<PAGE>
Filed Pursuant to Rule 424B3
Registration Number 33-50733
INFORMATION STATEMENT/PROSPECTUS
AND
SOLICITATION OF PLAN ACCEPTANCES
RESORTS INTERNATIONAL, INC.
GGRI, INC.
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
RESORTS INTERNATIONAL HOTEL, INC.
P.I. RESORTS LIMITED
<PAGE>
RESORTS INTERNATIONAL, INC.
1133 BOARDWALK
ATLANTIC CITY, NEW JERSEY 08401
(609) 344-6000
February 1, 1994
To: The Shareholders and Creditors of Resorts International, Inc. and GGRI,
Inc.
We are pleased to deliver to you the accompanying Information
Statement/Prospectus (together with the related ballots, the SIHL Prospectus and
other materials), pursuant to which Resorts International, Inc. ("RII") and
GGRI, Inc. ("GRI") are soliciting votes for the acceptance or rejection of a
"prepackaged" Plan of Reorganization and certain related consents for use by RII
and GRI in contemplated voluntary cases under chapter 11 of the Bankruptcy Code.
The Plan provides, among other things, for a restructuring of RII's and GRI's
debt and equity capitalization as described in the accompanying Information
Statement/Prospectus. Management of RII believes that the Restructuring will
improve RII's financial position and allow management to create long-term value
for the creditors and shareholders of RII and strengthen RII's position in the
gaming industry. OTHER THAN GRI, RII DOES NOT INTEND TO INCLUDE ANY OF ITS
SUBSIDIARIES IN ITS BANKRUPTCY CASE, NOR DOES RII INTEND TO CAUSE ANY OF ITS
SUBSIDIARIES TO FILE ITS OWN BANKRUPTCY CASE. NEITHER RII NOR GRI CURRENTLY IS
IN BANKRUPTCY. All capitalized terms not otherwise defined in this letter are
defined in the accompanying Information Statement/Prospectus.
RII believes that the Restructuring will improve its long-term liquidity and
enhance its ability to meet its financial obligations as they become due. The
Restructuring is intended, among other things, to reduce RII's financial
obligations on its outstanding Old Series Notes due April 15, 1994, which were
issued in two series, by exchanging the Old Series Notes for: (i) $125,000,000
principal amount of new mortgage notes issued by RIHF, a wholly owned subsidiary
of RII, and guaranteed by RIH, a wholly owned subsidiary of RII that owns the
Resorts Casino Hotel in Atlantic City, which guaranty is secured by a lien on
the Resorts Casino Hotel; (ii) $35,000,000 principal amount of new junior
mortgage notes issued by RIHF and guaranteed by RIH, which guaranty is secured
by a lien on the Resorts Casino Hotel; (iii) 40% of the RII Common Stock on a
fully diluted basis (excluding outstanding options issued pursuant to the 1990
Stock Option Plan and options to be issued under the 1994 Stock Option Plan);
and (iv) either (A) $65,000,000 in cash, plus interest thereon at an annual rate
of 7.5% from January 1, 1994 to the SIHL Closing Date, plus 40% of the capital
stock of Sun International Hotels Limited ("SIHL"), representing the
consideration received from the proposed sale of the Paradise Island Business to
SIHL (the "SIHL Sale"), or (B) if the proposed SIHL Sale is not consummated and
the PIRL Spin-Off is consummated on or prior to the Effective Date, 100% of the
common equity of PIRL, a wholly owned and newly formed subsidiary of RII, which
through its subsidiaries will own and operate the Paradise Island Business. In
addition, the holders of the Old Series Notes as of the Distribution Record Date
will receive on the relevant Distribution Date (1) cash payments of Excess Cash
which are projected to be at least $30,000,000 in the aggregate and (2)
non-transferable rights to receive (a) payments from Net Reserved Cash, if any,
resulting from any Reserved Cash in excess of that actually required to fund
certain adjustments under either the proposed SIHL Sale of the Paradise Island
Business pursuant to the Paradise Island Purchase Agreement or the PIRL Spin-Off
of the Paradise Island Business pursuant to the PIRL Standby Distribution
Agreement, (b) payments of Net Plan Consummation Cash, if any, resulting from
any Plan Consummation Cash in excess of that actually required to pay Plan
Expenses, and (c) payments of Deferred Cash, projected to total $2,500,000,
resulting from distributions in respect of the Litigation Trust Units owned by
RII.
By proposing the Plan and conducting the Solicitation in advance of
commencing chapter 11 cases, which is known as a "prepackaged bankruptcy", RII
and GRI anticipate that the pendency of their chapter 11 cases will be shortened
significantly and the administration of such cases will be simplified and less
costly.
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The Plan is a result of months of negotiation by RII, Fidelity and TCW. In
addition, RII, Fidelity and TCW held discussions with the Griffin Group
regarding the New Griffin Services Agreement and with representatives of SIHL
regarding the Paradise Island Purchase Agreement. RII and GRI believe that the
Plan is in the best interests of RII, GRI, and their respective shareholders and
creditors.
FIDELITY AND TCW SEPARATELY ADVISE AND MANAGE VARIOUS FUNDS AND ACCOUNTS
THAT AS OF THE VOTING RECORD DATE HELD IN THE AGGREGATE APPROXIMATELY
$308,833,000 PRINCIPAL AMOUNT OF THE OLD SERIES NOTES, OR APPROXIMATELY 64% OF
THE OUTSTANDING OLD SERIES NOTES. FIDELITY AND TCW HAVE ENGAGED IN EXTENSIVE
NEGOTIATIONS WITH RII AND GRI WITH RESPECT TO THE RESTRUCTURING AND HAVE AGREED,
SUBJECT TO CERTAIN CONDITIONS, TO VOTE ALL OLD SERIES NOTES OWNED BY FUNDS AND
ACCOUNTS MANAGED BY THEM AS OF THE VOTING RECORD DATE FOR ACCEPTANCE OF THE PLAN
AND TO CONSENT TO THE TERMINATION AND RELEASE OF THE OLD SECURITY DOCUMENTS IN
CONNECTION THEREWITH. PURSUANT TO THE PLAN, RIHF AND ONE OR MORE FUNDS MANAGED
BY FIDELITY WILL ENTER INTO THE RIHF SENIOR FACILITY DESCRIBED BELOW.
MERV GRIFFIN, WHO HOLDS 4,398,115 SHARES OF RII COMMON STOCK, OR
APPROXIMATELY 21.82% OF THE OUTSTANDING RII COMMON STOCK, HAS AGREED TO VOTE FOR
THE PLAN. IN CONNECTION WITH THE PLAN, THE NEW GRIFFIN SERVICES AGREEMENT WILL
REMAIN IN PLACE, $2,310,000 OF THE GRIFFIN GROUP NOTE BALANCE WILL BE APPLIED TO
THE NEXT PAYMENT DUE UNDER THE NEW GRIFFIN SERVICES AGREEMENT, THE THEN
REMAINING BALANCE OF THE GRIFFIN GROUP NOTE WILL BE PAID TO RII AND THE GRIFFIN
GROUP WILL RECEIVE THE GRIFFIN WARRANTS.
THE HOLDERS OF 1,307,300 1990 STOCK OPTIONS ISSUED UNDER THE 1990 STOCK
OPTION PLAN, OR APPROXIMATELY 74% OF THE OUTSTANDING 1990 STOCK OPTIONS, HAVE
AGREED TO VOTE FOR THE PLAN.
RII HAS AGREED TO VOTE ITS INTERCOMPANY CLAIM AGAINST GRI AND ITS EQUITY
INTEREST IN GRI FOR ACCEPTANCE OF THE PLAN.
To ensure that RII and RIH have adequate cash for working capital and
general corporate purposes, one or more funds managed by Fidelity will enter
into the RIHF Senior Facility with RIHF, which will allow RIHF to borrow up to
$20,000,000 through the issuance of RIHF Senior Facility Notes. Any amount
borrowed by RIHF under the RIHF Senior Facility will be loaned by RIHF to RIH,
and possibly by RIH to RII, through intercompany transactions. The RIHF Senior
Facility will be available for a single borrowing during the one-year period
from the Effective Date, provided that, among other conditions, the public
resale of the RIHF Senior Facility Notes by the purchasers thereof is registered
under the Securities Act, and the RIHF Senior Facility Indenture has been
qualified under the TIA. The RIHF Senior Facility Notes will by guaranteed by
RIH and RII. The guaranty of RIH will be secured by a lien on the Resorts Casino
Hotel. The guaranty of RII will be secured by a pledge of all of the issued and
outstanding capital stock of RIHF and GRI. The RIHF Senior Facility Notes will
also be secured by a pledge of the issued and outstanding capital stock of RIH.
Under the Bankruptcy Code, to confirm the Plan on a consensual basis, the
holders of at least 66 2/3% in principal amount and more than 50% in number of
the claims that vote in each impaired class of creditors, and the holders of at
least 66 2/3% of the outstanding interests that vote in each impaired class of
interests must vote to accept the Plan. No minimum number of votes is required
for confirmation of the Plan and only those who accept or reject the Plan will
be counted for purposes of determining acceptance or rejection of the Plan by
any impaired class of claims or interests. Unexecuted ballots will not be
counted. ANY EXECUTED BALLOT WITH RESPECT TO THE PLAN RETURNED WITHOUT AN
INDICATION TO ACCEPT OR REJECT THE PLAN WILL BE DEEMED AN ACCEPTANCE THEREOF.
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, as of the
Effective Date, the Old Security Documents under which the liens on the property
securing the Old Series Notes were granted or created shall be deemed released
and terminated. In addition, release of the Old Security Documents with respect
to the assets relating to the Paradise Island Business is a condition to the
SIHL Sale. To effectuate such termination and release consensually, the record
holders of at least 66 2/3% in aggregate principal amount of the outstanding Old
Series Notes and the record holders of at least a majority in aggregate
principal amount of each series of the Old Series Notes must execute consents
pursuant to the terms of the Old
2
<PAGE>
Series Note Indenture. Accordingly, RII and GRI are seeking consents to
terminate and release the Old Security Documents from the holders of Old Series
Notes. Such consents must be evidenced by record holders separately from their
vote on the Plan. The ballots for the holders of Old Series Notes permit holders
to give or withhold such consent. ANY EXECUTED BALLOT OF A HOLDER OF OLD SERIES
NOTES RETURNED WITHOUT AN INDICATION TO WITHHOLD SUCH CONSENT WILL BE DEEMED TO
GIVE SUCH CONSENT. If sufficient consents are received from the holders of Old
Series Notes, RII and GRI will request the Bankruptcy Court to confirm the
release and termination of the Old Security Documents by entry of an appropriate
order. If insufficient consents are received from holders of Old Series Notes to
effectuate a consensual termination and release and termination of the Old
Security Documents, RII and GRI intend to request the Bankruptcy Court to order
the release of the Old Security Documents; however, there can be no assurance
that such an order will be entered.
In no event will the consents to release the Old Security Documents be used
to effectuate the termination and release of the Old Security Documents in the
absence of the confirmation and consummation of the Plan. If RII and GRI fail to
receive the Requisite Acceptances, notwithstanding receipt of sufficient
consents to release and terminate the Old Security Documents pursuant to the Old
Series Note Indenture, such consents will only be used in the event that RII and
GRI continue to pursue confirmation and consummation of the Plan. In the event
that RII and GRI elect or are required to resolicit Acceptances of the Plan,
however, they reserve the right not to resolicit with respect to the consents to
release the Old Security Documents and to use consents received from the initial
Solicitation. Consents to release and terminate the Old Security Documents may
be withdrawn or revoked at any time prior to the Voting Deadline.
The Plan is also subject to approval by the Casino Control Commission and
the government of the Commonwealth of The Bahamas.
RII and GRI have fixed the close of business on January 10, 1994 as the
record date for the determination of holders of claims and of holders of
interests to whom the accompanying Information Statement/Prospectus and related
ballots, the SIHL Prospectus and other materials are being furnished and from
whom votes to accept or reject the Plan will be accepted and consents to release
the Old Security Documents are sought. TO BE COUNTED, BALLOTS MUST BE RECEIVED
BY HILL AND KNOWLTON, THE SOLICITATION AGENT, NO LATER THAN 5:00 P.M., NEW YORK
CITY TIME, ON MARCH 15, 1994 (or such later time and date to which RII and GRI
may extend the Solicitation in the manner described in the Information
Statement/Prospectus). The Solicitation will not be terminated prior to March
15, 1994, unless the Company is required to seek immediate protection under
chapter 11 of the Bankruptcy Code as a result of an acceleration of the maturity
of the Old Series Notes or a foreclosure upon the collateral securing the Old
Series Notes. If you are being asked to vote on the Plan, a ballot (together
with certain related materials) and a postage-paid pre-addressed return envelope
have been enclosed for your convenience. As soon as practicable after the
Confirmation Date, RII will furnish to each holder of Old Series Notes a letter
of transmittal for remittance of such holder's Old Series Notes. Such holders
should not send their Old Series Notes to RII at this time.
THE BOARD OF DIRECTORS OF EACH OF RII AND GRI HAS UNANIMOUSLY APPROVED THE
RESTRUCTURING, THE PLAN AND THE SOLICITATION AND RECOMMENDS THAT ALL IMPAIRED
CREDITORS AND EQUITY INTEREST HOLDERS SUBMIT BALLOTS ACCEPTING THE PLAN AND, IF
APPLICABLE, CONSENTING TO THE RELEASE OF THE OLD SECURITY DOCUMENTS.
IT IS OF THE UTMOST IMPORTANCE THAT YOU READ AND CAREFULLY CONSIDER THE
MATTERS DESCRIBED IN THE ACCOMPANYING INFORMATION STATEMENT/PROSPECTUS (TOGETHER
WITH THE RELATED BALLOTS, THE SIHL PROSPECTUS AND OTHER MATERIALS)
3
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AND THAT YOU VOTE ON THE PLAN IN SUFFICIENT TIME TO ENSURE THAT YOUR VOTE CAN BE
TRANSMITTED TO HILL AND KNOWLTON, THE SOLICITATION AGENT, BY THE VOTING
DEADLINE.
FOR INFORMATION WITH RESPECT TO SIHL, THE SIHL SALE, THE PARADISE ISLAND
PURCHASE AGREEMENT AND THE SIHL SERIES A SHARES, REFERENCE IS MADE TO THE
ACCOMPANYING SIHL PROSPECTUS RELATING TO THE SIHL SERIES A SHARES. RII HAS
SUPPLIED CERTAIN INFORMATION REGARDING THE PARADISE ISLAND BUSINESS (SUCH AS IS
FOUND IN RII'S REPORTS FILED WITH THE COMMISSION), AS WELL AS CERTAIN
INFORMATION CONCERNING THE RESTRUCTURING, TO SIHL SPECIFICALLY FOR ITS USE IN
THE PREPARATION OF THE SIHL PROSPECTUS (AND THE RELATED REGISTRATION STATEMENT
FILED BY SIHL WITH THE COMMISSION UNDER THE SECURITIES ACT). RII AND ITS
ADVISERS DISCLAIM ANY RESPONSIBILITY FOR THE ACCURACY, COMPLETENESS, NATURE AND
FORM OF PRESENTATION OF ANY INFORMATION CONTAINED IN THE SIHL PROSPECTUS (AND
RELATED REGISTRATION STATEMENT), EXCEPT THAT RII HAS MADE IN THE PARADISE ISLAND
PURCHASE AGREEMENT CERTAIN REPRESENTATIONS AND WARRANTIES TO SIHL AS TO THE
ACCURACY OF THE INFORMATION SUPPLIED BY RII SPECIFICALLY FOR INCLUSION IN THE
SIHL PROSPECTUS (AND RELATED REGISTRATION STATEMENT).
Very truly yours,
Christopher D. Whitney
OFFICE OF THE PRESIDENT,
EXECUTIVE VICE PRESIDENT AND CHIEF OF
STAFF
Matthew B. Kearney
OFFICE OF THE PRESIDENT,
EXECUTIVE VICE PRESIDENT-FINANCE,
CHIEF FINANCIAL OFFICER AND TREASURER
4
<PAGE>
Filed Pursuant to Rule 424B3
Registration Number 33-50733
INFORMATION STATEMENT/PROSPECTUS
AND
SOLICITATION OF PLAN ACCEPTANCES
RESORTS INTERNATIONAL, INC.
GGRI, INC.
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
RESORTS INTERNATIONAL HOTEL, INC.
P.I. RESORTS LIMITED
Resorts International, Inc., a Delaware corporation ("RII"), and GGRI, Inc.,
a Delaware corporation formerly known as Griffin Resorts Inc. ("GRI"), upon the
terms and subject to the conditions set forth in this Information
Statement/Prospectus and Solicitation of Plan Acceptances (this "Information
Statement/Prospectus") and the accompanying forms of Ballot and Master Ballot,
hereby solicit (the "Solicitation") from: (a) each owner of RII's Senior Secured
Redeemable Notes due April 15, 1994 (and beneficiary of the related GRI
Guaranty), which were issued in two series, the Series A Senior Secured
Redeemable Notes (the "Old Series A Notes") and the Series B Senior Secured
Redeemable Notes (the "Old Series B Notes"; and collectively with the Old Series
A Notes, the "Old Series Notes"); (b) each owner of shares of RII's common
stock, par value $.01 per share (the "RII Common Stock"); (c) RII, as the owner
of all the outstanding common stock, par value $.01 per share, of GRI (the "GRI
Common Stock"); (d) RII, as the holder of the RII Intercompany Claims against
GRI; and (e) each holder of stock options (the "1990 Stock Options") issued
under RII's Senior Management Stock Option Plan (the "1990 Stock Option Plan"),
each as of the close of business in New York City on January 10, 1994 (the
"Voting Record Date"), an acceptance (an "Acceptance") of that certain Joint
Plan of Reorganization for RII and GRI proposed by RII, GRI, Resorts
International Hotel, Inc., a New Jersey corporation and a wholly owned
subsidiary of RII ("RIH"), P. I. Resorts Limited, a corporation organized under
the laws of the Commonwealth of The Bahamas and a wholly owned subsidiary of RII
("PIRL"), and Resorts International Hotel Financing, Inc., a Delaware
corporation and a wholly owned subsidiary of RII ("RIHF"), a copy of which is
attached hereto as Appendix A (the "Plan"), to be filed pursuant to chapter 11
of title 11 of the United States Code (the "Bankruptcy Code") and the rules
promulgated thereunder (the "Bankruptcy Rules"). GRI has guaranteed payment of
the Old Series Notes (the "GRI Guaranty"). Thus, the owners of the Old Series
Notes are beneficiaries of the GRI Guaranty which is endorsed on the Old Series
Notes. The term "Company" as used herein includes RII and/or one or more of its
subsidiaries, as the context may require.
From each holder of Old Series Notes (and beneficiary of the related GRI
Guaranty endorsed thereon), RII and GRI hereby also solicit consents to
terminate and release the Old Security Documents so that certain of the
collateral covered thereby, including the Resorts Casino Hotel, the RIB Stock
and the RIB Collateral, can be pledged to secure the New Debt Securities and the
RIHF Senior Facility Notes and released to effect either the SIHL Sale or the
PIRL Spin-off.
The Plan will be consummated on the Effective Date. Consummation of the Plan
will result in a restructuring of RII's debt and equity capitalization in the
manner described below and the consummation of certain other transactions,
including either (i) the sale (the "SIHL Sale") of the Company's operations and
properties on or relating to Paradise Island, The Bahamas (the "Paradise Island
Business") to Sun International Hotels Limited, a corporation organized under
the laws of the Commonwealth of The Bahamas ("SIHL") and not affiliated with
RII, or (ii) if the SIHL Sale is not consummated on or before the Effective Date
and certain other conditions are satisfied, the spin-off to the holders of the
Old Series Notes of the Paradise Island Business (the "PIRL Spin-Off"). The
Paradise Island Business includes all of the outstanding capital stock (the
"Paradise Island Shares") of Resorts International (Bahamas) 1984 Limited, a
corporation organized under the laws of the Commonwealth of The Bahamas ("RIB"),
substantially all of the real property owned by RII in the State of Florida and
used primarily in connection with RII's operations on Paradise Island, The
Bahamas (the "RII Real Estate Assets"), and substantially all of the assets of
the U.S. Paradise Island Subsidiaries (the "RII Paradise Assets"). Such
restructuring and such other transactions collectively are referred to herein as
the "Restructuring".
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(COVER PAGE CONTINUED)
The Plan provides, among other things, that record holders of the Old Series
Notes as of the distribution record date (the "Distribution Record Date"), which
is defined as the close of business in New York City on the date that the Plan
becomes effective (the "Effective Date"), will receive the following
consideration on the relevant Distribution Date for each $1,000 of principal
amount of Old Series Notes outstanding on the Effective Date (and for any
accrued interest thereon)*:
<TABLE>
<S> <C> <C>
-- $259.38 principal amount of 11% Mortgage Notes due 2003 (the "New RIHF
Mortgage Notes") issued by RIHF and guaranteed (the "RIH Mortgage
Guaranty") by RIH;
-- One unit (a "Unit") comprised of (i) $72.63 principal amount of 11.375%
Junior Mortgage Notes due 2004 (the "New RIHF Junior Mortgage Notes")
issued by RIHF and guaranteed by RIH (the "RIH Junior Mortgage
Guaranty"), and (ii) .07263 share of RII's Class B Redeemable Common
Stock, par value $.01 per share (the "RII Class B Common Stock");
-- 35.33 shares of RII Common Stock;
-- Either (A) $134.88 in cash, plus interest on such amount at an annual
rate of 7.5% from January 1, 1994 to the closing date of the SIHL Sale
(the "SIHL Closing Date"), plus 4.15 Series A Ordinary Shares, par
value $.01 per share (the "SIHL Series A Shares"), issued by SIHL,
representing a pro rata share of the consideration received from the
SIHL Sale, or (B) if the SIHL Sale is not consummated on or before the
Effective Date, 10.375 Ordinary Shares, par value $.01 per share (the
"PIRL Ordinary Shares"), issued by PIRL pursuant to the PIRL Spin-Off;
-- A pro rata share of Excess Cash, which pro rata share is projected to be
a minimum of $62.25. "Excess Cash" means the amount by which RII's
Available Cash exceeds the sum of: (i) $20,000,000 (the "RII Retained
Cash"); (ii) "Target Adjusted Cash", as defined in either (a) the
Purchase Agreement dated as of October 11, 1993, between RII and SIHL,
as amended (the "Paradise Island Purchase Agreement") or (b) the
Standby Distribution Agreement dated as of October 15, 1993, between
RII and PIRL, as amended (the "PIRL Standby Distribution Agreement"),
as appropriate; (iii) such cash as RII reasonably estimates will be
required to fund certain adjustments (including without limitation any
adjustment related to "Adjusted Working Capital") under either the
Paradise Island Purchase Agreement or the PIRL Standby Distribution
Agreement, as the case may be (the "Reserved Cash"); (iv) such cash as
RII reasonably estimates will be necessary to pay Plan Expenses (the
"Plan Consummation Cash"), and (v) a $400,000 cash payment to be made
to Caesars World, Inc. on the Distribution Date (the "Caesars
Payment"). "Available Cash" means all cash of RII and its subsidiaries
on the Effective Date, including but not limited to cash deposited in
depository accounts, cash on hand and cage cash, before giving effect
to the SIHL Sale or PIRL Spin-Off, as the case may be, and the
distributions under the Plan, but specifically excluding (1) any cash
actually received by RII on or prior to the Effective Date, from
Atlantic City Showboat, Inc., as tenant under the Showboat Lease, which
has been escrowed by RII to pay its current obligations with respect to
the Showboat Notes, (2) any restricted cash relating to the
</TABLE>
- ------------------------
* Assumes that the principal amount of Old Series Notes outstanding as of the
Effective Date is $482,000,000, the balance at October 15, 1993. Additional
Old Series Notes not to exceed approximately $2,500,000 in aggregate principal
amount may be issued to holders of Old Plan Disputed Claims. If additional Old
Series Notes are issued, the consideration distributed for each $1,000
principal amount of Old Series Notes will be reduced slightly.
2
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(COVER PAGE CONTINUED)
<TABLE>
<S> <C> <C>
Litigation Trust or to the proceeds of the 1993 sale of a .63 acre tract
of land on Paradise Island, The Bahamas and (3) any portion of the SIHL
Aggregate Cash Purchase Price;
-- The non-transferable right to receive a pro rata share of Net Reserved
Cash and Net Plan Consummation Cash. "Net Reserved Cash" means the
amount of the Reserved Cash in excess of that required to fund or
received pursuant to certain adjustments under either the Paradise
Island Purchase Agreement or the PIRL Standby Distribution Agreement,
as the case may be, together with interest thereon at the average rate
of return received by RII and its subsidiaries on invested cash from
the Effective Date to but excluding the Distribution Date. "Net Plan
Consummation Cash" means the amount of Plan Consummation Cash in excess
of that required to pay Plan Expenses, together with interest thereon
at the average rate of return received by RII and its subsidiaries on
invested cash from the Effective Date to but excluding the Distribution
Date; and
-- The non-transferable right to receive a pro rata share of payments of
Deferred Cash, which pro rata share is projected to be a minimum of $5.
"Deferred Cash" means the aggregate amount of distributions (the
"Litigation Trust Distributions") by the Litigation Trust from time to
time after the Effective Date in respect of units of beneficial
interest (the "Litigation Trust Units") in the Litigation Trust
currently owned by RII.
</TABLE>
Notwithstanding the foregoing, no fractional shares of New Equity Securities
will be issued on the Distribution Date. New RIHF Mortgage Notes and New RIHF
Junior Mortgage Notes will be issued only in denominations of $1,000 or integral
multiples thereof. Pursuant to the Plan, the disbursing agent for the holders of
Old Series Notes will aggregate and sell all fractional amounts of New Equity
Securities and New Debt Securities and distribute the net proceeds to the
holders of Old Series Notes entitled thereto.
If the SIHL Sale is consummated, assuming a reorganization enterprise value
of approximately $225 million for RII and a reorganization enterprise value for
SIHL of approximately $150 million, the estimated recovery for holders of Old
Series Notes is projected to be approximately 70% of the principal amount of the
Old Series Notes outstanding on October 15, 1993. If the SIHL Sale is not
consummated and the PIRL Spin-Off is effected, assuming a reorganization
enterprise value of approximately $225 million for RII and a reorganization
enterprise value of PIRL of approximately $125 million, the estimated recovery
for holders of the Old Series Notes is projected to be approximately 70% of the
principal amount of the Old Series Notes outstanding on October 15, 1993. There
can be no assurance that the assumed reorganization enterprise values of RII, of
SIHL in the event of the SIHL Sale or of PIRL in the event of the PIRL Spin-Off
will be realized. The estimated reorganization enterprise value of SIHL and PIRL
is premised primarily on the implied value associated with the proposed SIHL
Sale. In the event the SIHL Sale is not consummated, and depending on the
reasons for such non-consummation, the estimated reorganization enterprise value
of PIRL could be lower by a material amount. See "The Restructuring --
Reorganization Values".
The "Distribution Date" for any claim that is an Allowed Claim on the
Effective Date will be the Effective Date or as soon thereafter as practicable,
but in no event later than 20 days after the Effective Date (except as described
below). For any claim that is a Disputed Claim on the Effective Date, the
Distribution Date will be the date as soon as practicable, but in no event later
than 30 days after the date upon which such claim becomes an Allowed Claim.
Notwithstanding the foregoing, the Distribution Date with respect to
distribution to the disbursing agent for holders of Old Series Notes is as
follows: (a) for distribution of the SIHL Aggregate Cash Purchase Price, the New
Debt Securities and the New Equity Securities, the Effective Date; (b) for
payments of Net Reserved Cash, as soon as practicable after the Effective Date,
but in no event later than 90 days after the Effective Date; (c) for payments of
Net Plan Consummation Cash, as soon as practicable but no later than 90 days
after the
3
<PAGE>
(COVER PAGE CONTINUED)
Effective Date; provided, however, that if all Plan Expenses have not been paid
by the 90th day after the Effective Date, RII and GRI may continue to hold back
for an additional 60 days the portion of Net Plan Consummation Cash deemed by
the Bankruptcy Court to be necessary to satisfy remaining Plan Expenses, after
which time the remaining Net Plan Consummation Cash shall be distributed, unless
otherwise ordered by the Bankruptcy Court; (d) for payments of Deferred Cash,
within three business days after receipt by RII of the Litigation Trust
Distributions in immediately available funds; and (e) for payments of Excess
Cash, the Effective Date or as soon thereafter as is practicable, but in no
event later than 20 days after the Effective Date. Distributions will be made by
the Disbursing Agent only to holders of Old Series Notes that comply with the
procedures for surrender of Old Series Notes set forth in section 6.11.5 of the
Plan.
On the Effective Date, the Company will establish a separate account for
Plan Consummation Cash and Reserved Cash. The cash contained in this account
will only be used to pay Plan Expenses and to fund adjustments under either the
Paradise Island Purchase Agreement or the PIRL Standby Distribution Agreement.
Such cash will not be commingled with RII Retained Cash.
Existing holders of RII Common Stock and of 1990 Stock Options will be
impaired by the Plan. Generally, a claim or interest is impaired under a plan of
reorganization if the plan provides that such claim or interest will not be
repaid in full or that the legal, equitable or contractual rights of the holder
of such claim or interest will be altered. Only classes of claims or interests
that are impaired are entitled to vote on the Plan.
Pursuant to the Plan, each holder of RII Common Stock will retain its shares
of RII Common Stock and each holder of 1990 Stock Options will retain his or her
stock options. As a result of the issuance of the shares of RII Common Stock and
RII Class B Common Stock to the holders of the Old Series Notes, the issuance of
Griffin Warrants and the issuance of options to be granted pursuant to the 1994
Stock Option Plan, the resulting ownership interest in RII represented by the
currently outstanding shares of RII Common Stock and the currently outstanding
1990 Stock Options will be substantially diluted and, therefore, the holders of
such equity interests will be impaired within the meaning of the Bankruptcy
Code.
All intercompany claims against GRI will be resolved pursuant to the Plan.
The intercompany claims against GRI consist of the intercompany debt obligations
owing from GRI to RII (the "RII Intercompany Claim"). The RII Intercompany Claim
against GRI will be impaired by the Plan. Pursuant to the Plan, RII will
contribute the RII Intercompany Claim to the capital of GRI. RII has agreed to
vote for the Plan in respect of the RII Intercompany Claim.
Also, as a result of the Plan, RII's equity interest in GRI, as the holder
of all the outstanding GRI Common Stock, will be impaired. RII has agreed to
vote for the Plan in respect of its equity interest in GRI.
SIHL SALE. SIHL, a corporation not affiliated with RII, was incorporated in
the Commonwealth of The Bahamas in 1993 for the purpose of acquiring the
Paradise Island Business pursuant to the terms of the Paradise Island Purchase
Agreement. Pursuant to the Paradise Island Purchase Agreement, in exchange for
2,000,000 SIHL Series A Shares, representing 40% of the capital stock of SIHL to
be outstanding after the SIHL Sale, and $65,000,000 in cash plus interest
thereon at an annual rate of 7.5% from January 1, 1994 to the SIHL Closing Date
(the "SIHL Aggregate Cash Purchase Price"), SIHL (i) will purchase from RII all
the capital stock of RIB and (ii) directly or through subsidiaries of SIHL will
purchase substantially all the assets of the U.S. Paradise Island Subsidiaries
and the RII Real Estate Assets, and will assume substantially all the
non-intercompany liabilities relating to such assets. If the SIHL Sale is
consummated on the Effective Date, the 2,000,000 SIHL Series A Shares and the
SIHL Aggregate Cash Purchase Price will be distributed, as described above, to
the disbursing agent on behalf of the holders of the Old Series Notes pursuant
to the Plan. The remaining 60% of the capital stock of SIHL will be owned by Sun
International Investments Limited ("SIIL"), which 60%
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equity interest in SIHL will be purchased by SIIL from SIHL for $90,000,000 plus
interest at an annual rate of 7.5% on $65,000,000 from January 1, 1994 (the
"SIIL Subscription Amount") on or prior to the SIHL Closing Date. SIHL will use
$65,000,000 of the SIIL Subscription Amount plus interest at 7.5% per year from
January 1, 1994, to fund the SIHL Aggregate Cash Purchase Price; the remaining
$25,000,000 of the SIIL Subscription Amount will, as of the Effective Date,
remain in SIHL. RII understands that the portion of the SIIL Subscription Amount
which remains in SIHL ($25,000,000) will be used by SIHL to fund a capital
expenditure and redevelopment program for the Paradise Island Business. The
$25,000,000 of the SIIL Subscription Amount which remains in SIHL will increase
the equity value of SIHL and, in effect, represents additional consideration in
the amount of $10,000,000 (40% of $25,000,000) for the sale of the Paradise
Island Business. Such consideration is realized by the holders of the Old Series
Notes through the increased value of the 40% equity interest in SIHL to be
distributed to such holders in the form of the SIHL Series A Shares. The holder
of each SIHL Series A Share will be entitled to sell, and require SIHL to
purchase on the fifth anniversary of the consummation of the SIHL Sale, such
SIHL Series A Share at a price equal to $35 per share (the "Put Right"). SIHL
has pledged its 60% equity interest in SIHL to secure its obligation to make
such purchase.
Under certain circumstances set forth in the Paradise Island Purchase
Agreement, RIB will transfer the outstanding capital stock of BDL (the "BDL
Shares") to a U.S. Paradise Island Subsidiary prior to the SIHL Closing Date. If
such a transfer occurs, such U.S. Paradise Island Subsidiary will grant an
option to RIB to purchase the BDL Shares for $1.00 following the SIHL Sale (the
"SIHL BDL Option").
In conjunction with the proposed SIHL Sale, RII placed $4,000,000 in escrow
to fund, if necessary, any obligations of RII under the Paradise Island Purchase
Agreement to reimburse SIHL for its reasonable out-of-pocket costs and expenses
incurred in connection with the proposed SIHL Sale in the event of certain
termination events identified in the Paradise Island Purchase Agreement (the
"SIHL Buyer Expense Escrow"). Also in conjunction with the proposed SIHL Sale,
SIHL placed $5,000,000 in escrow to secure SIHL's obligations under the Paradise
Island Purchase Agreement (the "SIHL Escrow"). For a further description of the
material terms of the Paradise Island Purchase Agreement, see "Description of
Paradise Island Purchase Agreement".
FOR INFORMATION WITH RESPECT TO SIHL, THE SIHL SALE, THE PARADISE ISLAND
PURCHASE AGREEMENT AND THE SIHL SERIES A SHARES, REFERENCE IS MADE TO THE
ACCOMPANYING PROSPECTUS OF SIHL RELATING TO THE SIHL SERIES A SHARES (THE "SIHL
PROSPECTUS"). RII HAS SUPPLIED CERTAIN INFORMATION REGARDING THE PARADISE ISLAND
BUSINESS (SUCH AS IS FOUND IN RII'S REPORTS FILED WITH THE COMMISSION), AS WELL
AS CERTAIN INFORMATION CONCERNING THE RESTRUCTURING, TO SIHL SPECIFICALLY FOR
ITS USE IN THE PREPARATION OF THE SIHL PROSPECTUS (AND THE RELATED REGISTRATION
STATEMENT FILED BY SIHL WITH THE COMMISSION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED). RII AND ITS ADVISERS DISCLAIM ANY RESPONSIBILITY FOR THE ACCURACY,
COMPLETENESS, NATURE AND FORM OF PRESENTATION OF ANY INFORMATION CONTAINED IN
THE SIHL PROSPECTUS (AND RELATED REGISTRATION STATEMENT), EXCEPT THAT RII HAS
MADE IN THE PARADISE ISLAND PURCHASE AGREEMENT CERTAIN REPRESENTATIONS AND
WARRANTIES TO SIHL AS TO THE ACCURACY OF THE INFORMATION SUPPLIED BY RII
SPECIFICALLY FOR INCLUSION IN THE SIHL PROSPECTUS (AND RELATED REGISTRATION
STATEMENT).
PIRL SPIN-OFF. PIRL, a wholly owned subsidiary of RII, was incorporated in
the Commonwealth of The Bahamas in 1993 for the purpose of acquiring the
Paradise Island Business pursuant to the terms of the PIRL Standby Distribution
Agreement if the SIHL Sale is not consummated on or before the Effective Date.
The closing under the PIRL Standby Distribution Agreement is subject to the
satisfaction or waiver of certain conditions precedent. Pursuant to the PIRL
Standby Distribution
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Agreement, in exchange for 5,000,000 PIRL Ordinary Shares, representing 100% of
the PIRL Ordinary Shares to be outstanding after the PIRL Spin-Off, (i) PIRL
will purchase from RII all the capital stock of RIB and (ii) subsidiaries of
PIRL will purchase substantially all the assets of the U.S. Paradise Island
Subsidiaries and the RII Real Estate Assets, and will assume substantially all
the non-intercompany liabilities relating to such assets. If the PIRL Spin-Off
is consummated on the Effective Date, all of the PIRL Ordinary Shares will be
distributed, as described above, to the holders of the Old Series Notes pursuant
to the Plan. Under certain circumstances set forth in the PIRL Standby
Distribution Agreement, RIB will transfer the BDL Shares to a U.S. Paradise
Island Subsidiary prior to the closing of the PIRL Spin-Off. If such a transfer
occurs, such U.S. Paradise Island Subsidiary will grant an option to RIB to
purchase the BDL Shares for $1.00 following the PIRL Spin-Off (the "PIRL BDL
Option"). For a further description of the material terms of the PIRL Spin-Off
and the PIRL Standby Distribution Agreement, see "Description of PIRL Standby
Distribution Agreement". For a discussion of the risks associated with the PIRL
Spin-Off, see "Risk Factors -- Risks Associated with the Paradise Island
Business".
RIHF SENIOR FACILITY. As part of the implementation of the Restructuring
and prior to the commencement of the Solicitation, various funds and accounts
that hold Old Series Notes and are advised and managed by Fidelity Management &
Research Company ("Fidelity"), will deliver a commitment letter to the effect
that they will enter into a senior secured note purchase agreement with RIHF
(the "RIHF Senior Facility") on the Effective Date. The RIHF Senior Facility
will allow RIHF to borrow up to $20,000,000 through the issuance notes issued
under the RIHF Senior Facility (the "RIHF Senior Facility Notes"). Any amount
borrowed by RIHF under the RIHF 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. Any borrowings under the
RIHF Senior Facility will be subject to the prior approval of the New Jersey
Casino Control Commission (the "Casino Control Commission") as to amount and use
of proceeds. All principal payments on the RIHF Senior Facility Notes will be
due July 15, 2002. Interest on the RIHF Senior Facility Notes will accrue at the
rate of 11% per year and will be payable in cash, semi-annually on January 15
and July 15 of each year, commencing on the January 15 or July 15 next following
the date of the initial borrowing under the RIHF Senior Facility. The RIHF
Senior Facility will be available for a single borrowing during the one-year
period from the Effective Date, provided that, among other conditions, the
public resale of the RIHF Senior Facility Notes by the purchasers thereof upon a
resale is registered under the Securities Act of 1933, as amended (the
"Securities Act"), and the indenture (the "RIHF Senior Facility Note Indenture")
has been qualified under the Trust Indenture Act of 1939, (the "TIA"). The RIHF
Senior Facility Notes and the RIH Senior Facility Guaranty are not included
among the securities registered under the Registration Statement, nor has the
RIHF Senior Facility Note Indenture yet been qualified under the TIA. Any public
offering of the RIHF Senior Facility Notes and RIH Senior Facility Guaranty will
be made only by means of a prospectus pursuant to a separate registration
statement to be filed by RIHF, RIH and RII under the Securities Act. Information
concerning the RIHF Senior Facility is included in this Information
Statement/Prospectus because execution of the RIHF Senior Facility and related
documents and instruments is a condition precedent to the Effective Date of the
Plan. Any borrowings under the RIHF Senior Facility will be subject to the prior
approval of the Casino Control Commission as to amount and use of proceeds.
All principal payments on the RIHF Senior Facility Notes will be due July
15, 2002. Interest on the RIHF Senior Facility Notes will accrue at the rate of
11% per year and will be payable in cash, semi-annually on January 15 and July
15 of each year, commencing on the January 15 or July 15 next following the date
of the initial borrowing under the RIHF Senior Facility. Although the RIHF
Senior Facility Notes are not contractually senior to the New RIHF Mortgage
Notes or the New RIHF Junior Mortgage Notes as to priority of payment, the liens
securing payment of the RIHF Senior Facility Notes will be senior to the liens
securing payment of the New RIHF Mortgage Notes and the New RIHF Junior Mortgage
Notes, and the RIHF Senior Facility Notes therefore are structurally senior to
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the New RIHF Mortgage Notes and the New RIHF Junior Mortgage Notes. The RIHF
Senior Facility Notes will be secured by (i) an assignment of a promissory note
of RIH (the "RIH Senior Facility 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 RIHF Senior Facility Notes which note will be 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"), (ii) a pledge by GRI to
the RIHF Senior Facility Trustee (the "GRI Stock Pledge Agreement") of all of
the issued and outstanding capital stock of RIH (the "RIH Shares"), and (iii) a
pledge by RII to the RIHF Senior Facility Trustee (the "RII Stock Pledge
Agreement"; the GRI Stock Pledge Agreement and the RII Stock Pledge Agreement
collectively are referred to as the "Pledge Agreements") of all of the issued
and outstanding capital stock of RIHF and GRI. The shares pledged pursuant to
the Pledge Agreements collectively are referred to as the "Pledged Shares". The
RIH Senior Facility Note and the Resorts Casino Hotel collectively are referred
to as the "RIHF Senior Facility Trust Estate". The Resorts Casino Hotel is
owned, and the liens will be granted, by RIH. In addition, RIH will issue a
guaranty (the "RIH Senior Facility Guaranty") of the payment of principal of and
interest on the RIHF Senior Facility Notes, which guaranty will be secured by a
lien on the Resorts Casino Hotel. The liens on the Resorts Casino Hotel securing
the payment of the RIH Senior Facility Note and the RIH Senior Facility Guaranty
will be senior to the liens securing the payment of the RIH Promissory Note, the
RIH Mortgage Guaranty, the RIH Junior Promissory Note and the RIH Junior
Mortgage Guaranty. RII also will issue a guaranty (the "RII Senior Facility
Guaranty") of the payment of principal and interest on the RIHF Senior Facility
Notes, which will be secured by the RII Stock Pledge Agreement.
NEW RIHF MORTGAGE NOTES. Interest on the New RIHF Mortgage Notes will
accrue from the Effective Date at the rate of 11% per year and will be payable
in cash, semi-annually on March 15 and September 15 of each year, commencing on
the March 15 or September 15 next following the Effective Date. See "Description
of New RIHF Mortgage Notes." The New RIHF Mortgage Notes will be 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 New RIHF Mortgage Notes,
which note will be secured by a lien on the Resorts Casino Hotel. The RIH
Promissory Note and the Resorts Casino Hotel collectively are referred to as the
"New RIHF Mortgage Trust Estate". In addition, RIH will issue the RIH Mortgage
Guaranty of the payment of principal of and interest on the New RIHF Mortgage
Notes, secured by a lien on the Resorts Casino Hotel. Although the New RIHF
Mortgage Notes are not contractually subordinated to the RIHF Senior Facility
Notes as to priority of payment, the lien securing the New RIHF Mortgage Notes
is junior to the lien securing the RIHF Senior Facility Notes, and the New RIHF
Mortgage Notes therefore are structurally subordinated to the RIHF Senior
Facility Notes. The liens on the Resorts Casino Hotel securing the payment of
the RIH Promissory Note and the RIH Mortgage Guaranty will be junior to the
liens securing payment of the RIH Senior Facility Note and the RIH Senior
Facility Guaranty and senior to the liens securing payment of the RIH Junior
Promissory Note and the RIH Junior Mortgage Guaranty.
NEW RIHF JUNIOR MORTGAGE NOTES. Interest on the New RIHF Junior Mortgage
Notes will accrue from the Effective Date at the rate of 11.375% per year and
will be payable in cash or, at RIHF's option and subject to certain limitations,
additional Units comprised of New RIHF Junior Mortgage Notes and RII Class B
Common Stock, semi-annually on June 15 and December 15 of each year, commencing
on the June 15 and December 15 next following the Effective Date. See
"Description of New RIHF 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 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 New RIHF
Junior Mortgage Notes, RII will redeem, at $0.01, the one share of RII Class B
Common Stock issued as a Unit with each $1,000
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principal amount of New RIHF Junior Mortgage Notes. THE NEW RIHF JUNIOR MORTGAGE
NOTES AND THE RII CLASS B COMMON STOCK COMPRISING THE UNITS MAY NOT BE
TRANSFERRED SEPARATELY. The New RIHF Junior Mortgage Notes will be 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 New RIHF Junior Mortgage
Notes, which note will be 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 "New RIHF Junior Mortgage Trust Estate". In addition, RIH will issue the
RIH Junior Mortgage Guaranty of the payment of principal of and interest on the
New RIHF Junior Mortgage Notes, secured by a lien on the Resorts Casino Hotel.
Although the New RIHF Junior Mortgage Notes are not contractually subordinated
to the RIHF Senior Facility Notes or the New RIHF Mortgage Notes as to priority
of payment, the lien securing the New RIHF Junior Mortgage Notes is junior to
the liens securing the RIHF Senior Facility Notes and the New RIHF Mortgage
Notes, and the New RIHF Junior Mortgage Notes therefore are structurally
subordinated to the RIHF Senior Facility Notes and the New RIHF Mortgage Notes.
The liens on the Resorts Casino Hotel securing the payment of the RIH Junior
Promissory Note and the RIH Junior Mortgage Guaranty will be junior to the liens
securing payment of the RIH Senior Facility Note, the RIH Senior Facility
Guaranty, the RIH Promissory Note and the RIH Mortgage Guaranty.
GRIFFIN GROUP TRANSACTIONS. The Griffin Group, Inc., a company controlled
by Merv Griffin (the "Griffin Group"), entered into a License and Services
Agreement in April 1993, but dated and effective as of September 17, 1992 (as
amended, the "New Griffin Services Agreement"), with RII and RIH. On September
17, 1993, RII paid $2,205,000 to the Griffin Group for the third year of the New
Griffin Services Agreement, by reducing the principal amount of a $7,523,333
promissory note issued by the Griffin Group to RII (the "Griffin Group Note") in
an equal amount. On or prior to the Effective Date, RII will pay $2,310,000 to
the Griffin Group for the fourth year of the New Griffin Services Agreement also
by reducing the principal amount of the Griffin Group Note in an equal amount.
After payment of the $2,310,000 referenced above, but no later than the
Effective Date, the Griffin Group will pay RII the then remaining balance of the
Griffin Group Note (approximately $3,000,000) plus accrued interest. RII will
distribute the proceeds of such payment to the holders of the Old Series Notes
as part of Excess Cash. Payment in full of the outstanding amounts under the
Griffin Group Note is a condition to consummation of the Plan.
The New Griffin Services Agreement also provides that, as additional
compensation pursuant to the New Griffin Services Agreement, RII will issue
warrants (the "Griffin Warrants") to the Griffin Group to purchase 4,665,000
shares of RII Common Stock, or approximately 10% of the RII Common Stock on a
fully diluted basis. The Griffin Warrants will be exercisable on the Effective
Date at an exercise price of the lesser of $1.875 and the average closing price
of RII Common Stock for the 20 trading days following the Effective Date.
TERMINATION AND RELEASE OF THE OLD SECURITY DOCUMENTS. RII is soliciting
the consents of the record holders of outstanding Old Series Notes pursuant to
the terms of the indenture under which the Old Series Notes were issued (the
"Old Series Note Indenture") to terminate and release the Old Security Documents
under which the liens on the property, including the Resorts Casino Hotel, the
RIB Stock and the RIB Collateral, securing the Old Series Notes were granted or
created. Such consents will terminate and release the Old Security Documents and
will release the parties to the Old Security Documents from all obligations
thereunder. Such consents must be evidenced by such record holders separately
from their vote on the Plan. The ballots for the holders of Old Series Notes
permit holders to give or withhold such consent. ANY EXECUTED BALLOT OF A HOLDER
OF OLD SERIES NOTES RETURNED WITHOUT AN INDICATION TO WITHHOLD SUCH CONSENT WILL
BE DEEMED TO GIVE SUCH CONSENT.
RII is requesting the consents for the purposes of: (i) releasing the
Resorts Casino Hotel from the liens of the Old Security Documents so that it may
be encumbered to secure the RIH Senior Facility Note, the RIH Senior Facility
Guaranty, the RIH Promissory Note, the RIH Mortgage Guaranty, the
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RIH Junior Promissory Note and the RIH Junior Mortgage Guaranty in connection
with the Restructuring; (ii) releasing all of the assets and capital stock of
RIB and the U.S. Paradise Island Subsidiaries to effect either the SIHL Sale or
the PIRL Spin-Off; and (iii) releasing the Non-Operating Real Property from the
liens of the Old Security Documents. Absent a release of the Old Security
Documents either through consent or an appropriate Bankruptcy Court order, the
transactions contemplated by the Plan cannot be consummated because RII will be
unable to pledge the requisite collateral for repayment of the New Debt
Securities and the RIHF Senior Facility or to effect either the SIHL Sale or the
PIRL Spin-Off. In no event will the consents to release the Old Security
Documents be used to effectuate the termination and release of the Old Security
Documents in the absence of the confirmation and consummation of the Plan. If
RII and GRI fail to receive the Requisite Acceptances, notwithstanding receipt
of sufficient consents to release and terminate the Old Security Documents
pursuant to the Old Series Note Indenture, such consents will only be used in
the event that RII and GRI continue to pursue confirmation and consummation of
the Plan. In the event that RII and GRI elect or are required to resolicit
Acceptances of the Plan, however, they reserve the right not to resolicit with
respect to the consents to release the Old Security Documents and to use
consents received from the initial Solicitation.
1994 STOCK OPTION PLAN. As part of the Restructuring, the 1990 Stock Option
Plan will be terminated and no further 1990 Stock Options will be issued.
Existing holders of 1990 Stock Options will retain their options under the Plan
and the exercise price for outstanding 1990 Stock Options will remain fixed at
the existing exercise price. In conjunction with the Restructuring, the Company
will implement as of the Effective Date a new senior management stock option
plan (the "1994 Stock Option Plan") for RII and its subsidiaries to attract,
retain and motivate their officers, directors and key employees. TO THE EXTENT
THAT SHAREHOLDER APPROVAL OF THE 1994 STOCK OPTION PLAN IS REQUIRED UNDER RULE
16B-3 PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE
"EXCHANGE ACT"), IF SUFFICIENT ACCEPTANCES ARE RECEIVED FROM HOLDERS OF RII
COMMON STOCK AND OLD SERIES NOTES (INCLUDING THE RELATED GRI GUARANTY), RII AND
GRI INTEND TO USE SUCH ACCEPTANCES, ALONG WITH THE CONFIRMATION ORDER, TO
CONSTITUTE APPROVAL OF THE 1994 STOCK OPTION PLAN IN COMPLIANCE WITH RULE 16B-3.
The form of the 1994 Stock Option Plan is attached as Exhibit C to the Plan.
POST-RESTRUCTURING RII BOARD OF DIRECTORS. Pursuant to the Restructuring, a
new classified Board of Directors of RII will be named. After the Restructuring,
the holders of the RII Common Stock, voting as a class, will be entitled to
elect four directors of RII and the holders of the RII Class B Common Stock,
voting as a class, will be entitled to elect two directors of RII (the "Class B
Directors"). Pursuant to the Plan, on the Effective Date the initial
post-Restructuring board of directors of RII will be composed of directors
designated by RII. If on more than six occasions (which need not be
consecutive), RIHF either (i) makes Payments-In-Kind in respect of the New RIHF
Junior Mortgage Notes or (ii) fails to make interest payments in respect of the
New RIHF Junior Mortgage Notes (the "Class B Triggering Event"), the holders of
the RII Class B Common Stock, voting as a class, will elect that number of
additional Class B Directors such that the total number of Class B Directors
will constitute, from time to time, a majority of the entire Board of Directors
of RII.
------------------------
OTHER THAN GRI, RII DOES NOT INTEND TO INCLUDE ANY OF ITS SUBSIDIARIES IN
THE BANKRUPTCY CASES, NOR DOES RII INTEND TO CAUSE ANY OF ITS SUBSIDIARIES TO
FILE ITS OWN BANKRUPTCY CASE. NEITHER RII NOR GRI CURRENTLY IS IN BANKRUPTCY.
The Old Series Notes and the RII Common Stock are traded on the American
Stock Exchange (the "AMEX"). The closing prices for the Old Series A Notes
(Symbol: RTG.A), the Old Series B Notes (Symbol: RTH.A), and the RII Common
Stock (Symbol: RT) on April 15, 1993 (the last trading day
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prior to RII's public announcement of the initial proposed terms of the
Restructuring) and January 28, 1994 (the last trading day prior to the date of
this Information Statement/Prospectus) for which closing prices were available,
were as follows:
<TABLE>
<CAPTION>
APRIL 15, JANUARY 28,
1993 1994
--------------- ---------------
<S> <C> <C>
Old Series A Notes (per $1,000 principal amount)....... $ 610.00 $ 712.50
Old Series B Notes (per $1,000 principal amount)....... 610.00 725.00
RII Common Stock (per share)........................... .8125 1.5625
</TABLE>
In this Information Statement/Prospectus, (i) the New RIHF Mortgage Notes
and the New RIHF Junior Mortgage Notes are sometimes referred to as the "New
Debt Securities" and (ii) the RII Common Stock issued on or after the Effective
Date pursuant the Plan, the RII Class B Common Stock and, if issued, the PIRL
Ordinary Shares are sometimes referred to as the "New Equity Securities".
The Company will apply to have the New RIHF Mortgage Notes, the Units
comprised of New RIHF Junior Mortgage Notes and the RII Class B Common Stock,
the RII Common Stock and (if issued) the PIRL Ordinary Shares listed on the
AMEX. It is a condition to consummation of the Plan that such securities be
listed on a national securities exchange or approved for quotation on the
National Association of Securities Dealers Automated Quotation ("Nasdaq")
National Market (subject to official notice of issuance). However, there can be
no assurance that an active trading market for any such securities will develop
on the AMEX, the Nasdaq National Market or otherwise, and no assurance can be
given as to the price at which any such securities might trade. The Company has
been informed that SIHL will apply to have the SIHL Series A Shares (if issued)
listed on the Nasdaq National Market. For information regarding the trading
market for the SIHL Series A Shares, see the accompanying SIHL Prospectus.
For the Plan to be confirmed, Acceptances must be received from the holders
of claims constituting at least 66 2/3% in principal amount and more than 50% in
number of the Allowed Claims in each impaired class of claims that votes to
accept or reject the Plan (the "Requisite Acceptances"). Although Acceptances
from holders of at least 66 2/3% in amount of the Allowed Interests in each
impaired class of interests that votes to accept or reject the Plan are
desirable, such Acceptances are not required as the Plan may be confirmed even
if an impaired class of interests votes to reject the Plan. See "The Plan --
Classification and Treatment of Claims and Interests". Pursuant to the
Bankruptcy Code, only votes to accept or reject the Plan, and not abstentions,
will be counted for purposes of determining acceptance or rejection of the Plan
by any impaired class of claims or interests. Therefore, the Plan could be
approved by any impaired class of claims with the affirmative vote of
significantly less than 66 2/3% in amount and 50% in number of the class of such
claims, or by any impaired class of interests with the affirmative vote of
significantly less than 66 2/3% in amount of the class of such interests.
IF THE REQUISITE ACCEPTANCES ARE OBTAINED, RII AND GRI CURRENTLY INTEND TO
COMMENCE CASES UNDER CHAPTER 11 OF THE BANKRUPTCY CODE IN THE UNITED STATES
BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE (THE "BANKRUPTCY COURT") AND TO
USE ALL OF THE ACCEPTANCES TO OBTAIN CONFIRMATION OF THE PLAN. IN ADDITION, RII
AND GRI RESERVE THE RIGHT TO USE THE ACCEPTANCES TO SEEK CONFIRMATION OF A PLAN
OF REORGANIZATION UNDER ANY OTHER CIRCUMSTANCE PERMITTED BY LAW, INCLUDING THE
FILING OF AN INVOLUNTARY BANKRUPTCY PETITION AGAINST RII AND GRI.
RII AND GRI RESERVE THE RIGHT TO WAIVE AT ANY TIME, WITHOUT NOTICE AND
WITHOUT LEAVE OF OR ORDER OF THE BANKRUPTCY COURT, ANY CONDITION TO CONFIRMATION
AND CONSUMMATION OF THE PLAN (SUBJECT IN EACH CASE TO THE APPROVAL OF FIDELITY
AND TCW SPECIAL CREDITS ("TCW"), SO LONG AS THE FUNDS AND ACCOUNTS MANAGED BY
EITHER OF THEM HOLD IN THE AGGREGATE AT LEAST 20% OF THE OUTSTANDING OLD SERIES
NOTES) OTHER THAN THE REQUIREMENT OF THE ENTRY OF AN ORDER OF THE BANKRUPTCY
COURT (THE "CONFIRMATION ORDER") CONFIRMING THE PLAN WHICH HAS NOT BEEN STAYED.
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THE SOLICITATION WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 15,
1994, UNLESS RII AND GRI, IN THEIR SOLE DISCRETION, EXTEND THE SOLICITATION TO A
LATER TIME AND DATE (SUCH DATE AND ANY EXTENSION THEREOF BEING REFERRED TO
HEREIN AS THE "VOTING DEADLINE"). THE SOLICITATION WIL NOT BE TERMINATED PRIOR
TO MARCH 15, 1994, UNLESS THE COMPANY IS REQUIRED TO SEEK IMMEDIATE PROTECTION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE AS A RESULT OF AN ACCELERATION OF THE
MATURITY OF THE OLD SERIES NOTES OR A FORECLOSURE UPON THE COLLATERAL SECURING
THE OLD SERIES NOTES.
RII and GRI can extend the Solicitation for that period of time necessary to
obtain the Requisite Acceptances. As a practical matter, however, without the
consent of SIHL and Fidelity and TCW (so long as the funds and accounts managed
by them hold in the aggregate at least 20% of the outstanding Old Series Notes),
the Solicitation cannot be extended beyond March 21, 1994, the date that chapter
11 cases must be filed (and the Solicitation thereby terminated) by RII and GRI
to avoid terminating SIHL's obligations under the Paradise Island Purchase
Agreement. In addition, if the Old Series Note Trustee accelerates the Old
Series Notes as a result of the default described in "Risk Factors -- Certain
Defaults" or if RII and GRI are unable to meet their payment obligations under
the Old Series Notes on April 15, 1994, foreclosure or other collection actions
may require RII and GRI to file chapter 11 cases and thereby terminate the
Solicitation. RII and GRI currently intend to extend the Solicitation only if
there is a likelihood that the extension will facilitate receipt of the
Requisite Acceptances and the Restructuring as proposed in the Plan is
achievable if the Solicitation is so extended.
Even if the Requisite Acceptances are obtained, the Plan will not be
consummated, and the Restructuring will not occur, unless the Plan is confirmed
as to both RII and GRI by the United States Bankruptcy Court or any court of
competent jurisdiction exercising jurisdiction over RII's and GRI's chapter 11
cases. There is no assurance that the Bankruptcy Court will confirm the Plan.
See "Risk Factors -- Certain Bankruptcy and Insolvency Considerations -- Certain
Risks of Non-Compliance with Confirmation Requirements". In addition, the Plan
is subject to the approval of the Casino Control Commission. See "Risk Factors
- -- New Jersey Regulatory Matters". The SIHL Sale and the PIRL Spin-Off are
subject also to the approval of the government of the Commonwealth of The
Bahamas. See "Risk Factors -- Risks Associated with the Paradise Island Business
- -- Bahamas Regulatory Matters". Finally, the Plan is subject to a number of
other conditions precedent to confirmation and to the Effective Date, including
but not limited to the requirements that the RIHF Senior Facility shall have
been executed and delivered and that an order of the Bankruptcy Court be entered
declaring that, as of the Effective Date, the Old Security Documents will be
deemed released and terminated. See "The Plan -- Conditions Precedent to
Confirmation and Consummation of the Plan". With the approval of Fidelity and
TCW, so long as the funds and accounts managed by either of them hold in the
aggregate at least 20% of the outstanding Old Series Notes, RII and GRI at any
time, without notice, without leave of or order of the Bankruptcy Court and
without any formal action other than proceeding to consummate the Plan, may
waive any condition precedent to confirmation or consummation of the Plan, other
than the condition requiring the entry of the Confirmation Order which has not
been stayed. As a practical matter, although the condition requiring the entry
of an order declaring that, as of the Effective Date, the Old Security Documents
shall be deemed released and terminated is waivable, the transactions
contemplated by the Plan cannot be consummated if the Old Security Documents are
not released and terminated. See "The Plan -- Conditions Precedent to
Confirmation and Consummation of the Plan". RII and GRI expressly reserve the
right, at any time and from time to time, to modify the terms of the
Solicitation or the Plan (subject to compliance with the requirements of section
1127 of the Bankruptcy Code and to the approval of Fidelity and TCW, so long as
the funds and accounts managed by either of them hold in the aggregate at least
20% of the outstanding Old Series Notes). See "The Plan -- Modifications of the
Plan".
11
<PAGE>
(COVER PAGE CONTINUED)
RII and GRI are soliciting Acceptances by means of ballots ("Ballots") and
master ballots ("Master Ballots"). Any holder of Old Series Notes (including the
related GRI Guaranty), RII Common Stock, GRI Common Stock, the RII Intercompany
Claim or 1990 Stock Options who wishes to vote with respect to the Plan should
complete and sign the applicable Ballot or Master Ballot in accordance with the
instructions set forth herein and return such Ballot or Master Ballot in
accordance with the instructions set forth therein. Ballots or Master Ballots
delivered to Hill and Knowlton (the "Solicitation Agent") may be withdrawn or
revoked, subject to the procedures described therein, at any time until the
Voting Deadline. Neither RII nor GRI intends to commence a case under chapter 11
of the Bankruptcy Code prior to the Voting Deadline, although either RII or GRI
may do so in its sole discretion. After the commencement of a case under the
Bankruptcy Code, Ballots and Master Ballots may be withdrawn or revoked only
with the approval of the Bankruptcy Court. Master Ballots are to be completed by
record holders, including nominees of beneficial owners of Old Series Notes or
RII Common Stock.
FIDELITY AND TCW SEPARATELY ADVISE AND MANAGE VARIOUS FUNDS AND ACCOUNTS
THAT AS OF THE VOTING RECORD DATE HELD IN THE AGGREGATE APPROXIMATELY
$308,833,000 PRINCIPAL AMOUNT OF THE OLD SERIES NOTES, OR APPROXIMATELY 64% OF
THE OUTSTANDING OLD SERIES NOTES. FIDELITY AND TCW HAVE ENGAGED IN EXTENSIVE
NEGOTIATIONS WITH RII AND GRI WITH RESPECT TO THE RESTRUCTURING, AND HAVE
AGREED, SUBJECT TO CERTAIN CONDITIONS, TO VOTE ALL OLD SERIES NOTES OWNED BY
FUNDS AND ACCOUNTS MANAGED BY THEM AS OF THE VOTING RECORD DATE FOR ACCEPTANCE
OF THE PLAN AND TO CONSENT TO THE TERMINATION AND RELEASE OF THE OLD SECURITY
DOCUMENTS IN CONNECTION THEREWITH.
MERV GRIFFIN, WHO HOLDS 4,398,115 SHARES OF RII COMMON STOCK, OR
APPROXIMATELY 21.82% OF THE OUTSTANDING RII COMMON STOCK, HAS AGREED TO VOTE FOR
ACCEPTANCE OF THE PLAN. IN CONNECTION WITH THE PLAN, THE NEW GRIFFIN SERVICES
AGREEMENT WILL REMAIN IN PLACE, $2,310,000 OF THE GRIFFIN GROUP NOTE BALANCE
WILL BE APPLIED TO THE NEXT PAYMENT DUE UNDER THE NEW GRIFFIN SERVICES
AGREEMENT, THE THEN REMAINING BALANCE OF THE GRIFFIN GROUP NOTE WILL BE PAID TO
RII AND THE GRIFFIN GROUP WILL RECEIVE THE GRIFFIN WARRANTS.
THE HOLDERS OF 1,307,300 1990 STOCK OPTIONS, OR APPROXIMATELY 74% OF THE
OUTSTANDING 1990 STOCK OPTIONS, HAVE AGREED TO VOTE FOR ACCEPTANCE OF THE PLAN.
RII HAS AGREED TO VOTE THE RII INTERCOMPANY CLAIM AND ITS EQUITY INTEREST IN
GRI FOR ACCEPTANCE OF THE PLAN.
THE BOARD OF DIRECTORS OF EACH OF RII AND GRI HAS UNANIMOUSLY APPROVED THE
RESTRUCTURING, THE PLAN AND THE SOLICITATION AND RECOMMENDS THAT ALL IMPAIRED
CREDITORS AND EQUITY INTEREST HOLDERS SUBMIT BALLOTS ACCEPTING THE PLAN AND, IF
APPLICABLE, CONSENTING TO THE RELEASE OF THE OLD SECURITY DOCUMENTS.
------------------------
NO APPRAISAL RIGHTS ARE AVAILABLE TO IMPAIRED CREDITORS
OR EQUITY INTEREST HOLDERS IN CONNECTION WITH THE PLAN.
------------------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE SECURITIES
AND INVOLVE A HIGH DEGREE OF RISK. THE RESTRUCTURING
DESCRIBED HEREIN WILL RESULT IN DILUTION TO HOLDERS OF
RII COMMON STOCK AND 1990 STOCK OPTIONS. SEE "RISK FACTORS".
------------------------
NEITHER THE TRANSACTIONS DESCRIBED HEREIN NOR THE SECURITIES
OFFERED HEREBY HAVE BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
12
<PAGE>
(COVER PAGE CONTINUED)
SUCH TRANSACTIONS OR UPON THE ACCURACY OR ADEQUACY OF THIS
INFORMATION STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
NEITHER THE NEW JERSEY CASINO CONTROL COMMISSION
NOR THE COMMONWEALTH OF THE BAHAMAS
HAS PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS INFORMATION STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
THIS INFORMATION STATEMENT/PROSPECTUS HAS NOT BEEN APPROVED BY THE
BANKRUPTCY COURT WITH RESPECT TO THE ADEQUACY OF THE
INFORMATION CONTAINED HEREIN. ONCE CHAPTER 11 CASES ARE
COMMENCED, RII AND GRI INTEND PROMPTLY TO SEEK AN ORDER OF THE
BANKRUPTCY COURT THAT THE SOLICITATION OF ACCEPTANCES TO THE PLAN
BY MEANS OF THIS INFORMATION STATEMENT/PROSPECTUS WAS IN
COMPLIANCE WITH SECTION 1126(B) OF THE BANKRUPTCY CODE.
------------------------
THIS INFORMATION STATEMENT/PROSPECTUS IS FIRST BEING MAILED ON OR ABOUT
FEBRUARY 1, 1994 TO HOLDERS OF OLD SERIES NOTES, RII COMMON STOCK AND 1990 STOCK
OPTIONS.
13
<PAGE>
AVAILABLE INFORMATION
RII, RIHF, RIH and PIRL (collectively, the "Registrants") have filed a
Registration Statement on Form S-4 (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 Information Statement/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 is subject to the informational requirements of the Exchange Act and, in
accordance therewith, files periodic reports and other information with the
Commission. If the SIHL Sale is consummated, SIHL will become subject to such
informational requirements. If the PIRL Spin-Off is effected, PIRL will become
subject to such informational requirements. After the issuance of the New Debt
Securities and the related RIH Mortgage Guaranty and RIH Junior Mortgage
Guaranty, RIH will become, and RIHF may become, subject to such informational
requirements. 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, 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 Old Series Notes and the RII Common Stock are listed on the AMEX, and
such reports and other information regarding RII 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.
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS INFORMATION STATEMENT/PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MAY NOT BE RELIED UPON. THIS
INFORMATION STATEMENT/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 INFORMATION
STATEMENT/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 RII OR ANY OF ITS SUBSIDIARIES OR IN THE INFORMATION CONTAINED HEREIN
SINCE THE DATE HEREOF.
------------------------
ENFORCEABILITY OF CIVIL LIABILITIES
If the PIRL Spin-Off is effected, PIRL will become a Bahamian holding
company, and all or a substantial portion of PIRL's assets may be located
outside the United States. PIRL has appointed The Prentice-Hall Corporation
System, Inc., 15 Columbus Circle, New York, New York, as its agent to receive
service of process with respect to any action brought against it in the United
States District Court for the Southern District of New York under the securities
laws of the United States or any State, or any action brought against it in the
Supreme Court of the State of New York in the County of New York under the
securities laws of New York State. However, it may be difficult for investors to
enforce outside the United States judgments against PIRL obtained in the United
States in any such actions, including actions predicated upon the civil
liability provisions of the United States Federal securities laws. In addition,
certain of the directors and officers of PIRL may be residents of The Bahamas,
and all or a substantial portion of the assets of such persons are or may be
located outside the United States. As a result, it may be difficult for
investors to effect service of process within the
14
<PAGE>
United States upon such persons, or to enforce against them judgments obtained
in United States courts, including judgments predicated upon the civil liability
provisions of the United States Federal securities laws. PIRL has been advised
by its Bahamian counsel, Harry B. Sands & Company, that there is uncertainty as
to whether the courts of The Bahamas would enforce (i) judgments of United
States courts obtained against PIRL or such persons predicated upon the civil
liability provisions of the United States Federal securities laws or (ii) in
original actions brought in The Bahamas, liabilities against PIRL or such
persons predicated upon the United States Federal securities laws.
------------------------
FOR INFORMATION WITH RESPECT TO SIHL, THE SIHL SALE, THE PARADISE ISLAND
PURCHASE AGREEMENT AND THE SIHL SERIES A SHARES, REFERENCE IS MADE TO THE
ACCOMPANYING SIHL PROSPECTUS RELATING TO THE SIHL SERIES A SHARES. RII HAS
SUPPLIED CERTAIN INFORMATION REGARDING THE PARADISE ISLAND BUSINESS (SUCH AS IS
FOUND IN RII'S REPORTS FILED WITH THE COMMISSION), AS WELL AS CERTAIN
INFORMATION CONCERNING THE RESTRUCTURING, TO SIHL SPECIFICALLY FOR ITS USE IN
THE PREPARATION OF THE SIHL PROSPECTUS (AND THE RELATED REGISTRATION STATEMENT
FILED BY SIHL WITH THE COMMISSION UNDER THE SECURITIES ACT). RII AND ITS
ADVISERS DISCLAIM ANY RESPONSIBILITY FOR THE ACCURACY, COMPLETENESS, NATURE AND
FORM OF PRESENTATION OF ANY INFORMATION CONTAINED IN THE SIHL PROSPECTUS (AND
RELATED REGISTRATION STATEMENT), EXCEPT THAT RII HAS MADE IN THE PARADISE ISLAND
PURCHASE AGREEMENT CERTAIN REPRESENTATIONS AND WARRANTIES TO SIHL AS TO THE
ACCURACY OF THE INFORMATION SUPPLIED BY RII SPECIFICALLY FOR INCLUSION IN THE
SIHL PROSPECTUS (AND RELATED REGISTRATION STATEMENT).
15
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TABLE OF CONTENTS
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AVAILABLE INFORMATION...................................................................................... 14
ENFORCEABILITY OF CIVIL LIABILITIES........................................................................ 14
INDEX OF CERTAIN DEFINED TERMS............................................................................. 22
SUMMARY.................................................................................................... 26
General.................................................................................................. 26
The Registrants.......................................................................................... 27
Pre-and Post-Restructuring Ownership Structures.......................................................... 28
Background of the Restructuring.......................................................................... 31
Financial Forecasts for the Company...................................................................... 34
The Restructuring........................................................................................ 35
The Plan................................................................................................. 40
Comparison of New RIHF Mortgage Notes and New RIHF Junior Mortgage Notes to Old Series Notes............. 50
Description of New Equity Securities..................................................................... 57
SIHL Series A Shares..................................................................................... 60
Voting Procedures........................................................................................ 60
Interests of Certain Persons in the Restructuring........................................................ 63
Solicitation Agent....................................................................................... 64
Other Elements of the Restructuring...................................................................... 65
Risk Factors............................................................................................. 68
Certain Federal Income Tax Considerations................................................................ 69
Summary Historical and Pro Forma Financial Data.......................................................... 69
Market Prices of Old Series Notes and RII Common Stock................................................... 72
Market and Trading....................................................................................... 72
RISK FACTORS............................................................................................... 73
Continuing High Leverage; Future Refinancings............................................................ 73
Recent Net Losses........................................................................................ 73
Lack of Market for New Debt Securities and New Equity Securities......................................... 74
Risks Relating to the Forecasts.......................................................................... 74
Interests of Certain Persons in the Restructuring........................................................ 75
Involvement of Merv Griffin.............................................................................. 76
Certain Federal Income Tax Considerations................................................................ 76
Certain Bankruptcy and Insolvency Considerations......................................................... 78
Certain Considerations Related to Original Issue Discount in the Event of Subsequent Bankruptcy.......... 84
Additional Senior Secured Debt; Subordination............................................................ 85
Security for the New RIHF Mortgage Notes and the New RIHF Junior Mortgage Notes.......................... 85
Fidelity and TCW Not Fiduciaries......................................................................... 85
Competition.............................................................................................. 86
New Jersey Regulatory Matters............................................................................ 87
Potential Disqualification of Holders by the Casino Control Commission................................... 88
Certain Defaults......................................................................................... 88
Risks Associated with the Paradise Island Business....................................................... 90
Termination of Put Option................................................................................ 91
Differences Between the Terms of the New Debt Securities and the Old Series Notes........................ 91
Risk of Highly Leveraged Transaction..................................................................... 92
THE RESTRUCTURING.......................................................................................... 92
Background............................................................................................... 92
Financial Forecasts for the Company...................................................................... 97
Reorganization Values.................................................................................... 104
The Bondholders Support Agreement........................................................................ 107
Overview of the Restructuring............................................................................ 107
</TABLE>
16
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Certain Significant Effects of the Restructuring......................................................... 111
THE PLAN................................................................................................... 113
Brief Explanation of Chapter 11.......................................................................... 113
Solicitation of Acceptances of the Plan.................................................................. 113
Proponents of the Plan................................................................................... 114
Voting on the Plan....................................................................................... 114
Treatment of Trade Creditors and Employees............................................................... 115
Use of Cash for Operations............................................................................... 115
Other First Day Orders................................................................................... 116
Paradise Island Interim Order............................................................................ 116
Subsidiaries of RII...................................................................................... 117
Classification and Treatment of Claims and Interests..................................................... 118
Summary of Other Provisions of the Plan.................................................................. 125
Confirmation of the Plan................................................................................. 129
Conditions Precedent to Confirmation and Consummation of the Plan........................................ 134
Modifications of the Plan................................................................................ 135
Consent Rights of Fidelity and TCW....................................................................... 136
Alternatives to Consummation of the Plan................................................................. 136
Means for Implementation of the Plan..................................................................... 137
Effects of Plan Confirmation............................................................................. 148
THE SOLICITATION........................................................................................... 150
General.................................................................................................. 150
Persons Entitled to Vote; Voting Record Date............................................................. 150
Voting Deadline; Extensions; Modifications............................................................... 151
Agreements Upon Furnishing Ballots....................................................................... 151
Procedure for Voting on the Plan......................................................................... 151
Waivers of Defects, Irregularities, etc.................................................................. 154
Consents to Termination and Release of Old Security Documents............................................ 154
Withdrawal; Revocation Rights............................................................................ 154
Termination.............................................................................................. 155
Fees and Expenses........................................................................................ 155
Solicitation Agent....................................................................................... 155
Security Ownership of Certain Beneficial Owners and Management........................................... 156
Interests of Certain Persons in the Restructuring........................................................ 156
CAPITALIZATION OF RII...................................................................................... 158
CAPITALIZATION OF PIRL..................................................................................... 159
ACCOUNTING TREATMENT....................................................................................... 160
SELECTED HISTORICAL FINANCIAL DATA......................................................................... 161
RII...................................................................................................... 162
RIH...................................................................................................... 164
PIRL Group............................................................................................... 166
PRO FORMA FINANCIAL DATA................................................................................... 167
RIHF..................................................................................................... 167
RII...................................................................................................... 168
RIH...................................................................................................... 172
PIRL..................................................................................................... 175
MARKET PRICES OF OLD SERIES NOTES.......................................................................... 179
MARKET PRICES OF RII COMMON STOCK.......................................................................... 179
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................... 180
Financial Condition...................................................................................... 180
Results of Operations.................................................................................... 185
First Three Quarters 1993 Compared to First Three Quarters 1992.......................................... 185
</TABLE>
17
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Comparison of the Years 1992, 1991 and 1990.............................................................. 186
First Three Quarters 1993 Compared to First Three Quarters 1992.......................................... 188
Comparison of the Years 1992, 1991 and 1990.............................................................. 189
BUSINESS OF THE COMPANY.................................................................................... 194
Atlantic City............................................................................................ 194
The Bahamas.............................................................................................. 198
Airline Operations....................................................................................... 202
Foreign Operations....................................................................................... 202
Regulation and Gaming Taxes and Fees..................................................................... 203
The Company's Properties................................................................................. 206
MANAGEMENT OF RII.......................................................................................... 208
Directors and Executive Officers......................................................................... 208
Executive Compensation................................................................................... 210
MANAGEMENT OF GRI.......................................................................................... 214
MANAGEMENT OF RIHF......................................................................................... 215
Directors and Executive Officers......................................................................... 215
MANAGEMENT OF RIH.......................................................................................... 215
Directors and Executive Officers......................................................................... 215
Executive Compensation................................................................................... 216
MANAGEMENT OF PIRL......................................................................................... 218
Directors and Executive Officers......................................................................... 218
SECURITY OWNERSHIP......................................................................................... 219
Security Ownership of Certain Beneficial Owners.......................................................... 219
Security Ownership of Management......................................................................... 220
CERTAIN TRANSACTIONS....................................................................................... 220
Transactions with Management and Others.................................................................. 220
DESCRIPTION OF NEW RIHF MORTGAGE NOTES..................................................................... 221
General.................................................................................................. 221
Ranking.................................................................................................. 221
Interest................................................................................................. 221
Sinking Fund Requirements................................................................................ 221
Mandatory Redemption..................................................................................... 221
Optional Redemption...................................................................................... 221
Casino Control Act Regulation............................................................................ 222
Intercreditor Agreement.................................................................................. 222
Collateral............................................................................................... 222
Release of Collateral.................................................................................... 223
Limitations on Ability to Realize on Collateral.......................................................... 223
Guaranty................................................................................................. 224
Payments of Net Proceeds of Asset Sales.................................................................. 224
Covenants................................................................................................ 224
Events of Default........................................................................................ 229
Limitation on Consolidation, Merger, Conveyance, Transfer or Lease of Property and Assets................ 231
Discharge of New RIHF Mortgage Indenture; Defeasance..................................................... 233
Modification of Indenture................................................................................ 234
Trustee.................................................................................................. 234
Reports to Holders....................................................................................... 234
Certain Definitions...................................................................................... 235
DESCRIPTION OF NEW RIHF JUNIOR MORTGAGE NOTES.............................................................. 239
General.................................................................................................. 239
Ranking.................................................................................................. 240
Interest................................................................................................. 240
</TABLE>
18
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Sinking Fund Requirements................................................................................ 240
Mandatory Redemption..................................................................................... 240
Optional Redemption...................................................................................... 240
Limitation on Open-Market Purchases...................................................................... 241
Casino Control Act Regulation............................................................................ 241
Intercreditor Agreement.................................................................................. 241
Collateral............................................................................................... 241
Release of Collateral.................................................................................... 241
Limitations on Ability to Realize on Collateral.......................................................... 242
Guaranty................................................................................................. 242
Payments of Net Proceeds of Asset Sales.................................................................. 242
Covenants................................................................................................ 242
Events of Default........................................................................................ 247
Limitation on Consolidation, Merger, Conveyance, Transfer or Lease of Property and Assets................ 250
Discharge of New RIHF Junior Mortgage Note Indenture..................................................... 251
Modification of Indenture................................................................................ 251
Trustee.................................................................................................. 252
Reports to Holders....................................................................................... 252
Certain Definitions...................................................................................... 253
DESCRIPTION OF RIHF SENIOR FACILITY NOTES.................................................................. 257
General.................................................................................................. 257
Ranking.................................................................................................. 258
Interest................................................................................................. 258
Sinking Fund Requirements................................................................................ 258
Mandatory Redemption..................................................................................... 258
Optional Redemption...................................................................................... 258
Limitation on Open-Market Purchases...................................................................... 259
Casino Control Act Regulation............................................................................ 259
Intercreditor Agreement.................................................................................. 259
Collateral............................................................................................... 259
Release of Collateral.................................................................................... 259
Limitations on Ability to Realize on Collateral.......................................................... 260
Guaranty................................................................................................. 260
Payment of Net Proceeds from Asset Sales................................................................. 260
Covenants................................................................................................ 260
Events of Default........................................................................................ 264
Limitation on Consolidation, Merger, Conveyance, Transfer or Lease of Property and Assets................ 267
Discharge of RIHF Senior Facility Indenture; Defeasance.................................................. 268
Certain Definitions...................................................................................... 269
DESCRIPTION OF NEW EQUITY SECURITIES....................................................................... 273
General.................................................................................................. 273
Casino Control Act Regulation............................................................................ 273
Description of RII Common Stock.......................................................................... 273
Description of RII Class B Common Stock.................................................................. 274
Description of PIRL Ordinary Shares...................................................................... 274
DESCRIPTION OF PARADISE ISLAND PURCHASE AGREEMENT.......................................................... 275
General.................................................................................................. 275
Purchase and Sale of the Paradise Island Shares and the RII Paradise Assets.............................. 276
Representations and Warranties........................................................................... 276
Handling of Cash and Working Capital..................................................................... 277
Additional Agreements.................................................................................... 278
</TABLE>
19
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Termination.............................................................................................. 279
Transfer Taxes........................................................................................... 280
Amendment and Waivers.................................................................................... 280
Indemnification.......................................................................................... 280
DESCRIPTION OF PIRL STANDBY DISTRIBUTION AGREEMENT......................................................... 281
General.................................................................................................. 281
Purchase and Sale of the Shares and the U.S. Paradise Island Assets...................................... 281
RII Representations and Warranties....................................................................... 282
Handling of Cash and Working Capital..................................................................... 282
Additional Agreements.................................................................................... 283
Termination.............................................................................................. 284
Transfer Taxes........................................................................................... 284
Amendment and Waivers.................................................................................... 284
Indemnification.......................................................................................... 285
DESCRIPTION OF THE CAESARS PAYMENT......................................................................... 285
DESCRIPTION OF DEFERRED CASH............................................................................... 285
DESCRIPTION OF EXCESS CASH................................................................................. 285
DESCRIPTION OF LITIGATION TRUST UNITS...................................................................... 286
DESCRIPTION OF NET RESERVED CASH........................................................................... 287
DESCRIPTION OF NET PLAN CONSUMMATION CASH AND PLAN EXPENSES................................................ 287
DESCRIPTION OF GRIFFIN WARRANTS............................................................................ 288
General.................................................................................................. 288
Exercise of Griffin Warrants............................................................................. 288
Adjustments.............................................................................................. 288
Limitation on Right to Vote or Receive Dividends......................................................... 289
Certain Definitions...................................................................................... 289
DESCRIPTION OF OLD SERIES NOTES............................................................................ 291
Certain Terms of the Old Series A Notes.................................................................. 291
Certain Terms of the Old Series B Notes.................................................................. 291
Mandatory Redemption..................................................................................... 292
Optional Redemption...................................................................................... 292
Limitation on Open-Market Purchases...................................................................... 292
Casino Control Act Regulation............................................................................ 293
Put Option Upon Change of Control........................................................................ 293
Collateral............................................................................................... 293
Negative Pledge Covenant................................................................................. 294
Release and Substitution of Collateral................................................................... 295
Limitations on Ability to Realize on Collateral.......................................................... 295
Guaranty................................................................................................. 296
Ranking.................................................................................................. 296
Payment of Net Proceeds of Asset Sales................................................................... 296
Restrictive Covenants.................................................................................... 296
Events of Default........................................................................................ 297
Limitation on Mergers.................................................................................... 297
Discharge of Old Series Note Indenture; Defeasance....................................................... 298
Modification of Indenture................................................................................ 298
Trustee.................................................................................................. 298
Reports to Holders....................................................................................... 299
DESCRIPTION OF SHOWBOAT NOTES.............................................................................. 299
General.................................................................................................. 299
Interest................................................................................................. 299
Optional Redemption...................................................................................... 300
Casino Control Act Regulation............................................................................ 300
</TABLE>
20
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Collateral............................................................................................... 300
Certain Covenants........................................................................................ 301
Events of Default........................................................................................ 302
Modification of Indenture................................................................................ 302
Reports to Holders....................................................................................... 302
Limitation on Mergers.................................................................................... 303
Discharge of Showboat Note Indenture; Defeasance......................................................... 303
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS.................................................................. 303
Treatment of New Debt Securities as Debt of RIH for Federal Income Tax Purposes.......................... 305
Classification of New Debt Securities as Debt Rather Than Equity......................................... 305
Exchange of Old Series Notes............................................................................. 306
OID With Respect to the New Debt Securities.............................................................. 307
Consequences if the New Debt Securities are Issued with OID.............................................. 309
Consequences of the Rights to Receive Payments from Deferred Cash........................................ 310
Consequences of Rights to Receive Payments from Net Reserved Cash and Net Plan Consummation Cash......... 311
Consequences of Holding the RII Common Stock and the RII Class B Common Stock............................ 311
Consequences of Holding the PIRL Ordinary Shares......................................................... 311
Sale, Exchange or Redemption............................................................................. 312
Market Discount.......................................................................................... 313
Tax Consequences to the Company.......................................................................... 313
Potential Application of High Yield Debt Obligation Rules................................................ 317
Backup Withholding....................................................................................... 317
CERTAIN BAHAMIAN TAX CONSIDERATIONS........................................................................ 317
LITIGATION................................................................................................. 317
APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS TO RESALES OF SECURITIES................................ 318
Issuance of Securities Under the Plan.................................................................... 318
Transfers of Securities.................................................................................. 318
Certain Transactions by Stockbrokers..................................................................... 319
Shares Eligible for Future Sale.......................................................................... 320
LEGAL MATTERS.............................................................................................. 320
EXPERTS.................................................................................................... 320
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................................................... F-1
APPENDIX A -- Plan of Reorganization...................................................................... A-1
APPENDIX B -- Liquidation Analysis........................................................................ B-1
APPENDIX C -- Amended RII Certificate of Incorporation.................................................... C-1
APPENDIX D -- Amended RII By-laws.......................................................................... D-1
</TABLE>
21
<PAGE>
INDEX OF CERTAIN DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
<S> <C>
1990 Letter Ruling................... 314
1990 Stock Option Plan............... 1
1990 Stock Options................... 1
1994 Stock Option Plan............... 9
Acceptance........................... 1
Adjusted Working Capital............. 2
Acquisition Proposal................. 278
ACS.................................. 86
Administrative Claim................. 119
Allowed Claim........................ 118
Allowed Interest..................... 118
Alvarez & Marsal..................... 34
Amended RII By-laws.................. 65
Amended RII Certificate of
Incorporation....................... 65
AMEX................................. 9
AMT.................................. 103
Annual Limitation.................... 315
ANTL................................. 27
Available Cash....................... 2
Awards............................... 143
Ballots.............................. 12
Bankruptcy Code...................... 1
Bankruptcy Court..................... 10
Bankruptcy Exception................. 316
Bankruptcy Rules..................... 1
BDL.................................. 27
BDL Shares........................... 5
Bear Stearns......................... 33
Best Interests Test.................. 131
Board of Education................... 206
Bondholders Support Agreement........ 107
Caesars Payment...................... 2
Carnival............................. 32
Cash Collateral...................... 116
Cash Collateral Order................ 116
Casino Control Act................... 58
Casino Control Commission............ 6
CFC.................................. 312
Change of Control Put Option......... 293
Class B Directors.................... 9
Class B Triggering Event............. 9
Closing Date Balance Sheet........... 277
<CAPTION>
TERM PAGE
<S> <C>
Closing Date Operations Statement.... 277
COD.................................. 77
Collateral Account................... 51
Combination Transaction.............. 55
Commission........................... 14
Company.............................. 1
Comprehensive Services Agreement..... 31
Confirmation Date.................... 136
Confirmation Order................... 10
Consolidated Cash Flow............... 254
Counsel.............................. 303
CRDA................................. 101
Crystal Palace....................... 32
Development Expenditures............. 279
Deferred Cash........................ 3
Disbursing Agent..................... 138
Disputed Claim....................... 118
Disputed Interest.................... 118
disqualifying disposition............ 144
Distribution Date.................... 3
Distribution Record Date............. 2
DLJ.................................. 34
Effective Date....................... 2
Eligible Participants................ 141
ERISA................................ 145
Escrow Agent......................... 279
Escrow Agreement..................... 276
ESS.................................. 67
Excess Cash.......................... 2
Exchange............................. 77
Exchange Act......................... 9
Excluded Employees................... 279
executory contract................... 125
Feasibility Test..................... 130
Fidelity............................. 6
Final Order.......................... 147
Force Majeure Event.................. 280
FPHC................................. 312
GAAP................................. 290
Gaming Act........................... 90
Great Island Property................ 206
GRH.................................. 31
GRI.................................. 1
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
GRI Common Stock..................... 1
<S> <C>
GRI Guaranty......................... 1
GRI Pledge Agreement................. 53
GRI Priority Claim................... 124
GRI Releases......................... 94
GRI Release Shares................... 94
Griffco.............................. 31
Griffin Group........................ 8
Griffin Group Note................... 8
Griffin Note......................... 32
Griffin Warrants..................... 8
GRI Stock Pledge Agreement........... 7
Guidelines........................... 116
Hanlon Employment Agreement.......... 64
Hanlon Termination Agreement......... 64
HCB.................................. 33
Hill and Knowlton.................... 64
IHC.................................. 27
Incentive Option..................... 141
Indemnity Agreement.................. 213
Indenture Trustee Charging Liens..... 119
Information Statement/Prospectus..... 1
Insider.............................. 144
Intercontinental..................... 209
Intercreditor Agreement.............. 222
Interim Management Agreement......... 65
ISI.................................. 27
January Enterprises.................. 209
Liquidation Analysis................. 78
Litigation Claims.................... 286
Litigation Trust..................... 32
Litigation Trust Agreement........... 94
Litigation Trust Distributions....... 3
Litigation Trust Units............... 3
Litigation Trustee................... 32
Master Ballots....................... 12
MD&A................................. 180
Nasdaq............................... 10
Net Plan Consummation Cash........... 3
Net Reserved Cash.................... 3
New Debt Securities.................. 10
New Equity Securities................ 10
New Griffin Services Agreement....... 8
New Jersey bankruptcy court.......... 31
<CAPTION>
TERM PAGE
<S> <C>
New RIHF Junior Mortgage Indenture... 50
New RIHF Junior Mortgage Notes....... 2
New RIHF Junior Mortgage Note
Trustee............................. 239
New RIHF Junior Mortgage Trust
Estate.............................. 8
New RIHF Mortgage Indenture.......... 50
New RIHF Mortgage Notes.............. 2
New RIHF Mortgage Note Trustee....... 221
New RIHF Mortgage Trust Estate....... 7
NOL.................................. 77
Non-Operating Real Property.......... 27
NPO.................................. 67
Officers Supplemental Plan........... 94
OID.................................. 69
Old Chapter 11 Cases................. 31
Old Debtors.......................... 31
Old Effective Date................... 32
Old Griffin Services Agreement....... 67
Old PIK Payments..................... 33
Old Plan............................. 31
Old Plan Disputed Claims............. 94
Old RIH Mortgage..................... 53
Old Security Documents............... 53
Old Series A Notes................... 1
Old Series B Notes................... 1
Old Series Note Indenture............ 8
Old Series Notes..................... 1
Old Series Note Trustee.............. 53
Option Committee..................... 141
Overbid Transaction.................. 84
Paradise Approval Order.............. 134
Paradise Employee.................... 279
Paradise Island Agreements........... 201
Paradise Island Business............. 1
Paradise Island Interim Order........ 84
Paradise Island Purchase Agreement... 2
Paradise Island Resorts.............. 27
Paradise Island Shares............... 1
Payments-In-Kind..................... 7
PBI.................................. 27
PEL.................................. 27
Petition Date........................ 41
PFIC................................. 312
PIA.................................. 27
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
PIB.................................. 27
<S> <C>
PIL.................................. 27
PIRL................................. 1
PIRL BDL Option...................... 6
PIRL Ordinary Shares................. 2
PIRL Group........................... 69
PIRL Spin-Off........................ 1
PIRL Standby Distribution Agreement.. 2
PIVI................................. 27
Plan................................. 1
Plan Consummation Cash............... 2
Pledge Agreements.................... 7
Pledged Shares....................... 7
Post Termination Sale................ 283
Priority Tax Claim................... 119
Proposed Contingent Debt
Regulations......................... 310
PSS.................................. 27
Put Right............................ 5
QSIPs................................ 308
Qualified Third Party................ 278
Radisson............................. 33
Registrants.......................... 14
Registration Statement............... 14
Regulations.......................... 307
Requisite Acceptances................ 10
Reserved Cash........................ 2
Reset Notes.......................... 294
Resorts Casino Hotel................. 7
Restoration Event.................... 314
Restructuring........................ 1
RIB.................................. 1
RIB Collateral....................... 53
RIB Collateral Assignment Agreement.. 53
RIB Gain............................. 314
RIB Mortgage......................... 294
RIB Note............................. 294
RIB Property......................... 294
RIB Stock............................ 53
RIB Subsidiary Guarantors............ 294
RIB Subsidiary Guaranty Agreements... 294
RIDI................................. 27
RIFI................................. 31
RIFI Releases........................ 94
RIFI Release Cash.................... 94
<CAPTION>
TERM PAGE
<S> <C>
RIHF................................. 1
RIHF Senior Facility................. 6
RIHF Senior Facility Notes........... 6
RIHF Senior Facility Note
Indenture........................... 6
RIHF Senior Facility Trustee......... 257
RIHF Senior Facility Trust Estate.... 7
RIH.................................. 1
RIH Guaranty Mortgage................ 52
RIH Junior Guaranty Mortgage......... 52
RIH Junior Mortgage.................. 53
RIH Junior Mortgage Guaranty......... 2
RIH Junior Promissory Note........... 8
RIH Mortgage......................... 53
RIH Mortgage Guaranty................ 2
RIH Notes............................ 52
RIH Pledge Agreement................. 53
RIH Promissory Note.................. 7
RIH Senior Facility Guaranty......... 7
RIH Senior Facility Guaranty
Mortgage............................ 52
RIH Senior Facility Mortgage......... 259
RIH Senior Facility Note............. 7
RIH Shares........................... 7
RII.................................. 1
RII Board of Directors............... 58
RII Class B Common Stock............. 2
RII Common Stock..................... 1
RII Intercompany Claim............... 4
RII Mortgage......................... 53
RII Pledge Agreement................. 53
RII Priority Claim................... 120
RII Property......................... 52
RII Paradise Assets.................. 1
RII Pledged Shares................... 267
RII Real Estate Assets............... 1
RII Retained Cash.................... 2
RII Stock Pledge Agreement........... 7
RII Senior Facility Guaranty......... 7
RII's Escrowed Property.............. 279
RRII................................. 27
Rum Point............................ 206
Salomon Brothers..................... 33
Securities Act....................... 6
Service.............................. 77
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
Settlement Agreement................. 286
<S> <C>
SFAS 96.............................. 163
SFAS 109............................. 174
Showboat Casino...................... 86
Showboat Lease....................... 86
Showboat Mortgage.................... 300
Showboat Note Trustee................ 299
Showboat Notes....................... 32
Showboat Property.................... 300
SIHL................................. 1
SIHL Aggregate Cash Purchase Price... 4
SIHL BDL Option...................... 5
SIHL Buyer Expense Escrow............ 5
SIHL Closing Date.................... 2
SIHL Escrow.......................... 5
SIHL's Escrowed Property............. 279
SIHL Expense Reimbursement........... 278
SIHL Prospectus...................... 5
SIHL Sale............................ 1
SIHL Series A Shares................. 2
SIHL Subscription Agreement.......... 277
SIIL................................. 4
SIIL Subscription Agreement.......... 277
SIIL Subscription Amount............. 5
Solicitation......................... 1
<CAPTION>
TERM PAGE
<S> <C>
Solicitation Agent................... 12
SOP 90-7............................. 160
Taj Mahal............................ 86
Target Adjusted Cash................. 2
Tax Code............................. 69
TCW.................................. 10
TGC Holdings......................... 67
TIA.................................. 6
TIN.................................. 317
Trading Testing Period............... 308
Trump Parties........................ 286
Trump Partnership.................... 31
Trust Beneficiaries.................. 286
Union................................ 277
Union Contract Dispute............... 277
Union Contract Dispute Amount........ 277
Unit................................. 2
United States Holder................. 311
United States Trustee................ 125
Unsurrendered Public Debt Claims..... 93
U.S. Government Obligations.......... 268
U.S. Paradise Island Subsidiaries.... 27
Voting Deadline...................... 11
Voting Record Date................... 1
</TABLE>
25
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS CONTAINED ELSEWHERE IN THIS INFORMATION
STATEMENT/PROSPECTUS. CERTAIN TERMS USED IN THE FOLLOWING SUMMARY AND ELSEWHERE
IN THIS INFORMATION STATEMENT/PROSPECTUS ARE DEFINED ON THE COVER PAGE OF THIS
INFORMATION STATEMENT/PROSPECTUS.
