this Agreement, as if made on and as
of such date.
2.2.2 Payment of Purchase Price
You shall have tendered to the Company the purchase price specified
herein in respect of the Securities to be sold at such Closing in such manner
as is specified herein or is otherwise agreed to by the Company.
SECTION 3. REPRESENTATIONS AND WARRANTIES
Solely in connection with the execution and delivery of this Agreement
and the other Documents, the Securities and the Indenture and solely with
respect to the rights and obligations of the Company and you created hereby and
thereby, the Company represents and warrants to each of you as follows (it
being understood and agreed that such representations and warranties are being
made on the mutually acceptable assumption that the Restructuring (as defined
in the Form S-4) has been consummated on the terms set forth in the Form S-4
and that such representations and warranties are not being made in connection
with the Restructuring):
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3.1 Organization, Standing and Qualification
(a) Each of the Company, RII, GGRI, RIH and all Material Subsidiaries
of the foregoing is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; has all requisite
corporate power and authority to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be conducted, except
where failure to be so existing and in good standing or to have such power and
authority would not individually or in the aggregate have a material adverse
effect on the Company, RIH, GGRI or RII and its Material Subsidiaries taken as
a whole or on the Collateral (a "Material Adverse Effect"). Each of the
Company, RII, GGRI, RIH and all Material Subsidiaries of the foregoing is duly
qualified or licensed to do business as a foreign corporation in good standing
in all jurisdictions in which it owns or leases property or in which the
conduct of its business requires it to so qualify or be licensed, except for
such jurisdictions where the failure to so qualify or be licensed would not
have a Material Adverse Effect. The Company has heretofore delivered to you
true, complete and correct copies of its Charter Documents, as well as the
Charter Documents of RII, GGRI and RIH, in each case as presently in effect and
a list of all jurisdictions in which any of it, RII, GGRI, RIH and all Material
Subsidiaries of the foregoing are qualified or licensed to do business as a
foreign corporation. The term "Material Subsidiaries" means all direct or
indirect subsidiaries of the Company that qualify as a "significant subsidiary"
for purposes of Section 1-02(v) of Regulation S-X promulgated by the Securities
and Exchange Commission.
(b) The Company has all requisite corporate power and authority to
enter into and perform all of its obligations under this Agreement and the
other Documents, to issue the Securities and to carry out the transactions
contemplated hereby and thereby. Each of RII, RIH and GGRI has all requisite
corporate power and authority to enter into and perform all of its obligations
under the Indenture and the Security Documents to which it is a party and to
carry out the transactions contemplated thereby.
(c) All shares of capital stock and other equity securities of the
Company, RII, GGRI, RIH and all Material Subsidiaries of the foregoing have
been validly issued and are fully paid and nonassessable and, with respect to
any direct or indirect Material Subsidiary of RII, are owned by RII or a direct
or indirect wholly-owned Subsidiary of RII beneficially and of record, free and
clear of any Lien, except for Liens set forth in Schedule 3.1. Neither the
Company, RII, RIH or any Material
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Subsidiary of the foregoing has outstanding stock or securities convertible
into or exchangeable or exercisable for any shares of its capital stock, nor
does it have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its capital
stock, except as set forth on Schedule 3.1.
3.2 Capitalization
The authorized capital stock of the Company consists of 1,000 shares
of common stock, $.01 par value per share, of which one share is issued and
outstanding as of the date hereof; the authorized capital stock of GGRI
consists of 1,000 shares of common stock, $1.00 par value per share, of which
1,000 shares are issued and outstanding as of the date hereof; and the
authorized capital stock of RIH consists of 5,000,000 shares of common stock,
$1.00 par value per share, of which 1,000,000 shares are issued and outstanding
as of the date hereof. All such outstanding shares have been duly and validly
issued, are fully paid and nonassessable. Except as set forth on Schedule 3.2,
all outstanding shares of the Company's and GGRI's capital stock are owned by
RII, and all outstanding shares of RIH's capital stock are owned by GGRI, in
each case free from any material Liens, Charges, security interests, pledges or
other encumbrances of any kind whatsoever. Except as contemplated by Schedule
3.2, (a) there are no outstanding subscriptions, warrants, options, calls or
commitments of any character relating to or entitling any Person to purchase or
otherwise acquire any capital stock of the Company, GGRI or RIH; (b) there are
no obligations or securities convertible into or exchangeable for shares of any
capital stock of the Company, GGRI or RIH or any commitments of any character
relating to or entitling any Person to purchase or otherwise acquire any such
obligations or securities; (c) there are no preemptive or similar rights to
subscribe for or to purchase any capital stock of the Company, GGRI or RIH;
and, (d) except for this Agreement and that certain registration rights
agreement, dated as of April 29, 1994 by and among RII, the Company, RIH,
GGRI, one the one hand, and you and another party, on the other hand, with
respect to the registration of certain equity and debt securities held by you
and such other party, neither RII, the Company, RIH nor GGRI has entered into
any agreement to register its equity or debt securities under the Securities
Act.
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3.3 Authorization of Agreement and Other Documents
(a) The Company has taken all actions necessary to authorize it to
enter into and perform its obligations under this Agreement, the Securities and
the other Documents and to consummate the transactions contemplated hereby and
thereby and by the Registration Statement. This Agreement is, and, as of the
Time of Purchase, the Documents will be, and, as of the Time of Purchase the
Securities will be, legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) and except to the extent that rights to indemnification thereunder
may be limited by federal or state securities laws or public policy relating
thereto.
(b) Each of RIH, RII and GGRI has taken all actions necessary to
authorize it to enter into and perform its obligations under any Documents to
which it is a party and to consummate the transactions contemplated thereby and
by the Registration Statement. As of the Time of Purchase, the Documents will
be legal, valid and binding obligations of RIH, RII or GGRI, as applicable,
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity) and except to the
extent that rights to indemnification thereunder may be limited by federal or
state securities laws or public policy relating thereto.
3.4 No Violation
(a) Neither the execution or delivery by the Company of the Documents
nor the issuance, sale or delivery of the Securities, nor the performance by
the Company of its obligations under the Documents and the Securities, nor the
consummation of the transactions contemplated hereby and thereby, will as of
the Time of Purchase, (a) violate any provision of the Charter Documents of the
Company, RII, GGRI, RIH or any Material Subsidiary of the foregoing; (b)
violate any statute or law or any judgment,
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decree, order, regulation or rule of any court or Governmental Authority to
which the Company, RII, GGRI, RIH or any Material Subsidiary of the foregoing
or any of their respective properties may be subject, the violation of which
would have a Material Adverse Effect; (c) cause the acceleration of the
maturity of any indebtedness for borrowed money or other obligation of the
Company, RII, GGRI, RIH or any Material Subsidiary of the foregoing; or (d)
violate, or be in conflict with, or constitute a default under, or permit the
termination of, or require the consent of any Person (other than consents which
have been or will be obtained prior to the Time of Purchase, which consents
shall remain and continue in full force and effect) under, or result in the
creation of any Lien upon any property of the Company, RII, GGRI, RIH or any
Material Subsidiary of the foregoing under, any material agreement to which the
Company is a party or by which the Company, RII, GGRI, RIH or any Material
Subsidiary of the foregoing (or their respective properties) may be bound other
than any of the foregoing that would not have a Material Adverse Effect.
Neither the Company, RII, GGRI, RIH nor any Material Subsidiary of the
foregoing is in default in any material respect (without giving effect to any
grace or cure period or notice requirement) under any agreement for borrowed
money or under any agreement pursuant to which any of its securities were sold.
(b) Neither the execution or delivery by any of RII, RIH or GGRI of
the Documents to which it is a party nor the issuance, sale or delivery of the
Securities by the Company, nor the performance by any of RII, RIH or GGRI of
its obligations under the Documents, nor the consummation of the transactions
contemplated hereby and thereby, will as of the Time of Purchase, (a) violate
any provision of the Charter Documents of the Company, RII, GGRI, RIH or any
Material Subsidiary of the foregoing; (b) violate any statute or law or
any judgment, decree, order, regulation or rule of any court or governmental
authority to which the Company, RII, GGRI, RIH or any Material Subsidiary of
the foregoing or any of their respective properties may be subject, the
violation of which would have a Material Adverse Effect; (c) cause the
acceleration of the maturity of any debt or obligation of the Company, RII,
GGRI, RIH or any Material Subsidiary of the foregoing; or (d) violate, or be
in conflict with, or constitute a default under, or permit the termination of,
or require the consent of any Person (other than consents which have been or
will be obtained prior to the Time of Purchase) under, or result in the
creation of any Lien upon any property of the Company, RII, GGRI, RIH or any
Material Subsidiary of the foregoing under, any material agreement to which
the Company is a party or by which the Company, RII, GGRI, RIH or any Material
Subsidiary of the foregoing (or any of
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their respective properties) may be bound (except as contemplated by the
Documents).
3.5 Use of Proceeds
(a) The net proceeds from the sale of the Securities will be used by
the Company, RIH, RII and GGRI solely for the purposes set forth in the
Registration Statement and in the Form S-4.