GENERAL
RII and GRI, upon the terms and subject to the conditions set forth in this
Information Statement/Prospectus and the accompanying forms of Ballot and Master
Ballot, hereby solicit from (a) each owner of Old Series Notes (and the
beneficiary of the related GRI Guaranty endorsed thereon), (b) each owner of RII
Common Stock, (c) RII, as the owner of the GRI Common Stock, (d) RII, as the
holder of the RII Intercompany Claim against GRI, and (e) each holder of 1990
Stock Options, each as of the close of business in New York City on the Voting
Record Date (January 10, 1994), an Acceptance of the Plan of RII and GRI to be
filed pursuant to chapter 11 of the Bankruptcy Code and the Bankruptcy Rules.
From each holder of Old Series Notes (and beneficiary of the related GRI
Guaranty endorsed thereon), RII and GRI hereby solicit consents to terminate and
release the Old Security Documents so that certain of the collateral covered
thereby, including the Resorts Casino Hotel, the RIB Stock and the RIB
Collateral, can be pledged to secure the New Debt Securities and the RIHF Senior
Facility Notes and released to effect either the SIHL Sale or the PIRL Spin-Off.
Consummation of the Plan on the Effective Date will result in a
restructuring of RII's debt and equity capitalization in the manner described
below and the consummation of certain other transactions, including either the
SIHL Sale or the PIRL Spin-Off. See "The Restructuring".
The Solicitation will expire at 5:00 p.m., New York City time, on March 15,
1994, unless RII and GRI, in their sole discretion, extend the Solicitation to a
later time and date. RII and GRI can extend the Solicitation for that period of
time necessary to obtain the Requisite Acceptances. As a practical matter,
however, without the consent of SIHL and of Fidelity and TCW (so long as the
funds and accounts managed by them hold in the aggregate at least 20% of the
outstanding Old Series Notes), the Solicitation cannot be extended beyond March
21, 1994, the date that chapter 11 cases must be filed (and the Solicitation
thereby terminated) by RII and GRI to avoid terminating SIHL's obligations under
the Paradise Island Purchase Agreement. In addition, if the Old Series Note
Trustee accelerates the Old Series Notes as a result of the default described in
"Risk Factors -- Certain Defaults" or if RII and GRI are unable to meet their
payment obligations under the Old Series Notes on April 15, 1994, foreclosure or
other collection actions may require RII and GRI to file chapter 11 cases and
thereby terminate the Solicitation. RII and GRI currently intend to extend the
Solicitation only if there is a likelihood that the extension will facilitate
receipt of the Requisite Acceptances and the Restructuring as proposed in the
Plan is achievable if the Solicitation is so extended.
Even if the Requisite Acceptances are obtained, the Plan will not be
consummated, and the Restructuring will not occur, unless the Plan is confirmed
as to both RII and GRI by the Bankruptcy Court and certain other conditions are
satisfied. Subject to the approval of Fidelity and TCW, so long as the funds and
accounts managed by either of them hold in the aggregate at least 20% of the Old
Series Notes, RII and GRI at any time, without notice, without leave of or order
of the Bankruptcy Court and without any formal action other than proceeding to
consummate the Plan, may waive any condition precedent to confirmation or
consummation of the Plan, other than the condition requiring the entry of the
Confirmation Order which has not been stayed. As a practical matter, although
the condition to confirmation requiring the entry of an order declaring that, as
of the Effective Date, the Old Security Documents shall be deemed released and
terminated is waivable, the transactions contemplated by the Plan cannot be
consummated if the Old Security Documents are not released and terminated. See
"The Plan -- Conditions Precedent to Confirmation and Consummation of the Plan".
RII and GRI expressly reserve the right, at any time and from time to time, to
modify the terms of the
26
<PAGE>
Solicitation or the Plan (subject to compliance with the requirements of section
1127 of the Bankruptcy Code and to the approval of Fidelity and TCW, so long as
the funds and accounts managed by either of them hold in the aggregate at least
20% of the Old Series Notes). See "The Plan -- Modifications of the Plan".
EACH OF FIDELITY AND TCW, SOLELY ON BEHALF OF FUNDS AND ACCOUNTS MANAGED BY
THEM, HAS NEGOTIATED EXTENSIVELY WITH RII AND GRI REGARDING THE TERMS OF THE
RESTRUCTURING. All information contained in the Information Statement/Prospectus
other than information relating to the ownership of Old Series Notes by Fidelity
or TCW, or funds and accounts managed by either of them, was prepared and
furnished by RII and GRI. Fidelity and TCW are not responsible for the accuracy,
completeness, nature and form of presentation of such information other than
information related to the holdings respectively managed by Fidelity and TCW.
See "The Restructuring -- Background".
THE REGISTRANTS
RESORTS INTERNATIONAL, INC.
RII is a holding company which, through its subsidiaries, is principally
engaged in the ownership and operation of the Resorts Casino Hotel in Atlantic
City, New Jersey, and the Paradise Island Resort & Casino, the Ocean Club Golf &
Tennis Resort and the Paradise Paradise Beach Resort (collectively, the
"Paradise Island Resorts"), all located on Paradise Island, The Bahamas. In
addition, RII owns land in Atlantic City at various sites (the "Non-Operating
Real Property"), approximately 90 acres of which are available for development.
RII was incorporated in 1958 and is a Delaware corporation.
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
RIHF was incorporated in Delaware in 1993 for the purpose of issuing the New
RIHF Mortgage Notes and the New RIHF Junior Mortgage Notes pursuant to the Plan.
RIHF also will enter into the RIHF Senior Facility with Fidelity. RIHF is a
wholly owned subsidiary of RII.
RESORTS INTERNATIONAL HOTEL, INC.
RIH is the subsidiary of RII that 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 will issue the RIH Senior Facility
Guaranty, the RIH Mortgage Guaranty and the RIH Junior Mortgage Guaranty.
P. I. RESORTS LIMITED
PIRL, a wholly owned subsidiary of RII, was incorporated in the Commonwealth
of The Bahamas in 1993 for the purpose of effecting the PIRL Spin-Off if the
SIHL Sale is not consummated on or prior to the Effective Date. If the PIRL
Spin-Off is effected, then (a) PIRL will acquire from RII all the capital stock
of RIB and (b) subsidiaries of PIRL will purchase the RII Real Estate Assets and
substantially all the assets of (i) Resorts International Disbursement, Inc.
("RIDI"), (ii) Paradise Island Vacations, Inc. ("PIVI"), (iii) Resorts
Representation International, Inc. ("RRII"), (iv) International Suppliers, Inc.
("ISI"), (v) Paradise Island Airlines, Inc. ("PIA"), and (vi) ANTL, Inc.
("ANTL"), and will assume substantially all the non-intercompany liabilities
relating to such assets, in exchange for the PIRL Ordinary Shares. RIDI, PIVI,
RRII, ISI, PIA and ANTL are all Florida corporations and are herein called the
"U.S. Paradise Island Subsidiaries".
RIB is the holding company for the Paradise Island assets located in The
Bahamas, which are held in the following corporations organized under the laws
of the Commonwealth of The Bahamas: (a) Island Hotel Company Limited ("IHC");
(b) Paradise Enterprises Limited ("PEL"); (c) Paradise Island Bridge Management
Company Limited ("PIB"); (d) Paradise Island Limited ("PIL"); (e) Paradise Beach
Inn, Limited ("PBI"); (f) Paradise Security Services Limited ("PSS"); and (g)
Bahamas Developers Limited ("BDL"). On the date hereof, RIB is a subsidiary of
GRI. The Paradise Island Resort & Casino includes two hotel towers totaling
1,186 guest rooms, the 30,000 square-foot Paradise Island casino and related
facilities. The Ocean Club Golf & Tennis Resort
27
<PAGE>
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. RIB and its subsidiaries also own and operate convention
facilities, shops, restaurants, bars and lounges, tennis courts, an 18-hole golf
course, swimming pools, approximately six miles of beach and water frontage and
other resort facilities on Paradise Island. RIB and its subsidiaries also own
approximately 218 acres of land on Paradise Island not used in the operation of
the Paradise Island Resorts, approximately 1,675 acres on Grand Bahama Island
(currently owned by BDL) and approximately 561 acres on Andros Island. The
activities of the U.S. Paradise Island Subsidiaries support the operations of
the Paradise Island Resorts.
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. The principal executive offices of PIRL are located
at P.O. Box N-4777, Paradise Island, Nassau, The Bahamas. The telephone number
of PIRL is (809) 363-3000.
PRE-AND POST-RESTRUCTURING OWNERSHIP STRUCTURES
Set forth below is a chart summarizing the ownership structure of RII, GRI
and certain related entities as they currently exist.
[GRAPHIC]
28
<PAGE>
Set forth below is a chart summarizing the ownership structure of RII, GRI
and certain related entities, and SIHL and certain related entities, as they
will exist after giving effect to the Restructuring assuming that the SIHL Sale
has been effected.
[GRAPHIC]
29
<PAGE>
Set forth below is a chart summarizing the ownership structure of RII, GRI
and certain related entities, and PIRL and certain related entities, as they
will exist after giving effect to the Restructuring assuming that the PIRL
Spin-Off has been effected.
[GRAPHIC]
30
<PAGE>
BACKGROUND OF THE RESTRUCTURING
In 1983, the Company commenced construction of the Taj Mahal project.
Although initially scheduled for completion in late 1986, the project
experienced cost overruns and construction delays and remained unfinished at the
time it was sold to a partnership controlled by Donald Trump (the "Trump
Partnership") in late 1988.
By the mid-1980s, the Company's position in the Atlantic City casino/hotel
industry was severely disadvantaged. In an atmosphere of increased competition,
the preoccupation of the Company's management with the Taj Mahal and several
bids for control of the Company caused the Company's then existing management to
neglect the Resorts Casino Hotel and allow its facilities to deteriorate and to
fail to respond to new trends in the industry.
In late 1988, through a stock purchase and merger, Griffco Resorts Holding,
Inc., a corporation then wholly owned by Merv Griffin ("Griffco"), acquired RII
from Donald Trump, the then Chairman of the RII Board of Directors and its
controlling shareholder, and RII's other shareholders. The aggregate cost of
this acquisition was approximately $296,208,000, in cash, and was principally
funded by means of Merv Griffin's $50,000,000 investment in Griffco and the
issuance of two series of public debt by GRI.
Immediately after Griffco's acquisition of RII, the Company entered into an
agreement pursuant to which it sold certain real and personal assets, including
the Taj Mahal, to the Trump Partnership for $273,000,000 in cash and the
assumption of approximately $19,000,000 of liabilities. In connection with the
foregoing transactions, RII also terminated that certain "Comprehensive Services
Agreement" which RII had entered into with the Trump Hotel Corporation and paid
such corporation an aggregate amount of $63,689,750 for such termination and
fees still owed under such agreement.
In the period following the acquisition of RII by Griffco, the Company
experienced a substantial deterioration in its results of operations from both
the Resorts Casino Hotel and the Paradise Island Business. The decrease in
earnings of the Resorts Casino Hotel was attributable largely to increased
competition and, among other things, the disruption of operations and patron and
employee relationships caused by ongoing renovations and the Company's financial
difficulties. RII and its affiliates issued approximately $600,000,000 of
subordinated debentures prior to the acquisition by Griffco, principally to fund
the construction of the Taj Mahal, and issued $325,000,000 of additional notes
to fund the acquisition. As a result, after certain repayments, the Company had
approximately $911,000,000 of long-term debt outstanding in August 1989. In
August 1989, faced with deteriorating results of operations and substantial debt
service, the Company announced a moratorium on the payment of interest on its
outstanding public debt.
In late 1989, the Company embarked upon recapitalization negotiations with
two unofficial committees representing the holders of the Company's outstanding
public debt in respect of which the Company had declared the interest payment
moratorium. For various reasons, however, RII came to believe that it would not
be possible to achieve, on a solely out-of-court basis, the comprehensive
restructuring needed to assure continued viability. Moreover, the possibility of
an out-of-court settlement was adversely affected when involuntary petitions for
relief under chapter 11 of the Bankruptcy Code were filed against RII and its
former subsidiary, Resorts International Financing, Inc.("RIFI"), in November
1989.
On December 22, 1989, RII and RIFI filed consents to the involuntary
petitions and GRI and its then immediate parent, Griffin Resorts Holding Inc.
("GRH"), another former subsidiary of RII, filed voluntary petitions for relief
under chapter 11 of the Bankruptcy Code (collectively, the "Old Chapter 11
Cases") in the United States Bankruptcy Court for the District of New Jersey
(the "New Jersey bankruptcy court"). RII, RIFI, GRI and GRH (collectively, the
"Old Debtors") filed the Second Amended Joint Plan of Reorganization dated as of
May 31, 1990 (the "Old Plan"), which was
31
<PAGE>
confirmed by the New Jersey bankruptcy court in August 1990. On September 17,
1990 (the "Old Effective Date"), all conditions to the effectiveness of the Old
Plan were either met or waived and the Old Plan became effective.
Pursuant to the Old Plan, the previously outstanding public debt issued by
RII, RIFI and GRI was canceled, the Old Debtors were discharged from all other
claims arising prior to the commencement of the Old Chapter 11 Cases and all
previously outstanding shares of stock of RII were canceled. In exchange for
such previously outstanding public debt, RII issued (i) debt securities
consisting of $187,500,000 principal amount of the Old Series A Notes,
$137,500,000 principal amount of the Old Series B Notes and $105,333,000
principal amount of First Mortgage Non-Recourse Pass-Through Notes due June 30,
2000 (the "Showboat Notes") and (ii) 15,100,000 shares of RII Common Stock.
Pursuant to the Old Plan, holders of general unsecured claims against the Old
Debtors received additional Old Series B Notes and RII Common Stock.
Further, pursuant to the Old Plan, Merv Griffin acquired 4,400,000 shares of
RII Common Stock for which RII received $12,345,000 in cash and an $11,000,000
promissory note which bore interest at the rate of 8% per year (the "Griffin
Note") secured by a bank letter of credit. Merv Griffin entered into a two-year
contract with RII dated as of September 17, 1990, pursuant to which RII was
granted a non-exclusive license to use his name and likeness to promote its
facilities and operations, and Merv Griffin agreed to act as Chairman of the
Board of RII and to provide certain other services without compensation.
The Old Plan further provided for the establishment of a litigation trust
(the "Litigation Trust") to pursue, for the benefit of certain classes of
general unsecured creditors of the Old Debtors, all claims the Old Debtors or
certain of their affiliates may have had against Donald J. Trump, the former
Chairman of the Board and controlling shareholder of RII, and certain of his
affiliates. In October 1990, RII funded the Litigation Trust by depositing with
the trustee under the Litigation Trust (the "Litigation Trustee") the sum of
$5,000,000 to cover expenses of the Litigation Trustee in pursuing such claims,
with any unused balance of such amount to be distributed to the beneficiaries of
the Litigation Trust. Under the Old Plan, the beneficiaries of the Litigation
Trust received the Litigation Trust Units to represent their beneficial
interests. Pursuant to the Old Plan, the holders of 1,785,000 Litigation Trust
Units (out of a total of at least 10,000,000 Litigation Trust Units) had the
right to require RII to purchase their Litigation Trust Units for approximately
$3,880,000 in the aggregate if certain conditions were not met by September 17,
1991. The $3,880,000 was deposited with the Litigation Trustee in October 1990.
The requisite conditions were not met and, as a result, approximately 1,760,000
Litigation Trust Units were purchased by RII in October 1991 for $3,831,000. See
"Description of Litigation Trust Units".
RII's ability to pay cash interest on the Old Series Notes, and the ultimate
repayment of the Old Series Notes at maturity, was premised in large measure
upon RII's ability to sell the Paradise Island Business (excluding PIA) at its
then-estimated value, and to generate substantial excess cash flow from the
Company's operations and the contemplated sale on acceptable terms of the
Non-Operating Real Property. The recession in the United States, and more
specifically in the northeast sector, the acute competition in Atlantic City and
The Bahamas, and the impact of the conflict in the Persian Gulf in early 1991
and its effect on transportation and tourism, all adversely affected RII's
ability to sell the Paradise Island Business at its then-estimated value and to
generate substantial excess cash flow from operations. The Old Plan projected
the Company's excess cash flow from operations for the initial two years of the
Old Plan, net of capital expenditures and prior to the sale of the Paradise
Island Business, to be $8,300,000. The Company's actual excess cash flow was
$2,476,000. The Old Plan also contemplated additional cash flow in the amount of
$15,000,000 from the sale of the Non-Operating Real Property in the initial two
years of the Old Plan. However, such sales were never accomplished. Due to these
and other factors, RII has never paid interest in cash on the Old Series Notes.
In addition, in late 1991 Carnival Cruise Lines, Inc. ("Carnival") announced
its plan to dispose of its Crystal Palace Resort and Casino (the "Crystal
Palace"), the Company's principal competition in
32
<PAGE>
The Bahamas. Carnival reported operating losses on the Crystal Palace in excess
of $60,000,000 in fiscal 1990 and 1991 combined, and in fiscal 1991 Carnival's
investment in the Crystal Palace was written down to its estimated net
realizable value of approximately $90,000,000. In early 1992, a portion of the
Crystal Palace complex, which Carnival had been leasing from The Hotel
Corporation of The Bahamas ("HCB"), a corporation owned by the government of the
Commonwealth of The Bahamas, was returned to HCB. That portion is now the
HCB-owned Radisson Cable Beach Casino & Golf Resort (the "Radisson"), which has
679 guest rooms. RII believes that the announcement of the financial problems at
Crystal Palace and the arrangements described above have had a further adverse
impact on RII's ability to sell the Paradise Island Business. Carnival continues
to operate the remainder of the Crystal Palace complex under the Crystal Palace
name and, in October 1993, announced that it had signed an agreement in
principle to sell an 81% interest in such complex to a group of German
investors.
In addition to the Crystal Palace casino, the Bahamian government is
obligated to facilitate the grant of a casino license to the operators of the
Ramada Resort situated on the southwestern end of New Providence Island. The
Bahamian government is also obligated to support a proposal for the operation of
a slot machine casino at the Radisson resort on Cable Beach.
RII's Business Plan and Financial Projections included in RII's Disclosure
Statement relating to the Old Plan stated that RII believed that the net
proceeds from the sale of the Paradise Island Business (excluding PIA) "could
range from $250,000,000 to $300,000,000". After interviewing several investment
banking firms, the Company retained Salomon Brothers Inc ("Salomon Brothers") on
October 29, 1990 to prepare sales materials and formally offer the Paradise
Island Business for sale. On August 1, 1991, the Company received an offer to
buy the Paradise Island Business for a purchase price of $160,000,000. The offer
was conditioned upon, among other things, satisfactory completion of due
diligence and execution of definitive documentation. Subsequent discussions with
the prospective purchaser did not lead to a definitive agreement. The Company
received no other offer to purchase the Paradise Island Business prior to the
proposed Restructuring. Based on the current economic climate, the events
described above regarding the Crystal Palace, the very limited amount of
interest indicated by prospective purchasers of the Paradise Island Business
and, in particular, the estimated net proceeds of the only offer received prior
to the proposed Restructuring ($150,000,000), RII does not believe that proceeds
of the magnitude originally contemplated in 1990 will be realizable prior to the
maturity date of the Old Series Notes on April 15, 1994.
To facilitate the Company's capital expenditure program, which management
believes was necessary for the Company's operating properties to remain
competitive, and to conserve cash, RII elected to satisfy its interest
obligations on the Old Series Notes by issuing additional Old Series Notes (the
"Old PIK Payments") on October 15, 1990 and on April 15 and October 15 of 1991,
1992 and 1993. For the 33 months ended September 30, 1993, RII's capital
expenditures totaled approximately $69,000,000. The aggregate face amount of Old
Series Notes issued in lieu of cash for the payment of interest on these seven
payment dates was approximately $156,000,000, which increased the outstanding
principal amount of the Old Series Notes to approximately $482,000,000 at
October 15, 1993. If there are no principal retirements or additional issuances
of Old Series Notes, the total obligation due on the Old Series Notes at
maturity on April 15, 1994 will be approximately $518,000,000. Additional Old
Series Notes not to exceed approximately $2,500,000 in aggregate principal
amount may be issued to holders of Old Plan Disputed Claims if such claims are
allowed by the New Jersey bankruptcy court.
Although the Company's liquidity is satisfactory until the maturity of the
Old Series Notes in April 1994, the Company must reduce its debt to a level that
can be supported by cash flow reasonably anticipated on a continuing basis. The
effort to achieve that reduction through asset sales in the current economic
environment has been unsuccessful. The Company therefore attempted to develop
financial alternatives which could be coupled with continuing efforts to sell
the Paradise Island Business. The Company retained Bear, Stearns & Co. Inc.
("Bear Stearns"), Donaldson, Lufkin &
33
<PAGE>
Jenrette Securities Corporation ("DLJ") and Alvarez & Marsal, Inc. ("Alvarez &
Marsal") on October 18, 1991, February 12, 1992 and March 1, 1992, respectively,
as financial advisers to assist in the development and analysis of financial
alternatives as well as the development of a long-term financial plan. Beginning
in October 1991, the Company and its financial and legal advisers examined and
considered a number of financial alternatives, including continued pursuit of a
cash sale of all or a portion of the Paradise Island Business, a spin-off of the
Paradise Island Business, a transfer of the Paradise Island Business to the
holders of the Old Series Notes in the context of a restructuring of the Old
Series Notes, and pursuit of an equity investment in the Company or the Paradise
Island Business. The analysis indicated, among other things, that a total debt
restructuring was necessary and that the separation of the Paradise Island
Business from the rest of the Company was advantageous and could be a key
component of a total financial restructuring of RII. In addition, the analysis
indicated that accomplishing the separation through a cash sale or a combination
cash and stock sale of the Paradise Island Business could provide additional
advantages if a satisfactory sale price could be obtained.
Acting on behalf of the Company, Salomon Brothers in January 1992 provided
an affiliate of SIHL, World Leisure Group Limited, with information concerning
the Paradise Island Business. From time to time thereafter, representatives of
SIHL's affiliate expressed interest in buying all or a portion of the Paradise
Island Business but made no formal offers. Moreover, the discussions
contemplated prices which could only be considered by the Company in the context
of a restructuring of the Old Series Notes. In June 1993, affiliates of SIHL
began a series of discussions with representatives of Fidelity and TCW which
culminated in the negotiation of the Paradise Island Purchase Agreement.
During the summer of 1992, RII began a series of discussions with Fidelity
and TCW, which represented to RII that various funds and accounts managed
separately by each of them owned in the aggregate over 60% of the Old Series
Notes. These discussions centered on RII's unsuccessful efforts to sell the
Paradise Island Business and the implications of such failure with respect to
the payment of the Old Series Notes upon their stated maturity in April 1994.
These discussions resulted in a preliminary agreement among RII, Fidelity and
TCW on December 14, 1992, which outlined a framework for the restructuring of
RII's business and obligations with respect to the Old Series Notes.
To facilitate further discussions with Fidelity and TCW, RII agreed to pay
the cost of their retention of independent counsel. Negotiations resulted in the
agreement by Fidelity and TCW to the Restructuring described in this Information
Statement/Prospectus. The negotiations were frank, complex, comprehensive and
protracted and involved not only RII, Fidelity and TCW, but also SIHL and its
various advisers with respect to the sale of the Paradise Island Business and
the Griffin Group with respect to the New Griffin Services Agreement.
The principal differences between the preliminary framework set forth in
December 1992 and the Restructuring are (i) the addition of the SIHL Sale, (ii)
the distribution to the holders of the Old Series Notes of Excess Cash instead
of a cash distribution fixed in the amount of $25,000,000, (iii) a change in the
vesting provisions and the exercise price of the Griffin Warrants and (iv) the
termination of the 1990 Stock Option Plan and the implementation of the 1994
Stock Option Plan. These changes were made to increase the value of the
consideration distributed to the holders of the Old Series Notes, to provide
additional incentives to the Griffin Group for its efforts to improve the
operations and value of RII and to attract, retain and motivate the Company's
directors, officers and key employees by providing for the proprietary interests
of such individuals in RII.
FINANCIAL FORECASTS FOR THE COMPANY
The Company has prepared forecasts of certain financial data including net
revenues, net earnings, cash flow and condensed balance sheets for the Company's
remaining operations after giving effect to the Restructuring. The forecasts
project net earnings and positive cash flow throughout the five-year forecast
period. The forecasts assume the Restructuring is completed as of December 31,
1993 and include no costs incurred or payments made in connection with the
Restructuring subsequent to that date. The forecasts assume modest growth in
revenues which are largely offset by
34
<PAGE>
increases in operating costs. They also assume no significant capital additions;
capital expenditures are assumed to be primarily for maintenance projects. The
forecasts are based on these and a variety of other assumptions. The Company
believes these assumptions are reasonable; however, they are subject to
significant business, industry, economic, regulatory and competitive
uncertainties, many of which are beyond the control of the Company. See "The
Restructuring -- Financial Forecasts for the Company" and "Risk Factors -- Risks
Relating to the Forecasts".
THE RESTRUCTURING
The purpose of the Restructuring is to effect the changes to the Company's
capital structure that the Company believes are necessary to return to
profitability and to consummate the SIHL Sale (or, if the SIHL Sale is not
consummated on or before the Effective Date, to effect the PIRL Spin-Off).
Management of the Company believes that the Restructuring will improve the
Company's financial position and allow management to create long-term value for
the creditors and shareholders of the Company and strengthen the Company's
position in the gaming industry. The Restructuring is designed to alleviate the
problems caused by the Company's excessive debt service levels and will help
assure the Company's long-term viability. There can be no assurance, however,
that implementation of the Restructuring will result in the Company's return to
profitability. Likewise, there can be no assurance that, if the SIHL Sale is not
consummated on or before the Effective Date, PIRL's operations will be
profitable once the PIRL Spin-Off is effected. The Restructuring will be
implemented pursuant to the Plan. The terms of the Plan have resulted primarily
from an analysis of the Company's financial condition and operations conducted
by RII and its financial advisers and from the negotiations conducted by RII and
its financial and legal advisers with Fidelity and TCW.
The Plan provides, among other things, that record holders of the Old Series
Notes as of the Distribution Record Date, which will be the close of business in
New York City on the Effective Date, will receive the following consideration on
the relevant Distribution Date for each $1,000 of principal amount of Old Series
Notes outstanding on the Effective Date (and for any accrued interest thereon)*:
<TABLE>
<S> <C> <C>
-- $259.38 principal amount of the New RIHF Mortgage Notes;
-- One Unit comprised of $72.63 principal amount of the New RIHF Junior
Mortgage Notes and .07263 share of RII Class B Common Stock;
-- 35.33 shares of RII Common Stock;
-- Either (A) $134.88 in cash, plus interest on such amount at an annual
rate of 7.5% from January 1, 1994 to the SIHL Closing Date, plus 4.15
SIHL Series A Shares, representing a pro rata share of the
consideration received from the SIHL Sale, or (B) if the SIHL Sale is
not consummated on or before the Effective Date, 10.375 PIRL Ordinary
Shares pursuant to the PIRL Spin-Off;
-- A pro rata share of Excess Cash, which pro rata share is projected to be
a minimum of $62.25;
-- The non-transferable right to receive a pro rata share of Net Reserved
Cash and Net Plan Consummation Cash; and
-- The non-transferable right to receive a pro rata share of payments from
Deferred Cash, which pro rata share is expected to be a minimum of $5.
See "Description of Litigation Trust Units".
</TABLE>
In addition to the foregoing distribution, RII will make the Caesars Payment
on behalf of the holders of Old Series Notes. See "Description of the Caesars
Payment".
- ------------------------
*Assumes that the principal amount of Old Series Notes outstanding as of the
Effective Date is $482,000,000, the balance at October 15, 1993. Additional Old
Series Notes not to exceed approximately $2,500,000 in aggregate principal
amount may be issued to holders of Old Plan Disputed Claims. If additional Old
Series Notes are issued, the consideration distributed for each $1,000 principal
amount of Old Series Notes will be reduced slightly.
35
<PAGE>
Notwithstanding the foregoing, no fractional shares of New Equity Securities
will be issued on the Distribution Date. New RIHF Mortgage Notes and New RIHF
Junior Mortgage Notes will be issued only in denominations of $1,000 or integral
multiples thereof. Pursuant to the Plan, the disbursing agent for the holders of
Old Series Notes will aggregate and sell all fractional amounts of New Equity
Securities and New Debt Securities and distribute the net proceeds to the
holders of Old Series Notes entitled thereto.
If the SIHL Sale is consummated, assuming a reorganization enterprise value
of approximately $225 million for RII and a reorganization enterprise value for
SIHL of approximately $150 million, the estimated recovery for holders of Old
Series Notes is projected to be approximately 70% of the principal amount of the
Old Series Notes outstanding on October 15, 1993. If the SIHL Sale is not
consummated and the PIRL Spin-Off is effected, assuming a reorganization
enterprise value of approximately $225 million for RII and a reorganization
enterprise value of PIRL of approximately $125 million, the estimated recovery
for holders of Old Series Notes is projected to be approximately 70% of the
principal amount of the Old Series Notes outstanding on October 15, 1993. There
can be no assurance that the projected enterprise values of RII, of SIHL in the
event of the SIHL Sale or of PIRL in the event of the PIRL Spin-Off will be
realized. The estimated reorganization enterprise value of SIHL and PIRL is
premised primarily on the implied value associated with the proposed SIHL Sale.
In the event the SIHL Sale is not consummated, and depending on the reasons for
such non-consummation, the estimated reorganization enterprise value of PIRL
could be lower by a material amount.
The SIHL Aggregate Cash Purchase Price, the New Debt Securities and the New
Equity Securities will be distributed to the disbursing agent for distribution
to the holders of Old Series Notes on the Effective Date. Payments of Net
Reserved Cash will be made as soon as practicable after the Effective Date, but
in no event later than 90 days after the Effective Date. Payments of Net Plan
Consummation Cash will be made as soon as practicable but no later than 90 days
after the Effective Date; provided, however, that if all Plan Expenses have not
been paid by the 90th day after the Effective Date, RII and GRI may continue to
hold back for an additional 60 days the portion of Net Plan Consummation Cash
deemed by the Bankruptcy Court to be necessary to satisfy remaining Plan
Expenses, after which time the remaining Net Plan Consummation Cash will be
distributed, unless otherwise ordered by the Bankruptcy Court. Payments of
Deferred Cash will be made within three business days after receipt by RII of
the Litigation Trust Distributions in immediately available funds. Payments of
Excess Cash will be made on the Effective Date or as soon thereafter as is
practicable, but in no event later than 20 days after the Effective Date.
Distributions to holders of Old Series Notes will be made by the Disbursing
Agent only to such holders that comply with the procedures for surrender of Old
Series Notes set forth in section 6.11.5 of the Plan.
On the Effective Date, the Company will establish separate bank accounts for
Plan Consummation Cash and Reserved Cash. The cash contained in these accounts
will only be used, respectively, to pay Plan Expenses and to fund adjustments
under either the Paradise Island Purchase Agreement or the PIRL Standby
Distribution Agreement. Such cash will not be commingled with RII Retained Cash.
As part of the implementation of the Restructuring and prior to the
commencement of the Solicitation, various funds and accounts that hold Old
Series Notes and are advised and managed by Fidelity, will deliver a commitment
letter to the effect that they will enter into the RIHF Senior Facility on the
Effective Date. The RIHF Senior Facility will allow RIHF to borrow up to
$20,000,000 through the issuance of RIHF Senior Facility Notes. Any amount
borrowed by RIHF under the RIHF 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. Any borrowings under the
RIHF Senior Facility will be subject to the prior approval of the Casino Control
Commission as to amount and use of proceeds. All principal payments on the RIHF
Senior Facility Notes will be due July 15, 2002. Interest on the RIHF Senior
Facility Notes will accrue at the rate of 11% per year and will be payable in
cash, semi-annually on January 15 and July 15 of each year, commencing on the
January 15 or July 15 next following the date of the initial borrowing under the
RIHF Senior Facility.
36
<PAGE>
The RIHF Senior Facility will be available for a single borrowing during the
one-year period from the Effective Date, provided that the public resale of the
RIHF Senior Facility Notes by the purchasers thereof upon a resale is registered
under the Securities Act and the RIHF Senior Facility Note Indenture has been
qualified under the TIA. The RIHF Senior Facility Notes will be secured by (i)
an assignment of the RIH Senior Facility Note which will be secured by a lien on
the Resorts Casino Hotel, and (ii) the Pledged Shares pursuant to the Pledge
Agreements. In addition, RIH will issue the RIH Senior Facility Guaranty that
will guarantee the payment of principal of and interest on the RIHF Senior
Facility Note, which guaranty will be secured by a lien on the Resorts Casino
Hotel. The liens on the Resorts Casino Hotel securing the payment of the RIH
Senior Facility Note and the RIH Senior Facility Guaranty will be senior to the
liens securing payment of the RIH Promissory Note, the RIH Mortgage Guaranty,
the RIH Junior Promissory Note and the RIH Junior Mortgage Guaranty. RII also
will issue the RII Senior Facility Guaranty, which guaranty will be secured by
the RII Pledge Agreement.
The following transactions, among others, will be effected in connection
with the Restructuring: (a) the holders of the Old Series Notes as of the
Distribution Record Date will receive on the relevant Distribution Date the New
Debt Securities, the New Equity Securities, Excess Cash and the right to
payments from Net Reserved Cash, Net Plan Consummation Cash and Deferred Cash in
accordance with the terms of the Plan; (b)(i) if the SIHL Sale is consummated on
the Effective Date, such holders will receive the SIHL Series A Shares and the
SIHL Aggregate Cash Purchase Price in accordance with the terms of the Plan; or
(ii) if the SIHL Sale is not consummated on or before the Effective Date, such
holders will receive the PIRL Ordinary Shares and, at the election of PIRL, the
Interim Management Agreement will be executed; (c) the RIHF Senior Facility will
be executed and delivered; (d) the Amended RII Certificate of Incorporation and
the Amended RII By-laws will be adopted; (e) the initial post-Restructuring
directors of RII will be named to RII's Board of Directors (including two Class
B Directors); (f) the Griffin Warrants will be issued; (g) various intercompany
reorganization transactions described on Schedule 6.3 to the Plan will be
effected; (h) the 1990 Stock Option Plan will be terminated and the 1994 Stock
Option Plan will be implemented; and (i) the Old Security Documents will be
released and terminated. If sufficient Acceptances are received from the holders
of Old Series Notes and from the holders of RII Common Stock, such Acceptances
will constitute approval of the 1994 Stock Option Plan by such holders for
purposes of compliance with Rule 16b-3 promulgated under the Exchange Act. For
information on the election of directors after the Effective Date, see "The
Restructuring -- Overview of the Restructuring -- Post-Restructuring RII Board
of Directors".
If the Requisite Acceptances are not received by the Voting Deadline, RII
and GRI will be forced to evaluate options then available to them. Pursuant to
the Paradise Island Purchase Agreement, RII has committed, notwithstanding the
failure to obtain the Requisite Acceptances, to continue to pursue confirmation
of the Plan until the Paradise Island Purchase Agreement is terminated. This
commitment could require RII to conduct a further solicitation with respect to
the Plan until December 31, 1994. Because the Paradise Island Purchase Agreement
can be terminated by SIHL if an RII chapter 11 case is not commenced by March
21, 1994, RII might conduct such solicitation after filing a chapter 11 case.
RII's failure to abide by the terms of the Paradise Island Purchase Agreement
would, under certain circumstances, give rise to a claim by SIHL for breach of
such agreement and entitle SIHL to reimbursement from the SIHL Buyer Expense
Escrow. Moreover, such failure, if not approved by Fidelity and TCW, may relieve
Fidelity and TCW of their obligations under the Bondholders Support Agreement.
The Paradise Island Purchase Agreement would remain in effect if RII filed for
protection under the Bankruptcy Code by March 21, 1994 without a preapproved or
consensual plan of reorganization, but thereafter could be terminated upon the
occurrence of certain events set forth in the agreement including RII's failure
to file the Plan by March 28, 1994. See "Description of Paradise Island Purchase
Agreement -- Termination".
Other options available to RII and GRI if the Requisite Acceptances are not
obtained include submission of a revised prepackaged plan of reorganization or
filing for protection under the Bankruptcy Code without a preapproved or
consensual plan of reorganization. If bankruptcy cases were
37
<PAGE>
commenced without a preapproved plan, no assurance can be given that a plan
would be confirmed or that any recovery would be realized by the existing
holders of the RII Common Stock and the holders of 1990 Stock Options. In such
event, the holders of the Old Series Notes might receive a substantially smaller
recovery on their claims than that proposed under the Plan. In connection with
the formulation and development of the Plan, RII and GRI and their financial and
legal advisers have explored various alternative plan structures. RII and GRI
believe the Plan enables creditors and equity interest holders, including both
the holders of Old Series Notes and of RII Common Stock, to realize greater
value than would be realized under the alternatives which RII and GRI believe
could be consensually implemented. On the other hand, an alternative
reorganization plan could be formulated which would attempt to eliminate
entirely the interests of equity interest holders. RII and GRI believe that this
form of alternative plan would be vigorously contested by equity interest
holders. The expense and delay associated with this dispute, coupled with its
potentially adverse impact on the operations of the Company and the morale of
its employees, could substantially impair reorganization value. If such an
alternative plan were confirmed, however, recoveries to holders of Old Series
Notes might, but not necessarily would, be greater than those projected under
the Plan and no recovery would be available to holders of RII Common Stock. See
"Risk Factors -- Certain Bankruptcy and Insolvency Considerations".
Confirmation and consummation of the Plan are subject to certain conditions.
There can be no assurance that such conditions will be satisfied. While RII and
GRI (with the consent of Fidelity and TCW, so long as the funds and accounts
managed by either of them hold in the aggregate at least 20% of the outstanding
Old Series Notes) can waive many of such conditions, they cannot waive the
condition requiring the entry of a Confirmation Order which has not been stayed.
Absent satisfaction of this condition, the Restructuring cannot proceed. As a
practical matter, although the condition requiring the entry of an order
declaring that, as of the Effective Date, the Old Security Documents shall be
deemed released and terminated is waivable, the transactions contemplated by the
Plan cannot be consummated if the Old Security Documents are not released and
terminated. See "The Plan -- Conditions Precedent to Confirmation and
Consummation of the Plan".
Implementation of the Restructuring would have important effects on the
Company and on the current holders of the Old Series Notes, the RII Common Stock
and the 1990 Stock Options and would result in a significant reduction of RII's
financial obligations. The Restructuring would have the effect of reducing and
rescheduling RII's principal and interest payments. See "Comparison of New RIHF
Mortgage Notes and New RIHF Junior Mortgage Notes to Old Series Notes". The
Restructuring would result in the modification or elimination of certain
restrictive covenants now applicable to RII pursuant to the Old Series Note
Indenture. The Restructuring also would result in either the sale of the
Paradise Island Business to SIHL or the PIRL Spin-Off of the Paradise Island
Business to the holders of the Old Series Notes.
The following table shows, at the dates and for the periods shown, on a pro
forma basis, the impact of the Restructuring as it affects the replacement of
the Old Series Notes with the New Debt Securities. It should be noted that the
table excludes the Showboat Notes and capital leases as it is the Company's
intention that such items will not be affected by the Restructuring. The pro
forma data for the principal amount of New Debt Securities at September 30, 1993
are based on the assumption that the Restructuring occurred on that date. The
pro forma data regarding the stated interest calculation for the New Debt
Securities for the fiscal year ended December 31, 1992, and the three quarters
ended September 30, 1993, are based on the assumption that the Restructuring
occurred on January 1, 1992.
38
<PAGE>
<TABLE>
<CAPTION>
OLD SERIES NEW DEBT
NOTES SECURITIES
-------------- ---------
(IN THOUSANDS)
<S> <C> <C>
Principal amount outstanding at September 30, 1993 (1).......................... $ 448,572 $ 160,000
Stated interest calculation for the fiscal year ended December 31,
1992........................................................................... 50,686(2) 17,731
Stated interest calculation for the three quarters ended September 30, 1993..... 47,224(2) 13,298
<FN>
- ------------------------
(1) Represents the principal amount of the Old Series Notes on a historical
basis and the principal amount of the New Debt Securities on a pro forma
basis, exclusive of unamortized discounts. At October 15, 1993, an Old PIK
Payment was made on the Old Series Notes bringing the principal amount
outstanding to approximately $482,000,000 on that date.
(2) The calculation of the interest on the Old Series Notes was based on the
stated interest rates with the principal amount increasing on April 15 and
October 15 due to the issuance of additional Old Series Notes in lieu of
paying cash interest.
</TABLE>
If the Restructuring were implemented, approximately 17,025,000 shares of
RII Common Stock would be issued to holders of the Old Series Notes. Issuance of
such number of shares of RII Common Stock would dilute significantly the equity
interests of the existing holders of the RII Common Stock and the 1990 Stock
Options. Up to approximately 160,000 additional shares of RII Common Stock may
be issued to holders of Old Plan Disputed Claims if such claims are allowed by
the New Jersey bankruptcy court. The number of shares of RII Common Stock to be
issued to the holders of Old Series Notes and with respect to the Griffin
Warrants and the 1994 Stock Option Plan would increase to offset the dilutive
effect of the issuance of additional RII Common Stock. The following table shows
the percentage of beneficial ownership of the RII Common Stock before and after
consummation of the Restructuring by the holders of the securities listed below,
based on the assumptions set forth in the notes thereto:
<TABLE>
<CAPTION>
POST-RESTRUCTURING
---------------------------------------
ASSUMING OPTIONS ASSUMING OPTIONS
PRE-RESTRUCTURING NOT EXERCISED EXERCISED
------------------ ------------------ ------------------
SHARES % SHARES % SHARES %
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Holders of RII Common Stock (1)......... 20,157,234 92.0% 20,872,234 49.0% 20,872,234 44.7%
Holders of Old Series Notes (2)......... 17,025,000 40.0 17,025,000 36.5
Griffin Warrants (3).................... 4,665,000 11.0 4,665,000 10.0
1990 Stock Options (4).................. 1,758,800 8.0 1,758,800 3.8
1994 Stock Options (5).................. 2,333,000 5.0
---------- ------ ---------- ------ ---------- ------
21,916,034 100.0% 42,562,234 100.0% 46,654,034 100.0%
---------- ------ ---------- ------ ---------- ------
---------- ------ ---------- ------ ---------- ------
<FN>
- ------------------------
(1) Pre-Restructuring amount represents shares of RII Common Stock outstanding
on November 30, 1993. Post-Restructuring amount includes 590,000 shares of
RII Common Stock to be issued to DLJ prior to the filing of RII's and
GRI's bankruptcy cases and 125,000 shares of RII Common Stock to be issued
to Alvarez & Marsal upon receipt of the Requisite Acceptances in
settlement of certain recapitalization costs.
(2) Assumes holders of Old Series Notes are issued shares in an amount that
would represent 40% of the shares of RII Common Stock outstanding assuming
the Griffin Warrants are exercised. Such ownership will be subject to
dilution by the exercise of the 1990 Stock Options outstanding as well as
options to be granted under the 1994 Stock Option Plan. Also assumes that
all holders of Unsurrendered Public Debt Claims and of Old Series Notes
timely comply with the provisions of the Plan and the Old Plan that govern
entitlement to distributions.
(3) Assumes the Griffin Warrants are granted and exercised.
(4) Represents shares of RII Common Stock which may be issued upon exercise of
the 1990 Stock Options outstanding on November 30, 1993; related
percentages assume all such options are exercised.
(5) The 1994 Stock Option Plan will allow for the granting of options to
purchase up to 5% of the outstanding RII Common Stock; related percentage
assumes all such options are granted and exercised.
</TABLE>
39
<PAGE>
THE PLAN
GENERAL. The Restructuring will be effected pursuant to the Plan. The Plan
is a plan of reorganization under chapter 11 of the Bankruptcy Code for RII and
GRI proposed by RII, GRI, RIH, RIHF and PIRL. If the Plan is confirmed and the
other conditions to the consummation of the Plan proposed by RII, GRI, RIH, RIHF
and PIRL are satisfied or waived, the Restructuring and each transaction
comprising it will be effected. Since RII and GRI believe that all the elements
of the Restructuring can be consummated only through reorganization under
chapter 11 of the Bankruptcy Code, RII and GRI are soliciting Acceptances of the
Plan, rather than approvals of an out-of-court restructuring. See "The
Restructuring -- Overview of the Restructuring".
For the Plan to be confirmed, Acceptances must be received from the holders
of claims constituting at least 66 2/3% in amount and more than 50% in number of
the Allowed Claims in each impaired class of claims that vote to accept or
reject the Plan. Although Acceptances from holders of at least 66 2/3% in amount
of the Allowed Interests in each impaired class of interests that votes to
accept or reject the Plan are desirable, such Acceptances are not required as
the Plan may be confirmed even if an impaired class of interests votes to reject
the Plan. See "The Plan -- Classification and Treatment of Claims and
Interests". Pursuant to the Bankruptcy Code, only votes to accept or reject the
Plan, and not abstentions, will be counted for purposes of determining
acceptance or rejection of the Plan by any impaired class of claims or
interests. Therefore, the Plan could be approved by any impaired class of claims
with the affirmative vote of significantly less than 66 2/3% in amount and 50%
in number of the class of such claims. The Plan must be confirmed as to both RII
and GRI. See "Risk Factors -- Certain Bankruptcy and Insolvency Considerations".
For a discussion of the procedures for voting on the Plan, see "The
Solicitation". In addition, the Plan is subject to the approval of the Casino
Control Commission. See "Risk Factors -- New Jersey Regulatory Matters". The
SIHL Sale and the PIRL Spin-Off are subject to the approval of the government of
the Commonwealth of The Bahamas. See "Risk Factors -- Risks Associated with the
Paradise Island Business -- Bahamas Regulatory Matters".
Claims of the holders of the Old Series Notes ("RII Class 2 Claims"), and
such holders' claims in respect of the GRI Guaranty ("GRI Class 2 Claims"), will
be impaired by the Plan. In addition, the RII Intercompany Claim against GRI
("GRI Class 4 Claim") will be impaired by the Plan. The holders of the Showboat
Notes ("RII Class 3 Claims") will not be impaired by the Plan. Creditors who
hold general unsecured claims ("RII Class 5 Claims" and "GRI Class 3 Claims")
will not be impaired by the Plan. Intercompany claims against RII ("RII Class 6
Claims") will not be impaired by the Plan.
The Company does not believe that there will be any Allowed RII Class 4
Claims. To the extent that there are such Allowed Claims, however, those claims
will be unimpaired.
Existing holders of RII Common Stock ("RII Class 7 Interests"), of 1990
Stock Options ("RII Class 8 Interests") and of GRI Common Stock ("GRI Class 5
Interests") will be impaired by the Plan. Pursuant to the Plan, each holder of
RII Common Stock will retain its shares of RII Common Stock and each holder of
1990 Stock Options will retain his or her stock options. The 1990 Stock Option
Plan will be terminated in conjunction with the consummation of the Plan. As a
result of the issuance of additional shares of RII Common Stock and RII Class B
Common Stock to the holders of the Old Series Notes and, the issuance of the
Griffin Warrants and options to be granted under the 1994 Stock Option Plan, the
resulting ownership interest in RII represented by the currently outstanding
shares of RII Common Stock and the currently issued 1990 Stock Options will be
substantially diluted. See the beneficial ownership table in "The Restructuring
- -- Certain Significant Effects of the Restructuring -- Significant Dilution of
Equity Interests".
RII and GRI reserve the right to modify the terms of the Plan (subject to
compliance with the requirements of section 1127 of the Bankruptcy Code and to
the approval of Fidelity and TCW, so long as the funds and accounts managed by
them hold in the aggregate at least 20% of the outstanding Old Series Notes), if
and to the extent that RII and GRI determine that such modifications are
necessary or desirable in order to complete the Restructuring. RII and GRI will
give notice of such modifications
40
<PAGE>
as may be required by applicable law. Prior to the commencement of cases under
chapter 11 of the Bankruptcy Code, the validity and the effectiveness of the
notice of such modifications of the Plan would be governed by applicable
non-bankruptcy law; following commencement of chapter 11 cases, such
modifications would be subject to the notice and approval requirements of the
Bankruptcy Code and the Bankruptcy Rules. Under the Bankruptcy Code and Rules,
such modifications may be approved by the Bankruptcy Court without
resolicitation of the votes of the members of any class whose treatment is not
adversely affected by such modifications. See "The Plan -- Modifications of the
Plan".
If the Requisite Acceptances are obtained, RII and GRI currently intend to
file petitions for relief under chapter 11 of the Bankruptcy Code (the date on
which such petitions are filed being referred to as the "Petition Date") and to
use all of the Acceptances to obtain confirmation of the Plan. In addition, RII
and GRI reserve the right to use Acceptances to seek confirmation of a plan of
reorganization under any other circumstances permitted by law, including the
filing of involuntary bankruptcy petitions against RII and GRI. Neither RII nor
GRI intends to commence a case under chapter 11 of the Bankruptcy Code prior to
the Voting Deadline, although it may do so in its sole discretion. Any party in
interest, including any creditor, equity interest holder or indenture trustee,
has standing to appear and be heard on any issue in the chapter 11 case.
Other than GRI, RII does not intend to include any of its subsidiaries in
its bankruptcy case, nor does RII intend to cause any of its subsidiaries to
file its own bankruptcy case. Neither RII nor GRI currently is in bankruptcy.
PROVISIONS FOR TRADE CREDITORS AND EMPLOYEES. Since the Plan and the
chapter 11 filings will relate only to RII and GRI and not to RII's operating
subsidiaries, the claims of trade creditors and employees of such operating
subsidiaries will not be affected by such filings. GRI does not have any
employees and believes that it does not have any trade creditors. As a holding
company, RII has few trade creditors and employees. Nevertheless, to the extent
necessary, RII intends promptly following commencement of RII's chapter 11 case
to seek Bankruptcy Court approval of various measures designed to ensure that
the trade creditors of RII who hold Allowed RII Class 5 Claims and employees of
RII who hold "allowed priority claims", as described below, also are unaffected
by the filing.
Allowed RII Class 5 Claims will not be impaired by the Plan. An "Allowed RII
Class 5 Claim" is a claim proof of which was timely filed and which is not
disputed or, if no proof of claim was so filed, any claim which has been listed
in RII's or GRI's chapter 11 schedules as liquidated in amount and not disputed
or contingent, or any claim otherwise allowed by a final order of the Bankruptcy
Court. Each such Allowed RII Class 5 Claim will be treated in the manner in
which such RII Class 5 Claim would have been treated if RII's chapter 11 case
had not been commenced. Pursuant to the Plan, RII and GRI have agreed not to
pay, and not to cause their subsidiaries to pay, any claim except in the
ordinary course of business and consistent with past practice and to collect,
and to cause their subsidiaries to collect, receivables in the ordinary course
of business and consistent with past practice. After the Effective Date, RII
Retained Cash rather than Plan Consummation Cash shall be used to pay any
prepetition Allowed Claims or post-petition Allowed Administrative Claims (other
than Plan Expenses) which, in the ordinary course of business and consistent
with past practice, would not have been paid on or before the Effective Date.
41
<PAGE>
CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS. The following table
briefly summarizes the classification and treatment of claims and interests
under the Plan. For a complete description of the classification and treatment
of such claims and interests, including the definition of certain capitalized
terms used herein and not otherwise defined in this Information
Statement/Prospectus, see the Plan attached hereto as Appendix A and "The Plan".
<TABLE>
<CAPTION>
CLASS DESCRIPTION: ESTIMATED AMOUNT OF CLAIMS: TREATMENT UNDER THE PLAN:
<S> <C> <C> <C>
Administrative Claims* -- Post-petition $ 5,000,000 -- Each holder will receive on the Distri-
costs and expenses of restructuring bution Date cash equal to the amount of
and operations its Allowed Administrative Claim, unless
Estimated Number of Hold- such holder shall have agreed to different
ers: Approximately 30 treatment of its Allowed Administrative
Claim; provided, however, that (a) subject
to section 14.6 of the Plan, Allowed Ad-
ministrative Claims of professional
persons, of the Indenture Trustees
(identified below), and of Fidelity and
TCW (and their professional persons) shall
be paid within ten days after allowance by
Final Order and (b) Allowed Administrative
Claims representing obligations incurred
in the ordinary course of business or
assumed by either RII or GRI shall be paid
or performed by RII or GRI in accordance
with the terms and conditions of each
agreement relating thereto and consistent
with past practice.
-- Recovery: 100% of Claim.
Priority Tax Claims $ 0 -- Unimpaired.
Estimated Number of Holders: 0 -- Each holder will receive, at RII's or GRI's
option, as applicable: (1) cash in full
payment of such holder's Allowed Priority
Tax Claim on the later of the Distribution
Date and the date such Claim becomes due
and payable or (2) the amount of such
holder's Allowed Priority Tax Claim, with
post-confirmation interest thereon at an
annual rate equal to the rate applicable
to Treasury-Bills on the Confirmation Date
or such other rate as may be set by the
Bankruptcy Court at the confirmation
</TABLE>
- ------------------------
* The Administrative Claims category includes the estimated amount of those
claims that will be paid as of the Effective Date, including, but not limited
to, cure payments on executory contracts and unexpired leases. This category
does not include Administrative Claims that will be paid in the normal course
of business, such as postpetition payables, fee claims (including claims of
indenture trustees and their counsel), certain retiree Administrative Claims,
or any Administrative Claim which will be settled on other terms.
42
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION: ESTIMATED AMOUNT OF CLAIMS: TREATMENT UNDER THE PLAN:
<S> <C> <C> <C>
hearing, in equal annual cash install-
ments on each anniversary of the Ef-
fective Date, until the earlier of the
sixth anniversary of the Effective Date
and the sixth anniversary of the date of
assessment of such Allowed Priority Tax
Claim; provided, however, that any
distributions made on account of Allowed
Priority Tax Claims shall be paid from RII
Retained Cash.
-- Recovery: 100% of Claim.
RII Class 1 -- Non-tax claims given $ 10,000 -- Unimpaired.
priority under the Bankruptcy Code, -- Each holder of an Allowed RII Class 1
including employee claims for Claim, at RII's option, shall receive such
pre-petition wages not to exceed treatment as (1) will not alter the legal,
$2,000 per employee. equitable or contractual rights to which
Estimated Number of Holders: 5 such Allowed RII Class 1 Claim entitles
the holder thereof, or (2) otherwise will
render such Allowed RII Class 1 Claim
unimpaired pursuant to section 1124(2) of
the Bankruptcy Code.
-- Recovery: 100% of claim.
RII Class 2 -- Old Series Note Claims 482,$000,000 (as of October) -- Impaired.
Estimated Number of Holders: 15, 1993 -- For each $1,000 principal amount of Old
Approximately: 6,200 Series Notes, holders as of the
Distribution Record Date will receive on
the relevant Distribution Date on account
of their Allowed RII Class 2 Claims the
following*:
-- $259.38 principal amount of New RIHF
Mortgage Notes;**
-- One Unit comprised of $72.63 principal
amount of the New RIHF Junior Mortgage
Notes** and .07263 shares of RII Class B
Common Stock**;
-- 35.33 shares of RII Common Stock**;
</TABLE>
- ------------------------
* Assumes that the principal amount of Old Series Notes outstanding as of the
Effective Date is $482,000,000, the balance at October 15, 1993. Additional
Old Series Notes not to exceed approximately $2,500,000 in aggregate
principal amount may be issued to holders of Old Plan Disputed Claims. If
additional Old Series Notes are issued, the consideration distributed for
each $1,000 principal amount of Old Series Notes will be reduced slightly.
** No New Debt Securities will be issued in a principal amount other than $1,000
or an integral multiple thereof. No fractional shares of New Equity
Securities will be issued. All fractional interests will be aggregated and
sold at market; the proceeds therefrom will be distributed in lieu of such
fractional interests.
43
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION: ESTIMATED AMOUNT OF CLAIMS: TREATMENT UNDER THE PLAN:
<S> <C> <C> <C>
-- Either (A) $134.88 in cash, plus in-
terest on such amount at an annual rate
of 7.5% from January 1, 1994 to the SIHL
Closing Date, plus 4.15 SIHL Series A
Shares, representing a pro rata share of
the consideration received from the SIHL
Sale, or (B) if the SIHL Sale is not
consummated on the Effective Date,
10.375 PIRL Ordinary Shares pursuant to
the PIRL Spin-Off;
-- A pro rata share of Excess Cash, which
pro rata share is projected to be a
minimum of $62.25;
-- The non-transferable right to receive a
pro rata share of Net Reserved Cash and
Net Plan Consummation Cash; and
-- The non-transferable right to receive a
pro rata share of payments from Deferred
Cash, which pro rata share is expected
to be a minimum of $5.
-- Post-Restructuring ownership interest
(fully diluted): 36.5%.
-- Estimated Recovery (including GRI Class 2
Claim and approximate reorganization value
of ownership interest):
-- 70% of principal amount (SIHL Sale); or
-- 70% of principal amount (PIRL
Spin-off).
RII Class 3 -- The Showboat $ 105,333,000 -- Unimpaired.
Note Claims -- At RII's option, each holder of an Al-
Estimated Number of Holders: lowed RII Class 3 Claim will receive such
Approximately: 550 treatment as (1) will not alter the legal,
equitable and contractual rights to which
such Allowed RII Class 3 Claim entitles
the holder thereof or (2) otherwise will
render such Claim unimpaired pursuant to
section 1124(2) of the Bankruptcy Code. To
the extent not previously paid when due,
interest shall be paid in cash on the
Distribution Date (at the applicable,
non-default contractual rate), together
with any additional amount required to be
paid to render such Allowed RII Class 3
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION: ESTIMATED AMOUNT OF CLAIMS: TREATMENT UNDER THE PLAN:
<S> <C> <C> <C>
Claim unimpaired pursuant to section
1124(1) or (2) of the Bankruptcy Code.
-- Recovery: 100% of Claim.
RII Class 4 -- Miscellaneous Secured $ 0 -- -- Unimpaired.
Claims At RII's option, with respect to each
Estimated Number of Holders: 0 Allowed RII Class 4 Claim, the Plan either
(1) will not alter the legal, equitable
and contractual rights to
which such Allowed RII Class 4 Claim
entitles the holder thereof, or (2)
otherwise will render such Allowed RII
Class 4 Claim unimpaired pursuant to
section 1124(2) of the Bankruptcy Code. To
the extent not previously paid when due,
interest shall be paid in cash on the
Distribution Date (at the applicable,
non-default contractual rate), together
with
any additional amount required to be paid
to render such Allowed RII Class 4 Claim
unimpaired pursuant to section 1124(1) or
(2) of the Bankruptcy Code.
-- Recovery: 100% of Claim.
RII Class 5 -- General Unsecured Claims $ 1,000,000 -- -- Unimpaired.
At RII's option, with respect to each
Estimated Number of Holders: Allowed RII Class 5 Claim, the Plan either
Approximately: 50 (1) will not alter the legal, equitable or
contractual rights to which such Allowed
RII Class 5 Claim entitles the holder
thereof, or (2) otherwise will render such
Allowed RII Class 5 Claim unimpaired
pursuant to section 1124(2) of the
Bankruptcy Code.
-- Recovery: 100% of Claim.
RII Class 6 -- U.S. Paradise $ 2,151,000 -- -- Unimpaired.
Island Subsidiary Claims (as of Septem- At RII's option, each holder of an Al-
Estimated Number of Hold- ber 30, 1993) lowed RII Class 6 Claim will receive such
ers: 2 treatment as (1) will not alter
the legal, equitable and contractual
rights to which such Allowed RII Class 6
Claim entitles the holder thereof or (2)
otherwise will render such Claim
unimpaired pursuant to section 1124(2) of
the Bankruptcy Code.
-- Recovery: 100% of Claim.
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION: ESTIMATED AMOUNT OF CLAIMS: TREATMENT UNDER THE PLAN:
<S> <C> <C> <C>
RII Class 7 -- RII Common Not applicable -- Impaired.
Stock -- Each holder will retain its shares of
Estimated Number of Beneficial Holders: RII Common Stock held as of the Effective
Approximately: 11,000 Date; provided, however, that as a class
all shares of RII Common Stock held by
holders of RII Class 7
Interests will be diluted by the issuance
under the Plan of (1) additional RII
Common Stock to the holders of RII and GRI
Class 2 Claims, (2) the Griffin Warrants,
(3) options under the 1994 Stock Option
Plan and (4) the RII Class B Common Stock.
-- Pre-Restructuring ownership interest:
92.0%. Post-Restructuring ownership
interest (fully diluted): 44.7%.
RII Class 8 -- 1990 Stock Options Not applicable -- -- Impaired.
Each holder retains his or her out-
Estimated Number of Holders: 31 standing 1990 Stock Options and the
exercise price for the outstanding 1990
Stock Options will remain fixed
at the exercise price at the time of grant;
provided, however, that as a class all
1990 Stock Options held by holders of RII
Class 8 Interests will be diluted by the
issuance under the
Plan of (1) additional RII Common Stock,
(2) the Griffin Warrants, (3) options
under the 1994 Stock Option Plan and (4)
the RII Class B Common Stock. The 1990
Stock Option Plan will be terminated as of
the Effective Date.
-- Pre-Restructuring ownership interest (fully
diluted): 8.0%. Post-Restructuring
ownership interest (fully diluted): 3.8%.
GRI Class 1 -- Non-tax Claims $ 0 -- Unimpaired.
given priority under the Bankruptcy -- Each holder of an Allowed GRI Class 1 Claim
Code, including employee claims for at GRI's option shall receive such
pre-petition wages not to exceed treatment as (1) will not alter the legal,
$2,000 per employee equitable or contractual rights to which
such Allowed GRI
Estimated Number of Holders: 0 Class 1 Claim entitles the holder thereof,
or (2) otherwise will render such Allowed
GRI Class 1 Claim unimpaired pursuant to
section 1124(2) of the Bankruptcy Code.
-- Recovery: 100% of claim.
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
CLASS DESCRIPTION: ESTIMATED AMOUNT OF CLAIMS: TREATMENT UNDER THE PLAN:
<S> <C> <C> <C>
GRI Class 2 -- GRI Guaranty Claims 482,$000,000 (as of October) -- Impaired.
Estimated Number of Holders: 15, 1993 -- The distribution to holders of Allowed RII
Approximately 6,200 Class 2 Claims also will constitute the
Plan consideration to holders of Allowed
GRI Class 2 Claims.
-- Recovery: See RII Class 2 Recovery.
GRI Class 3 -- General Unsecured Claims $ 0 -- Unimpaired.
Estimated Number of Holders: None known -- At GRI's option, with respect to each
Allowed GRI Class 3 Claim, the Plan either
(1) will not alter the legal, equitable or
contractual rights to which such Allowed
GRI Class 3 Claim entitles the holder
thereof, or (2) otherwise will render such
Allowed GRI Class 3 Claim unimpaired
pursuant to section 1124(2) of the
Bankruptcy Code.
Recovery: 100% of Claim.
GRI Class 4 -- RII Intercompany Claims $ 40,196,000) -- Impaired.
Estimated Number of Holders: 1 (as of September 30, 1993 -- The RII Intercompany Claim will be
satisfied by the contribution by RII of
the RII Intercompany Claim to the capital
of GRI.
GRI Class 5 -- GRI Common Stock Not applicable -- Impaired.
Estimated Number of Holders: 1 -- RII, as the holder of the GRI Class 5
Interest, will retain such Interest which
is impaired by virtue of the transfer of a
substantial portion of GRI's assets
pursuant to the Paradise Island Purchase
Agreement or the PIRL Standby Distribution
Agreement, as the case may be.
</TABLE>
EFFECTIVE DATE AND DISTRIBUTION DATES. The Effective Date is the later of
(a) the first business day on which no stay of the Confirmation Order is in
effect and that is ten days after the Confirmation Date, and (b) the date on
which each of the conditions precedent to consummation of the Plan have been
either satisfied or waived. It is anticipated that the Effective Date will occur
on or around May 15, 1994, although no assurance can be given that the Effective
Date will not be delayed, perhaps materially. Among other things, a relatively
brief delay in the Effective Date will delay distributions under the Plan and
increase the interest payable with respect to the SIHL Aggregate Cash Purchase
Price. Any delay in the Effective Date beyond June 30, 1994 could result in a
termination of the Paradise Island Purchase Agreement. See "Description of
Paradise Island Purchase Agreement -- Termination". Also, a delay in the
Effective Date could change the date for calculating Excess Cash. In addition, a
delay in the Effective Date may result in a termination of the Bondholders
Support Agreement and would increase the risk that the Restructuring will not be
consummated.
The Distribution Date for any claim that is an Allowed Claim on the
Effective Date will be the Effective Date or as soon thereafter as practicable,
but in no event later than 20 days after the Effective Date. For any claim that
is a Disputed Claim on the Effective Date, the Distribution Date will be the
date as soon as practicable, but in no event later than 30 days after the date
upon which such claim becomes an Allowed Claim. Notwithstanding the foregoing,
the Distribution Date with respect
47
<PAGE>
to distribution to the disbursing agent for holders of Old Series Notes is as
follows: (a) for distribution of the SIHL Aggregate Purchase Price, the New Debt
Securities and the New Equity Securities, the Effective Date; (b) for payments
of Net Reserved Cash, as soon as practicable after the Effective Date but in no
event later than 90 days after the Effective Date; (c) for payments of Net Plan
Consummation Cash, as soon as practicable but no later than 90 days after the
Effective Date; provided, however, that if all Plan Expenses have not been paid
by the 90th day after the Effective Date, RII and GRI may continue to hold back
for an additional 60 days the portion of Net Plan Consummation Cash deemed by
the Bankruptcy Court to be necessary to satisfy remaining Plan Expenses, after
which time the remaining Net Plan Consummation Cash will be distributed, unless
otherwise ordered by the Bankruptcy Court; (d) for payments of Deferred Cash,
within three business days after receipt by RII of the Litigation Trust
Distributions in immediately available funds; and (e) for payments of Excess
Cash, the Effective Date or as soon thereafter as practicable, but in no event
later than 20 days after the Effective Date. Distributions to holders of Old
Series Notes will be made by the Disbursing Agent only to holders that comply
with the procedures for surrender of Old Series Notes set forth in section
6.11.5 of the Plan.
CONFIRMATION REQUIREMENTS. If the Requisite Acceptances are received, RII
and GRI will seek to implement the Plan by commencing cases under chapter 11 of
the Bankruptcy Code and will request that the Bankruptcy Court as promptly as
practicable hold a hearing on the adequacy of this Information
Statement/Prospectus and on the Confirmation of the Plan. Parties in interest,
including all holders of claims and interests, will receive notice of the date
and time fixed by the Bankruptcy Court for the hearing on the adequacy of this
Information Statement/Prospectus and the confirmation hearing. The Bankruptcy
Code provides that any party in interest may object to the adequacy of this
Information Statement/Prospectus or confirmation of the Plan. The Bankruptcy
Court will establish procedures for the filing and service of objections to the
adequacy of this Information Statement/ Prospectus and to confirmation of the
Plan.
For the Plan to be confirmed, and regardless of whether all impaired classes
of claims and interests vote to accept the Plan, the Bankruptcy Code requires
that the Bankruptcy Court determine that the Plan complies with the requirements
of section 1129 of the Bankruptcy Code. Section 1129 of the Bankruptcy Code
requires, among other things, that: (i) the Plan be accepted by the requisite
votes of holders of impaired claims and interests, except to the extent that the
Plan may be confirmed under section 1129(b) of the Bankruptcy Code without the
acceptance of each impaired class; (ii) the Plan be feasible under section
1129(a)(11) of the Bankruptcy Code (that is, there is a reasonable probability
that RII and GRI will be able to perform their obligations under the Plan and
continue to operate their businesses without further financial reorganization);
(iii) the Plan be accepted by at least one class of impaired creditors
(excluding insiders); and (iv) the Plan meet the "best interests of creditors"
test of section 1129(a)(7) of the Bankruptcy Code which requires that each
impaired holder of a claim or interest either accepts the Plan or receives at
least as much pursuant to the Plan as such holder would receive in liquidations
of RII and GRI under chapter 7 of the Bankruptcy Code. See "The Plan --
Confirmation of the Plan".
Although RII and GRI believe that the Plan will meet such tests, as well as
the other requirements of section 1129 of the Bankruptcy Code, there can be no
assurance that the Bankruptcy Court will reach the same conclusion. Furthermore,
even if the Requisite Acceptances have been received prior to the commencement
of the chapter 11 cases, the Bankruptcy Court may determine not to confirm the
Plan if the Bankruptcy Court finds that the Solicitation did not comply with all
the applicable provisions of the Bankruptcy Code and the Bankruptcy Rules
(including the requirement under section 1126(b) that the Solicitation comply
with any applicable non-bankruptcy law, rule or regulation governing the
adequacy of disclosure or that the Solicitation be made after disclosure of
adequate information). In such an event, the Bankruptcy Court might order RII
and GRI to resolicit Acceptances.
If any impaired class or classes reject the Plan, section 1129(b) of the
Bankruptcy Code provides that, so long as at least one impaired class has
accepted the Plan (excluding votes cast by insiders), RII
48
<PAGE>
and GRI may seek confirmation of the Plan if they can demonstrate that the Plan
"does not discriminate unfairly" and is "fair and equitable" with respect to any
dissenting class. RII and GRI reserve the right to seek to apply section 1129(b)
of the Bankruptcy Code if the Plan is accepted by any, but not all, impaired
classes of claims or interests. See "The Plan -- Confirmation of the Plan --
Confirmation Without Acceptance by All Impaired Classes".
CONDITIONS TO CONFIRMATION. Confirmation of the Plan is subject to the
following conditions: (i) the Confirmation Date shall occur no later than
December 31, 1994; (ii) the Confirmation Order shall approve in all respects all
of the provisions, terms and conditions of the Plan; (iii) the Confirmation
Order shall provide for the confirmation of the Plan as to both RII and GRI;
(iv) the Confirmation Order shall be acceptable in form and substance to RII,
GRI, Fidelity and TCW (so long as the funds and accounts managed by either of
them hold in the aggregate at least 20% of the outstanding Old Series Notes),
and to SIHL (to the extent provided in the Paradise Island Purchase Agreement);
(v) the Confirmation Order shall contain a finding that, except as expressly
provided in the Plan, all of the property distributed under the Plan shall vest
in the recipients thereof free and clear of all liens, claims, encumbrances and
interests of any nature whatsoever and that consummation of the Plan shall not
result in a fraudulent transfer with respect to either RII or GRI or any of
their affiliates; and (vi) the Bankruptcy Court shall have entered an order
declaring that, as of the Effective Date, the Old Security Documents under which
the liens on the property securing the Old Series Notes were granted or created
shall be deemed released and terminated. Subject to the approval of Fidelity and
TCW, so long as the funds and accounts managed by them hold in the aggregate at
least 20% of the outstanding Old Series Notes, RII and GRI reserve the right at
any time, without notice, without leave or order of the Bankruptcy Court, to
waive any condition to confirmation of the Plan. As a practical matter, although
the condition requiring the entry of an order declaring that, as of the
Effective Date, the Old Security Documents shall be deemed released and
terminated is waivable, the transactions contemplated by the Plan, including the
SIHL Sale, the PIRL Spin-Off and the issuance of the New Debt Securities, cannot
be consummated if the Old Security Documents are not released and terminated.
To effect such release, RII is soliciting the consents of the record holders
of the outstanding Old Series Notes pursuant to the terms of the Old Series Note
Indenture to terminate and release the Old Security Documents. The Old Series
Note Indenture requires that consents be obtained from the record holders of at
least 66 2/3% in aggregate principal amount of the outstanding Old Series Notes
and the record holders of at least a majority in aggregate principal amount of
each series of the Old Series Notes to terminate and release of the Old Security
Documents. Such consents will terminate and release the Old Security Documents
and will release the parties to the Old Security Documents from all obligations
thereunder. Such consents must be evidenced by such record holders separately
from their vote on the Plan. The ballots for the holders of the Old Series Notes
permit holders to give or withhold such consent. ANY EXECUTED BALLOT WITH
RESPECT TO THE PLAN RETURNED WITHOUT AN INDICATION TO WITHHOLD SUCH CONSENT WILL
BE DEEMED TO GIVE SUCH CONSENT. IF SUFFICIENT CONSENTS ARE RECEIVED FROM HOLDERS
OF OLD SERIES NOTES, RII AND GRI WILL REQUEST THE BANKRUPTCY COURT TO CONFIRM
RELEASE OF THE OLD SECURITY DOCUMENTS, EFFECTIVE AS OF THE EFFECTIVE DATE, BY
ENTRY OF AN APPROPRIATE ORDER. IF INSUFFICIENT CONSENTS ARE RECEIVED FROM
HOLDERS OF OLD SERIES NOTES TO EFFECTUATE A CONSENSUAL TERMINATION AND RELEASE
OF THE OLD SECURITY DOCUMENTS BY THE HOLDERS OF OLD SERIES NOTES, RII AND GRI
INTEND TO REQUEST THE BANKRUPTCY COURT TO ORDER THE RELEASE OF THE OLD SECURITY
DOCUMENTS; HOWEVER, THERE CAN BE NO ASSURANCE THAT SUCH AN ORDER WILL BE
ENTERED.
In no event will the consents to release the Old Security Documents be used
to effectuate the termination and release of the Old Security Documents in the
absence of the confirmation and consummation of the Plan. If RII and GRI fail to
receive the Requisite Acceptances, notwithstanding receipt of sufficient
consents to release and terminate the Old Security Documents pursuant to the Old
Series Note Indenture, such consents will only be used in the event that RII and
GRI continue to pursue confirmation and consummation of the Plan. In the event
that RII and GRI elect or are required to resolicit Acceptances of the Plan,
however, they reserve the right not to resolicit with
49
<PAGE>
respect to the consents to release the Old Security Documents and to use
consents received from the initial Solicitation. Consents to release and
terminate the Old Security Documents may be withdrawn or revoked at any time
prior to the Voting Deadline.
CONDITIONS TO EFFECTIVE DATE. The Plan will be consummated on the Effective
Date. The occurrence of the Effective Date of the Plan is subject to the
following conditions: (i) the Confirmation Order shall have been entered and not
stayed; (ii) the New RIHF Mortgage Note Indenture and the New RIHF Junior
Mortgage Note Indenture shall have been qualified under the TIA; (iii) the
securities to be issued under the New RIHF Mortgage Note Indenture and the New
RIHF Junior Mortgage Note Indenture, the RII Class B Common Stock and the RII
Common Stock to be issued pursuant to the Plan, and the SIHL Series A Shares or
PIRL Ordinary Shares, as the case may be, shall be registered under the
Securities Act and accepted or admitted on a national securities exchange or
approved for quotation on the Nasdaq National Market (subject to official notice
of issuance); (iv) the Effective Date shall occur no later than January 31,
1995; (v) all required regulatory approvals shall have been obtained (including
without limitation any regulatory approvals from the Casino Control Commission,
the government of the Commonwealth of The Bahamas and the U.S. Department of
Transportation); (vi) all indentures, mortgages, security agreements and other
agreements and instruments to be delivered under or necessary to effectuate the
Plan, including without limitation the RIHF Senior Facility, shall have been
executed and delivered; (vii) either (a) the closing of the SIHL Sale shall have
occurred or (b) the closing of the PIRL Spin-Off shall have occurred; and (viii)
all outstanding amounts under the Griffin Group Note shall have been paid in
full.
Subject to the approval of Fidelity and TCW, so long as the funds and
accounts managed by them hold in the aggregate at least 20% of the outstanding
Old Series Notes, RII and GRI reserve the right at any time, without notice,
without leave of or order of the Bankruptcy Court, and without any formal action
other than proceeding to consummate the Plan, to waive any condition precedent
to consummation of the Plan, other than the condition requiring the entry of the
Confirmation Order which has not been stayed.
MODIFICATION OF THE PLAN. Subject to the approval of Fidelity and TCW, so
long as the funds and accounts managed by them hold in the aggregate at least
20% of the outstanding Old Series Notes, RII and GRI expressly reserve the right
to modify, at any time and from time to time, the terms of the Plan in
accordance with the provisions of section 1127 of the Bankruptcy Code if, and to
the extent that, RII and GRI determine that such modifications are necessary or
desirable in order to complete the Restructuring. After the date on which the
Plan is confirmed by the Bankruptcy Court, RII and GRI may institute proceedings
in the Bankruptcy Court to remedy any defects or omissions or reconcile any
inconsistencies in the Plan or the Confirmation Order as may be necessary to
carry out the purposes and intent of the Plan so long as the Plan as modified
meets the requirements of the Bankruptcy Code and prior notice of such
modification is served in accordance with Bankruptcy Rules 2002 and 9014. See
"The Plan -- Modifications of the Plan".
COMPARISON OF NEW RIHF MORTGAGE NOTES AND NEW RIHF JUNIOR MORTGAGE NOTES TO OLD
SERIES NOTES
The following is a brief comparison of the terms of the New RIHF Mortgage
Notes and New RIHF Junior Mortgage Notes to the terms of the Old Series Notes as
set forth in the Old Series Note Indenture, the indenture pursuant to which the
New RIHF Mortgage Notes will be issued (the "New RIHF Mortgage Indenture"), and
the indenture pursuant to which the New RIHF Junior Mortgage Notes will be
issued (the "New RIHF Junior Mortgage Indenture"). Certain capitalized terms
used in the following summary are defined below under the captions "Description
of Old Series Notes", "Description of New RIHF Mortgage Notes" and "Description
of New RIHF Junior Mortgage Notes".
The Company will apply to have the New RIHF Mortgage Notes, the Units
comprised of New RIHF Junior Mortgage Notes and the RII Class B Common Stock,
the newly issued RII Common Stock and (if issued) the PIRL Ordinary Shares
listed on the AMEX. The Company has been informed by SIHL that SIHL will apply
to have the SIHL Series A Shares (if issued) listed on the Nasdaq
50
<PAGE>
National Market. It is a condition to consummation of the Plan that all of such
securities, if issued, be listed on a national securities exchange or approved
for quotation on the Nasdaq National Market (subject to official notice of
issuance). However, there can be no assurance that an active trading market for
any such securities will develop on the AMEX, Nasdaq National Market or
otherwise, and no assurance can be given as to the price at which any such
securities might trade. Moreover, subject to the consent of Fidelity and TCW (so
long as the funds and accounts managed by them hold in the aggregate at least
20% of the outstanding Old Series Notes), the condition requiring listing on a
national securities exchange or approval for quotation on the Nasdaq National
Market may be waived by RII and GRI. For more information regarding the trading
market for the SIHL Series A Shares, see the accompanying SIHL Prospectus.
<TABLE>
<CAPTION>
NEW RIHF NEW RIHF
MORTGAGE NOTES JUNIOR MORTGAGE NOTES OLD SERIES NOTES
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
PRINCIPAL AMOUNT TO BE ISSUED: PRINCIPAL AMOUNT TO BE ISSUED: PRINCIPAL AMOUNT OUTSTANDING:
$125,000,000 will be issued by RIHF $35,000,000 will be issued by RIHF Approximately $482,000,000 as of
upon consummation of the upon consummation of the October 15, 1993, issued by RII.
Restructuring. Restructuring. Additional Old Series Notes not to
exceed approximately $2,500,000 in
aggregate principal amount may be
issued to holders of Old Plan
Disputed Claims if such Claims are
allowed by the bankruptcy court.
INTEREST: INTEREST: INTEREST:
11% per year, payable in cash, semi- 11.375% per year, payable in cash, -- Old Series A Notes -- 6% per year
annually on March 15 and September or at RIHF's option and subject to from April 11, 1990 until April 15,
15 of each year. Interest will certain limitations, additional 1991, 9% in the year ended April
accrue from the Effective Date. Units comprised of New RIHF Junior 15, 1992, 12% in the year ended
Mortgage Notes and RII Class B April 15, 1993, and 15% in the year
Common Stock, semi-annually on June ending April 15, 1994, payable
15 and December 15 of each year. semi-annually on April 15 and
Interest will accrue from the October 15 of each year. Interest
Effective Date. Interest may be is payable, at the option of RII,
paid in additional Units on any in cash or in additional Old Series
interest payment date on which A Notes.
RIH's Consolidated Cash Flow for -- Old Series B Notes -- 11% per
the most recently completed four year from May 8, 1990 until April
fiscal quarters is less than 15, 1991, and thereafter 15% per
$35,000,000. year, payable semi-annually on
April 15 and October 15 of each
year. Interest is payable, at the
option of RII, in cash or in
additional Old Series B Notes.
MATURITY: MATURITY: MATURITY:
September 15, 2003. December 15, 2004. April 15, 1994.
SINKING FUND REQUIREMENTS: SINKING FUND REQUIREMENTS: SINKING FUND REQUIREMENTS:
None. None. None.
MANDATORY REDEMPTION: MANDATORY REDEMPTION: MANDATORY REDEMPTION:
In the event of an RIH Sale, all the In the event of an RIH Sale, all the Upon certain sales by RII or any of
New RIHF Mortgage Notes will be New RIHF Junior Mortgage Notes will its subsidiaries of any assets
redeemed by RIHF whether such RIH be redeemed by RIHF whether such listed in a schedule to the Old
Sale occurs before, on or after the RIH Sale occurs before, on or after Series Note Indenture, certain real
fifth anniversary of the Effective the fifth anniversary of the property or the capital stock of
Date, at par together with Effective Date, at par together any RII subsidiary, the proceeds
interest, if any, accrued and with interest, if any, accrued and are deposited in an account (the
unpaid thereon to the Redemption unpaid thereon to the Redemption "Collateral Account"). If the
Date; provided, however, that such Date; provided, however, that such balance in the Collateral Account
obligation of RIHF to redeem the obligation of RIHF to redeem the exceeds $15,000,000, RII is
New RIHF Mortgage Notes in the New RIHF Junior Mortgage Notes in required to redeem Old Series Notes
event of a proposed RIH Sale shall the event of a proposed RIH Sale with the entire balance in the
cease to exist if the Holders of shall cease to exist if the Holders Collateral Account at 100% of the
not less than 66- 2/3% in of not less than 66- 2/3% in principal amount thereof plus
Outstanding Amount of the Outstanding Amount of the accrued and unpaid interest to the
Outstanding New RIHF Mortgage Notes Outstanding New RIHF Junior redemption date.
have consented to such proposed RIH Mortgage Notes have consented to
Sale. such proposed RIH Sale.
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
NEW RIHF NEW RIHF
MORTGAGE NOTES JUNIOR MORTGAGE NOTES OLD SERIES NOTES
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
OPTIONAL REDEMPTION: OPTIONAL REDEMPTION: OPTIONAL REDEMPTION:
The New RIHF Mortgage Notes are The New RIHF Junior Mortgage Notes The Old Series Notes are redeemable
redeemable at any time in whole, or are redeemable at any time in at any time in whole, or from time
from time to time in part, on or whole, or from time to time in to time in part, at the election of
after the fifth anniversary of the part, on or after the fifth RII, at 100% of their principal
Effective Date at the election of anniversary of the Effective Date amount plus accrued interest to the
RIHF, at 100% of the principal at the election of RIHF, at 100% of redemption date. Any such
amount thereof plus accrued the principal amount thereof plus redemption must be made of both Old
interest to the redemption date. accrued interest to the redemption Series A Notes and Old Series B
date. Notes, pro rata according to the
respective principal amounts of the
Old Series Notes of each such
Series then outstanding.
LIMITATION ON OPEN-MARKET PURCHASES: LIMITATION ON OPEN-MARKET PURCHASES: LIMITATION ON OPEN-MARKET PURCHASES:
Generally, none. See "Certain Other Generally, none, provided that See "Certain Other Covenants".
Covenants". interest on the New RIHF Junior
Mortgage Notes was paid in cash on
the interest payment date next
preceding the date of the
open-market purchase in question.
See "Certain Other Covenants".
GUARANTY: GUARANTY: GUARANTY:
RIH guarantees payment of principal RIH guarantees payment of principal GRI guarantees payment of principal
of and interest on the New RIHF of and interest on the New RIHF of and interest on the Old Series
Mortgage Notes pursuant to the RIH Junior Mortgage Notes pursuant to Notes pursuant to the GRI Guaranty.
Mortgage Guaranty. The RIH Mortgage the RIH Junior Mortgage Guaranty. GRI's assets consist principally of
Guaranty is secured by a lien on The RIH Junior Mortgage Guaranty is promissory notes made by RIH in the
the Resorts Casino Hotel pursuant secured by a lien on the Resorts aggregate principal amount of
to a mortgage and security Casino Hotel pursuant to a mortgage $325,000,000 (the "RIH Notes") and
agreement with an assignment of and security agreement with an the capital stock of RIB. RIB and
rents, and an assignment of leases assignment of rents, and an its subsidiaries own the Paradise
and rents (collectively, the "RIH assignment of leases and rents Island properties, including the
Guaranty Mortgage") between RIH, as (collectively, the "RIH Junior Paradise Island Resort & Casino,
mortgagor, and the New RIHF Guaranty Mortgage") between RIH, as the Ocean Club Golf & Tennis Resort
Mortgage Note Trustee for the mortgagor, and the New RIHF Junior and the Paradise Paradise Beach
benefit of the holders of the New Mortgage Note Trustee for the Resort, and all related furniture,
RIHF Mortgage Notes. The RIH benefit of the holders of the New fixtures, machinery and equipment.
Guaranty Mortgage is senior to the RIHF Junior Mortgage Notes. The RIH The RIH Notes and the Paradise
RIH Junior Guaranty Mortgage and Junior Guaranty Mortgage is junior Island properties, including all
junior to the lien securing the RIH to the RIH Senior Facility Guaranty additions or improvements, directly
Senior Facility Guaranty (the "RIH Mortgage and the RIH Guaranty or indirectly, comprise part of the
Senior Facility Guaranty Mortgage. collateral securing the Old Series
Mortgage"). Notes. Such collateral also
includes the lien on the Resorts
Casino Hotel, owned by RIH,
together with all additions or
improvements thereto.
COLLATERAL: COLLATERAL: COLLATERAL:
The New RIHF Mortgage Notes are The New RIHF Junior Mortgage Notes The Old Series A Notes and the Old
secured by an assignment by RIHF to are secured by an assignment by Series B Notes rank PARI PASSU with
the New RIHF Mortgage Note Trustee RIHF to the New RIHF Junior respect to amounts realized upon
for the benefit of the holders of Mortgage Note Trustee for the the sale or other disposition of
the New RIHF Mortgage Notes, of the benefit of the holders of the New the collateral (as described
RIH Promissory Note in the original RIHF Junior Mortgage Notes, of the below).
principal amount of up to RIH Junior Promissory Note in the The collateral consists of: (i)
$125,000,000, payable in amounts original principal amount of up to RII's fee and leasehold interests
and at times necessary to pay the $35,000,000, payable in amounts and in substantially all of its real
principal of and interest on the at times necessary to pay the properties, additions or all
New RIHF Mortgage Notes, which is principal of and interest on the improvements constructed thereon
secured by a lien on the Resorts New RIHF Junior Mortgage Notes, (other than the Showboat Lease and
Casino Hotel, I.E., RIH's fee and which is secured by a lien on the the real property that is subject
leasehold interests comprising the Resorts Casino Hotel, I.E., RIH's to the Showboat Lease and an office
Resorts Casino Hotel, the fee and leasehold interests building in Miami, Florida)
contiguous parking garage and comprising the Resorts Casino (collectively, the "RII Property"),
property, all additions or Hotel, the contiguous parking pursuant to an indenture of
improvements constructed thereon garage and property, all additions mortgage and assignment of leases
or
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
NEW RIHF NEW RIHF
MORTGAGE NOTES JUNIOR MORTGAGE NOTES OLD SERIES NOTES
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
improvements constructed thereon and rents (the "RII Mortgage")
(other than certain designated (other than certain designated between RII and the trustee under
facilities) and all furniture, facilities) and all furniture, the Old Series Note Indenture (the
fixtures, machinery and certain fixtures, machinery and certain "Old Series Note Trustee"); (ii)
other property and equipment of RIH other property and equipment of RIH RIH's fee and leasehold interests
related thereto, encumbered related thereto, encumbered comprising the Resorts Casino
pursuant to a mortgage and security pursuant to a mortgage and security Hotel, the contiguous parking
agreement with assignment of rents, agreement with assignment of rents, garage and property, all additions
and an assignment of leases and and an assignment of leases and or improvements constructed thereon
rents (collectively, the "RIH rents (collectively, the "RIH (other than certain designated
Mortgage") between RIH, as Junior Mortgage") between RIH, as facilities) and all furniture,
mortgagor, and RIHF, as mortgagee, mortgagor, and RIHF, as mortgagee, fixtures, machinery and certain
securing the payment of the RIH securing the payment of the RIH other property and equipment of RIH
Promissory Note. Such lien is Junior Promissory Note. Such lien related thereto, assignment of
junior to the lien securing the RIH is junior to the liens securing the leases and rents and a security
Senior Facility Mortgage and the RIH Senior Facility Mortgage, RIH agreement (collectively, the "Old
RIH Senior Facility Guaranty Senior Facility Guaranty Mortgage, RIH Mortgage") between RIH and the
Mortgage. the RIH Mortgage and the RIH Old Series Note Trustee; (iii) all
Guaranty Mortgage. the outstanding capital stock of
RIH, GRI and all RII's other direct
and indirect domestic subsidiaries
pledged by RII to the Old Series
Note Trustee pursuant to a pledge
agreement (the "RII Pledge
Agreement") between RII and the Old
Series Note Trustee; (iv) the RIH
Notes, pledged by GRI to the Old
Series Note Trustee pursuant to a
pledge agreement (the "RIH Pledge
Agreement") between GRI and the Old
Series Note Trustee; (v) 66% of the
outstanding voting stock of RIB
(the "RIB Stock"), pledged by GRI
to the Old Series Note Trustee
pursuant to a pledge agreement (the
"GRI Pledge Agreement") between GRI
and the Old Series Note Trustee;
and (vi) the RIB Note, the RIB
Subsidiary Guaranty Agreements and
the RIB Mortgage (collectively, the
"RIB Collateral") pledged by RIH to
the Old Series Note Trustee
pursuant to a Pledge and Assignment
Agreement between RIH and the Old
Series Note Trustee (the "RIB
Collateral Assignment Agreement"
and, collectively with the other
documents described in clauses (i)
through (v), the "Old Security
Documents").
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
NEW RIHF NEW RIHF
MORTGAGE NOTES JUNIOR MORTGAGE NOTES OLD SERIES NOTES
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
RANKING: RANKING: RANKING:
The New RIHF Mortgage Notes are The New RIHF Junior Mortgage Notes The Old Series Notes are senior
secured obligations of RIHF. are junior secured obligations of secured obligations of RII.
Although the New RIHF Mortgage RIHF. Although the New RIHF Junior
Notes are not contractually Mortgage Notes are not
subordinated to the RIHF Senior contractually subordinated to the
Facility Notes as to priority of RIHF Senior Facility Notes or the
payment, the lien securing the New New RIHF Mortgage Notes as to
RIHF Mortgage Notes is junior to priority of payment, the lien
the lien securing the RIHF Senior securing the New RIHF Junior
Facility Notes, and the New RIHF Mortgage Notes is junior to the
Mortgage Notes therefore are liens securing the RIHF Senior
structurally subordinated to the Facility Notes and the New RIHF
RIHF Senior Facility Notes. Mortgage Notes, and the New RIHF
The RIH Mortgage and the RIH Junior Mortgage Notes therefore are
Guaranty Mortgage are PARI PASSU structurally subordinated to the
with each other and subordinated to RIHF Senior Facility Notes and the
the liens on the Resorts Casino New RIHF Mortgage Notes.
Hotel securing payment of the RIHF The RIH Junior Mortgage and the RIH
Senior Facility Notes and the RIH Junior Guaranty Mortgage are PARI
Senior Facility Guaranty and any PASSU with each other and
other secured Working Capital subordinated to the liens on the
Facility and related guaranty. Resorts Casino Hotel securing
payment of the RIHF Senior Facility
Notes, the RIH Senior Facility
Guaranty, any other secured Working
Capital Facility and related
guaranty, the RIH Promissory Note
and the RIH Mortgage Guaranty.
PAYMENT OF NET PROCEEDS OF ASSET PAYMENT OF NET PROCEEDS OF ASSET PAYMENT OF NET PROCEEDS OF ASSET
SALES: SALES: SALES:
None. None. See "Mandatory Redemption".
CHANGE OF CONTROL: CHANGE OF CONTROL: CHANGE OF CONTROL:
Neither RIHF nor RIH will Neither RIHF nor RIH will Any holder of Old Series Notes may
consolidate, combine or merge with consolidate, combine or merge with require RII to purchase its Old
or into any other Person or permit or into any other Person or permit Series Notes upon the occurrence of
any other Person to consolidate, any other Person to consolidate, any of the following events
combine or merge with or into RIHF combine or merge with or into RIHF (unless, in certain circumstances,
or RIH, as the case may be; and or RIH, as the case may be; and RII calls all the Old Series Notes
neither RIHF with respect to its neither RIHF with respect to its for redemption): (i) a
assets nor RIH with respect to the assets nor RIH with respect to the consolidation or merger of RII in
New RIHF Mortgage Trust Estate New RIHF Junior Mortgage Trust which RII is not the surviving
shall sell, assign, convey or Estate shall sell, assign, convey entity; (ii) the sale of all or
transfer its interest in such or transfer its interest in such substantially all of RII's assets;
assets or the New RIHF Mortgage assets or the New RIHF Junior (iii) the percentage of RII voting
Trust Estate, as the case may be, Mortgage Trust Estate, as the case stock held by Merv Griffin and
substantially as an entirety to any may be, substantially as an affiliates falls below 15%, other
other Person or group of Persons, entirety to any other Person or than because of RII's issuance of
in one transaction or series of group of Persons, in one additional voting stock; or (iv) a
related transactions, or permit any transaction or series of related person or group not affiliated or
other Person or group of Persons to transactions, or permit any other associated with Merv Griffin
convey or transfer all or Person or group of Persons to sell, acquires 50% or more of RII voting
substantially all of its assets, assign, convey or transfer all or stock.
subject to liabilities other than substantially all of its assets, RII is required to give to the
DE MINIMIS liabilities, to RIHF or subject to liabilities other than holders of Old Series Notes notice
RIH; and RIHF and RIH shall not DE MINIMIS liabilities, to RIHF or of any event described above within
transfer, convey, sell or otherwise RIH; and RIHF and RIH shall not 30 business days of the occurrence
dispose of to any other Person, or transfer, convey, sell or otherwise thereof. Such notice must specify
issue to any Person, any equity dispose of to any other Person, or the event, the repurchase date and
interest in RIHF or RIH, as the issue to any Person, any equity repurchase instructions. The
case may be (each interest in RIHF or RIH, as the repurchase price is
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
NEW RIHF NEW RIHF
MORTGAGE NOTES JUNIOR MORTGAGE NOTES OLD SERIES NOTES
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
case may be (each such transaction 100% of the principal amount plus
such transaction referred to as a referred to as a "Combination accrued and unpaid interest.