(b) The net proceeds from the sale of the Securities will be loaned
by the Company to RIH simultaneously with the Company's receipt thereof, and
such loan shall be evidenced by a secured promissory note of RIH in the form
attached as Exhibit A to the Indenture, which secured promissory note shall be
assigned by RIH to the Trustee under the Indenture. The secured promissory
note of RIH will be secured by a first priority lien, subject to the "Permitted
Encumbrances" set forth in the Mortgages, on all property and improvements of
Merv Griffin's Resorts Casino Hotel in Atlantic City, New Jersey, such lien to
be evidenced by the Mortgage Documents attached as Exhibits B, D, E, F, G and J
to the Indenture.
(c) The net proceeds to RIH may be loaned by RIH to GGRI or RII, in
its discretion and subject to subparagraph (a) above, and any such loan shall
be evidenced by a secured promissory note of RII or GGRI, as applicable, in the
form attached as Exhibit I to the Indenture, which secured promissory note
shall be assigned by RIH to RIHF as security for the obligations of RIH under
the note referred to in subparagraph (b) above and shall be next assigned by
RIHF to the Trustee under the Indenture.
(d) The secured guaranty by RII of the obligations of the Company
with respect to the Securities will be secured by a pledge of all of the issued
and outstanding capital stock of each of the Company and GGRI, and by a pledge
of all the issued and outstanding capital stock of RIH, each such pledge to be
evidenced by a Pledge Agreement in the applicable form attached as Exhibit H to
the Indenture.
3.6 No Default
At and as of the Time of Purchase (after giving effect to the
transactions contemplated by this Agreement), no event has occurred or failed
to occur, the occurrence or failure of which to occur would constitute a
Default or Event of Default under the Indenture if the same were in full force
and effect.
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3.7 Outstanding Indebtedness - Senior Indebtedness
The capitalization table included in the Form S-4 sets forth and
identifies in reasonable detail the capitalization of the Company and its
consolidated affiliates, after giving effect to the transactions contemplated
by the Form S-4, as of September 30, 1993. The Company has no "Indebtedness"
(as such term is defined in the Indenture) ranking senior to, or pari passu
with, the Securities in right of payment or secured by liens ranking senior in
priority to the liens created by any of the Security Documents.
3.8 Financial Statements
The Form S-4 includes the following information regarding RII, (a)
audited consolidated balance sheets of RII and its Subsidiaries at December 31,
1992 and December 31, 1991 and related audited consolidated statements of
operations, consolidated statements of cash flows and changes in
stockholders' equity for the three fiscal years ended December 31, 1992,
certified by RII's independent certified public accountants, whose reports
thereon are included therewith, and (b) an unaudited condensed consolidated
balance sheet of RII and its Subsidiaries as of September 30, 1993 and
unaudited condensed consolidated statements of operations and of cash flows for
the nine months ended September 30, 1993 and 1992. Such financial statements
have been prepared in conformity with generally accepted accounting principles
applied on a consistent basis ("GAAP") and fairly present the consolidated
financial position and results of operations and cash flows of RII and its
Subsidiaries as of the dates and for the periods indicated. The financial
statements contained in the Registration Statement will be prepared in
conformity with GAAP and will fairly present the consolidated financial
position and results of operations and cash flows of RII and its Subsidiaries as
of the dates and for the periods indicated therein.
3.9 No Material Adverse Change
Nothing has come to the attention of the Company that would lead it to
believe that, since December 31, 1992, except as otherwise disclosed in or
contemplated by the Form S-4, RII and its Subsidiaries taken as a whole have
suffered any material adverse change in their assets, business, condition
(financial or otherwise), results of operations or prospects.
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3.10 Full Disclosure
The Form S-4 does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made,
not misleading (it being understood that the Company makes no representation
concerning the projections contained in the Prospectus, except that the Company
has no reason to believe that such projections are based on anything other than
good-faith estimates and assumptions).
3.11 No Litigation
Except as set forth in the Form S-4 or on Schedule 3.11 hereto, no
action, claim or proceeding is now pending or, to the knowledge of the Company,
threatened against the Company, RII or any of their Subsidiaries, at law, in
equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, or local government or of any agency or
subdivision thereof, or before any arbitrator or panel of arbitrators, which,
if determined adversely, could have a Material Adverse Effect. No action,
claim or proceeding is now pending, or to the best knowledge of the Company
threatened, which affects the validity of this Agreement, the issuance of the
Notes as contemplated hereby on your resale of any Notes that may be purchased
by you, questions the validity of any of the Securities or the Documents or any
action taken or to be taken pursuant thereto, or would have, either
individually or in the aggregate, a Material Adverse Effect.
3.12 Compliance with Laws
Neither the Company, RII, GGRI, RIH nor any Subsidiary of the
foregoing is subject to any judgment, order, decree, rule or regulation of any
court, governmental authority or arbitration board or tribunal, (i) which has
materially, adversely affected or which can reasonably be expected to
materially and adversely affect their businesses taken as a whole or (ii)
prohibiting or threatening to prohibit the consummation of the transactions
contemplated hereby (including, without limitation, the issuance of the
Securities).
3.13 Governmental Consents
Neither the nature of the business conducted by the Company, RII,
GGRI, RIH or any Subsidiary of the foregoing or of any of their businesses or
properties, nor any relationship between the Company and any other Person, nor
any circumstance in
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connection with the offer, issuance, sale or delivery of the Securities as
contemplated hereby and in the other Documents (relying upon the accuracy of
your representations and warranties herein), is such as to require a consent,
approval or authorization of, or filing, registration or qualification with,
any governmental authority on the part of the Company, RII, GGRI, RIH or any
Material Subsidiary of the foregoing as a condition to the execution and
delivery of this Agreement or the offer, issuance, sale or delivery of the
Securities at the Closing, other than (i) the consent, approval, authorization
and any filings, registrations or qualifications with the Casino Control
Commission and the Division of Gaming Enforcement of New Jersey, which shall
have been obtained in form and substance reasonably satisfactory to you and
shall be in full force and effect, and (ii) the filings, registrations or
qualifications pursuant to Regulation D under the Securities Act or under the
state securities laws or "blue sky" laws of any state of the United States of
America that may be required to be made or obtained, all of which either shall
have been made and obtained on the Time of Purchase (and copies of which
delivered to you) or shall have no bearing on the validity and enforceability
of this Agreement, the other Documents and the Securities.
3.14 Brokers
The Company has dealt with no broker, finder, commission agent or
other Person in connection with the sale of the Securities and the transactions
contemplated by this Agreement, and the Company is under no obligation to pay
any broker's fee or commission in connection with such transactions.
3.15 Burdensome Agreements
To the best knowledge of the Company, except as set forth in or
contemplated by the Form S-4, no agreement or instrument to which the Company,
RII, GGRI, RIH or any Subsidiary of the foregoing is a party or by which any of
them may be bound or to which any of their properties may be subject contains
any unusual or burdensome provisions which can reasonably be expected to
materially and adversely affect or impair the ownership or operation of the
properties or the conduct of the business of the Company or RII and its
Subsidiaries taken as a whole.
3.16 Certain Governmental Regulations
Except as set forth on Schedule 3.16 or as set forth in or
contemplated by the Form S-4, neither the Company, RII, GGRI, RIH nor any
Material Subsidiary of the foregoing is subject to
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regulation under the Public Utility Holding Company Act of 1935, as amended,
the Federal Power Act, the Interstate Commerce Act or to any federal or state
statute or regulation limiting its ability to incur indebtedness for borrowed
money.
3.17 Benefit Plans
(a) Schedule 3.17 contains a list of each "employee pension benefit
plan" (as defined in Section 3(2) of ERISA, hereinafter a "Pension Plan"),
"employee welfare benefit plan" (as defined in Section 3(1) of ERISA,
hereinafter a "Welfare Plan") and each material bonus, stock option, stock
purchase, incentive compensation, deferred or executive compensation plan or
arrangement maintained, contributed to or required to be maintained or
contributed to by RII or any of its Material Subsidiaries for the
benefit of any current or former employee of RII or any of its Material
Subsidiaries or their beneficiaries (all of the foregoing being herein called
"Benefit Plans"). RII has delivered or made available to you true, complete
and correct copies of (1) each Benefit Plan (or, in the case of any material
unwritten Benefit Plans, descriptions thereof), (2) the most recent annual
report (Form 5500 Series) filed with the Internal Revenue Service with respect
to any Benefit Plan (if any such report was filed), (3) the most recent summary
plan description for each Benefit Plan for which such a summary plan
description exists, and (4) each trust agreement and insurance or annuity
contract funding any Benefit Plan.
(b) Except as disclosed in Schedule 3.17, all contributions to the
Benefit Plans that were required to be made by RII or any Material Subsidiary
thereof in accordance with the Benefit Plans have been timely made.
(c) Except as disclosed in Schedule 3.17, any Benefit Plan that is a
Pension Plan, other than a multiemployer plan as defined in Section 4001(a)(3)
of ERISA that is intended to be tax-qualified and tax-exempt, has received a
determination letter from the IRS to the effect that such Pension Plan is
qualified and exempt from Federal income taxes under Section 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been revoked
nor, to the knowledge of the Company or any Subsidiary thereof, has revocation
been threatened, nor has any such Pension Plan been amended since the date of
its most recent determination letter or application therefor in any respect
that might reasonably be expected to adversely affect its qualification.
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(d) Schedule 3.17 contains a list of each pension Plan subject to
Title IV of ERISA maintained, contributed to or required to be maintained or
contributed to by an ERISA Affiliate (an "RII Affiliate Pension Plan"). RII
has furnished or made available to you the most recent actuarial report or
valuation, if any, with respect to each such RII Affiliate Pension Plan.
(e) Each RII Affiliate Pension Plan has paid all premiums when due
to the PBGC to the extent that any non-payment would result in a Material
Adverse Effect, and no ERISA Affiliate has incurred any material liability to
any such RII Affiliate Pension Plan or to the PBGC that would result in a
Material Adverse Effect.
(f) Except as disclosed on Schedule 3.17, no ERISA Affiliate has
incurred any withdrawal liability, within the meaning of Section 4201 or ERISA,
which liability has not been fully paid as of the date hereof, or announced an
intention to withdraw, but not yet completed such withdrawal, from any
multiemployer plan to the extent that any such withdrawal liability or
withdrawal would result in a Material Adverse Effect.
(g) Except as disclosed in Schedule 3.17, no ERISA Affiliate has
engaged in a transaction described in Section 4069 of ERISA that would result
in a Material Adverse Effect.
(h) With respect to each Welfare Plan that is a "group health plan"
(as such term is defined in Section 500(b)(1) of the Code), RII and all of its
Subsidiaries comply in all material respects with applicable requirements of
Section 4980B(f) of the Code to the extent that failure to do so would result
in a Material Adverse Effect.
3.18 No Violation of Regulations of Board of Governors
of Federal Reserve System
None of the transactions contemplated by this Agreement (including
without limitation the use of the proceeds from the sale of the Securities)
will violate or result in a violation of Section 7 of the Securities Exchange
Act of 1934, as amended, or any regulation issued pursuant thereto, including,
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System.
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3.19 Labor Matters
Except as set forth on Schedule 3.19 or as set forth in or
contemplated by the Form S-4, there are no strikes or other labor disputes
against the Company, RII, GGRI, RIH or any of their Subsidiaries pending or, to
the Company's knowledge, threatened which would have a Material Adverse Effect.
Hours worked by and payment made to employees of the Company, RII, GGRI, RIH
and their Subsidiaries have not been in violation of the Fair Labor Standards
Act or any other applicable law dealing with such matters which would have a
Material Adverse Effect. All payments due from the Company, RII, GGRI, RIH or
any of their Subsidiaries on account of employee health and welfare insurance
which would have a Material Adverse Effect if not paid have been paid or
accrued as a liability on the books of the Company, RII, GGRI, RIH or such
Subsidiary. Except as set forth on Schedule 3.19, neither the Company, RII,
GGRI, RIH nor any of their Subsidiaries has any obligation under any collective
bargaining agreement or any employment agreement. There is no organizing
activity involving the Company, RII, GGRI, RIH or any of their Subsidiaries
pending or threatened by any labor union or group of employees. Except as set
forth on Schedule 3.19, there are no representation proceedings pending or
threatened with the National Labor Relations Board, and no labor organization
or group of employees of the Company, RII, GGRI, RIH or any of their
Subsidiaries has made a pending demand for recognition. There are no material
complaints or charges against the Company, RII, GGRI, RIH or any of their
Subsidiaries pending or threatened to be filed with any federal, state, local
or foreign court, governmental agency or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment by the Company, RII, GGRI, RIH or any Subsidiary of any individual.
3.20 Investment Company Act
Neither the Company, RII, GGRI, RIH nor any Material Subsidiary is an
"investment company" or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended. Assuming the accuracy of your
representations and warranties hereunder, the sale of the Securities to you
hereunder, the application of the proceeds and repayment thereof by the
Company, RIH and RII and the consummation by the Company of the transactions
contemplated by this Agreement and the other Documents will not violate any
provision of such Act or any rule, regulation or order issued by the Securities
and Exchange Commission thereunder.
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3.21 Margin Regulations
The Company does not own any "margin security," as that term is
defined in Regulations G and U of the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board"), and the proceeds of the sale of the
Securities will be used only for the purposes contemplated hereunder.
Notwithstanding the foregoing, the proceeds of the sale of the Securities will
not be used, directly or indirectly, for the purpose of purchasing or carrying
any margin security, for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the loans under this Agreement to be
considered a "purpose credit" within the meaning of Regulations G, T, U or X of
the Federal Reserve Board. The Company will not take or permit any agent
acting on its behalf to take any action which might cause this Agreement or any
document or instrument delivered pursuant hereto to violate any regulation of
the Federal Reserve Board.
3.22 Taxes
All federal, state, local and foreign tax returns, reports and
statements required to be filed by the Company, RII and their Subsidiaries
relating to any material Charges for which the Company may be liable, jointly,
severally or otherwise, have been filed with the appropriate Governmental
Authority and all material Charges and other impositions shown thereon to be
due and payable have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof, or any
such fine, penalty, interest, late charge or loss has been paid. Each of the
Company, RII and their Subsidiaries has paid when due and payable all material
Charges required to be paid by it. Proper and accurate amounts have been
withheld by the Company and its Material Subsidiaries from their respective
employees for all periods in full and complete compliance with the tax, social
security and unemployment withholding provisions of applicable federal, state,
local and foreign law and such withholdings have been timely paid to the
respective Governmental Authorities. Schedule 3.22 sets forth, for each of the
Company, RII and their Subsidiaries, those taxable years for which its tax
returns, the adjustment of which may result in the imposition of a material
Charge payable by the Company, are currently being audited by the IRS or any
other applicable Governmental Authority. Except as described in Schedule 3.22
hereto, neither the Company, RII nor any of their Subsidiaries has executed or
filed with the IRS or any other Governmental Authority any agreement or other
document extending,
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or having the effect of extending, the period for assessment or collection of
any such material Charges. Except as set forth on Schedule 3.22 hereto,
neither the Company, RII nor any of their Subsidiaries has any obligation under
any written tax sharing agreement.
3.23 Liens
The Liens granted to the Trustee named in the Indenture pursuant to
the Security Documents (other than the Mortgages) will at the Time of Purchase,
and the filing of any financing statements or other instruments in respect
thereof, be fully perfected first priority Liens in and to the Collateral
described therein, subject to the "Permitted Encumbrances" set forth in the
Mortgages. The Liens granted to the Trustee named in the Indenture pursuant to
the mortgages (included in the Security Documents) will be fully perfected
first priority Liens in and to the Collateral therein described upon their
recording.
3.24 Environmental Protection
Except as set forth on Schedule 3.24, to the Company's knowledge
without independent investigation, all real property owned and real property
leased by the Company, RII or any of their Material Subsidiaries is free of
contamination from any substance or material currently identified to be toxic
or hazardous pursuant to the Environmental Laws, including, without limitation,
any asbestos, pcb, radioactive substance, methane, volatile hydrocarbons,
industrial solvents, or any other material or substance which has in the past
or could at any time in the future cause or constitute a health, safety, or
environmental hazard to any Person or property. Neither the Company, RII nor
any of their Material Subsidiaries has caused or suffered to occur any
discharge, spillage, uncontrolled loss, seepage, or filtration of oil or
petroleum or chemical liquids or solids, liquid or gaseous products, or
hazardous waste or hazardous substance in violation of the Environmental Laws
(a "Spill") at, under, or within any real property owned or leased by any such
Person that reasonably could be expected to result in a Material Adverse
Effect. Neither the Company, RII nor any of their Material Subsidiaries is
involved in operations which could lead to the imposition of any liability or
Lien on any such Person or any owner of any premises occupied by such Person
under the Environmental Laws and neither the Company, RII nor any of their
Material Subsidiaries permitted any tenant or occupant of such premises to
engage in any such activity.
28
<PAGE> 32
SECTION 4. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
Affiliate: With respect to any Person, any other Person who directly
or indirectly controls, is controlled by or is under common control with such
Person.
Agent: Any person authorized to act and who acts on behalf of you
with respect to the transactions contemplated by the Documents.
Agreement: See Section 1.2.
Applicable Percentage: With respect to any of you, the percentage set
forth opposite your name on Schedule I.
Charges: All Federal, state, county, city, municipal, local, foreign
or other governmental taxes at the time due and payable, levies, assessments,
charges, liens, claims or encumbrances upon or relating to (i) the Company, RII
or any Material Subsidiary's employees, payroll, income or gross receipts, (ii)
the Company's, RII's or any Material Subsidiary's ownership or use of any of
its assets, (iii) any other aspect of the Company's, RII's or any Material
Subsidiary's business, or (iv) the Collateral.
Charter Documents: The Articles or Certificate of Incorporation and
Bylaws, as amended or restated (or both) to date, of any corporation.
Closing: See Section 1.2.
Code: The Internal Revenue Code of 1986, as amended.
Collateral: The collateral covered by the Security Documents.
Company: See preamble hereto.
Default: See Section 1.01 of the Indenture.
Documents: This Agreement, the commitment letter, dated February 4,
1994, delivered to the Company by each of you, the Indenture, and the Security
Documents, collectively, together with any exhibits, schedules or other
attachments thereto or any
29
<PAGE> 33
documents or certificates delivered in connection therewith (including without
limitation UCC-1's).