"Combination Transaction"); Transaction"); provided, however,
provided, however, that (i) RIHF that (i) RIHF may engage in a
may engage in a Combination Combination Transaction in which
Transaction in which the only other the only other party or parties is
party or parties is RIH or a direct RIH or a direct or indirect wholly
or indirect wholly owned Subsidiary owned Subsidiary of RIHF or RIH,
of RIHF or RIH, and (ii) RIHF or and (ii) RIHF or RIH may engage in
RIH may engage in any other any other Combination Transaction,
Combination Transaction, subject to subject to certain conditions.
certain conditions.
CERTAIN OTHER COVENANTS: CERTAIN OTHER COVENANTS: CERTAIN OTHER COVENANTS:
The New RIHF Mortgage Note Indenture The New RIHF Junior Mortgage Note The Old Series Note Indenture
will contain covenants on the part Indenture will contain covenants on contains certain restrictive
of RIHF, RIH and each of their the part of RIHF, RIH and each of covenants on the part of RII,
Subsidiaries, including without their Subsidiaries, including including, without limitation,
limitation restrictions (subject to without limitation restrictions restrictions (subject to certain
certain exceptions) on: (i) the (subject to certain exceptions) on: exceptions) on: (i) the payment of
ability of RIHF, RIH and each of (i) the ability of RIHF, RIH and cash dividends or redemptions of
their Subsidiaries to terminate each of their Subsidiaries to capital stock by RII (other than as
their corporate existence or the terminate their corporate existence required by the Casino Control
rights (charter and statutory), or the rights (charter and Act); (ii) the repurchase (other
licenses, permits, approvals and statutory), licenses, permits, than as required by the Casino
governmental franchises necessary approvals and governmental Control Act) of any Old Series
to the conduct of its and their franchises necessary to the conduct Notes other than at par unless all
respective businesses; (ii) the of its and their respective interest due on the Old Series
ability of RIHF, RIH and each of businesses; (ii) the ability of Notes on the immediately preceding
their Subsidiaries to make certain RIHF, RIH and each of their interest payment date was paid in
Restricted Payments; (iii) the Subsidiaries to make certain cash and the funds used for the
ability of RIHF, RIH and each of Restricted Payments; (iii) the repurchase are not the proceeds of
their Subsidiaries to incur any ability of RIHF, RIH and each of asset sales that are required to be
Indebtedness other than (a) the New their Subsidiaries to incur any deposited in the Collateral Account
RIHF Mortgage Notes, the RIH Indebtedness other than (a) the New and that have not been so
Promissory Note and the RIH RIHF Mortgage Notes, the RIH deposited; (iii) the incurrence of
Mortgage Guaranty, (b) the Junior Promissory Note and the RIH additional indebtedness for
Mortgage Facility, the RIH Junior Mortgage Guaranty, (b) the Junior borrowed money, with exceptions for
Promissory Note and the RIH Junior Mortgage Facility, the RIH Junior (A) certain purchase money
Mortgage Guaranty, (c) the Working Promissory Note and the RIH Junior financing not to exceed $15,000,000
Capital Facility, any guaranty of a Mortgage Guaranty, (c) the Working in aggregate principal amount at
Working Capital Facility and the Capital Facility, any guaranty of a any time outstanding, (B) financing
RIH Senior Facility Note, (d) Working Capital Facility and the to develop certain property in The
Capitalized Lease Obligations in an RIH Senior Facility Note, (d) Bahamas to fulfill RIB's obligation
amount not in excess of $5,000,000 Capitalized Lease Obligations in an to the Bahamian Government to
in the aggregate at any time amount not in excess of $5,000,000 construct at least 150 first-class
outstanding, (e) FF&E Financing in the aggregate at any time hotel rooms or (after satisfaction
Agreements in an amount not in outstanding, (e) FF&E Financing of such obligation) otherwise, not
excess of $10,000,000 in the Agreements in an amount not in to exceed $20,000,000 in aggregate
aggregate at any time outstanding, excess of $10,000,000 in the principal amount at any time
(f) certain unsecured Indebtedness aggregate at any time outstanding, outstanding, and (C) after the sale
in an amount not in excess of (f) certain unsecured Indebtedness of the Paradise Island Business and
$5,000,000, (g) Non-Recourse in an amount not in excess of application of such sale proceeds
Indebtedness in an amount not in $5,000,000, (g) Non-Recourse to prepay Old Series Notes such
excess of $25,000,000 in the Indebtedness in an amount not in that the aggregate principal amount
aggregate at any time outstanding, excess of $25,000,000 in the of Old Series Notes remaining
(h) After-Acquired Fee Mortgage aggregate at any time outstanding, outstanding does not exceed
Debt in an amount not in excess of (h) After-Acquired Fee Mortgage $75,000,000, financing for the
$3,000,000 in the aggregate at any Debt in an amount not in excess of construction of new hotel
time outstanding, and (i) $3,000,000 in the aggregate at any facilities, including a parking
Intercompany advances between RIH, time outstanding, and (i) garage to serve the Resorts Casino
RIHF or any of their Subsidiaries Intercompany advances between RIH, Hotel, not to exceed $75,000,000 in
on the one hand, and RII, on the RIHF or any of their Subsidiaries aggregate principal amount at any
other hand, in an aggregate amount on the one hand, and RII, on the time outstanding; (iv) transactions
not to exceed $1,000,000; (iv) the other hand, in an aggregate amount with affiliates, with exceptions
ability of not to exceed $1,000,000; (iv) the for
ability of
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
NEW RIHF NEW RIHF
MORTGAGE NOTES JUNIOR MORTGAGE NOTES OLD SERIES NOTES
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
RIHF, RIH and each of their transactions that RII's Board of
RIHF, RIH and each of their Subsidiaries to repay the principal Directors determines to be on terms
Subsidiaries to repay the principal of any Indebtedness which is as favorable as could be obtained
of any Indebtedness which is subordinated in right of payment to from a non-affiliated party,
subordinated in right of payment to the New RIHF Junior Mortgage Notes; certain transactions in regard to
the New RIHF Mortgage Notes, except (v) the ability of RIHF, RIH and acquisition of and financing for
for certain repurchases or each of their Subsidiaries to new hotel facilities, and
redemptions under the Junior repurchase any New RIHF Junior contribution by RII or any of its
Mortgage Facility; (v) the ability Mortgage Notes in the open market subsidiaries of undeveloped land to
of RIHF, RIH and each of their if an Event of Default shall have joint ventures, provided that
Subsidiaries to repurchase any New occurred and be continuing under neither RII nor any of its
RIHF Mortgage Notes in the open the New RIHF Mortgage Note subsidiaries may enter into any of
market if an Event of Default shall Indenture, the New RIHF Junior the foregoing transactions in
have occurred and be continuing Mortgage Note Indenture or the RIHF excess of $10,000,000 without a
under the New RIHF Mortgage Note Senior Facility Note Indenture; fairness opinion of an independent
Indenture, the New RIHF Junior (vi) the ability of RIHF, RIH and financial adviser; (vi) mergers and
Mortgage Note Indenture or the RIHF each of their Subsidiaries to consolidations with entities other
Senior Facility Note Indenture; engage in certain activities; (vii) than affiliates of RII; and (vii)
(vi) the ability of RIHF, RIH and the ability of RIHF and RIH to the ability of RII and its
each of their Subsidiaries to create or acquire any additional subsidiaries to sell their
engage in certain activities; (vii) Subsidiaries; (viii) the creation respective assets. The Old Series
the ability of RIHF and RIH to of additional liens on the Mortgage Note Indenture also requires RII,
create or acquire any additional Documents or the New RIHF Junior at all times after December 31,
Subsidiaries; (viii) the creation Mortgage Trust Estate with 1990, to maintain a consolidated
of additional liens on the Mortgage exceptions for, among other things, tangible net worth (as defined)
Documents or the New RIHF Mortgage liens created in connection with equal to at least $50,000,000.
Trust Estate with exceptions for, permitted Indebtedness described in
among other things, liens created clause (iii) above; (ix)
in connection with permitted non-compliance with all applicable
Indebtedness described in clause statutes, rules, regulations and
(iii) above; (ix) non-compliance orders; (x) non-payment of taxes,
with all applicable statutes, (xi) maintenance of properties,
rules, regulations and orders; (x) (xii) maintenance of insurance,
non-payment of taxes, (xi) (xiii) the ability of RIHF, RIH and
maintenance of properties, (xii) their Subsidiaries to insist upon,
maintenance of insurance, (xiii) plead or claim any stay or
the ability of RIHF, RIH and their extension law or usury law or other
Subsidiaries to insist upon, plead law that would prohibit or forgive
or claim any stay or extension law RIHF or RIH from paying the
or usury law or other law that principal of, or interest on the
would prohibit or forgive RIHF or New RIHF Junior Mortgage Notes or
RIH from paying the principal of, the RIH Junior Promissory Note or
or interest on the New RIHF the RIH Junior Guaranty; (xiv) the
Mortgage Notes or the RIH ability of RIHF, RIH and their
Promissory Note or the RIH Subsidiaries to engage in certain
Guaranty; (xiv) the ability of transactions with Affiliates.
RIHF, RIH and their Subsidiaries to
engage in certain transactions with
Affiliates.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
NEW RIHF NEW RIHF
MORTGAGE NOTES JUNIOR MORTGAGE NOTES OLD SERIES NOTES
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
MODIFICATION OF INDENTURE: MODIFICATION OF INDENTURE: MODIFICATION OF INDENTURE:
Requirement of vote by two-thirds in Requirement of vote by two-thirds in Requirement of vote by two-thirds in
aggregate principal amount of New aggregate principal amount of New aggregate principal amount of Old
RIHF Mortgage Notes in order (a) to RIHF Junior Mortgage Notes in order Series Notes (including the vote of
amend or supplement the New RIHF to (a) amend or supplement the New a majority of each of the Old
Mortgage Note Indenture, the RIHF Junior Mortgage Note Series A Notes and the Old Series B
Mortgage Documents, the Assignment Indenture, the Mortgage Documents, Notes) in order to amend the Old
Agreement or the New RIHF Mortgage the Assignment Agreement or the New Series Note Indenture or any Old
Notes, or (b) release the New RIHF RIHF Junior Mortgage Notes, or (b) Security Document, except no such
Mortgage Trust Estate from the lien release the New RIHF Junior amendment, without the consent of
of the Mortgage Documents, except Mortgage Trust Estate from the lien the holder of each Old Series Note
no such amendment, or supplement of the Mortgage Documents except no affected, may change the terms of
without the consent of the holder such amendment or supplement, payment of principal and interest,
of each New RIHF Mortgage Note without the consent of the holder adversely change the redemption
affected may (i) change the stated ofeach New RIHF Junior Mortgage provisions, waive payment defaults
maturity of the principal, or any Note affected may (i) change the thereon, or reduce the aforesaid
installment of interest, reduce the stated maturity of the principal, voting amounts required for
principal amount, change any Place or any installment of interest, amendments.
of Payment where, or the coin or reduce the principal amount, change
currency in which, principal or any Place of Payment where, or the
interest is payable, or impair the coin or currency in which,
right to institute suit for the principal or interest is payable,
enforcement of payment, (ii) reduce or impair the right to institute
the aforesaid voting amount suit for the enforcement of
required for amendments, (iii) payment, (ii) reduce the aforesaid
modify the term "Outstanding", (iv) voting amount required for
modify the provisions described in amendments, (iii) modify the term
this paragraph or the provisions "Outstanding", (iv) modify the
regarding waiver of default, (v) provisions described in this
with certain exceptions, permit the paragraph or the provisions
creation of any lien ranking prior regarding waiver of default, (v)
to the lien of the RIH Mortgage. with certain exceptions, permit the
creation of any lien ranking prior
to the lien of the RIH Junior
Mortgage. In addition, the holders
of two-thirds in aggregate
principal amount of New RIHF
Mortgage Notes must consent to any
amendment of the New RIHF Junior
Mortgage Note Indenture allowing
for redemption of the New RIHF
Junior Mortgage Notes prior to the
fifth anniversary of the Effective
Date unless such redemption is in
connection with an RIH Sale.
TRUSTEE: TRUSTEE: TRUSTEE:
State Street Bank and Trust Company U.S. Trust Company of California, Chemical Bank (successor to
of Connecticut, National N.A. Manufacturers Hanover Trust
Association. Company).
The New RIHF Mortgage Note Trustee The New RIHF Junior Mortgage Note The Old Series Note Trustee may
may require reasonable indemnity Trustee may require reasonable require reasonable indemnity before
before exercising any of its rights indemnity before exercising any of exercising any of its rights or
or powers under the New RIHF its rights or powers under the New powers under the Old Series Note
Mortgage Note Indenture. RIHF Junior Mortgage Note Indenture.
Indenture.
</TABLE>
See "Description of Old Series Notes", "Description of New RIHF Mortgage
Notes" and "Description of New RIHF Junior Mortgage Notes".
DESCRIPTION OF NEW EQUITY SECURITIES
RII COMMON STOCK
RII Common Stock will be issued to the holders of the Old Series Notes as of
the Distribution Record Date. The existing holders of RII Common Stock will
continue to hold their RII Common Stock.
57
<PAGE>
<TABLE>
<S> <C>
Issuer............................ RII.
Number of shares.................. Up to 100,000,000 authorized, (i) 20,157,234 of which
are outstanding as of November 30, 1993, and (ii)
17,025,000 of which will be issued as of the
Distribution Date (assuming all distributions to be
made under the Plan are made on the Distribution Date
and no options and warrants to purchase RII Common
Stock have been exercised). Up to 160,000 additional
shares of RII Common Stock may be issued to holders of
Old Plan Disputed Claims if such Old Plan Disputed
Claims are allowed by the New Jersey bankruptcy court.
The number of shares of RII Common Stock to be issued
pursuant to the Plan would increase to offset the
dilutive effect of the issuance of additional RII
Common Stock.
Dividends......................... Dividends may be declared by the RII Board of Directors
and would be payable from legally available funds.
Redemption........................ Subject to redemption if a holder is required to qualify
under the New Jersey Casino Control Act and regulations
promulgated thereunder (the "Casino Control Act") and
refuses or fails to so qualify and subsequently fails
to divest itself of such RII Common Stock.
Liquidation rights................ The net proceeds of any liquidation will be payable pro
rata to the holders of the RII Common Stock and the RII
Class B Common Stock to the extent of par value per
share of each such class (I.E., $.01), with the balance
of such proceeds payable pro rata to the holders of the
RII Common Stock.
Restrictions on transfer.......... None.
Election of directors............. Holders of the RII Common Stock are entitled to elect
two-thirds of the entire Board of Directors (the "RII
Board of Directors") or, following the Class B
Triggering Event in respect of the New RIHF Junior
Mortgage Notes, one less than one-half of the RII Board
of Directors. Such directors are divided into three
classes of directors serving staggered three-year
terms. This 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
shareholders. The initial RII Board of Directors will
be appointed pursuant to the Plan.
Voting rights..................... One vote per share on all matters on which shareholders
are entitled to vote, other than the election of
directors by the holders of the RII Class B Common
Stock.
Preemptive rights................. None.
</TABLE>
See "Description of New Equity Securities".
RII CLASS B COMMON STOCK
The RII Class B Common Stock will be issued as part of the Units to the
holders of the Old Series Notes as of the Effective Date and is essentially a
non-participating stock that entitles its holders to elect the Class B
Directors.
58
<PAGE>
<TABLE>
<S> <C>
Issuer............................ RII.
Number of shares.................. Up to 80,000 authorized, 35,000 of which will be issued
as of the Distribution Date (assuming all distributions
to be made under the Plan are made on the Distribution
Date).
Dividends......................... None.
Redemption........................ Upon redemption, or cancellation following the purchase
thereof, of each $1,000 principal amount of New RIHF
Junior Mortgage Notes, RII will redeem, at a price of
$.01 per share, the share of RII Class B Common Stock
issued as a Unit with each $1,000 principal amount of
New RIHF Junior Mortgage Notes. 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 RII Class B
Common Stock.
Liquidation rights................ The net proceeds of any liquidation of RII will be
payable pro rata to the holders of the RII Class B
Common Stock to the extent of the $.01 par value per
share.
Restrictions on transfer.......... Each share of RII Class B Common Stock will be issued as
part of a Unit with each $1,000 principal amount of New
RIHF Junior Mortgage Notes and may not be transferred
separately from such New RIHF Junior Mortgage Note.
Election of directors............. Holders of the RII Class B Common Stock to elect
one-third of the RII Board of Directors or, following
the Class B Triggering Event in respect of the New RIHF
Junior Mortgage Notes, a majority of the RII Board of
Directors. The initial RII Board of Directors will be
appointed pursuant to the Plan.
Voting rights..................... None, other than (i) the election of directors by the
holders of RII Class B Common Stock, (ii) to the extent
required under Delaware law and (iii) with respect to
certain amendments to the Amended RII Certificate of
Incorporation or the Amended RII By-laws that would
affect the RII Class B Common Stock.
Preemptive rights................. None.
See "Description of New Equity Securities".
</TABLE>
PIRL ORDINARY SHARES
If the SIHL Sale is not consummated on or before the Effective Date, subject
to the satisfaction of certain conditions, PIRL Ordinary Shares will be issued
to the holders of the Old Series Notes as of the Distribution Record Date to
effect the PIRL Spin-Off. The PIRL Ordinary Shares will be the only outstanding
class of capital stock of PIRL as of the Distribution Date.
<TABLE>
<S> <C>
Issuer............................ PIRL.
Number of shares.................. Up to 25,000,000 authorized, 5,000,000 of which will be
issued as of the Distribution Date (assuming all
distributions to be made under the Plan are made on the
Distribution Date).
Dividends......................... Dividends declared by the PIRL Board of Directors would
be payable from legally available funds.
Redemption........................ None.
Liquidation rights................ The net proceeds of any liquidation of PIRL will be
payable pro rata to the holders of the PIRL Ordinary
Shares.
Restrictions on transfer.......... None.
Election of directors............. Holders of the PIRL Ordinary Shares to elect all
directors of PIRL.
</TABLE>
59
<PAGE>
<TABLE>
<S> <C>
Voting rights..................... One vote per share on all matters on which shareholders
are entitled to vote.
Preemptive rights................. None.
</TABLE>
See "Description of New Equity Securities" and "Description of PIRL Standby
Distribution Agreement".
SIHL SERIES A SHARES
If the SIHL Sale is consummated on or before the Effective Date, the SIHL
Series A Shares, representing 40% of the capital stock of SIHL to be outstanding
after the SIHL Sale, will be issued to the holders of the Old Series Notes on
the Distribution Date. Such shares are entitled to the benefit of the Put Right.
See "Description of Paradise Island Purchase Agreement."
FOR INFORMATION WITH RESPECT TO SIHL, THE SIHL SALE, THE PARADISE ISLAND
PURCHASE AGREEMENT AND THE SIHL SERIES A SHARES, REFERENCE IS MADE TO THE SIHL
PROSPECTUS RELATING TO THE SIHL SERIES A SHARES. RII HAS SUPPLIED CERTAIN
INFORMATION REGARDING THE PARADISE ISLAND BUSINESS (SUCH AS IS FOUND IN RII'S
REPORTS FILED WITH THE COMMISSION), AS WELL AS CERTAIN INFORMATION CONCERNING
THE RESTRUCTURING, TO SIHL SPECIFICALLY FOR ITS USE IN THE PREPARATION OF THE
SIHL PROSPECTUS (AND THE RELATED REGISTRATION STATEMENT FILED BY SIHL WITH THE
COMMISSION UNDER THE SECURITIES ACT). RII AND ITS ADVISERS DISCLAIM ANY
RESPONSIBILITY FOR THE ACCURACY, COMPLETENESS, NATURE AND FORM OF PRESENTATION
OF ANY INFORMATION CONTAINED IN THE SIHL PROSPECTUS (AND RELATED REGISTRATION
STATEMENT), EXCEPT THAT RII HAS MADE IN THE PARADISE ISLAND PURCHASE AGREEMENT
CERTAIN REPRESENTATIONS AND WARRANTIES TO SIHL AS TO THE ACCURACY OF THE
INFORMATION SUPPLIED BY RII SPECIFICALLY FOR INCLUSION IN THE SIHL PROSPECTUS
(AND RELATED REGISTRATION STATEMENT).
VOTING PROCEDURES
GENERAL. RII and GRI, upon the terms and conditions set forth herein and in
the voting instructions set forth in the Ballots, are soliciting an Acceptance
of the Plan from each person that was a beneficial owner on the Voting Record
Date of (a) any Old Series Notes (and the beneficiary of the related GRI
Guaranty endorsed thereon), (b) any RII Common Stock, (c) the GRI Common Stock,
(d) the RII Intercompany Claim and (e) any 1990 Stock Options. A form of Ballot
to be used for voting to accept or reject the Plan (and, in the case of holders
of Old Series Notes, for indicating consents to the termination and release of
the Old Security Documents), together with a pre-addressed, postage-paid
envelope, has been provided with this Information Statement/Prospectus. The
terms of the Solicitation are for the sole benefit of RII and GRI and may be
asserted by RII and GRI regardless of the circumstances or may be waived by RII
and GRI, in whole or in part, at any time and from time to time, in their sole
discretion (subject to the approval of Fidelity and TCW so long as the funds and
accounts managed by them hold in the aggregate at least 20% of the outstanding
Old Series Notes). Any determination by RII and GRI concerning the terms of the
Solicitation will be final and binding upon all parties. Master Ballots, which
will be distributed separately to banks and brokerage firms, will be used to
record the votes of beneficial owners.
The following classes of claims and interests are impaired under the Plan
and all holders of Allowed Claims or Interests in such classes as of the Voting
Record Date are entitled to vote to accept or reject the Plan:
RII Class 2 -- Claims of holders of Old Series Notes (use gray Ballot)
RII Class 7 -- Interests of holders of RII Common Stock (use blue Ballot)
RII Class 8 -- Interests of holders of 1990 Stock Options (use green Ballot)
GRI Class 2 -- Claims of holders of GRI Guaranty (use gray Ballot)
GRI Class 4 -- Claims of RII, as the holder of the RII Intercompany Claims
GRI Class 5 -- Interest of RII, as the holder of all GRI Common Stock
60
<PAGE>
ANY HOLDER OF CLAIMS AND INTERESTS IN MORE THAN ONE CLASS IS REQUIRED TO
VOTE SEPARATELY WITH RESPECT TO EACH CLASS IN WHICH SUCH HOLDER HAS CLAIMS AND
INTERESTS. PLEASE USE A SEPARATE BALLOT OF THE APPROPRIATE FORM TO VOTE EACH
SUCH CLASS OF CLAIM AND INTEREST. Although RII Class 2 and GRI Class 2 Claims
are to be voted on the same Ballot, holders of such claims must use a separate
Ballot for each series of Old Series Notes which they hold and for each account
in which Old Series Notes are held. In addition, banks and brokerage firms must
submit separate Master Ballots for each series of Old Series Notes for which
they have beneficial owners.
The Voting Record Date for voting on the Plan is the close of business in
The City of New York, State of New York, on March 15, 1994. To be entitled to
vote to accept or reject the Plan, a holder of an RII Class 2 Claim, RII Class 7
Interest, RII Class 8 Interest, GRI Class 2 Claim, GRI Class 4 Claim, or GRI
Class 5 Interest must have been the beneficial owner of such claim or interest
at the close of business on the Voting Record Date. It is important that all
beneficial owners vote to accept or reject the Plan. Under the Bankruptcy Code,
for purposes of determining whether the Requisite Acceptances have been
received, only beneficial owners who vote will be counted. Each beneficial owner
electing to vote on the Plan should (i) carefully read the voting instructions
set forth in the applicable Ballot, (ii) complete the applicable Ballot, (iii)
mark the Ballot to indicate such holder's vote on the Plan, (iv) indicate in the
appropriate place on the Ballot whether such holder consents to the release of
the Old Security Documents (record holders of Old Series Notes only), and (v)
sign and return the Ballot in accordance with the instructions set forth
thereon. ANY BALLOT THAT IS EXECUTED BY A RECORD HOLDER AND DOES NOT INDICATE A
REJECTION OF THE PLAN WILL BE DEEMED AN ACCEPTANCE OF THE PLAN. See "The
Solicitation".
CONSENTS TO TERMINATE AND RELEASE OLD SECURITY DOCUMENTS. RII also is
soliciting the consents of the record holders of outstanding Old Series Notes
pursuant to the terms of the Old Series Note Indenture in order to effect the
termination and release of the Old Security Documents under which the liens on
the property securing the Old Series Notes were granted or created. The Old
Series Note Indenture requires that consents be obtained from the record holders
of at least 66 2/3% in aggregate principal amount of the outstanding Old Series
Notes and the record holders of at least a majority in aggregate principal
amount of each series of the Old Series Notes in order to terminate and release
the Old Security Documents. Such consents will terminate and release the Old
Security Documents and will release the parties to the Old Security Documents
from all obligations thereunder. Such consents must be evidenced by such record
holders separately from their vote on the Plan. The Ballots for the holders of
Old Series Notes permit holders to give or withhold such consent. ANY BALLOT
EXECUTED BY A HOLDER OF OLD SERIES NOTES RETURNED WITHOUT AN INDICATION TO
WITHHOLD SUCH CONSENT WILL BE DEEMED TO GIVE SUCH CONSENT. The Company believes
that it is appropriate to count executed, unmarked Ballots as Acceptances of the
Plan and will ask the Bankruptcy Court to permit RII and GRI to do so. There can
be no assurance, however, that the Bankruptcy Court will approve such a
procedure. Accordingly, parties entitled to vote on the Plan are encouraged both
to sign their Ballots and to indicate their votes with respect to the Plan.
RII is soliciting these consents for the purposes of: (i) releasing the
Resorts Casino Hotel from the liens of the Old Security Documents so that it may
be encumbered to secure the RIH Senior Facility Note, the RIH Senior Facility
Guaranty, the RIH Promissory Note, the RIH Mortgage Guaranty, the RIH Junior
Promissory Note and the RIH Junior Mortgage Guaranty; (ii) releasing all of the
assets and capital stock of RII's subsidiaries to effect either the SIHL Sale or
the PIRL Spin-Off; and (iii) releasing the Non-Operating Real Property from the
liens of the Old Security Documents. Absent a release of the Old Security
Documents through either consent or an appropriate Bankruptcy Court order, the
transactions contemplated by the Plan cannot be consummated.
In no event will the consents to release the Old Security Documents be used
to effectuate the termination and release of the Old Security Documents in the
absence of the confirmation and consummation of the Plan. If RII and GRI fail to
receive the Requisite Acceptances, notwithstanding receipt of sufficient
consents to release and terminate the Old Security Documents pursuant to the
61
<PAGE>
Old Series Note Indenture, such consents will only be used in the event that RII
and GRI continue to pursue confirmation and consummation of the Plan. In the
event that RII and GRI elect or are required to resolicit Acceptances of the
Plan, however, they reserve the right not to resolicit with respect to the
consents to release the Old Security Documents and to use consents received from
the initial Solicitation. Consents to release and terminate the Old Security
Documents may be withdrawn or revoked at any time prior to the Voting Deadline.
VOTING DEADLINE; EXTENSIONS; WITHDRAWAL OR REVOCATION OF BALLOTS. The
Solicitation will expire at 5:00 p.m., New York City time, on the Voting
Deadline. Except to the extent RII and GRI so determine or as permitted by the
Bankruptcy Court, Ballots or Master Ballots that are received after the Voting
Deadline will not be accepted or used by RII and GRI in connection with RII's
and GRI's request for confirmation of the Plan (or any permitted modification
thereof). The Solicitation will not be terminated prior to March 15, 1994,
unless the Company is required to seek immediate protection under chapter 11 of
the Bankruptcy Code as a result of an acceleration of the maturity of the Old
Series Notes or a foreclosure upon the collateral securing the Old Series Notes.
RII and GRI expressly reserve the right, at any time or from time to time,
to extend the Voting Deadline by giving oral or written notice to the
Solicitation Agent of such extension. The Solicitation can be extended for that
period of time necessary to obtain the Requisite Acceptances. Any extension or
expiration of the Voting Deadline will be followed as promptly as practicable by
a public announcement made through the Dow Jones News Service. There can be no
assurance that RII and GRI will exercise their right to extend the Voting
Deadline. As a practical matter, however, without the consent of SIHL and
Fidelity and TCW (so long as the funds and accounts managed by them hold in the
aggregate at least 20% of the outstanding Old Series Notes), the Solicitation
cannot be extended beyond March 21, 1994, the date that chapter 11 cases must be
filed (and the Solicitation thereby terminated) by RII and GRI to avoid
terminating SIHL's obligations under the Paradise Island Purchase Agreement. In
addition, if the Old Series Note Trustee accelerates the Old Series Notes as a
result of the default described in "Risk Factors--Certain Defaults" or if RII
and GRI are unable to meet their payment obligations under the Old Series Notes
on April 15, 1994, foreclosure or other collection actions may require RII and
GRI to file chapter 11 cases and thereby terminate the Solicitation. RII and GRI
currently intend to extend the Solicitation only if there is a likelihood that
the extensions will facilitate receipt of the Requisite Acceptances and the
Restructuring as proposed in the Plan is achievable if the Solicitation is so
extended. During any extension of the Voting Deadline, all Ballots and Master
Ballots previously given will remain subject to all the terms and conditions of
the Solicitation, including the withdrawal and revocation rights specified
herein.
At any time prior to the Voting Deadline, a party may withdraw or revoke a
Ballot that it has previously delivered; provided however, that a vote of a
beneficial owner evidenced by a Master Ballot which has been previously
delivered may be withdrawn or revoked only by the nominee completing such Master
Ballot. A Ballot may be revoked or withdrawn either by submitting a superseding
Ballot or by providing written notice to the Solicitation Agent. Neither RII nor
GRI intends to commence a case under chapter 11 of the Bankruptcy Code prior to
the Voting Deadline, although they reserve the right to do so in their sole
discretion. After commencement of a case under the Bankruptcy Code, withdrawal
or revocation may be effected only with the approval of the Bankruptcy Court.
OWNERSHIP OF RII COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. As of November 30, 1993, there were 2,003 record holders of RII
Common Stock.
The following table sets forth certain information as to the beneficial
ownership of RII Common Stock as of November 30, 1993, by persons known by RII
to be holders of 5% or more of RII Common Stock, by each director of RII, by
each nominee for director of RII, by each executive officer named in the RII
Summary Compensation Table under "Management of RII -- Executive Compensation",
by
62
<PAGE>
all directors and officers of RII as a group and by all persons expected to
become holders of 5% or more of RII Common Stock when the Restructuring is
effected. Information as to the number of shares beneficially owned has been
furnished by the persons named in the table.
<TABLE>
<CAPTION>
PRE-RESTRUCTURING POST-RESTRUCTURING
-------------------------------------- ------------------------------------
AMOUNT AND AMOUNT AND
NATURE OF SHARES PERCENT OF NATURE OF SHARES PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS BENEFICIALLY OWNED CLASS(8)
- ---------------------------------------- --------------------- ------------ ------------------- ------------
<S> <C> <C> <C> <C>
Merv Griffin............................ 4,398,115 21.82% 9,063,115(4) 21.29%
Antonio C. Alvarez II................... 5,000 .02 5,000(5) .01
Warren Cowan............................ 5,000 .02 5,000 .01
Thomas E. Gallagher..................... -- -- -- --
Joseph G. Kordsmeier.................... -- -- -- --
Paul C. Sheeline........................ 5,000 .02 5,000 .01
Christopher D. Whitney.................. 100,000(1) .49 100,000 .26
Matthew B. Kearney...................... 87,500(1) .43 87,500 .23
David G. Bowden......................... 25,000(1) .12 25,000 .07
Directors and officers as a group (nine 4,625,615(2) 22.71 9,290,615(6) 21.72
persons)...............................
William Fallon.......................... -- -- -- --
Jay Green............................... -- -- -- --
Charles Masson.......................... -- -- -- --
Vincent Naimoli......................... -- -- -- --
David P. Hanlon......................... 1,094,800(3) 5.15 1,094,800 2.81
Certain funds and accounts managed by -- -- 6,686,633(7) 17.64
Fidelity...............................
Certain funds and accounts managed by -- -- 4,223,937(7) 11.15
TCW....................................
<FN>
- --------------------------
(1) Ownership represents shares issuable upon exercise of 1990 Stock Options.
Related percentages shown give effect to the exercise of all such stock
options.
(2) Includes 212,500 shares which are issuable upon exercise of 1990 Stock
Options. Related percentage shown gives effect to the exercise of all such
stock options.
(3) Ownership represents shares issuable upon exercise of certain fully vested
stock options issued pursuant to the 1990 Stock Option Plan. Related
percentages shown give effect to the exercise of all such stock options.
See Note (5) to RII Summary Compensation Table under "Management of RII --
Executive Compensation".
(4) Includes 4,665,000 shares issuable upon exercise of the Griffin Warrants
assuming that the Griffin Warrants are issued. Related percentage gives
effect to their exercise.
(5) Excludes any beneficial ownership interest attributable to the 125,000
shares which are to be issued to Alvarez & Marsal in settlement of certain
recapitalization costs.
(6) Includes 212,500 shares which are issuable upon exercise of 1990 Stock
Options and 4,665,000 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.
(7) Assumes that the funds and accounts managed by Fidelity and TCW continue
to own on the Distribution Record Date all the Old Series Notes they own
as of January 10, 1994.
(8) The percentages shown give effect to the issuance of 17,025,000 shares to
the holders of the Old Series Notes and 715,000 shares to financial
advisers in settlement of certain recapitalization costs.
</TABLE>
INTERESTS OF CERTAIN PERSONS IN THE RESTRUCTURING
The following directors and officers of RII may have, to the extent
indicated, an interest in the Restructuring.
In April 1993, RII, RIH and the Griffin Group executed the New Griffin
Services Agreement to be effective as of September 17, 1992, the termination
date of the Old Griffin Services Agreement. Merv Griffin serves as a director
and the Chairman of the Board of RII. The Griffin Group is a company controlled
by Merv Griffin. The New Griffin Services Agreement will remain in place after
the Effective Date. The New Griffin Services Agreement has a four-year term.
Under certain circumstances, however, the New Griffin Services Agreement could
remain in force up to an additional year. Pursuant to the New Griffin Services
Agreement, Mr. Griffin and the Griffin Group will promote the operations of the
Company in Atlantic City and, so long as owned by RII, The Bahamas. Fees of
$6,305,000 have already been paid to the Griffin Group for the first three years
of the term of the New Griffin Services Agreement. In conjunction with the
negotiations among RII, Fidelity, TCW and the Griffin Group relating to the
Griffin Group's performance under the New Griffin Services Agreement,
63
<PAGE>
certain modifications to the New Griffin Services Agreement were negotiated. As
a result of these modifications, the following will occur: (1) on or prior to
the Effective Date, RII will pay $2,310,000 to the Griffin Group for the fourth
year of the New Griffin Services Agreement by reducing the principal amount of
the Griffin Group Note in an equal amount; (2) subsequent to such payment, but
no later than the Effective Date, the Griffin Group will pay the then remaining
balance of the Griffin Group Note (approximately $3,000,000) plus accrued
interest to RII; and (3) on the Distribution Date, RII will issue to the Griffin
Group the Griffin Warrants to purchase 4,665,000 shares of RII Common Stock, or
approximately 10% of the RII Common Stock on a fully diluted basis. The Griffin
Warrants will be exercisable on the Effective Date at an exercise price of the
lesser of $1.875 and the average closing price of RII Common Stock for the 20
trading days following the Effective Date. In conjunction with the negotiations
among RII, Fidelity, TCW and the Griffin Group, the Griffin Group negotiated a
reduction in the exercise price for the Griffin Warrants from the original
exercise price set forth in the New Griffin Services Agreement. The exercise
prices prior to such amendment were based upon percentages of the average
closing price of the RII Common Stock during the 20 trading days following the
Effective Date (with certain minimum prices) and ranged from the greater of
$1.00 or 125% of such price as to the first 25% of the Griffin Warrants up to
the greater of $1.75 or 200% of such price as to the final 25% of the Griffin
Warrants. The change in the exercise price was approved by RII, and consented to
by Fidelity and TCW, to provide additional incentives to the Griffin Group for
its efforts to improve the operations and value of RII.
Pursuant to an agreement dated as of September 27, 1993, between RII and
David P. Hanlon (the "Hanlon Termination Agreement"), RII and Mr. Hanlon
mutually agreed to the termination, as of October 31, 1993, of Mr. Hanlon's
September 17, 1992 employment agreement with RII (the "Hanlon Employment
Agreement"). Mr. Hanlon served as President and Chief Executive Officer of RII
and owns fully vested 1990 Stock Options to purchase 1,094,800 shares of RII
Common Stock (or 5.15% of the outstanding shares of the RII Common Stock
assuming such options were exercised). RII entered into the Hanlon Termination
Agreement to effectuate an orderly restructuring of its senior management.
Pursuant to the Hanlon Employment Agreement, Mr. Hanlon received $720,000 earned
under the Hanlon Employment Agreement but not yet paid as of October 31, 1993.
In addition, pursuant to the Hanlon Termination Agreement, Mr. Hanlon is
entitled to receive a total of $2,648,656, consisting of the present value of
future base salary under 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, half of which was paid on October 31, 1993 and
half of which will be paid upon the earlier of (i) the acceptance of a
reorganization or recapitalization of RII by the requisite number and amount of
RII's creditors voting on such restructuring or reorganization and (ii) April
15, 1995. In addition, Mr. Hanlon will receive a bonus from RII in the amount of
$325,000 in connection with the reorganization or recapitalization of RII,
payable prior to any bankruptcy filing by RII. Finally, Mr. Hanlon will receive
a bonus of $300,000 upon the disposition of the Paradise Island Business.
Accordingly, Mr. Hanlon would receive a total of $625,000 in connection with the
Restructuring. The payment to be made to Mr. Hanlon with respect to the
disposition of the Paradise Island Business may be subject to the approval of
the Bankruptcy Court.
Mr. Alvarez, a director of RII, also is the Chairman of Alvarez & Marsal, a
financial advisory firm which RII has retained to provide it with advice
regarding RII's financial alternatives, including the Restructuring. If the
Requisite Acceptances are obtained, Alvarez & Marsal will receive a payment in
the amount of $250,000 and 125,000 shares of RII Common Stock prior to any
bankruptcy filing by RII.
SOLICITATION AGENT
Hill and Knowlton, Inc. ("Hill and Knowlton") will act as Solicitation Agent
in connection with the Solicitation. Its telephone number is (212) 210-8850
(call collect). All inquiries relating to the Solicitation should be directed to
Hill and Knowlton at such telephone number. As part of its responsibilities as
Solicitation Agent, Hill and Knowlton will tabulate all votes cast in connection
with the
64
<PAGE>
Solicitation. Requests for information or additional copies of this Information
Statement/Prospectus or Ballots should be directed to Hill and Knowlton. All
deliveries to Hill and Knowlton in its capacity as Solicitation Agent should be
directed to one of the addresses set forth on the back cover page of this
Information Statement/Prospectus.
Hill and Knowlton will receive reasonable and customary compensation for
services rendered in connection with the Solicitation, will be reimbursed for
reasonable out-of-pocket expenses and will be indemnified against certain
expenses in connection therewith.
OTHER ELEMENTS OF THE RESTRUCTURING
The transactions described below will be effected upon consummation of the
Restructuring. Each such transaction is provided for in the Plan.
RIHF SENIOR FACILITY. The RIHF Senior Facility will be executed and
delivered (although conditions precedent to funding may not have then been
satisfied.)
AMENDMENTS TO RII'S CERTIFICATE OF INCORPORATION AND BY-LAWS. Upon the
consummation of the Restructuring and pursuant to the Plan, the Restated
Certificate of Incorporation of RII will be amended (the "Amended RII
Certificate of Incorporation") to provide for: (i) an increase in the authorized
number of shares of RII Common Stock; (ii) the authorization and issuance of the
RII Class B Common Stock; (iii) the authorization of preferred stock; (iv) the
election of two-thirds of the RII Board of Directors by the holders of RII
Common Stock (or following the occurrence of the Class B Triggering Event with
respect to the New RIHF Junior Mortgage Notes one less than one-half of the RII
Board of Directors); and (v) the election of one-third of the RII Board of
Directors by the holders of RII Class B Common Stock (or following the
occurrence of the Class B Triggering Event with respect to the New RIHF Junior
Mortgage Notes, a majority of the RII Board of Directors). The form of the
Amended RII Certificate of Incorporation is attached as Appendix C.
Upon consummation of the Restructuring and pursuant to the Plan, the By-laws
of RII will be amended (the "Amended RII By-laws") as necessary in connection
with the Restructuring. The form of the Amended RII By-laws is attached as
Appendix D.
Pursuant to the Delaware General Corporation Law, the Amended RII
Certificate of Incorporation and the Amended RII By-laws may be adopted upon
confirmation of the Plan without further action by RII's directors or the
holders of RII Common Stock.
INTERIM MANAGEMENT AGREEMENT. If the SIHL Sale is not consummated on the
Effective Date, RII, at the election of PIRL, will enter into an Interim
Management Agreement with PIRL to operate the Paradise Island Business (the
"Interim Management Agreement"). The Interim Management Agreement would have an
initial term of one year and be renewable on a yearly basis thereafter. The
annual management fee payable to the Company under the Interim Management
Agreement would be 3% of gross revenues of the Paradise Island Business. PIRL
may terminate the Interim Management Agreement for any reason upon 30 days'
prior notice. In the event of such a termination, RII will be entitled to a
termination fee of $1,000,000, in addition to the unpaid balance of the annual
management fee actually earned through the date of termination.
MANAGEMENT COMPENSATION ARRANGEMENTS. All existing compensation
arrangements with management of the Company, except for the 1990 Stock Option
Plan, will continue. Existing employment contracts with management of the
Company are expected to be renewed in the ordinary course of business. As part
of the Restructuring, the 1990 Stock Option Plan will be terminated and no
further 1990 Stock Options will be issued. Existing holders of 1990 Stock
Options will retain their options under the Plan. The exercise price of the 1990
Stock Options shall remain fixed at the existing exercise price. See "Management
of RII".
1994 STOCK OPTION PLAN. In conjunction with the Restructuring, RII will
adopt the 1994 Stock Option Plan for RII and its subsidiaries to attract, retain
and motivate their officers, directors and key employees. To the extent that
shareholder approval of the 1994 Stock Option Plan is required under
65
<PAGE>
Rule 16b-3 promulgated under the Exchange Act, if sufficient Acceptances are
received from holders of RII Common Stock and Old Series Notes (including the
related GRI Guaranty), RII intends to use such Acceptances, along with the
Confirmation Order, to constitute approval of the 1994 Stock Option Plan in
compliance with Rule 16b-3. The form of the 1994 Stock Option Plan is attached
as Exhibit C to the Plan.
TRANSACTIONS RELATIVE TO SIHL SALE OR PIRL SPIN-OFF. On the Effective Date,
the following will occur (amounts reflected are balances as of September 30,
1993; actual amounts will be balances as of the Effective Date):
(1) GRI will assume the obligation of RIB to repay the intercompany debt
owed by RIB to RIH ($50,000,000) plus accrued interest thereon and the
intercompany debt owed by RIB to RII ($11,192,000). As a result of such
assumptions, RIB will have no obligations to repay any intercompany debt.
(2) If the SIHL Sale is consummated (or, with the consent of Fidelity
and TCW (so long as the funds and accounts managed by them hold in the
aggregate at least 20% of the outstanding Old Series Notes) if the PIRL
Spin-Off is effected), GRI will distribute to its immediate parent, RII, all
the outstanding capital stock of RIB that is owned by GRI. RIB is the
holding company for the Paradise Island assets located in The Bahamas, which
are held in the following corporations: (a) BDL; (b) IHC; (c) PEL; (d) PIB;
(e) PIL; (f) PBI; and (g) PSS. As a result of such distribution, RIB will be
a first-tier subsidiary of RII. Under certain circumstances set forth in the
Paradise Island Purchase Agreement (or, if the PIRL Spin-Off is effected,
the PIRL Standby Distribution Agreement), RIB will transfer the BDL Shares
to a U.S. Paradise Island Subsidiary prior to the SIHL Closing Date (or, if
the PIRL Spin-Off is effected, prior to the closing of the PIRL Spin-Off).
If such a transfer occurs, such U.S. Paradise Island Subsidiary will grant
the SIHL BDL Option (or, if the PIRL Spin-Off is effected, the PIRL BDL
Option) to RIB.
(3) Either: (A) pursuant to the Paradise Island Purchase Agreement, in
exchange for 2,000,000 SIHL Series A Shares, representing 40% of the capital
stock of SIHL to be outstanding after the SIHL Sale, and the SIHL Aggregate
Cash Purchase Price, SIHL will purchase (i) from RII all the capital stock
of RIB and (ii) directly or through subsidiaries the RII Real Estate Assets
and substantially all the assets of the U.S. Paradise Island Subsidiaries
and will assume substantially all the non-intercompany liabilities relating
to such assets; or (B) if the SIHL Sale is not consummated on the Effective
Date, (i) RII will contribute all the capital stock of RIB then directly
owned by RII to the capital of PIRL, which was formed as a first-tier
subsidiary of RII to effect the PIRL Spin-Off, in exchange for PIRL Ordinary
Shares (which, when added to the PIRL Ordinary Shares already owned by RII,
shall equal all the issued and outstanding PIRL Ordinary Shares and which
are to be distributed to the holders of the Old Series Notes on the
Distribution Date) and (ii) subsidiaries of PIRL will acquire the RII Real
Estate Assets and substantially all the assets of the U.S. Paradise Island
Subsidiaries and will assume substantially all the non-intercompany
liabilities relating to such assets.
For a chart summarizing the ownership structure of RII, including RIB and
its subsidiaries and the U.S. Paradise Island Subsidiaries, as of the date
hereof and after giving effect to the Restructuring, see "Pre-and
Post-Restructuring Ownership Structures".
ISSUANCE OF PROMISSORY NOTES BY RIH TO RIHF. In order to effect the
issuance of the RIH Promissory Note and the RIH Junior Promissory Note by RIH,
the following will occur on the Effective Date (amounts reflected are balances
as of September 30, 1993; actual amounts will be balances as of the Effective
Date):
(1) RIH will distribute the RIH Promissory Note and the RIH Junior
Promissory Note, secured by the RIH Mortgage and the RIH Junior Mortgage,
respectively, to RII in repayment of the intercompany debt owed to RII by
RIH ($51,325,000) and as a distribution to its shareholder.
66
<PAGE>
(2) RII will exchange the RIH Promissory Note and the RIH Junior
Promissory Note, together with the related RIH Mortgage and RIH Junior
Mortgage, for New RIHF Mortgage Notes and New RIHF Junior Mortgage Notes to
be issued by RIHF.
(3) The holders of Old Series Notes will receive the New RIHF Mortgage
Notes and the New RIHF Junior Mortgage Notes and RIHF will assign (a) to the
New RIHF Mortgage Note Trustee the RIH Promissory Note, the RIH Mortgage and
an assignment of leases and rents and an assignment of operating assets
securing the RIH Promissory Note and (b) to the New RIHF Junior Mortgage
Note Trustee the RIH Junior Promissory Note, the RIH Junior Mortgage and an
assignment of leases and rents and an assignment of operating assets
securing the RIH Junior Promissory Note.
(4) RII will contribute to GRI the intercompany obligation of GRI to RII
($51,388,000).
(5) Upon termination and release of the RIH Pledge Agreement on the
Effective Date, GRI will exchange with RIH the $325,000,000 of non-interest
bearing RIH Notes for an amount of stock representing on a fully diluted
basis 99.99% of the issued and outstanding common stock of RIH.
(6) On the Effective Date, after the transactions described above have
occurred, RII will contribute to the capital of GRI the remaining .01% of
the issued and outstanding stock of RIH held by RII on the date hereof. RIH
will become a wholly owned first-tier subsidiary of GRI and an indirect
subsidiary of RII. RIH will then distribute to GRI, as a return of surplus,
the intercompany debt owed by GRI to RIH ($50,000,000) plus accrued interest
thereon.
SUBSIDIARY TRANSACTIONS. The other subsidiaries of RII not discussed above,
I.E., TGC Holding Corp. ("TGC Holdings"), New Pier Operating Company, Inc.
("NPO"), and Ess Zee Corporation ("ESS"), will remain in place and will be
unaffected by the Plan.
GRIFFIN COMPENSATION ARRANGEMENTS. In September 1990, Merv Griffin entered
into a License and Services Agreement, among Merv Griffin, Griffin Group and RII
(the "Old Griffin Services Agreement"). 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 the Griffin Group and the Company has not paid any
compensation to the 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.
Pursuant to the New Griffin Services Agreement, which replaced the Old
Griffin Services Agreement as of its expiration, the Griffin Group granted RII
and RIH a non-exclusive license to use Merv Griffin's name and likeness for the
purpose of advertising and promoting the Resorts Casino Hotel and, so long as
owned by RII, the Paradise Island Business. Subject to the performance of their
obligations, RII and RIH also were granted the non-exclusive services of Merv
Griffin, as Chairman of the Board of Directors of RII and in other capacities,
including without limitation spokesperson for RII and RIH. The New Griffin
Services Agreement has a basic term of four years. Under certain circumstances,
however, the New Griffin Services Agreement could remain in force for up to an
additional year.
The Griffin Group was entitled to receive from RII or RIH $4,100,000 upon
execution of the New Griffin Services Agreement as compensation for the first
two years of services. The Griffin Group was entitled to compensation in the
amounts of $2,205,000 and $2,310,000 for the third and fourth years of such
services, respectively. Additional prorated compensation also may be paid to the
Griffin Group if the New Griffin Services Agreement continues in force longer
than four years. RIH made the
67
<PAGE>
$4,100,000 payment for the first two years under the New Griffin Services
Agreement in April 1993. Simultaneously, Merv Griffin made a partial prepayment
of the Griffin Note in an equal amount to RII thereby reducing the principal
amount of the Griffin Note to $7,523,333. RII then canceled the Griffin Note in
exchange for the Griffin Group Note in the principal amount of $7,523,333. The
Griffin Group Note is payable on demand and bears interest at the rate of 3% per
year. The bank letter of credit securing the Griffin Note was released by RII.
Merv Griffin has personally guaranteed payment of the Griffin Group Note. Under
the New Griffin Services Agreement, RII and RIH have the right, at their option,
to elect to satisfy any compensation obligation to the Griffin Group by reducing
the outstanding amount of the Griffin Group Note.
On September 17, 1993, RII made the $2,205,000 payment for the third year of
the New Griffin Services Agreement by reducing the principal amount of the
Griffin Group Note in an equal amount. On or prior to the Effective Date, RII
will pay $2,310,000 to the Griffin Group for the fourth year of the New Griffin
Services Agreement also by reducing the principal amount of the Griffin Group
Note in an equal amount. If for any reason the Griffin Group fails to fulfill
its obligations under the New Griffin Services Agreement, it will be obligated
to reimburse the Company for all amounts paid with respect to periods for which
such obligations are not fulfilled.
After payment of the $2,310,000 referenced above, but no later than the
Effective Date, the Griffin Group will pay RII the then remaining balance of the
Griffin Group Note (approximately $3,000,000) plus accrued interest. RII will
distribute the proceeds of such payment to the holders of the Old Series Notes
as part of Excess Cash. Payment in full of outstanding amounts under the Griffin
Group Note is a condition to consummation of the Plan.
The New Griffin Services Agreement also provides that, as additional
consideration thereunder, the Griffin Group will be granted the Griffin
Warrants. Finally, RII and RIH also will provide the Griffin Group and Merv
Griffin with certain indemnification and insurance coverage and reimburse them
for certain expenses incurred in connection with the New Griffin Services
Agreement. Pursuant to the Restructuring, the New Griffin Services Agreement
will remain in place. See "Description of Griffin Warrants".
FRACTIONAL INTERESTS AND ODD-LOT HOLDINGS. Pursuant to the Plan, fractional
shares of the New Equity Securities that would be distributable on the basis of
the provisions of the Plan will not be issued or distributed. The New RIHF
Mortgage Notes and the New RIHF Junior Mortgage Notes will be issued only in
denominations of $1,000 and integral multiples thereof. As soon as practicable
after the Effective Date, the disbursing agent for the holders of Old Series
Notes will aggregate and sell all fractional amounts of the New Equity
Securities and the New Debt Securities at then prevailing prices and distribute
the net proceeds pro rata to the securityholders entitled thereto. After the
initial distribution to holders of Old Series Notes and other creditors under
the Plan, no distribution of less than $25 in cash or less than five shares of
RII Common Stock shall be made under the Plan. Such undistributed amount will
become the property of RII. Undistributed RII Common Stock will be held as
treasury shares.
RISK FACTORS
In evaluating the Solicitation, impaired creditors and impaired equity
interest holders should consider, among other risks: (i) the continuing high
leverage of the Company; (ii) the Company's recent net losses; (iii) the
possible lack of a market for the New Debt Securities and the New Equity
Securities; (iv) uncertainties relating to financial forecasts; (v) interests of
certain persons in the Restructuring; (vi) the importance of the involvement of
Merv Griffin in the affairs of the Company; (vii) certain Federal income tax
considerations; (viii) certain bankruptcy and insolvency considerations; (ix)
certain considerations related to original issue discount in the event of
subsequent bankruptcy; (x) limitations on the Company's ability to incur
additional senior debt; (xi) securityholders' possible inability to realize
value from the security for the New RIHF Mortgage Notes or the New RIHF Junior
Mortgage Notes; (xii) the fact that Fidelity and TCW acted on their own behalf,
and not as fiduciaries; (xiii) competition; (xiv) certain regulatory matters;
(xv) the potential disqualification of
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<PAGE>
security holders by the Casino Control Commission; (xvi) the new ownership of
the Paradise Island Business; (xvii) if the PIRL Spin-Off shall be effected, the
enforceability of civil liabilities against PIRL; (xviii) certain considerations
regarding ownership of SIHL Series A Shares; (xix) certain defaults by RII under
the Old Series Note Indenture; (xx) if the SIHL Sale is not consummated and the
PIRL Spin-Off occurs, the recent and continuing operating losses of the Paradise
Island Business (xxi) certain risks regarding elimination of the Put Right
relating to the SIHL Series A Shares; (xxii) certain considerations regarding
differences between the terms of the New Debt Securities and the Old Series
Notes; and (xxiii) certain risks in the event of a change of control, highly
leveraged transaction, reorganization, restructuring, merger or similar
transaction involving the Company. See "Risk Factors".
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The Company intends to take the position that the exchange of the Old Series
Notes for the RII Common Stock and the RII Class B Common Stock will not be
treated as the receipt of stock pursuant to a recapitalization as such term is
defined in Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended
(the "Tax Code"). Accordingly, gain or loss will be recognized by a holder of
Old Series Notes as a result of the Restructuring to the extent that such
holder's basis for his Old Series Notes exchanged is less than (or greater than)
the sum of the respective fair market values of the New Debt Securities, the RII
Common Stock, the RII Class B Common Stock, the SIHL Series A Shares and the
SIHL Aggregate Cash Purchase Price (or, if the SIHL Sale is not consummated on
or before the Effective Date, the PIRL Ordinary Shares), Excess Cash, Net Plan
Deferred Cash and Net Plan Consummation Cash distributed to such holder. See
"Certain Federal Income Tax Considerations -- Exchange of Old Series Notes."
The New RIHF Mortgage Notes may be, and the New RIHF Junior Mortgage Notes
will be, issued with original issue discount ("OID"). Accordingly, holders may
be required to include amounts in income in advance of the receipt of cash
interest. See "Certain Federal Income Tax Considerations -- OID with Respect to
the New Debt Securities."
The Company expects that, as a result of the Restructuring, it will undergo
an "ownership change" within the meaning of Section 382 of the Tax Code;
however, the Company believes that an exception available to corporations in
chapter 11 will apply. See "Certain Federal Income Tax Considerations -- Tax
Consequences to the Company -- Net Operating Loss Carryovers and Limitations."
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables set forth certain historical and pro forma consolidated
financial data for RII and RIH. Certain historical financial data also are
presented for RIB, consolidated with its subsidiaries, and the U.S. Paradise
Island Subsidiaries on a combined basis. This group of companies is sometimes
hereinafter referred to as the "PIRL Group". If the SIHL Sale is not consummated
on the Effective Date and certain other conditions are satisfied or waived, the
PIRL Spin-Off will be effected. The pro forma information presented for the PIRL
Group assumes the PIRL Spin-Off occurs. Because the PIRL Spin-Off will result in
RIB becoming a subsidiary of PIRL and other subsidiaries of PIRL acquiring
substantially all the assets of the U.S. Paradise Island Subsidiaries and the
RII Real Estate Assets relating to the Paradise Island Business and assuming
substantially all the non-intercompany liabilities relating to such assets, the
pro forma information presented for this group is for PIRL consolidated with its
subsidiaries.
The historical financial data for the year 1990 is presented separately for
the periods "Through August 31" and "From September 1" due to a change in
control and accounting basis that occurred effective August 31, 1990 as a result
of the confirmation of the Old Plan.
The pro forma statement of operations data give effect to the Restructuring
as if it had occurred on January 1, 1992. The pro forma balance sheet data give
effect to the Restructuring as if it had occurred on September 30, 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
69
<PAGE>
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 Combined Financial Statements and the notes thereto and "Pro Forma
Financial Data" and the notes thereto.
<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, PRO FORMA
-------------------------------------------- --------------------------------
FOR THE FOR THE
1990 THREE QUARTERS FOR THE THREE QUARTERS
--------------------------- ENDED YEAR ENDED ENDED
THROUGH FROM SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
AUGUST 31 SEPTEMBER 1 1991 1992 1993 1992 1993
----------- ------------- ------ ------ --------------- -------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
RII STATEMENT OF OPERATIONS
DATA:
Operating revenues............ $ 294.0 $ 129.6 $418.2 $436.9 $ 337.9 $ 270.6 $ 214.8
Depreciation.................. 20.0 6.2 23.8 25.3 20.9 11.5 10.3
Earnings (loss) from
operations................... 13.5 (1.2) 16.0 21.5 20.7 25.6 22.5
Interest income (expense), net
(a).......................... 1.9 (12.3) (58.4) (73.5) (73.2) (23.9) (19.5)
Recapitalization costs (b).... (187.0) (2.8) (4.9)
Earnings (loss) before income
taxes and extraordinary
item......................... (171.6) (13.5) (42.4) (54.8) (57.4) 1.7 3.0
Extraordinary item (b)........ 429.8
Net earnings (loss)........... 258.2 (13.5) (41.6) (53.5) (58.4) 3.0 2.0
Earnings (loss) per share
(c).......................... (.68) (2.07) (2.65) (2.90) .08 .05
Ratio of earnings to fixed
charges (d).................. -- -- -- -- -- 1.1 1.1
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
------------------------
HISTORICAL PRO FORMA
----------- -----------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
RII BALANCE SHEET DATA:
Cash and cash equivalents (e)............................................................. $ 71.0 $ 20.0
Net property and equipment................................................................ 454.1 277.4
Total assets.............................................................................. 581.3 328.9
Current maturities of long-term debt (f).................................................. 429.5 0.1
Long-term debt, excluding current maturities (f).......................................... 84.5 232.0
Shareholders' equity (deficit)............................................................ (70.0) 4.5
Book value per share...................................................................... (3.47) .12
<FN>
- ------------------------------
(a) Amounts presented include amortization of debt discount. During the period
through August 31, 1990, RII was in bankruptcy and did not accrue interest
or amortize discounts or issuance costs on its public debt.
(b) See Note 2 of Notes to Consolidated Financial Statements of RII for a
discussion of these items in 1990.
(c) For the period through August 31, 1990 there was a sole shareholder of
RII. Accordingly, no per share data is disclosed for that period.
(d) 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 one-third of rent expense) by fixed charges. Fixed charges
include interest expense, amortization of debt discount and one-third of
rent expense. Earnings were insufficient to cover fixed charges by
$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 $57,370,000 for the three quarters ended September 30, 1993.
(e) Excludes restricted cash equivalents.
(f) Amounts are net of unamortized discounts.
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL
------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, PRO FORMA
------------------------------------------- --------------------------------
FOR THE FOR THE
1990 THREE QUARTERS FOR THE THREE QUARTERS
--------------------------- ENDED YEAR ENDED ENDED
THROUGH FROM SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
AUGUST 31 SEPTEMBER 1 1991 1992 1993 1992 1993
------------ ------------ ------ ------ --------------- -------------- ---------------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
RIH STATEMENT OF OPERATIONS DATA:
Operating revenues................. $ 158.8 $ 76.2 $247.5 $262.7 $ 208.8 $ 262.7 $ 208.8
Depreciation....................... 10.7 1.9 9.1 11.4 10.3 11.4 10.3
Earnings from operations........... 3.4 2.3 14.8 21.0 15.8 21.0 15.8
Interest income (expense),
net (g)........................... 5.3 2.7 7.0 7.3 5.5 (18.0) (13.5)
Recapitalization costs (h)......... (119.8) (.9) (1.6)
Affiliated bad debt write-off
(h)............................... (99.0)
Earnings (loss) before income taxes
and extraordinary item............ (210.1) 5.0 21.8 27.4 19.7 3.0 2.3
Extraordinary item (h)............. (17.3)
Net earnings (loss)................ (227.4) 5.0 13.1 16.4 19.3 3.0 1.9
Ratio of earnings to fixed charges
(i)............................... -- 14.2 15.5 21.5 23.3 1.2 1.2
</TABLE>
70
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
------------------------
HISTORICAL PRO FORMA
----------- -----------
(IN MILLIONS)
<S> <C> <C>
RIH BALANCE SHEET DATA:
Cash and cash equivalents................................................................. $ 30.8 $ 15.0
Net property and equipment................................................................ 166.4 166.4
Total assets.............................................................................. 275.4 209.0
Current maturities of notes payable to affiliate and other long-term debt................. 325.1 .1
Notes payable to affiliate and other long-term debt....................................... -- 147.6
Shareholder's equity (deficit)............................................................ (145.1) 17.3
<FN>
- ------------------------------
(g) Pro forma amounts include amortization of debt discount.
(h) See Note 2 of Notes to Consolidated Financial Statements of RIH for a
discussion of these items in 1990.
(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 and one-third of rent
expense) by fixed charges. Fixed charges include interest expense and
one-third of rent expense. Earnings were insufficient to cover fixed
charges by $210,129,000 for the period through August 31, 1990.
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, PRO FORMA
--------------------------------------------- --------------------------------
FOR THE FOR THE
1990 THREE QUARTERS FOR THE THREE QUARTERS
---------------------------- ENDED YEAR ENDED ENDED
THROUGH FROM SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
AUGUST 31 SEPTEMBER 1 1991 1992 1993 1992 1993
------------ ------------- ------ ------ --------------- -------------- ---------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
PIRL GROUP STATEMENT OF OPERATIONS DATA:
Operating revenues............ $ 129.4 $ 50.9 $163.2 $166.4 $ 123.0 $ 166.4 $ 123.0
Depreciation.................. 9.0 4.3 14.6 13.8 10.6 9.0 6.9
Earnings (loss) from
operations................... 8.0 (6.2) (5.8) (5.7) (3.1) (4.5) (2.0)
Interest income (expense),
net.......................... (3.8) (2.1) (6.6) (6.5) (4.8) .2 .3
Recapitalization costs (j).... (41.3) (1.1) (1.7)
Affiliated bad debt write-off
(j).......................... (2.3)
Net loss...................... (39.4) (8.3) (12.4) (13.3) (9.6) (4.3) (1.7)
Net loss per share (k)........ (.86) (.34)
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
------------------------
HISTORICAL PRO FORMA
----------- -----------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
PIRL GROUP BALANCE SHEET DATA:
Cash and cash equivalents (l)............................................................. $ 12.9 $ 12.1
Net property and equipment................................................................ 176.6 112.0
Total assets.............................................................................. 211.5 143.9
Long-term debt............................................................................ .2 .2
Shareholders' equity...................................................................... 104.1 125.0
Book value per share (k).................................................................. 25.00
<FN>
- ------------------------------
(j) See Note 2 of Notes to Combined Financial Statements of the PIRL Group for
a discussion of these items in 1990.
(k) For historical presentation, members of the combined PIRL Group are
directly or indirectly wholly owned subsidiaries of RII. Accordingly, no
per share data is disclosed on a historical basis. Pro forma per share
data was calculated assuming 5,000,000 shares were issued to holders of
the Old Series Notes in accordance with the Plan.
(l) Excludes restricted cash equivalents.
</TABLE>
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<PAGE>
MARKET PRICES OF OLD SERIES NOTES AND RII COMMON STOCK
The Old Series Notes and the RII Common Stock are listed and traded on the
AMEX. The following table sets forth, for the periods listed, the high and low
trading price on the AMEX for each $100 principal amount of Old Series A Notes,
for each $100 principal amount of Old Series B Notes and for each share of RII
Common Stock.
<TABLE>
<CAPTION>
OLD OLD RII
SERIES A SERIES B COMMON
NOTES NOTES STOCK
------------------ ------------------ ------------------
FISCAL YEARS HIGH LOW HIGH LOW HIGH LOW
------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
1991:
First Quarter............ 48 7/8 34 54 35 2 3/8 5/8
Second Quarter........... 55 44 55 51 2 1 3/8
Third Quarter............ 58 52 3/4 62 54 1/8 2 1 1/2
Fourth Quarter........... 62 56 63 3/4 57 1/2 1 5/8 1
1992:
First Quarter............ 76 58 75 58 3/4 2 3/4 1 1/4
Second Quarter........... 70 1/4 63 73 1/2 65 2 3/8 1
Third Quarter............ 68 1/2 60 1/2 69 3/4 60 1/2 1 1/4 3/4
Fourth Quarter........... 62 50 1/2 63 49 1/2 1 1/4 11/16
1993:
First Quarter............ 68 56 1/2 67 3/4 55 1 1/8 13/16
Second Quarter........... 74 60 74 59 1/2 3 7/8 13/16
Third Quarter............ 77 69 76 68 1/4 2 3/4 1 9/16
Fourth Quarter........... 72 66 72 64 1/2 2 1/8 1 3/8
1994:
First Quarter (through
January 28, 1994)....... 75 68 1/2 73 68 1 13/16 1 1/2
</TABLE>
On January 28, 1994, the last trading day prior to the date of this
Information Statement/ Prospectus for which closing prices were available, the
closing prices on the AMEX for each $100 principal amount of Old Series A Notes,
for each $100 principal amount of Old Series B Notes and for each share of RII
Common Stock were $71.25, $72.50 and $1.5625, respectively. No cash dividends on
the RII Common Stock were paid during any of the periods listed above.
MARKET AND TRADING
The Company will apply to have the New RIHF Mortgage Notes, the Units
comprised of the New RIHF Junior Mortgage Notes and the RII Class B Common
Stock, the RII Common Stock and (if issued) the PIRL Ordinary Shares listed on
the AMEX. It is a condition to consummation of the Plan that such securities be
listed on a national securities exchange or approved for quotation on the Nasdaq
National Market (subject to official notice of issuance). However there can be
no assurance that an active trading market for any such securities will develop
on the AMEX, the Nasdaq National Market or otherwise, and no assurance can be
given as to the price at which any such securities might trade. See "Risk
Factors -- Lack of Market for New Debt Securities and New Equity Securities".
The Company has been informed that SIHL will apply to have the SIHL Series A
Shares (if issued) listed on the Nasdaq National Market; such listing is a
condition to the SIHL Sale and to consummation of the Plan. For information
regarding the trading market for the SIHL Series A Shares, see the accompanying
SIHL Prospectus.
72
<PAGE>
RISK FACTORS
IN CONSIDERING WHETHER OR NOT TO VOTE TO ACCEPT THE PLAN, EACH IMPAIRED
CREDITOR AND EQUITY INTEREST HOLDER SHOULD CAREFULLY CONSIDER THE FOLLOWING
FACTORS, TOGETHER WITH ALL OF THE OTHER INFORMATION CONTAINED IN THIS
INFORMATION STATEMENT/PROSPECTUS.
FOR INFORMATION WITH RESPECT TO SIHL, THE SIHL SALE, THE PARADISE ISLAND
PURCHASE AGREEMENT AND THE SIHL SERIES A SHARES, REFERENCE IS MADE TO THE
ACCOMPANYING SIHL PROSPECTUS RELATING TO THE SIHL SERIES A SHARES. RII HAS
SUPPLIED CERTAIN INFORMATION REGARDING THE PARADISE ISLAND BUSINESS (SUCH AS IS
FOUND IN RII'S REPORTS FILED WITH THE COMMISSION), AS WELL AS CERTAIN
INFORMATION CONCERNING THE RESTRUCTURING, TO SIHL SPECIFICALLY FOR ITS USE IN
THE PREPARATION OF THE SIHL PROSPECTUS (AND THE RELATED REGISTRATION STATEMENT
FILED BY SIHL WITH THE COMMISSION UNDER THE SECURITIES ACT). RII AND ITS
ADVISERS DISCLAIM ANY RESPONSIBILITY FOR THE ACCURACY, COMPLETENESS, NATURE AND
FORM OF PRESENTATION OF ANY INFORMATION CONTAINED IN THE SIHL PROSPECTUS (AND
RELATED REGISTRATION STATEMENT), EXCEPT THAT RII HAS MADE IN THE PARADISE ISLAND
PURCHASE AGREEMENT CERTAIN REPRESENTATIONS AND WARRANTIES TO SIHL AS TO THE
ACCURACY OF THE INFORMATION SUPPLIED BY RII SPECIFICALLY FOR INCLUSION IN THE
SIHL PROSPECTUS (AND RELATED REGISTRATION STATEMENT).
CONTINUING HIGH LEVERAGE; FUTURE REFINANCINGS
The Company is highly leveraged. Although completion of the Restructuring
will reduce significantly the Company's debt obligations, the Company will
remain highly leveraged following the Restructuring. The Company had
approximately $482,000,000 principal amount of publicly issued recourse
indebtedness at October 15, 1993 (I.E., not including the Showboat Notes). After
giving effect to the Restructuring, the Company's estimated aggregate publicly
issued recourse indebtedness would total approximately $160,000,000, assuming no
borrowing is made under the RIHF Senior Facility. The Company's high leverage
poses substantial risks to holders of the Company's debt and equity securities.
Debt service on the New Debt Securities is premised solely on cash flows
generated from the continued operation of the Resorts Casino Hotel. The
Company's management believes that, following the completion of the
Restructuring, the Company will have sufficient cash flow from operations to pay
interest on all its outstanding debt as those payments become due.
There can be no assurance that the Company will generate sufficient cash
from operations to repay, when due, the principal amount of the New RIHF
Mortgage Notes maturing in 2003, the principal amount of the New RIHF Junior
Mortgage Notes maturing in 2004 or the principal amount of the Showboat Notes
maturing in 2000. 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 New Debt Securities.
RECENT NET LOSSES
RII. The Company experienced net losses of $41,571,000 and $53,454,000 in
its fiscal years ended December 31, 1991 and 1992, respectively, and $58,370,000
for the three quarters ended September 30, 1993. In addition, the Company's
earnings before fixed charges were inadequate to
73
<PAGE>
cover fixed charges by $42,402,000, $54,802,000 and $57,370,000 for the fiscal
years ended December 31, 1991 and 1992, and the three quarters ended September
30, 1993, respectively. The Company's recent net losses and its liquidity
problems make it extremely unlikely that the Company will be able, unless it is
able to consummate the Restructuring, to continue as a going concern beyond
April 15, 1994 when the Old Series Notes mature.
PARADISE ISLAND BUSINESS. The PIRL Group experienced net losses of
$12,399,000 and $13,257,000 in its fiscal years ended December 31, 1991 and
1992, respectively, and $9,616,000 for the three quarters ended September 30,
1993.
LACK OF MARKET FOR NEW DEBT SECURITIES AND NEW EQUITY SECURITIES
The New Debt Securities are new issues of securities for which there
currently is no market. If the New Debt Securities are traded after their
initial issuance, their trading price will depend on a number of factors beyond
RII's control, including (i) the number of holders thereof, (ii) prevailing
interest rates and the market for similar securities, (iii) a possible belief
that the New Debt Securities bear interest at a rate insufficient to compensate
investors for the risks inherent in owning the New Debt Securities, (iv) a risk
that an active trading market in the New Debt Securities may not develop and (v)
volatility in the market for "high yield" securities such as the New Debt
Securities.
The Company will apply to have the New RIHF Mortgage Notes, the Units
comprised of the New RIHF Junior Mortgage Notes and the RII Class B Common
Stock, the RII Common Stock and (if issued) the PIRL Ordinary Shares listed on
the AMEX. It is a condition to consummation of the Plan, unless waived, that
such securities be listed on a national securities exchange or approved for
quotation on the Nasdaq National Market (subject to official notice of
issuance). However, there can be no assurance that an active trading market for
any such securities will develop on the AMEX, the Nasdaq National Market or
otherwise, 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.
The Company has been informed that SIHL will apply to have the SIHL Series A
Shares (if issued) listed on the Nasdaq National Market; such listing is a
waivable condition to the SIHL Sale and to consummation of the Plan. For
information regarding the trading market for the SIHL Series A Shares, see the
accompanying SIHL Prospectus.
RISKS RELATING TO THE FORECASTS
The Company has prepared forecasts of certain financial data for the
five-year period following the Restructuring. The forecasts represent the
Company's best estimate of the most likely results of its operations and
financial position following the Restructuring. Such forecasts are based on
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, such as interest rates and the regulatory
climate, that are beyond the Company's control. Because the Paradise Island
Business will not be continued by the Company after the Restructuring, no
forecasts for the Paradise Island Business have been prepared by the Company. If
the PIRL Spin-Off occurs, the Paradise Island Business will be owned by the
holders of the Old Series Notes. Any forecasts for the Paradise Island Business
will be prepared by the new management of the Paradise Island Business. See
"Risks Associated with the Paradise Island Business." Holders of Old Series
Notes and RII Common Stock are cautioned not to place undue reliance on the
forecasts. See "The Restructuring -- Financial Forecasts for the Company".
In connection with the Old Plan, the Company prepared and publicly
disseminated forecasts of certain financial data for fiscal 1990 through fiscal
1994, including net revenues, operating expenses, operating income and earnings
before interest and taxes, describing the projected financial performance of the
Company after consummation of the Old Plan. The Company's actual results varied
significantly from the forecasted results prepared in connection with the Old
Plan due, in large part, to the Company's inability to sell the Paradise Island
Business at a satisfactory price.
74
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE RESTRUCTURING
The Company believes that the terms of the Restructuring are the result of
arm's-length negotiations between the Company and representatives of Fidelity
and TCW. In addition, discussions were held with representatives of SIHL
regarding the Paradise Island Purchase Agreement and with the Griffin Group
regarding the New Griffin Services Agreement.
In April 1993, RII, RIH and the Griffin Group executed the New Griffin
Services Agreement to be effective as of September 17, 1992, the termination
date of the Old Griffin Services Agreement. Merv Griffin is a shareholder and
serves as a director and the Chairman of the Board of RII. The Griffin Group is
a company controlled by Merv Griffin. The New Griffin Services Agreement will
remain in place after the Effective Date. The New Griffin Services Agreement has
a four-year term. Under certain circumstances, however, the New Griffin Services
Agreement could remain in force up to an additional year. Pursuant to the New
Griffin Services Agreement, Mr. Griffin and the Griffin Group will promote the
operations of the Company in Atlantic City and The Bahamas. Fees of $6,305,000
have already been paid to the Griffin Group for the first three years of the
term of the New Griffin Services Agreement. In conjunction with the negotiations
among Fidelity, TCW and the Griffin Group relating to the Griffin Group's
performance under the New Griffin Services Agreement, certain modifications to
the New Griffin Services Agreement were negotiated. As a result of these
modifications, the following will occur: (1) on or prior to the Effective Date,
RII will pay $2,310,000 to the Griffin Group for the fourth year of the New
Griffin Services Agreement by reducing the principal amount of the Griffin Group
Note in an equal amount; (2) subsequent to such payment, but no later than the
Effective Date, the Griffin Group will pay the then remaining balance of the
Griffin Group Note (approximately $3,000,000) plus accrued interest to RII; and
(3) on the Distribution Date, RII will issue to the Griffin Group the Griffin
Warrants to purchase 4,665,000 shares RII Common Stock, or approximately 10% of
the RII Common Stock on a fully diluted basis. The Griffin Warrants will be
exercisable on the Effective Date at an exercise price of the lesser of $1.875
and the average closing price of RII Common Stock for the 20 trading days
following the Effective Date. In conjunction with the negotiations among RII,
Fidelity, TCW and the Griffin Group, the Griffin Group negotiated a reduction in
the exercise price for the Griffin Warrants from the original exercise price set
forth in the New Griffin Services Agreement. The exercise prices prior to such
amendment were based upon percentages of the average closing price of the RII
Common Stock during the 20 trading days following the Effective Date (with
certain minimum prices) and ranged from the greater of $1.00 or 125% of such
price as to the first 25% of the Griffin Warrants up to the greater of $1.75 or
200% of such price as to the final 25% of the Griffin Warrants. The change in
the exercise price was approved by RII, and consented to by Fidelity and TCW, in
order to provide additional incentives to the Griffin Group under the New
Griffin Services Agreement for its efforts to improve the operations and value
of RII. Consequently, Mr. Griffin may have interests which conflict with those
of RII and the interests of the holders of the Old Series Notes, of RII Common
Stock (including Mr. Griffin in his capacity as a shareholder of RII) and of
1990 Stock Options.
Mr. David Hanlon, the President and Chief Executive Officer of RII until
October 31, 1993, owns fully vested 1990 Stock Options to purchase 1,094,800
shares of RII Common Stock (or 5.15% of the outstanding shares of the RII Common
Stock assuming such options were exercised). RII entered into the Hanlon
Termination Agreement in an effort to effectuate an orderly restructuring of its
senior management. Pursuant to the Hanlon Employment Agreement, Mr. Hanlon
received $720,000 earned under the Hanlon Employment Agreement but not yet paid
as of October 31, 1993. In addition, pursuant to the Hanlon Termination
Agreement, Mr. Hanlon is entitled to receive a total of $2,648,656, consisting
of the present value of future base salary under 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, half of which was
paid on October 31, 1993 and half of which will be paid upon the earlier of (i)
the acceptance of a reorganization or recapitalization of RII by the requisite
number and amount of RII's creditors voting on such restructuring or
reorganization and
75
<PAGE>
(ii) April 15, 1995. In addition, Mr. Hanlon will receive a bonus from RII in
the amount of $325,000 in connection with the reorganization or recapitalization
of RII, payable prior to any bankruptcy filing by RII. Finally, Mr. Hanlon will
receive a bonus of $300,000 upon the disposition of the Paradise Island
Business. Accordingly, Mr. Hanlon would receive a total of $625,000 in
connection with the Restructuring. The payment to be made to Mr. Hanlon with
respect to the disposition of the Paradise Island Business may be subject to the
approval of the Bankruptcy Court. Consequently, Mr. Hanlon may have interests
which conflict with those of RII and the interests of the holders of the Old
Series Notes, of RII Common Stock and of 1990 Stock Options.
Mr. Antonio Alvarez is a director of RII. Mr. Alvarez is also the Chairman
of Alvarez & Marsal, a financial advisory firm which RII has retained to provide
it with advice regarding RII's financial alternatives, including the
Restructuring. RII paid Alvarez & Marsal a monthly fee of $50,000 for such
advice amounting to $300,000 as of September 1, 1992, at which time RII's
payment of such fees was suspended. If the Requisite Acceptances are obtained,
Alvarez & Marsal will receive $250,000 and 125,000 shares of RII Common Stock
prior to any bankruptcy filing by RII. Consequently, Mr. Alvarez may have
interests which conflict with the interests of RII and the interests of the
holders of the Old Series Notes, of RII Common Stock and of 1990 Stock Options.
Pursuant to the Restructuring, all existing compensation arrangements with
members of the Company's management will continue after the Effective Date. As
part of the Plan, the 1990 Stock Option Plan will be terminated and the 1994
Stock Option Plan will be adopted. Holders of outstanding 1990 Stock Options
will retain their 1990 Stock Options and the exercise price therefor will remain
fixed at the existing exercise price. See "Management of RII -- Executive
Compensation -- Employment Agreements; Termination of Employment and Change in
Control Arrangements".
INVOLVEMENT OF MERV GRIFFIN
The involvement of Merv Griffin 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, 1996, the termination date of the New Griffin Services Agreement.
No later than the Effective Date, the Griffin Group will have received advance
payment of the full amount due under the New Griffin Services Agreement, but
will be required to reimburse the Company for any advance payment that may not
have been earned if the Griffin Group fails to perform its obligations
thereunder through September 17, 1996. Under certain circumstances, the New
Griffin Services Agreement could remain in force up to an additional year. See
"The Plan -- Means for Implementation of the Plan -- Griffin Compensation
Arrangements".
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL Due to the lack of definitive judicial or administrative authority,
substantial uncertainties exist with respect to many of the tax consequences of
the transactions to be undertaken pursuant to the Plan. Specifically, the
Company's counsel is unable to render an unqualified legal opinion with respect
to: (i) whether the New Debt Securities will be treated as indebtedness of RIH
or RIHF; (ii) classification of the New Debt Securities as debt rather than
equity; (iii) whether or not the exchange of the Old Series Notes for the RII
Class B Common Stock and the RII Common Stock will be treated as pursuant to a
recapitalization as such term is defined in Section 368 (a)(1)(E) of the Tax
Code; (iv) consequences of the rights to receive payments from Deferred Cash,
Net Reserved Cash and Net Plan Consummation Cash; (v) whether the exchange of
the Old Series Notes for the RII Common Stock will qualify for the
stock-for-debt exception from the recognition of COD income; and (vi) whether an
ownership change within the meaning of Section 382 of the Tax Code will occur in
connection with the implementation of the Plan, and, if such an ownership change
were to occur, whether the "bankruptcy exception" contained in Section 382
(1)(5) of the Tax Code will apply.
76
<PAGE>
The Company's counsel has opined that it is more likely than not that the
New RIHF Senior Mortgage Notes will be treated as debt for Federal income tax
purposes. In each of the other instances described in the preceding paragraph,
the Company's counsel believes that there is substantial authority for the
positions that the Company intends to take.
TAXATION OF THE EXCHANGE OF OLD SERIES NOTES. The Company intends to take
the position that the exchange (the "Exchange") of Old Series Notes for New Debt
Securities, RII Common Stock, RII Class B Common Stock, SIHL Series A Shares and
the SIHL Aggregate Cash Purchase Price (or if the SIHL Sale is not consummated
on the Effective Date, PIRL Ordinary Shares), Excess Cash and non-transferable
rights to receive payments from Net Reserved Cash, if any, Net Plan Consummation
Cash, if any, and Deferred Cash will be a taxable event for exchanging holders
upon which gain or loss will be recognized, except that a holder of Old Series
Notes will recognize ordinary income on the exchange to the extent a portion of
the consideration is treated as received in respect of accrued interest that the
holder has not included in income. If the Exchange is treated as a
recapitalization for Federal income tax purposes, no loss would be recognized by
any holder of the Old Series Notes, and gain, if any, would be recognized only
to the extent a holder receives "boot" (E.G., cash and property other than stock
or securities of the Company) in the Exchange that is not deemed to be in
payment of accrued interest. See "Certain Federal Income Tax Considerations --
Exchange of Old Series Notes".
ORIGINAL ISSUE DISCOUNT. The New RIHF Junior Mortgage Notes will be, and
the New RIHF Mortgage Notes may be, issued with original issue discount. 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".
AVAILABILITY OF NET OPERATING LOSSES. Because the exchange of the Old
Series Notes for the New Debt Securities and New Equity Securities will occur
pursuant to the Plan in the chapter 11 cases, the Company does not expect to be
required to include in its gross income any cancellation of debt ("COD") income
realized by reason of the consummation of the Plan. Moreover, the Company
expects that it will not be required to reduce any of its tax attributes as a
result of such cancellation of debt. If, however, the stock-for-debt exception
were determined not to apply to the exchange of RII Common Stock for a portion
of the Old Series Notes, the Company would be required to reduce certain of its
tax attributes (including net operating loss carryforwards) by the amount of COD
income arising from such exchange that would be excluded from the Company's
gross income under Section 108 of the Tax Code. The stock-for-debt exception
expires on December 31, 1994. Therefore, if the Effective Date does not occur on
or before December 31, 1994, the stock-for-debt exception will not apply to the
exchange of RII Common Stock. See "Certain Federal Income Tax Considerations --
Tax Consequences to the Company -- Cancellation of Indebtedness".
The Company expects that, as a result of the Restructuring, it will undergo
an "ownership change" within the meaning of Section 382 of the Tax Code;
however, the Company believes that an exception available to corporations in
title 11 cases will apply (and the Company does not intend to elect for such
exception not to apply). Assuming such exception applies, the amount of the
Company's net operating loss ("NOL") carryforwards will be reduced to a certain
extent, but such remaining NOLs will not be subject to an annual use limitation
(except for NOLs that arose prior to October 1, 1990, which are already subject
to an annual use limitation). There can be no assurance, however, that the
Internal Revenue Service (the "Service") will not successfully challenge the
applicability of such exception. Moreover, the Federal income tax returns of the
Company for the periods in which the NOLs were generated have not been examined
by the Service. Therefore, if the Service were to determine that (i) no
ownership change occurred in connection with the Restructuring, with the likely
result that an ownership change would occur shortly after the Restructuring when
the exception available to corporations in title 11 cases would not be
available, (ii) an ownership change did occur, but the exception to corporations
in title 11 cases does not apply, or (iii) all or a portion of the NOLs were to
be disallowed for any reason, the ability of the Company to offset future
taxable income with
77
<PAGE>
NOLs remaining after the consummation of the Restructuring could be
substantially limited. See "Certain Federal Income Tax Considerations -- Tax
Consequences to the Company -- Net Operating Loss Carryovers and Limitations".
CERTAIN BANKRUPTCY AND INSOLVENCY CONSIDERATIONS
Use of a bankruptcy case to implement the Restructuring also entails risks
that should be considered carefully.
GENERAL. If the Requisite Acceptances are received, RII and GRI currently
intend to commence prepackaged bankruptcy cases and to seek to confirm the Plan
using the Requisite Acceptances. See "The Solicitation -- Procedure for Voting
on the Plan" and "The Plan -- Confirmation of the Plan". RII and GRI believe
that obtaining the Requisite Acceptances before commencing bankruptcy cases
would minimize disputes during such cases, would substantially reduce the time
and costs of such cases and would afford the best opportunity to accomplish the
Restructuring. If RII and GRI do not obtain the Requisite Acceptances prior to
the Voting Deadline, RII and GRI will be forced to evaluate options then
available to them.
One such option is to conduct another solicitation with respect to the Plan.
Pursuant to the Paradise Island Purchase Agreement, RII and GRI have committed,
notwithstanding the failure to obtain the Requisite Acceptances, to continue to
pursue confirmation of the Plan until the Paradise Island Purchase Agreement is
terminated. This commitment could require RII and GRI to conduct a further
solicitation with respect to the Plan until December 31, 1994. Because the
Paradise Island Purchase Agreement can be terminated by SIHL if RII and GRI
bankruptcy cases are not commenced by March 21, 1994, RII and GRI might conduct
such solicitation after filing a chapter 11 case. RII's and GRI's failure to
abide by the terms of the Paradise Island Purchase Agreement under certain
circumstances would give rise to a claim by SIHL for breach of such agreement
and entitle SIHL to reimbursement from the SIHL Buyer Expense Escrow. Moreover,
such failure, if not approved by Fidelity and TCW, may relieve Fidelity and TCW
of their obligations under the Bondholders Support Agreement.
Other options available to RII and GRI if the Requisite Acceptances are not
obtained include submission of a revised prepackaged plan of reorganization and
filing for bankruptcy protection under the Bankruptcy Code without a
pre-approved or consensual plan of reorganization. There can be no assurance
that a restructuring other than pursuant to the Plan will result in a
reorganization of RII and GRI rather than a liquidation, or that any
reorganization would be on terms as favorable to the holders of Old Series Notes
(and beneficiaries of the related GRI Guaranty endorsed thereon), the holders of
the RII Common Stock and the holders of 1990 Stock Options as the terms of the
Plan. In connection with the formulation and development of the Plan, RII and
GRI and their financial and legal advisers have explored various alternative
plan structures. RII and GRI believe the Plan enables creditors and equity
interest holders, including the holders of the Old Series Notes and the RII
Common Stock, to realize greater value than would be realized under the
alternatives that RII and GRI believe could be implemented nonconsensually.
However, an alternative reorganization plan could be formulated which would
eliminate entirely the interests of equity interest holders. RII and GRI believe
that this form of alternative plan would be vigorously contested by equity
interest holders. The expense and delay associated with such a dispute, coupled
with its potential adverse impact on the operations of the Company and the
morale of its employees, could substantially impair the reorganization value of
the Company. If such an alternative plan were confirmed, however, recoveries to
holders of the Old Series Notes might be greater than those projected under the
Plan and no recovery would be available to holders of RII Common Stock.
LIQUIDATION ANALYSIS. For purposes of comparison with the distributions
under the Plan, RII and GRI have prepared, in conjunction with their financial
advisers, an analysis of estimated recoveries in a liquidation under chapter 7
of the Bankruptcy Code (the "Liquidation Analysis"). The Liquidation Analysis is
attached as Appendix B, and includes a description of procedures followed and
the assumptions and qualifications used in connection with the Liquidation
Analysis. A general
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discussion of the Liquidation Analysis is included under "The Plan --
Confirmation of the Plan -- Best Interests Test". Confirmation of the Plan
requires a finding that each non-accepting creditor and equity interest holder
receive as much under the Plan as in a chapter 7 liquidation of RII and GRI. RII
and GRI believe that the Liquidation Analysis demonstrates this result. The
Bankruptcy Court, however, may reach a differing conclusion.
The Liquidation Analysis represents the Company's best estimate of the most
likely outcome in the event of a liquidation of the Company under chapter 7 of
the Bankruptcy Code. It is based on numerous assumptions regarding factors which
may be beyond the Company's control. Holders of Old Series Notes and RII Common
Stock are cautioned not to place undue reliance on the Liquidation Analysis.
SECOND BANKRUPTCY FILING. The Plan provides for a restructuring of the Old
Series Notes issued in connection with the Old Plan. No provision of the
Bankruptcy Code expressly limits the ability of a debtor to file a second
chapter 11 case. In addition, the United States Supreme Court, in an analogous
context involving the filing of a second chapter 13 case, refused to impose a
limitation on the ability of the debtor to file a second chapter 13 case absent
an explicit limitation in the Bankruptcy Code. See JOHNSON V. HOME STATE BANK,
111 S. Ct. 2150 (1991); IN RE TARAS, 136 B.R. 941, 954 (Bankr. E.D. Pa. 1992).
The court in IN RE JARTRAN, 886 F.2d 859 (7th Cir. 1989) found that a second
chapter 11 filing was permissible so long as it was filed in good faith. The
court indicated that the second filing could satisfy the good faith requirement
if the second chapter 11 filing was for the purpose of effecting a liquidation
rather than a reorganization involving a restructuring of the debt treated in
the prior chapter 11 filing. A number of other courts also have held that a
second chapter 11 filing is in good faith if the filing is the result of
unforeseen changed circumstances. See, E.G., ELMWOOD DEVELOPMENT COMPANY V.
GENERAL ELECTRIC PENSION TRUST, 964 F.2d 508 (5th Cir. 1992); IN RE CASA LOMA
ASSOCS.,122 B.R. 814 (Bankr. N.D. Ga. 1991).
Several courts have limited the ability of a debtor that has emerged from
chapter 11 to file a second chapter 11 case to modify obligations undertaken in
the reorganization plan confirmed in the first case. See, E.G., IN RE JARTRAN,
886 F.2d 859 (7th Cir. 1989); IN RE NORTHHAMPTON CORP., 59 B.R. 963 (E.D. Pa.
1984); IN RE AT OF MAINE, INC.,56 B.R. 55 (Bankr. D.Me. 1985). The NORTHHAMPTON
and AT OF MAINE courts found that a second chapter 11 filing after substantial
consummation of a plan confirmed in a prior chapter 11 case was PER SE
impermissible. Courts which have held that there are limitations on the ability
of a debtor to make a second chapter 11 filing have relied principally on the
provisions of section 1127 of the Bankruptcy Code, which provide that a
confirmed chapter 11 plan that has been substantially consummated may not be
modified under section 1127.
RII and GRI believe that the filing of new chapter 11 cases in connection
with seeking confirmation of the Plan would satisfy any applicable good faith
requirement and would be permissible under the Bankruptcy Code. As a result,
among other things, of the unforeseen difficulty in selling the Paradise Island
Business, which was a critical component of the Old Plan, the Company believes
that it will be able to satisfy the good faith requirement for filing a second
bankruptcy case. Accordingly, while it is possible that these filings by RII and
GRI could be challenged, RII and GRI believe that they would prevail against any
such challenge.
DISRUPTION OF OPERATIONS. RII believes that it has sufficient cash on hand
to fund its working capital needs during a prepackaged bankruptcy case,
including the continued timely payment of pre-petition employee and trade
obligations to the extent permitted by the Bankruptcy Court. Since the Plan and
the chapter 11 filings will relate only to RII and GRI and not to RII's
operating subsidiaries, the claims of trade creditors and employees of such
operating subsidiaries will not be affected by such filings. Although there is a
risk that the filing of chapter 11 cases by RII and GRI will disrupt their
business operations, RII and GRI believe that such risk is minimal. GRI does not
have any employees and does not believe that it has any trade creditors; it has
no operating business which could be disrupted. As a holding company, RII has
few trade creditors and employees. To the extent necessary, RII, upon
commencement of its chapter 11 case, intends promptly to seek the authorization
of the
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Bankruptcy Court to maintain flexibility to pay, prior to confirmation of the
Plan, the pre-petition claims of trade creditors. In addition, RII intends to
seek the approval of the Bankruptcy Court to pay all accrued prepetition
salaries and wages, expense reimbursements and severance, to permit affected
employees to utilize their paid vacation time which accrued prior to the date of
the filing of the prepackaged bankruptcy case (so long as they remain employees
of RII) and to continue paying medical benefits under RII's health plan. There
can be no assurance that such authorization will be obtained. In any event, the
Plan provides that claims of employees and trade creditors which are not paid or
honored, as the case may be, prior to consummation of the Plan will be paid or
honored in full on the Distribution Date or as soon thereafter as such payments
or other obligations, consistent with past practice and the agreements governing
such claims, become due or performable in the ordinary course of business. See
"The Plan -- Treatment of Trade Creditors and Employees".
The Solicitation of Acceptances for the Plan or any subsequent commencement
of chapter 11 cases, even in connection with the Plan, could adversely affect
the Company's relationships with patrons, suppliers and employees. However, the
Company designed the Plan to minimize such effects. If such relationships were
adversely affected, the Company's financial position could materially
deteriorate. This deterioration could adversely affect the Company's ability to
complete the Solicitation of Acceptances of the Plan, or if the Solicitation is
successfully completed, to obtain confirmation of the Plan. Any disruption in
relationships with the Company's suppliers could reduce the quality and
availability of casino facilities, entertainment and promotional events, as well
as guest and other patron services which could result in a loss of earnings.
EFFECT ON SUBSIDIARIES. Other than GRI, RII does not currently intend to
seek protection under the Bankruptcy Code for any of its subsidiaries.
CERTAIN RISKS OF NON-COMPLIANCE WITH CONFIRMATION REQUIREMENTS. Even if the
Requisite Acceptances are received, there can be no assurance that the
Bankruptcy Court will confirm the Plan. The Bankruptcy Court might determine
that the disclosure contained herein or the Solicitation hereunder are
inadequate. See "Risk of Inadequacy of Solicitation" and "Risk of Improper
Voting Procedures." Moreover, the Bankruptcy Court could still decline to
confirm the Plan if it were to find that any statutory condition to confirmation
had not been met. Section 1129 of the Bankruptcy Code sets forth the
requirements for confirmation and requires, among other things, a finding by the
Bankruptcy Court that the confirmation of the Plan will not be followed by a
further need for financial reorganization, and that the value of distributions
under the Plan to non-accepting creditors and equity interest holders is not
less than the value of distributions such creditors and equity interest holders
would receive if RII and GRI were liquidated under chapter 7 of the Bankruptcy
Code. See "The Plan -- Confirmation of the Plan -- Confirmation Requirements".