Environmental Laws: All federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any judicial or administrative
interpretation thereof, including, without limitation, any applicable judicial
or administrative order, consent decree or judgment, relative to the applicable
Real Estate, relating to the regulation and protection of human health, safety,
the environment and natural resources (including, without limitation, ambient
air, surface water, groundwater, wetlands, land surface or subsurface strata,
wildlife, aquatic species and vegetation). Environmental Laws include but are
not limited to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.) ("CERCLA");
the Hazardous Material Transportation Act, as amended (49 U.S.C. Section 1801
et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act, as amended
(7 U.S.C. Section 136 et seq.); the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Section 6901 et seq.) ("RCRA"); the Toxic Substance Control
Act, as amended (15 U.S.C. Section 2601 et seq.); the Clean Air Act, as
amended (42 U.S.C. Section 740 et seq.); the Federal Water Pollution Control
Act, as amended (33 U.S.C. Section 1251 et seq.); the Occupational Safety and
Health Act, as amended (29 U.S.C. Section 651 et seq.) ("OSHA"); and the Safe
Drinking Water Act, as amended (42 U.S.C. Section 300f et seq.), and any and
all regulations promulgated thereunder, and all analogous state and local
counterparts or equivalents and any transfer of ownership notification or
approval statutes such as the New Jersey Environmental Cleanup Responsibility
Act (N.J. Stat. Ann. Section 13:1K-6 et seq.) ("ECRA").
Effectiveness Termination Date: See Section 1.8.
ERISA: Employee Retirement income Security Act of 1974, as amended.
ERISA Affiliate: Any person that, together with the Company, is
treated as a single employer under Section 414(b), (c) or (m) of the Code.
Event of Default: See Section 1.01 of the Indenture.
Exchange Act: The Securities and Exchange of 1934, as amended.
Form S-4: See Section 2.1.8.
30
<PAGE> 34
GGRI: GGRI, Inc., a Delaware corporation.
Governmental Authority: Any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
Indenture: See Section 1.1.
IRS: The Internal Revenue Service, or any successor thereto.
Lien: Any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, Charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security
interest under the Uniform Commercial Code or comparable law of any
jurisdiction).
Losses: See Section 1.6.
Material Adverse Effect: See Section 3.1.
Mortgages: The "Mortgage" and the "Guaranty Mortgage", as defined in
the Indenture.
NASD: National Association of Securities Dealers, Inc.
Other Transactions: See Section 2.1.7.
PBGC: Pension Benefit Guaranty Corporation.
Person: An individual, partnership, corporation, trust or
unincorporated organization or a government or agency or political subdivision
thereof.
Plan: See Section 1.1.
Prospectus: The Prospectus contained or to be contained in the
Registration Statement.
Registration Statement: See Section 2.1.5.
31
<PAGE> 35
Restructuring: See Section 3.
RIH: Resorts International Hotel, Inc., a New Jersey corporation.
RII: Resorts International, Inc., a Delaware corporation.
SEC: The Securities and Exchange Commission.
Securities: See Section 1.1.
Securities Act: The Securities Act of 1933, as amended.
Security Documents: The RII Stock Pledge Agreement, the GGRI Stock
Pledge Agreement, the RIH Senior Promissory Note, the Assignment Agreement, and
the other Mortgage Documents (all as defined in the Indenture), the Mortgages
and (i) that certain Assignment of Leases and Rents, and (ii) that certain
Assignment of Operating Assets, each dated the date hereof by RIH to the
Trustee and securing the RIH Guaranty (as defined in the Indenture), the
Intercreditor Agreement, and any financing statements delivered in connection
with any of the foregoing.
Senior Notes: All the 11% Senior Secured Notes due July 15, 2002 of
the Company issued pursuant to the Indenture and Section 1.1 hereof.
Subsidiary: With respect to any Person, a corporation more than 50%
of the outstanding voting stock of which is owned, directly or indirectly, by
such Person or one or more Subsidiaries of such Person.
Time of Purchase: See Section 1.2.
Trustee: The trustee identified in the Indenture. See Section 2.1.6.
SECTION 5. MISCELLANEOUS
5.1 Notices
All notices and other communications provided for or permitted
hereunder shall be made by hand-delivery, first-class mail (registered or
certified, return receipt requested), telex, telecopier, or overnight air
courier guaranteeing next day delivery:
32
<PAGE> 36
(a) if to you at your address set forth on the first page of this
Agreement (Attention: Judy K. Mencher, Esq.), with a copy to Weil, Gotshal &
Manges, 767 Fifth Avenue, New York, New York 10153, Attention: Bruce R.
Zirinsky, Esq., and
(b) if to the Company, at its address set forth on the first page of
this Agreement, with a copy to Gibson, Dunn & Crutcher, 200 Park Avenue, New
York, New York 10166, Attention: Steven R. Finley, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and the
next business day after timely delivery to the courier, if sent by overnight
air courier guaranteeing next day delivery.
5.2 Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon the
successors and permitted assigns of each of the parties. The Company, RII and
RIH shall not be permitted to assign any of their respective rights and
obligations hereunder without your express written consent, and any purported
assignment of such rights or obligations without such written consent shall be
null, void and of no force or effect.
5.3 Amendment and Waiver
Prior to the Time of Purchase, this Agreement and the other Documents
may be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may be given, provided that the same are in writing
and signed by you and the Company. Thereafter, the Documents (other than this
Agreement) may only be so amended, and such waivers be given, in accordance
with the provisions of the applicable Document, and this Agreement may only be
amended, and such waivers be given, with the consent of the Company and the
holders of at least 66-2/3% of the then outstanding aggregate principal amount
of the Senior Notes.
5.4 Counterparts
This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original
33
<PAGE> 37
and all of which taken together shall constitute one and the same agreement.
5.5 Headings
The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
5.6 Governing Law
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York.
5.7 Entire Agreement
This Agreement, together with the other Documents and the Securities,
is intended by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the agreement, and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein.
This Agreement, together with the other Documents and the Securities,
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
5.8 Severability
In the event that any one or more of the provisions contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected, it
being intended that each of your and the Company's rights and privileges shall
be enforceable to the fullest extent permitted by law.
5.9 The Registration Statement
The following provisions shall apply to the Registration Statement to
be filed by the Company pursuant to Section 2.1.5:
(a) The Company agrees, if necessary, to supplement or amend the
Registration Statement, as required by the registration
34
<PAGE> 38
form used, by the instructions applicable to such registration form or by the
relevant provisions of the Securities Act, and the Company agrees to furnish to
you copies of any such supplement or amendment prior to its being used and/or
filed with the SEC.
(b) Following the effectiveness of the Registration Statement and
the issuance of the Securities, the Company will as expeditiously as possible:
(i) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective until the
Effectiveness Termination Date and comply with the provisions of the
Securities Act applicable to it with respect to the disposition of all
Securities covered by such Registration Statement during such period;
(ii) furnish to you without charge, at least one signed copy
of the Registration Statement and any post-effective amendment thereto,
as soon as such documents become available to the Company, and such
number of conformed copies thereof and such number of copies of the
Prospectus (including any preliminary prospectus) and any amendments or
supplements thereto, and any documents incorporated by reference therein,
as you may reasonably request as soon as such documents become available
to the Company in order to facilitate the disposition of the Securities
by you (it being understood that the Company consents to the use of the
Prospectus and any amendment or supplement thereto by you in connection
with the offering and sale of the Securities covered by the Prospectus or
any amendment or supplement thereto);
(iii) on or prior to the date on which the Registration
Statement is declared effective, and thereafter, if necessary, or as
requested by you, use its best efforts to register or qualify the
Securities under such other securities or blue sky laws of such
jurisdictions as you reasonably request and do any and all other acts and
things which may be reasonably necessary or advisable to enable you to
consummate the disposition in such jurisdictions of such Securities;
provided, however, that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise
be required to qualify but for this paragraph, (B) subject itself to
general taxation in any such jurisdiction or (C) consent to general
service of process in such jurisdiction for purposes
35
<PAGE> 39
of actions arising other than out of such Registration Statement;
(iv) use its best efforts to cause the Securities covered by
such Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue
of the business and operations of the Company to enable you to consummate
the disposition of such Securities;
(v) notify you at any time while the Registration Statement
is required to be effective under paragraph (b)(i) above of the happening
of any event which results in the Prospectus containing an untrue
statement of a material fact or omitting to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Company will prepare a supplement or amendment to
such Prospectus so that, as thereafter delivered to the purchasers of
such Securities, such Prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(vi) enter into customary agreements and make such
representations and warranties to the Sellers of Registrable Securities
and you as in form, substance and scope are customarily made by issuers
to selling securityholders in non-underwritten offerings and take such
other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities;
(vii) make available for inspection during regular business
hours by you and your Agents all financial and other records, corporate
documents, books and records, questionnaires, agreements, properties of
the Company and other information (collectively, the "Records"), as shall
be reasonably requested to enable them to exercise "due diligence," and
cause the Company's officers, directors and employees to supply all
information reasonably requested by you or any such Agent in connection
with the Registration Statement. You agree that Records and other
information which the Company determines in good faith to be
confidential, and of which determination the Agents and you are so
notified, shall not be disclosed by the Agents or you unless (A) the
disclosure of such Records is necessary to avoid or correct a
misstatement or omission in the Registration Statement or (B) the release
of such Records is re-
36
<PAGE> 40
quired in your reasonable judgment to assert a "due diligence" defense to
any claim that you knew or should have known of a misstatement or
omission in the Registration Statement (whether or not such claim has
been asserted in a court of law) or (C) pursuant to a subpoena, court
order or regulatory or agency request;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to their
security holders, as soon as reasonably practicable, earnings statements
which need not be audited, covering a period of twelve months, beginning
within three months after the effective date of the Registration
Statement, which earnings statements shall satisfy the provisions of
Section 11(a) of the Securities Act of 1933, as amended;
(ix) notify you of any stop order or other suspension of
effectiveness of the Registration Statement;
(x) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at
the earliest possible moment;
(xi) use its best efforts, if requested by you, to cause the
Securities to be listed on the American Stock Exchange or any other
national securities exchange or automated quotation system that is
reasonably acceptable to you;
(xii) cooperate with you to facilitate the timely preparation
and delivery of certificates representing securities to be sold under the
Registration Statement (which certificates shall be in DTC-eligible form)
and enable such securities to be in such denominations and registered in
such names as such sellers may request.