There can be no assurance that the Bankruptcy Court will conclude that these
requirements have been met. If the Plan is filed, there can be no assurance that
modifications thereof would not be required for confirmation, or that such
modifications would not require a resolicitation of Acceptances. RII and GRI
believe that the Plan does comply with all of the confirmation requirements,
including the requirements that confirmation of the Plan not be followed by a
need for further financial reorganization and that non-accepting creditors and
equity interest holders receive distributions under the Plan at least as great
as would be received if RII and GRI were liquidated pursuant to chapter 7 of the
Bankruptcy Code. See "The Plan -- Alternatives to Consummation of the Plan --
Liquidation under Chapter 7". There can be no assurance, however, that the
Bankruptcy Court would reach the same conclusion.
Furthermore, the Plan contains an exculpation provision that provides that
none of the directors, officers, employees, agents, representatives, financial
advisors, or attorneys of (i) RII or GRI, (ii) any subsidiary of RII or GRI,
(iii) TCW, (iv) Fidelity, or (v) the Old Series Note Trustee and neither RII,
GRI, any subsidiary of RII or GRI, TCW, Fidelity nor the Old Series Note
Trustee, shall have any liability for actions taken or omitted to be taken in
good faith under or in connection with the Plan or in connection with RII's and
GRI's bankruptcy cases. The Company believes that such an exculpation provision,
which is not a general release and waiver of causes of action against third
parties but rather is limited in scope to actions taken solely in connection
with RII's and GRI's bankruptcy cases, is
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commonly approved in chapter 11 cases and is necesary to encourage entities to
participate in such cases without incurring undue liability. In some chapter 11
cases, however, the Commission has taken the position that exculpation
provisions are not authorized under the Bankruptcy Code and that, absent
separate consideration supplied by the parties receiving exculpation, such
provisions violate section 524(e) of the Bankruptcy Code. As a result, the
Commission, as well as other parties, may object at the Confirmation Hearing to
the inclusion of the exculpation provision in the Plan. Although the Company is
aware of many cases in which this form of exculpation provision has been found
acceptable by the Bankruptcy Court, there can be no assurance that the
Bankruptcy Court in RII's and GRI's cases will confirm the Plan with the
exculpation provision.
The confirmation and consummation of the Plan also are subject to certain
conditions imposed by RII and GRI. See "The Plan -- Conditions Precedent to
Confirmation and Consummation of the Plan". There can be no assurance that such
conditions will be satisfied or, if not satisfied, that RII and GRI (with the
consent of Fidelity and TCW if the funds and accounts managed by them hold in
the aggregate at least 20% of the Old Series Notes) would waive such conditions.
The consummation condition requiring entry of a Confirmation Order that has not
been stayed must be satisfied and may not be waived under any circumstances. The
confirmation condition requiring the entry of an order declaring that, as of the
Effective Date, the Old Security Documents shall be deemed released and
terminated is waivable, but the transactions contemplated by the Plan cannot be
consummated if the Old Security Documents are not released and terminated
because RII and GRI will be unable to pledge the requisite collateral to secure
the New Debt Securities and the RIHF Senior Facility Notes and RII will be
unable to effect either the SIHL Sale or the PIRL Spin-Off.
RISK OF INADEQUACY OF SOLICITATION. Section 1126(b) of the Bankruptcy Code
provides that the holder of a claim against, or interest in, a debtor who
accepts or rejects a plan of reorganization before the commencement of a chapter
11 case is deemed to have accepted or rejected such plan under the Bankruptcy
Code so long as the solicitation of such acceptance was made in accordance with
applicable non-bankruptcy law governing the adequacy of disclosure in connection
with such solicitation, or, if such law does not apply, such acceptance was
solicited after disclosure of "adequate information". Bankruptcy Rule 3018(b)
requires, in the case of a prepackaged plan of reorganization, that: (i) the
plan of reorganization be disseminated for a vote to substantially all impaired
creditors and equity holders entitled to vote; (ii) the time prescribed for
voting on such plan must not be unreasonably short; and (iii) the solicitation
must be conducted in compliance with all applicable non-bankruptcy laws or, in
the absence of such laws, that the disclosure statement for such plan contain
"adequate information". This Information Statement/Prospectus is being
transmitted to all holders of claims against, and all holders of interests in,
RII and GRI to satisfy the requirements of section 1126(b) of the Bankruptcy
Code and Bankruptcy Rule 3018(b). Notwithstanding the foregoing, votes on the
Plan only are being solicited from impaired creditors and equity interest
holders of RII and GRI. RII and GRI believe that the Solicitation complies with
the requirements of Bankruptcy Rule 3018(b) and that the 35-day time period
prescribed for voting on the Plan is not unreasonably short. In addition, RII
and GRI believe that the Solicitation is being conducted in compliance with
state and Federal securities laws and all other applicable non-bankruptcy laws.
However, failure of the Solicitation to comply with the requirements of section
1126(b) of the Bankruptcy Code or Bankruptcy Rule 3018(b) could result in the
Bankruptcy Court requiring resolicitation of Acceptances. If a resolicitation
were required, there can be no assurance that the Paradise Island Purchase
Agreement would remain in effect or that Fidelity and TCW would continue to
support the Plan.
RISK OF IMPROPER VOTING PROCEDURES. Even if the Requisite Acceptances are
received, the Bankruptcy Court may find that impaired creditors and equity
interest holders have not validly accepted the Plan if the Bankruptcy Court
determines that the Solicitation did not comply with the requirements of section
1126(b) of the Bankruptcy Code in respect to voting procedures. In an effort to
avoid such a result, RII and GRI are soliciting both Ballots and Master Ballots.
Master Ballots are to be completed by record holders of Old Series Notes and RII
Common Stock who are not the beneficial owners of such securities to reflect the
votes of the beneficial owners of such securities that hold
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through such record holder. RII and GRI believe that the use of Ballots and
Master Ballots for the purpose of obtaining Acceptances is in compliance with
the Bankruptcy Code. In addition, RII and GRI will take certain measures in
accordance with the practices of the securities industry and the requirements of
applicable non-bankruptcy law to ensure that this Information
Statement/Prospectus and other Solicitation materials are received by beneficial
owners of RII's securities in sufficient time to enable such parties to instruct
their nominees with respect to voting on the Plan.
The Company believes that it is appropriate to count executed, unmarked
Ballots as Acceptances of the Plan and will ask the Bankruptcy Court to permit
RII and GRI to count executed, unmarked Ballots as Acceptances of the Plan.
There can be no assurance, however, that the Bankruptcy Court will decide that
the voting procedures employed by RII and GRI meet the requirements of section
1126(b) of the Bankruptcy Code. If the Bankruptcy Court determines that the
Solicitation does not comply with the requirements of section 1126(b) of the
Bankruptcy Code, RII and GRI may seek to resolicit Acceptances.
RISK THAT PLAN MAY BE CONFIRMED OVER REJECTION OF IMPAIRED EQUITY
CLASSES. If certain conditions are met, the Plan may be confirmed even if it is
not accepted by the holders of the RII Common Stock or the holders of 1990 Stock
Options. Section 1129(b) of the Bankruptcy Code sets forth the conditions to a
confirmation (or "cram-down", as it is generally called) of a plan of
reorganization without the acceptance of all impaired classes. So long as at
least one impaired class of claims has accepted the plan (excluding votes cast
by insiders), such plan may be confirmed if it does not "discriminate unfairly"
and is "fair and equitable" with respect to each of the non-accepting classes.
It is generally accepted that a plan does not "discriminate unfairly" if holders
in a non-accepting class receive treatment under a plan that is economically
equivalent to that given to other classes whose holders have the same legal
priorities. In general terms, a plan is "fair and equitable" to a non-accepting
class of secured claims if provision is made under the plan for the holders of
such secured claims to retain the liens securing such claims and to receive
deferred cash payments totalling at least the allowed amount of such claim
having a present value on the effective date of the plan at least equal to the
value of the property securing claims. In general terms, a plan is "fair and
equitable" to a non-accepting class of unsecured claims or interests if the plan
provides that either (i) such holders receive or retain property having a value
as of the effective date of the plan equal to the allowed amount of such
holders' unsecured claims or interests, or (ii) the holders of claims and
interests that are junior to any such non-accepting class do not receive or
retain any property under the plan in respect of such junior claims or
interests. It is possible for a plan to be confirmed by the bankruptcy court
notwithstanding the non-acceptance of a class of claims or interests and the
holders of such claims or interests must accept whatever distribution, if any,
is provided for them under such plan, so long as the requirements set forth
above are satisfied. RII and GRI believe that section 1129(b) of the Bankruptcy
Code would permit confirmation of the Plan over the rejection of the classes of
holders of outstanding RII Common Stock and 1990 Stock Options, but would not
permit confirmation of the Plan over the rejection of the holders of Old Series
Notes. The Company intends to seek to confirm the Plan even if the holders of
outstanding RII Common Stock or 1990 Stock Options vote as a class to reject the
Plan. If the Plan were approved pursuant to a cram-down, distributions to all
classes of creditors and equity interest holders would not change. See "The Plan
- -- Confirmation of the Plan -- Confirmation Without Acceptance by All Impaired
Classes".
RISK OF IMPROPER CLASSIFICATION OF CLAIMS AND INTERESTS. Pursuant to
section 1122 of the Bankruptcy Code, RII and GRI must classify claims and
interests in classes that contain claims and interests that are substantially
similar to the other claims and interests in such class. Although RII and GRI
believe that they have classified all claims and interests in compliance with
section 1122, it is possible that the Bankruptcy Court may find that a different
classification is required for the Plan to be confirmed. In such event, it is
the current intention of RII and GRI to modify the Plan to provide for whatever
reasonable classification might be accepted by the Bankruptcy Court for
confirmation and to use the Acceptances received in the Solicitation to obtain
the approval of the class or classes of which the accepting holder is ultimately
deemed to be a member. Any such reclassification could adversely
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affect the class in which such claim or interest was initially classified or any
other class under the Plan by changing the composition of such class and the
required vote of such class for approval of the Plan. Furthermore, a
reclassification of claims or interests after approval of the Plan could
necessitate the resolicitation of Acceptances, which could result in a delay in
the consummation of the Restructuring and could increase the risk that the
Restructuring will not be consummated. To the extent a reclassification of
claims or interests after approval of the Plan materially and adversely changes
the treatment of the claim of any creditor or the interest of any equity
interest holder, such creditor or equity interest holder would no longer be
bound by its Acceptance of the Plan and RII and GRI would be obliged to obtain
such creditor's or equity interest holder's consent in writing to the
modification. The need to obtain any significant number of consents could result
in a delay in the consummation of the Restructuring and could increase the risk
that the Restructuring will not be consummated.
UNANTICIPATED CLAIMS. The Plan provides that general unsecured claims will
be unimpaired. This provision is based on the assumption, which the Company
believes to be correct, that general unsecured claims will not be substantially
higher than anticipated. If general unsecured claims materially exceed this
amount, the Company may be unable to treat general unsecured claims as
unimpaired and may be forced to modify the treatment of such claims in the Plan.
Such modification may require solicitation of the Plan as modified to holders of
general unsecured claims and to other classes of creditors and equity interest
holders. See "The Plan -- Classification and Treatment of Claims and Interests
- -- RII Class 5" for a discussion of potential disputed claims which have been or
may be asserted.
The Company believes that any claims based on Federal or state environmental
protection statutes will be discharged in connection with consummation of the
Plan. Under certain circumstances, however, environmental claims may survive
consummation of the Plan and remain assertable against the Company after the
conclusion of the Restructuring. The Company believes that environmental claims,
even if they survive consummation of the Plan, will not have a material impact
on the ability of the Company to effect the Restructuring or meet the Company's
financial forecasts. The feasibility of the Plan may be jeopardized if the
Company is found to have significant unanticipated environmental liability.
AVOIDANCE OF CERTAIN PREPETITION TRANSFERS. The Company has made or,
pursuant to the Restructuring, intends to make certain transfers to third
parties during the year preceding the date of filing of the chapter 11 cases
which may be subject to avoidance and recovery as either preferential transfers
or fraudulent conveyances. These transfers could include payments made under the
Hanlon Termination Agreement and the New Griffin Services Agreement. The Company
does not believe that these or any other transfers made by it or to be made by
it pursuant to the Restructuring constitute voidable transfers. The Company,
however, has conducted no investigation into the existence of potential voidable
transfers. The Bankruptcy Court, on request of a party in interest, might
determine that avoidable transfers had occurred. Even if the Bankruptcy Court
were to determine that certain prepetition transfers were voidable, the Company
does not believe such a determination would materially and adversely affect the
Restructuring. Pursuant to section 6.14 of the Plan, RII and GRI will waive and
release any avoidance and recovery actions (other than such avoidance and
recovery actions that have been or are permitted to be filed in connection with
the Old Chapter 11 Cases). There can be no assurance that the Bankruptcy Court
will permit such waiver and release. A fraudulent conveyance action filed by RII
with respect to the Old Chapter 11 Cases against Fred Lowenschuss styled RESORTS
INTERNATIONAL, INC. v. FRED LOWENSCHUSS, INDIVIDUALLY AND AS TRUSTEE OF FRED
LOWENSCHUSS, IRA, AND LAWRENCE LOWENSCHUSS, IRA is presently pending as Adv. No.
90-1005 in the New Jersey bankruptcy court. This action, which seeks among other
things the recovery by RII of merger consideration paid to Mr. Lowenschuss'
pension plan, will survive consummation of the Plan and any proceeds recovered
with respect thereto will become assets of RII.
RISKS RELATED TO PARADISE ISLAND INTERIM ORDER. Pursuant to the Paradise
Island Purchase Agreement, RII has committed to request, within five business
days after the filing of its chapter 11 case (if the Paradise Island Purchase
Agreement has not been terminated), and to use its best efforts
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to obtain, the entry of an order approving certain provisions of the Paradise
Island Purchase Agreement (the "Paradise Island Interim Order"). Such provisions
relate primarily to (i) the establishment of a procedure for the consideration
of competing bids for the Paradise Island Business and (ii) the provision of
certain reimbursements to SIHL if, through no fault of its own, the SIHL Sale is
not consummated. For a detailed description of the provisions of the Paradise
Island Purchase Agreement which RII will seek to have approved by the Bankruptcy
Court through the Paradise Island Interim Order, see "Description of Paradise
Island Purchase Agreement -- General -- Paradise Island Interim Order". If,
despite the best efforts of RII, the Paradise Island Interim Order is not
entered by the Bankruptcy Court, the Paradise Island Purchase Agreement will
continue in full force and effect.
Subject to the requirements of the Paradise Island Interim Order, RII and
GRI may receive other bids for the Paradise Island Business during the pendency
of RII's and GRI's chapter 11 cases. Such bids, if received, may lead to further
proceedings before the Bankruptcy Court, including the conduct of an auction. If
a bidder other than SIHL prevails at such an auction, the Plan may be modified,
as may be necessary, to accommodate the particular requirements of the
prevailing bidder. Any such modification will be subject to compliance with
applicable bankruptcy laws and the approval of Fidelity and TCW (so long as the
funds and accounts managed by either of them hold in the aggregate at least 20%
of the outstanding Old Series Notes). In addition, the Bankruptcy Court may, but
not necessarily will, require a new solicitation.
The Paradise Island Purchase Agreement imposes significant restrictions upon
the Company's ability to consider and ultimately accept acquisition proposals
for the Paradise Island Business other than the SIHL Sale. Pursuant to the
Paradise Island Purchase Agreement, the Company cannot consider any alternative
acquisition proposal unless such proposal constitutes an "Overbid Transaction"
from a financially qualified third party which provides for consideration
attributable to the entire Paradise Island Business having a fair market value
of more than $130 million. The imputed fair market value of the SIHL proposal is
$125 million. Moreover, when considering whether to approve an "Overbid
Transaction" from a competing bidder, the Bankruptcy Court will likely take into
consideration that the Company is required, under the terms of the Paradise
Island Purchase Agreement, to pay SIHL's out-of-pocket costs and expenses
incurred in connection with the proposed SIHL Sale and adjust the value of the
competing bid accordingly.
CERTAIN CONSIDERATIONS RELATED TO ORIGINAL ISSUE DISCOUNT IN THE EVENT OF
SUBSEQUENT BANKRUPTCY
In general, a bankruptcy claim represented by a debt security equals its
face amount plus accrued interest through the date of the commencement of the
bankruptcy case. A reduction must be made to the claim for any unmatured
interest, such as OID, included in the face amount of the instrument.
Some courts interpreting bankruptcy law have differed as to whether and to
what extent the issuance of debt securities through a bankruptcy reorganization
gives rise to OID for purposes of fixing the claim of a holder of such debt
securities in a subsequent bankruptcy of the issuing entity. In connection with
the Restructuring, holders of Old Series Notes might have their claims reduced
due to OID attributable to the issuance of the Old Series Notes. In addition,
OID imputed from the Restructuring might require the reduction of the claims of
holders of the New RIHF Mortgage Notes and the New RIHF Junior Mortgage Notes if
there were to be any future bankruptcy proceeding of RIHF or RIH.
A reduction in the amount of the claims of the present holders of Old Series
Notes due to OID, in all likelihood, will not alter their treatment in the
Restructuring. The reasons for this include, among others, that the proposed
treatment will be consensual if the Restructuring is implemented, and in any
event, the fair market value of the consideration to be given to holders of Old
Series Notes will not exceed the face amount of the Old Series Notes less
unamortized OID.
If there were to be any future bankruptcy proceeding involving RIHF or RIH,
the court might find that the New RIHF Mortgage Notes and the New RIHF Junior
Mortgage Notes were issued with OID represented by the difference between their
face amount and the closing price for the Old Series Notes
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on the Effective Date. Such a bankruptcy claim could be reduced to a greater
extent if a bankruptcy court allocated any portion of the fair market value of
the Old Series Notes to other consideration distributed to the Old Series Note
holders pursuant to the Restructuring. However, the more prevalent view
reflected by recent decisions in both the Second and Fifth Circuit Courts of
Appeals is that, for bankruptcy law purposes, no new OID arises by virtue of a
face value debt-for-debt exchange in a consensual out-of-court workout, even if
the fair market value of the old bonds is less than the face amount of the old
and new bonds. See IN RE CHATEAUGAY CORP., 961 F.2d 378 (2nd Cir. 1992) and IN
RE PENGO INDUSTRIES, 962 F.2d 543 (5th Cir. 1992). These cases, while not
completely on point, support the argument that no new OID should arise by virtue
of a debt-for-debt exchange embodied in a confirmed chapter 11 plan such as the
Plan or the Old Plan. No assurances can be given that this argument would
prevail.
ADDITIONAL SENIOR SECURED DEBT; SUBORDINATION
The RIHF Senior Facility will be available to meet working capital needs.
The Company currently does not forecast a need to use such a facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Financial Condition -- Liquidity." If borrowings are made under
the RIHF Senior Facility, the Company's post-Restructuring debt burden would
increase. The RIHF Senior Facility Notes will be senior secured obligations
issued by RIHF and guaranteed by RIH pursuant to the RIH Senior Facility
Guaranty. RII also will issue a guaranty of the payment of principal and
interest on the RIHF Senior Facility Notes. RII's guaranty will be secured by
the RII Pledge Agreement. The RIHF Senior Facility also will be secured by the
GRI Pledge Agreement.
The RIH Mortgage, the RIH Guaranty Mortgage, the RIH Junior Mortgage and the
RIH Junior Guaranty Mortgage on the Resorts Casino Hotel securing the payment of
the RIH Promissory Note, the RIH Mortgage Guaranty, the RIH Junior Promissory
Note and the RIH Junior Mortgage Guaranty, respectively, will be subordinated to
the liens securing the RIH Senior Facility Note and the RIH Senior Facility
Guaranty.
SECURITY FOR THE NEW RIHF MORTGAGE NOTES AND THE NEW RIHF JUNIOR MORTGAGE NOTES
If an Event of Default (as defined in either the New RIHF Mortgage Indenture
or the New RIHF Junior Mortgage 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 RIHF Senior Facility Notes (if any), SECOND, the principal of,
and accrued interest on, the New RIHF Mortgage Notes, and THIRD, the principal
of, and accrued interest on, the New RIHF 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 Casino Control
Act. If the New RIHF Mortgage Note Trustee or the New RIHF Junior Mortgage Note
Trustee, as the case may be, were unable to, or chose not to, sell the Resorts
Casino Hotel, the New RIHF Mortgage Note Trustee or the New RIHF Junior Mortgage
Note Trustee, 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 RIHF
Senior Facility Notes, the New RIHF Mortgage Notes and the New RIHF 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 RIHF Senior Facility Trustee, the New RIHF Mortgage Note Trustee or
the New RIHF Junior Mortgage Note Trustee.
FIDELITY AND TCW NOT FIDUCIARIES
RII and GRI have been informed by Fidelity and TCW that, in the opinion of
Fidelity and TCW, they owe no fiduciary, agency or other obligation to any
holder of Old Series Notes (and beneficiary of the related GRI Guaranty endorsed
thereon). If RII and GRI were to commence their chapter 11 cases as other than
prepackaged cases, a creditors' committee comprised of certain creditors of RII
and GRI
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would be appointed by the Office of the United States Trustee and, if it were so
appointed, such committee would owe a fiduciary obligation to the creditors of
RII and GRI, including the holders of Old Series Notes. Because RII and GRI
intend to commence their chapter 11 cases after receipt of the Requisite
Acceptances to the Plan and to seek expedited confirmation of the Plan, they
will request the Office of the United States Trustee to forego the appointment
of an official creditors' committee.
COMPETITION
GENERAL. The Company competes, and PIRL will compete, directly with other
casino operators in each market in which they operate principally on the basis
of price, quality and customer service. Such competition has intensified in
recent years. See "Business of the Company". 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 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.
Recently, the U.S. Secretary of the Interior approved a plan by the
Mashantucket Pequot Indians to operate a casino facility in Ledyard,
Connecticut, located in the eastern portion of the state. Such facility opened
in early 1991 and was only authorized to conduct table gaming operations. In
January 1993, such casino was authorized to operate slot machines. 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 836,000 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,
although preliminary, 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 Atlantic City Showboat, Inc. ("ACS") under a
99-year net lease (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
277,000 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
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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.
PARADISE ISLAND. The Company's Paradise Island facilities compete with
other hotels and resorts on Paradise Island, elsewhere in The Bahamas, the
southeastern United States, the Caribbean and Mexico, as well as cruise ships
serving these areas. As new hotels are constructed or new cruise ships are
introduced into service in these areas, competition can be expected to increase.
The Company's properties principally compete with a casino/hotel and resort
complex on Cable Beach, New Providence Island, comprised of Carnival's Crystal
Palace, with 860 guest rooms, a 33,500 square foot casino, a show theater and
other amenities, and the HCB-owned Radisson with 679 guest rooms. There is a
total of approximately 7,600 rooms for overnight guests on New Providence Island
and Paradise Island combined. Of such rooms, approximately 3,100 are located in
hotels on Paradise Island, including 1,357 in hotels owned and operated by RIB.
In October 1993, Carnival announced that it had signed an agreement in principle
to sell an 81% interest in the Crystal Palace complex to a group of German
investors. This investor group has announced that it plans to increase the
marketing of the Crystal Palace complex in Europe and will invest additional
capital in the complex to establish it as a high-end resort destination.
Although there can be no assurance that such sale will be completed, an upgraded
Crystal Palace complex may adversely affect the Company's operations in The
Bahamas.
In addition to the Crystal Palace casino, the Bahamian government is
obligated to facilitate the grant of a casino license to the operators of the
Ramada Resort situated on the southwestern end of New Providence Island. The
Bahamian government is also obligated to support a proposal for the operation of
a slot casino at the Radisson resort on Cable Beach.
In recent years, the Company's Bahamian hotel and casino operations have
experienced increased competition from the new, larger cruise ships which have
begun serving this area as these cruise ships have effectively provided more
available rooms. Also, the Company's Paradise Island casino competes with two
casinos on Grand Bahama Island, with casinos located on various Caribbean
islands and, to a lesser extent, with Atlantic City and Las Vegas casino/hotels.
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
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 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 1992, RIH's license was renewed until February 26, 1994.
RIH's renewed license is subject to several conditions, including: (i) the
submission of additional monthly financial reports to the Casino Control
Commission and the Division of Gaming Enforcement; (ii) monthly notification to
such bodies of any significant deviation from certain financial forecasts and
related information provided by the Company in connection with the 1992 renewal
proceedings; (iii) monthly notification of any significant variance in operating
results from the prior year; and (iv) quarterly reporting on its progress in the
development of a financing plan regarding its debt due in April 1994 and, by
June 30, 1993, submission of an outline of terms to satisfy that obligation.
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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 RIHF
Senior Facility Notes (if issued), the New RIHF Mortgage Notes and the New RIHF
Junior Mortgage Notes. See "Business of the Company -- Regulation and Gaming
Taxes and Fees -- New Jersey".
It is a condition to the effectiveness of the Plan that the Casino Control
Commission issue various approvals in connection with the Plan and the
transactions described in this Information Statement/ Prospectus. Among other
approvals, the Casino Control Commission must find that the Company will
continue to be financially stable after the consummation of the Plan and that
all holders of debt and equity securities of the Company are qualified, unless
the qualification requirement is waived by the Casino Control Commission. The
Casino Control Commission considers various factors in determining whether a
company is financially stable, including without limitation the ability of a
company to make necessary capital and maintenance expenditures, and to pay all
debts, including applicable taxes, as they come due. The Company has advised the
Casino Control Commission of its intention to implement the Restructuring and
the likelihood that the Plan will not be consummated prior to the expiration of
the current two year term of RIH's casino license as of February 26, 1994. The
Casino Control Commission will conduct a license renewal hearing in the normal
course prior to the scheduled expiration date and will consider in its
deliberations the factors here described.
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 Restated Certificate of Incorporation of RII
provides, and the Amended RII Certificate of Incorporation will provide, that
all securities of RII and any of its subsidiaries 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.
CERTAIN DEFAULTS
As of September 30, 1993, RII was not in compliance with its covenant
contained in the Old Series Note Indenture to maintain a Tangible Net Worth (as
defined in the Old Series Note Indenture) of at least $50,000,000. At that date,
RII's Tangible Net Worth was $45,625,000. Since that date, RII's Tangible Net
Worth has continued to decline.
Such non-compliance constitutes a "Default" under the Old Series Note
Indenture and will become an "Event of Default" under the Old Series Note
Indenture if RII fails to cure the Default
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within 30 days after receipt of a formal notice from the Old Series Note
Trustee. On January 3, 1994, the Old Series Note Trustee furnished a notice of
default to the Company stating that if such Default were not cured within 30
days of receipt of the notice it would become an Event of Default under the Old
Series Note Indenture. RII will not be able to cure the Default. Accordingly,
RII anticipates that the Default will become an Event of Default on February 2,
1994, the expiration of the 30 day cure period.
When the Default becomes an Event of Default, the Old Series Note Trustee
may accelerate the maturity of the Old Series Notes by declaring all unpaid
principal of and accrued interest on the Old Series Notes due and payable or may
immediately foreclose upon the collateral securing the Old Series Notes pursuant
to the Old Security Documents. In addition, the holders of 40% in principal
amount of the Old Series Notes then outstanding may require the Old Series Note
Trustee to accelerate the maturity of the Old Series Notes. The collateral
securing the Old Series Notes includes the Resorts Casino Hotel, the outstanding
capital stock of RIH, GRI and all of RII's other direct and indirect domestic
subsidiaries, as well as the RIB Collateral.
There can be no assurance that the Old Series Note Trustee, in the exercise
of its fiduciary duties under the Old Series Note Indenture or upon the request
of the holders of at least 40% in principal amount of the Old Series Notes, will
not accelerate the maturity of the Old Series Notes or seek to foreclose upon
the collateral securing the Old Series Notes at any time on or after February 2,
1994. Moreover, the holders of substantially less than 40% in principal amount
of the Old Series Notes may request the Old Series Note Trustee to take such
actions. There can be no assurance that the Old Series Note Trustee would not
comply with the requests of such holders.
The holders of two-thirds in principal amount of the outstanding Old Series
Notes (and the holders of at least a majority in principal amount of the Old
Series A Notes and of the Old Series B Notes) may waive an existing Default or
Event of Default. In addition, the holders of 50% or more in principal amount of
the Old Series Notes may rescind acceleration of the maturity of the Old Series
Notes if (i) all existing Events of Default, other than the non-payment of the
principal of the Old Series Notes which has become due solely by such
acceleration, have been cured or waived, (ii) interest on overdue installments
of interest and overdue principal, which has become due otherwise than by such
acceleration, has been paid and (iii) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction. RII will not be able to
cure the Event of Default. RII believes, therefore, that no rescission of any
acceleration of the maturity of the Old Series Notes would be possible absent a
waiver of the Event of Default.
Fidelity and TCW, which separately advise and manage various funds and
accounts that as of January 10, 1994 held in the aggregate approximately
$308,833,000 principal amount of Old Series Notes, or approximately 64% of the
outstanding Old Series Notes, have agreed, in the Bondholder Support Letter, to
vote in favor of the Plan. See "The Restructuring -- The Bondholders Support
Agreement". However, they have not agreed to waive the Default or to refrain
from seeking acceleration of the maturity of the Old Series Notes on or after
February 2, 1994.
If the Old Series Note Trustee accelerates the maturity of the Old Series
Notes or forecloses upon the collateral securing the Old Series Notes pursuant
to the Old Security Documents, RII and GRI, as guarantor of the Old Series
Notes, and certain of their subsidiaries whose assets are pledged to secure the
Old Series Notes (including RIH and RIB), would be forced to seek immediate
protection under chapter 11 of the Bankruptcy Code. If such events occur, there
can be no assurance that the Restructuring would be implemented, that a
reorganization of RII or GRI rather than a liquidation would occur or that any
reorganization that might occur would be on terms as favorable to the holders of
Old Series Notes (and the beneficiaries of the related GRI Guaranty endorsed
thereon) and holders of the RII Common Stock as the terms of the Plan. Without
limiting the generality of the foregoing, any foreclosure upon the RIB
Collateral would permit SIHL to terminate the Paradise Island Purchase
Agreement. See "Risk Factors -- Certain Bankruptcy and Insolvency Considerations
- -- General".
The Company intends to continue to solicit Acceptances of the Plan until the
Voting Deadline unless it is required to seek immediate protection under chapter
11 of the Bankruptcy Code as a result of an acceleration of the maturity of the
Old Series Notes or a foreclosure upon the collateral securing the Old Series
Notes as described above.
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RISKS ASSOCIATED WITH THE PARADISE ISLAND BUSINESS
If the SIHL Sale is not consummated ownership of the Paradise Island
Business will be transferred to the holders of the Old Series Notes through the
PIRL Spin-Off, subject to the terms of the PIRL Standby Distribution Agreement.
Even if the SIHL Sale is consummated, partial ownership of the Paradise Island
Business is a substantial component of the consideration under the Plan to
holders of Old Series Notes. In considering whether or not to vote to accept the
Plan, holders of Old Series Notes should consider the following additional risk
factors associated with the Paradise Island Business. Additionally, for a full
discussion of the risk factors related specifically to the SIHL Sale, reference
is made to the SIHL Prospectus and the related Registration Statement.
NEW OWNERSHIP OF PARADISE ISLAND BUSINESS. Pursuant to the Restructuring,
ownership of the Paradise Island Business will be transferred either to SIHL
through the SIHL Sale or to the holders of the Old Series Notes through the PIRL
Spin-Off, subject to the terms of the PIRL Standby Distribution Agreement.
Consequently, the Paradise Island Business will come under new ownership and new
management. No assurances can be made as to the ability or experience of such
new ownership or management, or as to the future earnings of the Paradise Island
Business thereunder.
RECENT NET LOSSES. The PIRL Group experienced net losses of $12,399,000 and
$13,257,000 in its fiscal years ended December 31, 1991 and 1992, respectively,
and $9,616,000 for the three quarters ended September 30, 1993. If the PIRL
Spin-off occurs, there can be no assurance regarding the ability of PIRL to
continue to operate the Paradise Island Business as a going concern. Moreover,
if the SIHL Sale occurs, there can be no assurance that SIHL will be able to
curtail such losses or to continue to operate the Paradise Island Business as a
going concern in its present form.
SIHL SERIES A SHARES. For information regarding certain consideration
associated with ownership of the SIHL Series A Shares, see the accompanying SIHL
Prospectus relating to the SIHL Series A Shares.
BAHAMAS REGULATORY MATTERS. The operation of casinos in The Bahamas is
regulated under The Lotteries and Gaming Act, 1969, as amended (the "Gaming
Act"), of the Commonwealth of The Bahamas. The Gaming Act established a Gaming
Board which observes the count of all gaming receipts, prescribes accounting and
control procedures and regulates personnel and security matters. Gaming licenses
are renewable annually. The Gaming Board also is empowered to revoke or suspend
any gaming license if a violation occurs.
PEL currently is licensed under the Gaming Act to operate the Paradise
Island casino. PEL's gaming license is subject to a number of conditions
relating to PEL's activities and operations. Pursuant to amendments of PEL's
casino license, the Company, among other things, is required to: (i) continue
its efforts to achieve a prompt sale of the Paradise Island Business to a
purchaser satisfactory to the government of the Commonwealth of The Bahamas and
HCB; (ii) consult with HCB in advance with respect to material aspects of any
contemplated disposition of the Paradise Island Business; (iii) provide
quarterly reports to HCB describing the progress made by the Company in
implementing plans for separating various functions relating to its Bahamian
operations from the Company's non-Bahamian operations; (iv) provide to HCB
various financial reports; and (v) reimburse the government of the Commonwealth
of The Bahamas and HCB for legal and advisory fees incurred by them relative to
any restructuring of the Company.
Additionally, approval by the government of the Commonwealth of The Bahamas
is required for foreign ownership of real property in The Bahamas. Moreover, any
foreign investment in The Bahamas requires exchange control approval by the
Central Bank of The Bahamas. No sale of any property located in The Bahamas to
non-Bahamian nationals may be completed until such governmental approvals are
obtained.
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST PIRL. If the SIHL Sale is not
consummated on the Effective Date, the PIRL Spin-Off will be effected and the
operations of the Paradise Island Business will come under the control of PIRL.
PIRL will then be a Bahamian holding company, and all or a substantial portion
of its assets are or may be located outside the United States. PIRL has
appointed an agent to receive service of process with respect to any action
brought against it in the United States District Court for the Southern District
of New York under the securities laws of the United States or any State, or any
action brought against it in the Supreme Court of the State of New York in the
County of New York under the securities laws of New York State. However, it may
be difficult for investors to
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enforce outside the United States judgments against PIRL obtained in the United
States in any such actions, including actions predicated upon the civil
liability provisions of the securities laws of the United States. In addition,
certain of the directors and officers of PIRL are or may be residents of The
Bahamas, and all or a substantial portion of the assets of such persons are or
may be located outside the United States. As a result, it may be difficult for
investors to effect service of process within the United States upon such
persons, or to enforce against them judgments obtained in United States courts,
including judgments predicated upon the civil liability provisions of the
securities laws of the United States. There can be no assurance as to whether
the courts of The Bahamas would enforce (i) judgments of United States courts
obtained against PIRL or such persons predicated upon the civil liability
provisions of the securities laws of the United States or (ii) in original
actions brought in The Bahamas, liabilities against PIRL or such persons
predicated upon the securities laws of the United States.
TERMINATION OF PUT OPTION
The SIHL charter documents provide that, until termination of the Put Right,
without the approval of 50% of the directors appointed by the holders of the
SIHL Series A Shares no amendment may be made to (a) the Articles of Association
of SIHL or (b) to certain arrangements agreed with the Bahamian government
requiring SIIL to place its SIHL Series B Ordinary Shares in trust pending the
government's consideration and approval of any subsequent change in ownership of
those shares following enforcement of the pledge relating to the Put Right, if
such amendment could reasonably be expected to have an adverse effect on the Put
Right or the rights of the holders of the SIHL Series A Shares. If such voting
requirements were met, the rights of the holders of the SIHL Series A Shares
regarding the Put Right could be altered or eliminated.
DIFFERENCES BETWEEN THE TERMS OF THE NEW DEBT SECURITIES AND THE OLD SERIES
NOTES
The terms and provisions of the New RIHF Mortgage Notes and the New RIHF
Junior Mortgage Notes, and the New RIHF Mortgage Indenture and New RIHF Junior
Mortgage Indenture, are substantially different from the terms of the Old Series
Notes and the Old Series Note Indenture, including without limitation as to
principal, interest, maturity and the collateral securing such notes.
The covenants which will be set forth in the New RIHF Mortgage Indenture and
the New RIHF Junior Mortgage Indenture, as they apply to RIH and RIHF, are
substantially similar in scope to, and in certain respects are more
comprehensive than, those set forth in the Old Series Note Indenture, as they
apply to RII, except that, among other things, (i) the Old Series Note Indenture
contains a covenant pursuant to which RII must maintain a tangible net worth of
not less than $50,000,000 at all times after December 31, 1990, while the New
RIHF Mortgage Indenture and the New RIHF Junior Mortgage Indenture will not
contain any minimum tangible net worth covenant, (ii) the Old Series Note
Indenture contains a prohibition on restricted payments, while the New RIHF
Mortgage Indenture and the New RIHF Junior Mortgage Indenture will permit RIH or
a subsidiary of RIH to make restricted payments, provided certain conditions set
forth therein are satisfied (See "Description of New RIHF Mortgage
Notes--Covenants--Limitations on Dividends and Restricted Payments", and
"Description of New RIHF Junior Mortgage Notes--Covenants--Limitation on
Dividends and Restricted Payments"), and (iii) the New RIHF Mortgage Indenture
and the New RIHF Junior Mortgage Indenture will permit RIH and RIHF to incur
certain indebtedness which is prohibited by the terms of the Old Series Note
Indenture (See "Description of New RIHF Mortgage Notes--Covenants--Limitation on
Additional Indebtedness and Issuance of Notes" and "Description of New RIHF
Junior Mortgage Notes--Covenants--Limitation on Additional Indebtedness and
Issuance of Notes"). In addition, the covenants restricting change of control in
the New RIHF Mortgage Indenture and the New RIHF Junior Mortgage Indenture will
differ from those set forth in the Old Series Note Indenture by (A) not
permitting any holder to require the repurchase of its notes if a change in
control should occur, (B) not requiring that Merv Griffin or his affiliates
retain certain controlling interests in RII, and (C) permitting certain mergers,
consolidations and asset sales, subject to certain conditions (See
"Summary--Comparison of New RIHF Mortgage Notes and New RIHF Junior Mortgage
Notes to Old Series Notes").
In addition to being secured by liens on the Resorts Casino Hotel, the Old
Series Notes are secured by (i) a mortgage lien on RII's fee and leasehold
interests in substantially all of is real property, additions and
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improvements (other than the Showboat Lease and an office building in Miami,
Florida), (ii) all the outstanding capital stock of RIH, GRI and all of RII's
other direct and indirect domestic subsidiaries, (iii) a promissory note made by
RIH in the aggregate principal amount of $325,000,000, (iv) 66% of the
outstanding voting stock of RIB and (v) the RIB Collateral. The New RIHF
Mortgage Notes will be secured by an assignment to the New RIHF Mortgage Note
Trustee of the RIH Promissory Note, the RIH Mortgage and any other security
interests in collateral securing the RIH Promissory Note. The New RIHF Junior
Mortgage Notes will be secured by an assignment to the New RIHF Junior Mortgage
Note Trustee of the RIH Junior Promissory Note, the RIH Junior Mortgage and any
other security interests in collateral securing the RIH Junior Promissory Note.
(See "Summary--Comparison of New RIHF Mortgage Notes and New RIHF Junior
Mortgage Notes to Old Series Notes").
The Old Series A Notes and the Old Series B Notes rank PARI PASSU with
respect to amounts realized upon the disposition of the collateral securing such
notes. The liens securing the New RIHF Mortgage Notes are senior in right of
payment from amounts realized upon the disposition of the collateral securing
such notes to the lien of the New RIHF Junior Mortgage Notes on such collateral.
Moreover, if the RIHF Senior Facility Notes are issued by RIHF, (a) the liens
securing the New RIHF Mortgage Notes will be expressly subordinated in right of
payment upon disposition of collateral to the liens securing the RIHF Senior
Facility Notes, and (b) the liens securing the New RIHF Junior Mortgage Notes
will be expressly subordinated in right of payment upon disposition of
collateral to the liens securing the RIHF Senior Facility Notes and the liens
securing the New RIHF Mortgage Notes.
RISK OF HIGHLY LEVERAGED TRANSACTION
The New RIHF Junior Mortgage Indenture does not require RIHF to offer to
purchase the New RIHF Junior Mortgage Notes upon occurrence of a change of
control and may not afford holders of the New RIHF 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 New RIHF Junior Mortgage Notes.
THE RESTRUCTURING
The following section of this Information Statement/Prospectus sets forth
certain information regarding the events leading to the Restructuring, the terms
of the Restructuring, the effects of the Restructuring on RII and the holders of
its securities and the Company's plan for post-Restructuring operations. The
Restructuring will be effected by means of the Plan.
BACKGROUND
EVENTS LEADING TO THE FILING OF THE OLD PLAN
CONSTRUCTION OF THE TAJ MAHAL. In 1983, the Company commenced construction
of the Taj Mahal project. Although initially scheduled for completion in late
1986, the project experienced cost overruns and construction delays and remained
unfinished at the time it was sold to the Trump Partnership in late 1988.
By the mid-1980s, the Company's position in the Atlantic City casino/hotel
industry was severely disadvantaged. In an atmosphere of increased competition,
the preoccupation of the Company's management with the Taj Mahal and several
bids for control of the Company caused the Company's then existing management to
neglect the Resorts Casino Hotel and allow its facilities to deteriorate and to
fail to respond to new trends in the industry.
THE ACQUISITION. In late 1988, through a stock purchase and merger,
Griffco, a corporation then wholly owned by Merv Griffin, acquired RII from
Donald Trump, the then Chairman of the RII Board of Directors and its
controlling shareholder, and RII's other shareholders. The aggregate cost of
this acquisition was approximately $296,208,000, in cash, and was principally
funded by means of Merv Griffin's $50,000,000 investment in Griffco and the
issuance of two series of public debt by GRI.
Immediately after Griffco's acquisition of RII, the Company entered into an
agreement pursuant to which it sold certain real and personal assets, including
the Taj Mahal, to the Trump Partnership for $273,000,000 in cash and the
assumption of approximately $19,000,000 of liabilities. In connection with the
foregoing transactions, RII also terminated the Comprehensive Services Agreement
which RII had entered into with the Trump Hotel Corporation and paid such
corporation an aggregate amount of $63,689,750 for such termination and fees
still owed under such agreement.
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DETERIORATION IN FINANCIAL CONDITION. In the period following the
acquisition of RII by Griffco, the Company experienced a substantial
deterioration in its results of operations from both the Resorts Casino Hotel
and the Paradise Island Business. The decrease in earnings of the Resorts Casino
Hotel was attributable largely to increased competition and, among other things,
the disruption of operations and patron and employee relationships caused by
ongoing renovations and the Company's financial difficulties. RII and its
affiliates had issued approximately $600,000,000 of subordinated debentures
prior to the acquisition by Griffco, principally to fund the construction of the
Taj Mahal, and issued $325,000,000 of additional notes to fund the acquisition.
As a result, after certain repayments, the Company had approximately
$911,000,000 of long-term debt outstanding in August 1989. In August 1989, faced
with deteriorating results of operations and substantial debt service, the
Company announced a moratorium on the payment of interest on its outstanding
public debt.
NEGOTIATIONS WITH UNOFFICIAL COMMITTEES. In late 1989, the Company embarked
upon recapitalization negotiations with two unofficial committees representing
the holders of the Company's outstanding public debt in respect of which the
Company had declared the interest payment moratorium. For various reasons,
however, RII came to believe that it would not be possible to achieve, on a
solely out-of-court basis, the comprehensive restructuring needed to assure
continued viability. Moreover, the possibility of an out-of-court settlement was
adversely affected when involuntary petitions for relief under chapter 11 of the
Bankruptcy Code were filed against RII and its former subsidiary, RIFI, in
November 1989.
OVERVIEW OF THE OLD PLAN
THE OLD BANKRUPTCY PROCEEDING. On November 12, 1989, certain creditors of
RII and RIFI filed involuntary petitions for relief under chapter 11 of the
Bankruptcy Code. On December 22, 1989, RII and RIFI filed consents to the
involuntary petitions and GRI and GRH, another former subsidiary of RII, filed
the Old Chapter 11 Cases in the New Jersey bankruptcy court. The Old Debtors
subsequently filed the Old Plan, which was confirmed by the New Jersey
bankruptcy court in August 1990. On the effective date of the Old Plan
(September 17, 1990), all conditions to the effectiveness of the Old Plan were
either met or waived and the Old Plan became effective.
FEATURES OF THE OLD PLAN. Set forth below is a brief summary of the
material features of the Old Plan. Pursuant to the Old Plan, the previously
outstanding public debt issued by RII, RIFI and GRI was canceled, the Old
Debtors were discharged from all other claims arising prior to the commencement
of the Old Chapter 11 cases and all previously outstanding shares of stock of
RII were canceled.
In consideration for the previously outstanding public debt of $911,000,000,
RII issued (i) debt securities consisting of $187,500,000 principal amount of
the Old Series A Notes, $137,500,000 principal amount of the Old Series B Notes
and $105,333,000 principal amount of the Showboat Notes (ii) 15,100,000 shares
of RII Common Stock and (iii) certain Litigation Trust Units. The distribution
with respect to the previously outstanding public debt was made to Chemical
Bank, as disbursing agent. In consideration for other unsecured liabilities and
claims, RII issued an additional $1,250,000 principal amount of the Old Series B
Notes, 137,234 shares of RII Common Stock and additional Litigation Trust Units.
Additional shares of RII Common Stock and Old Series B Notes may be issued to
holders of Old Plan Disputed Claims if such claims are allowed by the bankruptcy
court.
As of October 15, 1993, Chemical Bank, as disbursing agent, continues to
hold approximately $1,160,000 principal amount of Old Series A Notes, $1,243,000
principal amount of Old Series B Notes and 86,434 shares of RII Common Stock on
behalf of holders of the previously outstanding public debt of RII, GRI and RIFI
that have not yet surrendered such previously outstanding public debt in
accordance with the provisions of the Old Plan (the "Unsurrendered Public Debt
Claims"). Under the terms of the Old Plan, holders of Unsurrendered Public Debt
Claims have five years from September 17, 1990, to surrender such Unsurrendered
Public Debt Claims and to receive the distribution provided by the Old Plan. Any
distributions that remain unclaimed on September 17, 1995, will revert to and
become the property of RII.
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Certain claims against the Old Debtors are the subject of proceedings
pending in connection with the Old Plan ("Old Plan Disputed Claims") and the
distributions with respect to such Old Plan Disputed Claims have not yet been
made pursuant to the Old Plan. Such Old Plan Disputed Claims consist of a claim
for approximately $6,600,000 asserted by certain participants in the RII
Officers Supplemental Retirement Plan (the "Officers Supplemental Plan").
Litigation is pending with respect to this claim in the New Jersey bankruptcy
court. The Company has negotiated a settlement related to this claim. Pursuant
to this settlement, which has not yet been approved by the New Jersey bankruptcy
court, this claim would be allowed as a Class 3C claim under the Old Plan in the
amount of approximately $6,600,000 and would be entitled to a distribution of
155,623 shares of RII Common Stock, $2,318,000 aggregate principal amount of Old
Series B Notes (including Old PIK Payments) and an appropriate number of
Litigation Trust Units. Because the settlement is not yet evidenced by an
executed stipulation approved by the bankruptcy court, the calculations
contained in this Information Statement/Prospectus do not reflect the issuance
of these additional shares or Old Series B Notes. To the extent that any Old
Plan Disputed Claim is allowed, the holder thereof will be entitled to the
distributions set forth in the Old Plan and the recoveries of holders of RII
Common Stock and Old Series Notes projected herein will be diluted accordingly.
For a discussion of the treatment of Unsurrendered Public Debt Claims and Old
Plan Disputed Claims under the Plan, see "The Plan -- Summary of Other
Provisions of the Plan -- Unclaimed Distributions -- Treatment of Unclaimed
Consideration from Old Plan".
Pursuant to the Old Plan, Merv Griffin acquired 4,400,000 shares of RII
Common Stock for which RII received $12,345,000 in cash and the Griffin Note for
$11,000,000 secured by a bank letter of credit. In connection therewith, Merv
Griffin and the Griffin Group entered into the Old Griffin Services Agreement,
pursuant to which RII was granted a non-exclusive license to use his name and
likeness to promote its facilities and operations, and Merv Griffin agreed to
act as Chairman of the Board of RII and to provide certain other services
without compensation for the two-year period ended September 16, 1992.
Merv Griffin also made approximately $2,655,000 available to the indenture
trustee for the outstanding GRI public debt in exchange for voluntary releases
of Merv Griffin, the Company and others (the "GRI Releases") by the holders of
such debt. The trustee paid the $2,655,000 to RII in consideration for the
purchase of an additional 500,000 shares of RII Common Stock (the "GRI Release
Shares"). The GRI Release Shares were distributed in accordance with the formula
set forth in the Old Plan to certain holders of GRI public debt.
Merv Griffin also made $2.5 million in cash (the "RIFI Release Cash")
available to the disbursing agent under the Old Plan for distribution to holders
of the outstanding RIFI public debt in exchange for voluntary releases of Merv
Griffin, the Company and others by the holders of such debt (the "RIFI
Releases"). The disbursing agent distributed most of this sum, in accordance
with the formula set forth in the Old Plan, to the RIFI public debt holders
which delivered RIFI Releases. At the present time the disbursing agent
continues to hold approximately $169,000 of the RIFI Release Cash which has not
yet been exchanged for RIFI Releases. Under the terms of the Old Plan, electing
holders of old RIFI public debt were to have delivered their RIFI Releases prior
to the effective date of the Old Plan to receive a pro rata portion of the RIFI
Release Cash. The remaining RIFI Release Cash currently held by the disbursing
agent is subject to disputes as to whether the respective RIFI public debt
holders complied with the terms of the Old Plan relating to the RIFI Releases
and the RIFI Release Cash. Any portion of the RIFI Release Cash that is not
ultimately exchanged for RIFI Releases will be returned to Merv Griffin. For a
discussion of the treatment under the Plan of the RIFI Release Cash that is not
exchanged for the RIFI Releases, see "The Plan -- Summary of Other Provisions of
the Plan -- Unclaimed Distributions -- Treatment of Unclaimed Consideration from
Old Plan".
The Old Plan further provided for the establishment of the Litigation Trust
pursuant to a litigation trust agreement dated as of September 17, 1990, between
the Old Debtors and the Litigation Trustee (the "Litigation Trust Agreement"),
to pursue, for the benefit of certain classes of general unsecured creditors of
the Old Debtors, all claims the Old Debtors and certain of their affiliates may
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<PAGE>
have had against Donald Trump and certain of his affiliates. In October 1990,
RII funded the Litigation Trust by depositing with the Litigation Trustee the
sum of $5,000,000 to cover reasonable expenses of the Litigation Trust in
pursuing such claims, with any unused balance of such amount to be distributed
to the beneficiaries of the Litigation Trust. Under the Old Plan, the
beneficiaries of the Litigation Trust received the Litigation Trust Units to
represent their beneficial interests. Pursuant to the Old Plan, the holders of
1,785,000 Litigation Trust Units (out of at least 10,000,000 Litigation Trust
Units) had the right to require RII to purchase their Litigation Trust Units for
approximately $3,880,000 in the aggregate if certain conditions were not met by
September 17, 1991. The $3,880,000 was deposited with the Litigation Trustee in
October 1990. Such conditions were not met and, consequently, approximately
1,760,000 Litigation Trust Units were purchased by RII in October 1991 for
$3,831,000. See "Description of Litigation Trust Units".
RII accounted for its reorganization pursuant to the Old Plan by use of
"fresh start" accounting. Accordingly, all RII's assets and liabilities were
restated to reflect their estimated fair values and RII's accumulated deficit
was eliminated. RII recorded the effects of the reorganization as of August 31,
1990.
OPERATIONS SUBSEQUENT TO THE OLD PLAN
RII's ability to pay cash interest on the Old Series Notes, and the ultimate
repayment of the Old Series Notes at maturity, was premised in large measure
upon RII's ability to sell the Paradise Island Business (excluding PIA) at its
then-estimated value, and to generate substantial excess cash flow from its
operations and the contemplated sale of the Non-Operating Real Property. The
recession in the United States, and more specifically in the northeast sector,
the acute competition in Atlantic City and The Bahamas, and the impact of the
conflict in the Persian Gulf in early 1991 and its effect on transportation and
tourism, all adversely affected RII's ability to sell the Paradise Island
Business at its then-estimated value and to generate substantial excess cash
flow from operations. The Old Plan projected the Company's excess cash flows
from operations for the initial two years of the Old Plan, net of capital
expenditures and prior to the sale of the Paradise Island Business, to be
$8,300,000. The Company's actual excess cash flow was $2,476,000. The Old Plan
also contemplated additional cash flow in the amount of $15,000,000 from the
sale of the Non-Operating Real Property in the initial two years of the Old
Plan. However, such sales were never accomplished. Due to these and other
factors, RII has never paid interest in cash on the Old Series Notes.
In addition, in late 1991, Carnival announced its plan to dispose of the
Crystal Palace, the Company's principal competition in The Bahamas. Carnival
reported operating losses on the Crystal Palace in excess of $60,000,000 in
fiscal 1990 and 1991 combined, and in fiscal 1991 Carnival's investment in the
Crystal Palace was written down to its estimated net realizable value of
approximately $90,000,000. In early 1992, a portion of the Crystal Palace
complex, which Carnival had been leasing from HCB, was returned to HCB. That
portion is now the HCB-owned Radisson, which has 679 guest rooms. RII believes
that the announcement of the financial problems at Crystal Palace and the
arrangements described above have had a further adverse impact on RII's ability
to sell the Paradise Island Business. Carnival continues to operate the
remainder of the Crystal Palace complex under the Crystal Palace name and, in
October 1993, announced that it had signed an agreement in principle to sell an
81% interest in such complex to a group of German investors.
RII's Business Plan and Financial Projections included in RII's Disclosure
Statement relating to the Old Plan stated that RII believed that the net
proceeds from the sale of the Paradise Island Business (excluding PIA) "could
range from $250,000,000 to $300,000,000". Various other parties in interest in
the Old Chapter 11 Cases, such as RII's then financial advisers and certain
creditors' committees, concurred in such belief, and the Old Plan, which
contemplated the sale of the Paradise Island Business, was approved. Based on
the current economic climate, the events described above regarding the Crystal
Palace, the very limited amount of interest indicated by prospective purchasers
of the Paradise Island Business and, in particular, the estimated net proceeds
of the only offer received prior to the proposed Restructuring ($150,000,000),
for which no definitive agreement was reached, RII does not believe that
proceeds of the magnitude originally contemplated in 1990 will be realizable
prior to the maturity date of the Old Series Notes on April 15, 1994.
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<PAGE>
To facilitate the Company's capital expenditure program, which management
believes was necessary for the Company's operating properties to remain
competitive, and to conserve cash, RII elected to make Old PIK Payments for the
interest due on the Old Series Notes on October 15, 1990 and on April 15 and
October 15 of 1991, 1992 and 1993. For the 33 months ended September 30, 1993,
RII's capital expenditures totaled approximately $69,000,000. The aggregate face
amount of Old Series Notes issued in lieu of cash for the payment of interest on
these seven payment dates was approximately $156,000,000, which increased the
outstanding principal amount of the Old Series Notes to approximately
$482,000,000 at October 15, 1993. If there are no principal retirements or
additional issuances of Old Series Notes, the total obligation due on the Old
Series Notes at maturity on April 15, 1994 will be approximately $518,000,000.
Additional Old Series Notes not to exceed approximately $2,500,000 in aggregate
principal amount may be issued to holders of Old Plan Disputed Claims if such
claims are allowed by the New Jersey bankruptcy court.
Although the Company's liquidity is satisfactory until the maturity of the
Old Series Notes in April 1994, the Company must reduce its debt to a level that
can be supported by cash flow reasonably anticipated on a continuing basis. The
effort to achieve that reduction through asset sales in the current economic
environment has been unsuccessful. The Company therefore attempted to develop
financial alternatives which could be coupled with continuing efforts to sell
the Paradise Island Business. Between October 1991 and March 1992, RII retained
Bear Stearns, DLJ and Alvarez & Marsal as financial advisers to assist RII in
the development and analysis of such financial alternatives as well as the
development of a long-term financial plan.
Beginning in October 1991, the Company and its financial and legal advisers
examined and considered a number of alternatives, including continued pursuit of
a cash sale of all or a portion of the Paradise Island Business, a spin-off of
the Paradise Island Business, a transfer of the Paradise Island Business to the
holders of the Old Series Notes in the context of a restructuring of the Old
Series Notes, and pursuit of an equity investment in the Company or the Paradise
Island Business. The analysis indicated, among other things, that a total debt
restructuring was necessary and that the separation of the Paradise Island
Business from the rest of the Company was advantageous and could be a key
component of a total financial restructuring of RII. In addition, the analysis
indicated that accomplishing the separation through a cash sale or a combination
cash and stock sale of the Paradise Island Business could provide additional
advantages if a satisfactory sales price could be obtained.
Acting on behalf of the Company, Salomon Brothers provided an affiliate of
SIHL, World Leisure Group Limited, with information concerning the Paradise
Island Business in January 1992. From time to time thereafter, representatives
of SIHL's affiliate expressed interest in buying all or a portion of the
Paradise Island Business but made no formal offers. Moreover, the discussions
contemplated prices which could only be considered by the Company in the context
of a restructuring of the Old Series Notes. In June 1993, affiliates of SIHL
began a series of discussions with representatives of Fidelity and TCW which
culminated in the negotiation of the Paradise Island Purchase Agreement.
During the summer of 1992, RII began a series of discussions with Fidelity
and TCW, which represented to RII that various funds and accounts managed
separately by them owned in the aggregate over 60% of the Old Series Notes.
These discussions centered on RII's unsuccessful efforts to sell the Paradise
Island Business and the implications of such failure with respect to the payment
of the Old Series Notes upon their stated maturity in April 1994. These
discussions resulted in a preliminary agreement among RII, Fidelity and TCW on
December 14, 1992, which outlined a framework for the restructuring of RII's
business and obligations with respect to the Old Series Notes.
To facilitate further discussions with Fidelity and TCW, RII agreed to pay
the cost of retention of independent counsel. Thereafter, negotiations resumed
in earnest with Fidelity and TCW, culminating in the agreement of Fidelity and
TCW to the Restructuring described in this Information Statement/Prospectus. The
negotiations were frank, complex, comprehensive and protracted and involved not
only RII, Fidelity and TCW, but also SIHL and its various advisers with respect
to the sale of the Paradise Island Business and the Griffin Group with respect
to the New Griffin Services Agreement.
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The resulting proposed Restructuring described in this Information
Statement/Prospectus has the support and approval of the Boards of Directors of
each of RII and GRI, of Merv Griffin, and of Fidelity and TCW.
The principal differences between the preliminary framework set forth in
December 1992 and the Restructuring are (i) the addition of the SIHL Sale, (ii)
the distribution to the holders of the Old Series Notes of Excess Cash instead
of a cash distribution fixed in the amount of $25,000,000, (iii) a change in the
vesting provisions and the exercise price of the Griffin Warrants and (iv) the
termination of the 1990 Stock Option Plan and the implementation of the 1994
Stock Option Plan. These changes were made to increase the value of the
consideration distributed to the holders of the Old Series Notes, to provide
additional incentives to the Griffin Group for its efforts to improve the
operations and value of RII and to attract, retain and motivate the Company's
directors, officers and key employees by providing for the proprietary interests
of such individuals in RII.
FINANCIAL FORECASTS FOR THE COMPANY
Set forth below are forecasts of certain financial data including net
revenues, net earnings, cash flow and condensed balance sheets for the Company's
remaining operations after giving effect to the Restructuring. The forecasts
assume the Restructuring is completed on December 31, 1993.
The forecasts are based on a variety of assumptions as set forth below. The
Company believes these assumptions are reasonable; however, they are subject to
significant business, industry, economic, regulatory and competitive
uncertainties, many of which are beyond the control of the Company.
Although these forecasts represent the best estimates of the Company, for
which it believes it has a reasonable basis as of the date of preparation
thereof, September 1993, they are only estimates and actual results may vary
materially from the forecasts. Consequently, the inclusion of the forecasts
herein should not be regarded as a representation by the Company that the
forecast results will be achieved. Because the forecasts are subject to
significant uncertainties and are based upon assumptions that may not prove to
be correct, prospective holders of the New Debt Securities and the New Equity
Securities are cautioned not to place undue reliance on the forecasts. See "Risk
Factors -- Risks Relating to the Forecasts".
The Company does not intend to update or otherwise revise the forecasts to
reflect the actual date of the completion of the Restructuring, events or
circumstances existing or arising after the date hereof or the occurrence of
unanticipated events.
The forecasts should be read together with the information contained in RII
information under "Pro Forma Financial Data", "Business of the Company" and the
Consolidated Financial Statements of RII and the related notes included
elsewhere in this Information Statement/Prospectus.
The forecasts were prepared in compliance with the GUIDE FOR PROSPECTIVE
FINANCIAL INFORMATION published by the American Institute of Certified Public
Accountants. The Company's independent auditors have not performed any
procedures with respect to the forecasts and, accordingly, accept no
responsibility for them.
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FORECAST FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
----------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net revenues:
Resorts Casino Hotel:
Casino.................... $ 259.1 $ 264.2 $ 269.5 $ 274.9 $ 280.5
Rooms..................... 7.3 7.4 7.5 7.7 7.8
Food and beverage......... 16.6 17.2 17.6 17.8 18.1
Other casino/hotel........ 4.9 5.0 5.1 5.2 5.3
Real estate related....... 8.3 8.5 8.8 9.1 9.3
-------- -------- -------- -------- --------
Net revenues $ 296.2 $ 302.3 $ 308.5 $ 314.7 $ 321.0
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Earnings (loss) from
operations by segment:
Resorts Casino Hotel........ $ 29.2 $ 31.3 $ 34.7 $ 37.4 $ 39.9
Real estate related......... 6.7 6.8 7.1 7.3 7.4
Corporate expense........... (6.3) (6.5) (6.8) (7.0) (7.3)
-------- -------- -------- -------- --------
Consolidated earnings from
operations................. $ 29.6 $ 31.6 $ 35.0 $ 37.7 $ 40.0
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net earnings:
Consolidated earnings from
operations................. $ 29.6 $ 31.6 $ 35.0 $ 37.7 $ 40.0
Interest expense............ (26.0) (26.2) (26.5) (26.8) (27.0)
Amortization of debt
discount................... (3.0) (3.3) (3.7) (4.2) (4.7)
Income taxes................ -- -- -- -- (2.0)
-------- -------- -------- -------- --------
Net earnings $ 0.6 $ 2.1 $ 4.8 $ 6.7 $ 6.3
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net earnings per share........ $ 0.02 $ 0.06 $ 0.13 $ 0.18 $ 0.17
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Cash flow:
Consolidated earnings from
operations................. $ 29.6 $ 31.6 $ 35.0 $ 37.7 $ 40.0
Depreciation expense........ 13.1 12.1 9.9 8.4 7.1
Capital expenditures........ (12.0) (12.0) (12.0) (12.0) (12.0)
CRDA deposits, net of
provision.................. (1.6) (1.6) (1.6) (1.7) (1.7)
Payments of fees pursuant to
New Griffin Services
Agreement, net of
expense.................... 2.1 (.2) 2.3 1.8 --
Interest payments........... (21.9) (26.2) (26.5) (26.8) (27.0)
Income taxes................ -- -- -- -- (2.0)
-------- -------- -------- -------- --------
Cash flow................... $ 9.3 $ 3.7 $ 7.1 $ 7.4 $ 4.4
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
See "Assumptions".
BECAUSE THE FORECASTS ARE BASED ON A NUMBER OF ASSUMPTIONS AND ARE
INHERENTLY SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES THAT ARE
BEYOND THE COMPANY'S CONTROL, THERE CAN BE NO ASSURANCE THAT THE FORECASTS WILL
BE REALIZED, AND ACTUAL RESULTS MAY BE HIGHER OR LOWER THAN THOSE SHOWN,
POSSIBLY BY MATERIAL AMOUNTS.
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Condensed Balance Sheets:
<TABLE>
<CAPTION>
FORECAST
-----------------------------------------------------------
ACTIVITY DECEMBER 31,
HISTORICAL THROUGH 1993 BEFORE
SEPTEMBER 30, DECEMBER EFFECT OF EFFECT OF DECEMBER 31,
1993 31, 1993 RESTRUCTURING RESTRUCTURING 1993
-------------- ----------- ------------ ------------ ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 71.0 $ (2.6) $ 68.4 $ (48.4) $ 20.0
Restricted cash equivalents........... 8.1 2.0 10.1 (6.7) 3.4
Receivables, net...................... 13.9 3.0 16.9 (10.4) 6.5
Inventories........................... 8.5 -- 8.5 (7.0) 1.5
Prepaid expenses...................... 13.5 (0.5) 13.0 (2.3) 10.7
------- ----------- ------------ ------------ -------
Total current assets.............. 115.0 1.9 116.9 (74.8) 42.1
Property and equipment, net............. 454.1 (5.7) 448.4 (173.6) 274.8
Deferred charges and other assets....... 12.2 0.4 12.6 (1.3) 11.3
------- ----------- ------------ ------------ -------
$ 581.3 $ (3.4) $ 577.9 $ (249.7) $ 328.2
------- ----------- ------------ ------------ -------
------- ----------- ------------ ------------ -------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt,
net.................................. $ 429.5 $ 37.1 $ 466.6 $ (466.5) $ 0.1
Accounts payable and accrued
liabilities.......................... 83.2 (8.7) 74.5 (34.1) 40.4
------- ----------- ------------ ------------ -------
Total current liabilities......... 512.7 28.4 541.1 (500.6) 40.5
Long-term debt, net..................... 84.5 0.5 85.0 147.4 232.4
Deferred income taxes................... 54.0 -- 54.0 -- 54.0
Shareholders' equity (deficit).......... (69.9 ) (32.3) (102.2) 103.5 1.3
------- ----------- ------------ ------------ -------
$ 581.3 $ (3.4) $ 577.9 $ (249.7) $ 328.2
------- ----------- ------------ ------------ -------
------- ----------- ------------ ------------ -------
</TABLE>
See "Assumptions".
99
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 29.3 $ 33.0 $ 40.1 $ 47.5 $ 51.9
Restricted cash equivalents................................. 3.4 3.4 3.4 3.4 3.4
Receivables, net............................................ 6.6 6.6 6.6 6.6 6.6
Inventories................................................. 1.5 1.5 1.5 1.5 1.5
Prepaid expenses............................................ 8.6 8.8 6.5 4.7 4.7
--------- --------- --------- --------- ---------
Total current assets.................................... 49.4 53.3 58.1 63.7 68.1
--------- --------- --------- --------- ---------
Property and equipment, net................................... 273.7 273.6 275.7 279.3 284.2
Deferred charges and other assets............................. 12.8 14.4 16.0 17.7 19.4
--------- --------- --------- --------- ---------
$ 335.9 $ 341.3 $ 349.8 $ 360.7 $ 371.7
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities -- accounts payable and accrued
liabilities.................................................. $ 44.6 $ 44.6 $ 44.6 $ 44.6 $ 44.6
Long-term debt, net........................................... 235.5 238.8 242.5 246.7 251.4
Deferred income taxes......................................... 54.0 54.0 54.0 54.0 54.0
Shareholders' equity.......................................... 1.8 3.9 8.7 15.4 21.7
--------- --------- --------- --------- ---------
$ 335.9 $ 341.3 $ 349.8 $ 360.7 $ 371.7
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
See "Assumptions".
Assumptions
At the date of preparation of these forecasts, the Company was unable to
reliably estimate the Effective Date of the Restructuring. In order to provide
five complete years of comparable forecast data, the forecasts assume the
Restructuring is completed as of December 31, 1993. The forecasts do not include
any data related to the Paradise Island Business or any costs incurred or
expenditures made in connection with the Restructuring subsequent to December
31, 1993.
Described below are other assumptions that management believes are material
to the forecasts; however, not all assumptions used in the preparation of the
forecasts are set forth herein.
ACCOUNTING POLICIES. The forecasts were prepared using generally accepted
accounting principles and accounting policies consistent with those currently
being used, and expected to be used during the forecast period, in preparing
historical financial statements of the Company. These include a new income tax
accounting standard (Statement of Financial Accounting Standards No. 109), which
was adopted at the beginning of 1993.
NET REVENUES
RESORTS CASINO HOTEL
GENERAL. The following factors are anticipated to increase the
number of visitors to Atlantic City and, therefore, favorably impact the
Atlantic City casino/hotel industry during the forecast period:
-continuing improvements to be made to the Atlantic City International
Airport over the next one to two years making it more attractive for
carriers to provide scheduled air service to Atlantic City;
-the opening of the new Atlantic City Convention Center scheduled for the
fall of 1996;
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<PAGE>
-proposals by ten casino/hotels to add hotel rooms in Atlantic City in
conjunction with their applications for Casino Reinvestment Development
Authority (the "CRDA"), a public authority created under the Casino Control
Act, financing of such projects from a special fund set aside to spur
construction of new hotel rooms to support the new convention center; and
-Atlantic City's continuing efforts to position itself as a destination
resort.
CASINO. The Company's casino revenue forecasts are based on
projected industry growth and the Company's projected market share.
The Company projects the Atlantic City casino industry's gaming revenues
(excluding simulcast and poker revenues, as these games were introduced in June
1993) to experience a growth rate of approximately 2% per year from 1993 through
1998. Management believes these projections are reasonable given Atlantic City's
historical gaming revenue growth performance and in light of the factors noted
above under "General".
These forecasts consider the potential effects of the opening of a new
casino near Syracuse, New York by the Oneida Indians and the expansion of the
gaming facilities at the Foxwoods Indian Casino in Connecticut; however, they
assume no other jurisdictions on the east coast will approve and commence casino
gaming during the forecast period.
Resorts Casino Hotel contains a 60,000-square-foot casino and an
8,000-square-foot simulcast betting and poker area. In July 1993, Resorts Casino
Hotel operated 1,859 slot machines, 82 table games and 25 poker tables. This
represented 7.6% of the slot machines, 7.4% of the table games and 17.5% of the
poker tables in use in the Atlantic City casino industry at that time.
For the years 1994 through 1998 the Company projects its market share to be
7.5% for both slot and table game revenues. This projected market share is
slightly greater than the 7.3% market share that the Company has experienced in
the 33 months ended September 30, 1993 for slot revenues. Management believes
that the following factors will enable the Company to achieve this improved
market share:
-completion in 1993 of an extensive five-year capital improvements program
for the entire property, including conversion of the garage to self-parking
(completed in 1992);
-opening of a new VIP slot and table player lounge, and completion of recent
casino renovations including upgrade of high limit slot area and high limit
baccarat and table pit area, purchase of certain new slot machines, and
completion of the simulcast betting and poker room; and
-implementation of new marketing programs aimed at higher margin drive-in
customers coupled with a reduction in marketing efforts aimed at lower
margin bus patrons.
In addition, the forecasts include poker and simulcasting revenues, which
are projected to increase at 2% per year after 1994, the first full year of
offering such wagering.
ROOMS. In recent years the 670-room Resorts Casino Hotel has
experienced occupancy rates of 90% or better; however, consistent with industry
practice, the Company reserves a portion of its hotel rooms and suites as
complimentary accommodations for casino patrons. The Company currently is
shifting its marketing focus to higher margin players, so it is expected that
more rooms will be provided to casino patrons on a complimentary basis during
the forecast period than have been provided in recent history. Thus, fewer rooms
are expected to be available for sale.
In spite of this, the Company is projecting a slight increase in its room
revenues (net of complimentaries) due to projected increases in its average room
rates. The Company believes increased rates will be realizable because (i) the
demand for first class casino/hotel rooms in Atlantic City has historically been
very strong, (ii) the Company's facilities have recently undergone a major
renovation program and (iii) the factors noted above under "General" are
expected to increase the number of visitors to Atlantic City.
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FOOD AND BEVERAGE. Resorts Casino Hotel's food and beverage
operations currently include three gourmet restaurants, four volume restaurants,
two cocktail and entertainment lounges, room service and banquet operations, and
the Turf Club, a bar with food service located in the new simulcast and poker
room.
The Company plans a restaurant master plan reconfiguration during 1994 and
1995 which is to include the addition of a mid-priced restaurant and the
consolidation of kitchen operations for the gourmet restaurants. The kitchen
consolidation should allow for faster service in the gourmet restaurants,
thereby increasing the number of patrons served.
Because of these changes planned by the Company and in light of the factors
noted above under "General" that are expected to increase the number of visitors
to Atlantic City, the Company projects an increase in food and beverage revenues
to result from a modest increase in the number of patrons served, other than
complimentaries provided to guests of the casino, and a slight increase in
prices.
OTHER CASINO/HOTEL REVENUES. Revenues in this category are derived
primarily from entertainment and concessions. Resorts Casino Hotel's
entertainment revenues are from ongoing production and headliner shows presented
in the Superstar Theatre and special events (such as boxing matches) held in the
Coconut Ballroom. As the Company's marketing efforts are targeting higher margin
casino customers, the entertainment policy is shifting to more top name
headliners than have been presented in recent years. The Company plans to
continue to capitalize on Merv Griffin's celebrity status in attracting top name
entertainers.
Increased ticket prices are projected with the addition of headliners and
more ticket sales and retail outlet sales are projected with the increase in the
number of visitors to Atlantic City anticipated due to factors described above
under "General". However, because the majority of seating at shows and special
events are typically provided to guests of the casino on a complimentary basis,
the projected increase in other casino/hotel revenues during the forecast period
is slight.
REAL ESTATE RELATED
Although the Company plans to continue its efforts to sell the Non-Operating
Real Property in Atlantic City, no revenues from such sales are included in the
forecasts.
Real estate related revenues forecast herein represent rental revenues
pursuant to the Showboat Lease. Revenues under this lease currently amount to
$8,118,000 per lease year and are adjusted annually based on changes in the
consumer price index. The forecasts assume a 3% increase per year in the
consumer price index.
EARNINGS (LOSS) FROM OPERATIONS
RESORTS CASINO HOTEL. Earnings from operations for Resorts Casino Hotel
are projected to increase throughout the forecast period as the projected
revenue increases discussed above are projected to be largely offset by
increased operating expenses.
REAL ESTATE RELATED. Earnings from operations of this segment include
rental revenues pursuant to the Showboat Lease, which make up the forecast real
estate related revenues. No expenses are forecast relative to the Showboat Lease
as it is a net lease.
This segment also includes forecasted real estate taxes associated with the
Company's Non-Operating Real Property holdings in Atlantic City. Although the
Company plans to continue its efforts to sell these properties, no decreases in
real estate taxes or other expenses which would result from the sale of these
properties have been forecast. The forecasts assume that current assessed values
for the properties will remain unchanged during the forecast period, and allow
for increased property tax rates of 3.5% per year, which is the average of the
rate increases experienced in 1992 and 1993.
CORPORATE EXPENSE. Corporate expense includes payroll and related taxes
and benefits of RII officers and employees in certain other corporate office
functions, RII's directors' fees and expenses, and insurance and other overhead
expenses. These expenses are forecast to increase by an annual inflation factor
of between 3% and 4%.
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NET EARNINGS
INTEREST EXPENSE. Forecast interest expense comprises interest on the
New RIHF Mortgage Notes, the New RIHF Junior Mortgage Notes and the Showboat
Notes. Based on forecast operating results, it is assumed the Company will not
need to make a borrowing under the RIHF Senior Facility.
AMORTIZATION OF DEBT DISCOUNT. Forecast amortization of debt discount
comprises amortization of estimated discounts on the New Debt Securities and the
discount on the Showboat Notes.
INCOME TAXES. The Company has significant net operating loss
carryforwards for Federal income tax purposes which, based on the forecasts,
will be sufficient to offset all taxable income generated during the forecast
period. Based upon its analysis of the transactions that will occur on the
Effective Date, the Company believes that it will have in excess of $194,700,000
of net operating loss carryovers, which loss carryovers would be available to
offset taxable income without restriction. In addition, the Company believes
that it will have in excess of $388,500,000 of net operating loss carryovers the
use of which is subject to an annual limitation. If all of the Company's net
operating loss carryovers were subject to an annual limitation on use, the
Company believes that it will be able to utilize approximately $3,600,000 of net
operating loss carryovers per year to offset taxable income. The taxable income
of the Company is not projected to exceed $3,600,000 for any year during the
forecast period. To the extent taxable income is completely offset with net
operating loss carryforwards, the Company will be subject to the alternative
minimum tax ("AMT") with respect to such income at an effective rate of 2%. For
financial reporting purposes, the current tax provision resulting from such AMT
will be offset by a deferred tax benefit, as the AMT gives rise to a credit that
carries forward indefinitely. During the forecast period the Company's AMT is
projected to be negligible.
For state income tax purposes, RIH has significant net operating loss
carryforwards which will expire in 1997. All forecast taxable income through
1997 for RIH is anticipated to be offset by the utilization of such
carryforwards. The taxable income forecast for RIH in 1998 gives rise to
$2,000,000 of state income taxes included in the forecasts for 1998. RII and its
other subsidiaries are not forecast to have taxable income for state purposes
during the forecast period.
NET EARNINGS PER SHARE
Net earnings per share data were calculated assuming 715,000 shares of RII
Common Stock are issued in payment of financial advisory fees on the
Restructuring prior to the Effective Date and 17,025,000 shares of RII Common
Stock are issued to holders of Old Series Notes pursuant to the Restructuring.
Net earnings per share data do not give effect to 1990 Stock Options, 1994 Stock
Options or the Griffin Warrants.
CASH FLOW
DEPRECIATION EXPENSE. Forecast depreciation expense is based on
existing property and equipment as well as capital expenditures projected to be
made throughout the forecast period.
CAPITAL EXPENDITURES. Since Resorts Casino Hotel will be completing an
extensive capital improvements program in 1993, the majority of capital
expenditures during the forecast period are for maintenance projects.
CRDA DEPOSITS, NET OF PROVISION. This adjustment reflects the cash
outflow for amounts projected to be deposited with the CRDA and eliminates from
cash flow a non-cash expense associated with the Company's obligation to
purchase CRDA bonds which bear below-market rates.
PAYMENTS OF FEES PURSUANT TO NEW GRIFFIN SERVICES AGREEMENT, NET OF
EXPENSE. This adjustment reflects the cash outflow for fees payable in 1995
(the fees payable in 1994 are to be offset against the balance of the Griffin
Group Note on or prior to the Effective Date, thus requiring no cash outflow)
and eliminates from cash flow the non-cash expense recorded as prepaid fees are
written off.
INTEREST PAYMENTS. Forecast interest payments reflect interest on the
New RIHF Mortgage Notes, the New RIHF Junior Mortgage Notes and the Showboat
Notes. Interest on the New Debt Securities is projected to accrue from January
1, 1994; therefore, based on proposed interest payment
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dates, interest payments forecast for 1994 are less than one full year's
interest. Based on forecast operating results, it is assumed the Company will
not need to make a borrowing under the RIHF Senior Facility.
INCOME TAXES. See discussion of income taxes under "Assumptions -- Net
Earnings -- Income Taxes".
CONDENSED BALANCE SHEETS
The forecast balance sheets assume the Restructuring is completed as of
December 31, 1993. See RII information under "Pro Forma Financial Data" for a
description of the nature of the adjustments included in the forecast effect of
the Restructuring.
REORGANIZATION VALUES
Over the past two years, RII and GRI have been advised by Bear Stearns with
respect to: the value of post-Restructuring RII; in the case of the SIHL Sale,
SIHL; in the case of the PIRL Spin-Off, the value of PIRL; and the imputed value
of the distributions to the holders of the Old Series Notes. The total fees paid
through December 31, 1993 by the Company to Bear Stearns were $2,100,000. The
Company requested that Bear Stearns provide it with such valuation advice for
purposes of a plan of reorganization under chapter 11 of the Bankruptcy Code and
did not impose any limitations on the scope of Bear Stearns' analysis. Solely
for the purposes of the Plan, the reorganization enterprise value of RII was
assumed by the Company, based on advice from Bear Stearns, to be approximately
$225 million as of October 15, 1993. Under the Plan, based upon such
reorganization enterprise value, the Company believes that the imputed
reorganization value of its common equity is approximately $70 million or
approximately $1.80 per share of RII Common Stock (based upon approximately 38
million shares of RII Common Stock outstanding as of the Distribution Date).
Solely for purposes of the Plan, the reorganization enterprise value of
SIHL, in the case of the SIHL Sale, and of PIRL, in the case of the PIRL
Spin-Off, was assumed by the Company, based on advice from Bear Stearns, to be
approximately $150 million and $125 million, respectively, as of October 15,
1993. Under the Plan, based upon such assumed reorganization enterprise values,
the Company believes that the imputed reorganization value of the common equity
of SIHL, in the case of the SIHL Sale is approximately $150 million or
approximately $30 per SIHL Series A Share and of PIRL, in the case of the PIRL
Spin-Off is approximately $125 million or approximately $25 per PIRL Ordinary
Share (based upon an aggregate of approximately 2 million SIHL Series A Shares
and 3 million SIHL Series B Ordinary Shares or approximately 5 million PIRL
Ordinary Shares outstanding as of the Distribution Date).
Based on the advice of Bear Stearns, the Company believes that: (a) the RIHF
Mortgage Notes have an aggregate reorganization value of approximately $117
million or 93% of face; (b) the RIHF Junior Mortgage Notes have an aggregate
reorganization value of approximately $31 million or 89% of face; (c) the SIHL
Series A Shares issued and cash distributed to the holders of the Old Series
Notes if the SIHL Sale is consummated have an aggregate reorganization value of
approximately $161 million (comprised of $101 million cash and $60 million for
the SIHL Series A Shares); and (d) the PIRL Ordinary Shares and cash distributed
to holders of Old Series Notes if the PIRL Spin-Off is effected have an
aggregate reorganization value of approximately $161 million (comprised of $36
million cash and $125 million for the PIRL Ordinary Shares). There can be no
assurance that the amount of Excess Cash to be distributed on the Distribution
Date will be $36 million. The amount of Excess Cash is expected to be at least
$30 million. These reorganization values suggest the following aggregate
reorganization values for the distributions to holders of Old Series Notes as of
October 15, 1993:
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<PAGE>
ESTIMATED REORGANIZATION VALUE OF
AGGREGATE PLAN DISTRIBUTIONS TO HOLDERS OF OLD SERIES NOTES
<TABLE>
<CAPTION>
PLAN SCENARIO
----------------------------
SIHL SALE PIRL SPIN-OFF
----------- ---------------
(IN MILLIONS)
<S> <C> <C>
Cash from SIHL Sale............................................... $ 65 $ --
Other Cash........................................................ 36 36
RIHF Mortgage Notes............................................... 117 117
RIHF Junior Mortgage Notes........................................ 31 31
RII Common Stock.................................................. 31 31
SIHL Series A Shares.............................................. 60 --
PIRL Ordinary Shares.............................................. -- 125
----- -----
Total....................................................... $ 340 $ 340
----- -----
----- -----
</TABLE>
The foregoing aggregate reorganization values suggest the following
reorganization values for the distributions for each $1,000 of principal amount
of Old Series Notes as of October 15, 1993:
ESTIMATED REORGANIZATION VALUE OF PLAN DISTRIBUTIONS
FOR EACH $1,000 PRINCIPAL AMOUNT OF OLD SERIES NOTES*
<TABLE>
<CAPTION>
PLAN SCENARIO
----------------------------
SIHL SALE PIRL SPIN-OFF
----------- ---------------
<S> <C> <C>
Cash from SIHL Sale............................................... $ 135 $ --
Other Cash........................................................ 75 75
RIHF Mortgage Notes............................................... 243 243
RIHF Junior Mortgage Notes........................................ 64 64
RII Common Stock.................................................. 64 64
SIHL Series A Shares.............................................. 124 --
PIRL Ordinary Shares.............................................. -- 259
----- -----
Total....................................................... $ 705 $ 705
----- -----
----- -----
<FN>
- ------------------------
* Assumes that the principal amount of Old Series Notes outstanding as of the
Effective Date is $482,000,000, the balance on October 15, 1993. Additional
Old Series Notes not to exceed approximately $2,500,000 in aggregate principal
amount may be issued to holders of Old Plan Disputed Claims. If additional Old
Series Notes are issued, the reorganization value of plan distributions per
$1,000 principal amount of Old Series Notes would be reduced slightly.
</TABLE>
Such reorganization values further suggest that, although the holders of the RII
Common Stock are diluted under the Plan, such holders retain reorganization
value in RII equivalent to approximately $1.80 per share.
The foregoing valuations are based on a number of assumptions, including a
successful reorganization of RII's and GRI's businesses and finances in a timely
manner, the achievement of the financial forecasts reflected herein, the
availability of net operating loss tax carryforwards, the amount of available
cash, current market conditions, and the Plan becoming effective in accordance
with its terms and on a basis consistent with the estimates and other
assumptions discussed herein.
The amount of distributions to be made to the holders of the Old Series
Notes is a result of months of negotiation by RII, Fidelity and TCW (on behalf
of various funds and accounts managed severally by each of them). In addition,
discussions were held with the Griffin Group regarding the New Griffin Services
Agreement and with SIHL regarding the Paradise Island Purchase Agreement. The
Company, Fidelity and TCW were advised throughout the negotiating process by
their respective legal and financial advisers. The Company's legal and financial
advisers are disclosed in this Information Statement/Prospectus.
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In preparing a range of the respective estimated reorganization enterprise
values of RII, SIHL and PIRL and of the reorganization value of the
distributions to holders of Old Series Notes, Bear Stearns: (i) received certain
historical financial information of RII and GRI for recent years and interim
periods; (ii) received certain internal financial and operating data of RII and
GRI, including financial forecasts prepared in September 1993, provided by
management for the Company's remaining operations after giving effect to the
Restructuring; (iii) met with certain members of senior management of RII and
GRI to discuss the Company's remaining operations after giving effect to the
Restructuring and their future prospects; (iv) reviewed publicly available
financial data and considered the market values of public companies which Bear
Stearns deemed generally comparable to the operating businesses of RII and GRI;
and (v) considered certain economic and industry information relevant to the
operating businesses. Although Bear Stearns conducted a review and analysis of
RII's and GRI's businesses, operating assets and liabilities and the forecasts
of the Company's remaining operations after giving effect to the Restructuring,
Bear Stearns assumed and relied on the accuracy and completeness of all (a)
financial and other information furnished to it by RII and GRI and by other
firms retained by RII and GRI and (b) publicly available information. Neither
Bear Stearns nor any of the other financial advisers to RII and GRI
independently verified management's projections in connection with such
valuation, and no independent evaluations or appraisals of RII and GRI's assets
were sought or were obtained in connection therewith.
Estimates of reorganization enterprise values and of the reorganization
value of the RII Common Stock and the SIHL Series A Shares, the PIRL Ordinary
Shares, the New RIHF Mortgage Notes and the New RIHF Junior Mortgage Notes do
not purport to be appraisals or necessarily to reflect the values that may be
realized if assets are sold. The estimate of the values of RII, SIHL, and PIRL
prepared by Bear Stearns represents hypothetical going concern reorganization
enterprise values of these entities as the continued owner and operator of their
businesses and assets and assumes consummation of the Plan, and, in the case of
SIHL, the SIHL Sale, and in the case of PIRL, the PIRL Spin-Off, each on terms
as disclosed herein. Such estimate was developed solely for purposes of
formulation and negotiation of a plan of reorganization and analysis of imputed
relative recoveries to creditors thereunder. Such estimate reflects computations
of the estimated reorganization enterprise value of RII, SIHL and PIRL through
the application of various valuation techniques (which techniques Bear Stearns
has concluded are reasonably applicable to these entities) and does not purport
to reflect or constitute appraisals, liquidation values or estimates of the
actual market value that may be realized through the sale of any securities to
be issued pursuant to the Plan, which may be significantly different than the
amount set forth herein. The value of an operating business is subject to
uncertainties and contingencies which are difficult to predict, and will
fluctuate with changes in factors affecting the financial conditions and
prospects of such a business. As a result, the estimate of the reorganization
enterprise values of RII, SIHL and PIRL and the reorganization value of the RII
Common Stock, the SIHL Series A Shares, the PIRL Ordinary Shares, the New RIHF
Mortgage Notes and the New RIHF Junior Mortgage Notes set forth herein are not
necessarily indicative of actual outcomes, which may be significantly more or
less favorable than those set forth therein. Actual market prices of securities
at issuance will depend upon, among other things, prevailing interest rates,
conditions in the financial markets, the anticipated initial securities holdings
of prepetition creditors, some of which may prefer to liquidate their investment
rather than hold it on a long-term basis, and other factors which generally
influence the prices of securities. Actual market prices of such securities also
may be affected by RII's and GRI's history in their chapter 11 cases or by other
factors not possible to predict. See "Risk Factors" for a discussion of various
other factors which could materially affect the value of the securities
distributed pursuant to the Plan.
In the course of its evaluation, Bear Stearns considered a number of
valuation indicators in determining the reorganization enterprise value of RII,
SIHL, and PIRL and the reorganization value of their respective new securities.
These included consideration of the agreement of SIHL to purchase the operations
of the Paradise Island Business, comparable company analyses based upon publicly
traded gaming companies, and comparable securities analysis. The estimated
reorganization enterprise value of SIHL and PIRL is premised primarily on the
implied value associated with the proposed
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SIHL Sale. In the event the SIHL Sale is not consummated, and depending on the
reasons for such non-consummation, the estimated reorganization enterprise value
of PIRL could be lower by a material amount. Depending on the results of RII's
and GRI's operations, changes in the financial markets, or failure to consummate
the SIHL Sale, it is possible that Bear Stearns' valuation advice will differ at
the Confirmation Hearing from that disclosed herein. See "Risk Factors".
Based on the foregoing reorganization enterprise value, the anticipated
value of distributions under the Plan equals or exceeds, as to any impaired
class, the liquidation value of distributions to the creditors of such class. To
compare the anticipated value of the distributions under the Plan with the
liquidation value of RII and GRI, see "The Plan -- Confirmation of the Plan --
Best Interests Test" and the Liquidation Analysis attached as Appendix B.
THE BONDHOLDERS SUPPORT AGREEMENT
As a result of the negotiations described above with Fidelity and TCW, RII
and GRI have entered into a letter agreement (the "Bondholders Support
Agreement"), with SIHL, SIIL, Fidelity and TCW, which separately advise and
manage various funds and accounts that held as of the Voting Record Date in the
aggregate approximately $308,833,000 of the outstanding principal amount of the
Old Series Notes, or approximately 64% of the outstanding Old Series Notes.
Pursuant to the Bondholders Support Agreement and subject to the conditions
set forth therein, Fidelity and TCW have agreed to submit Acceptances of the
Plan with respect to all the outstanding principal amounts of Old Series Notes
(and the related GRI Guaranty endorsed thereon) held by funds or accounts
managed by them on the Voting Record Date. Fidelity and TCW have agreed to
consent to the termination and release of the Old Security Documents in
connection with the Restructuring and the Plan with respect to all the
outstanding principal amounts of Old Series Notes (and the related GRI Guaranty
endorsed thereon) held by the funds and accounts managed by them. During the
term of the Bondholders Support Agreement, Fidelity and TCW are not obligated to
support any plan other than the Plan.
Fidelity and TCW severally have the right to terminate the Bondholders
Support Agreement if the Plan, the SIHL Purchase Agreement, the New RIHF
Mortgage Indenture, or New RIHF Junior Mortgage Indenture or certain other
agreements are breached, waived, amended, modified, altered in any material
respect or terminated without their prior written consent. These consents and
approval rights terminate as to Fidelity and TCW if the funds and accounts
managed by either of them hold in the aggregate less than 20% of the Old Series
Notes and terminate as to Fidelity or TCW to the extent either of them owns no
Old Series Notes.
In addition, the Company has agreed, under certain circumstances, to file a
shelf registration statement with respect to the New Debt Securities and the RII
Common Stock held by Fidelity, TCW and any other holder of the Old Series Notes
which the Company believes may be an "affiliate" of the Company if such holders
do not deliver to the Company a written representation to the effect that they
are not "affiliates" of the Company and to grant to Fidelity and TCW certain
demand and piggy-back registration rights with respect to their New Debt
Securities and shares of RII Common Stock.
OVERVIEW OF THE RESTRUCTURING
GENERAL
The purpose of the Restructuring is to effect the changes to the Company's
capital structure that the Company believes are necessary to return to
profitability and to consummate the SIHL Sale (or, if the SIHL Sale is not
consummated on the Effective Date, to effect the PIRL Spin-Off). Management of
the Company believes that the Restructuring will improve the Company's financial
position and allow management to create long-term value for the creditors and
the shareholders of the Company and strengthen the Company's position in the
gaming industry. The Restructuring is designed to alleviate the problems caused
by the Company's excessive debt service levels and will help assure the
Company's long-term viability. There can be no assurance, however, that
implementation of the Restructuring will result in the Company's return to
profitability. Likewise, there can be no assurance that, if the SIHL Sale is not
consummated on the Effective Date, PIRL's operations will be profitable once the
PIRL Spin-Off is effected. The Restructuring will be implemented by the Plan.
The terms of the Plan
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<PAGE>
result primarily from an analysis of the Company's financial condition and
operations conducted by RII and its financial advisers and from negotiations
conducted by RII and its financial and legal advisers with Fidelity and TCW.
RII considered a number of alternatives to the Restructuring, including
liquidation, an out-of-court restructuring of the Old Series Notes, a
refinancing of the Old Series Notes and the sale of RII's resorts and casinos.
RII and its financial advisers concluded that liquidation was not as favorable
to RII's creditors and equity interest holders as the Plan. The Company's
discussions with Fidelity and TCW, representing funds and accounts that hold a
very substantial portion of the outstanding Old Series Notes, led it to conclude
that an out-of-court restructuring of the Old Series Notes was not an option.
With respect to refinancing the Old Series Notes, the Company does not believe
that there exists any source of refinancing for the principal amount of the Old
Series Notes on terms acceptable to the Company. Also, the Company's experience
in attempting to sell its Paradise Island Business led it to conclude that a
sale of its resorts and casinos individually would not realize the fair value of
the Company's business and assets.
FIDELITY AND TCW SEPARATELY ADVISE AND MANAGE VARIOUS FUNDS AND ACCOUNTS
THAT AS OF THE VOTING RECORD DATE HELD IN THE AGGREGATE APPROXIMATELY
$308,833,000 PRINCIPAL AMOUNT OF THE OLD SERIES NOTES, OR APPROXIMATELY 64% OF
THE OUTSTANDING OLD SERIES NOTES. FIDELITY AND TCW HAVE ENGAGED IN EXTENSIVE
NEGOTIATIONS WITH RII AND GRI WITH RESPECT TO THE RESTRUCTURING, AND HAVE
AGREED, SUBJECT TO CERTAIN CONDITIONS, TO VOTE ALL OLD SERIES NOTES OWNED BY
FUNDS AND ACCOUNTS MANAGED BY THEM AS OF THE VOTING RECORD DATE FOR ACCEPTANCE
OF THE PLAN AND TO CONSENT TO THE TERMINATION AND RELEASE OF THE OLD SECURITY
DOCUMENTS IN CONNECTION THEREWITH.
MERV GRIFFIN, WHO HOLDS 4,398,115 SHARES OF RII COMMON STOCK, OR
APPROXIMATELY 21.82% OF THE OUTSTANDING RII COMMON STOCK, HAS AGREED TO VOTE FOR
ACCEPTANCE OF THE PLAN.
THE HOLDERS OF 1,307,300 1990 STOCK OPTIONS ISSUED UNDER THE 1990 STOCK
OPTION PLAN, OR APPROXIMATELY 74% OF THE OUTSTANDING 1990 STOCK OPTIONS, HAVE
AGREED TO VOTE FOR ACCEPTANCE OF THE PLAN.
RII HAS AGREED TO VOTE ITS INTERCOMPANY CLAIM AGAINST GRI AND THE GRI COMMON
STOCK FOR ACCEPTANCE OF THE PLAN.
THE BOARD OF DIRECTORS OF EACH OF RII AND GRI HAS UNANIMOUSLY APPROVED THE
RESTRUCTURING, THE PLAN AND THE SOLICITATION AND RECOMMENDS THAT ALL IMPAIRED
CREDITORS AND EQUITY INTEREST HOLDERS SUBMIT BALLOTS ACCEPTING THE PLAN.
THE PLAN. The Plan provides, among other things, that record holders of the
Old Series Notes as of the Distribution Record Date, which will be the close of
business in New York City on the Effective Date, will receive the following
consideration on the relevant Distribution Date for each $1,000 of principal
amount of Old Series Notes outstanding as of such date (and for any accrued
interest thereon)*.
<TABLE>
<S> <C> <C>
-- $259.38 principal amount of the New RIHF Mortgage Notes;
-- One Unit comprised of $72.63 principal amount of the New RIHF Junior
Mortgage Notes and .07263 share of RII Class B Common Stock;
-- 35.33 shares of RII Common Stock;
-- Either (A) $134.88 in cash, plus interest on such amount at an annual
rate of 7.5% from January 1, 1994 to the SIHL Closing Date, plus 4.15
SIHL Series A Shares, representing a pro rata share of the
consideration received from the SIHL Sale, or (B) if the SIHL Sale is
not consummated on or before the Effective Date, 10.375 PIRL Ordinary
Shares pursuant to the PIRL Spin-Off;
</TABLE>
- ------------------------
* Assumes that the principal amount of Old Series Notes outstanding as of the
Effective Date is $482,000,000, the balance on October 15, 1993. Additional
Old Series Notes not to exceed approximately $2,500,000 in aggregate principal
amount may be issued to the holders of Old Plan Disputed Claims. If additional
Old Series Notes are issued, the consideration distributed for each $1,000
principal amount of Old Series Notes will be reduced slightly.
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<PAGE>
<TABLE>
<S> <C> <C>
-- A pro rata share of Excess Cash, which pro rata share is projected to be
a minimum of $62.25;
-- The non-transferable right to receive a pro rata share of Net Reserved
Cash and Net Plan Consummation Cash; and
-- The non-transferable right to receive a pro rata share of payments from
Deferred Cash, which pro rata share is projected to be a minimum of $5.
See "Description of Litigation Trust Units".
</TABLE>
Notwithstanding the foregoing, no fractional shares of New Equity Securities
will be issued on the Distribution Date. New RIHF Mortgage Notes and New RIHF
Junior Mortgage Notes will be issued only in denominations of $1,000 or integral
multiples thereof. Pursuant to the Plan, the disbursing agent for the holders of
Old Series Notes will aggregate and sell all fractional amounts of New Equity
Securities and New Debt Securities and distribute the net proceeds to the
holders of Old Series Notes entitled thereto.
If the SIHL Sale is consummated, assuming a reorganization enterprise value
of approximately $225 million for RII and a reorganization enterprise value for
SIHL of approximately $150 million, the estimated recovery for holders of Old
Series Notes is projected to be approximately 70% of the principal amount of the
Old Series Notes outstanding on October 15, 1993. If the SIHL Sale is not
consummated and the PIRL Spin-Off is effected, assuming a reorganization
enterprise value of approximately $225 million for RII and a reorganization
enterprise value for PIRL of approximately $125 million, the estimated recovery
for holders of the Old Series Notes is projected to be approximately 70% of the
principal amount of Old Series Notes outstanding on October 15, 1993. There can
be no assurance that the projected enterprise values of RII or of SIHL in the
event of the SIHL Sale or of PIRL in the event of the PIRL Spin-Off will be
realized. The estimated reorganization enterprise value of SIHL and PIRL is
premised primarily on the implied value associated with the proposed SIHL Sale.
In the event the SIHL Sale is not consummated, and depending on the reasons for
such non-consummation, the estimated reorganization enterprise value of PIRL
could be lower by a material amount.
The SIHL Aggregate Cash Purchase Price, the New Debt Securities and the New
Equity Securities will be distributed to the disbursing agent for distribution
to the holders of Old Series Notes on the Effective Date. Payments of Net
Reserved Cash will be made as soon as practicable after the Effective Date, but
in no event later than 90 days after the Effective Date. Payments of Net Plan
Consummation Cash will be made as soon as practicable but no later than 90 days
after the Effective Date; provided, however, that if all Plan Expenses have not
been paid by the 90th day after the Effective Date, RII and GRI may continue to
hold back for an additional 60 days the portion of Net Plan Consummation Cash
deemed by the Bankruptcy Court to be necessary to satisfy remaining Plan
Expenses, after which time the remaining Net Plan Consummation Cash will be
distributed, unless otherwise ordered by the Bankruptcy Court. Payments of
Deferred Cash will be made within three business days after receipt by RII of
the Litigation Trust Distributions in immediately available funds. Payments of
Excess Cash will be made on the Effective Date or as soon thereafter as
practicable, but in no event later than 20 days after the Effective Date.
Distributions to holders of Old Series Notes will be made by the Disbursing
Agent only to holders that comply with the procedures for surrender of Old
Series Notes set forth in section 6.11.5 of the Plan.
On the Effective Date, the Company will establish separate bank accounts for
Plan Consummation Cash and Reserved Cash. The cash contained in these accounts
will only be used, respectively, to pay Plan Expenses and to fund adjustments
under either the Paradise Island Purchase Agreement or the PIRL Standby
Distribution Agreement. Such Plan Consummation Cash and Reserved Cash will not
be commingled with RII Retained Cash.
As part of the implementation of the Restructuring and prior to the
commencement of the Solicitation, various funds that hold Old Series Notes and
are advised and managed by Fidelity will deliver a commitment letter to the
effect that they will enter into the RIHF Senior Facility on the Effective Date.
The RIHF Senior Facility will allow RIHF to borrow up to $20,000,000 through the
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<PAGE>
issuance of RIHF Senior Facility Notes. Any amount borrowed by RIHF under the
RIHF 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. All principal payments on the RIHF Senior Facility
Notes will be due July 15, 2002. Interest on the RIHF Senior Facility Notes will
accrue at the rate of 11% per year and will be payable in cash, semi-annually on
January 15 and July 15 of each year, commencing on the January 15 or July 15
next following the date of the initial borrowing under the RIHF Senior Facility.
The RIHF Senior Facility will be available for a single borrowing during the
one-year period from the Effective Date, provided that the public resale of the
RIHF Senior Facility Notes by the purchaser thereof upon a resale is registered,
if required, under the Securities Act and the RIHF Senior Facility Note
Indenture has been qualified under the TIA. The RIHF Senior Facility Notes will
be secured by (i) an assignment of the RIH Senior Facility Note, which note will
be secured by a lien on the Resorts Casino Hotel, and (ii) the Pledged Shares
pursuant to the Pledge Agreements. In addition, RIH will issue the RIH Senior
Facility Guaranty that will guarantee the payment of principal of and interest
on the RIHF Senior Facility Notes, which guaranty will be secured by a lien on
the Resorts Casino Hotel. Although the RIHF Senior Facility Notes are not
contractually senior to the New RIHF Mortgage Notes and the New RIHF Junior
Mortgage Notes as to priority of payment, the lien securing payment of the RIHF
Senior Facility Notes will be senior to the liens securing payment of the New
RIHF Mortgage Notes and the New RIHF Junior Mortgage Notes, and the RIHF Senior
Facility Notes therefore are structurally senior to the New RIHF Mortgage Notes
and the New RIHF Junior Mortgage Notes. The liens on the Resorts Casino Hotel
securing the payment of the RIH Senior Facility Note and the RIH Senior Facility
Guaranty will be senior to the liens securing payment of the RIH Promissory
Note, the RIH Mortgage Guaranty, the RIH Junior Promissory Note and the RIH
Junior Mortgage Guaranty. RII also will issue the RII Senior Facility Guaranty,
which will be secured by the RII Pledge Agreement.
The following transactions will be effected in connection with the
Restructuring: (a) the holders of the Old Series Notes as of the Distribution
Record Date will receive on the relevant Distribution Date the New Debt
Securities, the New Equity Securities, Excess Cash and the right to payments
from Net Reserved Cash, Net Plan Consummation Cash and Deferred Cash in
accordance with the terms of the Plan; (b) (i) if the SIHL Sale is consummated
on the Effective Date, such holders will also receive the SIHL Series A Shares
and the SIHL Aggregate Cash Purchase Price in accordance with the terms of the
Plan; or (ii) if the SIHL Sale is not consummated on or before the Effective
Date, such holders will also receive the PIRL Ordinary Shares and, at the
election of PIRL, the Interim Management Agreement will be executed; (c) the
RIHF Senior Facility will be executed and delivered; (d) the Amended RII
Certificate of Incorporation and the Amended RII By-Laws will be adopted; (e)
the initial post-Restructuring directors will be appointed to RII's Board of
Directors (including two Class B Directors); (f) the Griffin Warrants will be
issued; (g) various intercompany reorganization transactions described on
Schedule 6.3 to the Plan will be effected; (h) the 1990 Stock Option Plan will
be terminated and the 1994 Stock Option Plan will be implemented; and (i) the
Old Security Documents will be released and terminated. If sufficient
Acceptances are received from the holders of Old Series Notes (including the
related GRI Guaranty) and from the holders of RII Common Stock, such Acceptances
will constitute approval of the 1994 Stock Option Plan by such holders for
purposes of compliance with Rule 16b-3 promulgated under the Exchange Act. For
information on the election of directors after the Effective Date, see
"Post-Restructuring RII Board of Directors".
If the Requisite Acceptances are not received by the Voting Deadline, RII
and GRI will be forced to evaluate options then available to them. Pursuant to
the Paradise Island Purchase Agreement, RII has committed, notwithstanding the
failure to obtain the Requisite Acceptances, to continue to pursue confirmation
of the Plan until the Paradise Island Purchase Agreement is terminated. This
commitment could require RII to conduct a further solicitation with respect to
the Plan until December 31, 1994. Because the Paradise Island Purchase Agreement
can be terminated by SIHL if an RII Chapter 11 case is not commenced by March
21, 1994, RII might conduct such solicitation after filing a chapter 11 case.
RII's failure to abide by the terms of the Paradise Island Purchase Agreement
would, under certain circumstances, give rise to a claim by SIHL for breach of
such agreement and
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<PAGE>
entitle SIHL to reimbursement from the SIHL Buyer Expense Escrow. Moreover, such
failure, if not approved by Fidelity and TCW, may relieve Fidelity and TCW of
their obligations under the Bondholders Support Agreement.
Other options available to RII and GRI if the Requisite Acceptances are not
obtained include submission of a revised prepackaged plan of reorganization and
filing for protection under the Bankruptcy Code without a preapproved or
consensual plan of reorganization. If a bankruptcy proceeding were commenced
without a preapproved plan, there is no assurance that a plan would be confirmed
or that any recovery would be realized by the holders of the RII Common Stock
and the existing holders of 1990 Stock Options. In such event, the holders of
the Old Series Notes might receive a substantially smaller recovery on their
claims than under the Plan. See "Risk Factors -- Certain Bankruptcy and
Insolvency Considerations".
Confirmation and consummation of the Plan is subject to certain conditions.
The condition requiring the entry of a Confirmation Order which has not been
stayed cannot be waived by RII and GRI. There can be no assurance that such
condition will be satisfied. As a practical matter, although the condition
requiring the entry of an order declaring that, as of the Effective Date, the
Old Security Documents shall be deemed released and terminated is waivable, the
transactions contemplated by the Plan cannot be consummated if the Old Security
Documents are not released and terminated. See "The Plan -- Conditions Precedent
to Confirmation and Consummation of the Plan".
POST-RESTRUCTURING RII BOARD OF DIRECTORS
Pursuant to the Restructuring, the number of persons comprising the Board of
Directors of RII will remain at six. Subject to receipt of any necessary
qualification of directors from the Casino Control Commission, the initial
post-Restructuring Board of Directors of RII will consist of Merv Griffin,
Thomas Gallagher, Jay Green and William Fallon, and as Class B Directors,
Vincent Naimoli and Charles Masson. After the Restructuring, the holders of
RII's Common Stock, voting as a class, will be entitled to elect four directors
of RII and the holders of RII Class B Common Stock, voting as a class, will be
entitled to elect two Class B Directors of RII. The Board of Directors will be
divided into three classes, and one-third of the total number of directors will
be elected each year. If the Class B Triggering Event should occur, the holders
of the RII Class B Common Stock, voting as a class, would elect that number of
additional Class B Directors as will constitute, from time to time, a majority
of the entire RII Board of Directors.
CERTAIN SIGNIFICANT EFFECTS OF THE RESTRUCTURING
Implementation of the Restructuring would have important effects on the
Company and on the current holders of the Old Series Notes, the RII Common Stock
and the 1990 Stock Options and would result in a significant reduction of RII's
financial obligations. Certain of the anticipated effects are described below.
REDUCTION OF DEBT SERVICE OBLIGATIONS
The Restructuring would have the effect of reducing and rescheduling RII's
principal and interest payments. The Restructuring also would result in the
elimination and modification of certain restrictive covenants now applicable to
RII pursuant to the Old Series Note Indenture. Such modifications give the
Company increased financial flexibility, including the ability to explore
additional revenue generating operations. See "Summary -- Comparison of New RIHF
Mortgage Notes and New RIHF Junior Mortgage Notes to Old Series Notes".
The following table shows, at the dates and for the periods shown, on a pro
forma basis, the impact of the Restructuring as it affects the replacement of
the Old Series Notes with the New Debt Securities. It should be noted that the
table excludes the Showboat Notes and capital leases as it is the Company's
intention that such items will not be affected by the Restructuring. The pro
forma data for the principal amount of the New Debt Securities at September 30,
1993 are based on the assumption that the Restructuring occurred on that date.
The pro forma data regarding the stated interest
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<PAGE>
calculation for the New Debt Securities for the fiscal year ended December 31,
1992, and the three quarters ended September 30, 1993, are based on the
assumption that the Restructuring occurred on January 1, 1992.
<TABLE>
<CAPTION>
OLD NEW
SERIES DEBT
NOTES SECURITIES
----------- ---------
(IN THOUSANDS)
<S> <C> <C>
Principal amount outstanding at September 30, 1993 (1)............................ $ 448,572 $160,000
Stated interest calculation for the fiscal year ended December 31, 1992........... 50,686 (2) 17,731
Stated interest calculation for the three quarters ended September 30, 1993....... 47,224 (2) 13,298
<FN>
- ------------------------
(1) Represents the principal amount of the Old Series Notes on a historical
basis or the principal amount of the New Debt Securities on a pro forma
basis, exclusive of unamortized discounts. At October 15, 1993, an Old PIK
Payment was made on the Old Series Notes bringing the principal amount
outstanding to approximately $482,000,000 on that date.
(2) The calculation of the interest on the Old Series Notes was based on the
stated interest rates with the principal amount increasing on April 15 and
October 15 due to the issuance of additional Old Series Notes in lieu of
paying cash interest.
</TABLE>
SIGNIFICANT DILUTION OF EQUITY INTERESTS
If the Restructuring were implemented, approximately 17,025,000 shares of
RII Common Stock would be issued to holders of the Old Series Notes. Issuance of
such number of shares of RII Common Stock would dilute significantly the equity
interests of the existing holders of the RII Common Stock and the existing
holders of the 1990 Stock Options. Up to approximately 160,000 additional shares
of RII Common Stock may be issued to holders of Old Plan Disputed Claims if such
claims are allowed by the New Jersey bankruptcy court. The number of shares of
RII Common Stock to be issued to the holders of Old Series Notes and with
respect to the Griffin Warrants and the 1994 Stock Option Plan would increase to
offset the dilutive effect of the issuance of additional RII Common Stock. The
following table shows the percentage of beneficial ownership of the RII Common
Stock before and after consummation of the Restructuring by the holders of the
securities listed below, based on the assumptions set forth in the notes
thereto:
<TABLE>
<CAPTION>
POST-RESTRUCTURING
---------------------------------------
ASSUMING OPTIONS ASSUMING OPTIONS
PRE-RESTRUCTURING NOT EXERCISED EXERCISED
------------------ ------------------ ------------------
SHARES % SHARES % SHARES %
---------- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Holders of RII Common Stock (1)......... 20,157,234 92.0% 20,872,234 49.0% 20,872,234 44.7%
Holders of Old Series Notes (2)......... 17,025,000 40.0 17,025,000 36.5
Griffin Warrants (3).................... 4,665,000 11.0 4,665,000 10.0
1990 Stock Options (4).................. 1,758,800 8.0 1,758,800 3.8
1994 Stock Options (5).................. 2,333,000 5.0
---------- ------ ---------- ------ ---------- ------
21,916,034 100.0% 42,562,234 100.0% 46,654,034 100.0%
---------- ------ ---------- ------ ---------- ------
---------- ------ ---------- ------ ---------- ------
<FN>
- ------------------------
(1) Pre-Restructuring amount represents shares of RII Common Stock outstanding
on November 30, 1993. Post-Restructuring amount includes 590,000 shares of
RII Common Stock to be issued to DLJ prior to the filing of RII's and
GRI's bankruptcy cases and 125,000 shares of RII Common Stock to be issued
to Alvarez & Marsal upon receipt of the Requisite Acceptances in
settlement of certain recapitalization costs.
(2) Assumes holders of Old Series Notes are issued shares in an amount that
would represent 40% of the shares of RII Common Stock outstanding assuming
the Griffin Warrants are exercised. Such ownership will be subject to
dilution by the exercise of the 1990 Stock Options outstanding as well as
options to be granted under the 1994 Stock Option Plan. Assumes that all
holders of Unsurrendered Public Debt Claims and of Old Series Notes timely
comply with the provisions of the Plan and the Old Plan that govern
entitlement to distributions.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
(3) Assumes the Griffin Warrants are granted and exercised.
(4) Represents shares of RII Common Stock which may be issued upon exercise of
the 1990 Stock Options outstanding on November 30, 1993; related
percentages assume all such options are exercised.
(5) The 1994 Stock Option Plan will allow for the granting of options to
purchase up to 5% of the outstanding RII Common Stock; related percentage
assumes all such options are granted and exercised.
</TABLE>
THE PLAN
The following is a summary of the material provisions of the Plan. A copy of
the Plan is attached hereto as Appendix A.
BRIEF EXPLANATION OF CHAPTER 11
Chapter 11 is the business reorganization chapter of the Bankruptcy Code.
Under chapter 11 of the Bankruptcy Code, a debtor is authorized to reorganize
its business for the benefit of its creditors and equity interest holders. In
addition to permitting rehabilitation of the debtor, another goal of chapter 11
is to promote equality of treatment of creditors and equity interest holders of
equal rank with respect to the distribution of a debtor's assets. In furtherance
of these two goals, upon the filing of a petition for reorganization under
chapter 11, section 362 of the Bankruptcy Code provides for an automatic stay of
substantially all acts and proceedings against the debtor and its property,
including all attempts to collect claims or enforce liens that arose prior to
the commencement of the debtor's case under chapter 11.
The consummation of a plan of reorganization is the principal objective of a
chapter 11 reorganization case. A plan of reorganization sets forth the means
for satisfying claims against, and interests in, a debtor. Confirmation of a
plan of reorganization by the bankruptcy court makes the plan binding upon the
debtor, any issuer of securities under the plan, any person acquiring property
under the plan and any creditor, equity security holder or general partner in
the debtor. Confirmation of a plan discharges the debtor from any debt that
arose prior to the date of confirmation of the plan and substitutes therefor the
obligations specified under the confirmed plan.
SOLICITATION OF ACCEPTANCES OF THE PLAN
RII and GRI hereby solicit acceptances or rejections of the Plan from
holders of impaired claims and interests under section 1126(b) of the Bankruptcy
Code. Under section 1126(b) of the Bankruptcy Code, a holder of a claim or
interest that has accepted or rejected a plan of reorganization before the
commencement of a chapter 11 case will be deemed to have accepted or rejected
such plan for purposes of confirmation of such plan under chapter 11 of the
Bankruptcy Code if the solicitation is in compliance with any applicable
non-bankruptcy law, rule or regulation governing the adequacy of disclosure in
connection with the solicitation, or if there is not any such law, rule or
regulation, such solicitation was made after disclosure of adequate information
as defined in section 1125(a) of the Bankruptcy Code. RII and GRI believe that
this Information Statement/Prospectus complies with the requirements of section
1126(b) of the Bankruptcy Code for purposes of soliciting acceptances or
rejections of the Plan.
If, by the Voting Deadline, the Requisite Acceptances have been received,
RII and GRI currently intend to commence reorganization cases by filing
petitions for relief under chapter 11 of the Bankruptcy Code and to use the
Acceptances solicited pursuant to this Information Statement/Prospectus to seek
confirmation of the Plan under chapter 11 of the Bankruptcy Code as promptly as
practicable. Neither RII nor GRI intends to commence a case under chapter 11 of
the Bankruptcy Code prior to the Voting Deadline, although it reserves the right
to do so in its sole discretion. RII and GRI voluntarily would commence a
bankruptcy case prior to the Voting Deadline if necessary to preserve their
rights under the Paradise Island Purchase Agreement, in the event of a material
adverse change in the finances or operations of the Company or the commencement
of collection or foreclosure actions with respect to the Old Series Notes or the
collateral securing the Old Series Notes.
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Any party in interest, including any creditor, equity interest holder or
indenture trustee, has standing to appear and be heard on any issue in the
chapter 11 case. At or before the hearing on approval of this Information
Statement/Prospectus, RII and GRI will seek an order of the Bankruptcy Court
finding that (a) the Solicitation was in compliance with the Securities Act and
the Exchange Act and the rules and regulations thereunder and, if applicable,
the provisions of the Bankruptcy Code, and therefore, (b) the holders of claims
and interests that have accepted or rejected the Plan pursuant to the
Solicitation are deemed to have accepted or rejected the Plan for purposes of
confirmation of the Plan under chapter 11 of the Bankruptcy Code.
RII and GRI believe that they will have the best opportunity to confirm the
Plan and accomplish the Restructuring if RII and GRI receive the Requisite
Acceptances prior to the commencement of any bankruptcy cases. See "Confirmation
of the Plan" for a discussion of the Requisite Acceptances. In addition, RII and
GRI believe that the prior acceptance of the Plan would minimize disputes during
a bankruptcy case concerning the reorganization of RII and GRI and would shorten
the time required to complete the reorganization, reduce the expenses of the
proceeding and minimize the disruption of RII's and GRI's business that could
result from protracted and contested bankruptcy cases. IF RII AND GRI WERE
FORCED TO COMMENCE BANKRUPTCY CASES PRIOR TO RECEIPT OF THE REQUISITE
ACCEPTANCES, RII AND GRI BELIEVE THAT SUCH CASES COULD BE PROTRACTED, COSTLY AND
DISRUPTIVE TO RII'S AND GRI'S BUSINESS AND, AS A RESULT, COULD JEOPARDIZE THE
ACCOMPLISHMENT OF THE PLAN.
PROPONENTS OF THE PLAN
The Plan is proposed by RII, GRI, RIH, RIHF and PIRL. This joint proposal of
the Plan has potential ramifications with respect to the securities law
registration exemption contained in section 1145 of the Bankruptcy Code. For
further discussion of these securities law issues, see "Applicability of Federal
and Other Securities Laws to Resales of Securities -- Issuance of Securities
Under the Plan".
VOTING ON THE PLAN
Pursuant to the Bankruptcy Code, only classes of claims or interests that
are "impaired" are entitled to vote on a plan. Generally speaking, a claim or
interest is impaired under a plan of reorganization if the plan provides that
such claim or interest will not be repaid in full or that the legal, equitable
or contractual rights of the holder of such claim or interest are altered. Only
claims or interests in the following classes are impaired under the Plan:
<TABLE>
<C> <C> <S>
RII Class 2 -- Claims of holders of Old Series Notes
RII Class 7 -- Interests of holders of RII Common Stock
RII Class 8 -- Interests of holders of the 1990 Stock Options
GRI Class 2 -- Claims of holders of the GRI Guaranty
GRI Class 4 -- Claims of RII, as the holder of the RII Intercompany Claim
GRI Class 5 -- Interest of RII, as the holder of all GRI Common Stock
</TABLE>
ALL OTHER CLASSES OF CLAIMS AND INTERESTS ARE UNIMPAIRED UNDER SECTION 1124
OF THE BANKRUPTCY CODE. HOLDERS OF CLAIMS OR INTERESTS IN THESE UNIMPAIRED
CLASSES ARE DEEMED TO HAVE ACCEPTED THE PLAN PURSUANT TO SECTION 1126(F) OF THE
CODE. HOWEVER, HOLDERS OF CLAIMS OR INTERESTS IN ANY CLASS, WHETHER IMPAIRED OR
NOT, MAY OBJECT TO CONFIRMATION OF THE PLAN.
FIDELITY AND TCW SEPARATELY ADVISE AND MANAGE VARIOUS FUNDS AND ACCOUNTS
THAT AS OF THE VOTING RECORD DATE HELD IN THE AGGREGATE CLAIMS IN RII CLASS 2 OF
APPROXIMATELY $308,833,000 PRINCIPAL AMOUNT OF THE OLD SERIES NOTES (AND RELATED
CLAIMS IN GRI CLASS 2), OR APPROXIMATELY 64% OF THE OUTSTANDING OLD SERIES
NOTES. FIDELITY AND TCW HAVE ENGAGED IN EXTENSIVE NEGOTIATIONS WITH RII AND GRI
IN RESPECT TO THE RESTRUCTURING AND HAVE AGREED, SUBJECT TO CERTAIN CONDITIONS,
TO VOTE ALL OLD SERIES NOTES OWNED BY FUNDS AND ACCOUNTS MANAGED BY THEM AS OF
THE VOTING RECORD DATE FOR ACCEPTANCE OF THE PLAN AND TO CONSENT TO THE
TERMINATION AND RELEASE OF THE OLD SECURITY DOCUMENTS IN CONNECTION THEREWITH.
MERV GRIFFIN, WHO HOLDS INTERESTS IN RII CLASS 7 OF 4,398,115 SHARES OF RII
COMMON STOCK, REPRESENTING APPROXIMATELY 21.82% OF THE OUTSTANDING RII COMMON
STOCK, HAS AGREED TO VOTE FOR THE PLAN.
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<PAGE>
THE HOLDERS OF 1,307,300 1990 STOCK OPTIONS (I.E., INTERESTS IN RII CLASS
8), OR APPROXIMATELY 74% OF THE OUTSTANDING 1990 STOCK OPTIONS, HAVE AGREED TO
VOTE FOR THE PLAN.
RII HAS AGREED TO VOTE THE RII INTERCOMPANY CLAIM AND ITS EQUITY INTEREST IN
GRI FOR ACCEPTANCE OF THE PLAN.
The Bankruptcy Code defines acceptance of a plan of reorganization by a
class of claims as acceptance by holders of at least 66 2/3% in dollar amount
and more than one-half in number of the Allowed Claims of that class that have
actually been voted on the plan. The Bankruptcy Code defines acceptance of a
plan of reorganization by a class of interests as acceptance by the holders of
at least 66 2/3% in number of the Allowed Interests of that class that have
actually been voted on the plan. Under the Bankruptcy Code, only those who vote
to accept or to reject the Plan will be counted for purposes of determining
acceptance or rejection of the Plan by any impaired class of claims or
interests. Votes cast by holders of Disputed Claims or Interests will not be
counted unless the holders thereof, upon application to the Bankruptcy Court,
obtain an order temporarily allowing such claims for voting purposes only. See
"Confirmation of the Plan".
IF THE PLAN IS CONFIRMED BY THE BANKRUPTCY COURT, EACH HOLDER OF A CLAIM OR
INTEREST IN A CLASS WILL RECEIVE THE SAME CONSIDERATION AS THE OTHER MEMBERS OF
SUCH CLASS, WHETHER OR NOT SUCH HOLDER VOTED TO ACCEPT THE PLAN. MOREOVER, UPON
CONFIRMATION, THE PLAN WOULD BE BINDING ON ALL CREDITORS AND EQUITY INTEREST
HOLDERS OF RII AND GRI REGARDLESS OF WHETHER SUCH CREDITORS OR EQUITY INTEREST
HOLDERS, OR THE CLASS OF WHICH THEY ARE MEMBERS, VOTED TO ACCEPT THE PLAN.
TREATMENT OF TRADE CREDITORS AND EMPLOYEES
Since the Plan and the chapter 11 filings will relate only to RII and GRI
and not to RII's operating subsidiaries or the properties they own and operate,
the claims of trade creditors and employees of such subsidiaries will not be
affected by such filings. GRI does not have any employees and believes that it
does not have any trade creditors. As a result of its being a holding company,
RII has few trade creditors and employees. To the extent necessary, RII, upon
commencement of its chapter 11 case, intends promptly to seek the authorization
of the Bankruptcy Court to maintain flexibility to pay, prior to confirmation of
the Plan, the prepetition claims of trade creditors. In addition, RII intends to
seek the approval of the Bankruptcy Court to pay all accrued prepetition
salaries and wages, expense reimbursements and severance, to permit affected
employees to utilize their paid vacation time which accrued prior to the date of
the filing of the prepackaged bankruptcy case (so long as they remain employees
of RII) and to continue paying medical benefits under RII's health plan. There
can be no assurance that such authorization will be obtained.
Pursuant to the Plan, RII and GRI have agreed not to pay, and not to cause
their subsidiaries to pay, any claim of a trade creditor or employee except in
the ordinary course of business and consistent with past practice and to
collect, and to cause their subsidiaries to collect, receivables in the ordinary
course of business and consistent with past practice. On the Effective Date, RII
Retained Cash rather than Plan Consummation Cash shall be used to pay any
prepetition Allowed Claims or post-petition Allowed Administrative Claims of
trade creditors and employees which, in the ordinary course of business and
consistent with past practice, would not have been paid by the Effective Date
(other than Plan Expenses).
USE OF CASH FOR OPERATIONS
To maintain RII's operations during its chapter 11 case, RII will need the
ability to use its cash on hand on the Petition Date as well as funds received
during the pendency of its case. The Bankruptcy Code provides that, to the
extent any person has a security interest in any Cash Collateral, (i) RII is
prohibited from making any post-petition use of such Cash Collateral without
obtaining Bankruptcy Court approval or the consent of such person and (ii) such
person is entitled to "adequate protection" of such security interest as a
condition to the Bankruptcy Court's authorization of such use.
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<PAGE>
RII does not believe that any person has a security interest in any cash
that could be Cash Collateral. If any person asserts that cash which RII intends
to use is cash collateral, as such term is defined in section 363 of the
Bankruptcy Code (the "Cash Collateral"), RII will seek entry of an order (the
"Cash Collateral Order") authorizing RII to use such Cash Collateral subject to
provision of appropriate adequate protection. The Bankruptcy Code generally
defines "cash collateral" as cash, negotiable instruments, documents of title,
securities, deposit accounts, or other cash equivalents in which both the
debtor's estate and a third party have an interest. It includes the proceeds,
products, rents, or profits of property subject to a security interest.
The Cash Collateral Order will provide that RII will be authorized to use
the Cash Collateral in accordance with the terms of the Cash Collateral Order.
The terms of the Cash Collateral Order will be negotiated with any person
objecting to the use of Cash Collateral.
OTHER FIRST DAY ORDERS
In addition to any orders relating to the payment of prepetition claims of
trade creditors and employees, if any, and relating to the use of Cash
Collateral, RII and GRI intend to seek certain first day orders, including the
following (if necessary): (i) an order authorizing the retention of
professionals (including accountants, attorneys and financial advisors) in
connection with the chapter 11 cases; (ii) an order authorizing the retention of
ordinary course professionals without the filing of individual retention
applications and affidavits; (iii) an order authorizing RII and GRI to continue
to provide certain services on behalf of their subsidiaries until confirmation
of the Plan in exchange for certain fees or charges paid by such subsidiaries;
(iv) an order authorizing RII and GRI (a) to continue their current cash
management system, (b) to maintain prepetition bank accounts and (c) to continue
use of existing business forms and existing books and records; (v) an order to
permit RII and GRI to use their current internal financial records and to be
relieved from the filing of certain forms and schedules otherwise required by
the "United States Trustee Operating Guidelines and Reporting Requirements" (the
"Guidelines") to the extent the Guidelines are inconsistent with such current
internal financial records; (vi) an order authorizing RII and GRI to continue
their current investment guidelines and invest their available cash in their
customary manner; (vii) an order fixing the dates for the hearings on approval
of this Information Statement/Prospectus, the Solicitation and confirmation of
the Plan; (viii) an order authorizing RII to borrow from its subsidiaries, if
required, to pay operating expenses and provide working capital; (ix) an order
enjoining the continuation of collection or other enforcement actions against
RIH, or any other subsidiary of RII, pending confirmation of the Plan; and (x)
such other orders that are typical in chapter 11 cases or that may be necessary
for the preservation of the assets of RII and GRI or for confirmation of the
Plan.
The first day orders will be sought pursuant to accompanying applications
and, if appropriate, memoranda of law. The foregoing list is subject to change
depending upon the needs of RII and GRI in connection with their operations
during the chapter 11 cases. Failure of the Bankruptcy Court to enter one or
more of these orders, or a delay in doing so, could result in RII's and GRI's
chapter 11 cases becoming protracted and could delay, perhaps materially, the
hearing on, and the ultimate confirmation of, the Plan.
PARADISE ISLAND INTERIM ORDER
Pursuant to the Paradise Island Purchase Agreement, RII has agreed to
request, within five days after the filing of its chapter 11 case (if the
Paradise Island Purchase Agreement has not been terminated), the entry of the
Paradise Island Interim Order. The Paradise Island Interim Order would approve
certain provisions of the Paradise Island Purchase Agreement. Such provisions
relate to (1) the establishment of a procedure for the consideration of
competing bids for the Paradise Island Business and (2) the provision of certain
reimbursements to SIHL if, through no fault of its own, SIHL is not the
successful purchaser of the Paradise Island Business. If the Paradise Island
Interim Order is entered, RII would be prohibited from considering an
alternative proposal for the acquisition of the Paradise Island Business unless
it constituted an Overbid Transaction. In general, an Overbid Transaction is an
offer from a financially qualified third party which provides for consideration
attributable
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to the entire Paradise Island Business having a fair market value of more than
$130 million. The imputed value of the SIHL proposal is $125 million. In
addition, pursuant to the Paradise Island Interim Order, RII would be
responsible for up to $4 million of expense reimbursement to SIHL if it were not
the successful purchaser of the Paradise Island Business. If, despite RII's best
efforts, the Paradise Island Interim Order is not entered, the Paradise Island
Purchase Agreement will remain in full force and effect. See "Description of
Paradise Island Purchase Agreement."
To secure its reimbursement obligations described under the Paradise Island
Purchase Agreement, RII deposited $4 million in the SIHL Buyer Expense Escrow
with Citibank, N.A. for the benefit of SIHL. Any amount paid from such escrow
after the filing of the chapter 11 cases will be subject to the approval of the
Bankruptcy Court as provided in the Paradise Island Interim Order. At the same
time, SIHL deposited $5 million in the SIHL Escrow with Citibank, N.A. to secure
its obligations to RII under the Paradise Island Purchase Agreement.
Subject to the requirements of the Paradise Island Interim Order, RII and
GRI may receive other bids for the Paradise Island Business during the pendency
of RII's and GRI's chapter 11 cases. Such bids, if received, may lead to further
proceedings before the Bankruptcy Court, including the conduct of an auction. If
a bidder other than SIHL prevails at such an auction, the Plan may be modified,
as may be necessary, to accommodate the particular requirements of the
prevailing bidder. Any such modification will be subject to compliance with
applicable bankruptcy laws and the approval of Fidelity and TCW (if the funds
and accounts managed by either of them hold in the aggregate at least own 20% of
the outstanding Old Series Notes). A new solicitation may be required as well.
As indicated above, however, the Paradise Island Interim Order would impose
significant restrictions upon the Company's ability to consider and ultimately
accept alternative acquisition proposals for the Paradise Island Business other
than the SIHL Sale. The Company cannot consider any alternative acquisition
proposal unless such proposal constitutes an Overbid Transaction. Moreover, when
considering whether to approve an Overbid Transaction from a competing bidder,
the Bankruptcy Court will likely take into consideration that the Company is
required, under the terms of the Paradise Island Purchase Agreement, to pay
SIHL's out-of-pocket costs and expenses incurred in connection with the proposed
SIHL Sale and adjust the competing bid accordingly.
SUBSIDIARIES OF RII
Other than GRI, RII currently does not intend to seek protection under the
Bankruptcy Code for any of its subsidiaries.
The commencement of a chapter 11 case by GRI will prevent any holder of the
Old Series Notes from taking action against GRI under the terms of the GRI
Guaranty.
The Old Series Note Trustee has the right to realize upon the collateral of
various RII subsidiaries pledged pursuant to the Old Security Documents to
secure the Old Series Notes. If necessary, RII will seek an order of the
Bankruptcy Court under section 105 of the Code enjoining any actions against
such subsidiaries for such time as is necessary to consummate the Plan. There
can be no assurance, however, that such an order would be obtained. If RII is
unable to obtain relief from actions taken against such subsidiaries, RII may
seek protection under the Bankruptcy Code for such subsidiaries. In such event,
the business and financial condition of such subsidiary or subsidiaries would be
adversely affected, the consummation of the Plan might be jeopardized and other
bankruptcy filings might be necessary.
In the Solicitation, RII and GRI are soliciting consents to the release of
the Old Security Documents and, if sufficient consents are not obtained, intend
to request the Bankruptcy Court to order the release of the Old Security
Documents. The requisite vote necessary for the voluntary release of the Old
Security Documents is at least 66 2/3 in aggregate principal amount of the
outstanding Old Series Notes and the record holders of at least a majority in
aggregate amount of each of the Old Series A
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Notes and the Old Series B Notes. A condition to confirmation of the Plan is the
entry of an order of the Bankruptcy Court declaring that, as of the Effective
Date, the Old Security Documents are deemed released and terminated.
CLASSIFICATION AND TREATMENT OF CLAIMS AND INTERESTS
IN GENERAL
The Plan provides for the classification and treatment of claims and
interests of RII's and GRI's creditors and equity interest holders allowed under
section 502 of the Bankruptcy Code (each, as the case may be, an "Allowed Claim"
or an "Allowed Interest").
An Allowed Claim or Allowed Interest is a claim or interest (i) listed by
RII or GRI in schedules filed with the Bankruptcy Court and not designated as
"contingent", "unliquidated" or "disputed", (ii) as to which a timely proof of
claim or interest has been filed or deemed filed and which is not a disputed
claim or interest, or (iii) which is otherwise allowed under the Plan or by a
final order of the Bankruptcy Court. If an objection is made, the validity and
amount of the claim or interest will be determined by the Bankruptcy Court. A
holder of a claim or interest must file a proof of claim or interest with the
Bankruptcy Court to assert any claim or interest not scheduled by RII or GRI or
with respect to any scheduled claim or interest that is shown as "contingent",
"unliquidated" or "disputed". Such a filing also is required by any person
seeking to assert a claim or interest in an amount larger than the amount
scheduled by RII or GRI or asserting a classification (I.E., secured, priority
or unsecured) different from that which is shown in RII's and GRI's schedules.
A "Disputed Claim" or "Disputed Interest" is a claim or interest in GRI or
RII, to the extent that a proof of claim or interest has been filed or deemed
filed under applicable law, (i) as to which an objection has been or may be
timely filed and which objection has not been withdrawn or denied by a Final
Order and (ii) which claim or interest has not been disallowed by a Final Order.
RII and GRI are required under section 1122 of the Bankruptcy Code to
classify the claims and interests into classes that contain claims and interests
that are substantially similar to the other claims or interests in such class.
The Plan designates ten classes of claims and three classes of interests. These
classes take into account the differing nature and priority under the Bankruptcy
Code of the various claims and interests.
Although RII and GRI believe that they have classified all claims and
interests in compliance with the provisions of section 1122 of the Bankruptcy
Code, it is possible that, once chapter 11 proceedings have been commenced, a
creditor or equity interest holder may challenge RII's or GRI's classification
of claims or interests and the Bankruptcy Court may find that a different
classification is required for the Plan to be confirmed. In such event, it is
the current intention of RII and GRI to modify the Plan to provide for whatever
reasonable classification might be required by the Bankruptcy Court for
confirmation and to use the Acceptances received in the Solicitation, to the
extent permitted by the Bankruptcy Court, to obtain the approval of the class or
classes of which the accepting holder is ultimately deemed to be a member. Any
such reclassification could adversely and materially affect the class in which
such claim or interest was initially classified or any other class under the
Plan by changing the composition of such class and the required vote of such
class for approval of the Plan. Furthermore, a reclassification of claims or
interests after approval of the Plan could necessitate the resolicitation of
Acceptances, which would result in a delay in the consummation of the
Restructuring and could increase the risk that the Restructuring will not be
consummated. To the extent a reclassification of claims or interests after
approval of the Plan adversely and materially changes the treatment of the claim
of any creditor or the interest of any equity interest holder, such creditor or
equity interest holder may no longer be bound by its Acceptance of the Plan and
RII and GRI would be obliged to obtain the Acceptance of the class of which the
creditor or equity interest holder is a member by the requisite votes. The need
to obtain such Acceptance could result in a delay in the consummation of the
Restructuring and could increase the risk that the Restructuring will not be
consummated.
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SUMMARY OF DISTRIBUTIONS UNDER THE PLAN
The following summarizes the Plan distributions on account of the claims
against and interests in RII and GRI. Such summary does not purport to be
complete and is subject, and is qualified in its entirety by reference, to the
Plan.
ADMINISTRATIVE CLAIMS -- An "Administrative Claim" is a claim for payment of
an administrative expense of a kind specified in section 503(b) of the
Bankruptcy Code and referred to in section 507(a)(1) of the Bankruptcy Code,
including without limitation the actual and necessary costs and expenses
incurred after the commencement of the chapter 11 cases of preserving the estate
and operating the business of RII and GRI, including wages, salaries or
commissions for services, compensation for legal and other services and
reimbursement of expenses awarded under section 330(a) or 331 of the Bankruptcy
Code, and all fees and charges assessed against the estate under chapter 123 of
title 28, United States Code.
If the Bankruptcy Court confirms the Plan within the time frame anticipated
by RII and GRI , RII and GRI expect that the amount of Administrative Claims
will be significantly less than if RII and GRI had commenced chapter 11 cases
without prior receipt of the Requisite Acceptances. Assuming there is no
significant litigation initiated or objections filed with respect to the Plan
and the Plan is confirmed within 90 days after commencement of the chapter 11
cases, RII and GRI estimate that the aggregate allowed amount of unpaid
Administrative Claims, including without limitation the Administrative Claims of
professional persons, will be approximately $5,000,000 as of the Effective Date.
Administrative Claims do not include claims that will be paid in the normal
course of business, such as postpetition payables, fee claims (including claims
of indenture trustees and their counsel), certain retiree Administrative Claims,
or any Administrative Claim which will be settled on other terms.
Administrative Claims include the fees and expenses of Fidelity, TCW and
Chemical Bank, as successor indenture trustee for the Old Series Notes. Pursuant
to the Plan, RII will compensate Chemical Bank, as the Old Series Note Trustee,
for the reasonable fees and costs incurred by the Old Series Note Trustee
(including the reasonable fees and expenses of its professionals) under the Old
Series Note Indenture. This payment or payments will constitute full
satisfaction of the Old Series Note Trustee's claims for compensation and
reimbursement pursuant to the Old Series Note Indenture, including the claims
secured by the liens granted to the indenture trustee pursuant to the Old Series
Note Indenture (the "Indenture Trustee Charging Liens"). Similarly, under the
Plan RII will consent to the compensation and reimbursement of Fidelity and TCW
and their agents (including legal counsel) for their reasonable fees and
expenses incurred in connection with the chapter 11 cases. The fees and expenses
of the Old Series Note Trustee, Fidelity and TCW and their professional persons
(including legal counsel), which are unpaid as of or incurred after the Petition
Date are subject to the approval of the Bankruptcy Court.
Pursuant to the Plan, Allowed Administrative Claims will be paid in cash in
full on the Distribution Date (or, if later, the date on which any such
Administrative Claim is allowed by a Final Order of the Bankruptcy Court),
except to the extent any holder of an Allowed Administration Claim shall have
agreed to different treatment thereof; provided, however, that (a)
Administrative Claims of professional persons, the New RIHF Mortgage Note
Trustee, the New RIHF Junior Mortgage Note Trustee, Fidelity, TCW and their
agents (including legal counsel) shall be paid within ten days after allowance
by Final Order and (b) Administrative Claims representing liabilities incurred
in the ordinary course of business by RII and GRI (including amounts owed to
vendors and suppliers which have sold goods or furnished services to RII and GRI
after the commencement of the chapter 11 cases) will be assumed and paid by RII
and GRI in accordance with past practice and the terms and conditions of the
particular transactions and any agreement relating thereto.
PRIORITY TAX CLAIMS -- A "Priority Tax Claim" is a claim for an amount
entitled to priority under section 507(a)(7) of the Bankruptcy Code. Each holder
of a Priority Tax Claim shall be paid in full in an amount equal to the amount
of such Allowed Claim on the later of the Distribution Date and the date such
Priority Tax Claim becomes due and payable or, at the option of RII or GRI,
shall be paid in
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deferred annual cash payments over a period not exceeding six years after the
earlier of the Effective Date and the date of assessment of such claim including
an interest component as required by the provisions of section 1129(a)(9)(C) of
the Bankruptcy Code. Interest shall be payable quarterly in arrears at an annual
rate equal to the rate applicable to Treasury-Bills on the Confirmation Date or
such other rate as may be set by the Bankruptcy Court at the confirmation
hearing. Any distributions of cash on account of Priority Tax Claims shall be
paid from RII Retained Cash. RII and GRI anticipate that Priority Tax Claims, if
any, will be minimal.
RII CLASS 1 -- RII PRIORITY CLAIMS -- An "RII Priority Claim" is any claim
against RII entitled to priority in accordance with section 507(a) of the
Bankruptcy Code (other than Administrative Claims and Priority Tax Claims)
including: (i) unsecured claims for accrued employee compensation earned within
90 days prior to the filing of the chapter 11 petition to the extent of $2,000
per employee; and (ii) contributions to employee benefit plans arising from
services rendered within 180 days prior to the filing of the chapter 11
petition, but only for such plans to the extent of (a) the number of employees
covered by such plans multiplied by $2,000 less (b) the aggregate amount paid to
such employees from the estate for wages, salaries or commissions.
RII will seek an order approving the pre-Effective Date payment of RII
Priority Claims. To the extent such an order is not entered or these claims are
not paid prior to the Effective Date, pursuant to the Plan each holder of an
Allowed RII Class 1 Claim, at RII's option, shall receive such treatment as (i)
will not alter the legal, equitable or contractual rights to which such Allowed
RII Class 1 Claim entitles the holder thereof, or (ii) otherwise will render
such Allowed RII Class 1 Claim unimpaired pursuant to section 1124(2) of the
Bankruptcy Code. RII anticipates that RII Priority Claims will aggregate
approximately $10,000.
RII CLASS 1 IS UNIMPAIRED AND HOLDERS OF RII CLASS 1 CLAIMS ARE CONCLUSIVELY
PRESUMED PURSUANT TO SECTION 1126(F) OF THE BANKRUPTCY CODE TO HAVE ACCEPTED THE
PLAN.
RII CLASS 2 -- CLAIMS OF THE HOLDERS OF OLD SERIES NOTES -- RII Class 2
consists of the claims of the holders of the Old Series Notes which claims are
allowed for purposes of the Plan only in the aggregate outstanding principal
amount of $482,000,000 plus accrued and unpaid interest and certain costs and
expenses of collection. The outstanding principal amount of Old Series Notes
will increase if additional Old Series Notes are issued to holders of Old Plan
Disputed Claims.
Pursuant to the Plan, each holder of the Old Series Notes as of the
Distribution Record Date will receive on the relevant Distribution Date and on
account of such holders' Allowed RII Class 2 Claims and Allowed GRI Class 2
Claims, for each $1,000 principal amount of such claim and all accrued interest
thereon*:
<TABLE>
<S> <C> <C>
-- $259.38 principal amount of New RIHF Mortgage Notes;
-- One Unit comprised of $72.63 principal amount of New RIHF Junior
Mortgage Notes and .07263 share of RII Class B Common Stock;
-- 35.33 shares of RII Common Stock;
-- Either (A) $134.88 in cash, plus interest on such amount at an annual
rate of 7.5% from January 1, 1994, to the SIHL Closing Date, plus 4.15
SIHL Series A Shares, representing a pro rata share of the
consideration received from the SIHL Sale, or (B) if the SIHL Sale is
not consummated on the Effective Date, 10.375 PIRL Ordinary Shares
pursuant to the PIRL Spin-Off;
</TABLE>
- ------------------------
* Assumes that the principal amount of Old Series Notes outstanding as of the
Effective Date is $482,000,000, the balance at October 15, 1993. Additional
Old Series Notes not to exceed approximately $2,500,000 in aggregate principal
amount may be issued to holders of Old Plan Disputed Claims. If additional Old
Series Notes are issued, the consideration distributed for each $1,000
principal amount of Old Series Notes will be reduced slightly.
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<TABLE>
<S> <C> <C>
-- A pro rata share of Excess Cash, which pro rata share is projected to be
a minimum of $62.25;
-- The non-transferable right to receive a pro rata share of Net Reserved
Cash and Net Plan Consummation Cash; and
-- The non-transferable right to receive a pro rata share of payments from
Deferred Cash, which pro rata share is expected to be a minimum of $5.
See "Description of Litigation Trust Units."
</TABLE>
In addition to the foregoing distribution, RII will make the Caesars Payment
on behalf of the holders of Old Series Notes. See "Description of the Caesars
Payment."
Any distribution under the Plan on account of such Allowed RII Class 2 Claim
shall be deemed to have been applied first to original issue price and then to
accrued and unpaid original issue discount. For a description of the New RIHF
Mortgage Notes and the New RIHF Junior Mortgage Notes, see "Description of New
RIHF Mortgage Notes" and "Description of New RIHF Junior Mortgage Notes". For a
description of the RII Class B Common Stock, the RII Common Stock and the PIRL
Ordinary Shares, see "Description of New Equity Securities". For a description
of the Deferred Cash, see "Description of Deferred Cash" and "Description of
Litigation Trust Units". For a description of Excess Cash, Net Reserved Cash and
Net Plan Consummation Cash, see "Description of Excess Cash", "Description of
Net Reserved Cash" and "Description of Net Plan Consummation Cash and Plan
Expenses". THE DISTRIBUTION TO HOLDERS OF ALLOWED RII CLASS 2 CLAIMS IS PROVIDED
ALSO IN CONSIDERATION FOR THEIR ALLOWED GRI CLASS 2 CLAIMS. FRACTIONAL SHARES OF
THE NEW EQUITY SECURITIES WILL NOT BE DISTRIBUTED. NEW RIHF MORTGAGE NOTES AND
NEW RIHF JUNIOR MORTGAGE NOTES WILL BE ISSUED ONLY IN DENOMINATIONS OF $1,000 OR
INTEGRAL MULTIPLES THEREOF. PURSUANT TO THE PLAN, THE DISBURSING AGENT FOR THE
HOLDERS OF OLD SERIES NOTES WILL AGGREGATE AND SELL ALL FRACTIONAL AMOUNTS OF
NEW EQUITY SECURITIES AND NEW DEBT SECURITIES AND DISTRIBUTE THE NET PROCEEDS TO
THE HOLDERS OF OLD SERIES NOTES ENTITLED THERETO.
For information with respect to SIHL, the SIHL Sale, the Paradise Island
Purchase Agreement and the SIHL Series A Shares, reference is made to the
accompanying SIHL Prospectus relating to the SIHL Series A Shares. RII HAS
SUPPLIED CERTAIN INFORMATION REGARDING THE PARADISE ISLAND BUSINESS (SUCH AS IS
FOUND IN RII'S REPORTS FILED WITH THE COMMISSION), AS WELL AS CERTAIN
INFORMATION CONCERNING THE RESTRUCTURING, TO SIHL SPECIFICALLY FOR ITS USE IN
THE PREPARATION OF THE SIHL PROSPECTUS (AND THE RELATED REGISTRATION STATEMENT
FILED BY SIHL WITH THE COMMISSION UNDER THE SECURITIES ACT). RII AND ITS
ADVISERS DISCLAIM ANY RESPONSIBILITY FOR THE ACCURACY, COMPLETENESS, NATURE AND
FORM OF PRESENTATION OF ANY INFORMATION CONTAINED IN THE SIHL PROSPECTUS (AND
RELATED REGISTRATION STATEMENT), EXCEPT THAT RII HAS MADE IN THE PARADISE ISLAND
PURCHASE AGREEMENT CERTAIN REPRESENTATIONS AND WARRANTIES TO SIHL AS TO THE
ACCURACY OF THE INFORMATION SUPPLIED BY RII SPECIFICALLY FOR INCLUSION IN THE
SIHL PROSPECTUS (AND RELATED REGISTRATION STATEMENT).
RII CLASS 2 IS IMPAIRED AND THE HOLDERS OF RII CLASS 2 CLAIMS ARE ENTITLED
TO VOTE ON THE PLAN.
RII CLASS 3 -- CLAIMS UNDER THE SHOWBOAT NOTES -- RII Class 3 consists of
the claims of holders of the Showboat Notes. As of the Voting Record Date, the
aggregate outstanding principal amount of the Showboat Notes was $105,333,000
and such claim is deemed to be an Allowed Claim under the Plan. Pursuant to the
Plan, each holder of the Showboat Notes will receive such treatment as (i) will
not alter the legal, equitable and contractual rights to which such Allowed RII
Class 3 Claim entitles the holder thereof or (ii) otherwise will render such
claim unimpaired pursuant to section 1124(2) of the Bankruptcy Code. To the
extent not previously paid when due, interest shall be paid in cash on the
Distribution Date (at the applicable, non-default contractual rate), together
with any additional amount required to be paid to render the Showboat Note
claims unimpaired pursuant to section 1124(2) of the Bankruptcy Code.
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RII CLASS 3 IS UNIMPAIRED AND THE HOLDER OF RII CLASS 3 CLAIMS ARE
CONCLUSIVELY PRESUMED PURSUANT TO SECTION 1126(F) OF THE BANKRUPTCY CODE TO HAVE
ACCEPTED THE PLAN.
RII CLASS 4 -- MISCELLANEOUS SECURED CLAIMS -- RII Class 4 consists of each
claim secured by a security interest in or lien upon property of RII other than
any RII Class 2 or RII Class 3 Claims, including without limitation claims
secured by mortgages or trust deeds of real property, by mechanic's or
materialmen's liens, by artisan's liens, or by miscellaneous personal property
such as office furniture, telephone systems, copiers and mailing equipment. RII
is not aware of any RII Class 4 Claims.
Pursuant to the Plan, at the option of RII with respect to each Allowed
Claim in RII Class 4, the Plan either (a) will not alter the legal, equitable or
contractual rights to which such claim entitles the holder thereof, or (b)
otherwise will render such claim unimpaired pursuant to section 1124(2) of the
Bankruptcy Code; provided that in each case the Plan shall not alter the rights
of the holder of such claim in any collateral securing such claim as of the
Petition Date and the liens thereunder shall be ratified and affirmed. To the
extent not previously paid when due, interest shall be paid in cash on the
Distribution Date (at the applicable, non-default contractual rate), together
with any additional amount required to be paid to render such Allowed RII Class
4 Claim unimpaired pursuant to section 1124(1) or (2) of the Bankruptcy Code.
RII CLASS 4 IS UNIMPAIRED AND HOLDERS OF RII CLASS 4 CLAIMS ARE CONCLUSIVELY
PRESUMED PURSUANT TO SECTION 1126(F) OF THE BANKRUPTCY CODE TO HAVE ACCEPTED THE
PLAN.
RII CLASS 5 -- GENERAL UNSECURED CLAIMS -- RII Class 5 consists of the
claims of all unsecured creditors not classified in any other RII Class above.
RII Class 5 Claims generally consist of claims of employees (other than RII
Priority Claims) and trade creditors for goods and services provided to RII
prior to the Petition Date, other contract claims and damage claims, and any
other general unsecured claims, such as litigation claims.
RII estimates that after all objections to claims are resolved the ultimate
amount of Allowed Claims included in RII Class 5 (exclusive of claims covered by
insurance) will aggregate approximately $1,000,000. THIS IS AN ESTIMATE
REFLECTING THE COSTS AND UNCERTAINTIES OF LITIGATION. RII DOES NOT ADMIT THAT IT
IS LIABLE IN ANY AMOUNT WITH RESPECT TO ANY DISPUTED CLAIMS. IN ADDITION, THERE
CAN BE NO GUARANTY OR ASSURANCE THAT SUCH ESTIMATE WILL BE CORRECT AND,
ACCORDINGLY, THERE IS A RISK THAT THE AMOUNT OF THE ALLOWED CLAIMS INCLUDED IN
RII CLASS 5 WILL BE GREATER THAN THE AMOUNT ESTIMATED BY RII.
RII intends to dispute certain RII Class 5 Claims. In this regard, RII
believes that state and Federal environmental agencies may assert claims against
RII related to alleged environmental hazards. RII intends to dispute any such
claims, if asserted. Similarly, RII is, or prior to the Petition Date may
become, a defendant in a number of pending or threatened legal proceedings
arising in the ordinary course of business. RII may request the Bankruptcy Court
to determine the allowed amount of any environmental or other claims. This
allowance process may include proceedings for estimating such claims pursuant to
section 502(c) of the Bankruptcy Code. The Company does not believe that any
litigation or environmental claims of which it is aware will have a material
adverse impact on the Company, the Plan or the Restructuring. The feasibility of
the Plan may be jeopardized if the Company is found to have significant
unanticipated environmental liability.
The claims asserted in certain of the pending or threatened legal
proceedings are covered by insurance maintained by RII and to the extent any
claims covered by insurance are upheld, it is anticipated that the major portion
thereof would be paid by RII's insurance carriers. RII intends to (i) consent to
a modification of the automatic stay provisions of section 362(a) of the
Bankruptcy Code so as to permit the prosecution of claims covered by insurance
solely to the extent of such coverage, or (ii) utilize a claims resolution
procedure as may be implemented by the Bankruptcy Court.
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RII will seek an order approving the pre-Effective Date payment of RII Class
5 Claims of certain employees and trade creditors. To the extent such an order
is not entered or RII Class 5 Claims are not paid prior to the Effective Date,
at RII's option, each holder of an Allowed RII Class 5 Claim will receive such
treatment as (i) will not alter the legal, equitable or contractual rights to
which such claim entitles the holder thereof, or (ii) otherwise will render such
claim unimpaired pursuant to section 1124(2) of the Bankruptcy Code. The
practical effect of this treatment is that any allowed RII Class 5 Claim will be
paid on the Effective Date or as soon thereafter as such RII Class 5 Claim, in
the ordinary course of business and consistent with past practice and the
agreements related thereto, would have been paid in the absence of RII's chapter
11 filing.
RII CLASS 5 IS UNIMPAIRED AND HOLDERS OF RII CLASS 5 CLAIMS ARE CONCLUSIVELY
PRESUMED PURSUANT TO SECTION 1126(F) OF THE BANKRUPTCY CODE TO HAVE ACCEPTED THE
PLAN.
RII CLASS 6 -- U.S. PARADISE ISLAND SUBSIDIARY INTERCOMPANY CLAIMS -- RII
Class 6 consists of the claims of certain of the U.S. Paradise Island
Subsidiaries, specifically PIVI and ISI, against RII. The aggregate amount of
such claims as of September 30, 1993 was approximately $2,151,000. The U.S.
Paradise Island Subsidiary Claims are intercompany debt obligations of RII. PIVI
and ISI shall retain unaltered the legal, equitable and contractual rights to
which their Allowed RII Class 6 Claims entitle them.
RII CLASS 6 IS UNIMPAIRED AND THE HOLDERS OF RII CLASS 6 CLAIMS ARE NOT
ENTITLED TO VOTE ON THE PLAN.
RII CLASS 7 -- INTERESTS OF THE HOLDERS OF RII COMMON STOCK -- RII Class 7
consists of the interests of the holders of RII Common Stock. As of the Voting
Record Date, there were 20,157,234 shares of RII Common Stock outstanding. Up to
approximately 160,000 additional shares of RII Common Stock may be issued to
holders of Old Plan Disputed Claims if such claims are allowed by the New Jersey
bankruptcy court. The number of shares of RII Common Stock to be issued to the
holders of Old Series Notes and with respect to the Griffin Warrants and the
1994 Stock Option Plan would increase to offset the dilutive effect of the
issuance of additional RII Common Stock.
Pursuant to the Plan, each holder of RII Common Stock will retain its shares
of RII Common Stock. As a result of the issuance under the Plan of (1)
additional shares of RII Common Stock to the holders of RII Class 2 Claims (and
related GRI Class 2 Claims), (2) the Griffin Warrants, (3) options to be issued
under the 1994 Stock Option Plan and (4) shares of RII Class B Common Stock, the
resulting ownership interest in RII represented by the currently outstanding
shares of RII Common Stock will be substantially diluted.
RII CLASS 7 IS IMPAIRED AND HOLDERS OF RII CLASS 7 INTERESTS ARE ENTITLED TO
VOTE ON THE PLAN.
RII CLASS 8 -- INTERESTS OF THE HOLDERS OF 1990 STOCK OPTIONS -- RII Class 8
consists of the interests of the holders of 1990 Stock Options. As of the Voting
Record Date, 1,758,800 1990 Stock Options were outstanding.
Pursuant to the Plan, each holder of 1990 Stock Options will retain his or
her options. As part of the Plan, the 1990 Stock Option Plan will be terminated
and the exercise price for the outstanding 1990 Stock Options shall thereafter
remain fixed at the existing exercise price. No further 1990 Stock Options will
be issued and the 1994 Stock Option Plan will be implemented. If sufficient
Acceptances are received from the holders of Old Series Notes and from the
holders of RII Common Stock, such Acceptances will constitute approval of the
1994 Stock Option Plan by such holders for purposes of compliance with Rule
16b-3 promulgated under the Exchange Act. As a result of the issuance under the
Plan of (1) additional shares of RII Common Stock to the holders of RII Class 2
Claims (and related GRI Class 2 Claims), (2) the Griffin Warrants, (3) options
to be issued under the 1994 Stock Option Plan and (4) shares of RII Class B
Common Stock, the resulting ownership interest in RII represented by the
currently outstanding 1990 Stock Options will be substantially diluted.
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RII CLASS 8 IS IMPAIRED AND HOLDERS OF RII CLASS 8 INTERESTS ARE ENTITLED TO
VOTE ON THE PLAN.
GRI CLASS 1 -- GRI PRIORITY CLAIMS -- A "GRI Priority Claim" is any claim
against GRI entitled to priority in accordance with section 507(a) of the
Bankruptcy Code (other than Administrative Claims and Priority Tax Claims)
including: (i) unsecured claims for accrued employee compensation earned within
90 days prior to the filing of the chapter 11 petition, to the extent of $2,000
per employee; and (ii) contributions to employee benefit plans arising from
services rendered within 180 days prior to the filing of the chapter 11
petition, but only for such plans to the extent of (a) the number of employees
covered by such plans multiplied by $2,000 less (b) the aggregate amount paid to
such employees from the estate for wages, salaries or commission.
GRI does not believe there will be any Allowed GRI Priority Claims. However,
to the extent any such Allowed Claims exist, GRI will seek an order approving
the pre-Effective Date payment of GRI Priority Claims. To the extent such an
order is not entered or these claims are not paid prior to the Effective Date,
pursuant to the Plan each holder of an Allowed GRI Class 1 Claim shall, at GRI's
option, receive such treatment as (i) will not alter the legal, equitable or
contractual rights to which such Allowed GRI Class 1 entitled the holder
thereof, or (ii) otherwise will render such Allowed GRI Class 1 Claim unimpaired
pursuant to section 1124(2) of the Bankruptcy Code.
GRI CLASS 1 IS UNIMPAIRED AND HOLDERS OF GRI CLASS 1 CLAIMS ARE CONCLUSIVELY
PRESUMED PURSUANT TO SECTION 1126(F) OF THE BANKRUPTCY CODE TO HAVE ACCEPTED THE
PLAN.
GRI CLASS 2 -- GRI GUARANTY CLAIMS -- GRI Class 2 consists of the claims of
the holders of Old Series Notes arising from GRI's guaranty of RII's obligations
under the Old Series Notes pursuant to the GRI Guaranty. For the purposes of the
Plan only, the GRI Guaranty Claims are Allowed in the aggregate principal amount
of $482,000,000 plus accrued interest and certain costs and expenses of
collection. The outstanding principal amount of Old Series Notes will increase
if additional Old Series Notes are issued to holders of Old Plan Disputed Claims
in an amount not to exceed approximately $2,500,000. The holders of GRI Class 2
Claims also hold RII Class 2 Claims. The distribution provided to holders of RII
Class 2 Claims under the Plan constitutes the distribution provided under the
Plan on account of GRI Class 2 Claims as well.
GRI CLASS 2 IS IMPAIRED AND HOLDERS OF GRI CLASS 2 CLAIMS ARE ENTITLED TO
VOTE ON THE PLAN.
GRI CLASS 3 -- GENERAL UNSECURED CLAIMS -- Pursuant to the Plan, at the
option of GRI with respect to each Allowed Claim in GRI Class 3, the Plan either
(i) will not alter the legal, equitable or contractual rights to which such
claim entitles the holder thereof, or (ii) otherwise will render such claim
unimpaired pursuant to section 1124(2) of the Bankruptcy Code. GRI is not aware
of any GRI Class 3 Claims. Because it is not an operating entity, GRI believes
that minimal, if any, GRI Class 3 Claims exist.
GRI CLASS 3 IS UNIMPAIRED AND HOLDERS OF GRI CLASS 3 CLAIMS ARE CONCLUSIVELY
PRESUMED PURSUANT TO SECTION 1126(F) OF THE BANKRUPTCY CODE TO HAVE ACCEPTED THE
PLAN.
GRI CLASS 4 -- RII INTERCOMPANY CLAIM -- GRI Class 4 consists of the RII
Intercompany Claim in the amount of $40,196,000 as of September 30, 1993. The
RII Intercompany Claim is the intercompany debt obligation of GRI to RII.
Pursuant to the Plan, RII will contribute the RII Intercompany Claim to the
capital of GRI. The RII Intercompany Claim is an impaired claim.
GRI CLASS 4 IS IMPAIRED AND RII AS THE HOLDER OF THE RII CLASS 4 CLAIM IS
ENTITLED TO VOTE ON THE PLAN. RII, AS THE HOLDER OF SUCH ALLOWED CLAIM, WILL
VOTE IN FAVOR OF THE PLAN.
GRI CLASS 5 -- INTEREST OF HOLDER OF GRI COMMON STOCK -- The GRI Class 5
Interest consists of the interest of RII, as the sole holder of GRI common
stock. As of the Voting Record Date, there were 1,000 shares of GRI common stock
outstanding, all held by RII. Pursuant to the treatment provided under the Plan,
the GRI Class 5 Interest is an impaired interest by virtue of the transfer of a
substantial portion of GRI's assets pursuant to either the Paradise Island
Purchase Agreement or the PIRL Standby Distribution Agreement, as the case may
be.
Pursuant to the Plan, RII as the holder of GRI Common Stock shall retain
such Allowed Interest.
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GRI CLASS 5 IS IMPAIRED AND RII AS THE HOLDER OF THE GRI CLASS 5 INTEREST IS
ENTITLED TO VOTE ON THE PLAN. RII WILL VOTE SUCH ALLOWED INTEREST IN FAVOR OF
THE PLAN.
PAYMENTS IN THE ORDINARY COURSE. Pursuant to the Plan, RII and GRI have
agreed: (i) not to pay, and not to permit their subsidiaries to pay, any
prepetition Allowed Claim or postpetition Allowed Administrative Claim,
including claims of trade creditors, on or before the Effective Date, except in
the ordinary course of business and consistent with past practice; and (ii) to
continue to collect, and to cause their subsidiaries to collect, receivables in
the ordinary course of business and consistent with past practice. After the
Effective Date, RII Retained Cash rather than Plan Consummation Cash shall be
used to pay any prepetition Allowed Claims or post-petition Allowed
Administrative Claims of trade creditors which, in the ordinary course of
business and consistent with past practice and the agreements with such
creditors, would not have been paid on or before the Effective Date (other than
Plan Expenses).
SUMMARY OF OTHER PROVISIONS OF THE PLAN
CREDITORS' COMMITTEES
The Bankruptcy Code sets forth the powers and duties of creditors' and
equity interest holders' committees. After a petition is filed, the United
States trustee (the "United States Trustee") is required to appoint a committee
of holders of unsecured claims, and may appoint additional committees of
creditors or equity interest holders as deemed appropriate to assure the
adequate representation of creditors and equity interest holders in the
proceeding. In the context of a prepackaged plan of reorganization, however,
many of the services generally performed by such a committee already have been
performed prior to the filing of the petition commencing the chapter 11 case.
Because of the prepackaged nature of the Plan and the participation of Fidelity
and TCW in the solicitation process, RII and GRI will request the United States
Trustee not to appoint a separate creditors' committee. If any such committee is
appointed by the United States Trustee pursuant to section 1103 of the
Bankruptcy Code, such committee may hire advisers, consult with the debtors
concerning administration of the case, conduct investigations of the financial
condition and operation of the debtors' business and the desirability of the
continuance of such business, and perform such other services as are relevant to
the formulation of the plan of reorganization. Committee members serve in a
fiduciary capacity with respect to holders they represent.
EXECUTORY CONTRACTS AND LEASES
The Bankruptcy Code gives RII and GRI the power after the commencement of
the chapter 11 cases, subject to the approval of the Bankruptcy Court, to assume
or reject executory contracts and unexpired leases. Although not defined in the
Bankruptcy Code, an "executory contract" is usually described as a contract
under which material performance (other than the payment of money) remains due
at the time of commencement of a bankruptcy case. The Plan provides for the
assumption by RII and GRI of all executory contracts and unexpired leases that
are not expressly rejected or subject to a motion to reject filed by RII and GRI
on or before the Confirmation Date. However, RII and GRI may file motions to
reject certain executory contracts or unexpired leases. Assumed executory
contracts and unexpired leases will be reinstated and rendered unimpaired. In
connection with the assumption of an executory contract or unexpired lease, RII
or GRI, as the case may be, will cure monetary defaults and otherwise satisfy
the requirements of section 365 of the Bankruptcy Code. Disputes regarding
issues related to assumptions of an executory contract or unexpired lease will
be resolved by the Bankruptcy Court on a case by case basis. If an executory
contract or unexpired lease is rejected, the other party to the agreement may
file a proof of claim with respect to a claim for damages by reason of the
rejection. The Plan provides that a proof of claim with respect to any such
claim must be filed within 30 days after the Confirmation Date, or within such
shorter period as may be ordered by the Bankruptcy Court. Each such claim will
constitute an RII Class 5 Claim, to the extent such claim is finally allowed by
the Bankruptcy Court.
DISCHARGE OF INDENTURE TRUSTEE AND RELEASE OF CHARGING LIENS
Subsequent to the performance by the Old Series Note Trustee of its duties
and obligations under the provisions of the Plan and the Confirmation Order, if
any, and under the terms of the Old Series
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Note Indenture, the Old Series Note Trustee and its agents shall be relieved of
all obligations associated with the Old Series Note Indenture. Furthermore, on
the Effective Date, the Old Series Note Indenture, except for purposes of making
distributions under the Plan, will be deemed canceled, terminated and of no
further force or effect. Except as otherwise provided in the Plan, such
cancellation of the Old Series Note Indenture will extinguish the rights and
obligations of RII and the holders of the Old Series Notes under the Old Series
Note Indenture and the rights of the Old Series Note Trustee to assert any
Indenture Trustee Charging Liens against the distributions to the holders of Old
Series Notes for unpaid fees and expenses. Notwithstanding the foregoing, RII
remains liable, subject to approval of the Bankruptcy Court, to pay the
reasonable unpaid fees and expenses of the Old Series Note Trustee in accordance
with other provisions of the Plan. On the Effective Date, all outstanding Old
Series Notes will be canceled on the books of RII and GRI and become settled and
compromised solely as provided in the Plan in consideration for the right to
participate in distributions under the Plan. The cancellation of the Old Series
Note Indenture and surrender of the Old Series Notes will extinguish the right
of any holder of Old Series Notes to commence any cause of action against any
entity for unpaid principal and interest thereon.
EXCULPATION PROVISION
The Plan provides that none of the directors, officers, employees, agents,
representatives, financial advisers or attorneys of (i) RII and GRI, (ii) any
subsidiary of RII and GRI, (iii) TCW, (iv) Fidelity or (v) the Old Series Note
Trustee, and neither RII or GRI, any subsidiary, TCW, Fidelity nor the Old
Series Note Trustee, shall have any liability for actions taken or omitted to be
taken in good faith under or in connection with the Plan or in connection with
the chapter 11 cases. The Company believes that such an exculpation provision,
which is not a general release and waiver of causes of action against third
parties but rather is limited in scope to actions taken solely in connection
with RII's and GRI's bankruptcy cases, is commonly approved in chapter 11 cases
and is necessary to encourage entities to participate in such cases without
incurring undue liability. In some chapter 11 cases, however, the Commission has
taken the position that exculpation provisions are not authorized under the
Bankruptcy Code and that, absent separate consideration supplied by the parties
receiving exculpation, such provisions violate section 524(e) of the Bankruptcy
Code. As a result, the Commission, as well as other parties, may object at the
confirmation hearing to the inclusion of the exculpation provision in the Plan.
Although the Company is aware of many cases in which this form of exculpation
provision has been found acceptable by the bankruptcy court, there can be no
assurance that the Bankruptcy Court in RII's and GRI's cases will confirm the
Plan with the exculpation provision.
CERTAIN INDEMNIFICATION OBLIGATIONS
The Plan also provides that RII's and GRI's obligations to indemnify their
current and former directors and officers pursuant to their respective
certificates of incorporation, by-laws, applicable state law or agreements will
survive confirmation of the Plan irrespective of whether indemnification is owed
in connection with an event occurring before, on or after the Petition Date.
An officer of the Company has been named as a defendant in an adversary
proceeding filed in the United States Bankruptcy Court for the District of
Nevada. Although the Company is not a defendant in the action, it intends to
indemnify the officer. The complaint in this adversary proceeding alleges that
the Company filed frivolous proofs of claim in the bankruptcy proceedings of
Fred Lowenschuss. The complaint seeks unspecified compensatory damages and
punitive damages for malicious prosecution and prosecution of a frivolous claim.
For information concerning additional indemnity obligations of the Company, see
"Management of RII -- Executive Compensation -- Compensation Committee
Interlocks and Insider Participation -- Indemnity Agreement".
In addition, certain warranties and representations related to the Paradise
Island Purchase Agreement or, if applicable, the PIRL Standby Distribution
Agreement may survive consummation of the Plan. RII and GRI do not believe that
any such warranties and representations will give rise to a claim against RII
after the Effective Date.
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If the PIRL Spin-Off occurs, PIRL will assume and RII will be released from
RII's obligations to reimburse SIHL for certain costs and expenses incurred in
connection with the Paradise Island Purchase Agreement. PIRL will pledge assets,
reasonably acceptable to SIHL, with a fair market value of $6 million to secure
such obligation.
RESERVES FOR DISPUTED CLAIMS AND DISPUTED INTERESTS
RII will seek a determination from the Bankruptcy Court as a part of the
hearing on the confirmation of the Plan that RII and GRI have the financial
ability to meet their obligations under the Plan with respect to Disputed Claims
or Interests should such claims or interests be allowed, without the need for a
reserve for such Disputed Claims or Interests. The Bankruptcy Court nevertheless
may require such a reserve. Moreover, the disbursing agreement relative to
disbursements to holders of Old Series Notes will contain appropriate reserve
provisions relative to Old Plan Disputed Claims and unclaimed distributions.
PAYMENT OF PLAN EXPENSES
Plan Expenses shall be paid from Plan Consummation Cash. Plan Expenses
generally include costs and expenses or other needs for cash to consummate and
implement the Plan. Specifically, these expenses would include the unpaid
Administrative Claims (other than Administrative Claims of professional persons,
Fidelity, TCW and the Old Series Indenture Trustee) and RII Classes 1, 4 and 5
and GRI Classes 1 and 3 Claims (whether or not such claims are Disputed Claims)
which, apart from the filing of the prepackaged chapter 11 cases, would in the
ordinary course of business and consistent with past practice have been paid on
or before the Effective Date plus (i) any actual payments required to be made by
RII or the U.S. Paradise Island Subsidiaries for transfer taxes or federal
alternative minimum taxes incurred solely as a result of the consummation of the
transactions contemplated by the Paradise Island Purchase Agreement or,
alternatively, the PIRL Standby Distribution Agreement (after giving effect to
all available deductions or credits allowed to the affiliated group of which RII
is the common parent for the taxable year in which such transaction occurs), and
for costs and liabilities pursuant to section 6.10 of the Paradise Island
Purchase Agreement or, alternatively, section 5.09 of the PIRL Standby
Distribution Agreement, (ii) the Administrative Claims of professional persons,
Fidelity, TCW and the Old Series Indenture Trustee and (iii) costs or expenses
incurred in connection with the implementation and consummation of the Plan for
(a) amounts payable to the Disbursing Agent under the Plan as provided in
section 6.11.9 of the Plan and (b) the reasonable post-Confirmation Date fees
and expenses of professional persons, Fidelity, TCW and the Old Series Indenture
Trustee associated with litigating Disputed Claims or Disputed Interests and
implementing and consummating the Plan. Such costs and expenses could be
substantial and could include any costs and liabilities arising under applicable
bulk transfer laws, reasonable fees and reasonable expenses of professional
persons associated with litigating Disputed Claims or Disputed Interests and
implementing and consummating the Plan.
On the Effective Date, RII will estimate the amount of cash it reasonably
believes will be necessary to pay Plan Expenses and will establish a separate
bank account to hold such amount as Plan Consummation Cash. RII will take
reasonable efforts to pay all Plan Expenses as soon as practicable. Once all
Plan Expenses have been paid, RII will distribute any Net Plan Consummation
Cash, together with interest on Net Plan Consummation Cash at the average rate
of return received by RII and its subsidiaries on invested cash from the
Effective Date to but excluding the date of payment, to the disbursing agent for
the holders of the Old Series Notes. If all Plan Expenses have not been paid
within 90 days after the Effective Date, RII may retain for an additional 60
days such amount of Plan Consummation Cash as the Bankruptcy Court determines to
be necessary to pay any remaining Plan Expenses, with the excess to be
distributed to the disbursing agent for the holders of the Old Series Notes as
Net Plan Consummation Cash. After such 60-day period, RII shall pay the
remaining Plan Consummation Cash (together with interest thereon), if any, to
the disbursing agent for the holders of the Old Series Notes, unless otherwise
ordered by the Bankruptcy Court.
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UNCLAIMED DISTRIBUTIONS
If any person entitled to receive cash or securities directly from RII under
the Plan cannot be located within two years of the Effective Date, any such cash
or securities and accrued interest or dividends thereon will become the property
of and will be released to RII, and any New Equity Securities or New Debt
Securities issued by RII and RIHF will be canceled. Notwithstanding the
foregoing, any SIHL Series A Shares, PIRL Ordinary Shares or cash, as the case
may be, allocable to a holder of Old Series Notes that cannot be located will be
redistributed to the holders who do claim their distributions in a timely
manner.
TREATMENT OF UNCLAIMED CONSIDERATION FROM OLD PLAN. As of the date hereof,
the indenture trustee for the RIFI public debt continues to hold RIFI Release
Cash which has not yet been exchanged for the RIFI Releases. Pursuant to the Old
Plan, any undistributed RIFI Release Cash on September 17, 1995 is to be
returned to Merv Griffin. Accordingly, the undistributed RIFI Release Cash is
not treated under the Plan.
As of the date hereof, Chemical Bank, as disbursing agent for holders of
public debt under the Old Plan, continues to hold the consideration, including
Old Series A Notes, Old Series B Notes and RII Common Stock, payable under the
Old Plan with respect to Unsurrendered Public Debt Claims. Any holder of an
Unsurrendered Public Debt Claim who fails to comply, within the five-year time
period to claim distributions under the Old Plan, with the provisions for the
receipt of distributions under the Old Plan will not receive such distributions
and, accordingly, will not be entitled to participate in the distributions under
the Plan. On the other hand, compliance with the provisions for the receipt of
distributions under the Old Plan will entitle a holder to participate in the
distributions under the Plan if such holder complies, within the two-year time
period to claim distributions under the Plan, with the provisions for the
receipt of distributions under the Plan. The distributions under the Plan that
would have been paid to holders of Unsurrendered Public Debt Claims will be
returned to and become the property of RII. Notwithstanding the foregoing, the
Plan provides that SIHL Series A Shares or PIRL Ordinary Shares which are
unclaimed will be redistributed to holders of Old Series Notes who do claim
their distributions in a timely manner.
To the extent that Old Plan Disputed Claims are allowed, the holders thereof
will be entitled to the distributions set forth in the Old Plan. Subject to
compliance with the provisions of the Plan and the Bankruptcy Code relative to
allowance, such holders will then be entitled to participate in the
distributions set forth in the Plan. Such Old Plan Disputed Claims consist of a
claim for approximately $6,600,000 asserted by certain participants in the
Officers Supplemental Plan. Litigation is pending with respect to this claim in
the New Jersey bankruptcy court. The Company has negotiated a settlement related
to this claim. Pursuant to this settlement, which has not yet been approved by
the New Jersey bankruptcy court, this claim would be allowed as approximately
$6,600,000 in Class 3C claims under the Old Plan and would be entitled to a
distribution of 155,623 shares of RII Common Stock, $2,318,000 aggregate
principal amount of Old Series B Notes (including Old PIK Payments) and an
appropriate number of Litigation Trust Units. Because the settlement is not yet
evidenced by an executed stipulation approved by the bankruptcy court, the
calculations contained in this Information Statement/Prospectus do not reflect
the issuance of these additional shares of RII Common Stock or Old Series B
Notes. To the extent that any Old Plan Disputed Claim is allowed, the holder
thereof will be entitled to the distributions set forth in the Old Plan and the
recoveries of holders of RII Common Stock and Old Series Notes projected herein
will be diluted accordingly.
PAYMENT OF POST-CONFIRMATION FEES AND EXPENSES
After the Confirmation Date, RII and GRI, in the ordinary course of business
and without the necessity for any approval by the Bankruptcy Court, will pay as
Plan Expenses the reasonable fees and expenses of professionals related to
implementation and consummation of the Plan incurred after the Confirmation
Date; provided, however, that no such fees and expenses will be paid except upon
receipt by RII and GRI of a detailed written invoice, which invoice shall also
be served upon the United States
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Trustee, Fidelity and TCW, from the professionals seeking fee and expense
reimbursement; and provided further that any such party may, within ten days
after receipt of an invoice for fees and expenses, request that the Bankruptcy
Court determine any such request.
PREFERENCE AND FRAUDULENT CONVEYANCE CLAIMS
RII and GRI do not believe that there are material transactions that will
give rise to preference claims or fraudulent conveyance claims by RII or GRI
upon commencement of the chapter 11 cases. Material payments have been made only
to secured creditors and to trade creditors in the ordinary course of business
or financial affairs, none of which should give rise to preference claims or
fraudulent conveyance claims. RII and GRI, however, have conducted no
investigation into whether viable preference or fraudulent conveyance claims may
exist. RII and GRI have no current intention to bring any such actions, and the
Plan, in fact, provides that no such actions (other than such avoidance and
recovery actions that have been or are permitted to be filed in connection with
the Old Chapter 11 Cases) shall survive consummation of the Plan.
A fraudulent conveyance action filed by RII with respect to the Old Chapter
11 Cases against Fred Lowenschuss and related parties styled RESORTS
INTERNATIONAL, INC. V. FRED LOWENSCHUSS, INDIVIDUALLY AND AS TRUSTEE OF FRED
LOWENSCHUSS, IRA, AND LAURANCE LOWENSCHUSS, IRA, is pending as Adv. No. 90-1005
in the United States Bankruptcy Court for the District of New Jersey. This
action, which seeks among other things the recovery of merger consideration paid
to Mr. Lowenschuss' pension plan, will survive consummation of the Plan and any
proceeds received with respect thereto will become assets of RII.
CONTINUATION OF RETIREE BENEFIT PLANS
To the extent applicable to the Company, the Plan provides for the
continuation of all retiree benefit plans, at the level established pursuant to
section 1114 (e)(1)(B) of the Bankruptcy Code, for the duration of the period
the Company is obligated to provide such benefits as required by section
1129(a)(13) of the Bankruptcy Code. Notwithstanding the foregoing, the Company
does not believe it is a party to any retiree benefit plans within the meaning
of section 1129(a)(13).
ENVIRONMENTAL CLAIMS. The Company believes that any claims based on Federal
or state environmental protection statutes will be discharged in connection with
consummation of the Plan. Under certain circumstances, however, environmental
claims may survive consummation of the Plan and remain assertable against the
Company after the conclusion of the Restructuring. The Company believes that
environmental claims, even if they survive consummation of the Plan, will not
have a material impact on the ability of the Company to effect the Restructuring
or meet the Company's financial forecasts. The feasibility of the Plan may be
jeopardized if the Company is found to have significant unanticipated
environmental liability.
SUCCESSORS AND ASSIGNS
The rights, benefits and obligations of any person named or referred to in
the Plan will be binding upon, and will inure to the benefit of, the heir,
executor, administrator, successor or assign of such person.
CONFIRMATION OF THE PLAN
CONFIRMATION REQUIREMENTS
If the Requisite Acceptances are received, RII and GRI will seek to
implement the Plan by commencing cases under chapter 11 of the Bankruptcy Code
and will request that the Bankruptcy Court as promptly as practicable hold a
confirmation hearing and a hearing to approve the Information
Statement/Prospectus under section 1126(b) of the Bankruptcy Code. Parties in
interest, including all holders of claims and interests, will receive notice of
the date and time fixed by the Bankruptcy Court for the these hearings. Section
1128(b) of the Bankruptcy Code provides that any party in interest may object
to confirmation of the Plan and approval of the Information
Statement/Prospectus. The Bankruptcy Court also will establish procedures for
the filing and service of objections to the adequacy of the Information
Statement/Prospectus and to confirmation of the Plan.
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In order for the Plan to be confirmed, and regardless of whether all
impaired classes of claims and interests vote to accept the Plan, the Code
requires that the Bankruptcy Court determine that the Plan complies with the
requirements of section 1129 of the Bankruptcy Code. Section 1129 of the
Bankruptcy Code requires, among other things, that: (i) the Plan be accepted by
the requisite votes of holders of impaired claims and interests, except to the
extent that confirmation, despite lack of acceptance by an impaired class, is
available under section 1129(b) of the Bankruptcy Code (see "Confirmation
Without Acceptance by All Impaired Classes"); (ii) the Plan be feasible under
section 1129(a)(ii) of the Bankruptcy Code (that is, there is a reasonable
probability that RII and GRI will be able to perform their obligations under the
Plan and continue to operate their businesses without further financial
reorganization) (see "Feasibility of the Plan"); and (iii) the Plan meet the
requirements of section 1129(a)(7) of the Bankruptcy Code, which requires that,
with respect to each impaired class, each holder of a claim or interest either
accepts the Plan or receives at least as much pursuant to the Plan as such
holder would receive in liquidations of RII and GRI under chapter 7 of the
Bankruptcy Code (see "Best Interests Test" and "Alternatives to Consummation of
the Plan -- Liquidation Under Chapter 7").
Although RII and GRI believe that the Plan will meet such tests, as well as
the other requirements of section 1129 of the Bankruptcy Code, there can be no
assurance that the Bankruptcy Court will reach the same conclusion. Even if the
Requisite Acceptances have been received prior to the commencement of the
chapter 11 cases, the Bankruptcy Court may find that the holders of claims and
interests have not accepted the Plan if the Bankruptcy Court finds that the
Solicitation did not comply with all the applicable provisions of the Bankruptcy
Code and the Bankruptcy Rules (including the requirement under section 1126(b)
that the Solicitation comply with any applicable non-bankruptcy law, rule or
regulation governing the adequacy of disclosure or that the Solicitation be made
after disclosure of adequate information). In such an event, the Bankruptcy
Court might order RII and GRI to resolicit Acceptances, and therefore,
confirmation of the Plan would be delayed and possibly jeopardized. Although RII
and GRI believe that the Solicitation complies with the applicable provisions of
the Bankruptcy Code and the Bankruptcy Rules and that the Acceptances received
will be accepted as votes for the Plan in chapter 11 cases by the Bankruptcy
Court, there can be no assurance that the Bankruptcy Court would reach the same
conclusion.
ACCEPTANCE OF THE PLAN
Except as described under "Confirmation Without Acceptance by All Impaired
Classes", the Bankruptcy Code generally requires that each impaired class of
claims or interests accept a plan of reorganization as a condition to
confirmation. Classes of claims or interests that are not "impaired" under a
plan are deemed to have accepted the plan and are not entitled to vote. The
Bankruptcy Code defines acceptance of a plan of reorganization by a class of
claims as acceptance by holders of at least 66 2/3% in dollar amount and more
than one-half in number of the Allowed Claims in that class, but for this
purpose counts only those claims that have voted on the plan. The Bankruptcy
Code defines acceptance of the plan of reorganization by a class of interests as
acceptance by the holders of at least 66 2/3% in amount of the Allowed Interests
in that class, but for this purpose counts only those interests that have been
voted on the plan. Holders of claims or interests who fail to vote and holders
of disputed claims or interests (which have not been temporarily allowed for
voting purposes) who vote will not be counted to determine the acceptance or
rejection of the Plan by any impaired class of claims or interests.
FEASIBILITY OF THE PLAN
Section 1129(a) of the Bankruptcy Code requires that, to confirm the Plan,
the Bankruptcy Court must find that confirmation of the Plan will not likely be
followed by the liquidation or the need for further financial reorganization of
RII and GRI that is not provided for in the Plan (the "Feasibility Test"). For
the Plan to meet the Feasibility Test, the Bankruptcy Court must find that RII
and GRI will possess the resources and working capital necessary to meet their
obligations under the Plan.
RII and GRI have analyzed their ability to meet their obligations under the
Plan. As part of this analysis, the Company has prepared forecasts of its
financial performance for the five-year period
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ending December 31, 1998. These forecasts, and the significant assumptions on
which they are based, are included in this Information Statement/Prospectus. See
"The Restructuring -- Financial Forecasts for the Company". The forecasts
indicate that the Company has sufficient cash to make all distributions required
to be made on the applicable Distribution Date. Although the forecasts do not
extend through the final maturity of the New Debt Securities, the Company
believes it will have sufficient cash to meet, or the financial strength to
refinance, its deferred obligations under the Plan, including payments with
respect to the New Debt Securities. The Company believes, based on this
analysis, that the Plan provides a feasible means of reorganization and
operation from which there is a reasonable expectation that, subject to the
risks disclosed in this Information Statement/Prospectus, the Company will be
able to make all payments required to be made pursuant to the Plan.
However, there can be no assurance that the Company will generate sufficient
cash from operations to repay, when due, the principal amount of the New RIHF
Mortgage Notes maturing in 2003 and the principal amount of the New RIHF Junior
Mortgage Notes maturing in 2004. As a result, the Company may be required to
refinance such amounts as they become due and payable. 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 ultimately could result in the Company's inability to
meet its debt obligations, including its obligations under the New Debt
Securities. Holders of the Old Series Notes are cautioned not to place undue
reliance on the forecasts. See "Risk Factors -- Risks Relating to the
Forecasts".
Consummation of the transactions contemplated by the Plan requires the
release and termination of the Old Security Documents. Absent such release, the
Company will be unable to pledge the requisite collateral as security for the
New Debt Securities and the RIHF Senior Facility Notes or effect either the SIHL
Sale or the PIRL Spin-off.
BEST INTERESTS TEST
With respect to each impaired class, confirmation of the Plan requires that
each holder of a claim or interest either (a) accept the Plan or (b) receive or
retain under the Plan property of a value as of the Effective Date that is not
less than the value such holder would receive or retain if RII and GRI were
liquidated under chapter 7 of the Bankruptcy Code (the "Best Interests Test").
To determine the value that holders of each impaired class of claims and
interests would receive if RII and GRI were liquidated, the Bankruptcy Court
must determine the dollar amount that would be generated from the liquidation of
RII's and GRI's assets and properties in the context of chapter 7 liquidation
cases. Secured claims and the costs and expenses of the liquidation case would
be paid in full from the liquidation proceeds before the balance of those
proceeds would be made available to pay prepetition unsecured claims and
interests.
In applying the Best Interests Test, it is possible that claims and
interests in the chapter 7 cases may not be classified according to the
classification provided in the Plan. In the absence of a contrary determination
by the Bankruptcy Court, all general unsecured claims arising prior to the
Petition Date would be treated as one class for purposes of determining the
potential distribution of the liquidation proceeds resulting from RII's and
GRI's chapter 7 cases. The distributions from the liquidation proceeds would be
calculated ratably according to the amount of the claim held by each creditor
holding a claim. Section 510(b) of the Bankruptcy Code also requires, among
other things, that any claim for damages arising from the purchase or sale of a
security of the debtor shall be subordinated to all claims or interests that are
senior to or equal to the claim or interest represented by such security (except
that claims in respect of common stock have the same priority as common stock).
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After consideration of the effect that chapter 7 liquidations would have on
the ultimate proceeds available for distribution to RII's and GRI's creditors
and equity interest holders, including (i) increased costs and expenses of
liquidation under chapter 7 arising from fees payable to a trustee in bankruptcy
and professional advisers to such trustee, (ii) the erosion in value of assets
in the context of the expeditious liquidation required under chapter 7 and the
"forced sale" atmosphere that would prevail, (iii) the adverse effects on the
salability of business segments that could result from the probable departure of
key employees and the loss of guests, (iv) the costs attributable to the time
value of money resulting from what is likely to be a more protracted proceeding
than if the Plan is confirmed (because of the time required to liquidate the
assets of RII and GRI, resolve claims and related litigation and prepare for
distributions) and (v) the application of the rule of absolute priority to
distributions under a chapter 7 liquidation, RII and GRI have determined that
the Plan will provide each creditor and equity interest holder holding a claim
or interest in an impaired class with a greater recovery than such creditor or
equity interest holder would receive pursuant to liquidations of RII and GRI
under chapter 7 of the Bankruptcy Code. This determination is evidenced by the
Liquidation Analysis attached hereto as Appendix B.
The Liquidation Analysis provides a summary of the liquidation values of the
assets of RII and GRI aggregated in accordance with the Plan, all assuming a
chapter 7 liquidation in which a trustee appointed by the Bankruptcy Court would
liquidate the assets of RII's and GRI's estates within a six-month period
beginning on October 15, 1993. The Company believes the Liquidation Analysis to
be reasonably accurate.
Reference should be made to Appendix B for a complete discussion and
presentation of the Liquidation Analysis which was prepared by the management of
the Company, together with the Company's financial adviser, Bear Stearns. In
summary, however, the Liquidation Analysis indicates that, in a liquidation, the
creditors and equity interest holders would likely receive the following
distributions:
<TABLE>
<CAPTION>
ESTIMATED NET PRESENT LIQUIDATION VALUE
OF DISTRIBUTIONS TO CLASSES OF
IMPAIRED AND POTENTIALLY NON-ACCEPTING
CREDITORS AND EQUITY INTEREST HOLDERS(1)
(AS OF OCTOBER 15, 1993)
- ----------------------------------------------------------------------------------------------------------------
CLASS UNDER PLAN TYPE OF CHAPTER 7 CLAIM DISTRIBUTION
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
RII Class 2 Old Series Notes $485 per $1,000 claim (2)
RII Class 7 and 8 Equity--RII Common None
Stock and 1990 Stock Options
GRI Class 2 GRI Guaranty Recovery implied in recovery of RII
Class 2
<FN>
- ------------------------
(1) GRI Class 4 Claims consist of a single claim held by RII, and GRI Class 5
Interests consist of the common stock of GRI, all of which is owned by RII.
The GRI Class 4 Claims and the GRI Class 5 Interests will be voted in favor
of the Plan.