The Company may require you to furnish to the Company information
regarding the distribution of such securities and such other information
relating to you and your ownership of
37
<PAGE> 41
Securities as the Company may from time to time reasonably request for
inclusion in the Registration Statement.
You agree that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(b)(v) hereof, you
will forthwith discontinue disposition of Securities pursuant to the
Registration Statement covering such Securities until your receipt of the
copies of the supplemented or amended Prospectus contemplated by Section
4(b)(v) hereof and, if so directed by the Company, you will deliver to the
Company (at the expense of the Company), all copies, other than permanent file
copies then in your possession of the Prospectus current at the time of receipt
of such notice.
5.10 Access to Information
Following the Time of Purchase, the Company shall, from time to time,
provide to you, as long as you continue to hold, in the aggregate, at least
fifty percent (50%) of the Senior Notes originally issued pursuant to the
Indenture, such other information respecting the business, operations,
financial condition or assets of the Company or any of its subsidiaries as you
may reasonably request. You agree to keep confidential all such information
obtained from the Company and identified to you as confidential information,
except to the extent required by law or legal process; provided, however, that
you shall have no further obligation to maintain the confidentiality of any
such information which shall become generally known without any violation by
you of this Section 5.10.
5.11 Survival of Representations and Warranties
All of your representations and warranties in Section 1.3 hereof and
all of the Company's representations and warranties in Section 3 hereof and in
the other Documents shall survive the execution and delivery of the same, the
issuance of the Securities and, with respect to the Company's representations
and warranties, any investigation by you.
5.12 Guaranty
RII and RIH, jointly and severally, hereby guarantee to each of you
and your assigns the due and punctual payment and performance when due of all
of the obligations of the Company hereunder. Failing payment or performance
when due of any obligation so guaranteed, for whatever reason, each of RII and
RIH, jointly and severally, will be obligated to pay the same immediately.
Each of RII and RIH hereby agrees that its
38
<PAGE> 42
obligations under this Section 5.12 shall be unconditional, irrespective of the
validity, regularity, or enforceability of this Agreement, the absence of any
action to enforce the same, any waiver or consent by you with respect to the
provisions hereof or any other circumstances which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. This guaranty is a
guaranty of payment and not of collectibility. Each of RII and RIH hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that this guaranty will not be discharged except by
complete performance of the obligations contained herein. If you are required
by any court or otherwise to return to either RII, RIH or the Company, or any
custodian, trustee, liquidator or other similar official acting in relation to
either RII, RIH or the Company, any amount paid by either RII, RIH or you, this
guaranty, to the extent theretofore discharged, shall be reinstated in full
force and effect. Each of RII and RIH agrees that it shall not be entitled to,
and hereby irrevocably waives, any right of subrogation in relation to the
Company in respect of any obligations guaranteed hereby.
5.13 Casino Control Act
Each of the provisions of this agreement is subject to and shall be
enforced in compliance with the provisions of the New Jersey Casino Control Act
and the regulations promulgated thereunder, as amended, unless such provisions
are in conflict with the Trust Indenture Act of 1939, as amended (the "TIA"),
in which case the TIA shall control.
39
<PAGE> 43
If this Agreement is satisfactory to you, please so indicate by
signing in the space provided below a counterpart of this Agreement and deliver
such fully-executed counterpart to us, whereupon this Agreement will become
binding between us in accordance with its terms.
Very truly yours,
RESORTS INTERNATIONAL HOTEL
FINANCING, INC.
By:
-----------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED FOR PURPOSES OF SECTION 5.12:
RESORTS INTERNATIONAL, INC.
By:
--------------------------------
Name:
Title:
RESORTS INTERNATIONAL HOTEL, INC.
By:
-------------------------------
Name:
Title:
<PAGE> 44
ACCEPTED AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:
FIDELITY ASSET MANAGER
By:
------------------------------------
Name:
Title:
BELMONT FUND, L.P.
By: Fidelity Management Trust Company,
pursuant to a power of attorney for
Fidelity International Services
Ltd., Managing General Partner
By:
-------------------------------------
Name:
Title:
BELMONT CAPITAL PARTNERS II, L.P.
By: Fidelity Capital Partners II Corp.,
General Partner
By:
-------------------------------------
Name:
Title:
FIDELITY CAPITAL & INCOME FUND
By:
-------------------------------------
Name:
Title:
<PAGE> 45
FIDELITY ADVISOR HIGH YIELD FUND
By:
-------------------------------------
Name:
Title:
BANKERS TRUST, AS TRUSTEE FOR:
GENERAL MOTORS HOURLY RATE EMPLOYEES
PENSION PLAN
By:
-------------------------------------
Name:
Title:
BANKERS TRUST, AS TRUSTEE FOR:
GENERAL MOTORS RETIREMENT PROGRAM FOR
SALARIED EMPLOYEES
By:
-------------------------------------
Name:
Title:
NORTHERN TRUST, AS TRUSTEE FOR:
ILLINOIS MUNICIPAL RETIREMENT FUND
MASTER TRUST
By:
-------------------------------------
Name:
Title:
NORTHERN TRUST, AS TRUSTEE FOR:
ILLINOIS STATE BOARD OF INVESTMENTS
By:
-------------------------------------
Name:
Title:
<PAGE> 46
KODAK RETIREMENT INCOME PLAN TRUST FUND
By: Fidelity Management Trust Company,
pursuant to power of attorney
By:
-------------------------------------
Name:
Title:
FIDELITY MAGELLAN FUND
By:
-------------------------------------
Name:
Title:
STATE STREET BANK & TRUST COMPANY,
CUSTODIAN FOR: PENSION RESERVES INVESTMENT
MANAGEMENT BOARD
By:
-------------------------------------
Name:
Title:
FIDELITY PURITAN FUND
By:
-------------------------------------
Name:
Title:
SPARTAN HIGH INCOME FUND
By:
-------------------------------------
Name:
Title:
<PAGE> 47
VARIABLE INSURANCE PRODUCTS FUND:
HIGH INCOME PORTFOLIO
By:
-------------------------------------
Name:
Title:
VARIABLE INSURANCE PRODUCTS FUND II:
ASSET MANAGER PORTFOLIO
By:
-------------------------------------
Name:
Title:
MELLON BANK, N.A., AS TRUSTEE FOR:
WHITE CONSOLIDATED INDUSTRIES INC.
MASTER TRUST FUND, as directed by
Fidelity Management Trust Company
By:
-------------------------------------
Name:
Title:
<PAGE> 48
SCHEDULE I
----------
<TABLE>
<CAPTION>
NAME OF FUND PERCENTAGE (%) MAXIMUM DOLLAR
OR ACCOUNT OF PARTICIPATION AMOUNT OF COMMITMENT*
- -------------------------------------------------------------------
<S> <C> <C>
Fidelity Asset Manager 0.99% $ 197,000.00
Belmont Fund, L.P. 5.14 1,027,000.00
Belmont Capital
Partners II, L.P. 5.68 1,136,000.00
Fidelity Capital &
Income Fund 59.43 11,886,000.00
Fidelity Advisor High
Yield Fund 0.90 180,000.00
General Motors Hourly Rate
Employees Pension Plan 2.44 487,000.00
General Motors Retirement
Program for Salaried
Employees 1.71 341,000.00
Illinois Municipal Retire-
ment Fund Master Trust 4.09 818,000.00
Illinois State Board of
Investments 1.20 239,000.00
Kodak Retirement Income
Plan Trust Fund 1.31 262,000.00
Fidelity Magellan Fund 4.08 815,000.00
Pension Reserves Invest-
ment Management Board 0.51 102,000.00
Fidelity Puritan Fund 5.01 1,001,000.00
</TABLE>
- ----------------------------------
* REGARDLESS OF THE AGGREGATE PRINCIPAL AMOUNT OF SECURITIES PURCHASED
HEREUNDER, THE PORTION THEREOF THAT IS ALLOCABLE TO EACH FUND OR ACCOUNT SHALL
BE ROUNDED TO AN APPROPRIATE $1,000 INCREMENT AS DETERMINED BY THE FUNDS IN
THEIR SOLE DISCRETION.
<PAGE> 49
<TABLE>
<S> <C> <C>
Spartan High Income Fund 4.75 949,000.00
Variable Insurance Products
Fund: High Income
Portfolio 1.96 391,000.00
Variable Insurance Products
Fund II: Asset Manager
Portfolio 0.33 66,000.00
White Consolidated
Industries Inc.
Master Trust Fund 0.52 103,000.00
------ --------------
TOTAL 100.00% $20,000,000.00
====== ==============
</TABLE>
<PAGE> 1
EXHIBIT 10.66
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
among
RESORTS INTERNATIONAL, INC.
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
RESORTS INTERNATIONAL HOTEL, INC.
FIDELITY MANAGEMENT & RESEARCH COMPANY,
on behalf of various
funds and accounts
managed by it
and
TCW SPECIAL CREDITS,
on behalf of various
funds and accounts
managed by it
Dated as of April 29, 1994
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Securities Subject to This Agreement; Representations and Covenants
of Fidelity and TCW with Respect to the Registrable Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. Shelf Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 3. Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 4. Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 5. Indemnification; Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Indemnification by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) Indemnification by Holders of Registrable Securities . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Conduct of Indemnification Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 6. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(b) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(g) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(h) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(i) Further Actions; Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
i
<PAGE> 3
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of April 29, 1994, among RESORTS INTERNATIONAL, INC., a
Delaware corporation (the "Company"), RESORTS INTERNATIONAL HOTEL FINANCING,
INC., a Delaware corporation and a wholly-owned subsidiary of the Company
("RIHF"), RESORTS INTERNATIONAL HOTEL, INC., a New Jersey corporation and
wholly-owned subsidiary of the Company, FIDELITY MANAGEMENT & RESEARCH COMPANY,
a Massachusetts corporation, on behalf of various funds and accounts that it
manages which are to own shares of the Common Stock, $0.01 par value per share,
of the Company (the "Shares"), Mortgage Notes due 2003 of RIHF (the "Mortgage
Notes"), and Units (the "Units") comprised of Class B Common Stock, $0.01 par
value per share, of the Company, and Junior Mortgage Notes due 2004 of RIHF
("Fidelity"), and TCW SPECIAL CREDITS, a California general partnership, on
behalf of various funds and accounts which are to own Shares, Mortgage Notes
and Units ("TCW").
The parties hereby agree as follows:
SECTION 1. Securities Subject to This Agreement; Representations
and Covenants of Fidelity and TCW with Respect to the Registrable Securities.
(a) The term "Registrable Securities" means the Shares, Mortgage
Notes and Units (including in each case any securities from time to time
received from the Company, RIHF or any affiliate thereof in exchange therefor
or as a result of dividends, splits or similar actions with respect to
Registrable Securities) to be received by each of Fidelity and TCW on behalf of
the aforesaid funds and accounts and by any other holder of such securities who
becomes a signatory to the Agreement as contemplated by Section 6(b) of the
Agreement (the "Holders" or a "Holder," or the "Sellers" or a "Seller")
as of the effectiveness (the "Effective Date") of the restructuring of the
Company's Senior Secured Redeemable Notes that were due April 15, 1994. For
convenience, unless the context otherwise indicates, the various agreements
made herein with respect to Fidelity and TCW shall be deemed to be made on
behalf of the respective Holders or Sellers, and references herein to
"Signatories" shall include Fidelity, TCW and any other holder of Registrable
Securities as of the Effective Date that becomes a party to this Agreement.
(b) Each Holder from time to time of Registrable Securities
covenants and agrees that it will not, directly or indirectly, offer, transfer,
sell, assign, pledge, hypothecate or otherwise dispose of (collectively
"Transfer") any of its Registrable Securities except in compliance with or
pursuant to an exemption under the Securities Act of 1933, as amended (the
"Act"), all applicable state securities laws and all rules and regulations
promulgated thereunder (collectively, the "Securities Acts").
SECTION 2. Shelf Registration.
(a) The Company shall use its best efforts to prepare and file
with the Securities and Exchange Commission (the "SEC") on or before April 29,
1994, and to cause to be declared effective as soon as possible thereafter
under the Act a Registration Statement on
<PAGE> 4
Form S-1 covering the Registrable Securities in accordance with Rule 415 under
the Act (the "Registration Statement") relating to the non-underwritten offer
and sale of the Registrable Securities by the Holders from time to time in
accordance with the methods of distribution elected by the Sellers and set
forth in the Registration Statement.
(b) The Company shall use its best efforts to keep the
Registration Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by the Holders for a period of two years from
the Effective Date or such shorter period that will terminate when all the
Registrable Securities covered by the Registration Statement have been sold
pursuant to the Registration Statement (in any such case, such period being
called the "Shelf Registration Period"). The Company shall be deemed not to
have used its best efforts to keep the Registration Statement effective during
the requisite period if it voluntarily takes any action that would result in
the Holders not being able to offer and sell the Registrable Securities during
that period, unless (i) such action is required by applicable law, or (ii) such
action is taken by the Company in good faith and for valid business reasons
(not including avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly
thereafter complies with the requirements of Section 3(e) hereof, if
applicable.
(c) Selection of Counsel. The Holders of the Registrable
Securities to be included in the Registration Statement shall select one
counsel reasonably acceptable to the Company to represent their interests in
connection with such offering. The expenses of such counsel to the Holders
shall be borne by the Company.
SECTION 3. Registration Procedures. In connection with the
Registration Statement to be filed pursuant to Section 2 of this Agreement, the
Company will as expeditiously as possible:
(a) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for at least two years from the
Effective Date (or such shorter period which will terminate when all
Registrable Securities covered by such Registration Statement have been sold)
and comply with the provisions of the Securities Acts applicable to it with
respect to the disposition of all Registrable Securities of the Company covered
by such Registration Statement during such period;
(b) furnish to each Signatory without charge, at least one signed
copy of the Registration Statement and any post- effective amendment thereto,
as soon as such documents become available to the Company, and such number of
conformed copies thereof and such number of copies of the prospectus (including
any preliminary prospectus) and any amendments or supplements thereto, and any
documents incorporated by reference therein, as such Signatory may reasonably
request as soon as such documents become available to the Company in order to
facilitate the disposition of the Registrable Securities being sold by each
Seller (it being understood that the Company consents to the use of the
prospectus
2
<PAGE> 5
and any amendment or supplement thereto by each Seller of such Registrable
Securities in connection with the offering and sale of the Registrable
Securities covered by the prospectus or any amendment or supplement thereto);
(c) on or prior to the effective date of the Registration
Statement, or thereafter if necessary, use its best efforts to register or
qualify the Registrable Securities under such other securities or blue sky laws
of such jurisdictions as each Signatory reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
each Seller to consummate the disposition in such jurisdictions of such
Registrable Securities owned by such Seller; provided, however, that the
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph, (ii) subject itself to general taxation in any such jurisdiction or
(iii) consent to general service of process in such jurisdiction for purposes
of actions arising other than out of the Registration Statement;
(d) use its best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Sellers to consummate the
disposition of such Registrable Securities;
(e) notify each Signatory at any time while the Registration
Statement is required to be effective under paragraph (a) above of the
happening of any event which results in the prospectus included in such
Registration Statement containing an untrue statement of a material fact or
omitting to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and, as promptly as practicable,
the Company will prepare a supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(f) enter into customary agreements and make such representations
and warranties to the Sellers of Registrable Securities as in form, substance
and scope are customarily made by issuers to selling securityholders in
non-underwritten offerings and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
(g) make available for inspection during regular business hours by
Fidelity and TCW and any attorney, accountant or other agent retained by them
and their attorneys and agents (collectively, the "Inspectors"), all financial
and other records, corporate documents, books and records, questionnaires,
agreements, properties of the Company and other information (collectively, the
"Records") as shall be reasonably requested to enable them to exercise "due
diligence," and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such Inspector in connection with
the Registration Statement;
3
<PAGE> 6
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to their security holders,
as soon as reasonably practicable, earnings statements which need not be
audited, covering a period of twelve months beginning after the effective date
of the Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act of 1933, as amended;
(i) notify each Signatory of any stop order or other suspension of
effectiveness of the Registration Statement;
(j) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(k) use its best efforts to cause the Registrable Securities to be
listed on the American Stock Exchange or any other national securities exchange
or automated quotation system on which a listing for Shares, the Mortgage Notes
or the Units, as applicable, is maintained; and
(l) cooperate with the Sellers of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
securities to be sold under the Registration Statement (which certificates
shall be in DTC-eligible form) and enable such securities to be in such
denominations and registered in such names as such Sellers may request.
The Company may require each Seller of Registrable Securities as to
which any registration is being effected to furnish to the Company information
regarding the distribution of such securities and such other information
relating to the Seller and its ownership of Registrable Securities as the
Company may from time to time reasonably request for inclusion in the
Registration Statement.
Each Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(e) hereof, such holder will forthwith discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) hereof and, if
so directed by the Company, such Holder will deliver to the Company (at the
expense of the Company), all copies, other than permanent file copies then in
such Holder's possession of the prospectus covering such Registrable Securities
current at the time of receipt of such notice.
SECTION 4. Registration Expenses. All expenses incident to the
Company's performance of or compliance with Section 2 of this Agreement
including, without limitation, all registration and filing fees, and expenses
of compliance with state securities or blue sky laws (including fees and
disbursements of counsel in connection with blue sky
4
<PAGE> 7
qualifications of the Registrable Securities), messenger and delivery expenses,
internal expenses (including, without limitation, all salaries and expenses of
the Company's officers and employees performing legal or accounting duties),
printing costs, fees and expenses of counsel for the Company and its
independent certified public accountants (including the expenses of any special
audit required by or incident to such performance), Securities Acts liability
insurance (if the Company elects to obtain such insurance), fees and expenses
of counsel for the Sellers under Section 2(c) above and the fees and expenses
of any special experts retained by the Company in connection with such
registration (all such expenses being herein called "Registration Expenses")
shall be borne by the Company; provided, however, that in no event shall
Registration Expenses include any discounts, commissions or fees attributable
to the sale of the Registrable Securities.