(2) Recovery by RII Class 2 claimants may be reduced below that estimated here
to the extent that RII Class 5 Claims share distributions with any RII Class
2 deficiency claims arising from any assets of RII which are not subject to
the security interests benefitting the RII Class 2 Claims. RII Class 5 will
not be impaired under the Plan. However, RII Class 5 will not be paid in
full in a chapter 7 context, but will rank pari passu with any RII Class 2
deficiency claims and will obtain recoveries based upon the level of assets
at RII which are not subject to the security interests benefitting the RII
Class 2 Claims.
</TABLE>
Underlying the Liquidation Analysis are a number of estimates and
assumptions (the most important of which are set forth in Appendix B) that,
although considered reasonable by management, are inherently subject to
significant economic and competitive uncertainties and contingencies beyond the
control of the Company and management. The Liquidation Analysis also is based
upon
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assumptions (the most important of which are set forth in Appendix B) with
regard to liquidation decisions that are subject to change. Accordingly, there
can be no assurance that the values reflected would be realized if RII and GRI
were, in fact, to undergo such liquidation.
The Liquidation Analysis assumes that the Resorts Casino Hotel and the
Paradise Island Business would continue to operate during the pendency of a
chapter 7 liquidation by RII and GRI. This assumption may be incorrect. For
example, in the case of the Resorts Casino Hotel, there is a risk that a chapter
7 liquidation by RII and GRI would provide the Casino Control Commission with
sufficient grounds to revoke or refuse to renew RIH's casino license. If this
occurred, the Resorts Casino Hotel would cease to operate. The value of the
Resorts Casino Hotel if sold in a non-operating mode would be substantially less
than the value ascribed to such asset in the Liquidation Analysis and
distributions to creditors would be reduced accordingly.
The procedures followed and the assumptions and qualifications made in
connection with the analyses are described in the Liquidation Analysis set forth
in Appendix B. There can be no assurance that such assumptions would be accepted
by the Bankruptcy Court.
Moreover, it is possible, in the context of a chapter 7 liquidation of RII
and GRI, that litigation with respect to various claims of RII and GRI against
various affiliates of RII and GRI could make it difficult to continue to operate
the Resorts Casino Hotel and the Paradise Island Business as going concerns. In
such event, recoveries in a chapter 7 context could be significantly below those
estimated above.
A summary comparison of the estimated net present liquidation value of
distributions to creditors and equity interest holders in a chapter 7
liquidation of RII and GRI (assuming that the chapter 7 liquidation of RII and
GRI does not cause the termination of operations of the Resorts Casino Hotel or
of the Paradise Island Business) to the value of anticipated distributions to
such creditors under the Plan is set forth in the following table:
<TABLE>
<CAPTION>
COMPARISON OF ESTIMATED NET PRESENT LIQUIDATION VALUE
TO REORGANIZATION VALUE OF ANTICIPATED DISTRIBUTIONS UNDER PLAN
FOR IMPAIRED AND POTENTIALLY NON-ACCEPTING CLASSES OF CREDITORS AND EQUITY INTEREST HOLDERS
(AS OF OCTOBER 15, 1993)
- ----------------------------------------------------------------------------------------------------------------
CLASS UNDER PLAN PROJECTED PLAN DISTRIBUTION CHAPTER 7 DISTRIBUTION
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
RII Class 2 $705 per $1,000 claim $485 per $1,000 claim
RII Class 7 44.7% of equity in RII (fully None
diluted basis)
RII Class 8 3.8% of equity in RII (fully diluted None
basis)
GRI Class 2 Recovery implied in recovery of RII Recovery implied in recovery of RII
Class 2 Class 2
</TABLE>
The foregoing table demonstrates that anticipated recoveries to all
impaired, potentially non-accepting classes of creditors and equity interest
holders under the Plan are substantially greater than likely recoveries to such
creditors and equity interest holders in a chapter 7 liquidation. See "The
Restructuring -- Reorganization Values". Accordingly, RII and GRI believe that
the Plan satisfies the Best Interests Test.
CONFIRMATION WITHOUT ACCEPTANCE BY ALL IMPAIRED CLASSES
If any impaired class or classes reject the Plan, section 1129 of the
Bankruptcy Code provides that, so long as at least one impaired class has
accepted the Plan (excluding the vote of insiders), the Bankruptcy Court may
still confirm the Plan under section 1129(b). To obtain confirmation on such
basis, RII and GRI must demonstrate to the Bankruptcy Court that the Plan "does
not discriminate unfairly" and is "fair and equitable" with respect to any
dissenting class. The "unfair discrimination"
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<PAGE>
test generally requires that holders of a non-accepting class receive treatment
under a plan that is economically equivalent to that given to other classes
whose holders have the same legal priorities and that no class receives more
than it is legally entitled to receive for its claims or equity interests.
The Bankruptcy Code establishes different "fair and equitable" tests for
secured creditors, unsecured creditors and equity interest holders. The
respective tests are as follows:
(a) SECURED CREDITORS. Each impaired creditor in the rejecting class
either (i) (A) retains its liens in the collateral securing such creditor's
claim or in the proceeds thereof to the extent of the allowed amount of its
secured claim and (B) receives deferred cash payments in at least the
allowed amount of such secured claim with a present value at the Effective
Date at least equal to such creditor's interest in its collateral or in the
proceeds thereof, or (ii) realizes the indubitable equivalent of its allowed
secured claim.
(b) UNSECURED CREDITORS. Either (i) each impaired unsecured creditor
of the rejecting class receives or retains under the plan property of a
value equal to the amount of its Allowed Claim, or (ii) the holders of
claims and interests that are junior to the claims of the dissenting class
do not receive or retain any property under the plan.
(c) EQUITY INTEREST HOLDERS. Either (i) each equity interest holder of
the rejecting class receives or retains under the plan property of a value
equal to the greater of (A) the fixed liquidation preference or redemption
price, if any, of the equity interest it holds and (B) the value of such
equity interest, or (ii) the holders of interests that are junior to such
equity interest do not receive or retain any property under the plan.
RII and GRI intend to seek to apply section 1129(b) of the Bankruptcy Code
if the Plan is not accepted by the holders of RII Class 7 and 8 Interests, and
believe that the Bankruptcy Court would confirm the Plan over the rejection of
such holders. The Company believes the Plan does not unfairly discriminate
against the holders of RII Class 7 and Class 8 Interests because no class of
creditors will receive under the Plan more than it is legally entitled to
receive. The Company believes the Plan is fair and equitable because there are
no junior interest holders which receive or retain property under the Plan. RII
and GRI will not seek to confirm the Plan over the rejection of the holders of
RII Class 2 Claims and GRI Class 2 Claims.
PARADISE ISLAND APPROVAL ORDER
In connection with confirmation of the Plan, and assuming that the Paradise
Island Purchase Agreement has not been terminated, RII will request the
Bankruptcy Court to enter an order, which may be included as part of the
Confirmation Order, approving the sale of the Paradise Island Business to SIHL
pursuant to the terms of the Paradise Island Purchase Agreement (the "Paradise
Approval Order"). Subject to the approval of the Bankruptcy Court, the Paradise
Approval Order will contain detailed findings and conclusions relative to the
SIHL Sale.
CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN
CONDITIONS TO CONFIRMATION
Confirmation of the Plan is subject to the following conditions: (i) the
Confirmation Date shall occur no later than December 31, 1994; (ii) the
Confirmation Order shall approve in all respects all of the provisions, terms
and conditions of the Plan; (iii) the Confirmation Order shall provide for the
confirmation of the Plan as to both RII and GRI; (iv) the Confirmation Order
shall be acceptable in form and substance to RII, GRI, TCW, Fidelity and, to the
extent provided in the Paradise Island Purchase Agreement, SIHL; (v) the
Confirmation Order shall contain a finding that, except as expressly provided in
the Plan, all of the property distributed under the Plan shall vest in the
recipients thereof free and clear of all liens, claims, encumbrances and
interests of any nature whatsoever and that consummation of the Plan shall not
result in an avoidable transfer with respect to either RII or GRI or any of
their affiliates; and (vi) the entry of an order declaring that, as of the
Effective Date, the Old Security Documents, under which the liens on the
property securing the Old Series Notes were granted or created, shall be deemed
released and terminated. Subject to the
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approval of Fidelity and TCW so long as the funds and accounts managed by either
of them hold in the aggregate at least 20% of the outstanding Old Series Notes,
RII and GRI reserve the right to waive at any time, without notice, without
leave of or order of the Bankruptcy Court, any condition to confirmation of the
Plan. As a practical matter, although the condition requiring the entry of an
order declaring that, as of the Effective Date, the Old Security Documents shall
be deemed released and terminated is waivable, the transactions contemplated by
the Plan cannot be consummated if the Old Security Documents are not released
and terminated. To effect such release, RII is soliciting the consents of the
record holders of Old Series Notes pursuant to the terms of the Old Series Note
Indenture to terminate and release the Old Security Documents under which the
liens on the property securing the Old Series Notes were granted or created.
Such consents will terminate and release the Old Security Documents and will
release the parties to the Old Security Documents from all obligations
thereunder. Such consents must be evidenced by such record holders separately
from their vote on the Plan. The ballots for the holders of Old Series Notes
permit holders to give or withhold such consent. Any executed ballot with
respect to the Plan returned without an indication to withhold such consent will
be deemed to give such consent. If sufficient consents are received from holders
of Old Series Notes, RII and GRI will request the Bankruptcy Court to confirm
release of the Old Security Documents, effective as of the Effective Date, by
entry of an appropriate order. If insufficient consents are received from
holders of Old Series Notes to effectuate a consensual termination and release
of the Old Security Documents by the holders of Old Series Notes, RII and GRI
intend to request the Bankruptcy Court to order the release of the Old Security
Documents; however, there can be no assurance that such an order will be
entered.
CONDITIONS TO EFFECTIVE DATE
The occurrence of the Effective Date of the Plan is subject to the following
conditions: (i) the entry of the Confirmation Order which has not been stayed;
(ii) the New RIHF Mortgage Indenture and the New RIHF Junior Mortgage Indenture
shall have been qualified under the TIA; (iii) the securities to be issued under
the New RIHF Mortgage Indenture and the New RIHF Junior Mortgage Indenture, as
well as the RII Class B Common Stock and the RII Common Stock, and SIHL Series A
Shares or PIRL Ordinary Shares, as the case may be, shall be registered under
the Securities Act and accepted or admitted on a national securities exchange or
the Nasdaq National Market; (iv) the Effective Date shall occur no later than
January 31, 1995; (v) all required regulatory approvals shall have been obtained
(including without limitation any regulatory approvals from the Casino Control
Commission, the government of the Commonwealth of The Bahamas and the U.S.
Department of Transportation; (vi) all indentures, mortgages, security
agreements and other agreements and instruments to be delivered under or
necessary to effectuate the Plan, including without limitation the RIHF Senior
Facility, shall have been executed and delivered; (vii) either (a) the closing
of the SIHL Sale shall have occurred or (b) the closing of the transactions
necessary to effectuate the PIRL Spin-Off shall have occurred; and (viii) all
outstanding amounts under the Griffin Group Note shall have been paid in full.
Subject to the approval of Fidelity and TCW, so long as the funds and
accounts managed by either of them hold in the aggregate at least 20% of the
outstanding Old Series Notes, RII and GRI at any time, without notice, without
leave of or order of the Bankruptcy Court and without any formal action other
than consummation of the Plan, may waive any condition precedent to consummation
of the Plan, other than the condition that the Confirmation Order has been
entered and not stayed.
MODIFICATIONS OF THE PLAN
Subject to the approval of Fidelity and TCW, so long as the funds and
accounts managed by either of them hold in the aggregate at least 20% of the
outstanding Old Series Notes, RII and GRI expressly reserve the right to modify,
at any time and from time to time, the terms of the Plan in accordance with the
provisions of section 1127 of the Bankruptcy Code, if, and to the extent that,
RII and GRI determine that such modifications are necessary or desirable in
order to complete the Restructuring. Under the Bankruptcy Rules, such
modifications may be approved by the Bankruptcy Court at confirmation without
resolicitation of the votes of the members of any class whose treatment is not
adversely affected by such modification. RII and GRI will give holders of the
claims and interests such notice of such modifications as may be required by
applicable law. RII and GRI reserve the right to use
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<PAGE>
Acceptances to confirm any modifications of the Plan to the extent permitted by
law. In addition, RII and GRI reserve the right to use Acceptances received in
the Solicitation to seek confirmation of the Plan under any other circumstances,
including a case commenced by the filing of involuntary petitions against RII
and GRI under section 303 of the Bankruptcy Code. An "involuntary petition"
involves the filing of a bankruptcy case against a debtor by creditors of the
debtor without the debtor's consent.
After the date on which the Plan has been confirmed by the Bankruptcy Court
and the Confirmation Order has been entered by the clerk of the Bankruptcy Court
(the "Confirmation Date"), RII and GRI may institute proceedings seeking
Bankruptcy Court approval to remedy any defects or omissions or reconcile any
inconsistencies in the Plan or the Confirmation Order as may be necessary to
carry out the purposes and intent of the Plan so long as the holders of claims
and interests are not adversely affected and prior notice of such proceeding is
served in accordance with Bankruptcy Rules 2002 and 9014.
CONSENT RIGHTS OF FIDELITY AND TCW
If at any time prior to the Effective Date, the funds and accounts managed
by Fidelity and TCW cease to beneficially own an aggregate of at least 20% of
the aggregate principal amount of outstanding Old Series Notes, all the rights
of consent, approval, acceptance or directions granted to Fidelity and TCW under
the Plan, the Paradise Island Purchase Agreement, the PIRL Standby Distribution
Agreement or any document relating to any of the foregoing shall automatically
cease to exist. Notwithstanding the foregoing, the failure of Fidelity and TCW
beneficially to own an aggregate of at least 20% of the aggregate principal
amount of outstanding Old Series Notes shall not limit or otherwise prejudice in
any manner any rights which Fidelity and TCW may have under the Bankruptcy Code
and the Bankruptcy Rules. In addition, if either the Fidelity-managed funds and
accounts or the TCW-managed funds and accounts cease to beneficially own any Old
Series Notes whatsoever (but the other retains an aggregate of at least 20% of
the aggregate principal amount of outstanding Old Series Notes), then the
obligations of RII and GRI to obtain consent will be extinguished solely as to
Fidelity or TCW, as the case may be, without prejudice to the rights of the
other.
ALTERNATIVES TO CONSUMMATION OF THE PLAN
The theoretical alternatives to consummation of the Plan include (i)
withdrawal of the Plan, (ii) liquidation of RII and GRI under chapter 7 of the
Bankruptcy Code and (iii) an alternative plan of reorganization or liquidation.
WITHDRAWAL OF THE PLAN
Subject to the approval of Fidelity and TCW, so long as the funds and
accounts managed by either of them hold in the aggregate at least 20% of the
outstanding principal amount of the Old Series Notes, RII and GRI reserve the
right not to file the Plan, or, if they file the Plan, to withdraw the Plan at
any time prior to confirmation, in which case the Plan will be deemed to be null
and void. In such event, nothing contained in the Plan will be deemed to
constitute a waiver or release of any claims by or against RII, GRI or any other
person or to prejudice in any manner the rights of RII, GRI or any other person.
Given the maturity of the Old Series Notes on April 15,1994, the Company does
not believe that withdrawal of the Plan, in the absence of an alternative plan
of reorganization, is a practical alternative. See "The Restructuring --
Background -- Operations Subsequent to the Old Plan."
LIQUIDATION UNDER CHAPTER 7
If the Plan is not confirmed or consummated, the chapter 11 cases filed by
RII and GRI may, but not necessarily will, be converted to cases under chapter 7
of the Bankruptcy Code in which a trustee or trustees would be appointed to
liquidate the assets of RII and GRI for distribution to the creditors in
accordance with priorities established by the Bankruptcy Code. Discussion of the
effect that chapter 7 liquidations would have on the recovery of holders of
impaired claims and interests is set forth under the caption "Confirmation of
the Plan -- Best Interests Test". RII and GRI believe that liquidation under
chapter 7 would result in smaller distributions being made to creditors than
those provided for in the Plan because of: (i) additional administrative
expenses involved in the appointment of a trustee and attorneys
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<PAGE>
and other professionals to assist the trustee; (ii) additional expenses and
claims, some of which would be entitled to priority, which would be generated
during the liquidation and from the rejection of leases and other executory
contracts in connection with the cessation of RII's operations; and (iii) the
likelihood that the assets of RII and GRI would have to be sold or otherwise
disposed of expeditiously and at lower prices than otherwise might be the case.
For these same reasons and as a result of the distributional priorities
applicable to chapter 7 liquidation, RII and GRI believe that equity interest
holders would receive no distribution under a chapter 7 liquidation.
ALTERNATIVE PLAN OF REORGANIZATION
If RII and GRI commence their chapter 11 cases, but the Plan is not
confirmed, RII, GRI or any other party in interest could attempt to formulate a
different plan. Such a plan might involve either reorganization and continuation
of RII's and GRI's business or an orderly liquidation of their assets.
In connection with the formulation and development of the Plan, RII and GRI
and their financial advisers have explored various alternative plan structures.
RII and GRI believe the Plan enables creditors and equity interest holders,
including both the holders of Old Series Notes and of RII Common Stock, to
realize greater value than would be realized under the alternatives which RII
and GRI believe could be consensually implemented. On the other hand, an
alternative reorganization plan could be formulated which would attempt to
eliminate entirely the interests of equity interest holders. RII and GRI believe
that this form of alternative plan would be vigorously contested by equity
interest holders. The expense and delay associated with this dispute, coupled
with its potentially adverse affect on the operations of the Company and the
morale of its employees, could substantially impair reorganization value. If
such an alternative plan were confirmed, however, recoveries to holders of Old
Series Notes might, but not necessarily would, be greater than those projected
under the Plan and no recovery would be available to holders of RII Common
Stock.
In a liquidation under chapter 11, RII's and GRI's assets would be sold in
an orderly fashion over a more extended period of time than in a liquidation
under chapter 7, probably resulting in somewhat greater recoveries and
distributions. Further, if a trustee were not appointed (which generally is the
case under chapter 11), the expenses for professional fees most likely would be
lower than in a chapter 7 case. Although preferable to a chapter 7 liquidation,
RII and GRI believe that a liquidation under chapter 11 would not realize the
full going-concern value of RII's and GRI's assets and, as it is likely to be a
more protracted proceeding than the chapter 11 case in which confirmation of the
Plan would be sought as described herein, would involve greater administrative
expenses. Consequently, RII and GRI believe that a liquidation under chapter 11
is a much less attractive alternative to creditors and equity interest holders
than the Plan because the Plan provides for a greater return to creditors and
equity interest holders than would likely be realized in a chapter 11
liquidation.
MEANS FOR IMPLEMENTATION OF THE PLAN
ISSUANCE OF NEW DEBT SECURITIES AND THE NEW EQUITY SECURITIES
The Company will have authorized and, on the Effective Date, will issue the
New Debt Securities and the New Equity Securities as provided in the Plan. The
New Debt Securities and the New Equity Securities to be issued pursuant to the
Plan have been registered with the Commission pursuant to the Registration
Statement of which this Information Statement/Prospectus is a part, filed by the
Company under the Securities Act. See "Description of New RIHF Mortgage Notes",
"Description of New RIHF Junior Mortgage Notes" and "Description of New Equity
Securities".
CASH DISTRIBUTIONS
Pursuant to the Plan, RII proposes to make certain distributions to
creditors in cash. Distributions of cash are computed by reference to certain
defined terms related to cash. See the definitions of these terms (Available
Cash, Excess Cash, RII Retained Cash, Target Adjusted Cash, Reserved Cash, Plan
Consummation Cash) and the formulas embodied therein to evaluate the cash
distributions under the Plan. For a description of Available Cash, Excess Cash
and RII Retained Cash, see "Description of Excess Cash." For a description of
Target Adjusted Cash, see "Description of Paradise Island
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Purchase Agreement" and "Description of PIRL Standby Distribution Agreement".
For a description of Reserved Cash, see "Description of Net Reserved Cash". For
a description of Plan Consummation Cash, see "Description of Net Plan
Consummation Cash and Plan Expenses".
DISTRIBUTIONS
Distributions of securities and cash under the Plan may be made by RII or
GRI, as the case may be. Alternatively, at the option of RII and GRI, one or
more disbursing agents (a "Disbursing Agent") may be designated and employed by
RII and GRI to make such distributions. With respect to distributions to holders
of Old Series Notes (and the related GRI Guaranty), a Disbursing Agent, which
may be the Old Series Note Trustee, may be designated for such distributions. It
is not expected that distributions to holders of Old Series Notes will be made
by RII or GRI. All distributions to be made by a Disbursing Agent other than RII
and GRI shall be made pursuant to a disbursing agreement approved by the
Bankruptcy Court. Any such disbursing agreement relative to any distribution to
a class of claims will be approved by the Bankruptcy Court and will provide for
an appropriate reserve to be maintained by the Disbursing Agent relative to
Disputed Claims as of the Distribution Date. No reserve will be required when
RII or GRI act as the Disbursing Agent.
DISTRIBUTION DATE
The Distribution Date for any claim that is an Allowed Claim on the
Effective Date will be the Effective Date or as soon thereafter as practicable,
but in no event later than 20 days after the Effective Date. For any claim that
is a Disputed Claim on the Effective Date, the Distribution Date will be the
date as soon as practicable, but in no event later than 30 days, after the date
upon which such claim becomes an Allowed Claim. Notwithstanding the foregoing,
the Distribution Date with respect to distribution to the Disbursing Agent for
holders of Old Series Notes is as follows: (a) for distribution of the SIHL
Aggregate Cash Purchase Price, the New Debt Securities and the New Equity
Securities, the Effective Date; (b) for payments of Net Reserved Cash, as soon
as practicable after the Effective Date, but in no event later than 90 days
after the Effective Date; (c) for payments of Net Plan Consummation Cash, as
soon as practicable but no later than 90 days after the Effective Date;
provided, however, that if all Plan Expenses have not been paid by the 90th day
after the Effective Date, RII and GRI may continue to hold back for an
additional 60 days the portion of Net Plan Consummation Cash deemed by the
Bankruptcy Court to be necessary to satisfy remaining Plan Expenses, after which
time, the remaining Net Plan Consummation Cash shall be distributed, unless
otherwise ordered by the Bankruptcy Court; (d) for payments of Deferred Cash,
within three business days after receipt by RII of the Litigation Trust
Distributions in immediately available funds; and (e) for payments of Excess
Cash, the Effective Date or as soon thereafter as practicable, but in no event
later than 20 days after the Effective Date. Distributions to holders of Old
Series Notes will be made by the Disbursing Agent only to holders that comply
with the procedures for surrender of Old Series Notes set forth in section
6.11.5 of the Plan.
ADDITIONAL DISTRIBUTION PROVISIONS
DISTRIBUTIONS TO BE MADE TO HOLDERS AS OF THE DISTRIBUTION RECORD DATE. Only
holders of record as of the Distribution Record Date will be entitled to receive
the distributions provided under the Plan. As of the close of business on the
Distribution Record Date, the respective transfer ledgers in respect of the Old
Series Notes will be closed. RII, GRI and any Disbursing Agent will have no
obligation to recognize any transfer of Old Series Notes occurring after the
Distribution Record Date. RII, GRI and any Disbursing Agent shall be entitled
instead to recognize and, for purposes of making distributions under the Plan,
deal only with those holders of record stated on the transfer ledgers maintained
by the registrar for the Old Series Notes as of the close of business on the
Distribution Record Date.
DISTRIBUTION TO HOLDERS OF OLD SERIES NOTES. On the Effective Date, all Old
Series Notes will be settled and compromised in full by the treatment accorded
to such claims in this Plan. Distributions to holders of Old Series Notes shall
be delivered on the Distribution Date to the Disbursing Agent, if any, for the
holders of Old Series Notes, which in turn will deliver the distributions to the
holders of record of the Old Series Notes on the Distribution Record Date in
accordance with the provisions of the Plan,
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the Old Series Note Indenture and the applicable disbursing agreement, if any.
For purposes of any distributions by RII and GRI to holders of Old Series Notes,
the Disbursing Agent, if any, will be deemed to be the sole holder of all such
Old Series Notes.
PROCEDURES FOR DISTRIBUTION TO HOLDERS OF OLD SERIES PUBLIC DEBT CLAIMS. On
the Distribution Date, the Disbursing Agent, if any, for the holders of Old
Series Notes will receive from RII or, in the case of the SIHL Series A Shares
and the SIHL Aggregate Cash Purchase Price, SIHL (i) certificates representing
New RIHF Mortgage Notes, New RIHF Junior Mortgage Notes, SIHL Series A Shares or
PIRL Ordinary Shares, as the case may be, RII Common Stock, RII Class B Common
Stock and (ii) cash. As soon as practicable, the Disbursing Agent, in accordance
with the applicable disbursing agreement and the Plan, shall deliver such cash
and certificates to the holders of Old Series Notes that have validly
surrendered the Old Series Notes held by such holders.
As a condition to receiving distributions provided for by the Plan in
respect of the Old Series Notes, any holder of Old Series Notes shall be
required to surrender such securities, accompanied by duly executed and
completed letters of transmittal, to RII or the Disbursing Agent, as
appropriate. All instruments so surrendered shall be canceled, marked
"Compromised and Settled Only as Provided in the Plan of Reorganization for
Resorts International, Inc. and GGRI, Inc." and delivered to RII. RII or the
Disbursing Agent shall make distributions only to holders of Old Series Notes
that have surrendered such instruments as herein provided. Except as otherwise
provided in the Plan, no distribution shall be made to any holder of Old Series
Notes that has not so surrendered such instruments held by it.
Unless waived by RII or the Disbursing Agent, any holder of a claim based
upon an Old Series Note which has been lost, stolen, mutilated or destroyed
shall, in lieu of surrendering such Old Series Note as provided in this section,
deliver to RII or the Disbursing Agent, as appropriate, (i) satisfactory
evidence of the loss, theft, mutilation or destruction of such instrument and
(ii) such security or indemnity as may be reasonably required by RII and the
Disbursing Agent, if any, to hold RII and the Disbursing Agent harmless from any
damages, liabilities, or costs incurred in treating such entity as a holder of
such Old Series Notes. Thereafter, such entity shall be treated as the holder of
Old Series Notes for all purposes of the Plan and shall, for all purposes under
this Plan, be deemed to have surrendered the instrument representing such Old
Series Notes.
ANY HOLDER OF OLD SERIES NOTES WHO HAS NOT SURRENDERED THE CERTIFICATES
REPRESENTING ITS OLD SERIES NOTES WITHIN TWO YEARS AFTER THE EFFECTIVE DATE
SHALL HAVE ITS CLAIM BASED ON SUCH OLD SERIES NOTES DISALLOWED, SHALL RECEIVE NO
DISTRIBUTIONS ON SUCH CLAIM UNDER THIS PLAN AND SHALL BE FOREVER BARRED FROM
ASSERTING ANY CLAIM THEREON. In such case, the Disbursing Agent, if any, shall
return to RII or, in the case of New RIHF Mortgage Notes and New RIHF Junior
Mortgage Notes, RIHF, and RII or RIHF, as applicable, will retain all
certificates representing New RIHF Mortgage Notes (and any proceeds thereof),
New RIHF Junior Mortgage Notes (and any proceeds thereof), SIHL Series A Shares
or PIRL Ordinary Shares, as the case may be, RII Class B Common Stock, RII
Common Stock and all cash allocable to such non-surrendering holders. All such
certificates representing New RIHF Mortgage Notes, New RIHF Junior Mortgage
Notes, RII Class B Common Stock, and RII Common Stock which are so returned to
RII or, as applicable, RIHF shall be canceled. All cash and certificates
representing SIHL Series A Shares or PIRL Ordinary Shares which are so returned
to RII shall be redistributed as soon as practicable after the end of the 24th
month after the Effective Date to the other holders of Old Series Notes as of
the Distribution Record Date who previously surrendered their Old Series Notes.
DELIVERY OF DISTRIBUTIONS. Subject to Bankruptcy Rule 9010, distributions to
holders of Allowed Claims shall be made at the address of each such holder as
set forth on the schedules filed with the Bankruptcy Court unless superseded by
the address as set forth on the proofs of claim filed by such holders (or at the
last known addresses of such a holder if no proof of claim is filed or if RII
and GRI have been notified in writing of a change of address), or in the case of
holders of Old Series Notes, may be made at the addresses contained in the
records of the registrar, except as provided below. If any holder's distribution
is returned as undeliverable, no further distributions to such holder shall be
made unless and until RII or the Disbursing Agent, if any, is notified of such
holder's then current
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address, at which time all missed distributions shall be made to such holder
without interest. Amounts in respect of undeliverable distributions made through
a disbursing agent shall be returned to such Disbursing Agent making such
distribution until such distributions are claimed. All claims for undeliverable
distributions shall be made on or before the later of the second anniversary of
the Effective Date and the date 90 days after such claim is allowed. After such
date, all unclaimed property shall be returned to RII and GRI or their
successors in accordance with the Plan and the claim of any holder with respect
to such property shall be discharged and forever barred.
FEES AND EXPENSES OF DISBURSING AGENTS
Except as otherwise ordered by the Bankruptcy Court, the amount of any
reasonable fees and expenses incurred by a Disbursing Agent, including without
limitation the Old Series Note Trustee on or after the Confirmation Date
(including without limitation tax related expenses) and any compensation and
expense reimbursement claims (including reasonable fees and expenses of its
agents) made by such Disbursing Agent shall be paid as a Plan Expense by RII in
accordance with the applicable disbursing agreement without further order of the
Bankruptcy Court; provided, however, that the Bankruptcy Court will hear and
determine any disputes in respect of such fees and expenses.
AMENDMENTS TO RII'S CERTIFICATE OF INCORPORATION AND BY-LAWS
Upon the consummation of the Restructuring and pursuant to the Plan, the
Restated Certificate of Incorporation of RII will be amended to provide for: (i)
an increase in the authorized number of shares of RII Common Stock; (ii) the
authorization and issuance of the RII Class B Common Stock; (iii) the
authorization of preferred stock; (iv) the election of two-thirds of the RII
Board of Directors by the holders of RII Common Stock (or, following the
occurrence of the Class B Triggering Event, one-half minus one of the RII Board
of Directors); and (v) the election of one-third of the RII Board of Directors
by the holders of RII Class B Common Stock (or, following the occurrence of the
Class B Triggering Event, a majority of the RII Board of Directors). The form of
the Amended RII Certificate of Incorporation is attached as Appendix C.
Upon consummation of the Restructuring and pursuant to the Plan, the By-laws
of RII will be amended as necessary in connection with the Restructuring. The
form of the Amended RII By-laws is attached as Appendix D.
Pursuant to the Delaware General Corporation Law, the Amended RII
Certificate of Incorporation and the Amended RII By-laws may be adopted upon
confirmation of the Plan without further action by RII's directors or the
holders of RII Common Stock.
INTERIM MANAGEMENT AGREEMENT
If the SIHL Sale is not consummated on the Effective Date, RII, at the
election of PIRL, will enter into the Interim Management Agreement with PIRL to
operate the Paradise Island Business. The Interim Management Agreement would
have an initial term of one year and be renewable on a yearly basis thereafter.
The annual management fee payable to the Company under the Interim Management
Agreement would be 3% of gross revenues of the Paradise Island Business. PIRL
may terminate the Interim Management Agreement for any reason upon 30 days'
prior notice. In the event of such a termination, RII would be entitled to a
termination fee of $1,000,000, in addition to a prorated portion of the unpaid
balance of the annual management fee through the date of termination.
MANAGEMENT AND MANAGEMENT COMPENSATION ARRANGEMENTS
The Plan provides for the executive officers of RII and GRI immediately
before confirmation of the Plan to continue to serve immediately after
confirmation of the Plan in their respective capacities. Upon the Effective
Date, the composition of the Board of Directors of RII and GRI will change. For
a description of the method of selection of the Board of Directors of RII and
other related matters, see "The Restructuring -- Overview of the Restructuring
- -- Post-Restructuring RII Board of Directors". Subject to receipt of any
necessary qualification of directors from the Casino Control Commission, the
initial post-Restructuring Board of Directors of RII will consist of Merv
Griffin, Thomas Gallagher, Jay Green and William Fallon and, as Class B
Directors, Vincent Naimoli and Charles Masson. Prior to confirmation of the
Plan, RII will disclose, in accordance with section 1129(a)(5) of the Bankruptcy
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Code, any additional information regarding (i) the identity of and affiliations
of any individual proposed to serve, after confirmation of the Plan, as a
director, officer or voting trustee of RII, GRI and the other proponents of the
Plan, and (ii) the identity of any insider (as such term is defined in section
101 of the Bankruptcy Code) that will be employed and retained by RII, GRI and
the other proponents of the Plan, and the nature of any compensation for such
insider. All existing compensation arrangements with members of the Company's
management will continue. Existing employment contracts with members of the
Company's management are expected to be renewed in the ordinary course of
business. For certain information regarding the current directors and executive
officers of RII and a description of the employment agreements of certain
insiders and their compensation, see "Management of RII".
1994 STOCK OPTION PLAN: DESCRIPTION AND FEDERAL TAX CONSEQUENCES
DESCRIPTION
GENERAL. In connection with the Plan, RII is proposing to adopt the 1994
Stock Option Plan to enable RII and its subsidiaries to attract, retain and
motivate their directors, officers and key employees by providing for
proprietary interests of such individuals in RII. No 1994 Stock Options will be
granted prior to 20 trading days after the Effective Date.
If sufficient Acceptances are received from the holders of claims entitled
to receive RII Common Stock pursuant to the Plan (holders of Allowed RII Class 2
and GRI Class 2 Claims) and from the holders of RII Class 7 Interests, such
Acceptances will constitute approval of the 1994 Stock Option Plan by such
holders for purposes of compliance with Rule 16b-3 promulgated under the
Exchange Act. The following description of the 1994 Stock Option Plan is
qualified in its entirety by reference to the full text of the 1994 Stock Option
Plan and the terms providing for automatic option grants to directors serving on
the Option Committee, which is contemplated to be in substantially the form
attached as Exhibit C to the Plan. The 1994 Stock Option Plan will be unfunded.
The 1994 Stock Option Plan will be administered by a committee appointed by
the Board of Directors of RII (the "Option Committee".) The Option Committee
will consist solely of "disinterested" directors, as that term is defined for
purposes of satisfying Rule 16b-3 and of "outside directors" as that term is
defined in Section 162(m) of the Tax Code. Subject to the provisions of the 1994
Stock Option Plan, the Option Committee will have full and final authority to
select the participants to whom awards will be granted thereunder, to grant such
awards, and to determine the terms and conditions of such awards (including,
subject to certain limitations, exercise price) and the number of shares to be
issued pursuant thereto.
Key employees, officers and directors of RII or any of its subsidiaries who
do not serve on the Option Committee ("Eligible Participants") are eligible to
be considered for the grant of awards under the 1994 Stock Option Plan. The
maximum number of shares of RII Common Stock that may be issued pursuant to
awards granted under the 1994 Stock Option Plan will be no more than 5% of the
fully diluted shares of RII Common Stock to be issued and outstanding as
contemplated by the Plan. For the market price of RII Common Stock, see "Market
Prices of RII Common Stock".
AWARDS. The proposed terms of the 1994 Stock Option Plan authorize the
Option Committee to grant to Eligible Participants options to purchase RII
Common Stock at not less than 100% of the fair market value of the stock at the
date of the grant of the options. The fair market value of the stock as of a
date shall be deemed to be the closing price of RII Common Stock on the date of
grant of such option. The fair market value of RII Common Stock as of the
Effective Date is at this point indeterminable.
Any stock option granted to Eligible Participants under the 1994 Stock
Option Plan may be a tax benefited incentive stock option (an "Incentive
Option") (in which case it may be granted only to employees and certain other
restrictions will apply), or it may be a nonqualified stock option that is not
tax benefited (in which case it may be issued to both employees, officers and
directors, and few, if any, legal restrictions will apply).
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The proposed terms of the 1994 Stock Option Plan provide that all options
immediately become fully exercisable upon a "change in control," as defined in
the 1994 Stock Option Plan. In the event of a "change in control" or a merger in
which RII is not the surviving entity, any unexercised options shall be replaced
by the surviving corporation. The 1994 Stock Option Plan deems a "change in
control" to have occurred if any corporation, person or group acquires a
majority of RII's Common Stock or a majority of RII's outstanding voting
securities, or if within a two-year period a majority of the RII Board of
Directors is replaced by persons who were not directors at the beginning of such
period and who were not nominated or ratified by at least two-thirds of the
directors who were directors at the beginning of such two-year period. For
purposes of the 1994 Stock Option Plan, the occurrence of the Class B Triggering
Event will not constitute such a "change of control".
No awards will be granted under the 1994 Stock Option Plan prior to the
Effective Date. Subject to the express requirements under the 1994 Stock Option
Plan, the terms of any and all awards granted to Eligible Participants will be
determined by, and subject to the conditions imposed by the Option Committee,
including provisions as to the exercisability, expiration, termination or
forfeiture of options.
Under the 1994 Stock Option Plan, on the date that a director first
commences service on the Option Committee (which in the case of the initial
members of the Committee shall be deemed to be at least 20 trading days after
the Effective Date), such director automatically will be granted an option to
purchase 10,000 shares of RII Common Stock, half of which will be exercisable
upon grant and half of which will be exercisable upon the first anniversary of
the grant. During the term of the 1994 Stock Option Plan on the third business
day following the date of any annual meeting of RII's security holders at which
directors are elected, each person who is on such day serving on the Option
Committee or has been named to serve on the Option Committee will automatically
be granted an option to purchase 5,000 shares of RII Common Stock, which option
will be fully exercisable upon grant. Options granted under the 1994 Stock
Option Plan to directors serving on the Option Committee expire one year after
an optionee's death or cessation of service as a director. Notwithstanding the
foregoing, in all cases options granted to directors serving on the Option
Committee expire ten years after the date of grant. The exercise price of such
option shall equal 100% of the fair market value of the underlying shares of RII
Common Stock as of the date such options are granted and such options shall vest
in three equal annual installments.
Options granted under the 1994 Stock Option Plan to employees or officers of
RII or its subsidiaries expire one year after an optionee's death, one year
after the optionee's termination of employment because of disability,
immediately upon termination of the optionee's employment for "good cause," as
defined in the 1994 Stock Option Plan, and three months after an optionee's
employment terminates for any other reason. Notwithstanding the foregoing, in
all cases options expire ten years after the date of grant, or at such earlier
time as the Option Committee may provide.
An award under the 1994 Stock Option Plan may permit the recipient to pay
all or part of the purchase price of the shares issuable pursuant thereto, or to
pay all or part of such recipient's tax withholding obligation with respect to
such issuance, by delivering a sufficient amount of shares of stock of RII or by
having such number of shares withheld from the amount otherwise issuable upon
exercise of the option (the fair market value thereof being calculated as of the
date next preceding the date of exercise) or otherwise as the Option Committee
may determine according to the terms and conditions of the 1994 Stock Option
Plan.
The 1994 Stock Option Plan authorizes the Option Committee to provide for
arrangements under which brokers that are compensated by RII provide temporary
financing to assist an optionee in paying the exercise price of an option, such
financing to be paid off by the sale of shares issuable upon exercise of the
option.
No option granted under the 1994 Stock Option Plan may be transferred other
than by will or the laws of descent and distribution or, except as to Incentive
Options, pursuant to a qualified domestic relations order (as defined in the Tax
Code) and the award may be exercised during the recipient's lifetime only by the
recipient or by his or her guardian or legal representative.
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The exercise price for such awards will be equal to (i) the fair market
value per share (as determined according to the 1994 Stock Option Plan) of RII
Common Stock at the time the options are awarded, or (ii) in the event that such
award is an Incentive Option granted to a person who, at the time such option is
granted, owns shares of RII, or any subsidiary corporation thereof, which
possess more than 10% of the total combined voting power of all classes of
shares of capital stock of RII or of any subsidiary corporation of RII, 110% of
the fair market value per share (as determined according to the 1994 Stock
Option Plan) of RII Common Stock at the time such Incentive Option is awarded.
Consequently, the value of any such awards is not yet determinable. Also, as
noted below, given the vesting requirements of awards under the 1994 Stock
Option Plan and the restrictions on transfer of any awards, the value of awards
under the 1994 Stock Option Plan is not currently determinable, and would be
speculative at best. For a description of awards under RII's 1990 Stock Option
Plan, see "Management of RII -- Executive Compensation".
AMENDMENT AND TERMINATION. Under the proposed terms of the 1994 Stock
Option Plan, the RII Board of Directors will be able to alter, amend, suspend or
terminate the 1994 Stock Option Plan, provided that no such action shall alter
or impair any option granted to the optionee pursuant to the 1994 Stock Option
Plan without the optionee's consent. Except as provided in the 1994 Stock Option
Plan, no amendment by the RII Board of Directors, unless taken with the approval
of the shareholders of RII, may:
(1) materially increase the benefits accruing to participants under
the 1994 Stock Option Plan;
(2) materially increase the number of securities which may be issued
under the 1994 Stock Option Plan (except for permitted adjustments
pursuant to a "change of control" and certain dilutive events);
(3) materially modify the requirements as to eligibility for
participation in the 1994 Stock Option Plan; or
(4) decrease the minimum exercise price of an Incentive Option.
VESTING OF OPTIONS. Pursuant to the 1994 Stock Option Plan, options granted
to eligible participants shall vest on the dates and in the amounts set forth in
the particular stock option agreement between RII and the optionee.
In the event of the death or termination due to disability or retirement of
any employee holder of option awards, all options held by such employee on the
date of such death or termination shall vest in full and become immediately
exercisable.
FEDERAL INCOME TAX TREATMENT
The following is a brief description of the Federal income tax treatment
which generally will apply to benefits or awards ("Awards") made under the 1994
Stock Option Plan, based on Federal income tax laws in effect on the date
hereof. The exact Federal income tax treatment of Awards will depend on the
specific nature of any such Award. BECAUSE THE FOLLOWING PROVIDES ONLY A BRIEF
SUMMARY OF THE GENERAL FEDERAL INCOME TAX RULES, INDIVIDUALS SHOULD NOT RELY
THEREON FOR INDIVIDUAL TAX ADVICE, AS EACH TAXPAYER SITUATION AND THE
CONSEQUENCES OF ANY PARTICULAR TRANSACTION WILL VARY DEPENDING UPON THE SPECIFIC
FACTS AND CIRCUMSTANCES INVOLVED. RATHER, EACH TAXPAYER IS ADVISED TO CONSULT
WITH HIS OR HER OWN TAX ADVISER FOR PARTICULAR FEDERAL, AS WELL AS STATE AND
LOCAL INCOME AND ANY OTHER TAX ADVICE.
INCENTIVE STOCK OPTIONS. Pursuant to the 1994 Stock Option Plan,
participants may be granted options which are intended to qualify as Incentive
Options under the provisions of section 422 of the Tax Code. Generally, the
optionee is not taxed and RII is not entitled to a deduction on the grant or the
exercise of an Incentive Option. However, if the optionee disposes of the shares
acquired upon the exercise of an Incentive Option at any time within (i) one
year after the date the shares are transferred to the optionee pursuant to the
exercise of such Incentive Option or (ii) two years after the date of
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grant of such Incentive Option (a "disqualifying disposition"), the optionee
will recognize ordinary income in an amount equal to the excess, if any, of the
lesser of the amount realized on the date of such disposition or the fair market
value of RII's stock on the date of exercise, over the exercise price of such
Incentive Option (with any remaining gain being taxed as a capital gain). In
such an event, RII generally will be entitled to a deduction in an amount equal
to the amount of ordinary income recognized by such optionee. If the optionee
does not dispose of the option shares within the above described time limits,
there will be no ordinary income recognized upon any subsequent sale or other
disposition of the shares, but rather capital gain or loss will be recognized in
an amount equal to the difference between the amount realized on the sale or
disposition and the exercise price. RII will not be entitled to any deduction in
this event. Finally, exercise of an Incentive Option may result in alternative
minimum tax liability for the optionee. Any excess of the fair market value of
the stock on the date the Incentive Option is exercised over the option exercise
price will be included in the calculation of the optionee's alternative minimum
taxable income, which may subject the optionee to the alternative minimum tax at
a rate of up to 28%. The portion of any such alternative minimum tax
attributable to the exercise of an incentive stock option can be credited
against the optionee's regular tax liability in later years to the extent that
in any such year the optionee's regular tax liability exceeds the alternative
minimum tax.
NONQUALIFIED STOCK OPTIONS. The grant of an option which does not qualify
for treatment as an Incentive Option generally is not a taxable event for the
optionee. However, upon exercise, the optionee generally will recognize ordinary
income in an amount equal to the excess of the fair market value of the stock
acquired upon exercise (determined as of the date of exercise) over the exercise
price of such option, and RII will generally be entitled to a deduction equal to
such amount. Upon the later disposition of the option shares acquired upon
exercise, appreciation (or depreciation) after the date of exercise will be
treated as capital gain (or loss) to the optionee and will have no tax effect as
to RII.
SPECIAL RULES FOR SECTION 16 INSIDERS. If a nonqualified option has been
held for less than six months at the time of exercise, and the exercise price of
the option is equal to or less than the fair market value of the acquired shares
at the time of exercise, an officer, director or more than 10% shareholder of
RII subject to the provisions of Section 16 of the Exchange Act (an "Insider")
will not be taxed until the earlier of (i) the expiration of the six-month
holding period beginning on the date of grant of the nonqualified option, or
(ii) the sale of the acquired shares, at which time the Insider will recognize
ordinary income in an amount equal to the excess, if any, of the then fair
market value of the acquired shares over the exercise price of the nonqualified
option. Alternatively, pursuant to Section 83(b) of the Tax Code, the Insider
may elect within 30 days after exercise of the nonqualified option to recognize
ordinary income equal to the excess, if any, of the fair market value of the RII
Common Stock on the date of exercise over the exercise price. The capital gains
holding period for the acquired shares shall commence immediately following the
date on which the optionee is required to recognize ordinary income, and any
appreciation (or depreciation) realized following such date, will be taxed as a
capital gain (or loss).
MISCELLANEOUS. Special rules will apply in cases where the participant pays
the exercise or purchase price of awards or applicable withholding tax
obligations under the 1994 Stock Option Plan by delivering previously owned RII
Common Stock or by reducing the amount of shares or other property otherwise
issuable pursuant to the award. The surrender in the circumstances below or
withholding of such stock will be a taxable event, resulting in the recognition
of gain or loss. Such gain will be taxable as ordinary income if the stock
surrendered or withheld either (i) was acquired upon exercise of an Incentive
Option and the surrender takes place within one year after the exercise or two
years after the date of grant of the Incentive Option, or (ii) is both subject
to a substantial risk of forfeiture and is not freely transferable for purposes
of Section 83 of the Tax Code if the market value of such stock is in excess of
the amount paid for the stock and no election has been made under Section 83(b)
of the Tax Code. In addition, shares withheld on the exercise of a nonqualified
option in order to pay tax withholding should result in tax on the withheld
shares equal to the difference between the fair market value of the shares (on
the date of exercise) and the exercise price.
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Generally, RII will receive a deduction equal to, and will be required to
withhold applicable taxes with respect to, any ordinary income recognized by a
participant in connection with awards made under the 1994 Stock Option Plan.
The 1994 Stock Option Plan is not a "qualified plan" within the meaning of
Section 401(a) of the Tax Code and is not subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
Grants of options under the 1994 Stock Option Plan are intended to qualify
as "performance-based compensation" that is excluded from the limitation on the
deductibility of compensation paid to certain executive officers under Section
162(m) of the Tax Code.
Upon the accelerated exercisability of an option in connection with a change
in ownership or control of RII, depending upon the individual circumstances of
the recipient participant, certain amounts with respect to such awards may
constitute "excess parachute payments" under the golden parachute provisions of
the Tax Code. Pursuant to these provisions a participant will be subject to a
20% excise tax on any "excess parachute payment" and RII will be denied any
deduction with respect to such excess parachute payment.
GRIFFIN COMPENSATION ARRANGEMENTS
In September 1990, Merv Griffin, the Griffin Group and RII entered into the
Old Griffin Services Agreement. Pursuant to the Old Griffin Services Agreement,
the 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, the 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 the Griffin Group and the Company has not paid any
compensation to the 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.
Pursuant to the New Griffin Services Agreement, which replaced the Old
Griffin Services Agreement as of its expiration, the Griffin Group granted RII
and RIH a non-exclusive license to use Merv Griffin's name and likeness for the
purpose of advertising and promoting the Resorts Casino Hotel and the Paradise
Island Business. Subject to the performance of their obligations, the Griffin
Group also granted RII and RIH the non-exclusive services of Merv Griffin, as
Chairman of the Board of Directors of RII and in other capacities, including
without limitation spokesperson for RII and RIH. The New Griffin Services
Agreement has a basic term of four years. Under certain circumstances however,
the New Griffin Services Agreement could remain in force for up to an additional
year.
The Griffin Group was entitled to receive from RII or RIH $4,100,000 upon
execution of the New Griffin Services Agreement as compensation for the first
two years of services under the New Griffin Services Agreement. The Griffin
Group was entitled to compensation in the amounts of $2,205,000 and $2,310,000
for the third and fourth years of such services, respectively. Additional
prorated compensation also may be paid to the Griffin Group if the New Griffin
Services Agreement continues in force longer than four years. RIH made the
$4,100,000 payment for the first two years under the New Griffin Services
Agreement in April 1993. Simultaneously, Merv Griffin made a partial prepayment
of the Griffin Note in an equal amount to RII thereby reducing the principal
amount of the Griffin Note to $7,523,333. RII then canceled the Griffin Note in
exchange for the Griffin Group Note in the principal amount of $7,523,333. The
Griffin Group Note is payable on demand and bears interest at the rate of 3% per
year. The bank letter of credit securing the Griffin Note was released by RII.
Merv Griffin has personally guaranteed payment of the Griffin Group Note. Under
the New Griffin Services Agreement, RII and RIH have the right, at their option,
to elect to satisfy any compensation obligation to the Griffin Group by reducing
the outstanding amount of the Griffin Group Note.
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On September 17, 1993, RII made the $2,205,000 payment for the third year of
the New Griffin Services Agreement by reducing the principal amount of the
Griffin Group Note in an equal amount. On or prior to the Effective Date, RII
will pay $2,310,000 to the Griffin Group for the fourth year of the New Griffin
Services Agreement also by reducing the principal amount of the Griffin Group
Note in an equal amount. If for any reason the Griffin Group fails to fulfill
its obligations under the New Griffin Services Agreement, it will be obligated
to reimburse the Company for all amounts paid with respect to periods for which
such obligations are not fulfilled.
After payment of the $2,310,000 referenced above, but no later than the
Effective Date, the Griffin Group will pay RII the balance of the Griffin Group
Note (approximately $3,000,000) plus accrued interest. RII will distribute the
proceeds of such payment to the holders of the Old Series Notes as part of
Excess Cash. Payment in full of outstanding amounts under the Griffin Group Note
is a condition to consummation of the Plan.
The New Griffin Services Agreement also provides that, on the Effective
Date, the Griffin Group will be granted the Griffin Warrants. Upon issuance, the
Griffin Warrants will entitle the Griffin Group to purchase approximately 10% of
the RII Common Stock on a fully diluted basis at a purchase price per share
equal to the lesser of $1.875 and the average closing trading price for the 20
trading days following the Effective Date. Once issued, the Griffin Group may
exercise the Griffin Warrants, subject to applicable securities laws, at any
time prior to the fourth anniversary of the Effective Date. Finally, RII and RIH
also will provide the Griffin Group and Merv Griffin with certain
indemnification and insurance coverage and reimburse them for certain expenses
incurred in connection with the performance under the New Griffin Services
Agreement. Pursuant to the Restructuring, the New Griffin Services Agreement
will remain in place. See "Description of Griffin Warrants".
TRANSACTIONS RELATIVE TO SIHL SALE OR PIRL SPIN-OFF. On the Effective Date,
the following will occur (amounts reflected are balances as of September 30,
1993; actual amounts will be balances as of the Effective Date):
(1) GRI will assume the obligation of RIB to repay the intercompany debt
owed by RIB to RIH ($50,000,000) plus accrued interest thereon and the
intercompany debt owed by RIB to RII ($11,192,000). As a result of such
assumptions, RIB will have no obligations to repay any inter-company debt.
(2) If the SIHL Sale is consummated (or, with the consent of Fidelity
and TCW (so long as the funds and accounts managed by them hold in the
aggregate at least 20% of the outstanding Old Series Notes) if the PIRL
Spin-Off is effected), GRI will distribute to its immediate parent, RII, all
the outstanding capital stock of RIB that is owned by GRI. RIB is the
holding company for the Paradise Island assets located in The Bahamas, which
are held in the following corporations: BDL, IHC, PEL, PIB, PIL, PBI and
PSS. As a result of such distribution, RIB will be a first-tier subsidiary
of RII. Under certain circumstances set forth in the Paradise Island
Purchase Agreement (or, if the PIRL Spin-Off is effected, the PIRL Standby
Distribution Agreement), RIB will transfer the BDL Shares to a U.S. Paradise
Island Subsidiary prior to the SIHL Closing Date (or if the PIRL Spin-Off is
effected, prior to the closing of the PIRL Spin-Off). If such a transfer
occurs, such U.S. Paradise Island Subsidiary will grant the SIHL BDL Option
(or if the PIRL Spin-Off is effected, the PIRL BDL Option) to RIB.
(3) Either: (A) pursuant to the Paradise Island Purchase Agreement, in
exchange for 2,000,000 SIHL Series A Shares, representing 40% of the capital
stock of SIHL to be outstanding after the SIHL sale, and the SIHL Aggregate
Cash Purchase Price, SIHL will purchase (i) from RII all the capital stock
of RIB and (ii) directly or through subsidiaries the RII Real Estate Assets
and substantially all the assets of the U.S. Paradise Island Subsidiaries
and will assume substantially all the non-intercompany liabilities relating
to such assets; or (B) if the SIHL Sale is not consummated on the Effective
Date, (i) RII will contribute all the capital stock of RIB to the capital of
PIRL, which was formed as a first-tier subsidiary of RII to effect the PIRL
Spin-Off, in exchange for PIRL Ordinary Shares (which, when added to the
shares of PIRL Ordinary Shares owned by RII, shall equal all the issued and
outstanding PIRL Ordinary Shares and which are to
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be distributed to the holders of the Old Series Notes on the Distribution
Date) and (ii) subsidiaries of PIRL will acquire the RII Real Estate Assets
and substantially all the assets of the U.S. Paradise Island Subsidiaries
and will assume substantially all the non-intercompany liabilities relating
to such assets.
For a chart summarizing the ownership structure of RII, including RIB and
its subsidiaries and the U.S. Paradise Island Subsidiaries, as of the date
hereof and after giving effect to the Restructuring, see "Summary -- Pre-and
Post-Restructuring Ownership Structures".
ISSUANCE OF PROMISSORY NOTES BY RIH TO RIHF. In order to effect the
issuance by RIH of the RIH Promissory Note and the RIH Junior Promissory Note
the following will occur on the Effective Date (amounts reflected are balances
as of September 30, 1993; actual amounts will be balances as of the Effective
Date):
(1) RIH will distribute the RIH Promissory Note and the RIH Junior
Promissory Note, secured by the RIH Mortgage and the RIH Junior Mortgage,
respectively, to RII in repayment of the intercompany debt owed to RII by
RIH ($51,325,000) and as a distribution to its shareholder.
(2) RII will exchange the RIH Promissory Note and the RIH Junior
Promissory Note, together with the related RIH Mortgage and the RIH Junior
Mortgage, for New RIHF Mortgage Notes and the New RIHF Junior Mortgage Notes
to be issued by RIHF.
(3) The holders of Old Series Notes will receive the New RIHF Mortgage
Notes and the New RIHF Junior Mortgage Notes and RIHF will assign (A) to the
New RIHF Mortgage Note Trustee the RIH Promissory Note, the RIH Mortgage
together with an assignment of leases and rents and an assignment of
operating assets securing the RIH Promissory Note and (B) to the New RIHF
Junior Mortgage Note Trustee the RIH Junior Promissory Note, the RIH Junior
Mortgage together with an assignment of leases and rents and an assignment
of operating assets securing the RIH Junior Promissory Note.
(4) RII will contribute to GRI the intercompany obligation of GRI to RII
($51,388,000).
(5) Upon termination and release of the RIH Pledge Agreement on the
Effective Date, GRI will exchange with RIH the $325,000,000 of non-interest
bearing RIH Notes for an amount of stock representing on a fully diluted
basis 99.99% of the issued and outstanding common stock of RIH.
(6) On the Effective Date, after the transactions described above have
occurred, RII will contribute to the capital of GRI the remaining .01% of
the issued and outstanding stock of RIH held by RII on the date hereof. RIH
will become a wholly owned first-tier subsidiary of GRI and an indirect
subsidiary of RII. RIH will then distribute to GRI, as a return of surplus,
the intercompany debt owed by GRI to RIH ($50,000,000) plus accrued interest
thereon.
SUBSIDIARY TRANSACTIONS.
TGC Holdings, NPO and ESS will remain in place and will be unaffected by the
Plan.
NON-OPERATING REAL PROPERTY. The Company will continue its attempts to sell
all the Non-Operating Real Property. However, there can be no assurance that any
such sale will occur or, if such a sale does occur, as to the amount of proceeds
therefrom. The Company does not expect to sell any portion of the Non-Operating
Real Property prior to the consummation of the Plan. If any such sale were to
occur prior to the consummation of the Plan, the proceeds would be distributed
to holders of the Old Series Notes as a component of Excess Cash. The
Non-Operating Real Property will not constitute collateral securing any of the
New Debt Securities or the New RIHF Senior Facility Notes.
DISPUTED CLAIMS OR INTERESTS
RII and GRI, as well as any other party in interest, may object to the
allowance of claims or interests filed with the Bankruptcy Court. Objections
will be litigated to a final order in which all rights of appeal have been
exhausted (a "Final Order"). However, RII and GRI may compromise and
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settle any objections to claims or interests, subject to the approval of the
Bankruptcy Court, and may seek Bankruptcy Court estimation of disputed claims or
interests pursuant to section 502(c) of the Bankruptcy Code.
SURRENDER AND CANCELLATION OF INSTRUMENTS
As a condition to receiving any distribution pursuant to the Plan, each
holder of an Old Series Note (and the related GRI Guaranty) evidencing an RII
Class 2 Claim and a GRI Class 2 Claim must surrender such Old Series Note (and
the related GRI Guaranty) to RII or the Disbursing Agent, if any (or establish
the unavailability thereof and provide an indemnity arrangement to the
satisfaction of RII or the Disbursing Agent, as the case may be), in all cases,
in proper form for transfer. Any holder of such an RII Class 2 Claim and a GRI
Class 2 Claim that fails to surrender such Old Series Note (and the related GRI
Guaranty) within two years from the Effective Date will be deemed to have
forfeited all rights, claims and interests and will not participate in any
distributions under the Plan.
On the Effective Date (a) all such Old Series Notes (and the related GRI
Guaranty endorsed thereon) will be canceled, and (b) RII's and GRI's obligations
under the Old Series Note Indenture, the Old Security Documents and related
instruments and agreements will be terminated, canceled and discharged.
FRACTIONAL INTERESTS AND ODD-LOT HOLDINGS
Pursuant to the Plan, fractional shares of the New Equity Securities that
would be distributable on the basis of the provisions of the Plan will not be
issued or distributed. The New RIHF Mortgage Notes and the New RIHF Junior
Mortgage Notes will be issued only in denominations of $1,000 and integral
multiples thereof. As soon as practicable after the Effective Date, the
Disbursing Agent for the holders of the Old Series Notes will aggregate and sell
all fractional amounts of the New Equity Securities and the New Debt Securities
at then prevailing prices and distribute the net proceeds to the security
holders entitled thereto. After the initial distribution to holders of Old
Series Notes and other creditors under the Plan, no distribution of less than
$25 in cash or less than five shares of RII Common Stock shall be made to any
holder of an Allowed Claim. Such undistributed amount will be retained by RII
and in the case of undistributed RII Common Stock held as treasury shares.
MANNER OF PAYMENTS UNDER THE PLAN
At the option of RII, any cash payment to be made by RII pursuant to the
Plan may be made by a check or wire transfer or as otherwise required or
provided in applicable agreements, except that payments made to foreign trade
creditors holding unsecured claims or to foreign governmental units holding
Priority Tax Claims will be in such funds and by such means as are customary or
as may be necessary in a particular foreign jurisdiction. Checks issued by RII
in respect of Allowed Claims shall be null and void if not negotiated within six
months after the date of issuance thereof. Any amounts paid to a Disbursing
Agent in respect of such a check shall be promptly returned to RII by a
Disbursing Agent. Requests for reissuance of any check shall be made directly to
RII by the holder of the Allowed Claim with respect to which such check
originally was issued. Any claim in respect of such a voided check shall be made
on or before the later of the second anniversary of the Effective Date and 90
days after the six month period following the date of issuance of such check.
After such date, all claims in respect of void checks shall be discharged and
forever barred.
EFFECTS OF PLAN CONFIRMATION
VESTING OF ASSETS
Except as provided in the Plan, on the Effective Date, all assets of RII's
bankruptcy estate and GRI's bankruptcy estate shall vest in RII and GRI,
respectively, as reorganized pursuant to the Plan, free and clear of all liens,
claims, encumbrances and interests, except as provided by the Plan. The Plan
contemplates that the rights in collateral of RII Class 3 and RII Class 4 claims
existing at the time RII's and GRI's chapter 11 cases are commenced (as modified
or supplemented by the order regarding the use of Cash Collateral) will be
preserved.
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DISCHARGE OF RII AND GRI
Upon confirmation of the Plan, the Plan's provisions shall (i) bind all
holders of claims and interests, whether or not they accept the Plan and (ii)
except as otherwise provided in the Plan, discharge RII and GRI from any claim
and any "debt" (as such term is defined in section 101(12) of the Bankruptcy
Code) incurred before the Confirmation Date, and RII's and GRI's liability in
respect thereof shall be extinguished completely, including without limitation
any liability of a kind specified in section 502(g) of the Bankruptcy Code. In
addition, except as otherwise provided in the Plan, confirmation of the Plan
pursuant to the Confirmation Order acts as a discharge, effective as of the
Confirmation Date, as to each creditor or equity interest holder in respect of
any direct or indirect right or claim or interest such creditor or equity
interest holder had or may have had against or in respect of RII and GRI that
arose at any time prior to the Confirmation Date, including without limitation
all principal and interest, whether accrued before, on or after the Petition
Date commencing RII's and GRI's chapter 11 cases.
RETENTION OF JURISDICTION
Notwithstanding entry of the Confirmation Order or the occurrence of the
Effective Date, the Plan provides for the retention of jurisdiction by the
Bankruptcy Court over RII's and GRI's chapter 11 cases: (a) to determine the
Allowed Amount of disputed claims; (b) to determine requests for payment of
claims entitled to priority under section 507(a)(1) of the Bankruptcy Code,
including compensation of and reimbursement of expenses of parties entitled
thereto; (c) to resolve controversies and disputes regarding interpretation and
implementation of the Plan; (d) to enter orders in aid of the Plan, including
without limitation appropriate orders (which may include contempt or other
sanctions) to protect RII or GRI; (e) to modify the Plan or remedy any apparent
defect or omission in the Plan; (f) to determine any and all applications,
claims, adversary proceedings and contested or litigated matters pending on the
Confirmation Date or as timely filed pursuant to the Bankruptcy Code or an order
of the Bankruptcy Court; (g) to allow, disallow, estimate, liquidate or
determine any claim and to enter or enforce any order requiring the filing of
any such claim before a particular date; (h) to determine any and all pending
applications for the rejection or disaffirmance of executory contracts or
leases, or for the assignment of assumed executory contracts and leases, and to
hear, determine, and, if appropriate, liquidate, any and all claims arising
therefrom; (i) to hear and determine any avoidance or recovery action not waived
or released pursuant to the Plan and any action for determination of RII's and
GRI's tax liability pursuant to section 505 of the Bankruptcy Code; (j) to enter
a final decree closing the chapter 11 cases; and (k) to determine such other
matters that may arise in connection with the chapter 11 cases, the Plan or the
Confirmation Order.
TERM OF INJUNCTIONS OR STAYS
Unless otherwise provided in the Plan, all injunctions or stays provided for
in RII's and GRI's chapter 11 cases pursuant to section 105 or 362 of the
Bankruptcy Code or otherwise and in effect on the Confirmation Date shall remain
in full force and effect until the Effective Date. The Confirmation Order shall
provide that the distributions and transfers of property pursuant to the terms
of the Plan are made free and clear of all claims (except as otherwise expressly
provided in the Plan), and that upon the confirmation of the Plan, except as
otherwise expressly provided in the Plan, all holders of claims will be
permanently enjoined from and restrained against commencing or continuing any
suit, action or proceeding or asserting against RII, GRI or their assets any
claim, interest or cause of action based upon any claim or interest, which is
based upon any act or omission, transaction or other activity of any kind or
nature that occurred before the Confirmation Date.
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THE SOLICITATION
GENERAL
RII and GRI, upon the terms and subject to the conditions set forth herein
and in the voting instructions set forth in the Ballots and Master Ballots, are
soliciting an Acceptance of the Plan from each entity that was a beneficial
owner on the Voting Record Date of (a) any Old Series Notes (and the beneficiary
of the related GRI Guaranty endorsed therein), (b) any RII Common Stock, (c) the
GRI Common Stock, (d) the RII Intercompany Claim and (e) 1990 Stock Options. The
term "beneficial owner" includes any person who has or shares, directly or
indirectly, through any contract, arrangement, understanding, relationship, or
otherwise, the power to vote or direct the voting of a security, and/or dispose
or direct the disposition of a security. A form of Ballot and, where
appropriate, a form of Master Ballot, to be used for voting to accept or reject
the Plan and, in the case of holders of Old Series Notes, for indicating
consents to the termination and release of the Old Security Documents, together
with a pre-addressed postage-paid envelope, has been provided with this
Information Statement/ Prospectus.
The terms of the Solicitation are for the sole benefit of RII and GRI and
may be asserted by RII and GRI regardless of the circumstances or may be waived
by RII and GRI, in whole or in part, at any time and from time to time, in their
sole discretion (subject to the approval of Fidelity and TCW, so long as the
funds and accounts managed by them hold in the aggregate at least 20% of the
outstanding Old Series Notes). Any determination by RII and GRI concerning the
terms of the Solicitation will be final and binding upon all parties, subject
only to approval of the Bankruptcy Court when required.
PERSONS ENTITLED TO VOTE; VOTING RECORD DATE
The following classes of claims and interests are impaired under the Plan
and all holders of Allowed Claims or Interests in such classes as of the Voting
Record Date are entitled to vote to accept or reject the Plan:
<TABLE>
<S> <C> <C>
RII Class 2 -- Claims of holders of Old Series Notes (use the gray Ballot)
RII Class 7 -- Interests of holders of RII Common Stock (use the blue Ballot)
RII Class 8 -- Interests of holders of 1990 Stock Options (use the green Ballot)
GRI Class 2 -- Claims of holders of GRI Guaranty (use the gray Ballot)
GRI Class 4 -- Claim of RII, as the holder of the RII Intercompany Claim
GRI Class 5 -- Interest of RII, as the holder of all GRI Common Stock
</TABLE>
Any holder of claims or interests in more than one class is required to vote
separately with respect to each class in which such holder has claims or
interests. Please use a separate Ballot of the appropriate form to vote each
such class or interest. Although RII Class 2 Claims and GRI Class 2 Claims are
to be voted on the same Ballot, holders of such claims must use a separate
Ballot for each series of Old Series Notes which they hold and for each account
in which Old Series Notes are held. In addition, banks and brokerage firms must
submit separate Master Ballots for each series of Old Series Notes for which
they have beneficial owners.
The Voting Record Date for voting on the Plan is the close of business in
the City of New York, State of New York on January 10, 1994. To be entitled to
vote to accept or reject the Plan, a holder of an RII Class 2 Claim, RII Class 7
Interest, RII Class 8 Interest, GRI Class 2 Claim, GRI Class 4 Claim or GRI
Class 5 Interest must have been the beneficial owner of such claim or interest
at the close of business on the Voting Record Date. It is important that all
beneficial owners vote to accept or reject the Plan. Under the Bankruptcy Code,
for purposes of determining whether the Requisite Acceptances have been
received, only beneficial owners who vote will be counted. Each beneficial owner
electing to vote on the Plan should (i) carefully read the voting instructions
set forth in the applicable Ballot, (ii) complete the applicable Ballot, (iii)
mark the Ballot to indicate his or her vote on the Plan, (iv) in the case of
holders of Old Series Notes, indicate in the appropriate place on the Ballot
whether he or she consents to the release of the Old Security Documents and (v)
sign and return the Ballot in accordance with the instructions set forth
thereon. ANY BALLOT THAT IS EXECUTED BY A BENEFICIAL OWNER AND DOES NOT INDICATE
A REJECTION OF THE PLAN WILL BE DEEMED AN ACCEPTANCE OF THE PLAN.
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VOTING DEADLINE; EXTENSIONS; MODIFICATIONS
The Solicitation will expire at 5:00 p.m., New York City time, on the Voting
Deadline. Except to the extent RII and GRI so determine or as permitted by the
Bankruptcy Court, Ballots or Master Ballots that are received after the Voting
Deadline will not be accepted or used by RII and GRI in connection with RII's or
GRI's request for confirmation of the Plan (or any permitted modification
thereof). The Solicitation will not be terminated prior to March 15, 1994,
unless the Company is required to seek immediate protection under chapter 11 of
the Bankruptcy Code as a result of an acceleration of the maturity of the Old
Series Notes or a foreclosure upon the collateral securing the Old Series Notes.
RII and GRI expressly reserve the right, at any time or from time to time,
to extend the Voting Deadline by giving oral or written notice to the
Solicitation Agent of such extension. Any extension or expiration of the Voting
Deadline will be followed as promptly as practicable by a public announcement
made through the Dow Jones News Service. There can be no assurance that RII and
GRI will exercise their right to extend the Voting Deadline. During any
extension of the Voting Deadline, all Ballots and Master Ballots previously
given will remain subject to all the terms and conditions of the Solicitation,
including the withdrawal and revocation rights specified herein.
RII and GRI expressly reserve the right to modify, at any time and from time
to time, the terms of the Solicitation or the Plan (subject to compliance with
the requirements of section 1127 of the Bankruptcy Code and to the approval of
Fidelity and TCW, so long as the funds and accounts managed by them hold in the
aggregate at least 20% of the outstanding Old Series Notes). If RII or GRI makes
a material change in the terms of the Solicitation or the Plan or if it waives a
material condition, RII and GRI will disseminate additional solicitation
materials and will extend the Solicitation, in each case to the extent required
by law. See "The Plan -- Conditions Precedent to Confirmation and Consummation
of the Plan".
AGREEMENTS UPON FURNISHING BALLOTS
The delivery of a Ballot or Master Ballot by a holder in accordance with the
procedures set forth below will constitute an agreement between such holder and
RII and GRI to accept all the terms of, and conditions to, this Solicitation.
PROCEDURE FOR VOTING ON THE PLAN
GENERAL
Under the Bankruptcy Code, for purposes of determining whether the Requisite
Acceptances have been received with respect to the Old Series Notes (and the
related GRI Guaranty), the RII Intercompany Claim, the RII Common Stock, the GRI
Common Stock or 1990 Stock Options, only those beneficial owners of the Old
Series Notes, the RII Common Stock or 1990 Stock Options as of the Voting Record
Date who vote will be counted. It is therefore important that all such holders
of the Old Series Notes, the RII Common Stock or 1990 Stock Options vote to
accept or reject the Plan. Each beneficial owner electing to vote on the Plan
should (i) carefully read the voting instructions set forth herein and in the
applicable Ballot, (ii) complete the applicable Ballot, in accordance with the
instructions set forth below, (iii) mark the Ballot to indicate his or her vote
on the Plan, (iv) in the case of holders of Old Series Notes, indicate in the
appropriate place on the Ballot whether he or she consents to the release of the
Old Security Documents and (v) sign and return the Ballot in accordance with the
instructions set forth thereon. ANY BALLOT THAT IS EXECUTED BY A HOLDER AND DOES
NOT INDICATE A REJECTION OF THE PLAN WILL BE DEEMED AN ACCEPTANCE OF THE PLAN.
RII and GRI intend to urge the Bankruptcy Court to count executed but unmarked
Ballots as deemed acceptances of the Plan and, in the case of Ballots from
holders of Old Series Notes, consents to release and terminate the Old Security
Documents. There can be no assurance, however, that the Bankruptcy Court will
permit unmarked Ballots to be counted. Accordingly, RII and GRI urge all persons
entitled to vote to both execute their Ballots and mark whether they accept or
reject the Plan.
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ANY BALLOT THAT IS EXECUTED BY A HOLDER OF OLD SERIES NOTES BUT FAILS TO
INDICATE WHETHER CONSENT TO RELEASE OF THE OLD SECURITY DOCUMENTS IS GIVEN OR
WITHHELD SHALL BE DEEMED TO BE A CONSENT TO THE TERMINATION AND RELEASE OF THE
OLD SECURITY DOCUMENTS. Failure by a beneficial owner to send a duly signed
Ballot will be deemed not to be a vote regarding the Plan.
RII and GRI are providing copies of this Information Statement/Prospectus,
Ballots and, where appropriate, Master Ballots, to all holders of record of the
Old Series Notes (and the related GRI Guaranty endorsed thereon), the RII Common
Stock and 1990 Stock Options on the Voting Record Date. Such holders may include
brokerage firms, commercial banks, trust companies, or other nominees. If such
entities do not hold for their own account, they should provide copies of this
Information Statement/Prospectus and the appropriate Ballots to their customers
and beneficial owners and follow the procedures described below.
SOLICITATION AGENT
Hill and Knowlton will act as Solicitation Agent in connection with the
Solicitation. Its telephone number is (212) 210-8850 (call collect). As part of
its responsibilities as Solicitation Agent, Hill and Knowlton will tabulate all
votes cast in connection with the Solicitation. All inquiries relating to the
Solicitation should be directed to Hill and Knowlton. Requests for information
or additional copies of this Information Statement/Prospectus or Ballots also
should be directed to Hill and Knowlton. All deliveries to Hill and Knowlton in
its capacity as Solicitation Agent should be directed to the address set forth
on the back cover page of this Information Statement/Prospectus.
BROKERAGE FIRMS, BANKS AND OTHER NOMINEES
Each brokerage firm that is the registered holder of Old Series Notes (and
the related GRI Guaranty) or RII Common Stock for a beneficial owner, or is a
participant in a securities clearing agency and is authorized to vote in the
name of such securities clearing agency pursuant to an omnibus proxy (as
described below) and is acting for a beneficial owner, should vote on behalf of
such beneficial owner by (i) distributing a copy of this Information
Statement/Prospectus, the SIHL Prospectus and all appropriate Ballot(s) and a
self addressed, postage prepaid envelope to such beneficial owner, (ii)
collecting a signed Ballot from each such beneficial owner, (iii) completing a
Master Ballot by compiling the votes and other information from the Ballots
collected, and (iv) transmitting such Master Ballot to the Solicitation Agent on
or before the Voting Deadline. A proxy intermediary acting on behalf of a
brokerage firm or bank may perform the procedures outlined in the preceding
sentence on behalf of such brokerage firm.
Each commercial bank or trust company that is the registered holder of Old
Series Notes (and the related GRI Guaranty) or RII Common Stock for a beneficial
owner may arrange for such beneficial owner to vote by (i) executing all
appropriate Ballot(s), and (ii) sending to such beneficial owner a copy of this
Information Statement/Prospectus, the SIHL Prospectus, such executed Ballot(s)
and a stamped envelope addressed to the Solicitation Agent to be completed by
such beneficial owner and returned to the Solicitation Agent or follow the
procedures outlined in the previous paragraph.
A beneficial owner of Old Series Notes (and beneficiary of the related GRI
Guaranty) or RII Common Stock may receive multiple mailings containing
Ballot(s), especially if such beneficial owner owns Old Series Notes or RII
Common Stock through more than one broker or bank. Each beneficial owner should
complete and return all Ballots received by it in the return envelope provided
with each such Ballot. Each beneficial owner should indicate on each Ballot the
names of all broker-dealers or other intermediaries or persons who are
registered holders of Old Series Notes (and the related GRI Guaranty) or RII
Common Stock on his behalf. Registered holders or nominees compiling Master
Ballots should include all such account information on the Master Ballot. Any
beneficial owner who has not received a Ballot should contact his brokerage firm
or nominee, or the Solicitation Agent.
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BENEFICIAL OWNERS HOLDING THROUGH NOMINEES
Any beneficial owner holding Old Series Notes (and the related GRI Guaranty)
or RII Common Stock in "street name" through a brokerage firm, bank, trust
company or other nominee must vote on the Plan by following the instructions set
forth below:
1. Complete and sign the Ballot (unless the Ballot has already been
signed by the bank, trust company or other nominee); and
2. Return the Ballot as promptly as possible to the addressee on the
pre-addressed, stamped envelope enclosed with the Ballot. If no
pre-addressed, postage paid envelope was enclosed, contact the Solicitation
Agent for instructions.
Any Ballot returned by a beneficial owner to a brokerage firm or proxy
intermediary will not be counted until such brokerage firm or proxy intermediary
properly completes and delivers to the Solicitation Agent a Master Ballot that
reflects such vote. Therefore, you must return your Ballot to the brokerage firm
or financial intermediary in sufficient time prior to the Voting Deadline to
permit the nominee to complete and return a Master Ballot to the Solicitation
Agent prior to the Voting Deadline.
BENEFICIAL AND RECORD OWNERS
Any beneficial owner of Old Series Notes (and the related GRI Guaranty) or
RII Common Stock who also is the record owner of such Old Series Notes or RII
Common Stock must vote on the Plan by following the instructions set forth
below:
1. Complete and sign the Ballot; and
2. Mail the Ballot to the Solicitation Agent as promptly as possible
using the pre-addressed, stamped envelope enclosed with the Ballot. If no
pre-addressed, postage paid envelope was enclosed, contact the Solicitation
Agent for instructions.
SECURITIES CLEARING AGENCIES
RII and GRI expect that each of the Depository Trust Company, The Midwest
Securities Trust Company and The Philadelphia Depository Trust Company, as a
nominee holder of Old Series Notes or RII Common Stock, will execute an omnibus
proxy in favor of its respective participants. As a result of such omnibus
proxies, each such participant will be authorized to vote the securities owned
by it and held in the name of such securities clearing agencies.
OTHER
If a Ballot is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person should indicate such capacity when
signing and, if requested by RII or GRI, must submit proper evidence
satisfactory to RII or GRI of authority to so act. Authorized signatories (E.G.,
custodians, trustees, etc.) should submit separate Ballots for each beneficial
owner for whom they are voting.
RII and GRI, in their sole discretion, may reject any Ballot or Master
Ballot as invalid and, therefore, decline to utilize it in connection with
seeking confirmation of the Plan by the Bankruptcy Court unless such Ballot or
Master Ballot is properly completed and timely submitted to the Solicitation
Agent on or prior to the Voting Deadline together with any other documents
required by such Ballot or Master Ballot. IN NO CASE SHOULD A BALLOT OR MASTER
BALLOT BE DELIVERED TO RII, GRI, OR THE OLD SERIES NOTE TRUSTEE.
RII AND GRI ARE NOT AT THIS TIME REQUESTING THE DELIVERY OF, AND WILL NOT
ACCEPT, CERTIFICATES REPRESENTING OLD SERIES NOTES. PROMPTLY AFTER THE EFFECTIVE
DATE, RII WILL FURNISH ALL HOLDERS OF OLD SERIES NOTES WITH AN APPROPRIATE
LETTER OF TRANSMITTAL TO BE USED TO REMIT OLD SERIES NOTES IN EXCHANGE FOR
APPROPRIATE NEW DEBT SECURITIES, NEW EQUITY SECURITIES, EXCESS CASH, NET
RESERVED CASH, IF ANY, NET PLAN CONSUMMATION CASH, IF ANY, AND DEFERRED CASH.
THE EXISTING HOLDERS OF EQUITY INTERESTS WILL RETAIN THE CERTIFICATES
REPRESENTING RII COMMON STOCK AND THE 1990 STOCK OPTIONS, AS THE CASE MAY BE.
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<PAGE>
WAIVERS OF DEFECTS, IRREGULARITIES, ETC.
Unless otherwise directed by the Bankruptcy Court, all questions as to the
validity, form, eligibility (including time of receipt), acceptance, and
revocation or withdrawal of Ballots or Master Ballots or Acceptances will be
determined by RII and GRI, in their sole discretion, which determination will be
final and binding. RII and GRI reserve the absolute right to contest the
validity of any revocation or withdrawal. RII and GRI also reserve the right to
reject any and all Ballots or Master Ballots not in proper form, the acceptance
of which would, in the opinion of RII, GRI or their counsel, be unlawful. RII
and GRI further reserve the right to waive any defects or irregularities or
conditions of delivery as to any particular Ballot or Master Ballot. The
interpretation (including of the Ballot or Master Ballot and the respective
instructions thereto) by RII and GRI, unless otherwise directed by the
Bankruptcy Court, will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with deliveries of Ballots or Master
Ballots must be cured within such time as RII and GRI (or the Bankruptcy Court)
determine. Neither RII nor GRI nor any other person will be under any duty to
provide notification of defects or irregularities with respect to deliveries of,
or notices of revocation or withdrawal of, Ballots or Master Ballots, nor will
any of them incur any liability for failure to provide such notification. Unless
otherwise directed by the Bankruptcy Court, delivery of such Ballots or Master
Ballots will not be deemed to have been made until such irregularities have been
cured or waived. Ballots or Master Ballots previously furnished (and as to which
any irregularities have not theretofore been cured or waived) will be
invalidated.
CONSENTS TO TERMINATION AND RELEASE OF OLD SECURITY DOCUMENTS
RII also is soliciting the consents of the record holders of Old Series
Notes pursuant to the terms of the Old Series Note Indenture in order to
terminate and release the Old Security Documents under which the liens on the
property securing the Old Series Notes were granted or created. Such consents
will terminate and release the Old Security Documents and will release the
parties to the Old Security Documents from all obligations thereunder. Such
consents must be evidenced by such record holder separately from their vote on
the Plan. The Ballots for the holders of the Old Series Notes permit holders to
give or withhold such consent. ANY EXECUTED BALLOT WITH RESPECT TO THE PLAN
RETURNED WITHOUT AN INDICATION TO WITHHOLD SUCH CONSENT WILL BE DEEMED TO GIVE
SUCH CONSENT.
RII is soliciting these consents for the purposes of: (i) releasing the
Resorts Casino Hotel from the lien of the Old Security Documents so that it may
be encumbered to secure the RIH Senior Facility Note, the RIH Senior Facility
Guaranty, the RIH Promissory Note, the RIH Mortgage Guaranty, the RIH Junior
Promissory Note and the RIH Junior Mortgage Guaranty; (ii) releasing all of the
assets and capital stock of RII's subsidiaries to effect either the SIHL Sale or
the PIRL Spin-Off; and (iii) releasing the Non-Operating Real Property from the
liens of the Old Security Documents. Absent a release of the Old Security
Documents through either consent or (if feasible) an appropriate Bankruptcy
Court order, the transactions contemplated by the Plan cannot be consummated. In
no event will the consents to release the Old Security Documents be used to
effectuate the termination and release of the Old Security Documents in the
absence of the confirmation and consummation of the Plan. If RII and GRI fail to
receive the Requisite Acceptances, notwithstanding receipt of sufficient
consents to release and terminate the Old Security Documents pursuant to the Old
Series Note Indenture, such consents will only be used in the event that RII and
GRI continue to pursue confirmation and consummation of the Plan. In the event
that RII and GRI elect or are required to resolicit Acceptances of the Plan,
however, they reserve the right not to resolicit with respect to the consents to
release the Old Security Documents and to use consents received from the initial
Solicitation. Consents to release and terminate the Old Security Documents may
be withdrawn or revoked at any time prior to the Voting Deadline.
WITHDRAWAL; REVOCATION RIGHTS
Ballots or Master Ballots previously delivered may be withdrawn or revoked
at any time prior to the Voting Deadline by the beneficial owner on the Voting
Record Date who completed the original Ballot or by the nominee who completed
the Master Ballot on such beneficial owner's behalf, as the case may be. Only
the person or nominee who submits a Ballot can withdraw or revoke that Ballot. A
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<PAGE>
Ballot may be revoked or withdrawn either by submitting a superseding Ballot or
by providing written notice to the Solicitation Agent. Neither RII nor GRI
intends to commence a case under chapter 11 of the Bankruptcy Code prior to the
Voting Deadline, although it reserves the right to do so in its sole discretion.
After commencement of the chapter 11 cases, withdrawal or revocation may be
effected only with the approval of the Bankruptcy Court.
Acceptances or rejections may be withdrawn or revoked prior to commencement
of the chapter 11 cases by complying with the following procedures: (a) a
beneficial owner holding Old Series Notes or RII Common Stock in "street name"
who returned his Ballot to a brokerage firm, proxy intermediary, or other
nominee should deliver a written notice of withdrawal or revocation to such
brokerage firm proxy intermediary or other nominee, as the case may be; and (b)
all other beneficial owners should deliver a written notice of withdrawal or
revocation to the Solicitation Agent. To be effective, notice of revocation or
withdrawal must: (i) be received on or before the Voting Deadline by the
Solicitation Agent at its address specified on the back cover of this
Information Statement/Prospectus; (ii) specify the name of the holder of the Old
Series Notes or RII Common Stock whose vote on the Plan is being withdrawn or
revoked; (iii) contain the description of the Old Series Notes (and related GRI
Guaranty) or RII Common Stock or 1990 Stock Options as to which a vote on the
Plan is withdrawn or revoked; and (iv) be signed by the holder of the Old Series
Notes (and related GRI Guaranty) or RII Common Stock or 1990 Stock Options who
executed the Ballot reflecting the vote being withdrawn or revoked, or by the
nominee who executed the Master Ballot reflecting the vote being withdrawn or
revoked, as applicable, in each case in the same manner as the original
signature on the Ballot or Master Ballot, as the case may be. In addition to the
foregoing information, in the case of a nominee that withdraws or revokes votes
reflected on a Master Ballot, such nominee also must specify the customer
account or sequence number(s) of the beneficial owner whose vote is being
withdrawn or revoked. The foregoing procedures should also be followed with
respect to a person entitled to vote on the Plan who wishes to change (rather
than revoke or withdraw) its vote.
TERMINATION
Notwithstanding any provisions of the Solicitation, RII and GRI will not be
required to accept any Ballot or Master Ballot and may terminate or amend the
Solicitation at its option at any time on or after the date of the commencement
of the Solicitation.
FEES AND EXPENSES
The expenses of soliciting Acceptances will be borne by RII (including the
costs and expenses incurred by nominees in mailing this Information
Statement/Prospectus, Master Ballots and Ballots to impaired creditors and
equity interest holders). The principal solicitation is being made by mail;
however, additional solicitations may be made by facsimile, telephone or in
person by officers and regular employees of RII and its affiliates, who will not
receive additional compensation therefor, and by Hill and Knowlton. Arrangements
also may be made with brokerage houses and other custodians, nominees and
fiduciaries to forward the material regarding the Solicitation to the beneficial
owners of each of the Old Series Notes and the RII Common Stock. RII will
reimburse such forwarding agents for reasonable out-of-pocket expenses incurred
by them, but no compensation will be paid for their services.
SOLICITATION AGENT
Hill and Knowlton will act as Solicitation Agent in connection with the
Solicitation. Its telephone number is (212) 210-8850 (call collect). All
inquiries relating to the Solicitation should be directed to Hill and Knowlton
at such telephone number. Requests for information or additional copies of this
Information Statement/Prospectus or Ballots should be directed to Hill and
Knowlton. All deliveries to Hill and Knowlton in its capacity as Solicitation
Agent should be directed to the address set forth on the back cover page of this
Information Statement/Prospectus.
Hill and Knowlton will receive reasonable and customary compensation for
services rendered in connection with the Solicitation, will be reimbursed for
reasonable out-of-pocket expenses and will be indemnified against certain
expenses in connection therewith.
155
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of November 30, 1993, Merv Griffin, the Chairman of the Board, owned of
record or beneficially 4,398,115 shares of RII Common Stock (approximately
21.82% of such class). Merv Griffin has informed RII that he will vote his RII
Common Stock in favor of the Plan.
As of November 30, 1993, there were 37 holders of 1990 Stock Options to
purchase 1,758,800 shares of RII Common Stock. The holders of 1990 Stock Options
to purchase 1,307,300 shares of RII Common Stock (approximately 74% of such
class), consisting of the Company's current management and David P. Hanlon, the
former Chief Executive Officer of RII, have informed RII that they intend to
vote their 1990 Stock Options in favor of the Plan.
INTERESTS OF CERTAIN PERSONS IN THE RESTRUCTURING
The following directors and officers of RII may have, to the extent
indicated, an interest in the Restructuring.
In April 1993, RII, RIH and the Griffin Group executed the New Griffin
Services Agreement to be effective as of September 17, 1992, upon the expiration
of the Old Griffin Services Agreement. Merv Griffin serves as a director and the
Chairman of the Board of RII. The Griffin Group is a company controlled by Merv
Griffin. The New Griffin Services Agreement will remain in place after the
Effective Date. The New Griffin Services Agreement has a four-year term. Under
certain circumstances, however, the New Griffin Services Agreement could remain
in force up to an additional year. Pursuant to the New Griffin Services
Agreement, Mr. Griffin and the Griffin Group will promote the operations of the
Company in Atlantic City and The Bahamas. Fees of $6,305,000 have already been
paid to the Griffin Group for the first three years of the term of the New
Griffin Services Agreement. In conjunction with the negotiations among RII,
Fidelity, TCW and the Griffin Group relating to the Griffin Group's performance
under the New Griffin Services Agreement, certain modifications to the New
Griffin Services Agreement were negotiated. As a result of these modifications,
the following will occur: (1) on or prior to the Effective Date, RII will pay
$2,310,000 to the Griffin Group for the fourth year of the New Griffin Services
Agreement by reducing the principal amount of the Griffin Group Note in an equal
amount; (2) subsequent to such payment, but no later than the Effective Date,
the Griffin Group will pay the balance of the Griffin Group Note (approximately
$3,000,000) plus accrued interest to RII; and (3) on the Distribution Date, RII
will issue to the Griffin Group the Griffin Warrants to purchase 4,665,000
shares RII Common Stock, or approximately 10% of the RII Common Stock on a fully
diluted basis. The Griffin Warrants will be exercisable on the Effective Date at
an exercise price of the lesser of $1.875 and the average closing price of RII
Common Stock for the 20 trading days following the Effective Date. In
conjunction with the negotiations among RII, Fidelity, TCW and the Griffin
Group, the Griffin Group negotiated a reduction in the exercise price for the
Griffin Warrants from the original exercise price set forth in the New Griffin
Services Agreement. The exercise prices prior to such amendment were based upon
percentages of the average closing price of the RII Common Stock during the 20
trading days following the Effective Date (with certain minimum prices) and
ranged from the greater of $1.00 or 125% of such price as to the first 25% of
the Griffin Warrants up to the greater of $1.75 or 200% of such price as to the
final 25% of the Griffin Warrants. The change in the exercise price was approved
by RII, and consented to by Fidelity and TCW, to provide additional incentives
to the Griffin Group for its efforts to improve the operations and value of RII.
Mr. David Hanlon, the President and Chief Executive Officer of RII until
October 31, 1993, owns fully vested 1990 Stock Options to purchase 1,094,800
shares of RII Common Stock (or 5.15% of the outstanding shares of the RII Common
Stock assuming such options were exercised). Pursuant to the Hanlon Employment
Agreement, Mr. Hanlon received $720,000 earned under the Hanlon Employment
Agreement but not yet paid as of October 31, 1993. In addition, pursuant to the
Hanlon Termination Agreement, Mr. Hanlon is entitled to receive a total of
$2,648,656, consisting of the present value of future base salary under 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
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<PAGE>
performance bonuses for fiscal years ending 1994 and 1995 payable under the
Hanlon Employment Agreement, half of which was paid on October 31, 1993 and half
of which will be paid upon the earlier of (i) the acceptance of a reorganization
or recapitalization of RII by the requisite number and amount of RII's creditors
voting on such restructuring or reorganization and (ii) April 15, 1995. In
addition, Mr. Hanlon will receive a bonus from RII in the amount of $325,000 in
connection with the reorganization or recapitalization of RII, payable prior to
any bankruptcy filing by RII. Finally, Mr. Hanlon will receive a bonus of
$300,000 upon the disposition of the Paradise Island Business. Accordingly, Mr.
Hanlon would receive a total of $625,000 in connection with the Restructuring.
The payment to be made to Mr. Hanlon with respect to the disposition of the
Paradise Island Business may be subject to the approval of the Bankruptcy Court.
Mr. Alvarez, a director of RII, is also the Chairman of Alvarez & Marsal, a
financial advisory firm which RII has retained to provide it with advice
regarding the Restructuring. For a discussion of the interests of Alvarez &
Marsal in the Restructuring, see "Agreements with Financial Advisers".
AGREEMENTS WITH FINANCIAL ADVISERS
In October 1991, RII retained Bear Stearns as its financial adviser to
assist it in the development and analysis of financial alternatives and the
development of a long-term financial plan. In February 1992, RII's Board of
Directors also authorized the retention of two other financial advisers, DLJ and
Alvarez & Marsal, to provide additional advice.
RII retained Bear Stearns pursuant to a letter agreement, amended as of July
1, 1993. Under the Bear Stearns letter agreement, RII paid Bear Stearns an
initial cash fee of $150,000 and is obligated to pay Bear Stearns a monthly fee
of $75,000. As of June 30, 1993, RII had paid Bear Stearns fees in an aggregate
amount of $1,650,000. Pursuant to the terms of the Bear Stearns letter
agreement, RII also has agreed to pay Bear Stearns a transaction fee, which will
be payable upon the completion of the Restructuring. RII estimates that the
transaction fee payable to Bear Stearns will be approximately $1,633,000. All
monthly fees payable to Bear Stearns subsequent to July 1, 1993 are creditable
against such transaction fee. RII also has agreed to reimburse Bear Stearns for
certain out-of-pocket expenses, and to indemnify it against certain liabilities
that might arise in connection with the Restructuring.
RII's agreement with DLJ provided for RII to pay to DLJ an initial fee of
$65,000 and 100,000 shares of RII Common Stock, and monthly fees of $50,000 and
35,000 shares of RII Common Stock commencing March 1, 1992. RII paid the initial
cash fee and the cash portion of monthly fees through April 1993, at which time
the agreement was terminated. No shares of RII Common Stock have yet been issued
to DLJ pursuant to the agreement. RII also reimbursed DLJ for certain
out-of-pocket expenses, and indemnified it against certain liabilities that
might arise in connection with the Restructuring. The total amount that has been
paid to DLJ was $765,000, and DLJ is entitled to receive 590,000 shares of RII
Common Stock, which will be distributed to DLJ prior to the Petition Date.
RII engaged Alvarez & Marsal pursuant to a letter agreement, dated March 1,
1992, as amended on September 14, 1992. Under the Alvarez & Marsal letter
agreement, RII paid Alvarez & Marsal monthly fees of $50,000 amounting to
$300,000 through August 1992, at which time RII's payment of such fees was
suspended. Pursuant to the terms of the Alvarez & Marsal letter agreement, RII
also has agreed to pay Alvarez & Marsal a transaction fee of $250,000 and
125,000 shares of RII Common Stock upon receipt of Requisite Acceptances for the
Restructuring. It is anticipated that this fee will be paid prior to the filing
of RII's and GRI's bankruptcy cases. RII also has agreed to reimburse Alvarez &
Marsal for its out-of-pocket expenses, and to indemnify it against certain
liabilities that might arise in connection with the Restructuring.
157
<PAGE>
CAPITALIZATION OF RII
The following table sets forth the historical consolidated capitalization of
RII and its subsidiaries at September 30, 1993, and RII's pro forma
capitalization at such date after giving effect to the Restructuring.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
--------------------------
HISTORICAL PRO FORMA
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt:
Old Series A Notes (a)........................................................... $ 233,953
Old Series B Notes (a)........................................................... 195,336
Other............................................................................ 211 $ 81
------------ ------------
Total current maturities....................................................... 429,500 81
------------ ------------
Long-term debt:
New RIHF Mortgage Notes (b)...................................................... 116,625
New RIHF Junior Mortgage Notes (c)............................................... 30,975
RIHF Senior Facility Notes (d)...................................................