SECTION 5. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify, to the full extent permitted by law, each participating Holder of
Registrable Securities, its officers, directors, partners, employees and agents
and each person or entity that controls such Holder (within the meaning of the
Act), and any investment advisor thereof or agent therefor against all losses,
claims, damages, liabilities and expenses (including reasonable out-of-pocket
costs of investigation and reasonable legal expenses) arising out of or based
upon any untrue or alleged untrue statement of a material fact contained in the
Registration Statement or prospectus or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of a prospectus, in light of the
circumstances under which they are made) not misleading, except insofar as the
same arise out of or are based upon any information with respect to such Seller
furnished in writing to the Company by such Seller. The Company will also
indemnify any selling brokers, dealer managers and similar securities industry
professionals participating in the distribution and their officers and
directors and each person who controls such persons or entities (within the
meaning of the Act) to the same extent as provided above with respect to the
indemnification of the Holders of Registrable Securities.
(b) Indemnification by Holders of Registrable Securities. In
connection with the Registration Statement in which a Holder of Registrable
Securities is participating, each such Holder will furnish to the Company, in
writing, such information and affidavits with respect to such Holder as the
Company reasonably requests for use in connection with such Registration
Statement or any prospectus included therein and agrees to indemnify, to the
extent permitted by law, the Company, its directors, officers, employees and
agents and each person or entity that controls the Company (within the meaning
of the Act), and any investment advisor thereof or agent therefor against any
losses, claims, damages, liabilities and expenses (including reasonable
out-of-pocket costs of investigation and reasonable legal expenses) arising out
of or based upon any untrue or alleged untrue statement of a material fact
contained in the Registration Statement or prospectus or any omission or
alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which
5
<PAGE> 8
they were made) not misleading, to the extent, but only to the extent, that
such untrue statement or omission is contained in or should have been contained
in any information or affidavit with respect to such Holder so furnished in
writing by such Holder expressly for inclusion in such Registration Statement.
(c) Conduct of Indemnification Proceedings. Any person or entity
entitled to indemnification hereunder agrees to give prompt written notice to
the indemnifying party after the receipt by such person or entity of any
written notice of the commencement of any action, suit or proceeding against
such person or entity or investigation thereof for which such person or entity
will claim indemnification or contribution pursuant to this Agreement and,
unless in the reasonable judgment of such indemnified party a conflict of
interest exists between such indemnified party and the indemnifying party with
respect to such claim, permit the indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to such indemnified party. If
the indemnifying party is not entitled to, or elects not to, assume the defense
of a claim, it will not be obligated to pay the fees and expenses of more than
one lead counsel with respect to such claim (plus local counsel fees, if
required), unless in the reasonable judgment of counsel to such indemnified
party a conflict of interest exists between such indemnified party and any
other of such indemnified parties with respect to such claim, in which event
the indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels. The indemnifying party will not be subject to
any liability for any settlement made without its consent, which consent shall
not be unreasonably withheld.
(d) Contribution. If the indemnification provided for in this
Section 5 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein by reason other than that set forth in the exception at the
end of the first sentence of Section 5(a) hereof, then the indemnifying party,
in lieu of indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions or inactions which resulted in such losses, claims,
damages, liabilities or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 5(c), any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
6
<PAGE> 9
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this paragraph were determined by pro rata allocation
or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
If indemnification is available under this Section 5, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 5(a) and (b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 5.
SECTION 6. Miscellaneous.
(a) Remedies. Each party hereto, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. Each
party agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that
a remedy at law would be adequate.
(b) Additional Signatories. If the Company determines that any
persons, other than the original Signatories hereto, who are to receive
Shares, Mortgage Notes and Units as of the Effective Date of the restructuring
referred to in Section 1(a), may be deemed to be underwriters within the
meaning of the Act with respect to such securities, the parties hereto agree
that such persons may become additional Signatories to the Agreement and their
Shares, Mortgage Notes and Units shall be deemed to be Registrable Securities.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made by telecopy (followed by registered
first-class mail or overnight courier delivery of a hard-copy), by overnight
courier or by hand-delivery:
(i) if to the Company, RIHF or RIH, at:
1133 Boardwalk
Atlantic City, New Jersey 08401
Attention: Christopher D. Whitney, Esq.
Telecopy: (609) 345-3260
7
<PAGE> 10
with a copy to:
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, N.W.
Suite 825
Washington, D.C. 20036
Attention: Peter E. Panarites
Telecopy: (202) 457-5151
(ii) if to Fidelity, at:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Judy K. Mencher, Esq.
Telecopy: (617) 570-7688
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Bruce R. Zirinsky, Esq.
Telecopy: (212) 310-8007; and
(iii) if to TCW, at:
865 South Figueroa Street
Los Angeles, California 90017
Attention: Mr. Bruce A. Karsh
Telecopy: (213) 244-0549
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Bruce R. Zirinsky, Esq.
Telecopy: (212) 310-8007
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties hereto; provided, however, that the rights provided to the Holders of
Registrable Securities in Section 2 of this Agreement shall be exercisable only
by Holders of Registrable Securities as determined in accordance with Section 1
of this Agreement.
8
<PAGE> 11
(e) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereto.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nw York applicable to
contracts made and to be performed wholly within the State.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any
way impaired thereby.
(i) Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
(j) Further Actions; Best Efforts. Each of RIHF and RIH agrees to
use its best efforts to take or cause to be taken all appropriate action, and
to do or cause to be done all things, reasonably necessary, proper or advisable
under applicable law and regulations to assist the Company in the performance
of its obligations hereunder, including without limitation the preparation and
filing of the Registration Statement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
RESORTS INTERNATIONAL, INC.
By:
--------------------------------
Name:
Title:
9
<PAGE> 12
RESORTS INTERNATIONAL HOTEL
FINANCING, INC.
By:
--------------------------------
Name:
Title:
RESORTS INTERNATIONAL HOTEL,
INC.
By:
--------------------------------
Name:
Title:
FIDELITY MANAGEMENT &
RESEARCH COMPANY, on behalf of
various funds that it manages
which are to own Shares, Mortgage Notes
and Junior Notes and which may
acquire Senior Facility Notes
By:
--------------------------------
Name:
Title:
TCW SPECIAL CREDITS, on behalf
of various funds and accounts which
are to own Shares, Mortgage Notes
and Junior Notes
By: TCW ASSET MANAGEMENT CO.,
its Managing Partner
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
10
<PAGE> 1
EXHIBIT 12.01
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------
1990
------------------------
THROUGH FROM
1989 AUGUST 31 SEPTEMBER 1 1991 1992 1993
--------- --------- ----------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed
charges:
Loss before income taxes and
extraordinary item........ $(306,589) $(171,594) $ (13,531) $(42,402) $(54,802) $(101,164)
Interest and amortization of
debt discount and
expense................... 121,579 434 14,057 63,262 78,425 108,447
Portion (one-third) of
rental charges............ 2,464 1,443 561 2,152 2,535 2,539
--------- --------- ----------- -------- -------- ---------
Earnings available for
fixed charges.......... $(182,546) $(169,717) $ 1,087 $ 23,012 $ 26,158 $ 9,822
--------- --------- ----------- -------- -------- ---------
--------- --------- ----------- -------- -------- ---------
Fixed charges:
Interest and amortization of
debt discount and
expense................... $ 121,579 $ 434 $ 14,057 $ 63,262 $ 78,425 $ 108,447
Capitalized interest........ 99
Portion (one-third) of
rental charges............ 2,464 1,443 561 2,152 2,535 2,539
--------- --------- ----------- -------- -------- ---------
Total fixed charges....... $ 124,142 $ 1,877 $ 14,618 $ 65,414 $ 80,960 $ 110,986
--------- --------- ----------- -------- -------- ---------
--------- --------- ----------- -------- -------- ---------
Ratio of earnings to fixed
charges(a).................. -- -- -- -- -- --
--------- --------- ----------- -------- -------- ---------
--------- --------- ----------- -------- -------- ---------
</TABLE>
- ---------------
(a) Earnings were insufficient to cover fixed charges by $306,688,000 for the
year 1989; $171,594,000 for the period through August 31, 1990; $13,531,000
for the period from September 1, 1990; $42,402,000 for the year 1991;
$54,802,000 for the year 1992; and $101,164,000 for the year 1993.
A change in control, management and accounting basis occurred on August 31,
1990, as the Company emerged from bankruptcy proceedings.