Showboat Notes (e)............................................................... 84,357 84,357
Other............................................................................ 184 15
------------ ------------
Total long-term debt........................................................... 84,541 231,972
------------ ------------
Shareholders' equity (deficit):
RII Common Stock................................................................. 202 379
RII Class B Common Stock (f).....................................................
Capital in excess of par......................................................... 102,092 133,965
Accumulated deficit.............................................................. (166,926) (129,797)
------------ ------------
(64,632) 4,547
Note receivable from related party............................................... (5,318)
------------ ------------
Total shareholders' equity (deficit)........................................... (69,950) 4,547
------------ ------------
Total capitalization......................................................... $ 444,091 $ 236,600
------------ ------------
------------ ------------
<FN>
- ------------------------
(a) See "Description of Old Series Notes". Historical amounts are net of
unamortized discounts of $10,273,000 and $9,010,000 for the Old Series A
Notes and the Old Series B Notes, respectively.
(b) See "Description of New RIHF Mortgage Notes". Pro forma balance is net of
unamortized discount of $8,375,000.
(c) See "Description of New RIHF Junior Mortgage Notes". Pro forma balance is
net of unamortized discount of $4,025,000.
(d) See "Description of RIHF Senior Facility Notes". Assumes no borrowings
under the RIHF Senior Facility.
(e) See "Description of Showboat Notes". Amounts are net of unamortized
discount of $20,976,000.
(f) See "Description of New Equity Securities -- Description of RII Class B
Common Stock".
</TABLE>
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<PAGE>
CAPITALIZATION OF PIRL
The following table sets forth the historical combined capitalization at
September 30, 1993, for RIB, consolidated with its subsidiaries, and the U.S.
Paradise Island Subsidiaries. If the SIHL Sale is not consummated on the
Effective Date, the PIRL Spin-Off will be effected. The pro forma capitalization
of PIRL assumes the PIRL Spin-Off occurs. Because the PIRL Spin-Off will result
in RIB becoming a subsidiary of PIRL and other subsidiaries of PIRL acquiring
the assets and related liabilities of the U.S. Paradise Island Subsidiaries, the
pro forma capitalization presented is for PIRL consolidated with its
subsidiaries.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
------------------------
HISTORICAL PRO FORMA
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current maturities of long-term debt.................................................. $ 130 $ 130
Note payable to affiliate (a)......................................................... 50,000 --
----------- -----------
50,130 130
----------- -----------
Long-term debt -- capitalized lease obligations......................................... 169 169
----------- -----------
Shareholders' equity:
Capital stock......................................................................... 33 50
Capital in excess of par.............................................................. 147,546 124,950
Retained earnings (accumulated deficit)............................................... (43,527) --
----------- -----------
Total shareholders' equity.......................................................... 104,052 125,000
----------- -----------
Total capitalization.............................................................. $ 154,351 $ 125,299
----------- -----------
----------- -----------
<FN>
- ------------------------
(a) Note payable to RIH to be assumed by GRI as part of the Restructuring.
</TABLE>
159
<PAGE>
ACCOUNTING TREATMENT
RII proposes to account for the Restructuring as required by Statement of
Position 90-7 "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"). Pursuant to SOP 90-7, the New Debt Securities
will be stated at the present values of amounts to be paid, determined at
appropriate current interest rates. The difference between the carrying value of
the Old Series Notes and the sum of the fair values of the items exchanged
therefor (I.E., (i) Excess Cash, (ii) New RIHF Mortgage Notes, (iii) the Units
comprised of the New RIHF Junior Mortgage Notes and RII Class B Common Stock,
(iv) SIHL Series A Shares, the SIHL Aggregate Cash Purchase Price and
non-transferable rights to receive payments from Net Reserved Cash (or if the
SIHL Sale is not consummated on the Effective Date, PIRL Ordinary Shares), (v)
RII Common Stock and (vi) non-transferable rights to receive payments from Net
Plan Consummation Cash and Deferred Cash) will be recognized as an extraordinary
item, along with the tax effects of the exchange. In addition, the difference
between the carrying values and the fair values of the equity and/or assets
transferred in clause (iv) above will be recognized in earnings from operations.
160
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial information presented below for RII, RIH
and the PIRL Group was derived from the consolidated financial statements of RII
and RIH and the combined financial statements of the PIRL Group and should be
read in conjunction with such consolidated or combined financial statements, the
notes thereto and the other financial information included herein. Information
presented at September 30, 1993 and for the three quarters ended September 30,
1992 and 1993 is derived from unaudited consolidated or combined financial
statements of the respective entities. In the opinion of management, such
unaudited financial statements include all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation. The results for
the three quarters ended September 30, 1993 are not necessarily indicative of
the results to be expected for the year ending December 31, 1993.
RESORTS INTERNATIONAL, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
FOR THE THREE
1988 1990 QUARTERS ENDED
-------------------------- ---------------------- SEPTEMBER 30,
OPERATING INFORMATION THROUGH FROM THROUGH FROM --------------------
(NOTE A) NOVEMBER 14 NOVEMBER 15 1989 AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
- ----------------------- ------------ ------------ --------- --------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues
(Note B).............. $ 407,145 $ 48,826 $ 451,254 $ 293,972 $ 129,591 $ 418,243 $ 436,934 $ 330,254 $ 337,858
------------ ------------ --------- --------- ----------- --------- --------- --------- ---------
------------ ------------ --------- --------- ----------- --------- --------- --------- ---------
Earnings (loss) from
operations (Note B)... $ 30,907 $ (2,490) $ (7,850) $ 13,540 $ (1,214) $ 16,036 $ 21,502 $ 20,107 $ 20,680
Recapitalization costs
(Note C).............. (7,291) (187,018) (2,848) (2,337) (4,879)
Write-off of
goodwill.............. (181,311)
Net gain from purchases
of subordinated
debentures (Note D)... 4,149
Loss on sale of assets
and termination fee
(Note E).............. (335,690)
Other income
(deductions), net
(Note F).............. (65,895) (15,262) (114,286) 1,884 (12,317) (58,438) (73,456) (54,993) (73,171)
------------ ------------ --------- --------- ----------- --------- --------- --------- ---------
Loss before income
taxes and
extraordinary item.... (370,678) (17,752) (306,589) (171,594) (13,531) (42,402) (54,802) (37,223) (57,370)
Income tax benefit
(expense) (Note G).... 7,000 3,700 831 1,348 (1,000)
------------ ------------ --------- --------- ----------- --------- --------- --------- ---------
Loss before
extraordinary item.... (363,678) (17,752) (302,889) (171,594) (13,531) (41,571) (53,454) (37,223) (58,370)
Extraordinary item
(Note C).............. 429,809
------------ ------------ --------- --------- ----------- --------- --------- --------- ---------
Net earnings (loss).... $ (363,678) $ (17,752) $(302,889) $ 258,215 $ (13,531) $ (41,571) $ (53,454) $ (37,223) $ (58,370)
------------ ------------ --------- --------- ----------- --------- --------- --------- ---------
------------ ------------ --------- --------- ----------- --------- --------- --------- ---------
Net loss per share
(Note H).............. $ (.68) $ (2.07) $ (2.65) $ (1.85) $ (2.90)
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Ratio of earnings to
fixed charges
(Note I).............. -- -- -- -- -- -- -- -- --
------------ ------------ --------- --------- ----------- --------- --------- --------- ---------
------------ ------------ --------- --------- ----------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------ AT SEPTEMBER 30,
BALANCE SHEET INFORMATION (NOTE A) 1988 1989 1990 1991 1992 1993
- -------------------------------------- ---------- --------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total assets.......................... $1,034,578 $ 745,976 $ 568,746 $ 567,890 $ 568,950 $ 581,314
Current maturities of long-term debt
(Note J)............................. 14,516 1,269 1,528 1,571 828 429,500
Long-term debt, excluding current
maturities (Note J).................. 785,461 858,931 341,069 392,667 460,712 84,541
Shareholders' equity (deficit)........ 32,248 (260,641) 77,041 36,099 (17,262) (69,950)
</TABLE>
161
<PAGE>
NOTES TO RII SELECTED HISTORICAL FINANCIAL DATA
NOTE A: Effective November 15, 1988 Griffco acquired RII through a series
of transactions. These transactions were accounted for as a purchase, and
according to an accounting practice known as "push-down" accounting, RII
adjusted its net assets to reflect the amount of Griffco's investment in RII. In
doing so, RII's consolidated assets and liabilities were adjusted to their
estimated fair values.
During 1989, the Old Debtors filed consents to involuntary petitions or
filed voluntary petitions for relief under chapter 11 of 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 New Jersey 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.
Note 2 of Notes to Consolidated Financial Statements of RII describes
another change in entity and related presentation resulting from the application
of "fresh start" accounting in connection with the Company's emergence from
bankruptcy proceedings in 1990.
Changes in operations during the past five years include the following:
operations of Trump Air ceased in November 1988; Amphibious airline operation
was sold in December 1990; Security consulting service operations were sold in
1990 and 1991.
NOTE B: Operating revenues for 1988 include the sales of various
residential lots in The Bahamas for net proceeds of $1,520,000. Earnings from
operations for 1988 include a net gain of $1,192,000 on those sales.
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.
NOTE C: See Note 2 of Notes to Consolidated Financial Statements of RII for
a discussion of these items in 1990.
NOTE D: The 1989 net gain from purchases of subordinated debentures
resulted from RII's purchases of $13,528,000 of its subordinated debentures to
satisfy sinking fund requirements.
NOTE E: Includes a provision for the loss of $275,000,000 on the sale to
affiliates of Donald Trump of the Taj Mahal, the Steel Pier, certain helicopters
and associated assets, certain real property adjacent to the Taj Mahal site and
certain other assets. Also includes a provision of $60,690,000 for a fee to
terminate the ten-year Comprehensive Services Agreement with the Trump Hotel
Corporation.
NOTE F: Includes interest income, interest expense net of capitalized
interest, and amortization of debt discount and issuance costs. For the periods
through November 14 and from November 15, 1988, $12,867,000 and $79,000,
respectively, of interest was capitalized. In 1989 $99,000 of interest was
capitalized.
NOTE G: For the period through November 14, 1988 the Company had Federal
and state net operating losses for financial reporting purposes. The tax benefit
relating to these net operating losses for this period was recognized for
financial reporting purposes by reducing the deferred tax liability. The Company
adopted Statement of Financial Accounting Standards No. 96, "Accounting For
Income
162
<PAGE>
Taxes", ("SFAS 96") effective November 15, 1988. For the period from November
15, 1988 the Company also generated Federal and state net operating losses;
however, pursuant to the accounting method prescribed in SFAS 96, no tax benefit
was recorded for that period.
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 $181,311,000 of goodwill in 1989 was
a non-deductible item for income tax purposes.
See Note 13 of Notes to Consolidated Financial Statements of RII for
discussion of income taxes for 1990, 1991 and 1992, and Note 17 for discussion
of income taxes for the three quarters ended September 30, 1993.
NOTE H: See Note 1 of Notes to Consolidated Financial Statements of RII for
discussion of net loss per share of RII Common Stock.
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. Earnings were insufficient to cover
fixed charges by $383,545,000 for the period through November 14, 1988;
$17,831,000 for the period from November 15, 1988; $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; $37,223,000
for the three quarters ended September 30, 1992; and $57,370,000 for the three
quarters ended September 30, 1993.
NOTE J: Net of unamortized discounts.
NOTE K: RII has not paid any dividends on its capital stock during the
periods presented.
163
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------
FOR THE THREE
1988 1990 QUARTERS ENDED
--------------------------- ---------------------- SEPTEMBER 30,
OPERATING INFORMATION THROUGH FROM NOVEMBER THROUGH FROM --------------------
(NOTE A) NOVEMBER 14 15 1989 AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
- ----------------------- ------------ ------------- --------- --------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues..... $ 246,716 $ 27,464 $ 255,054 $ 158,805 $ 76,216 $ 247,474 $ 262,740 $ 203,080 $ 208,814
------------ ------------- --------- --------- ----------- --------- --------- --------- ---------
------------ ------------- --------- --------- ----------- --------- --------- --------- ---------
Earnings (loss) from
operations............ $ 20,985 $ 189 $ (7,286) $ 3,449 $ 2,304 $ 14,819 $ 21,049 $ 19,421 $ 15,805
Recapitalization costs
(Note B).............. (2,430) (119,804) (874) (704) (1,580)
Write-off of
goodwill.............. (105,161)
Termination fee (Note
C).................... (35,690)
Affiliated bad debt
write-off (Note B).... (98,983)
Other income
(deductions), net
(Note D).............. (30,080) (4,142) (37,565) 5,209 2,696 6,942 7,181 5,331 5,441
------------ ------------- --------- --------- ----------- --------- --------- --------- ---------
Earnings (loss) before
income taxes and
extraordinary item.... (44,785) (3,953) (152,442) (210,129) 5,000 21,761 27,356 24,048 19,666
Income tax benefit
(expense) (Note E).... 1,600 3,400 (8,704) (10,942) (9,620) (400)
------------ ------------- --------- --------- ----------- --------- --------- --------- ---------
Earnings (loss) before
extraordinary item.... (44,785) (2,353) (149,042) (210,129) 5,000 13,057 16,414 14,428 19,266
Extraordinary item
(Note B).............. (17,335)
------------ ------------- --------- --------- ----------- --------- --------- --------- ---------
Net earnings (loss).... $ (44,785) $ (2,353) $(149,042) $(227,464) $ 5,000 $ 13,057 $ 16,414 $ 14,428 $ 19,266
------------ ------------- --------- --------- ----------- --------- --------- --------- ---------
------------ ------------- --------- --------- ----------- --------- --------- --------- ---------
Ratio of earnings to
fixed charges
(Note F).............. -- -- -- -- 14.2 15.5 21.5 24.3 23.3
------------ ------------- --------- --------- ----------- --------- --------- --------- ---------
------------ ------------- --------- --------- ----------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------- AT SEPTEMBER 30,
BALANCE SHEET INFORMATION (NOTE A) 1988 1989 1990 1991 1992 1993
- -------------------------------------- --------- --------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total assets.......................... $ 545,463 $ 414,608 $ 221,193 $ 235,235 $ 250,636 $ 275,351
Current maturities of notes payable to
affiliate and other long-term debt... 770 482 1,044 958 643 325,081
Notes payable to affiliate and
other long-term debt, excluding
current maturities................... 325,000 356,953 326,787 326,539 325,904 15
Shareholder's equity (deficit)........ 142,677 (6,365) (193,829) (180,772) (164,358) (145,092)
</TABLE>
164
<PAGE>
NOTES TO RIH SELECTED HISTORICAL FINANCIAL DATA
NOTE A: Effective with Griffco's purchase of RII on November 15, 1988, and
according to an accounting practice known as "push-down" accounting, RIH
adjusted its net assets to reflect its portion of the cost of Griffco's
investment in RII. In doing so, RIH's assets and liabilities were adjusted to
their estimated fair values.
At the end of 1989, when the Old Debtors 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.
Note 2 of Notes to Consolidated Financial Statements of RIH describes
another change in entity and related presentation resulting from the application
of "fresh start" accounting in connection with RII's emergence from bankruptcy
proceedings in 1990.
NOTE B: See Note 2 of Notes to Consolidated Financial Statements of RIH for
discussion of these items in 1990.
NOTE C: Represents RIH's allocated portion of the fee paid to terminate the
Comprehensive Services Agreement between RII and the Trump Hotel Corporation.
NOTE D: Includes interest income, interest expense and amortization of debt
discount and issuance costs.
NOTE E: For the period through November 14, 1988, RIH had an agreement with
RII whereby RIH provided for Federal and state income taxes using a combined
rate of 40% except for material transactions which, under then existing tax
laws, would be subject to a significantly different combined tax rate. Such
transactions were separately tax effected using appropriate tax rates. Pursuant
to this agreement, no tax benefits were allocated to RIH.
For the period from November 15, 1988 and the year ended December 31, 1989,
RIH accounted for income taxes under the liability method prescribed by SFAS 96.
Also, effective November 15, 1988 RIH entered into a Tax Sharing Agreement among
Griffco, RII and another subsidiary of RII, pursuant to which RIH was liable to
Griffco for the amount of Federal income taxes calculated on a separate return
basis, and the tax benefit for that period was calculated on that basis.
See Note 11 of Notes to Consolidated Financial Statements of RIH herein for
discussion of income taxes for 1990, 1991 and 1992, and Note 14 for discussion
of income taxes for the three quarters ended September 30, 1993.
NOTE F: 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
$44,785,000 for the period through November 14, 1988; $3,953,000 for the period
from November 15, 1988; $152,442,000 for 1989; and $210,129,000 for the period
through August 31, 1990.
165
<PAGE>
PIRL GROUP
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------
1988 1990
--------------------------- -------------------------
OPERATING INFORMATION THROUGH FROM THROUGH FROM
(NOTE A) NOVEMBER 14 NOVEMBER 15 1989 AUGUST 31 SEPTEMBER 1 1991 1992
- ------------------------------ ------------ ------------ -------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues (Note B)... $ 152,126 $ 20,117 $184,045 $ 129,413 $ 50,937 $163,216 $166,381
------------ ------------ -------- ---------- ------------ -------- --------
------------ ------------ -------- ---------- ------------ -------- --------
Earnings (loss) from
operations (Note B).......... $ 15,286 $ (1,636) $ (1,828) $ 8,005 $ (6,163) $ (5,787) $ (5,667)
Recapitalization costs (Note
C)........................... (2,430) (41,270) (1,099)
Affiliated bad debt write-off
(Note C)..................... (2,251)
Write-off of goodwill......... (76,151)
Loss on sale of assets and
termination fee (Note D)..... (25,537)
Other income (deductions), net
(Note E)..................... 618 (459) (4,142) (3,848) (2,092) (6,612) (6,491)
------------ ------------ -------- ---------- ------------ -------- --------
Net loss...................... $ (9,633) $ (2,095) $(84,551) $ (39,364) $ (8,255) $(12,399) $(13,257)
------------ ------------ -------- ---------- ------------ -------- --------
------------ ------------ -------- ---------- ------------ -------- --------
<CAPTION>
FOR THE THREE
QUARTERS ENDED
SEPTEMBER 30,
OPERATING INFORMATION ------------------
(NOTE A) 1992 1993
- ------------------------------ -------- --------
<S> <C> <C>
Operating revenues (Note B)... $121,329 $123,016
-------- --------
-------- --------
Earnings (loss) from
operations (Note B).......... $ (5,944) $ (3,091)
Recapitalization costs (Note
C)........................... (929) (1,719)
Affiliated bad debt write-off
(Note C).....................
Write-off of goodwill.........
Loss on sale of assets and
termination fee (Note D).....
Other income (deductions), net
(Note E)..................... (4,835) (4,806)
-------- --------
Net loss...................... $(11,708) $ (9,616)
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------- AT SEPTEMBER 30,
BALANCE SHEET INFORMATION (NOTE A) 1988 1989 1990 1991 1992 1993
- ---------------------------------------- --------- --------- --------- --------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Total assets............................ $ 382,710 $ 303,818 $ 252,066 $ 237,498 $ 227,676 $ 211,528
Long-term debt.......................... 319 671 1,153 457 269 169
Shareholders' equity.................... 271,494 186,943 139,324 126,925 113,668 104,052
</TABLE>
NOTES TO PIRL GROUP SELECTED HISTORICAL FINANCIAL DATA
NOTE A: Effective with Griffco's purchase of RII on November 15, 1988, and
according to an accounting practice known as "push-down" accounting, the PIRL
Group adjusted its net assets to reflect its portion of the cost of Griffco's
investment in RII. In doing so, the PIRL Group's assets and liabilities were
adjusted to their estimated fair values.
Note 2 of Notes to Combined Financial Statements of PIRL Group describes
another change in entity and related presentation resulting from the application
of "fresh start" accounting in connection with RII's emergence from bankruptcy
proceedings in 1990.
Changes in operations during the past five years include the following:
PIA's Dash 7 service commenced in March 1989 and PIA's amphibious airline
operation was sold in December 1990.
NOTE B: Operating revenues for 1988 include the sale of various residential
lots in The Bahamas for net proceeds of $1,520,000. Earnings from operations for
1988 include a net gain of $1,192,000 on those sales.
Operating revenues for 1989 include the sales of various parcels of vacant
land in The Bahamas for net proceeds of $733,000. Earnings from operations for
1989 include a net gain of $668,000 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.
NOTE C: See Note 2 of Notes to Combined Financial Statements of PIRL Group
for a discussion of these items in 1990.
NOTE D: This includes $25,000,000 which represents PIRL Group's allocated
portion of the fee paid to terminate the Comprehensive Services Agreement
between RII and the Trump Hotel Corporation.
NOTE E: Includes interest income and interest expense, net of capitalized
interest. For the period from November 15, 1988, $79,000 of interest was
capitalized. In 1989 $99,000 of interest was capitalized.
166
<PAGE>
PRO FORMA FINANCIAL DATA
Set forth below is certain unaudited pro forma financial information for
RII, RIH and PIRL. The pro forma balance sheet information as of September 30,
1993 gives effect to the Restructuring as if it occurred on that date. The pro
forma statements of operations information for the year ended December 31, 1992
and the three quarters ended September 30, 1993 gives effect to the
Restructuring as if it occurred on January 1, 1992. However, the pro forma
statements 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 statements are 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 New RIHF
Mortgage Notes and the New RIHF 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 RIHF Senior
Facility. If RIHF does draw upon the RIHF Senior Facility, RIHF will have an
additional note receivable from RIH (the RIH Senior Facility Note) in an amount
equal to its notes payable balance pursuant to the RIHF Senior Facility (the
RIHF Senior Facility Notes), and will have interest income from such note
receivable in an amount equal to the interest expense on its notes payable.
167
<PAGE>
RESORTS INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
-----------------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 71,026 $ 1,211(a) $ 20,000
3,008(b)
(45,245)(c)
(10,000)(e)
Restricted cash equivalents......................................... 8,076 (1,211)(a) 1,372
(1,099)(c)
(4,394)(d)
Receivables, net.................................................... 13,961 (7,380)(c) 6,581
Inventories......................................................... 8,484 (7,020)(c) 1,464
Prepaid expenses.................................................... 13,492 2,310(b) 11,190
(3,406)(c)
(1,206)(e)
----------- ----------------- -----------
Total current assets.............................................. 115,039 (74,432) 40,607
Property and equipment, net........................................... 454,055 (176,606)(c) 277,449
Deferred charges and other assets..................................... 12,220 (1,332)(c) 10,888
----------- ----------------- -----------
$ 581,314 $ (252,370) $ 328,944
----------- ----------------- -----------
----------- ----------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt, net........................... $ 429,500 $ (429,419)(c) $ 81
Accounts payable and accrued liabilities............................ 83,223 (40,471)(c) 38,344
(3,520)(d)
(888)(e)
----------- ----------------- -----------
Total current liabilities......................................... 512,723 (474,298) 38,425
----------- ----------------- -----------
Long-term debt, net................................................... 84,541 147,431(c) 231,972
----------- ----------------- -----------
Deferred income taxes................................................. 54,000 54,000
----------- -----------
Shareholders' equity (deficit):
Common stock........................................................ 202 170(c) 379
7(e)
Capital in excess of par............................................ 102,092 30,815(c) 133,965
1,058(e)
Accumulated deficit................................................. (166,926) 49,386(c) (129,797)
(874)(d)
(11,383)(e)
----------- ----------------- -----------
(64,632) 69,179 4,547
Note receivable from related party.................................. (5,318) 5,318(b) 0
----------- ----------------- -----------
Total shareholders' equity (deficit).............................. (69,950) 74,497 4,547
----------- ----------------- -----------
$ 581,314 $ (252,370) $ 328,944
----------- ----------------- -----------
----------- ----------------- -----------
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet of RII.
168
<PAGE>
RESORTS INTERNATIONAL, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE QUARTERS ENDED
DECEMBER 31, 1992 SEPTEMBER 30, 1993
------------------------------------------ ---------------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
Revenues:
Casino............................ $ 299,900 $ (66,120)(f) $ 233,780 $ 236,488 $(48,685)(f) $187,803
Rooms............................. 39,001 (30,235)(f) 8,766 27,992 (22,622)(f) 5,370
Food and beverage................. 48,907 (32,851)(f) 16,056 35,933 (23,593)(f) 12,340
Other casino/hotel revenues....... 22,028 (17,890)(f) 4,138 17,713 (14,412)(f) 3,301
Other operating revenues.......... 19,072 (19,072)(f) 0 13,704 (13,704)(f) 0
Real estate related............... 8,026 (213)(f) 7,813 6,028 6,028
---------- ------------- ---------- ---------- ----------- ------------
436,934 (166,381) 270,553 337,858 (123,016) 214,842
---------- ------------- ---------- ---------- ----------- ------------
Expenses:
Casino............................ 176,119 (48,272)(f) 127,847 141,600 (36,587)(f) 105,013
Rooms............................. 11,799 (8,217)(f) 3,582 8,064 (5,562)(f) 2,502
Food and beverage................. 42,819 (25,161)(f) 17,658 31,332 (17,902)(f) 13,430
Other casino/hotel operating
expenses......................... 64,654 (31,373)(f) 33,281 49,995 (24,247)(f) 25,748
Other operating expenses.......... 15,549 (15,549)(f) 0 11,122 (11,122)(f) 0
Selling, general and
administrative................... 73,262 (26,806)(f) 46,456 53,835 (18,319)(f) 35,516
Provision for doubtful
receivables...................... 4,047 (2,633)(f) 1,414 2,284 (1,748)(f) 536
Depreciation...................... 25,322 (13,792)(f) 11,530 20,942 (10,612)(f) 10,330
Real estate related............... 1,599 (230)(f) 1,369 1,114 1,114
Unallocated corporate expense..... 262 (15)(f) 1,806 (3,110) (8)(f) (1,822)
5,284(g) 3,596(g)
(3,725)(h) (2,300)(h)
---------- ------------- ---------- ---------- ----------- ------------
415,432 (170,489) 244,943 317,178 (124,811) 192,367
---------- ------------- ---------- ---------- ----------- ------------
Earnings from operations............ 21,502 4,108 25,610 20,680 1,795 22,475
Other income (deductions):
Interest income................... 4,969 6,391(f) 4,610 2,485 4,772(f) 2,194
(6,750)(i) (5,063)(i)
Interest expense.................. (40,856) 100(f) (25,999) (38,336) 34(f) (19,550)
32,488(j) 32,050(j)
(17,731)(k) (13,298)(k)
Amortization of debt discount..... (37,569) 35,745(j) (2,553) (37,320) 35,811(j) (2,113)
(729)(k) (604)(k)
Recapitalization costs............ (2,848) 1,099(f) 0 (4,879) 1,719(f) 0
1,749(l) 3,160(l)
---------- ------------- ---------- ---------- ----------- ------------
Earnings (loss) before income
taxes.............................. (54,802) 56,470 1,668 (57,370) 60,376 3,006
Income tax benefit (expense)........ 1,348 1,348 (1,000) (1,000)
---------- ------------- ---------- ---------- ----------- ------------
Net earnings (loss)................. $ (53,454) $ 56,470(m) $ 3,016 $ (58,370) $60,376(m) $ 2,006
---------- ------------- ---------- ---------- ----------- ------------
---------- ------------- ---------- ---------- ----------- ------------
Net earnings (loss) per share....... $ (2.65) $ .08 $ (2.90) $ .05
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
Weighted average number of shares
outstanding........................ 20,146 37,886(n) 20,157 37,897(n)
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
Ratio of earnings to fixed
charges............................ -- 1.1 -- 1.1
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
</TABLE>
See Notes to Pro Forma Consolidated Statements of Operations of RII.
169
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects the reclassification of the balance of the collateral account for
the Old 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 New Griffin Services Agreement by application of such amount
as a reduction of the Griffin Group Note balance and (ii) collection of the
remaining balance of the Griffin Group Note.
(c) Reflects the exchange, net of related tax effects, of the Old Series Notes
for the following:
(i) $125,000,000 principal amount of New RIHF Mortgage Notes;
(ii) $35,000,000 principal amount of New RIHF Junior Mortgage Notes, and
35,000 shares of RII Class B Common Stock to be issued therewith;
(iii) Excess Cash;
(iv) 17,025,000 shares of RII Common Stock, which will approximate 40% of
the outstanding RII Common Stock after giving effect to the
Restructuring, assuming the Griffin Warrants are exercised; and
(v) either the SIHL Aggregate Cash Purchase Price and the SIHL Series A
Shares or, if the SIHL Sale is not consummated on the Effective Date, the
PIRL Ordinary Shares. As none of these items are reflected in the
historical consolidated balance sheet of RII at September 30, 1993, the
pro forma adjustments recording this component of the exchange reflect
the elimination of balances of the PIRL Group, after adjustment of its
working capital to $12,000,000, of which cash is a minimum of $5,000,000.
The equity and/or assets and related liabilities of members of the PIRL
Group are to be purchased by SIHL in the SIHL Sale, or transferred to
PIRL through the PIRL Spin-Off.
(d) Reflects payment of expenses of the Litigation Trust and distribution of its
remaining restricted cash balance to holders of Old Series Notes. Also
reflects elimination of liability for Litigation Trust obligations.
(e) Reflects the write-off of prepaid recapitalization costs and settlement of
other recapitalization costs through cash payments and the issuance of
715,000 shares of RII Common Stock, 590,000 of which were accrued for at
September 30, 1993.
170
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS 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 is based on 3% of certain PIRL Group gross revenues. Assumes no
fees earned by RII pursuant to the Interim Management Agreement.
(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 RIB which is to be canceled pursuant to the terms of the
Restructuring.
(j) Reflects the elimination of interest expense and amortization of debt
discount on the Old Series Notes.
(k) Reflects interest expense and amortization of debt discount on the New RIHF
Mortgage Notes and the New RIHF 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
September 30, 1993, the operating loss on the Restructuring, which results
from the difference between the carrying value of the PIRL Group and its
fair value, would amount to approximately $65,000,000. For purposes of this
computation, fair value was estimated based on the proposed terms of the
SIHL Sale. Also assuming the Restructuring was effective on that date, the
extraordinary gain on the Restructuring would amount to approximately
$123,000,000.
(n) Reflects (i) the issuance of 715,000 shares of RII Common Stock to financial
advisers in settlement of certain recapitalization costs and (ii) the
issuance of 17,025,000 shares of RII Common Stock to holders of the Old
Series Notes, which will approximate 40% of the outstanding RII Common Stock
after giving effect to the Restructuring, assuming the Griffin Warrants are
exercised.
171
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
---------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ---------------- -----------
<S> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 30,820 $ (15,820)(a) $ 15,000
Receivables, net.................................................... 5,682 5,682
Interest receivable from affiliate.................................. 2,813 (2,813)(b) --
Note receivable from affiliate...................................... 50,000 (50,000)(b) --
Inventories......................................................... 1,464 1,464
Prepaid expenses.................................................... 7,260 2,310(c) 9,570
----------- ---------------- -----------
Total current assets.............................................. 98,039 (66,323) 31,716
Property and equipment, net........................................... 166,424 166,424
Deferred charges and other assets..................................... 10,888 10,888
----------- ---------------- -----------
$ 275,351 $ (66,323) $ 209,028
----------- ---------------- -----------
----------- ---------------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt................................ $ 81 $ 81
Accounts payable and accrued liabilities............................ 24,622 24,622
Notes payable to affiliate -- RIH Notes............................. 325,000 $ (325,000)(d) --
Due to parent company............................................... 51,325 2,310(c) --
(53,635)(e)
----------- ---------------- -----------
Total current liabilities......................................... 401,028 (376,325) 24,703
----------- ---------------- -----------
Notes payable to affiliate -- RIH Promissory Note and RIH Junior
Promissory Note, net................................................. 147,600(e) 147,600
---------------- -----------
Other long-term debt.................................................. 15 15
----------- -----------
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............................................ (15,820)(a) 215,139
(52,813)(b)
324,000(d)
(40,228)(e)
Retained earnings................................................... 53,737 (53,737)(e) --
----------- ---------------- -----------
Total shareholder's equity (deficit).............................. (145,092) 162,402 17,310
----------- ---------------- -----------
$ 275,351 $ (66,323) $ 209,028
----------- ---------------- -----------
----------- ---------------- -----------
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet of RIH.
172
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE QUARTERS ENDED
DECEMBER 31, 1992 SEPTEMBER 30, 1993
----------------------------------------- -----------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
----------- --------------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT RATIOS)
Revenues:
Casino.................. $ 233,780 $ 233,780 $ 187,803 $ 187,803
Rooms................... 8,766 8,766 5,370 5,370
Food and beverage....... 16,056 16,056 12,340 12,340
Other casino/hotel
revenues............... 4,138 4,138 3,301 3,301
----------- --------------- ----------- ----------- --------------- -----------
262,740 262,740 208,814 208,814
----------- --------------- ----------- ----------- --------------- -----------
Expenses:
Casino.................. 127,847 127,847 105,013 105,013
Rooms................... 3,582 3,582 2,502 2,502
Food and beverage....... 17,658 17,658 13,430 13,430
Other casino/hotel
operating expenses..... 33,281 33,281 25,748 25,748
Selling, general and
administrative......... 46,507 46,507 35,516 35,516
Provision for doubtful
receivables............ 1,414 1,414 536 536
Depreciation............ 11,402 11,402 10,264 10,264
----------- --------------- ----------- ----------- --------------- -----------
241,691 241,691 193,009 193,009
----------- --------------- ----------- ----------- --------------- -----------
Earnings from
operations............... 21,049 21,049 15,805 15,805
Other income (deductions):
Interest income......... 7,576 $ (6,750)(f) 826 5,631 $ (5,063)(f) 568
Interest expense........ (395) (17,731)(g) (18,126) (190) (13,298)(g) (13,488)
Amortization of debt
discount............... (729)(g) (729) (604)(g) (604)
Recapitalization
costs.................. (874) 874(h) -- (1,580) 1,580(h) --
----------- --------------- ----------- ----------- --------------- -----------
Earnings before income
taxes.................... 27,356 (24,336) 3,020 19,666 (17,385) 2,281
Income tax expense........ (10,942) 10,942(i) -- (400) (400)
----------- --------------- ----------- ----------- --------------- -----------
Net earnings.............. $ 16,414 $ (13,394) $ 3,020 $ 19,266 $ (17,385) $ 1,881
----------- --------------- ----------- ----------- --------------- -----------
----------- --------------- ----------- ----------- --------------- -----------
Ratio of earnings to fixed
charges.................. 21.5 1.2 23.3 1.2
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See Notes to Pro Forma Consolidated Statements of Operations of RIH.
173
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects the distribution to GRI of cash not needed for current operations.
GRI, in turn, is to distribute these funds to RII for its distribution of
Excess Cash to holders of Old Series Notes.
(b) Reflects (i) the assumption by GRI of RIB's note payable to RIH and accrued
interest thereon and (ii) RIH's distribution to GRI 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 New Griffin Services Agreement by application of such amount
as a reduction of the Griffin Group Note balance receivable by RII.
(d) Reflects GRI's exchange of the RIH Notes for RIH's issuance to GRI 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.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(f) Reflects the elimination of interest income on the note receivable from RIB,
which note is to be distributed to GRI 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.
(i) For the year ended December 31, 1992, reflects a change in method of
accounting for income taxes, as RIH adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" ("SFAS 109") in
the first quarter of 1993. See the "Income Tax Accounting" section of Note
14 of Notes to Consolidated Financial Statements of RIH.
174
<PAGE>
P. I. RESORTS LIMITED
(PIRL SPIN-OFF SCENARIO)
PRO FORMA CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
---------------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ---------------- -----------
<S> <C> <C> <C>
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 12,870 $ (757)(a) $ 12,063
(50)(b)
Restricted cash equivalents......................................... 1,099 1,099
Receivables, net.................................................... 7,380 7,380
Inventories......................................................... 7,020 7,020
Prepaid expenses.................................................... 5,221 (1,815)(a) 3,206
(200)(b)
----------- -------- -----------
Total current assets............................................ 33,590 (2,822) 30,768
Property and equipment, net........................................... 176,606 (64,590)(c) 112,016
Deferred charges and investment in joint venture...................... 1,332 (179)(c) 1,153
----------- -------- -----------
$ 211,528 $ (67,591) $ 143,937
----------- -------- -----------
----------- -------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt................................ $ 130 $ 130
Accounts payable and accrued liabilities............................ 18,688 $ (50)(b) 18,638
Due to parent company............................................... 35,676 (2,572)(a) --
(10,435)(d)
(22,669)(e)
Interest payable to affiliate....................................... 2,813 (2,813)(d) --
Note payable to affiliate........................................... 50,000 (50,000)(d) --
----------- -------- -----------
Total current liabilities....................................... 107,307 (88,539) 18,768
----------- -------- -----------
Long-term debt........................................................ 169 169
----------- -------- -----------
Shareholders' equity:
Capital stock:
RIB and U.S. Paradise Island Subsidiaries combined................ 33 (33)(f) --
P. I. Resorts Limited............................................. 50(f) 50
----------- -------- -----------
33 17 50
Capital in excess of par............................................ 147,546 (64,769)(c) 124,950
22,669(e)
(17)(f)
19,521(g)
Retained earnings (accumulated deficit)............................. (43,527) (200)(b) --
63,248(d)
(19,521)(g)
----------- -------- -----------
Total shareholders' equity...................................... 104,052 20,948 125,000
----------- -------- -----------
$ 211,528 $ (67,591) $ 143,937
----------- -------- -----------
----------- -------- -----------
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet of PIRL.
175
<PAGE>
P. I. RESORTS LIMITED
(PIRL SPIN-OFF SCENARIO)
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE THREE QUARTERS ENDED
DECEMBER 31, 1992 SEPTEMBER 30, 1993
------------------------------------------------ --------------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- ------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Casino........................... $ 66,120 $ 66,120 $ 48,685 $ 48,685
Rooms............................ 30,235 30,235 22,622 22,622
Food and beverage................ 32,851 32,851 23,593 23,593
Other casino/hotel revenues...... 17,890 17,890 14,412 14,412
Other operating revenues......... 19,072 19,072 13,704 13,704
Real estate related.............. 213 213
---------- ------------- ------------- ---------- ----------- ------------
166,381 166,381 123,016 123,016
---------- ------------- ------------- ---------- ----------- ------------
Expenses:
Casino........................... 48,272 48,272 36,587 36,587
Rooms............................ 8,217 8,217 5,562 5,562
Food and beverage................ 25,161 25,161 17,902 17,902
Other casino/hotel operating
expenses........................ 31,373 31,373 24,247 24,247
Other operating expenses......... 15,549 15,549 11,122 11,122
Selling, general and
administrative.................. 21,537 $ 3,725(h) 25,262 14,731 $ 2,300(h) 17,031
Provision for doubtful
receivables..................... 2,633 2,633 1,748 1,748
Depreciation..................... 13,792 (4,800)(i) 8,992 10,612 (3,700)(i) 6,912
Real estate related.............. 230 230
Management fee................... 5,284 (5,284)(j) 5,239 3,596 (3,596)(j) 3,886
5,239(k) 3,886(k)
---------- ------------- ------------- ---------- ----------- ------------
172,048 (1,120) 170,928 126,107 (1,110) 124,997
---------- ------------- ------------- ---------- ----------- ------------
Loss from operations............... (5,667) 1,120 (4,547) (3,091) 1,110 (1,981)
Other income (deductions):
Interest income.................. 359 359 291 291
Interest expense................. (6,850) 6,750(l) (100) (5,097) 5,063(l) (34)
Recapitalization costs........... (1,099) 1,099(m) -0- (1,719) 1,719(m) -0-
---------- ------------- ------------- ---------- ----------- ------------
Net loss........................... $ (13,257) $ 8,969 $ (4,288) $ (9,616) $ 7,892 $ (1,724)
---------- ------------- ------------- ---------- ----------- ------------
---------- ------------- ------------- ---------- ----------- ------------
Net loss per share................. $ (.86)(n) $ (.34)(n)
------------- ------------
------------- ------------
Weighted average number of shares
outstanding....................... 5,000(n) 5,000(n)
------------- ------------
------------- ------------
</TABLE>
See Notes to Pro Forma Consolidated Statements of Operations of PIRL.
176
<PAGE>
P. I. RESORTS LIMITED
GENERAL NOTE TO PIRL PRO FORMA FINANCIAL STATEMENTS
The historical financial information presented for PIRL is combined
financial information of the PIRL Group as, for the historical periods
presented, PIRL did not exist. The pro forma financial information presented for
PIRL assumes the PIRL Spin-Off, rather than the SIHL Sale, occurs. Such
information is presented on a consolidated basis as, pursuant to the PIRL
Spin-Off, PIRL is to become the parent of RIB and other subsidiaries of PIRL are
to acquire the assets and related liabilities of the U.S. Paradise Island
Subsidiaries.
The accounting principles, policies and estimates to be used in the
preparation of PIRL consolidated financial statements will be the responsibility
of PIRL's new management, which may or may not be the management of RII, who has
prepared these pro forma consolidated financial statements. Thus, PIRL
consolidated financial statements may be prepared on different bases utilizing
different accounting treatments and estimates from those used in the preparation
of these pro forma consolidated financial statements.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Reflects the transfer to RII of prepaid insurance not related to PIRL Group.
Also reflects the transfer of cash to RII in order to establish a working
capital balance of $12,000,000, of which cash is a minimum of $5,000,000, at
the time of the PIRL Spin-Off.
(b) Reflects the payment of PIRL Group's accrued recapitalization costs and the
write-off of PIRL Group's prepaid recapitalization costs.
(c) Effective with the PIRL Spin-Off, the balance sheet of PIRL will be adjusted
to its estimated fair value based on independent appraisals, discounted cash
flows and other appropriate studies and estimates. For purposes of this
presentation (i) the equity of PIRL was valued at $125,000,000 based on the
proposed terms of the SIHL Sale and (ii) it was assumed that all deferred
charges were written off, with the balance of the basis adjustment reflected
in property and equipment. Appraisals and other valuation procedures as of
the Effective Date may result in significantly different valuations.
(d) Reflects the assumption by GRI of (i) RIB's note payable to RIH and accrued
interest thereon and (ii) RIB's remaining intercompany payables to RII.
(e) Reflects the elimination of intercompany balances between RII and the U.S.
Paradise Island Subsidiaries which are not to be purchased or assumed by
PIRL's subsidiaries.
(f) Reflects (i) the issuance of PIRL Ordinary Shares to RII in exchange for the
capital stock of members of the PIRL Group and (ii) the consolidation of
PIRL Group with PIRL.
(g) Reflects adjustment of beginning retained earnings to zero.
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(h) Reflects the costs incurred by RII for services provided to PIRL Group
including accounting, data processing and other support services. These
costs do not include any costs of RII executives or costs of corporate
office functions such as treasury, financial reporting and tax services.
(i) Reflects decrease in depreciation expense due to the basis adjustment of
property and equipment. For purposes of this presentation it was assumed
that depreciation expense would decrease by 35%, which approximates the
percentage decrease in valuation of property and equipment. The depreciable
lives of different categories of property and equipment may vary greatly.
The actual decrease in depreciation expense may differ significantly from
that presented here as it will depend on estimated fair values attributed to
the individual components of property and equipment and the remaining
depreciable lives assigned to those components by the new management of
PIRL.
177
<PAGE>
(j) Reflects the elimination of the management fee charged to PIRL Group from
RII. Such fee is based on 3% of certain gross revenues.
(k) Reflects management fees to RII pursuant to the Interim Management
Agreement. For tax provision computations it was assumed that PIRL allocates
a portion of such fees to its subsidiaries which operate in the U.S.
(l) Reflects the elimination of interest expense on RIB's note payable to RIH
which is to be assumed by GRI.
(m) Reflects the elimination of recapitalization costs incurred in connection
with the Restructuring.
(n) Reflects the issuance of 5,000,000 PIRL Ordinary Shares to holders of the
Old Series Notes. Net earnings (loss) per share data could differ
significantly from those presented herein as appraisals, valuation
procedures and estimates used as of the Effective Date may result in
significantly different valuations and estimated remaining depreciable lives
from those used in preparing this pro forma information. Also, this pro
forma information assumes the PIRL Spin-Off, rather than the SIHL Sale,
occurs.
178
<PAGE>
MARKET PRICES OF OLD SERIES NOTES
The Old Series Notes are listed and traded on the AMEX. The following table
sets forth, for the periods indicated, the high and low trading price for each
$100 principal amount of Old Series Notes on the AMEX.
<TABLE>
<CAPTION>
OLD SERIES A NOTES OLD SERIES B NOTES
------------------ ------------------
<S> <C> <C> <C> <C>
FISCAL YEARS HIGH LOW HIGH LOW
------------------------- ------- ------- ------- -------
1991:
First Quarter.......... 48 7/8 34 54 35
Second Quarter......... 55 44 55 51
Third Quarter.......... 58 52 3/4 62 54 1/8
Fourth Quarter......... 62 56 63 3/4 57 1/2
1992:
First Quarter.......... 76 58 75 58 3/4
Second Quarter......... 70 1/4 63 73 1/2 65
Third Quarter.......... 68 1/2 60 1/2 69 3/4 60 1/2
Fourth Quarter......... 62 50 1/2 63 49 1/2
1993:
First Quarter.......... 68 56 1/2 67 3/4 55
Second Quarter......... 74 60 74 59 1/2
Third Quarter.......... 77 69 76 68 1/4
Fourth Quarter......... 72 66 72 64 1/2
1994:
First Quarter (through
January 28, 1994)..... 75 68 1/2 73 68
</TABLE>
On January 28, 1994, the last trading day prior to the date of this
Information Statement/ Prospectus for which closing prices were available, the
closing prices of the Old Series A Notes and the Old Series B Notes were $71.25
and $72.50, respectively.
MARKET PRICES OF RII COMMON STOCK
RII Common Stock is listed and traded on the AMEX. As of November 30, 1993,
there were 20,157,234 shares of RII Common Stock outstanding and held of record
by 2,003 holders. The following table sets forth, for the periods listed, the
high and low trading prices per share of RII Common Stock on the AMEX.
<TABLE>
<CAPTION>
FISCAL YEARS HIGH LOW
------------------------- ------- -------
<S> <C> <C>
1991:
First Quarter.......... 2 3/8 5/8
Second Quarter......... 2 1 3/8
Third Quarter.......... 2 1 1/2
Fourth Quarter......... 1 5/8 1
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 (through
January 28, 1994)..... 1 13/16 1 1/2
</TABLE>
On January 28, 1994, the last trading day prior to the date of this
Information Statement/ Prospectus, the closing price for RII Common Stock on the
AMEX was $1.5625. No cash dividends on the RII Common Stock were paid during any
of the periods listed above.
179
<PAGE>
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 (comprised of RII and its
subsidiaries), RIH, the Paradise Island Business (which, pursuant to the
Restructuring, will become the operations of PIRL) and RIHF. The Company's
Atlantic City casino/hotel segment and Resorts Casino Hotel are the operations
and property of RIH. The Company's Paradise Island properties, the Paradise
Island casino/hotel segment, the Paradise Island real estate related segment,
and the Company's airline operations or airline segment all are components of
the Paradise Island Business. For M D & A of RIH and the Paradise Island
Business, the relevant portions of the Company's M D & A should be read in
conjunction with the sections specifically designated as "RIH" or "Paradise
Island Business", as appropriate. M D & A of RIHF, which entity did not exist in
the historical periods discussed below, is limited to a prospective discussion
specifically identified in "Financial Condition -- Liquidity".
FINANCIAL CONDITION
LIQUIDITY
THE COMPANY. At September 30, 1993, the Company's current liabilities
exceeded its current assets by $397,684,000 because the Old Series Notes, which
are due April 15, 1994, are classified as current liabilities (due within one
year). The Company's working capital at September 30, 1993 included unrestricted
cash and equivalents of $71,026,000. A substantial amount of the unrestricted
cash and equivalents currently 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 Old Series Notes is approximately $482,000,000.
Assuming there are no principal retirements resulting from any asset sales, the
interest obligation due on April 15, 1994 will approximate $36,000,000. This
will result in a total obligation of approximately $518,000,000 at the maturity
date.
As of September 30, 1993, RII was not in compliance with its covenant
contained in the Old Series Note Indenture to maintain a Tangible Net Worth (as
defined in the Old Series Note Indenture) of at least $50,000,000. At that date,
RII's Tangible Net Worth was $45,625,000. Since that date, RII's Tangible Net
Worth has continued to decline.
Such non-compliance constitutes a "Default" under the Old Series Note
Indenture and will become an "Event of Default" under the Old Series Note
Indenture if RII fails to cure the Default within 30 days after receipt of a
formal notice from the Old Series Note Trustee. On January 3, 1994, the Old
Series Note Trustee furnished a notice of default to the Company stating that if
such Default were not cured within 30 days of receipt of the notice it would
become an Event of Default under the Old Series Note Indenture. RII will not be
able to cure the Default. Accordingly, RII anticipates that the Default will
become an Event of Default on February 2, 1994, the expiration of the 30 day
cure period.
When the Default become an Event of Default, the Old Series Note Trustee may
accelerate the maturity of the Old Series Notes by declaring all unpaid
principal of and accrued interest on the Old Series Notes due and payable or may
immediately foreclose upon the collateral securing the Old Series Notes pursuant
to the Old Security Documents. In addition, the holders of 40% in principal
amount of the Old Series Notes then outstanding may require the Old Series Note
Trustee to accelerate the maturity of the Old Series Notes. The collateral
securing the Old Series Notes includes the Resorts Casino Hotel, the outstanding
capital stock of RIH, GRI and all of RII's other direct and indirect domestic
subsidiaries, as well as the RIB Collateral. See "Risk Factors -- Certain
Defaults".
180
<PAGE>
The Company's ability to pay the principal balance due on the Old Series
Notes at maturity was premised on certain assumptions included in the Old Plan,
the most significant of which was the Company's ability to sell the Paradise
Island assets 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. 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 in other jurisdictions, the unforeseen
difficulty is selling the Paradise Island Business at the projected price, and
the impact of the conflict in the Persian Gulf in early 1991 and its effect on
transportation and tourism, all adversely affected the Company's ability to
achieve the assumptions in the Old Plan.
In addition, in late 1991 Carnival announced its plan to dispose of its
Crystal Palace, the Company's principal competition in The Bahamas. In early
1992, a portion of the Crystal Palace complex, which Carnival had been leasing
from HCB, was returned to HCB. Since that time as Carnival continued to operate
the remainder of the Crystal Palace complex under the Crystal Palace name, it
continued to seek a buyer for that property. In October 1993, Carnival announced
that it had signed an agreement in principle to sell an 81% interest in such
complex to a group of German investors.
Although the Company did not discontinue its efforts to sell the Paradise
Island assets, as the economy entered the recent recession, the events described
above related to the Crystal Palace unfolded, and the Company experienced a very
limited amount of interest by prospective purchasers of the Paradise Island
assets, it became apparent that proceeds of the magnitude originally
contemplated in 1990 would not be realizable prior to the maturity date of the
Old Series Notes. The only offer received by the Company prior to the proposed
Restructuring for its Paradise Island assets 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 Old 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. A sale of the Paradise
Island assets in October 1991 for $250,000,000 and application of the proceeds
to retire outstanding Old Series Notes would have reduced the amount of Old
Series Notes outstanding at maturity by approximately $348,000,000. Additional
reductions in principal amount of Old Series Notes outstanding at maturity could
have been achieved if the Company had sold all or a portion of its non-operating
real estate holdings in Atlantic City or if the Company's operations had
generated substantial excess cash flow. The Old Plan assumed that $50,000,000 of
such real estate assets would be sold and, for the first two years of the Old
Plan, operations would generate approximately $5,800,000 more cash flow, net of
capital expenditures, than was actually generated. For the years 1992 and 1993,
the Old Plan assumed the cash flow generated by the Resorts Casino Hotel, net of
capital expenditures, would be approximately $9,000,000 more than currently
projected.
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 Old Series
Notes (originally $325,000,000) increased due to Old PIK 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 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. The Paradise
Island Purchase Agreement restricts the Company's ability to solicit or consider
other offers for sale of the Paradise Island Business.
Since obligations of approximately $518,000,000 under Old Series Notes will
be due on April 15, 1994 and the Company currently does not have the means to
repay them, management is unable to predict the future liquidity of the Company
if the Restructuring is not accomplished by that date. If
181
<PAGE>
the Restructuring is accomplished, management believes that, although the
Restructuring includes the disposition of the Paradise Island Business, 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 will result in a significant reduction in the Company's
unrestricted cash and equivalents due to the distribution of Excess Cash to
holders of Old Series Notes, the Company will retain $20,000,000 of cash and
will have the $20,000,000 RIHF Senior Facility available for one year from the
Effective Date, should the Company have unforeseen cash needs. The Company
believes that the RIHF 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.
However, there can be no assurance that the Company will generate sufficient
cash from operations to repay, when due, the principal amount of the New RIHF
Mortgage Notes maturing in 2003, the principal amount of the New RIHF Junior
Mortgage Notes maturing in 2004 or the principal amount of the Showboat Notes
maturing in 2000. 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 New Debt Securities. Holders of the Old
Series Notes are cautioned not to place undue reliance on the forecasts. See
"Risk Factors -- Risks Relating to the Forecasts".
RIH. At September 30, 1993 RIH's current liabilities exceeded its current
assets by $302,989,000 because its notes payable to GRI in the amount of
$325,000,000, which are due upon demand after April 15, 1994, are classified as
current liabilities. RIH's working capital at September 30, 1993 included
$30,820,000 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 GRI will be canceled.
Also, RIH, through its affiliated notes payable to RIHF, will be the principal
source of funds for servicing the New RIHF Mortgage Notes and the New RIHF
Junior Mortgage Notes, as well as the RIHF 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.
PARADISE ISLAND BUSINESS. At September 30, 1993 the current liabilities of
the companies whose operations and properties compose the Paradise Island
Business, on a combined basis, exceeded their combined current assets by
$73,717,000. However, their combined current liabilities include a $50,000,000
demand note payable by RIB to RIH and $35,676,000 of advances from RII.
At September 30, 1993 these companies, on a combined basis, had $12,870,000
of unrestricted cash and equivalents. The day-to-day operations of the Paradise
Island Business require approximately $5,000,000 of currency and coin on hand
which amount varies by days of the week, holidays and seasons.
Thus, these companies' liquidity was satisfactory as long as RII advanced
funds if and when needed, RII made no attempt to collect on its advances, and
RIH did not demand payment of the note.
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As part of the Restructuring: (i) RIB's $50,000,000 demand note payable to
RIH, the interest accrued thereon and advances from RII are to be assumed by
GRI; (ii) the net intercompany liability from the U.S. Paradise Island
Subsidiaries to RII will not be assumed by subsidiaries of SIHL, should the SIHL
Sale occur, nor assumed by subsidiaries of PIRL, should the PIRL Spin-Off occur;
and (iii) at the time the equity and assets and liabilities of members of the
PIRL Group are transferred from the Company (through either the SIHL Sale or the
PIRL Spin-Off), the group's collective working capital will amount to
$12,000,000, of which at least $5,000,000 will be cash. Management of RII can
make no representations concerning the liquidity of PIRL and the companies to
become its subsidiaries on a prospective basis as they will no longer be
affiliated with RII.
RIHF. RIHF was formed for the purpose of issuing the New RIHF Mortgage
Notes and the New RIHF Junior Mortgage Notes as part of the Restructuring, as
well as the RIHF Senior Facility Notes to the extent issued. Also as part of the
Restructuring, RIHF is to obtain notes receivable from RIH with terms that
mirror the terms of the New Debt Securities and, to the extent issued, the RIHF
Senior Facility 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 have consistently 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 in 1990 for Resorts Casino Hotel amounted to $24,582,000
and included the completion of casino renovations which were started in 1989,
certain infrastructure improvements and the refurbishment of approximately 150
guest rooms in the East Tower. In 1991, capital additions amounted to
$22,734,000 as approximately 200 more 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 1990 for the Paradise Island properties amounted to
$9,324,000 and included refurbishment of guest rooms and the purchase and
installation of 265 new slot machines as replacements for older models. In 1991,
new carpeting was installed in the casino, a new casino management system was
implemented and certain kitchen areas and additional guest rooms were renovated
at a cost of $3,726,000. 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. The expenditures for both 1991 and 1992 were somewhat curtailed
from those originally planned, in response to the operating performance of the
Company's facilities on Paradise Island.
During the first three quarters of 1993, the Company expended approximately
$20,000,000 for capital improvements at Resorts Casino Hotel. The Company
converted certain back-of-the-house space into an 8,000-square-foot simulcast
facility, which houses eight betting windows 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 will replace older models, and
the new VIP slot and table player lounge, "Club Griffin", opened. In addition,
guest room refurbishments continued and a new centralized
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<PAGE>
mobile communications system was installed. In subsequent years recurring
capital expenditures to keep existing facilities competitive can be expected to
approximate $12,000,000 per year for the Resorts Casino Hotel.
During the first three quarters of 1993, the Company expended approximately
$3,000,000 on capital improvements at its facilities in The Bahamas. This
included the purchase of 110 slot machines as replacements for older models as
well as various 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 $5,585,000 in the first three quarters of 1993 and $2,460,000 in 1992 in
contemplation of a possible restructuring of the Old Series Notes, and payments
of $163,000, $2,954,000, $5,883,000 and $12,528,000 in the first three quarters
of 1993 and the years 1992, 1991 and 1990, 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.
Recapitalization costs in 1990 and 1992 were another significant use of funds,
as RIH pays RII its allocable portion (approximately one-third) of such costs as
they are incurred. Other uses of RIH's funds are for CRDA deposits and bond
purchases, as required by the New Jersey Casino Control Act, and repayments of
advances from RII.
PARADISE ISLAND BUSINESS. Expenditures for capital improvements noted above
have consistently been a large use of funds for the Paradise Island Business
during the periods discussed here. Recapitalization costs in 1990 and 1992 were
another significant use of funds, as RIB pays RII its allocable portion
(approximately one-third) of such costs as they are incurred. In the period of
1990 through August 31, when these companies had more available cash,
$14,878,000 was used to repay advances to RII and other affiliates.
CAPITAL RESOURCES AND OTHER SOURCES OF FUNDS
THE COMPANY. Since 1990, operations have been the most significant source
of funds to the Company.
In accordance with the Old Plan, in September 1990, RII received $12,345,000
cash from Merv Griffin as partial payment for the issuance of 4,400,000 shares
of RII Common Stock. An additional $2,655,000 was received in October 1990 on
behalf of certain holders of the Company's previously outstanding public debt in
consideration for the issuance to them of an aggregate of 500,000 shares of RII
Common Stock.
The Griffin Group owes the Company $5,318,333 under the Griffin Group Note.
The next payment required under the New Griffin Services Agreement ($2,310,000)
is to be applied to reduce the balance due under the Griffin Group Note. The
then remaining balance of the Griffin Group Note is to be collected by RII and
distributed to holders of Old Series Notes as part of Excess Cash.
As part of the Restructuring, the Company will have the $20,000,000 RIHF
Senior Facility available for one year from the Effective Date for the Company's
working capital and general corporate purposes. The Company believes that the
RIHF 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.
RIH. Since 1990 operations have been the most consistent significant source
of funds for RIH. Advances from RII and affiliates have also been a source of
funds in certain periods.
PARADISE ISLAND BUSINESS. Since 1990 cash flows from operations have been
adversely affected by a number of factors which are discussed below under
"Results of Operations". During 1990 and
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1991 sales of assets were a significant source of funds. These included assets
previously used in PIA's amphibious airline operation ($6,652,000), parcels of
land on Paradise Island ($3,979,000), and helicopters and other aircraft owned
by ANTL which had been primarily used in the Company's Atlantic City
casino/hotel operations ($2,736,000).
RESULTS OF OPERATIONS
GENERAL
Included in the discussion below are comments on the Paradise Island
Business which, pursuant to the Restructuring, is to be disposed of. The
Paradise Island Business includes the casino/hotel on Paradise Island, The
Bahamas, the real estate located on Paradise Island, The Bahamas and the
Company's airline operations.
REVENUES
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------------------------
1990 FOR THE THREE QUARTERS
------------------------ ENDED SEPTEMBER 30,
THROUGH FROM ------------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Casino/hotel:
Atlantic City, New Jersey:
Casino....................................... $ 139,466 $ 66,259 $ 218,881 $ 233,780 $ 180,510 $ 187,803
Rooms........................................ 5,093 2,599 8,074 8,766 6,688 5,370
Food and beverage............................ 10,492 5,320 16,406 16,056 12,801 12,340
Other casino/hotel........................... 3,948 2,041 4,113 4,138 3,081 3,301
----------- ----------- ----------- ----------- ----------- -----------
158,999 76,219 247,474 262,740 203,080 208,814
----------- ----------- ----------- ----------- ----------- -----------
Paradise Island, The Bahamas:
Casino....................................... 43,321 19,940 61,003 66,120 44,171 48,685
Rooms........................................ 31,840 9,435 33,173 30,235 23,984 22,622
Food and beverage............................ 29,317 11,207 36,053 32,851 25,157 23,593
Other casino/hotel........................... 11,584 4,895 17,563 17,890 13,457 14,412
----------- ----------- ----------- ----------- ----------- -----------
116,062 45,477 147,792 147,096 106,769 109,312
----------- ----------- ----------- ----------- ----------- -----------
Total casino/hotel......................... 275,061 121,696 395,266 409,836 309,849 318,126
----------- ----------- ----------- ----------- ----------- -----------
Real estate related:
Atlantic City, New Jersey...................... 4,759 2,426 7,542 7,813 5,845 6,028
Paradise Island, The Bahamas................... 3,721 212 213 213
----------- ----------- ----------- ----------- ----------- -----------
8,480 2,638 7,542 8,026 6,058 6,028
----------- ----------- ----------- ----------- ----------- -----------
Airline.......................................... 11,071 6,083 18,234 22,483 16,841 16,618
Other segments................................... 1,183 27 97 162 124 109
Intersegment eliminations........................ (1,823) (853) (2,896) (3,573) (2,618) (3,023)
----------- ----------- ----------- ----------- ----------- -----------
Revenues from operations......................... $ 293,972 $ 129,591 $ 418,243 $ 436,934 $ 330,254 $ 337,858
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
Note 2 of Notes to Consolidated Financial Statements of RII describes a
change in entity and related presentation for periods presented.
FIRST THREE QUARTERS 1993 COMPARED TO FIRST THREE QUARTERS 1992
CASINO/HOTEL -- ATLANTIC CITY, NEW JERSEY
Casino revenues were up $7,293,000 for the first three quarters of 1993.
This increase was due to slot win, poker revenue and simulcast commissions. Slot
win increased as the effect of an increase in
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<PAGE>
amounts wagered by patrons offset a decrease in the hold percentage (ratio of
casino win to total amount wagered for slots or total amount of chips purchased
for table games). The Company began offering poker and simulcast betting on June
28, 1993.
Although total occupancy was relatively flat for the first three quarters of
1993 as compared to the same period of 1992, the number of complimentary rooms
provided to casino patrons increased. The reduced occupancy from rooms sold
resulted in lower room revenues and contributed to the decrease in food and
beverage revenues.
CASINO/HOTEL -- PARADISE ISLAND, THE BAHAMAS
Casino revenues increased by $4,514,000 for the first three quarters of
1993. This improvement was due to increases in both slot win and table game win.
The increased table game win resulted primarily from the effect of increased
amounts wagered by patrons and, to a lesser extent, from an improved hold
percentage.
Room revenues and food and beverage revenues were lower in the first three
quarters of 1993 due to a reduction in occupancy.
The Restructuring contemplates the disposition of the Company's Paradise
Island assets and operations.
REAL ESTATE RELATED
The Paradise Island real estate related revenues in 1992 resulted from the
sale of a residential lot on Paradise Island.
AIRLINE
Airline revenues decreased $223,000 for the first three quarters of 1993.
This resulted as decreased revenues from contracted training, flight and
maintenance work for non-affiliated parties more than offset a slight increase
in passenger revenues. Though passenger revenues were up slightly for the first
three quarters of 1993, competition for passenger revenues increased with the
addition of a new air shuttle service between Miami and Nassau in March 1993.
The Restructuring contemplates the disposition of the Company's airline
operations.
COMPARISON OF THE YEARS 1992, 1991 AND 1990
CASINO/HOTEL -- ATLANTIC CITY, NEW JERSEY
Casino revenues from the Resorts Casino Hotel increased by $14,899,000 in
1992 and $13,156,000 in 1991. For both 1992 and 1991, the increase resulted
primarily from increased slot revenues. The improvement in slot revenues
resulted from increases in amounts wagered by patrons, while the slot hold
percentage declined. This reflects management's decision to decrease the slot
hold percentage in order to attract more slot players and encourage increased
slot play per player as well as marketing programs which targeted slot players.
In 1991 the Company's table game revenues were up slightly. In 1992 the
Company's table game revenues declined as did the entire Atlantic City casino
industry's. The Company's decline of 6.5% was greater than the industry's
decline of 3.3% and can be attributed to a decrease in amounts wagered and, to a
lesser extent, a decrease in the table game hold percentage. The Company is
adjusting its marketing focus in an effort to recapture some of its lost market
share in table revenues by increasing the use of star headliners and changing
the revue show more frequently.
Also affecting the comparison of gaming revenues between 1991 and 1990 is
the fact that portions of the casino were closed for renovations during the
first half of 1990.
CASINO/HOTEL -- PARADISE ISLAND, THE BAHAMAS
Revenues from the Company's Paradise Island casino/hotel operations
decreased by $696,000 in 1992 and by $13,747,000 in 1991.
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<PAGE>
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 revenues 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 -- New Providence
Island area were down in 1992 by 10%, which management of the Company attributes
to the continuing economic recession and reduced air service available. Air
arrivals to this area were already down in 1991 as compared to the prior year
due to factors noted below. In addition, the Company's competitors reduced room
rates in 1992 and the Company, in an effort to maintain occupancy, did the same.
In 1991, all facets of the Company's Paradise Island operations suffered due
to the economic recession experienced during that year. Also, the tour and
travel industry in general was significantly affected by the Persian Gulf
conflict in early 1991. The impact of this on the Company's Bahamian operations
was severe, as this occurred during the first quarter, which is typically the
period when the Company realizes its highest revenues and earnings in The
Bahamas, due to seasonal factors.
REAL ESTATE RELATED
Atlantic City real estate related revenues in 1992, 1991 and 1990 represent
rent from ACS pursuant to the Showboat Lease. Commencing July 1, 1990, such rent
receipts were restricted for the payment of interest on the Showboat Notes. See
Note 7 of Notes to Consolidated Financial Statements of RII.
The Paradise Island real estate related revenues in 1992 resulted from the
sale of a residential lot on Paradise Island. Substantially all the Paradise
Island real estate related revenues for 1990 resulted from the sale of
approximately seven acres of beach front property near the Company's Ocean Club
Golf & Tennis Resort on Paradise Island.
AIRLINE
Airline revenues increased $4,249,000 in 1992 and $1,080,000 in 1991. The
increase in 1992 was 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.
The increase in 1991 resulted from an increase in passengers flown due to
reasons noted above as well as an increase in average fare.
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<PAGE>
CONTRIBUTION TO CONSOLIDATED LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEM
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------------------------
1990 FOR THE THREE QUARTERS
-------------------------- ENDED SEPTEMBER 30,
THROUGH FROM ----------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
------------ ------------ ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Casino/hotel:
Atlantic City, New Jersey.................. $ 4,179 $ 2,412 $ 14,817 $ 21,051 $ 19,421 $ 15,804
Paradise Island, The Bahamas*.............. 7,351 (6,166) (5,707) (5,592) (6,132) (2,974)
------------ ------------ ---------- ---------- ---------- ----------
11,530 (3,754) 9,110 15,459 13,289 12,830
------------ ------------ ---------- ---------- ---------- ----------
Real estate related:
Atlantic City, New Jersey.................. 2,803 1,947 5,911 6,425 4,741 4,900
Paradise Island, The Bahamas............... 188 59 (17) (17)
------------ ------------ ---------- ---------- ---------- ----------
2,991 2,006 5,911 6,408 4,724 4,900
------------ ------------ ---------- ---------- ---------- ----------
Airline*..................................... 5 (4) 83 77 314 (14)
Other segments............................... (68) (156) (148) (70) (53) (94)
Unallocated corporate expense................ (918) 694 1,080 (372) 1,833 3,058
------------ ------------ ---------- ---------- ---------- ----------
Earnings (loss) from
operations.................................. 13,540 (1,214) 16,036 21,502 20,107 20,680
Other income (deductions):
Interest income............................ 2,318 1,740 4,824 4,969 2,311 2,485
Interest expense........................... (434) (5,476) (31,157) (40,856) (30,795) (38,336)
Amortization of debt discount.............. (8,581) (32,105) (37,569) (26,509) (37,320)
Recapitalization costs..................... (187,018) (2,848) (2,337) (4,879)
------------ ------------ ---------- ---------- ---------- ----------
Loss before income taxes and extraordinary
item........................................ $ (171,594) $ (13,531) $ (42,402) $ (54,802) $ (37,223) $ (57,370)
------------ ------------ ---------- ---------- ---------- ----------
------------ ------------ ---------- ---------- ---------- ----------
</TABLE>
* The Paradise Island casino/hotel segment subsidized the operation of PIA in
the following amounts for the periods indicated: through August 31, 1990 --
$1,320,000; from September 1, 1990 -- $571,000; 1991 -- $760,000; and first
three quarters of 1993 -- $813,000.
- ------------------------
Note 2 of Notes to Consolidated Financial Statements of RII describes a
change in entity and related presentation for periods presented.
FIRST THREE QUARTERS 1993 COMPARED TO FIRST THREE QUARTERS 1992
CASINO/HOTEL -- ATLANTIC CITY, NEW JERSEY
Casino, hotel and related operating results decreased by $3,617,000 in the
first three quarters of 1993 as increased revenues were offset by a net increase
in operating expenses. For the first three quarters of 1993 the most significant
increases in operating expenses were casino promotional costs ($4,800,000),
payroll and related costs ($3,600,000), casino operating costs ($1,700,000),
fees to the Griffin Group ($1,700,000) and depreciation ($1,600,000). The
increase in casino promotional costs was due primarily to a new program 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. Payroll
and related costs and casino operating costs increased due primarily to the
increased staffing levels and other operating costs associated with the new
simulcast and poker facility. The fees paid to the Griffin Group are for
services rendered under the New Griffin Services Agreement described in Note 17
of Notes to Consolidated Financial Statements of RII. The most significant cost
reductions were in the performance incentive bonus accrual ($2,900,000) and food
and beverage costs ($1,200,000).
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<PAGE>
For a discussion of competition in the Atlantic City casino/hotel industry
see "Business of the Company -- Atlantic City -- Competition".
CASINO/HOTEL -- PARADISE ISLAND, THE BAHAMAS
Casino, hotel and related operating results improved by $3,158,000 for the
first three quarters of 1993. This resulted from increased revenues and a net
decrease in operating expenses. The most significant decrease in operating
expenses was in payroll and related costs ($1,800,000) as staffing levels were
reduced in response to lower occupancy. The most significant increases in costs
were in gaming taxes and fees ($900,000) and in the subsidy of PIA ($813,000).
Gaming taxes and fees increased relative to the increase in casino revenues. The
subsidy of PIA, RII's subsidiary which provides air service between south
Florida and the Company's Paradise Island Airport, increased as PIA's operating
results declined. See "Airline" below.
For a discussion of competition in The Bahamas see "Business of the Company
- -- The Bahamas -- Competition".
AIRLINE
Airline operating results before the subsidy from the Paradise Island
casino/hotel segment decreased by $1,141,000 for the first three quarters of
1993 as results of both the scheduled and charter flights and the contract work
for non-affiliated parties were down ($600,000 and $500,000, respectively). A
slight increase in flight revenues was more than offset by a net increase in
operating, particularly maintenance, costs. The decrease in contract work
largely resulted from a decline in revenues from such activity.
OTHER INCOME (DEDUCTIONS)
THE COMPANY. The increase in interest expense for the first three quarters
of 1993 was due to the net effect of (i) increased principal amounts of debt
outstanding, as the Company has issued additional Old Series Notes to satisfy
its interest obligations on the Old Series Notes, (ii) an increase in the stated
interest rate on the Old Series A Notes and (iii) changes in the market value of
the Old Series Notes, as the Company records interest at the estimated market
value of additional Old Series Notes to be issued in satisfaction of its
interest obligations. Interest expense is expected to increase significantly in
the next several months as, subsequent to October 15, 1993, the Company will be
recording interest expense on the Old Series Notes at the stated rate in lieu of
a discounted rate to reflect market value, as the Company's option to make Old
PIK Payments is no longer available.
Amortization of debt discounts increased primarily due to the additional
discounts associated with Old Series Notes issued in satisfaction of interest
obligations.
The Company's interest expense and amortization of debt discounts are
expected to be significantly less after the Restructuring.
RIH. RIH's interest income has been largely attributable to the $50,000,000
note receivable from RIB, which bears interest at 13.5% per year. This note is
to be cancelled 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 New RIHF Mortgage Notes and the New RIHF
Junior Mortgage Notes and, to the extent issued, the RIHF Senior Facility Notes,
through notes payable to RIHF, the terms of which will mirror the terms of such
debt of RIHF.
COMPARISON OF THE YEARS 1992, 1991 AND 1990
CASINO/HOTEL -- ATLANTIC CITY, NEW JERSEY
Casino, hotel and related operating results improved by $6,234,000 for 1992
and by $8,226,000 for 1991.
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<PAGE>
For 1992 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 1991 increased revenues discussed above were partially offset by a net
increase in operating expenses. The most significant increases in operating
expenses were management fees ($2,500,000), performance incentive bonuses
($2,000,000), advertising ($1,400,000), provision for doubtful receivables
($1,400,000) and food and beverage ($1,300,000). The increase in management fees
resulted from a change in the Company's method of allocating overhead expenses
from corporate to the operating properties, which was effective September 1,
1990. The increase in advertising cost was primarily attributable to a new
television campaign. The increase in food and beverage costs resulted primarily
from increased patronage of the Beverly Hills Buffet. The Beverly Hills Buffet
offers all you can eat for a price which is on average below the cost to the
Company. This reflected the Company's change in marketing emphasis, whereby the
Company targeted slot and mid-level players by featuring programs that provide
attractive values in food, beverage and entertainment.
For 1991 the most significant decreases in operating expenses were
depreciation ($3,800,000) and entertainment ($2,700,000). The reduction in
depreciation was due to the revaluation of the Company's assets in conjunction
with the reorganization in 1990. The reduction in entertainment costs resulted
from a shift in emphasis from headliner shows to a revue format in conjunction
with the change in the targeted markets discussed above.
CASINO/HOTEL -- PARADISE ISLAND, THE BAHAMAS
Casino, hotel and related operating results improved by $115,000 for 1992
and decreased by $6,892,000 for 1991. For 1992 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."
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 to
attract a greater number of patrons to its facilities.
For 1991 decreased revenues discussed above were partially offset by a net
decrease in operating expenses. The most significant reductions in operating
expenses were payroll and related costs ($4,000,000), food, beverage and other
direct costs ($1,900,000), casino promotional costs ($1,800,000) and a reduction
in the subsidy of PIA ($1,131,000). Due to the factors discussed above, in early
1991 occupancy levels at the Company's Paradise Island properties were such that
the Company implemented a cost containment program which included a reduction in
room availability, reduced operating schedules of the casino and food and
beverage outlets, and payroll reductions. By the summer of 1991, the Company's
facilities returned to their normal operating schedules. The reduction in casino
promotional costs is due primarily to increased efforts to monitor
complimentaries given to casino customers. The subsidy of PIA decreased as PIA's
operating results improved due to its previously noted increased revenues. The
most significant increase in costs for 1991 was depreciation ($1,800,000).
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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. The
favorable results in 1991 also reflect the elimination of property tax expense
on a tract of land which the Company had under option. Such option was
terminated in 1990.
The Paradise Island real estate related earnings represent the net loss in
1992 and the net gain in 1990 on the sales of Paradise Island properties
mentioned above.
AIRLINE
Airline operating results before the subsidy from the Paradise Island
casino/hotel segment increased by $754,000 in 1992 and by $1,213,000 in 1991.
For 1992 the increase resulted primarily from the contract work for
non-affiliated parties noted above. For 1991 the increase was primarily due to
the increase in passenger revenues described above.
UNALLOCATED CORPORATE EXPENSE
Unallocated corporate expense increased by $1,452,000 in 1992 and decreased
by $1,304,000 in 1991.
Effective September 1, 1990, the Company changed its method of allocating
certain overhead costs from corporate to certain operations. This new allocation
method, based on a percentage of certain gross revenues, accounted for a
favorable variance in unallocated corporate expense of $2,300,000 in 1991. This
was partially offset by an increase in 1991 in the cost of directors and
officers liability insurance ($900,000).
In 1992, the Company recorded charges 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. The impact of this
charge was partially offset by 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).
OTHER INCOME (DEDUCTIONS)
THE COMPANY. The Company did not accrue interest or amortize discounts on
its previously outstanding public debt during 1990 while it was involved in
bankruptcy proceedings. RII began accruing interest and amortizing discounts on
its Old Series Notes and the Showboat Notes effective October 1, 1990, the
initial distribution date of those securities.
The increase in interest expense in 1992 was due to a combination of: (i) an
increase in the stated interest rates of the Old Series Notes; (ii) increased
principal amounts of debt outstanding, as RII has issued additional Old Series
Notes to satisfy its interest obligations on the Old Series Notes; and (iii)
changes in the market value of the Old Series Notes, as RII records interest at
the estimated market value of additional Old Series Notes to be issued in
satisfaction of its interest obligations. Amortization of debt discounts
increased primarily due to the additional discounts associated with Old Series
Notes issued in satisfaction of interest obligations.
Recapitalization costs in 1992 resulted from the Company's retention of
financial advisers to assist in the development and analysis of financial
alternatives which would enable the Company to reduce its future debt service
requirements. For a description of recapitalization costs in 1990 see Note 2 of
Notes to Consolidated Financial Statements of RII.
RIH. For a description of recapitalization costs and the affiliated bad
debt write-off in 1990, see Note 2 of Notes to Consolidated Financial Statements
of RIH.
PARADISE ISLAND BUSINESS. For a description of recapitalization costs and
the affiliated bad debt write-off in 1990, see Note 2 of Notes to Combined
Financial Statements of PIRL Group.
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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 1990 through 1992 and the section on "Income Taxes" in Note 1
of Notes to Consolidated Financial Statements of RII for a discussion of the
anticipated effects of the 1993 adoption of a new standard of accounting for
income taxes.
RIH. See Note 11 of Notes to Consolidated Financial Statements of RIH for a
discussion of RIH's income tax expense for the years 1990 through 1992 and Note
14 for a discussion of the effects of the 1993 adoption of a new standard of
accounting for income taxes.
PARADISE ISLAND BUSINESS. See Note 10 of Notes to Combined Financial
Statements of PIRL Group for a discussion of income tax accounting for the
combined group and the section on "Income Taxes" in Note 1 of Notes to Combined
Financial Statements of PIRL Group for a discussion of the anticipated effects
of the 1993 adoption of a new standard of accounting for income taxes.
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IDENTIFIABLE ASSETS, DEPRECIATION AND CAPITAL ADDITIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
------------------------------------------
LESS ACCUMULATED
DEPRECIATION AND
GROSS VALUATION
ASSETS ALLOWANCES NET ASSETS DEPRECIATION
----------- ---------------- ----------- -------------
CAPITAL
ADDITIONS
-----------
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
----------- -------- ----------- ------------- -----------
----------- -------- ----------- ------------- -----------
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1991 DECEMBER 31, 1991
------------------------------------------ --------------------------
<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>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1990
------------------------------------------------------
FROM THROUGH FROM THROUGH
DECEMBER 31, 1990 SEPTEMBER 1 AUGUST 31 SEPTEMBER 1 AUGUST 31
------------------------------------------ ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Casino/hotel:
Atlantic City, New Jersey..... $ 173,527 $ (7,671) $ 165,856 $ 1,902 $ 10,772 $ 5,307 $ 19,275
Paradise Island, The Bahamas.. 198,825 (8,256) 190,569 3,878 8,153 4,320 5,004
----------- -------- ----------- ------------- ----------- ------------- -----------
372,352 (15,927) 356,425 5,780 18,925 9,627 24,279
----------- -------- ----------- ------------- ----------- ------------- -----------
Real estate related:
Atlantic City, New Jersey..... 113,376 (6) 113,370 6 151
Paradise Island, The Bahamas.. 34,075 34,075
----------- -------- ----------- ------------- ----------- ------------- -----------
147,451 (6) 147,445 6 151
----------- -------- ----------- ------------- ----------- ------------- -----------
Airline......................... 11,568 (319) 11,249 370 746 35 56
Other segments.................. 2,067 (116) 1,951 8 91
Corporate (A)................... 51,744 (68) 51,676 68 134 1 86
----------- -------- ----------- ------------- ----------- ------------- -----------
$ 585,182 $ (16,436) $ 568,746 $ 6,232 $ 20,047 $ 9,663 $ 24,421
----------- -------- ----------- ------------- ----------- ------------- -----------
----------- -------- ----------- ------------- ----------- ------------- -----------
<FN>
- ------------------------------
(A) Includes cash equivalents, restricted cash equivalents not pledged for
operations, and other corporate assets.
</TABLE>
Note 2 of Notes to Consolidated Financial Statements of RII describes a
change in entity and related presentation for periods presented.
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BUSINESS OF THE COMPANY
ATLANTIC CITY
GAMING FACILITIES
The Resorts Casino Hotel has a casino of approximately 60,000 square feet
and a racetrack simulcast betting and poker area of approximately 8,000 square
feet. In July 1993 these gaming areas contained 51 blackjack tables, 25 poker
tables, 13 dice tables, 10 roulette tables, 4 baccarat tables, 2 pai gow poker
tables, 1 big six wheel, 1 sic bo table, 1,859 slot machines and 8 betting
windows 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. The
Resorts Casino Hotel is owned and operated by RII's subsidiary, RIH.
During 1992, the Company had a total gross win (the amount won before all
costs and expenses, including taxes) from its Atlantic City casino of
$233,780,000. This compares to total gross wins of $218,881,000 for 1991 and
$205,725,000 for 1990.
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 -- New Jersey" 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 1900's, 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,
three cocktail and entertainment lounges, an indoor swimming pool and health
club, and retail stores. The complex also has approximately 50,000 square feet
of convention facilities, including ten large meeting rooms and a
16,000-square-foot ballroom.
During 1992, the Company added two floors to its multi-storied parking
garage and converted it from a valet-parking facility into a self-parking
facility which accommodates approximately 700 vehicles. This parking facility is
connected to the Resorts Casino Hotel by a covered walkway. The Company believes
that the conversion to self-parking and the remodeling of its garage encourages
increased patronage and enhances the Company's competitive position. The Company
continues to offer valet parking at nearby, uncovered leased lots that provide
space for approximately 700 automobiles and has an additional leased lot which
provides self-parking for approximately 100 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 1992, 1991 and 1990 the average occupancy rates, including
complimentary rooms which were primarily provided to casino patrons, were 93%,
90% and 84%, respectively. The average occupancy rate and weighted average daily
room rental, excluding complimentary rooms, were 57% and $61, respectively, for
1992. This compares with 51% and $67, respectively, for 1991, and 55% and $66,
respectively, for 1990.
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 the first
three quarters of 1993 the Company expended approximately $20,000,000 for
capital improvements at the Resorts Casino Hotel. The Company converted certain
back-of-the-house space into a simulcast facility, which houses eight betting
windows 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 will replace older models, and the new VIP
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slot and table player lounge, "Club Griffin", opened. In addition, guest room
refurbishments continued and a new centralized mobile communications system was
installed. From 1989 through 1992 capital additions at Resorts Casino Hotel
totalled approximately $80,000,000. 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 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 anticipated 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.
EMPLOYEES
During 1992, the Company had a maximum of approximately 3,700 employees
located in Atlantic City. The Company believes that its employee relations are
satisfactory.
In Atlantic City, approximately 1,400 of the Company's employees are
represented by unions. Of these employees, approximately 1,200 are represented
by the Hotel Employees and Restaurant Employees International Union Local 54,
whose contract expires in September 1994. There are several other union
contracts covering Atlantic City union employees.
In Atlantic City, all 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.
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. Merv Griffin also produced live at
Resorts Casino Hotel "Merv Griffin's New Year's Eve Special 1993" which was
broadcast nationwide. Mr. Griffin is obligated to participate in the operations
and marketing of the Company until expiration of the New Griffin Services
Agreement in September 1996.
The Company's marketing strategy is designed to increase the attractiveness
of the Resorts Casino Hotel to the mid and premium-level slot and table game
players. For slot players, the Company has: (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 program has also been retargeted to attract the mid and
premium players by increasing the use of star headliners and changing the revue
show more frequently in 1993 than had been done in recent years. The revue that
had been offered since January 1993 was replaced with a new revue that opened in
September 1993.
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
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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 which it expects to
complete in 1994. The State of New Jersey acquired the airport terminal and
surrounding property from Atlantic City in 1991.
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 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.
PROPOSED NEW CONVENTION CENTER
In January 1992, the State of New Jersey enacted legislation that authorizes
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 proposed convention
center will have 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 anticipated that it will be completed within three years.
The convention center has been reported to be part of a broader plan that
includes 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 new convention center. 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 proposed
convention center and airport expansion projects.
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 768,000 square feet
of casino space, 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 Casino has recently announced plans, although
preliminary, for a sizable addition to its casino gaming floor. Also, several
competitors are expected to add simulcasting rooms which are permitted to house
poker and 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 277,000 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.
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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 would compete with casinos located in other
U.S. jurisdictions, particularly those close to New Jersey, which may adopt
legislation approving casino gaming. Colorado, Illinois, Iowa, Louisiana,
Mississippi, Missouri and South Dakota have legalized, and several other states
and the District of Columbia are currently considering legalizing limited
land-based and riverboat casino gaming. Since 1988 Indian tribes have negotiated
at least 87 compacts with 19 states to operate legalized gambling, not including
bingo parlors. In January 1993, a gaming casino on an Indian reservation located
in Connecticut was authorized to operate slot machines. Previously, the 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 in New York State on the St. Regis Mohawk reservation near the
Canadian border, 50 miles southwest of Montreal. Under New York state law, poker
and slot machines currently are not permitted. Due to the proximity to Atlantic
City, the casinos in Connecticut and New York may have, to an indeterminate
extent, an adverse effect on the Atlantic City casino industry.
SEASONAL FACTORS
The Company's business activities are strongly affected by seasonal factors
that influence the New Jersey beach trade. Higher revenues and earnings are
typically realized from the Company's Atlantic City operations during the middle
third of the year.
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 23% of table game volume at the Resorts
Casino Hotel in 1992, 24% in 1991 and 26% in 1990. Gaming receivables, net of
allowance for uncollectible amounts, were $4,503,000, $5,586,000 and $6,949,000
as of December 31, 1992, 1991 and 1990, 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 has approximately 515 guest rooms, a 60-lane bowling
center, a 64,000-square-foot casino and a 15,000-square-foot simulcast betting
and poker room. The Showboat Casino is situated on approximately ten acres which
are owned by the Company and leased to ACS pursuant to the Showboat Lease, dated
October 26, 1983, as amended, which is a 99-year net lease. The Showboat Lease
provided for an initial annual rental, which commenced in March 1987, of
$6,340,000, subject to future annual adjustment based upon changes in the
consumer price index. The rental for the 1993 lease year is $8,118,000.
The Showboat Notes issued by RII are First Mortgage Non-Recourse
Pass-Through Notes due June 30, 2000, and are secured and serviced by the
Showboat Lease. All lease payments thereunder 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 all the Company's 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
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aforesaid, ACS would have an option to acquire ownership of the ten 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 New Jersey's 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 personnel trained and
supervised by the Company. Prior to employment in Atlantic City, 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. Security at the Resorts Casino Hotel utilizes
closed circuit video cameras to monitor the casino floor and money counting
areas. The count of money from gaming is observed daily by state government
representatives.
OTHER PROPERTIES
The Company owns the Non-Operating Real Property, including approximately 90
acres of land in Atlantic City at various sites which could be developed and are
available for sale. This acreage primarily consists of vacant land in Great
Island, Rum Point, the Marina Area and waterfront parcels in the inlet sections.
See also "The Company's Properties -- Atlantic City -- Other Properties".
THE BAHAMAS
GENERAL
The Company, through Bahamian subsidiaries, owns and operates a major
destination resort on Paradise Island, The Bahamas. The Company's Paradise
Island Resorts consist of three hotel complexes: (i) the Paradise Island Resort
& Casino; (ii) the Ocean Club Golf & Tennis Resort; and (iii) the Paradise
Paradise Beach Resort. The Paradise Island Resort & Casino includes two hotel
towers totaling 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
Company also owns and operates convention facilities, shops, restaurants, bars
and lounges, tennis courts, swimming pools and an 18-hole golf course. It owns
approximately six miles of beach and water frontage and other resort facilities
on Paradise Island. Its holdings on Paradise Island, including undeveloped real
estate, represent 562 acres, or almost 70%, of the acreage of the entire island.
In addition, certain of the U.S. Paradise Island Subsidiaries provide
support services for the Paradise Island Business. RRII provides reservation
services to RIB's hotels and to PIA. PIVI is a wholesale tour company whose
primary objective is the production of incremental tour revenues to
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the Paradise Island Resorts. PIVI provides air inclusive packages primarily to
Paradise Island for individual tourists, groups, conventions and casino patrons.
ISI is a centralized purchasing company which obtains supplies for the Paradise
Island Resorts.
Since 1990, given the Company's intention to sell its Paradise Island assets
and in light of the operating performance of those properties (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Results of Operations -- Casino/hotel -- Paradise Island, The Bahamas"), capital
expenditures there were essentially limited to maintenance of existing
facilities. Approximately $3,000,000 was expended for maintenance projects
during the first three quarters of 1993. No significant improvements to
facilities are planned.
Paradise Island is part of the Commonwealth of The Bahamas. It is situated
immediately across Nassau Harbour, north of the capital city of Nassau, New
Providence Island, and is connected to Nassau by a two-lane toll bridge and
ferry boat service. The entire island is 5.5 miles in length, two-thirds of a
mile wide at its widest point, and totals 826 acres.
PARADISE ISLAND CASINO
The Paradise Island casino is the center of the Paradise Island Resort &
Casino complex. It is connected by arcades with shops to the 682-room Britannia
Towers and the 504-room Paradise Towers. The one-story and part-mezzanine casino
building situated between the two hotel towers contains nearly 165,000 square
feet, including the 30,000-square-foot casino gaming area. It also houses
several restaurants and bars; the Le Cabaret Theatre, which also serves meals, a
central commissary, employee cafeteria, shops and casino offices.
At July 31, 1993, the Paradise Island casino gaming area contained 58
blackjack tables, 10 dice tables, 10 roulette tables, 2 big six wheels, 2
baccarat tables and 799 slot machines. During 1992, the Company's Paradise
Island casino had a total gross gaming win of $66,120,000, compared to
$61,003,000 and $63,261,000 in 1991 and 1990, respectively.
PARADISE ISLAND RESORT AND HOTEL FACILITIES
The Company's resort and hotel facilities on Paradise Island include the
Paradise Island Resort & Casino, the Ocean Club Golf & Tennis Resort and the
Paradise Paradise Beach Resort, with a total of 1,357 guest rooms, suites and
villas, 15 restaurants, 13 bars and lounges, 21 tennis courts, 4 swimming pools,
an 18-hole golf course, approximately six miles of beach and water frontage, and
other resort facilities and land holdings.
The Paradise Island Resort & Casino is the largest hotel complex in The
Bahamas. It includes a 1,186-room hotel and casino complex with two swimming
pools, restaurants, lounges, tennis courts, convention facilities, ocean beach,
shops and other resort facilities. This complex includes the 682-room Britannia
Towers and the 504-room Paradise Towers. The total floor area of the two hotel
towers, villas, casino and restaurants exceeds 1,000,000 square feet.
The Ocean Club Golf & Tennis Resort is an exclusive, luxury resort facility
geared toward the affluent visitor. The complex comprises 71 guest rooms
including villas and cabanas, an 18-hole golf course, tennis courts, a swimming
pool, ocean beach and dining and cocktail facilities.
The Paradise Paradise Beach Resort includes 100 guest rooms, a restaurant,
lounge, swimming pool and ocean beach. The complex attracts value-conscious
tourists.
Consistent with industry practice, the Company reserves a portion of its
hotel rooms and suites as complimentary accommodations for high-level wagerers.
During 1992, 1991 and 1990 the average occupancy rates, including complimentary
rooms which were primarily provided to casino patrons, were 68%, 71% and 77%,
respectively. The average occupancy rate and weighted average daily room rental,
excluding complimentary rooms, were 54% and $108, respectively, for 1992. This
compares with 58% and $111, respectively, for 1991, and 66% and $123,
respectively, for 1990.
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EMPLOYEES
During 1992, the Company had a maximum of approximately 3,100 employees
located in The Bahamas. The Company believes that its employee relations are
satisfactory.
In The Bahamas, approximately 1,900 of the Company's employees are
represented by The Bahamas Catering and Allied Workers Union, whose contract
expires in January 1995. In light of the downturn in business being experienced
by hotels in the Paradise-New Providence Island area, the Company, along with
other affected operators in that area, did not pay wage and pension increases
scheduled for January 1993 as they were negotiating with the union for certain
concessions under the contract. Since then the union filed claims against the
employers and, after attempting to mediate the dispute, the Minister of Labour
referred it to arbitrators. The dispute remains unsettled, negotiations among
the parties continue and no work interruptions have been experienced.
In The Bahamas, all casino employees also must be licensed and all
non-Bahamian employees must apply for and receive work permits issued by the
Government of The Bahamas. From time to time this requirement has created
difficulties in hiring certain skilled non-Bahamian employees. These work
permits are generally subject to renewal annually.
MARKETING
The Company's marketing strategy for the Paradise Island properties has
recently increased its focus on the casino rather than primarily promoting the
hotels and related amenities. Through direct mailings to those known to be
casino players, both in the United States and abroad, and increased casino
promotional activities, the Company hopes to attract more casino customers to
Paradise Island. In addition, the Paradise Island complex has well-established
ties with numerous tour and travel wholesalers, as well as many repeat patrons.
Merv Griffin is involved in the development of marketing campaigns promoting
the Paradise Island facilities. During December 1993, Merv Griffin hosted his
fifth annual "Star Sports Spectacular" which featured celebrities from the
entertainment and sports fields who participated with the Company's casino
guests in golf and tennis tournaments. It is expected that Merv Griffin will not
be associated with the Paradise Island Business subsequent to the Restructuring.
See "Competition" for information regarding the Company's competitive position
in The Bahamas.
TRANSPORTATION FACILITIES
AIRLINE TRANSPORTATION. Several major airlines provide regularly scheduled
service to Nassau International Airport. In March 1993 Jet Shuttle began a new
air shuttle service between Miami and Nassau, and in 1992 American Eagle
initiated service to Nassau; however, in recent years overall air transportation
to Nassau has been reduced significantly. This has resulted from the failure of
certain major United States air carriers, financial difficulties experienced by
Bahamasair, the national air carrier of The Bahamas, as well as the current
state of the economy, particularly in the northeastern United States. The
reduction in airline service to Nassau has adversely affected the Company's
Paradise Island operations.
Most patrons arriving by air use the Nassau International Airport. However,
the Company also owns and operates a "STOL" airport facility, including a
3,000-foot runway, airport terminal and customs building, situated on 63 acres
of land located at the southeast corner of Paradise Island. PIA, a subsidiary of
RII, is currently the second largest passenger carrier to The Bahamas. PIA
provides scheduled service between Paradise Island and Miami, Ft. Lauderdale and
West Palm Beach, Florida, and offers a program of casino night flights to and
from Ft. Lauderdale, Florida. PIA operates one Company-owned and four leased
Dash 7 STOL aircraft. See "Airline Operations".