<PAGE> 1
EXHIBIT 12.02
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1990
------------------------
THROUGH FROM
1989 AUGUST 31 SEPTEMBER 1 1991 1992 1993
--------- --------- ----------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Earnings available for fixed
charges:
Earnings (loss) before income
taxes and extraordinary
item.......................... $(152,442) $(210,129) $ 5,000 $21,761 $27,356 $16,763
Interest and amortization of
debt discount and expense..... 48,008 306 136 563 395 193
Portion (one-third) of rental
charges....................... 902 749 243 938 942 921
--------- --------- ----------- ------- ------- -------
Earnings available for fixed
charges.................... $(103,532) $(209,074) $ 5,379 $23,262 $28,693 $17,877
--------- --------- ----------- ------- ------- -------
--------- --------- ----------- ------- ------- -------
Fixed charges:
Interest and amortization of
debt discount and expense..... $ 48,008 $ 306 $ 136 $ 563 $ 395 $ 193
Portion (one-third) of rental
charges....................... 902 749 243 938 942 921
--------- --------- ----------- ------- ------- -------
Total fixed charges........... $ 48,910 $ 1,055 $ 379 $ 1,501 $ 1,337 $ 1,114
--------- --------- ----------- ------- ------- -------
--------- --------- ----------- ------- ------- -------
Ratio of earnings to fixed
charges(a)...................... -- -- 14.19 15.50 21.46 16.05
--------- --------- ----------- ------- ------- -------
--------- --------- ----------- ------- ------- -------
</TABLE>
- ---------------
(a) Earnings were insufficient to cover fixed charges by $152,442,000 for the
year 1989; and $210,129,000 for the period through August 31, 1990.
A change in control, management and accounting basis occurred on August 31,
1990, as the Company emerged from bankruptcy proceedings.
<PAGE> 1
EXHIBIT 12.03
RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1993
------------------
<S> <C>
Pro forma earnings available for fixed charges:
Loss before income taxes........................................... $ (4,785)
Interest and amortization of debt discount and expense............. 28,796
Portion (one-third) of rental charges.............................. 833
----------
Earnings available for fixed charges.......................... $ 24,844
----------
----------
Pro forma fixed charges:
Interest and amortization of debt discount and expense............. $ 28,796
Portion (one-third) of rental charges.............................. 833
----------
Total fixed charges........................................... $ 29,629
----------
----------
Pro forma ratio of earnings to fixed
charges(a)............................................................ --
----------
----------
</TABLE>
- ---------------
(a) Pro forma earnings were insufficient to cover fixed charges by $4,785,000
for the year ended December 31, 1993.
<PAGE> 1
EXHIBIT 12.04
RESORTS INTERNATIONAL HOTEL, INC. AND SUBSIDIARIES
COMPUTATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1993
------------------
<S> <C>
Pro forma earnings available for fixed charges:
Loss before income taxes........................................... $ (5,720)
Interest and amortization of debt discount and expense............. 18,653
Portion (one-third) of rental charges.............................. 921
----------
Earnings available for fixed charges.......................... $ 13,854
----------
----------
Pro forma fixed charges:
Interest and amortization of debt discount and expense............. $ 18,653
Portion (one-third) of rental charges.............................. 921
----------
Total fixed charges........................................... $ 19,574
----------
----------
Pro forma ratio of earnings to fixed
charges(a)............................................................ --
----------
----------
</TABLE>
- ---------------
(a) Pro forma earnings were insufficient to cover fixed charges by $5,720,000
for the year ended December 31, 1993.
<PAGE> 1
EXHIBIT 21.01
SUBSIDIARIES OF RESORTS INTERNATIONAL, INC.
AS OF APRIL 15, 1994
<TABLE>
<CAPTION>
PERCENTAGE OF
OUTSTANDING
PLACE OF STOCK HELD
NAME OF SUBSIDIARY INCORPORATION BY REGISTRANT
- ------------------------------------------------------------- ------------- --------------
<S> <C> <C>
ANTL, Inc. Florida 100%
Aces Advertising Agency, Inc. New Jersey (1)
Bahamas Developers Limited The Bahamas (2)
Ess Zee Corporation New Jersey 100%
GGRI, Inc. Delaware 100%
International Suppliers, Inc. Florida 100%
Island Hotel Company Limited* The Bahamas (2)
New Pier Operating Company, Inc. New Jersey 100%
P.I. Resorts Limited* The Bahamas 100%
Paradise Beach Inn, Limited* The Bahamas (3)
Paradise Enterprises Limited* The Bahamas (2)
Paradise Island Airlines, Inc. Florida 100%
Paradise Island Bridge Management Company Limited* The Bahamas (2)
Paradise Island Limited* The Bahamas (2)
Paradise Island Vacations, Inc. Florida 100%
Paradise Security Services Limited* The Bahamas (2)
Resorts International (Bahamas) 1984 Limited* The Bahamas (4)
Resorts International Disbursement, Inc. Florida 100%
Resorts International Hotel Financing, Inc. Delaware 100%
Resorts International Hotel, Inc. New Jersey 100%
Resorts Representation International, Inc. Florida 100%
</TABLE>
- ---------------
(1) 100% owned by Resorts International Hotel, Inc.
(2) 100% owned by Resorts International (Bahamas) 1984 Limited
(3) 100% owned by Paradise Island Limited
(4) 100% owned by GGRI, Inc.
* As of the Effective Date, these companies will no longer be affiliated with
Resorts International, Inc. due to the SIHL Sale.
Resorts International, Inc.'s subsidiaries generally do business in their
respective corporate names or distinctive short forms thereof which are readily
identifiable. Resorts International Hotel, Inc. uses the name Merv Griffin's
Resorts Casino Hotel extensively. Resorts International (Bahamas) 1984 Limited,
Paradise Enterprises Limited and Island Hotel Company Limited do business under
the name Paradise Island Resort & Casino. Paradise Beach Inn, Limited does
business under the name Paradise Paradise Beach Resort.
The names of certain subsidiaries, which considered in the aggregate did
not constitute a "significant subsidiary" as of April 15, 1994 as defined in
Rule 1.02(v) of Regulation S-X, have been omitted.
<PAGE> 1
EXHIBIT 23.01
CONSENT
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports, as outlined in the following table, in the Registration
Statement (Form S-1 No. 33- ) and related Prospectus of Resorts
International, Inc., Resorts International Hotel Financing, Inc., and Resorts
International Hotel, Inc. for the registration of the 11% Mortgage Notes due
2003, 11.375% Junior Mortgage Notes due 2004, Class B Common Stock, par value
$.01 per share and Common Stock, par value $.01 per share.
<TABLE>
<S> <C>
Resorts International, Inc. February 18, 1994 and February 18,
1994 except for paragraph 8 of
Note 1, as to which the date is
March 17, 1994
Resorts International Hotel, Inc. February 18, 1994 and February 18,
1994 except for paragraph 14 of
Note 12, as to which the date is
March 17, 1994
Resorts International Hotel March 17, 1994
Financing, Inc.
ERNST & YOUNG
</TABLE>
April 25, 1994
<PAGE> 1
EXHIBIT 23.06
April 27, 1994
The undersigned has been identified as a director in a Registration
Statement on Form S-1 being filed by Resorts International, Inc., Resorts
International Hotel Financing, Inc. and Resorts International Hotel, Inc. (the
"Registration Statement"). The Registration Statement is being filed to
register the public resale of certain debt and equity securities to be received
by certain selling securityholders in the Restructuring (as defined in the
Registration Statement). The undersigned is to become a director upon the
Effective Date (as defined in the Registration Statement) of the Restructuring.
The undersigned hereby agrees to serve as a director of Resorts International,
Inc., assuming his appointment pursuant to the Restructuring and consents to
the inclusion of his name in the Registration Statement.
/s/ CHARLES MASSON
----------------------------
Charles Masson
<PAGE> 1
EXHIBIT 23.07
April 27, 1994
The undersigned has been identified as a director in a Registration
Statement on Form S-1 being filed by Resorts International, Inc., Resorts
International Hotel Financing, Inc. and Resorts International Hotel, Inc. (the
"Registration Statement"). The Registration Statement is being filed to
register the public resale of certain debt and equity securities to be received
by certain selling securityholders in the Restructuring (as defined in the
Registration Statement). The undersigned is to become a director upon the
Effective Date (as defined in the Registration Statement) of the Restructuring.
The undersigned hereby agrees to serve as a director of Resorts International,
Inc., assuming his appointment pursuant to the Restructuring and consents to
the inclusion of his name in the Registration Statement.
/s/ WILLIAM FALLON
----------------------------
William Fallon
<PAGE> 1
EXHIBIT 23.08
April 27, 1994
The undersigned has been identified as a director in a Registration
Statement on Form S-1 being filed by Resorts International, Inc., Resorts
International Hotel Financing, Inc. and Resorts International Hotel, Inc. (the
"Registration Statement"). The Registration Statement is being filed to
register the public resale of certain debt and equity securities to be received
by certain selling securityholders in the Restructuring (as defined in the
Registration Statement). The undersigned is to become a director upon the
Effective Date (as defined in the Registration Statement) of the Restructuring.
The undersigned hereby agrees to serve as a director of Resorts International,
Inc., assuming his appointment pursuant to the Restructuring and consents to
the inclusion of his name in the Registration Statement.
/s/ VINCENT NAIMOLI
----------------------------
Vincent Naimoli
<PAGE> 1
EXHIBIT 23.09
April 27, 1994
The undersigned has been identified as a director in a Registration
Statement on Form S-1 being filed by Resorts International, Inc., Resorts
International Hotel Financing, Inc. and Resorts International Hotel, Inc. (the
"Registration Statement"). The Registration Statement is being filed to
register the public resale of certain debt and equity securities to be received
by certain selling securityholders in the Restructuring (as defined in the
Registration Statement). The undersigned is to become a director upon the
Effective Date (as defined in the Registration Statement) of the Restructuring.
The undersigned hereby agrees to serve as a director of Resorts International,
Inc., assuming his appointment pursuant to the Restructuring and consents to
the inclusion of his name in the Registration Statement.
/s/ JAY GREEN
----------------------------
Jay Green