CRUISE SHIPS. The Company believes that a significant portion of the cruise
ship tourists currently docking at New Providence Island visit the Company's
facilities on Paradise Island. The Bahamian government operates 11 cruise ship
berths in Nassau Harbour.
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COMPETITION
The Company's Paradise Island facilities compete with other hotels and
resorts on Paradise Island, elsewhere in The Bahamas, the southeastern United
States, the Caribbean and Mexico, as well as with cruise ships serving these
areas. As new hotels are constructed or new cruise ships are introduced into
service in these areas, competition can be expected to increase.
The Company's properties principally compete with a casino/hotel and resort
complex on Cable Beach, New Providence Island, comprised of Carnival's Crystal
Palace, with 860 guest rooms, a 33,500-square-foot casino, a show theater and
other amenities, and the HCB-owned Radisson with 679 guest rooms. Carnival had
operated the entire complex prior to February 1992, as until that time Carnival
leased the property now known as the Radisson from HCB. In October 1993,
Carnival announced that it had signed an agreement in principle to sell an 81%
interest in the Crystal Palace complex to a group of German investors. This
investor group has announced that it plans to increase the marketing of the
Crystal Palace complex in Europe and will invest additional capital in the
complex to establish it as a high-end resort destination. Although there can be
no assurance that such sale will be completed, an upgraded Crystal Palace
complex may adversely affect the Company's operations in The Bahamas. Carnival
Air Lines, affiliated with Carnival, provides charter air service from the
continental United States to Nassau International Airport.
In addition to the Crystal Palace casino, the Bahamian government is
obligated to facilitate the grant of a casino license to the operators of the
Ramada Resort situated on the southwestern end of New Providence Island. The
Bahamian government is also obligated to support a proposal for the operation of
a slot casino at the Radisson resort on Cable Beach.
There are a total of approximately 7,600 rooms for overnight guests on New
Providence Island and Paradise Island combined. Of such rooms, approximately
3,100 are located in hotels on Paradise Island, including 1,357 in hotels owned
and operated by the Company. In recent years the Company's Bahamian hotel and
casino operations have experienced increased competition from the new, larger
cruise ships which have begun serving this area as these cruise ships have
effectively provided more available rooms. Also, the Company's Paradise Island
casino competes with two casinos on Grand Bahama Island, with casinos located on
Caribbean islands and, to a lesser extent, with Atlantic City and Las Vegas
casino/hotels.
Competition among hotels and resort properties is, in general, based upon:
the attractiveness of the facilities and the relative convenience of available
transportation to destinations; the presence of a casino; service; quality and
price of rooms, food and beverages; convention facilities; and entertainment.
The Company believes that its Paradise Island resort facilities, because of
location, variety of hotels and restaurants, beaches, available sports
activities and overall quality, compete strongly with other resort facilities.
SEASONAL FACTORS
The Company's business activities are strongly affected by seasonal factors
that affect the Caribbean tourist trade. Higher revenues and earnings are
typically realized from the Company's operations in The Bahamas during the first
quarter of the year.
CERTAIN ARRANGEMENTS WITH THE BAHAMIAN GOVERNMENT
The Company, through certain of its Bahamian subsidiaries, and HCB have
entered into various agreements, effective in 1978, pursuant to which the
Paradise Island casino facility is leased to HCB, and PEL, an indirect
subsidiary of RII, is retained by HCB to manage and operate the casino. These
agreements, as subsequently amended, are referred to herein as the "Paradise
Island Agreements".
Under the Paradise Island Agreements, the casino facility is leased to HCB
at an annual rental of $500,000 and PEL has an exclusive right to manage and
operate the casino through December 31, 1997, subject to an annual finding of
fitness. The lease of the casino facility was extended to December 31, 1997, by
a 1988 letter agreement between RIB, an indirect Bahamian subsidiary of RII
which,
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with its subsidiaries, owns and operates the Company's Bahamian properties, and
HCB. In consideration of the right to manage and operate the casino and to use
the gaming facilities, PEL pays HCB an annual operating fee of $5,000,000 plus
15% of gross revenues from casino gaming in excess of $25,000,000. PEL also pays
all gaming taxes.
Pursuant to amendments of PEL's casino license, the Company, among other
things, is required to: (i) continue its efforts to achieve a prompt sale of the
Paradise Island Business to a purchaser satisfactory to the Government of The
Bahamas and HCB; (ii) consult with HCB in advance with respect to material
aspects of any contemplated disposition of the Paradise Island Business; (iii)
provide quarterly reports to HCB describing the progress made by the Company in
implementing plans for separating various functions relating to its Bahamian
operations from the Company's non-Bahamian operations; (iv) provide to HCB
various financial reports; and (v) reimburse the Government of The Bahamas and
HCB for legal and advisory fees incurred by them relative to any restructuring
of the Company.
SECURITY CONTROLS
Gaming at the Paradise Island casino is conducted by personnel trained and
supervised by the Company. In The Bahamas all casino personnel must be cleared
by the Bahamian Government. 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.
Security at the Paradise Island casino utilizes closed circuit video cameras to
monitor the casino floor and money counting areas. The count of money from
gaming is closely observed daily by Bahamian government representatives.
LAND AND OTHER ASSETS
The Company, through Bahamian subsidiaries, owns 562 acres on Paradise
Island. Approximately 218 acres of such land is not used in the Company's
operations and is available for sale or joint venture. The Company has prepared
a master plan for the island, which includes properties available for hotel,
commercial, condominium and time-share land use. The Company also owns roads and
other land improvements on Paradise Island and a water and sewage system which
serves, at stated charges, substantially all facilities on Paradise Island. The
water and sewage system presently is operating near full capacity and
significant additional development on the island will require expansion of the
system. BDL also owns approximately 1,555 acres of undeveloped and 120 acres of
partially developed land located on Little Hawksbill Creek, several miles from
Freeport, Grand Bahama Island. See "The Company's Properties -- The Bahamas --
Other Properties".
Approval by the Government of The Bahamas is required for foreign ownership
of real property in The Bahamas. In addition, any foreign investment in The
Bahamas requires exchange control approval by the Central Bank of The Bahamas.
No sale of any property located in The Bahamas to non-Bahamian nationals may be
completed until such governmental approvals are obtained.
AIRLINE OPERATIONS
The Company's airline operations are entirely conducted by PIA and are
described under "The Bahamas -- Transportation Facilities".
FOREIGN OPERATIONS
A significant portion of the Company's operating assets are located in The
Bahamas. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Revenues,
- -- Contribution to Consolidated Loss Before Income Taxes and Extraordinary
Item", and the table titled "Identifiable Assets, Depreciation and Capital
Additions". The Company believes that its business experience in The Bahamas has
been satisfactory. Changes in applicable taxes, duties, immigration policies,
exchange control regulations, policies concerning investments, ownership and
transfer of real estate, or legislation could adversely affect the Company. In
August 1992 a new Prime
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Minister was elected in The Bahamas. The former Prime Minister had been in
office for 25 years. Management believes that the change in government will
favorably impact the tourism industry in The Bahamas over the long term.
From time to time, Bahamian subsidiaries of the Company have made, and in
the future may make, legal political contributions in The Bahamas solely for
general goodwill purposes without any understandings or agreements as to the
receipt by the Company of any favors, privileges or other special treatment in
its dealings with the Government of The Bahamas.
REGULATION AND GAMING TAXES AND FEES
NEW JERSEY
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 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.
Significant regulatory changes in 1992 and 1993 included the approval by the
Casino Control Commission of simulcast betting, poker and 24-hour gaming, as
well as the adoption of guidelines to evaluate the financial stability of casino
licensees. To establish evidence of financial stability, casino licensees must,
among other things, demonstrate the ability to make necessary capital and
maintenance expenditures and to adequately manage debts as they come due.
CASINO LICENSE. 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 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
1992, RIH's license was renewed until February 26, 1994. RIH's renewed license
is subject to several conditions, including: (i) the submission of additional
monthly financial reports to the Casino Control Commission and the Division of
Gaming Enforcement; (ii) monthly notification to such bodies of any significant
deviation from certain financial forecasts and related information provided by
the Company in connection with the 1992 renewal proceedings; (iii) monthly
notification of any significant variance in operating results from the prior
year; and (iv) quarterly reporting on its progress in the development of a
financing plan regarding the Old Series Notes due in April 1994 and by June 30,
1993 submission of an outline of terms to satisfy that obligation.
The Company has advised the Casino Control Commission of its intention to
implement the Restructuring and the likelihood that the Plan will not be
consummated prior to the expiration of the current two year term of RIH's casino
license as of February 26, 1994. The Casino Control Commission will conduct a
license renewal hearing in the normal course prior to the scheduled expiration
date and will consider in its deliberations the factors here described.
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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.
Each holder of securities issued by RII or RIHF must be qualified by the
Casino Control Commission, unless the qualification requirement is waived. The
Casino Control Commission has the authority to waive the qualification
requirement for any security holder who does not have the ability to control the
issuer or elect one or more directors thereof. The Casino Control Act provides
that anyone who holds 5% or more of the securities of a publicly traded holding
company or affiliate, such as RII and RIHF, is presumed to have to qualify. In
addition, the Casino Control Commission has the authority to waive the
qualification requirement for an "institutional investor" (as defined in the
Casino Control Act) who holds less than 10% of the equity securities of a
publicly traded holding company of a casino licensee, such as RII, or holds less
than 20% of the outstanding debt securities and less than 50% of any issue of
debt securities issued by a publicly traded affiliate, such as RIHF, if the
institutional investor holds the securities for investment purposes only and has
no intention of influencing or affecting the affairs of the issuer and there is
no reason to believe that the institutional investor may be found unqualified.
If a security holder is required to qualify, the security holder must submit an
application for qualification or dispose of its securities within certain time
periods. An application for qualification must include a trust agreement whereby
the security holder places its securities in trust with a trustee qualified by
the Casino Control Commission. If the security holder is found qualified, the
trust agreement will be terminated. If the security holder is not found
qualified, the trust will become operative and the trustee will be empowered
with all rights of ownership pertaining to such security holder's securities,
including the right to sell the securities. In the event of such a sale, the
former security holder will not be entitled to receive an amount in excess of
the lesser of the actual costs at which the securities were acquired or the
value of the securities at the time the trust became operative. The Company will
apply for waiver of the qualification requirement for all security holders who
appear to be eligible for same.
If the Casino Control Commission finds that an individual owner or holder of
any securities of a corporate licensee, its holding company or affiliate 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, its holding company or affiliate who is required to be qualified
is found disqualified, it will be unlawful for the security holder to: (i)
receive any dividends or interest upon any such securities; (ii) exercise,
directly or through any trustee or nominee, any right conferred by such
securities; or (iii) receive any remuneration in any form from the corporate
licensee for services rendered or otherwise. The Restated Certificate of
Incorporation of RII provides, and the Amended RII Certificate of Incorporation
will provide, that all securities of RII and any of its subsidiaries 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.
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The Casino Control Act permits the Casino Control Commission to appoint a
conservator to operate the casino and hotel facility if a license is revoked,
not renewed or 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 what 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 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
----------------------------------------------
1990 1991 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Gaming tax....................................................... $ 16,351,000 $ 17,384,000 $ 18,788,000
License, investigation, inspection and other fees................ 5,014,000 4,730,000 4,417,000
-------------- -------------- --------------
$ 21,365,000 $ 22,114,000 $ 23,205,000
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
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. 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.
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, a public authority created under the Casino Control Act,
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 1992, 1991 and 1990 amounted to $2,930,000,
$2,706,000 and $2,542,000, respectively, and have been satisfied by deposits
made with the CRDA. At December 31, 1992, the Company held $4,873,000 face
amount of bonds issued by the CRDA and had $9,921,000 on deposit with the CRDA.
The CRDA bonds issued through 1992 have interest rates ranging from 5.8% to 7%
and have repayment terms of between 41 and 50 years.
THE BAHAMAS
LICENSING. PEL is currently licensed to operate the Paradise Island casino
under the Gaming Act of the Commonwealth of The Bahamas, which regulates the
operation of casinos in The Bahamas. The Gaming Act established a "Gaming Board"
which observes the count of all gaming receipts,
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prescribes accounting and control procedures and regulates personnel and
security matters. Gaming licenses are renewable annually. The Gaming Board also
is empowered to revoke or suspend any gaming license if a violation occurs.
PEL's gaming license is subject to a number of conditions relating to PEL's
activities and operations. Under the casino license, PEL and its parent entities
are required to observe certain operating requirements and to provide certain
financial and other information to the Government of The Bahamas on a continuing
basis. See "The Bahamas -- Certain Arrangements with The Bahamian Government".
LICENSE FEES AND TAXES. Currently, the Gaming Act provides for an annual
basic license fee of $200,000 plus a tax of 25% on all gaming win up to
$10,000,000, 20% on the next $6,000,000 of win, 10% on the next $4,000,000 of
win, and 5% on all win over $20,000,000, with a minimum tax of $2,000,000
payable each year on gaming win.
The following table summarizes, for the periods shown, the taxes and fees
paid or accrued by the Company under the Gaming Act and the Paradise Island
Agreements.
<TABLE>
<CAPTION>
FOR THE YEAR
----------------------------------------------
1990 1991 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Gaming tax....................................................... $ 6,269,000 $ 6,153,000 $ 6,411,000
Basic license and operating fees................................. 10,957,000 10,610,000 11,382,000
-------------- -------------- --------------
$ 17,226,000 $ 16,763,000 $ 17,793,000
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
THE COMPANY'S PROPERTIES
The Company's casino, resort hotel and related properties in Atlantic City
and The Bahamas, together with certain other properties, described above 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.
RII's office in North Miami, Florida, is located in a three-story building owned
by RII.
The Company's principal properties, including the Resorts Casino Hotel, the
Paradise Island Resort & Casino, the Ocean Club Golf & Tennis Resort and the
Paradise Paradise Beach Resort (but not the land underlying the Showboat Casino
or the Showboat Lease), and, in each case, any additions or improvements to
those properties, together with all related furniture, fixtures, machinery and
equipment, directly or indirectly comprise the collateral securing the Old
Series Notes. The Showboat Lease, including the land subject to the lease,
secures the payment of the Showboat Notes.
ATLANTIC CITY -- OTHER PROPERTIES
The Company owns the Non-Operating Real Property in Atlantic City including
various sites that could be developed and are available for sale. The
Non-Operating Real Property consists 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 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. In 1987, the Atlantic City Board of Education
(the "Board of Education") acquired a 48-acre parcel of non-wetland property
which was part of the Great Island Property owned by RII that originally
comprised
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600 acres. The acquisition was pursuant to eminent domain proceedings brought by
the Board of Education. In 1987 RII received $5,382,500 of the total estimated
compensation of $5,720,000 for the 48-acre parcel taken by the Board of
Education. The difference of $337,500 was set aside for estimated tidelands
claims by the State of New Jersey. In December 1990, a jury decided that the
value of the property was approximately $7,537,000. In 1992, RII received
$1,817,000 of additional compensation plus interest thereon.
ESS 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 ten
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 proposed convention center.
THE BAHAMAS -- OTHER PROPERTIES
The Company, through RIB, owns 562 acres on Paradise Island. RIB has
prepared a land use master plan for the island. See "-- The Bahamas -- Land and
Other Assets" for a description of the acreage available for development and/or
sale and the preparation of a master plan for Paradise Island. The Company
recently sold a .63 acre tract of land on Paradise Island. The Company does not
anticipate any significant real estate sales on Paradise Island while it is
seeking to implement the Restructuring.
The Company, through BDL, also owns approximately 1,555 acres of undeveloped
and 120 acres of partially developed land located on Little Hawksbill Creek,
several miles from Freeport, Grand Bahama Island.
As previously indicated, approval by the Bahamian Government is required for
foreign ownership of real property in The Bahamas. In addition, any foreign
investment in The Bahamas requires exchange control approval by the Central Bank
of The Bahamas. No sale of any property located in The Bahamas to non-Bahamian
nationals may be completed until such governmental approvals are obtained.
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MANAGEMENT OF RII
DIRECTORS AND EXECUTIVE OFFICERS
The directors of RII are:
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE
- ---------------------------------------- --- --------------
<S> <C> <C>
Merv Griffin 68 1988
Chairman of the Board of Directors
Antonio C. Alvarez II 45 1990
Warren Cowan 72 1990
Thomas E. Gallagher 49 1993
Joseph G. Kordsmeier 54 1991
Paul C. Sheeline 72 1990
</TABLE>
Pursuant to RII's 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. Kordsmeier and Sheeline comprise Class I, Messrs. Alvarez and
Gallagher comprise Class II, and Messrs. Griffin and Cowan comprise Class III.
Upon completion of the Restructuring, the Board of Directors will consist of
Messrs. Merv Griffin, Thomas Gallagher, Jay Green (age 46) and William Fallon
(age 40), and, as Class B directors, Messrs. Charles Masson (age 40) and Vincent
Naimoli (age 56):
RIH's casino license from the Casino Control Commission requires that (i) at
least two members of the RII Board of Directors be independent, outside
directors, and (ii) the audit committee of the RII Board of Directors consist
entirely of independent, outside members of the Board of Directors. The audit
committee of the RII Board of Directors consists of two independent directors,
Messrs. Kordsmeier and Sheeline. Messrs. Griffin, Sheeline and Gallagher are
members of the Executive Committee of the Board of Directors. The Executive
Committee was formed in November 1993.
The executive officers of RII are:
<TABLE>
<CAPTION>
EXECUTIVE
NAME AGE OFFICER SINCE
- ---------------------------------------- --- --------------
<S> <C> <C>
Merv Griffin 68 1988
Chairman of the Board of Directors
Christopher D. Whitney 49 1988
Office of the President, Executive Vice
President, Chief of Staff, General
Counsel and Secretary
Matthew B. Kearney 53 1982
Office of the President, Executive Vice
President -- Finance, Chief Financial
Officer and Treasurer
David G. Bowden 52 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 the Hanlon Termination Agreement, David P. Hanlon resigned as of
October 31, 1993, from his positions as President, Chief Executive Officer and a
director of RII. Pending completion of the Restructuring, RII will be managed by
an Office of the President comprised of Mr. Whitney and Mr. Kearney. It is
anticipated that RII's post-Restructuring board of directors will commence a
search for a new Chief Executive Officer upon completion of the Restructuring.
208
<PAGE>
BUSINESS EXPERIENCE
The principal occupations and business experience for the last five years or
more of the directors, nominees and executive officers of RII are as follows:
MERV GRIFFIN -- Chairman of the Board of RII since November 1988; Chairman
of Griffco 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 since 1964; 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 Chief Executive
Officer of January Enterprises, presently a wholly owned indirect subsidiary of
Sony Pictures Entertainment, Inc.
ANTONIO C. ALVAREZ II -- Chief Executive Officer of Phar-Mor Inc., a
discount drugstore chain, since February 1993; President and Chief Operating
Officer of Phar-Mor Inc. from September 1992 to February 1993; Chairman of
Alvarez & Marsal, a financial advisory firm, since September 1983; Vice
President and Controller of Norton Simon Inc. from December 1981 to September
1983; prior thereto, Partner, Coopers & Lybrand.
WARREN COWAN -- Public relations consultant since July 1992; Chairman of
Rogers & Cowan, Inc., a public relations firm, from 1986 until July 1992;
President of Rogers & Cowan, Inc., from 1964 until 1986.
THOMAS E. GALLAGHER -- President and Chief Executive Officer of the Griffin
Group since April 1, 1992 and a director of Players International, Inc., a
riverboat gaming company, since December 10, 1992. For the preceding 15 years,
Mr. Gallagher was a partner of the law firm of Gibson, Dunn & Crutcher.
JOSEPH G. KORDSMEIER -- President and sole owner of Kordsmeier Company,
consultants to the lodging industry, since 1982; Senior Vice President of Sales
and Marketing Worldwide and other positions with Hyatt Hotels from 1972 to 1982;
Mr. Kordsmeier also serves on the Advisory Board to Language Line, a division of
AT&T.
PAUL C. SHEELINE -- Chairman of Vale Petroleum Corporation from 1989 to
1991; Consultant to Intercontinental Hotels Corporation ("Intercontinental")
from 1986 to June 1990; Chief Executive Officer of Intercontinental from 1971 to
1985. In addition, Mr. Sheeline through 1992 was Of Counsel to the Washington,
D.C. law firm of Verner, Liipfert, Bernhard, McPherson and Hand.
WILLIAM FALLON -- Senior Vice President of R.M. Bradley & Co. Inc., a real
estate brokerage and management company, since 1988; a director of Massachusetts
Certified Development Corporation, a small business development company, from
1987.
CHARLES MASSON -- President of McCloud Partners, a private advisory firm,
since June 1, 1993; a director of Salomon Brothers Inc from 1991 through May 31,
1993; Vice President of Salomon Brothers Inc from 1983 through 1990.
JAY M. GREEN -- Executive Vice President Finance and Administration and
Treasurer of Culbro Corporation, 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.
VINCENT J. NAIMOLI -- 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; Chairman and Chief Executive Officer of Doehler-
209
<PAGE>
Jarvis Corporation since 1991; Chairman, President, Chief Executive Officer of
Harvard Industries, Inc.; Chairman, President and Chief Executive Officer of
Ladish Company, Inc. since 1993; director of Lincoln Foodservice Products, Inc.
since May 1991; a director of Simplicity Pattern Company since October 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 from
November 1984 to December 1988; Vice President, General Counsel and Secretary of
Harrah's, the western branch of Holiday's casino subsidiary 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.
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 RII's Chief
Executive Officer and to each of the other executive officers of RII who were
serving as executive officers at December 31, 1992, for services rendered in all
capacities to RII and its subsidiaries.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- NUMBER OF ALL
OTHER ANNUAL STOCK OPTIONS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION GRANTED COMPENSATION (6)
- ------------------------------------------- --------- --------- ------------- ------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
David P. Hanlon 1992 $ 764,231 $1,206,435(1) $177,776(4) $ 36,738
President and Chief Executive Officer 1991 750,000 1,325,000(1) 1,097,433(5)
1990 750,000 1,287,857(1) 1,097,433(5)
Christopher D. Whitney 1992 300,000 125,000(2) 14,592
Executive Vice President and Chief of 1991 283,269 150,000(2) 100,000
Staff 1990 250,000 275,000(3)
Matthew B. Kearney 1992 275,000 125,000(2) 16,074
Vice President -- Finance and Chief 1991 266,635 125,000(2) 87,500
Financial Officer 1990 250,000 120,000(3)
David G. Bowden 1992 135,000 40,000(2) 8,126
Vice President -- Controller and Chief 1991 131,654 35,000(2) 25,000
Accounting Officer 1990 125,000 45,000(3)
<FN>
- ------------------------------
(1) Includes special incentive bonus payments in satisfaction of a guaranteed
bonus of $1,500,000 in connection with Mr. Hanlon's agreement to enter
into employment with the Company. Such payments for 1992, 1991 and 1990
were $375,000, $375,000 and $750,000, respectively. Also includes
performance bonuses for 1992, 1991 and 1990 of $831,435, $950,000 and
$537,857, respectively.
(2) Performance bonus for year in which presented.
(3) In addition to performance bonuses for 1990, amounts include special
bonuses paid in connection with services related to the Company's
reorganization of $175,000 for Mr. Whitney, $50,000 for Mr. Kearney and
$25,000 for Mr. Bowden.
(4) Includes $157,776 for legal fees and expenses incurred in connection with
the preparation and negotiation of the Hanlon Employment Agreement.
(5) The 1990 Stock Option Plan provides for the grant to Mr. Hanlon of options
to purchase 5% of the shares of Common Stock Outstanding, which amount by
its definition is subject to adjustment. The amount reflected here is
based on Common
</TABLE>
210
<PAGE>
<TABLE>
<S> <C>
Stock Outstanding at December 31, 1992. In 1990 the Company granted an
option to Mr. Hanlon to purchase these shares at an exercise price of
$4.00 per share. In 1991, with the approval of RII's shareholders, a new
option was granted to Mr. Hanlon for the same number of shares at an
exercise price of $1.875 per share and the option granted in 1990 was
cancelled.
(6) Includes the cost of group life and health insurance: Mr. Hanlon --
$18,074, Mr. Whitney -- $8,612, Mr. Kearney -- $10,441 and Mr. Bowden --
$5,329; the Company's contribution to a defined contribution group
retirement plan: Mr. Hanlon -- $5,433, Mr. Whitney -- $5,980, Mr. Kearney
-- $5,633 and Mr. Bowden -- $2,797; and the cost of additional disability
insurance coverage: Mr. Hanlon -- $13,231.
</TABLE>
See also "Employment Agreements; Termination of Employment and Change in Control
Arrangements."
No options were granted in 1992 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, 1992,
concerning the unexercised options held by those executive officers, none of
whom exercised options in 1992. No options held by those executive officers were
in-the-money at December 31, 1992. 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 RII Common Stock on December 31, 1992,
was $.875 per share.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
OPTIONS
AT DECEMBER 31, 1992
--------------------------
NAME EXERCISABLE UNEXERCISABLE
- ----------------------------------------------------------- ----------- -------------
<S> <C> <C>
David P. Hanlon............................................ 1,097,433 0
Christopher D. Whitney..................................... 66,666 33,334
Matthew B. Kearney......................................... 58,333 29,167
David G. Bowden............................................ 16,666 8,334
</TABLE>
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 1992.
Messrs. Alvarez, Cowan, Kordsmeier and Sheeline received $41,500, $41,500,
$44,000 and $45,000, respectively, for their services as directors during 1992.
Mr. Sheeline's compensation includes $1,000 for participation in a Board meeting
of a subsidiary of RII.
EMPLOYMENT AGREEMENTS; 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 Hanlon
Employment Agreement.
Pursuant to the Hanlon Employment Agreement, Mr. Hanlon received $720,000
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 is entitled to receive 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, half of which was paid on October 31, 1993 and half of
which will be paid upon the earlier of (i) the acceptance of a reorganization or
recapitalization of RII by the requisite number and amount of RII's creditors
voting on such restructuring or reorganization and (ii) April 15, 1995. In
addition, Mr. Hanlon will receive a bonus from RII in the amount of $325,000 in
connection with the reorganization or recapitalization of RII, payable prior to
any bankruptcy filing by RII. Finally, Mr. Hanlon will receive a bonus of
$300,000 upon the disposition of the Paradise Island Business. Accordingly, Mr.
Hanlon would receive a total of $625,000 in connection with the Restructuring.
The payment to be made to Mr. Hanlon with respect to the disposition of the
Paradise Island Business may be subject to the approval of the Bankruptcy
211
<PAGE>
Court. 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 previously granted 1990 Stock Options.
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 respective terms of employment will each 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. Alvarez, Griffin and Sheeline serve
as members of the Compensation Committee of the Board of Directors of RII. Mr.
Griffin also serves as an officer of RII.
GRIFFIN SERVICES AGREEMENT. The Griffin Group, Merv Griffin and RII entered
into the Old Griffin Services Agreement in September 1990. Pursuant to the Old
Griffin Services Agreement, the 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, the 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 the Griffin Group
and the Company has not paid any compensation to the 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.
Pursuant to the New Griffin Services Agreement entered into in April 1993,
but dated and effective as of September 17, 1992 to replace the Old Griffin
Services Agreement as of its expiration, the 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 and the Paradise Island Business. In
connection with such license, the Griffin Group will not grant any similar
license to any casino/hotel located in either Atlantic City or The Bahamas
during the term of the New Griffin Services Agreement, so long as RII and RIH
own or operate casino and hotel facilities in such locations. It is not expected
that Merv Griffin will be associated with the Paradise Island Business
subsequent to the Restructuring.
Pursuant to the New Griffin Services Agreement, the Griffin Group also
agreed to provide to RII and RIH, for the term of the New Griffin Services
Agreement, the non-exclusive services of Merv Griffin, subject to the
performance by RII and RIH of its obligations under the New 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 New Griffin Services Agreement will continue in force (unless earlier
terminated under certain circumstances, including but not limited to a change in
control of RII, the removal of Merv Griffin as Chairman of the Board of
Directors of RII or a sale of the Resorts Casino Hotel) until the later of
September 17, 1996, or the fourth anniversary of the effective date of any
restructuring of
212
<PAGE>
RII's outstanding debt or any reorganization of RII under the Bankruptcy Code.
If no such restructuring or reorganization has been consummated as of September
17, 1996, the New Griffin Services Agreement shall terminate as of that date.
Additionally, in no event shall the New Griffin Services Agreement extend beyond
September 17, 1997.
Under the New Griffin Services Agreement, the 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 New Griffin Services
Agreement also provides for additional compensation to the Griffin Group in the
amounts of $2,205,000 and $2,310,000 for services during the third and fourth
years, respectively, of the term of the New Griffin Services Agreement.
Thereafter, should the New Griffin Services Agreement remain in force for
another full year, RII and RIH will pay Griffin Group additional compensation in
the amount of $2,425,000, or if the New Griffin Services Agreement remains in
force for less than a full year, a prorated portion of such amount. RIH made the
$4,100,000 payment for the first two years under the New Griffin Services
Agreement in April 1993. Simultaneously, Merv Griffin made a partial payment of
the Griffin Note in an equal amount to RII thereby reducing the principal amount
of the Griffin Note to $7,523,333. RII then cancelled the Griffin Note. The
Griffin Group Note in the principal amount of $7,523,333 was substituted
therefor. On September 17, 1993, RII satisfied its obligation to make the
$2,205,000 payment for the year ending September 16, 1995 by reducing the
Griffin Group Note by that amount. The Griffin Group Note is payable on demand
and bears interest at the rate of 3% per year. The bank letter of credit
securing the Griffin Note was released by RII. Merv Griffin has personally
guaranteed payment of the Griffin Group Note. On or before the Effective Date,
RII will pay $2,310,000 to the Griffin Group for the fourth year of the New
Griffin Services Agreement also by reducing the principal amount of the Griffin
Group Note in an equal amount. Subsequent thereto, RII will receive payment of
the then remaining balance of the Griffin Group Note (approximately $3,000,000)
plus accrued interest from the Griffin Group and will distribute the proceeds of
such payment to the holders of the Old Series Notes as part of Excess Cash.
Payment in full of the outstanding amounts under the Griffin Group Note is a
condition to consummation of the Plan.
Additionally, pursuant to the New Griffin Services Agreement, the Griffin
Group will also receive, on the Effective Date, the Griffin Warrants.
RII and RIH also have agreed to indemnify Merv Griffin and the Griffin Group
for certain costs and liabilities arising in connection with the New Griffin
Services Agreement or Merv Griffin's services, or the service of any employee of
the Griffin Group, as a director or officer of RII or any subsidiary thereof.
Pursuant to the New 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 the Griffin Group
and Merv Griffin, individually.
RII and RIH also have agreed to reimburse the Griffin Group for certain
expenses incurred by the Griffin Group and Merv Griffin in connection with the
license and services agreed to under the New Griffin Services Agreement. If the
Griffin Group fails to perform its obligations pursuant to the New Griffin
Services Agreement, all unearned advance payments to the 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 GRI. 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.
213
<PAGE>
INDEBTEDNESS OF MANAGEMENT. In September 1990, Merv Griffin, Chairman of
the Board of RII, purchased 4,400,000 shares of RII Common Stock for which RII
received $12,345,000 in cash and the $11,000,000 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 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 Griffin Group Note, payable by the Griffin
Group, a company controlled by Merv Griffin, was substituted therefor. The
Griffin Group Note is payable on demand and bears interest at the rate of 3% per
year. Merv Griffin has personally guaranteed payment of the Griffin Group Note.
Further payments on the Griffin Group Note have been and will be made as
described above in "Griffin Services Agreement".
CANCELLATION OF RECEIVABLES. As part of the Old Plan, $50,000,000 of the
Company's notes receivable from Griffco (formerly owned by Merv Griffin) were
cancelled. In addition, $386,000 of receivables from Griffco were eliminated as
a result of the merger of Griffco into a subsidiary of RII.
OTHER SERVICES. The Company reimbursed the Griffin Group $400,000,
$358,000, $396,000 and $181,000 for charter air services rendered in 1990, 1991,
1992 and to date in 1993, respectively, to Mr. Griffin as well as other
directors and officers of RII and the Griffin Group for travel related to
Company business.
In 1991 and 1992 the Company did business with various subsidiaries of
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 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.
The Company paid Alvarez & Marsal $2,145,000 and $241,000 in 1990 and 1991,
respectively, for financial advisory services performed in connection with the
Old Plan. Also, the Company paid Alvarez & Marsal $300,000 for financial
advisory services rendered in 1992. 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 agreement provided for monthly fees of $50,000 commencing on
March 1, 1992, reimbursement of expenses, and, upon a financial restructuring, a
fee of $250,000 and 125,000 shares of RII Common Stock. The agreement was
amended to suspend monthly fees as of September 1, 1992, in connection with Mr.
Alvarez's new position as an executive officer of Phar-Mor Inc. If the Requisite
Acceptances are received prior to the Petition Date, the Company intends to pay
Alvarez & Marsal its restructuring fee of $250,000 and 125,000 shares of RII
Common Stock prior to the Petition Date. Mr. Alvarez, a shareholder of Alvarez &
Marsal, has been a member of the Board of Directors of RII since September 1990.
The Company retained Verner, Liipfert, Bernhard, McPherson and Hand during
1992 for certain legal services. Mr. Sheeline, who was Of Counsel at that time
to such law firm, has been a director of RII since 1990.
MANAGEMENT OF GRI
It is anticipated that the post-Effective Date Board of Directors of GRI
will consist of Christopher D. Whitney and Matthew B. Kearney, who will also
serve as the executive officers of GRI. After the Effective Date, GRI will be a
non-operating entity.
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<PAGE>
MANAGEMENT OF RIHF
DIRECTORS AND EXECUTIVE OFFICERS
The directors of RIHF are:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ---------------------------------------- --- ------------
<S> <C> <C>
Christopher D. Whitney 49 1993
Matthew B. Kearney 53 1993
</TABLE>
The executive officers of RIHF are:
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE SINCE
- ---------------------------------------- --- ------------
<S> <C> <C>
Christopher D. Whitney 49 1993
President
Matthew B. Kearney 53 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 Agreements; Termination of Employment and Change in Control
Arrangements".
MANAGEMENT OF RIH
DIRECTORS AND EXECUTIVE OFFICERS
The directors of RIH are:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ---------------------------------------- ---- ------------
<S> <C> <C>
Christopher D. Whitney 49 1991
Matthew B. Kearney 53 1993
</TABLE>
The executive officers of RIH are:
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE SINCE
- ---------------------------------------- ---- ------------
<S> <C> <C>
John P. Belisle 39 1991
Executive Vice President and Chief
Operating Officer
Christopher D. Whitney 49 1989
Executive Vice President, Chief of
Staff and Secretary
Matthew B. Kearney 53 1982
Vice President and Chief Financial
Officer
Kimberly A. Corrigan 36 1991
Vice President -- Hotel Operations
Paul E. Patay 62 1989
Vice President -- Food and Beverage
Michelle Perna 41 1988
Vice President -- Human Resources
Anthony P. Rodio 35 1993
Vice President -- Finance
</TABLE>
215
<PAGE>
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 directors
or 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 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.
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 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 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 from August 1987 to
October 1990.
EXECUTIVE COMPENSATION
The following table (hereinafter referred to as 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, 1992 for services rendered in all capacities
to RIH, RII and RII's other subsidiaries for the year ended December 31, 1992.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION COMPENSATION (2)
- ------------------------------------------------- ----------- --------- ------------- ----------------
<S> <C> <C> <C> <C>
David P. Hanlon (1) (1) (1)
President and Chief Executive Officer(3)
Christopher D. Whitney (1) (1)
Executive Vice President
Matthew B. Kearney (1) (1)
Vice President and Chief
Financial Officer
John R. Spina $ 198,077 $ 97,568 $ 8,562
Executive Vice President and Chief Operating
Officer(3)
Earl Yanase $ 220,000 $ 53,068 $ 8,342
Vice President -- Casino Operations (3)
<FN>
- ------------------------
(1) Messrs. Hanlon, Whitney and Kearney were executive officers of RII at
December 31, 1992. See the RII Summary Compensation Table for information
regarding their compensation.
</TABLE>
216
<PAGE>
<TABLE>
<S> <C>
(2) Includes the cost of group life and health insurance: Mr. Spina -- $5,299
and Mr. Yanase -- $5,634; employer's contribution to a defined
contribution group retirement plan: Mr. Spina -- $3,263 and Mr. Yanase --
$2,708.
(3) Messrs. Hanlon, Spina and Yanase served in these capacities through
October 1993, November 1993 and July 1993, respectively.
</TABLE>
Certain executives of RIH participate in RII's 1990 Stock Option Plan. Their
options are to purchase shares of RII Common Stock. No options were granted in
1992 to the executive officers named in the RIH Summary Compensation Table.
Accordingly, no Option Grant Table is presented herein. The following table sets
forth information as of December 31, 1992, concerning the unexercised options
held by those executive officers, none of whom exercised options in 1992. No
options held by those executive officers were in-the-money at December 31, 1992.
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 RII
Common Stock on December 31, 1992 was $.875 per share.
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED OPTIONS AT
DECEMBER 31, 1992
-------------------------
NAME EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------- ---------- -------------
<S> <C> <C>
David P. Hanlon................................................ (1) (1)
Christopher D. Whitney......................................... (1) (1)
Matthew B. Kearney............................................. (1) (1)
John R. Spina.................................................. 23,333 11,667
Earl Yanase.................................................... 11,666 23,334
<FN>
- ------------------------
(1) For information regarding fiscal year end option values for Messrs.
Hanlon, Whitney and Kearney, see the table of unexercised options at
December 31, 1992 under "Management of RII -- Executive Compensation".
</TABLE>
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 during 1992, received no compensation specifically for his service as
an RIH director. During 1992 he served as an officer of RII and was compensated
for such service.
EMPLOYMENT AGREEMENTS; TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Messrs. Whitney and Kearney have employment agreements with RII. See
"Management of RII -- Executive Compensation -- Employment Agreements;
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 a director of RIH. In connection with Mr.
Spina's termination in November 1993, RIH paid Mr. Spina a lump sum cash
settlement of $176,250.
217
<PAGE>
MANAGEMENT OF PIRL
DIRECTORS AND EXECUTIVE OFFICERS
The directors of PIRL are:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ---------------------------------------- --- ------------
<S> <C> <C>
Christopher D. Whitney 49 1993
Matthew B. Kearney 53 1993
</TABLE>
The executive officers of PIRL are:
<TABLE>
<CAPTION>
EXECUTIVE
OFFICER
NAME AGE SINCE
- ---------------------------------------- --- ------------
<S> <C> <C>
Christopher D. Whitney 49 1993
President
Matthew B. Kearney 53 1993
Vice President -- Finance and Chief
Financial Officer and Secretary
</TABLE>
See "Management of RII" for a description of the business experience of
Messrs. Whitney and Kearney. The officers and directors of PIRL presently
receive no compensation specifically for their services as directors. However,
both of the officers and directors of PIRL 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 Agreements; Termination of Employment and Change in Control
Arrangements".
If the PIRL Spin-Off occurs, Messrs. Whitney and Kearney will resign as
directors and officers of PIRL. Pursuant to the Plan, Fidelity and TCW will
designate the initial directors and officers of PIRL for the period commencing
on the Effective Date.
218
<PAGE>
SECURITY OWNERSHIP
As of November 30, 1993, there were 2,003 record holders of RII Common
Stock.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as to the beneficial
ownership of RII Common Stock as of November 30, 1993, by persons known by RII
to be holders of 5% or more of RII Common Stock, or expected to become holders
of 5% or more of RII Common Stock when the Restructuring is effected.
Information as to the number of shares beneficially owned has been furnished by
the persons named in the table.
<TABLE>
<CAPTION>
PRE-RESTRUCTURING POST-RESTRUCTURING
------------------------- -------------------------
SHARES SHARES PERCENT
NAME AND ADDRESS OF BENEFICIALLY PERCENT BENEFICIALLY OF
BENEFICIAL OWNER OWNED OF CLASS OWNED CLASS(4)
----------------------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
Merv Griffin............................ 4,398,115 21.82% 9,063,115(2) 21.29%
c/o The Griffin Group, Inc.
780 Third Avenue, Suite 1801
New York, NY 10017
David P. Hanlon......................... 1,094,800(1) 5.15% 1,094,800 2.81%
P.O. Box 486
Oceanville, NJ 08231
Certain funds and accounts managed by -- -- 6,686,633(3) 17.64%
Fidelity................................
Certain funds and accounts managed by -- -- 4,223,937(3) 11.15%
TCW.....................................
<FN>
- ------------------------
(1) Ownership represents shares issuable upon exercise of fully vested 1990
Stock Options issued pursuant to the 1990 Stock Option Plan. Related
percentages shown give effect to the exercise of options for such shares.
See Note (5) to RII Summary Compensation Table under "Management of RII --
Executive Compensation".
(2) Assumes Griffin Warrants for 4,665,000 shares are issued. Related
percentage gives effect to their exercise.
(3) Assumes that the funds and accounts managed by Fidelity and TCW continue
to own on the Distribution Record Date all the Old Series Notes they own
as of January 10, 1994.
(4) The percentages shown give effect to the issuance of 17,025,000 shares to
the holders of the Old Series Notes and 715,000 shares to financial
advisers in settlement of certain recapitalization costs.
</TABLE>
219
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information as to the beneficial
ownership of RII Common Stock as of November 30, 1993, by each director, each
nominee, each executive officer named in the RII Summary Compensation Table and
by all directors and executive officers as a group.
<TABLE>
<CAPTION>
PRE-RESTRUCTURING POST-RESTRUCTURING
------------------------- -------------------------
AMOUNT AND AMOUNT AND
NATURE OF NATURE OF
SHARES SHARES PERCENT
BENEFICIALLY PERCENT BENEFICIALLY OF
NAME OF BENEFICIAL OWNER OWNED OF CLASS OWNED CLASS(6)
- ---------------------------------------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C>
Merv Griffin............................ 4,398,115 21.82% 9,063,115(3) 21.29%
Antonio C. Alvarez II................... 5,000 .02% 5,000(4) .01%
Warren Cowan............................ 5,000 .02% 5,000 .01%
Thomas E. Gallagher..................... None None None None
Joseph G. Kordsmeier.................... None None None None
Paul C. Sheeline........................ 5,000 .02% 5,000 .01%
Christopher D. Whitney.................. 100,000(1) .49% 100,000 .26%
Matthew B. Kearney...................... 87,500(1) .43% 87,500 .23%
David G. Bowden......................... 25,000(1) .12% 25,000 .07%
Directors and officers as a group (nine
persons)............................... 4,625,615(2) 22.71% 9,290,615(5) 21.72%
William Fallon.......................... None None None None
Jay Green............................... None None None None
Charles Masson.......................... None None None None
Vincent Naimoli......................... None None None None
<FN>
- ------------------------
(1) Ownership represents shares issuable upon exercise of 1990 Stock Options.
Related percentages shown give effect to the exercise of options for such
shares.
(2) Includes 212,500 shares which are issuable upon exercise of 1990 Stock
Options. Related percentage shown gives effect to the exercise of options
for such shares.
(3) Includes 4,665,000 shares issuable upon exercise of the Griffin Warrants
assuming that the Griffin Warrants are issued. Related percentage gives
effect to their exercise.
(4) Excludes any beneficial ownership interest attributable to the 125,000
shares which are to be issued to Alvarez & Marsal in settlement of certain
recapitalization costs.
(5) Includes 212,500 shares which are issuable upon exercise of 1990 Stock
Options and 4,665,000 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.
(6) The percentages shown give effect to the issuance of 17,025,000 shares to
the holders of the Old Series Notes and 715,000 shares to financial advisers
in settlement of certain recapitalization costs.
</TABLE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Messrs. Alvarez, Griffin and Sheeline serve as members of the Compensation
Committee of the Board of Directors of RII. Mr. Griffin also serves 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. $179,000, $147,000 and $128,000 for
public relations services rendered in 1990, 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, has been a director of RII since September
1990.
The Company retained Gibson, Dunn & Crutcher during 1992 and 1993 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.
220
<PAGE>
DESCRIPTION OF NEW RIHF MORTGAGE NOTES
The following is a summary of certain provisions of the New RIHF Mortgage
Notes and the New RIHF Mortgage Indenture. Wherever particular provisions of the
New RIHF Mortgage Indenture or New RIHF Mortgage Notes are referred to, such
provisions are incorporated by reference herein. References to Sections or
Articles refer to Sections or Articles of the New RIHF Mortgage 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 Information Statement/ Prospectus have the meanings ascribed
thereto in the New RIHF Mortgage Indenture and are incorporated by reference
herein.
GENERAL
The New RIHF Mortgage Notes will be issued pursuant to the New RIHF Mortgage
Indenture among RIHF, RIH and State Street Bank and Trust Company of
Connecticut, National Association, as trustee (the "New RIHF Mortgage Note
Trustee"). A copy of the New RIHF Mortgage Indenture is filed as an exhibit to
the Registration Statement of which this Information Statement/Prospectus is a
part. The terms of the New RIHF Mortgage Indenture also are governed by certain
provisions of the TIA. The New RIHF Mortgage Notes will be secured subordinated
obligations of RIHF in the aggregate principal amount of $125,000,000. The New
RIHF Mortgage Notes will mature on September 15, 2003.
RANKING
Although the New RIHF Mortgage Notes are not contractually subordinated to
the RIHF Senior Facility Notes as to priority of payment, the lien securing the
New RIHF Mortgage Notes is junior to the lien securing the RIHF Senior Facility
Notes, and the New RIHF Mortgage Notes therefore are structurally subordinated
to the RIHF Senior Facility Notes. The RIH Mortgage will be PARI PASSU with the
lien of the RIH Guaranty Mortgage and subordinated to the liens on the Resorts
Casino Hotel securing payment of the RIH Senior Facility Note, the RIHF Senior
Facility Guaranty and any other secured Working Capital Facility. (SECTION
4.03).
The aggregate principal amount that may be outstanding under the RIHF Senior
Facility and any other Working Capital Facility on and after the Effective Date
is limited to $20,000,000.
INTEREST
Interest on the New RIHF Mortgage Notes will accrue from the Effective Date
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 New RIHF 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 New RIHF 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 New RIHF Mortgage Notes have consented
to such proposed RIH Sale. (SECTION 3.12).
OPTIONAL REDEMPTION
The New RIHF 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 interest to the Redemption Date. (SECTION 3.12).
221
<PAGE>
From and after any Redemption Date, if funds for the redemption of any New
RIHF Mortgage Notes called for redemption shall have been made available, such
New RIHF 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 New RIHF Mortgage Indenture requires that notice of any redemption of
any New RIHF 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 New RIHF Mortgage Notes to
be redeemed, and, if less than all outstanding New RIHF Mortgage Notes are to be
redeemed, the identification (and, in the case of partial redemption, the
respective principal amounts) of the New RIHF Mortgage Notes to be redeemed and
the place or places where the New RIHF Mortgage Notes to be redeemed are to be
surrendered for payment of the Redemption Price. (SECTION 13.04).
The New RIHF Mortgage Indenture provides that in the event of redemption of
less than all the outstanding New RIHF Mortgage Notes, the particular New RIHF
Mortgage Notes to be redeemed will be selected by the New RIHF Mortgage Note
Trustee by a random, automated selection process or pro rata, as deemed
appropriate by the New RIHF Mortgage Note Trustee. (SECTION 13.03).
CASINO CONTROL ACT REGULATION
The New RIHF Mortgage Notes are subject to the qualification, divestiture
and redemption provisions under the Casino Control Act that are described in
"Business of the Company -- Regulation and Gaming Taxes and Fees -- New Jersey".
(SECTION 13.08).
INTERCREDITOR AGREEMENT
The RIH Senior Facility Note, the RIH Senior Facility Guaranty, the RIH
Promissory Note, the RIH Mortgage Guaranty, the RIH Junior Promissory Note and
the RIH Junior Mortgage Guaranty are all secured, in part, by the Resorts Casino
Hotel. See "Collateral", "Guaranty", "Description of RIHF Senior Facility Notes
- -- Collateral", "Description of RIHF Senior Facility Notes -- Guaranty",
"Description of New RIHF Junior Mortgage Notes -- Collateral" and "Description
of New RIHF Junior Mortgage Notes -- Guaranty".
RII, RIH, RIHF, the RIHF Senior Facility Trustee, the New RIHF Mortgage Note
Trustee, the New RIHF Junior Mortgage Note Trustee 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 will enter
into an intercreditor agreement (the "Intercreditor Agreement"), which shall
define the rights of each such lender in and to its respective security interest
in the Resorts Casino Hotel.
The Intercreditor Agreement will provide that: (i) the liens securing
payment of the RIH Senior Facility Note and the RIH Senior Facility Guaranty
will be PARI PASSU with each other and senior to liens securing payment of the
RIH Promissory Note, the RIH Mortgage Guaranty, the RIH Junior Promissory Note
and the RIH Junior Mortgage 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 RIH Mortgage
Guaranty will be PARI PASSU with each other, and senior to the liens securing
payment of the RIH Junior Promissory Note and the RIH Junior Mortgage Guaranty,
and junior to the liens securing payment of the RIH Senior Facility 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 New RIHF Mortgage Notes are secured by the New RIHF Mortgage Trust
Estate pursuant to the Mortgage Documents described below. (ARTICLE SIX).
222
<PAGE>
The "New RIHF Mortgage Trust Estate" consists of an assignment by RIHF to
the New RIHF Mortgage Note Trustee for the benefit of the holders of the New
RIHF 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 New RIHF Mortgage Notes, which is
secured by a lien on the RIH Property, 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, comprising the trust estate encumbered pursuant to the RIH Senior
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 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 New RIHF Mortgage Trust Estate may be released without the
consent of the Holders of not less than 66 2/3% in Outstanding Amount of the New
RIHF Mortgage Notes then Outstanding. (SECTION 11.02). Section 2.02 of the RIH
Mortgage will provide 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.
LIMITATIONS ON ABILITY TO REALIZE ON COLLATERAL
GENERAL
If there is an Event of Default under the New RIHF Mortgage Indenture or the
RIH Mortgage, the RIHF 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 New RIHF 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 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 RIHF
Mortgage Note Trustee could bid the amount of the outstanding New RIHF Mortgage
Notes. The RIHF 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 RIHF Mortgage Note Trustee, from taking action to realize on the New RIHF
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 RIHF
Mortgage Note Trustee may not have the right to cure any such default. However,
the RIHF Mortgage Note Trustee has the right under the New RIHF Mortgage
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
223
<PAGE>
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 will guarantee payment of principal of and interest on the New RIHF
Mortgage Notes pursuant to the RIH Mortgage Guaranty. In addition, the RIH
Mortgage Guaranty will be secured by 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 New RIHF Mortgage
Indenture will provide 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, 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 New RIHF Mortgage Indenture. (SECTION 12.04).
LIMITATION ON DIVIDENDS AND RESTRICTED PAYMENTS
The New RIHF Mortgage Indenture will provide that RIHF will not, directly or
indirectly, make, or permit any Subsidiary of RIHF to make, any Restricted
Payment.
The New RIHF Mortgage Indenture also will provide 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 New RIHF 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 New
RIHF Mortgage 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 New RIHF 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 New RIHF Mortgage Notes and the New RIHF 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 New RIHF Mortgage Indenture further will provide 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,
224
<PAGE>
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 RII,
as applicable, except (A) any restrictions existing on or prior to the date of
the New RIHF Mortgage Indenture, or in connection with agreements in effect, or
entered into, on the date of the New RIHF Mortgage 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 New
RIHF Mortgage 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 New RIHF Mortgage Indenture will provide 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 New RIHF Mortgage Notes, the RIH
Promissory Note and the RIH Mortgage Guaranty;
(ii) Indebtedness represented by the Junior Mortgage Facility, the RIH
Junior Promissory Note and the RIH Junior Mortgage Guaranty;
(iii) Indebtedness represented by the Working Capital Facility, the Working
Capital Facility Guaranty and the RIH Senior Facility 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
New RIHF Junior Mortgage Notes at least to the extent set forth in the
Subordination Provisions attached to the New RIHF 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 New RIHF 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 New RIHF
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;
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(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 New RIHF Mortgage Indenture also will provide 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 New RIHF Mortgage Indenture will provide 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 New RIHF 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).
LIMITATION ON CERTAIN TRANSACTIONS
The New RIHF Mortgage Indenture also will provide that each of RIHF and RIH
will not, and will not permit any Subsidiary to, repurchase any New RIHF
Mortgage Notes in the open market if an Event of Default shall have occurred and
shall be continuing under the New RIHF Mortgage Indenture, under the New RIHF
Junior Mortgage Indenture or under the RIHF Senior Facility Indenture. (SECTION
12.10).
RESTRICTION OF ACTIVITIES
The New RIHF Mortgage Indenture will provide 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 New RIHF 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 New RIHF Mortgage Indenture also will provide 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) loans by RIH
to RIHF evidenced by the RIH Senior Facility 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 New RIHF Mortgage Indenture further will provide 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 New RIHF
Mortgage Indenture and the Mortgage Documents and otherwise to comply with its
obligations thereunder and under the New RIHF Mortgage Notes, (iii) to do or
cause to be done all things necessary or appropriate to protect the New RIHF
Mortgage Trust Estate, (iv) to preserve its rights under the New RIHF Junior
Mortgage Indenture and the Junior Mortgage Documents and otherwise to comply
with its obligations thereunder and under the New RIHF Junior Mortgage Notes,
(v) to
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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 New RIHF Mortgage 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 New RIHF Mortgage Indenture will provide that RIHF and RIH will not have
any Subsidiaries except the Subsidiaries existing on the date of the New RIHF
Mortgage Indenture and Subsidiaries acquired by RIHF or RIH in transactions not
prohibited by the other provisions of the New RIHF Mortgage 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 New RIHF Mortgage Indenture will provide 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
New RIHF Mortgage Trust Estate, other than (a) Permitted Encumbrances on the New
RIHF Mortgage Trust Estate, (b) liens on the New RIHF Mortgage 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 Senior Mortgage to the extent the matters described in
(a) and (b) do not constitute a default under any Ground Lease or Superior
Mortgage (as defined in the RIH Mortgage). (SECTION 12.13).
COMPLIANCE WITH LAWS
The New RIHF Mortgage Indenture will provide 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 New RIHF Mortgage 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 New RIHF Mortgage Indenture will provide 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 New
RIHF Mortgage 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 New RIHF Mortgage
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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 New RIHF Mortgage Indenture further will provide that each of RIHF and
RIH will cause the New RIHF 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 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 New RIHF Mortgage Indenture will provide 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).
WAIVER OF STAY, EXTENSION OR USURY LAWS
The New RIHF Mortgage Indenture will provide 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 New RIHF Mortgage
Notes or the RIH Promissory Note or the RIH Mortgage Guaranty, wherever and
whenever enacted, or which may affect the covenants or the performance of the
New RIHF Mortgage Indenture or the RIH Promissory Note or the RIH Mortgage
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 New
RIHF Mortgage Note Trustee in the New RIHF Mortgage 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 New RIHF Mortgage Indenture also will provide 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,
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documents, instruments or transactions entered into in connection with the RIHF
Senior Facility Notes, (B) the New Griffin Services Agreement, (C) the RII
Management Contract or (D) the RII Tax Sharing Agreement. (SECTION 12.21).
EVENTS OF DEFAULT
The following events will constitute "Events of Default" under the New RIHF
Mortgage Indenture:
(a) default in the payment of any interest upon any New RIHF Mortgage Note
when such interest becomes due and payable and continuance of such
default (the deposit with the New RIHF 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 New
RIHF Mortgage Note at its Maturity;
(c) default in the performance or breach of any covenant of RIHF or RIH in
the New RIHF Mortgage 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
Liens" and "Covenants -- Transactions with Stockholders and Affiliates")
after there has been given (i) to RIHF by the New RIHF Mortgage Note
Trustee, or (ii) to RIHF and the New RIHF Mortgage Note Trustee by the
Holders of at least 25% in Outstanding Amount of the Outstanding New RIHF
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 New RIHF
Mortgage 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 or 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
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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 of 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 New RIHF Mortgage 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 New RIHF Mortgage 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 New RIHF Mortgage Trust
Estate or any 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 New RIHF Mortgage 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 New RIHF Mortgage 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 New RIHF Mortgage 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";
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(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 New RIHF Mortgage 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 amount
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 New RIHF
Mortgage Note Trustee or the Holders of not less than 25% in Outstanding Amount
of the New RIHF Mortgage Notes Outstanding may declare the Outstanding Amount of
all the New RIHF Mortgage Notes to be due and payable immediately, by a notice
in writing to RIHF (and to the New RIHF 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 New RIHF 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 New RIHF Mortgage
Notes has been obtained by the New RIHF Mortgage Note Trustee, the Holders of a
majority in Outstanding Amount of the New RIHF Mortgage Notes may, by written
notice to RIHF and the New RIHF Mortgage Note Trustee, rescind and annul such
declaration and its consequences if: (a) RIHF has deposited with the New RIHF
Mortgage Note Trustee a sum sufficient to pay (1) all overdue installments of
interest on all New RIHF Mortgage Notes, (2) the principal of any New RIHF
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 New RIHF Mortgage Notes, and (3) all sums paid or advanced by the New RIHF
Mortgage Note Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the New RIHF Mortgage Note Trustee, its agents and
counsel; and (b) all Events of Default, other than the non-payment of the
Outstanding Amount of the New RIHF Mortgage Notes which have become due solely
by such declaration of acceleration, have been cured or have been waived as
provided in the New RIHF Mortgage Indenture. No such rescission and annulment
shall affect any subsequent default or impair any right to consequent thereon.
(SECTION 7.02).
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 New RIHF Mortgage Trust Estate shall sell,
assign, convey or transfer its interest in such assets or the New RIHF Mortgage
Trust Estate, as the case may be, substantially as an entirety (and
notwithstanding anything to the contrary contained in the New RIHF Mortgage
Indenture (including the proviso at the end of this sentence), but subject to
the provisions of the RIH Mortgage regarding dispositions of the New RIHF
Mortgage Trust Estate, neither RIHF with respect to its assets nor RIH with
respect to the New RIHF Mortgage Trust Estate may sell, assign, convey or
transfer such assets or the New RIHF Mortgage Trust Estate,
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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 New RIHF Mortgage 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 New RIHF Mortgage 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 New RIHF
Mortgage Indenture, executed and delivered to the New RIHF Mortgage Note
Trustee, the performance and observance of every covenant, obligation and
condition of the New RIHF Mortgage 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 New RIHF 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 New RIHF Mortgage 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 New RIHF Mortgage
Indenture or of the Mortgage Documents or of the Assignment Agreement and the
rights and powers of the New RIHF Mortgage Note Trustee and the Holders of the
New RIHF Mortgage Notes thereunder; and (e) RIHF or RIH, as the case may be,
shall have delivered to the New RIHF 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 New RIHF Mortgage Indenture and that all
conditions precedent provided for in the New RIHF Mortgage Indenture relating to
such transaction have been complied with. (SECTION 10.01).
Except as otherwise expressly permitted by the RIH Mortgage and the New RIHF
Mortgage 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 New RIH Senior Mortgage 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, 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).
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DISCHARGE OF NEW RIHF MORTGAGE INDENTURE; DEFEASANCE
RIHF may terminate substantially all obligations under the New RIHF Mortgage
Indenture at any time by delivering all outstanding New RIHF Mortgage Notes to
the New RIHF Mortgage Note Trustee for cancellation and paying any other sums
payable under the New RIHF Mortgage Indenture. (ARTICLE FIVE).
The New RIHF Mortgage Indenture will also provide that RIHF will be deemed
to have paid and discharged the entire Indebtedness on the New RIHF Mortgage
Notes and the provisions of the New RIHF Mortgage Indenture (except as to any
surviving rights of transfer or exchange of New RIHF Mortgage Notes provided for
in the New RIHF Mortgage Indenture or the New RIHF 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 New RIHF Mortgage Note Trustee,
pursuant to an irrevocable trust and security agreement in form and substance
reasonably satisfactory to the New RIHF 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 New RIHF 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 New RIHF Mortgage Note Trustee) delivered to the New RIHF Mortgage Note
Trustee, to pay reasonable compensation to the New RIHF Mortgage Note Trustee
under Section 8.07 of the New RIHF Mortgage Indenture and the principal of and
interest on the outstanding New RIHF Mortgage Notes on the dates on which any
such payments are due and payable in accordance with the terms of the New RIHF
Mortgage Indenture and of the New RIHF Mortgage Notes; (2) such deposits will
not cause the New RIHF 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 New RIHF Mortgage Indenture; (4) RIHF will deliver to the New
RIHF Mortgage Note Trustee an Opinion of Counsel, or a private ruling of the
Internal Revenue Service, in form and substance satisfactory to the New RIHF
Mortgage Note Trustee, to the effect that Holders of the New RIHF 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 New RIHF 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 New RIHF 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 New RIHF Mortgage Notes are to be redeemed
through such irrevocable trust, RIHF must make arrangements satisfactory to the
New RIHF Mortgage Note Trustee, at the time of such deposit, for the giving of
the notice of such redemption or redemptions by the New RIHF Mortgage Note
Trustee in the name and at the expense of RIHF.
The New RIHF 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 New RIHF Mortgage
Indenture. (SECTION 14.01).
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MODIFICATION OF INDENTURE
From time to time, the parties to the New RIHF Mortgage Indenture, without
the consent of the Holders of the New RIHF 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 rights of any Holder. (SECTION 11.01). Modifications, changes and
amendments to the New RIHF Mortgage 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 New RIHF Mortgage Notes then Outstanding, except that, without the
consent of the Holder of each New RIHF 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 New RIHF 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 New
RIHF 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 New RIHF 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 New RIHF Mortgage
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 New RIHF Mortgage Note Trustee may require reasonable indemnity before
exercising any of its rights or powers under the New RIHF Mortgage Indenture.
(SECTION 8.03).
REPORTS TO HOLDERS
RIH will furnish or cause to be furnished to the New RIHF 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 New RIHF Mortgage 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. RIH contemporaneously with the furnishing of
such audited financial statements to the New RIHF 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 New RIHF 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
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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. RIH contemporaneously with
the furnishing of such unaudited financial statements to the New RIHF 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 New RIH Senior 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 New RIHF 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 New RIHF Mortgage 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 New RIHF Mortgage
Note Trustee and any exchange upon which the New RIHF 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 Section 314(a) of
the Trust Indenture Act.
RIHF will deliver to the New RIHF 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 New RIHF Mortgage 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 New RIHF Mortgage Indenture, providing for the assignment of the RIH
Promissory Note, the RIH
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Mortgage and certain of the other Mortgage Documents securing the RIH Promissory
Note to the New RIHF Mortgage Note Trustee by RIHF, and acknowledgment thereof
by RIH, a copy of which is attached to the New RIHF Mortgage 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 (or loss) 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 Guaranty as set forth in Article Four of the New
RIHF Mortgage Indenture.
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"HOLDER" means a Person in whose name a New RIHF 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 RIH Mortgage Guaranty, the RIH Junior
Mortgage 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 New RIHF 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 New
RIHF Mortgage 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 RIH Junior Mortgage 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 New RIHF Mortgage Indenture by
RIH to RIHF and any other security document to
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which either RIH or RIHF is a party relating to the New RIHF 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 New RIHF Mortgage 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
New RIHF Mortgage Trust Estate for such indebtedness.
"OUTSTANDING" when used with respect to New RIHF Mortgage Notes means, as of
the date of determination, all New RIHF Mortgage Notes theretofore authenticated
and delivered under the New RIHF Mortgage Indenture, except:
(a) New RIHF Mortgage Notes theretofore canceled by the New RIHF Mortgage
Note Trustee or delivered to the Trustee for cancellation;
(b) New RIHF Mortgage Notes for whose payment or redemption money in the
necessary amount has been theretofore deposited with the New RIHF
Mortgage Note Trustee or any Paying Agent in trust for the Holders of
such New RIHF Mortgage Notes;
(c) New RIHF Mortgage Notes in exchange for or in lieu of which other New
RIHF Mortgage Notes have been authenticated and delivered under the New
RIHF Mortgage Indenture; and
(d) New RIHF Mortgage Notes alleged to have been destroyed, lost or stolen
which have been paid as provided in Section 3.06 of the New RIHF Mortgage
Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of New RIHF Mortgage Notes Outstanding have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, New RIHF
Mortgage Notes owned by RIHF or any other obligor upon the New RIHF 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 New RIHF Mortgage Note
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only New RIHF Mortgage
Notes which the New RIHF 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 New RIHF 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
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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 New RIHF 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.
"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 New RIHF Mortgage 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 NEW RIHF JUNIOR MORTGAGE NOTES
The following is a summary of certain provisions of the New RIHF Junior
Mortgage Notes and the New RIHF Junior Mortgage Indenture. Wherever particular
provisions of the New RIHF Junior Mortgage Indenture or New RIHF 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 New RIHF
Junior Mortgage 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 New RIHF Junior
Mortgage Indenture and are incorporated by reference herein.
GENERAL
The New RIHF Junior Mortgage Notes will be issued pursuant to the New RIHF
Junior Mortgage Indenture among RIHF, RIH and U.S. Trust Company of California,
N.A. (the "New RIHF Junior Mortgage Note Trustee"). A copy of the New RIHF
Junior Mortgage Indenture is filed as an exhibit to the Registration Statement
of which this Information Statement/Prospectus is a part. The terms of the New
RIHF Junior Mortgage Indenture also are governed by certain provisions of the
TIA. The New RIHF Junior Mortgage Notes will be secured obligations of RIHF in
the aggregate principal
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amount of $35,000,000 plus the principal amount of New RIHF Junior Mortgage
Notes that may be issued in payment of interest as described below. The New RIHF
Junior Mortgage Notes will mature on December 15, 2004.
RANKING
Although the New RIHF Junior Mortgage Notes are not contractually
subordinated to the RIHF Senior Facility Notes and the New RIHF Mortgage Notes
as to priority of payment, the lien securing the New RIHF Junior Mortgage Notes
is junior to the liens securing the RIHF Senior Facility Notes and the New RIHF
Mortgage Notes, and the New RIHF Junior Mortgage Notes therefore are
structurally subordinated to the RIHF Senior Facility Notes and the New RIHF
Mortgage Notes. The RIH Junior Mortgage will be PARI PASSU with the lien of the
RIH Junior Guaranty Mortgage and subordinated to the liens on the Resorts Casino
Hotel securing payment of the RIH Senior Facility Note, the RIHF Senior Facility
Guaranty, any other secured Working Capital Facility, the RIH Promissory Note
and the RIH Mortgage Guaranty. (SECTION 4.03).
INTEREST
Interest on the New RIHF Junior Mortgage Notes will accrue from the
Effective Date at a rate of 11.375% per year. Interest is payable semi-annually
on June 15 and December 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 14.375% per year. (SECTION
3.10).
RIHF may pay all or any portion of interest accruing on the New RIHF Junior
Mortgage Notes by issuing additional Units comprised of New RIHF Junior Mortgage
Notes (valued, for purposes only of determining the principal amount of
additional New RIHF Junior Mortgage Notes to be issued in respect of interest so
paid, at 100% of their principal amount) and RII 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 New RIHF 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 New RIHF 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 New RIHF Junior Mortgage Notes have
consented to such proposed RIH Sale. (SECTION 3.13).
OPTIONAL REDEMPTION
The New RIHF 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 interest to the Redemption Date. (SECTION 3.13).
From and after any Redemption Date, if funds for the redemption of any New
RIHF Junior Mortgage Notes called for redemption shall have been made available,
such New RIHF 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 New RIHF Junior Mortgage Indenture requires that notice of any
redemption of any New RIHF 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 New
RIHF Junior Mortgage Notes to be redeemed, and, if less than all outstanding New
RIHF Junior Mortgage
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Notes are to be redeemed, the identification (and, in the case of partial
redemption, the respective principal amounts) of the New RIHF Junior Mortgage
Notes to be redeemed and the place or places where the New RIHF Junior Mortgage
Notes to be redeemed are to be surrendered for payment of the Redemption Price.
(SECTION 13.04).
The New RIHF Junior Mortgage Indenture provides that in the event of
redemption of less than all the outstanding New RIHF Junior Mortgage Notes, the
particular New RIHF Junior Mortgage Notes to be redeemed will be selected by the
New RIHF Junior Mortgage Note Trustee by a random, automated selection process
or pro rata, as deemed appropriate by the Trustee. (SECTION 13.03).
LIMITATION ON OPEN-MARKET PURCHASES
The New RIHF Junior Mortgage 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 New RIHF Junior Mortgage Indenture) any New RIHF Junior Mortgage
Notes unless all interest accrued on the New RIHF 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 New RIHF Junior Mortgage Indenture provides that RIHF and RIH
will not, and will not permit any of their respective subsidiaries to,
repurchase any New RIHF Junior Mortgage Notes in the open market if an Event of
Default has occurred and is continuing under the New RIHF Junior Mortgage
Indenture, the New RIHF Mortgage Indenture or the Senior Facility Note
Indenture. (SECTION 12.10).
CASINO CONTROL ACT REGULATION
The New RIHF Junior Mortgage Notes are subject to the qualification,
divestiture and redemption provisions under the Casino Control Act that are
described in "Business of the Company -- Regulation and Gaming Taxes and Fees --
New Jersey". (SECTION 13.08).
INTERCREDITOR AGREEMENT
See "Description of New Senior Mortgage Notes -- Intercreditor Agreement".
COLLATERAL
GENERAL
The New RIHF Junior Mortgage Notes are secured by the New RIHF Junior
Mortgage Trust Estate pursuant to the Mortgage Documents described below.
(ARTICLE SIX).
The "New RIHF Junior Mortgage Trust Estate" consists of an assignment by
RIHF to the New RIHF Junior Mortgage Note Trustee for the benefit of the Holders
of the New RIHF 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 New RIHF 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, 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 Note, the RIH Senior
Facility Guaranty, any other secured Working Capital Facility, the RIH
Promissory Note and the RIH Mortgage Guaranty) in the Resorts Casino Hotel.
RELEASE OF COLLATERAL
No portion of the New RIHF 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 New RIHF Junior Mortgage Notes
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then Outstanding. (SECTION 11.02). Section 2.02 of the RIH Junior Mortgage will
provide 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 New RIHF Junior Mortgage Indenture
or the RIH Junior Mortgage, the New RIHF 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 New RIHF 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 RIHF Mortgage Notes and the related RIH Mortgage
Guaranty) and certain costs, taxes and other items.
CERTAIN REGULATORY CONSIDERATIONS
In any foreclosure sale with respect to the Resorts Casino Hotel, the New
RIHF Junior Mortgage Note Trustee could bid the amount of the outstanding New
RIHF Junior Mortgage Notes. The New RIHF 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 New RIHF Junior Mortgage Note Trustee from taking action to realize on the
New RIHF 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 New RIHF
Junior Mortgage Note Trustee may not have the right to cure any such default.
However, the New RIHF Junior Mortgage Note Trustee has the right under the New
RIHF Junior Mortgage 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 will guarantee payment of principal of and interest on the New RIHF
Junior Mortgage Notes pursuant to the RIH Junior Mortgage Guaranty. In addition,
the RIH Junior Mortgage Guaranty will be secured by the RIH Junior 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 New RIHF Junior
Mortgage Indenture will provide that each of RIHF and RIH will do or cause to be
done all things necessary to preserve and keep in full force and
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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 New RIHF Junior Mortgage Indenture. (SECTION 12.04).
LIMITATION ON DIVIDENDS AND RESTRICTED PAYMENTS
The New RIHF Junior Mortgage Indenture will provide that RIHF will not,
directly or indirectly, make, or permit any Subsidiary of RIHF to make, any
Restricted Payment.
The New RIHF Junior Mortgage Indenture also will provide 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 New RIHF 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 New
RIHF Junior Mortgage 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 New RIHF 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 New RIHF Junior Mortgage Notes and the
New RIHF 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 New RIHF Junior Mortgage Indenture further will provide 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 RII, as applicable, except (A) any
restrictions existing on or prior to the date of the New RIHF Junior Morgage
Indenture, or in connection with agreements in effect, or entered into, on the
date of the New RIHF Junior Mortgage 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 New RIHF Junior Mortgage Indenture;
(D) customary provisions restricting assignment of contracts
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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 New RIHF Junior Mortgage Indenture will provide 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 New RIHF Mortgage Notes, the RIH
Promissory Note and the RIH Mortgage Guaranty;
(ii) Indebtedness represented by the Junior Mortgage Facility, the RIH
Junior Promissory Note and the RIH Junior Mortgage Guaranty;
(iii) Indebtedness represented by the Working Capital Facility, the Working
Capital Facility Guaranty and the RIH Senior Facility 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
New RIHF Junior Mortgage Notes at least to the extent set forth in the
Subordination Provisions attached to the New RIHF 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 New RIHF 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 New RIHF
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 New RIHF Junior Mortgage Indenture also will provide 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 New RIHF Junior Mortgage Indenture will provide 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
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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 New RIHF Junior Mortgage Notes. (SECTION 12.09).
LIMITATION ON CERTAIN TRANSACTIONS
The New RIHF Junior Mortgage Indenture also will provide that each of RIHF
and RIH will not, and will not permit any Subsidiary to, repurchase any New RIHF
Junior Mortgage Notes in the open market if an Event of Default shall have
occurred and shall be continuing under the New RIHF Junior Mortgage Indenture,
the New RIHF Junior Mortgage Indenture or under the RIHF Senior Facility
Indenture. (SECTION 12.10).
RESTRICTION OF ACTIVITIES
The New RIHF Junior Mortgage Indenture will provide 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 New RIHF 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 New RIHF Junior Mortgage Indenture also will provide 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) loans by RIH
to RIHF evidenced by the RIH Senior Facility 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 New RIHF Junior Mortgage Indenture further will provide 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 New RIHF Junior Mortgage Note Indenture and the Mortgage Documents and
otherwise to comply with its obligations thereunder and under the New RIHF
Junior Mortgage Notes, (iii) to do or cause to be done all things necessary or
appropriate to protect the New RIHF Junior Mortgage Trust Estate, (iv) to
preserve its rights under the New RIHF Mortgage Indenture and the Senior
Mortgage Documents and otherwise to comply with its obligations thereunder and
under the New RIHF 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 New RIHF
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 New RIHF
Junior Mortgage 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 New RIHF Junior Mortgage Indenture will provide that RIHF and RIH will
not have any Subsidiaries except the Subsidiaries existing on the date of the
New RIHF Junior Mortgage Note Indenture and Subsidiaries acquired by RIHF or RIH
in transactions not prohibited by the other provisions of the New RIHF Junior
Mortgage Indenture which are and shall at all times be wholly owned (directly or
indirectly) by RIHF or RIH. (SECTION 12.12).
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LIMITATIONS ON LIENS
The New RIHF Junior Mortgage Indenture will provide 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 New RIHF Junior Mortgage Trust Estate, other than (a) Permitted
Encumbrances on the New RIHF Junior Mortgage Trust Estate, (b) liens on the New
RIHF Junior Mortgage 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 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 to the
extent the matters described in (a) and (b) do not constitute a default under
any Ground Lease or Superior Mortgage (as defined in the RIH Junior Mortgage.)
(SECTION 12.13).
COMPLIANCE WITH LAWS
The New RIHF Junior Mortgage Indenture will provide 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
New RIHF Junior Mortgage 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 New RIHF Junior Mortgage Indenture will provide 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 New
RIHF Junior Mortgage 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 New RIHF Junior Mortgage 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 New RIHF Junior Mortgage Indenture further will provide that each of
RIHF and RIH will cause the 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).
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INSURANCE
The New RIHF Junior Mortgage Indenture will provide 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).
WAIVER OF STAY, EXTENSION OR USURY LAWS
The New RIHF Junior Mortgage Indenture will provide 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 New RIHF
Junior Mortgage Notes or the RIH Junior Promissory Note or the RIH Junior
Mortgage Guaranty, wherever and whenever enacted, or which may affect the
covenants or the performance of the New RIHF Junior Mortgage Note Indenture or
the RIH Junior Promissory Note or the RIH Junior Mortgage 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 New RIHF Junior Mortgage Note
Trustee in the New RIHF Junior Mortgage 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 New RIHF Junior Mortgage Indenture also will provide 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 will constitute "Events of Default" under the New RIHF
Junior Mortgage Indenture:
(a) default in the payment of any interest upon any New RIHF Junior Mortgage
Note when such interest becomes due and payable and continuance of such
default (the deposit with the New RIHF 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 New
RIHF Junior Mortgage Note at its Maturity;
(c) default in the performance or breach, of any covenant of RIHF or RIH in
the New RIHF Junior Mortgage Indenture (other than a covenant a default
in the performance or breach of
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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 -- Limitation on Liens" and "Covenants --
Transactions with Stockholders and Affiliates") after there has been
given (i) to RIHF by the New RIHF Junior Mortgage Note Trustee, or (ii)
to RIHF and the New RIHF Junior Mortgage Note Trustee by the Holders of
at least 25% in Outstanding Amount of the Outstanding New RIHF Junior
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 New RIHF Junior
Mortgage 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 New RIHF
Junior 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
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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 New RIHF Junior Mortgage 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 New RIHF Junior Mortgage 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 New RIHF Junior Mortgage
Trust Estate or any 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 New RIHF Junior Mortgage 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 New RIHF Junior Mortgage 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 New RIHF Junior Mortgage 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 New RIHF Junior Mortgage
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);
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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 New RIHF Junior
Mortgage Note Trustee or the Holders of not less than 25% in Outstanding Amount
of the New RIHF Junior Mortgage Notes Outstanding may declare the Outstanding
Amount of all the New RIHF Junior Mortgage Notes to be due and payable
immediately, by a notice in writing to RIHF (and to the New RIHF 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 New RIHF 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 New RIHF Junior
Mortgage Notes has been obtained by the New RIHF Junior Mortgage Note Trustee,
the Holders of a majority in Outstanding Amount of the New RIHF Junior Mortgage
Notes may, by written notice to RIHF and the New RIHF Junior Mortgage Note
Trustee, rescind and annul such declaration and its consequences if: (a) RIHF
has deposited with the New RIHF Junior Mortgage Note Trustee a sum sufficient to
pay (1) all overdue installments of interest on all New RIHF Junior Mortgage
Notes, (2) the principal of any New RIHF 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 New RIHF Junior Mortgage Notes, and
(3) all sums paid or advanced by the New RIHF Junior Mortgage Note Trustee
hereunder and the reasonable compensation, expenses, disbursements and advances
of the New RIHF 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 New RIHF Junior Mortgage Notes which have become due solely by such
declaration of acceleration, have been cured or have been waived as provided in
the New RIHF Junior Mortgage Indenture. No such rescission and annulment shall
affect any subsequent default or impair any right consequent thereon. (SECTION
7.02).
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 New RIHF Junior Mortgage Trust Estate shall
sell, assign, convey or transfer its interest in such assets or the New RIHF
Junior Mortgage Trust Estate, as the case may be, substantially as an entirety
(and notwithstanding anything to the contrary contained in the New RIHF Junior
Mortgage Indenture (including the proviso at the end of this sentence), but
subject to the provisions of the RIH Junior Mortgage regarding dispositions of
the New RIHF Junior Mortgage Trust Estate, neither RIHF with respect to its
assets nor RIH with respect to the New RIHF Junior Mortgage Trust Estate may
sell, assign, convey or transfer such assets or the new RIHF 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
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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
New RIHF Junior Mortgage 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 New RIHF Junior Mortgage 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 New RIHF Junior Mortgage
Indenture, executed and delivered to the New RIHF Junior Mortgage Note Trustee,
the performance and observance of every covenant, obligation and condition of
the New RIHF Junior Mortgage 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 New RIHF 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 New RIHF Junior Mortgage 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 New RIHF Junior Mortgage Indenture or of the Mortgage Documents
or of the Assignment Agreement and the rights and powers of the New RIHF Junior
Mortgage Note Trustee and the Holders of the New RIHF Junior Mortgage Notes
thereunder; and (e) RIHF or RIH, as the case may be, shall have delivered to the
New RIHF 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 New RIHF
Junior Mortgage Indenture and that all conditions precedent provided for in the
New RIHF Junior Mortgage Indenture relating to such transaction have been
complied with. (SECTION 10.01).
Except as otherwise expressly permitted by the RIH Junior Mortgage and the
New RIHF Junior Mortgage 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 New RIHF Junior Mortgage 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, 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 NEW RIHF JUNIOR MORTGAGE NOTE INDENTURE
RIHF may terminate substantially all obligations under the New RIHF Junior
Mortgage Indenture at any time by delivering all outstanding New RIHF Junior
Mortgage Notes to the New RIHF Junior Mortgage Note Trustee for cancellation and
paying any other sums payable under the New RIHF Junior Mortgage Indenture.
(ARTICLE FIVE).
MODIFICATION OF INDENTURE
From time to time, the parties to the New RIHF Junior Mortgage Indenture,
without the consent of the Holders of the New RIHF 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 rights of any Holder. (SECTION 11.01).
Modifications, changes and amendments to the New RIHF Junior Mortgage 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 New RIHF Junior Mortgage Notes
then Outstanding, except that without the consent of the Holder of
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each New RIHF 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 New RIHF 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 New RIHF 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 New RIHF 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 New RIH 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 New RIHF Mortgage Notes must consent to any amendment of
the New RIHF Junior Mortgage Note Indenture allowing for the redemption of the
New RIHF 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 New RIHF Junior Mortgage Note Trustee may require reasonable indemnity
before exercising any of its rights or powers under the New RIHF Junior Mortgage
Indenture. (SECTION 8.05).
REPORTS TO HOLDERS
RIH will furnish or cause to be furnished to the New RIHF 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 New RIHF Junior Mortgage 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 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. RIH contemporaneously with
the furnishing of such audited financial statements to the New RIHF 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 New RIHF 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. RIH contemporaneously with the furnishing of
such unaudited financial statements to the New RIHF 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).
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RIH will furnish or cause to be furnished to the New RIH 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 New RIHF 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 New RIHF Junior Mortgage 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 New RIHF Junior
Mortgage Note Trustee and any exchange upon which the New RIHF 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 Section 314(a) of
the Trust Indenture Act.
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 New RIHF Junior Mortgage Indenture or any of the Mortgage Documents, an
Officers' Certificate specifying with particularity such event. (SECTION 12.06).
CERTAIN DEFINITIONS
"ADDITIONAL NEW RIHF JUNIOR MORTGAGE NOTES" means additional New RIHF Junior
Mortgage Notes issued in payment of interest accrued on outstanding New RIHF
Junior Mortgage Notes pursuant to Section 3.11 of the New RIHF Junior Mortgage
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 "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 New RIHF Junior Mortgage Note Trustee by RIHF, and acknowledgment thereof
by RIH, a copy of which is attached to the New RIHF Junior Mortgage Indenture as
Exhibit B.
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"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 (or loss) 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.
"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 Guaranty as set forth in Article Four of the
New RIHF Junior Mortgage Indenture.
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"HOLDER" means a Person in whose name a New RIHF 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 RIH Mortgage Guaranty, the RIH Junior
Mortgage 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 New RIHF 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 New
RIHF 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 RIH Junior Mortgage 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 New
RIHF Junior Mortgage Indenture and any other security document to which either
RIH or RIHF is a party relating to the New RIHF 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 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 New RIHF Junior Mortgage Trust Estate) used by RIHF, RIH or any
Subsidiary of RIH or RIHF to engage in the casino
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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 New RIHF Junior Mortgage Trust Estate for such
indebtedness.
"OUTSTANDING" when used with respect to New RIHF Junior Mortgage Notes
means, as of the date of determination, all New RIHF Junior Mortgage Notes
theretofore authenticated and delivered under this Indenture, except:
(a) New RIHF Junior Mortgage Notes theretofore canceled by the New RIHF
Junior Mortgage Note Trustee or delivered to the New RIHF Junior Mortgage
Note Trustee for cancellation;
(b) New RIHF Junior Mortgage Notes for whose payment or redemption money
in the necessary amount has been theretofore deposited with the New RIHF
Junior Mortgage Note Trustee or any Paying Agent in trust for the Holders of
such New RIHF Junior Mortgage Notes;
(c) New RIHF Junior Mortgage Notes in exchange for or in lieu of which
other New RIHF Junior Mortgage Notes have been authenticated and delivered
under the New RIHF Junior Mortgage Indenture; and
(d) New RIHF Junior Mortgage Notes alleged to have been destroyed, lost
or stolen which have been paid as provided in Section 3.06 of the New RIHF
Junior Mortgage Indenture;
PROVIDED, HOWEVER, that in determining whether the Holders of the requisite
principal amount of New RIHF Junior Mortgage Notes Outstanding have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
New RIHF Junior Mortgage Notes owned by RIHF or any other obligor upon the New
RIHF 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 New RIHF Junior Mortgage Note Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver, only
New RIHF Junior Mortgage Notes which the New RIHF 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 New RIHF 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
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notwithstanding any other provision of this definition, if the primary effect of
any of the aforesaid transactions is the redemption of the New RIHF 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 New RIHF 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 New RIHF Junior Mortgage 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 RIHF SENIOR FACILITY NOTES
GENERAL
The RIHF Senior Facility Notes, if issued, will be issued pursuant to the
RIHF Senior Facility and the RIHF Senior Facility Note Indenture among RIHF,
RIH, RII and perhaps GRI and a trustee to be named prior to the Effective Date
(the "RIHF Senior Facility Trustee"). The RIHF Senior Facility Notes will be
secured senior obligations of RIHF in the aggregate principal amount of
$20,000,000. The RIHF Senior Facility Notes will mature on July 15, 2002.
As part of the implementation of the Restructuring and prior to the
commencement of the Solicitation, various funds that hold Old Series Notes and
are advised and managed by Fidelity, will deliver a commitment letter to the
effect that they will enter into the RIHF Senior Facility on the Effective Date.
The RIHF Senior Facility will allow RIHF to borrow up to $20,000,000 through the
issuance of RIHF Senior Facility Notes. Any amount borrowed by RIHF under the
RIHF Senior
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Facility will be loaned by RIHF to RIH, and possibly by RIH to RII, through
intercompany transactions for working capital and general corporate purposes.
Acceptances of the Plan by the holders of Old Series Notes and the entry of the
Confirmation Order will constitute the approval of and consent by the holders of
the Old Series Notes to the transfer to and use by RIH and RII of the proceeds
from the RIHF Senior Facility Notes. The RIHF Senior Facility will be available
for a single borrowing for a period of one year from the Effective Date,
provided that the public resale of the RIHF Senior Facility Notes by purchasers
upon a resale is registered under the Securities Act, and the RIHF Senior
Facility Note Indenture has been qualified under the TIA, among other
conditions. The RIHF Senior Facility Notes and the RIH Senior Facility Guaranty
are not included among the securities registered under the Registration
Statement, nor has the RIHF Senior Facility Note Indenture yet been qualified
under the TIA. Any public offering of the RIHF Senior Facility Notes and RIH
Senior Facility Guaranty will be made only by means of a prospectus pursuant to
a separate registration statement to be filed by RIHF, RIH, RII and GRI under
the Securities Act. Information concerning the RIHF Senior Facility is included
in this Information Statement/Prospectus because the execution of the RIHF
Senior Facility Indenture and related documents and instruments is a condition
precedent to the consummation of the Plan.
RANKING
Although the RIHF Senior Facility Notes are not contractually senior to the
New RIHF Mortgage Notes and the New RIHF Junior Mortgage Notes as to priority of
payment, the lien securing payment of the RIHF Senior Facility Notes will be
senior to the liens securing payment of the New RIHF Mortgage Notes and the New
RIHF Junior Mortgage Notes, and the RIHF Senior Facility Notes therefore are
structurally senior to the New RIHF Mortgage Notes and the New RIHF Junior
Mortgage Notes.
The RIH Senior Facility Mortgage will be senior to the liens on the Resorts
Casino Hotel securing payment of the RIH Promissory Note, the RIH Mortgage
Guaranty, the RIH Junior Promissory Note and the RIH Junior Mortgage Guaranty.
INTEREST
Interest on the RIHF Senior Facility Notes will accrue from and after their
date of original issuance at a rate of 11% per year. Interest is payable
semi-annually on January 15 and July 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.
SINKING FUND REQUIREMENTS
None.
MANDATORY REDEMPTION
In the event of an RIH Sale, all the RIHF Senior Facility Notes shall be
redeemed by RIHF (a) at 103% of their principal amount plus accrued interest to
the Redemption Date, if redeemed on or prior to the third anniversary of the
date of issuance, and (b) at 100% of their principal amount plus accrued
interest to the Redemption Date, if redeemed after the third anniversary of the
date of issuance; provided, however, that such obligation of RIHF to redeem the
RIHF Senior Facility 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 RIHF Senior Facility Notes have consented to such proposed RIH Sale.
OPTIONAL REDEMPTION
The RIHF Senior Facility Notes will be redeemable at any time in whole, or
from time to time in part, at the election of RIHF, at a redemption price of
103% of their principal amount plus accrued interest to the Redemption Date
during the first three years after the issuance and at a redemption price of
100% of their principal amount plus accrued interest to the Redemption Date
thereafter.
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LIMITATION ON OPEN-MARKET PURCHASES
The RIHF Senior Facility Indenture provides that RIHF and RIH will not, and
will not permit any of their respective Subsidiaries to, repurchase any RIHF
Senior Facility Notes in the open market if an Event of Default has occurred and
is continuing under the RIHF Senior Facility Indenture, the New RIHF Mortgage
Indenture or the New RIHF Junior Mortgage Indenture. Similar restrictions may
apply to RII, subject to negotiations between the parties to the Senior Facility
Indenture.
CASINO CONTROL ACT REGULATION
Any borrowings under the RIHF Senior Facility will be subject to the prior
approval of the Casino Control Commission as to amount and use of proceeds. In
addition, the RIHF Senior Facility Notes will be subject to the qualification,
divestiture and redemption provisions under the Casino Control Act that are
described in "Business of the Company -- Regulation and Gaming Taxes and Fees --
New Jersey".
INTERCREDITOR AGREEMENT
See "Description of New RIHF Mortgage Notes -- Intercreditor Agreement".
COLLATERAL
GENERAL
The RIHF Senior Facility Notes will be secured by the RIHF Senior Facility
Trust Estate pursuant to the Mortgage Documents described below.
The "RIHF Senior Facility Trust Estate" will consist of an assignment by
RIHF to the RIHF Senior Facility Trustee for the benefit of the holders of the
RIHF Senior Facility Notes, of the RIH Senior Facility Note issued by RIH to
RIHF on the date of the issuance of the RIHF Senior Facility Notes, to evidence
the loan by RIHF to RIH of the proceeds thereof, in a principal amount equal to
the aggregate principal amount of the RIHF Senior Facility Notes, and payable in
amounts and at times necessary to pay the principal of and interest on the RIHF
Senior Facility Notes, which note will be 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, 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, comprising
the Trust Estate encumbered pursuant to an indenture of mortgage, an assignment
of leases and rents and a security agreement (collectively, the "RIH Senior
Facility Mortgage") between RIH, as mortgagor, and RIHF, as mortgagee, securing
the RIH Senior Facility Note.
In addition, the Pledged Shares will secure the RIHF Senior Facility Notes
pursuant to and in accordance with the Pledge Agreements.
THE RIH SENIOR FACILITY MORTGAGE
The RIH Senior Facility Mortgage creates a mortgage lien and security
interest (senior to the RIH Mortgage, the RIH Guaranty Mortgage, the RIH Junior
Mortgage and the RIH Junior Guaranty Mortgage) in the Resorts Casino Hotel.
RELEASE OF COLLATERAL
No portion of the RIHF Senior Facility Trust Estate may be released, nor may
the liens of the RIHF Senior Facility Note Trustee with respect to the stock of
RIH, RIHF and GRI be released, without the consent of the Holders of not less
than 66 2/3% in Outstanding Amount of the RIHF Senior Facility Notes then
Outstanding. Section 2.02 of the RIH Senior Facility Mortgage will provide 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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LIMITATIONS ON ABILITY TO REALIZE ON COLLATERAL
GENERAL
If there is an Event of Default under the RIHF Senior Facility, the RIHF
Senior Facility Note Indenture or the RIH Senior Facility Mortgage, the RIHF
Senior Facility Trustee, subject to the requirements of the Casino Control Act,
may enforce the rights and remedies arising under the RIH Senior Facility
Mortgage. The net amount realized in any foreclosure sale for the benefit of
holders of the RIHF Senior Facility Notes will be only that amount that exceeds
all amounts then due and owing to creditors, if any, having senior security
interests and certain costs, taxes and other items.
GUARANTY
RIH and RII each will guaranty payment of principal of and interest on the
RIHF Senior Facility Notes pursuant to the RIH Senior Facility Guaranty. The RIH
Senior Facility Guaranty will be secured by the RIH Senior Facility Guaranty
Mortgage, which creates a mortgage lien in the Resorts Casino Hotel (senior to
the RIH Mortgage, the RIH Junior Mortgage and the RIH Junior Guaranty Mortgage
and PARI PASSU with the lien of the RIH Senior Facility Mortgage). The RII
Senior Facility Guaranty will be secured by the RII Pledge Agreement.
PAYMENT OF NET PROCEEDS FROM ASSET SALES
None.
COVENANTS
CORPORATE EXISTENCE
Subject to the provisions described under "Limitations on Merger,
Consolidation, Transfer or Lease of Property and Assets", the RIHF Senior
Facility Indenture will provide that each of RIHF, RIH and RII 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 RII
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, that (i) 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 RIHF Senior Facility Indenture; and
(ii) GRI may merge with or into RII or RIH if, following any such merger, RII
assumes the obligations of GRI under the GRI Pledge Agreement with respect to
the capital stock of RIH pledged pursuant thereto.
LIMITATION ON ADDITIONAL INDEBTEDNESS AND ISSUANCE OF NOTES
The RIHF Senior Facility Indenture will provide 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 (on a consolidated basis), any
Indebtedness other than, without duplication, the following:
(i) Indebtedness represented by the RIHF Senior Facility Notes, the RIHF
Senior Facility Guaranty and the RIH Senior Facility Note;
(ii) Indebtedness represented by the New RIHF Mortgage Notes, the RIH
Promissory Note and the RIH Mortgage Guaranty;
(iii) Indebtedness represented by the Junior Mortgage Facility, the RIH
Junior Promissory Note and the RIH Junior Mortgage Guaranty;
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(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
New RIHF Junior Mortgage Notes at least to the extent set forth in certain
subordination provisions attached to the RIHF Senior Facility Indenture and
which Indebtedness does not have any requirements for amortization payments,
mandatory redemption or sinking fund payments prior to the stated maturity
of the New RIHF 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 New RIHF 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 or advances
from RIH to RII of proceeds received by it from the RIHF Senior Facility
Notes in accordance with the RIHF Senior Facility Indenture.
The RIHF Senior Facility Indenture also will provide 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.
LIMITATION ON REPAYMENT OF SUBORDINATED INDEBTEDNESS
The RIHF Senior Facility Indenture will provide 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 or with respect to collateral to the RIHF
Senior Facility Notes; provided, however, that the provisions of this paragraph
shall not apply with respect to the Indebtedness incurred pursuant to the Junior
Mortgage Facility.
LIMITATION ON CERTAIN TRANSACTIONS
The RIHF Senior Facility Indenture also will provide that each of RIHF and
RIH will not, and will not permit any Subsidiary to, repurchase any RIHF Senior
Facility Notes in the open market if an Event of Default shall have occurred and
shall be continuing under the RIHF Senior Facility Indenture, under the New RIHF
Mortgage Indenture or under the New RIHF Junior Mortgage Indenture. Similar
restrictions may apply to RII, subject to negotiations between the parties to
the RIHF Senior Facility Indenture.
RESTRICTION OF ACTIVITIES
The RIHF Senior Facility Indenture will provide that RIH will not, until the
date that is 91 days after the payment in full by RIHF of the principal of (and
interest or premium, if any, on) all Outstanding RIHF Senior Facility 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, or
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those related to the casino, gaming, hospitality, entertainment, media, or
subject to negotiation between the parties to the RIHF Senior Facility
Indenture, real estate or education businesses or any activities related or
ancillary to such businesses.
The RIHF Senior Facility Indenture also will provide 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) or (x) of the covenant
described in "Limitation on Additional Indebtedness and Issuance of Notes", (ii)
loans by RIH to RIHF evidenced by the RIH Senior Facility 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 RIHF Senior Facility Notes;
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 RIHF Senior Facility Indenture further will provide 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 RIHF
Senior Facility Indenture and the Mortgage Documents and otherwise to comply
with its obligations thereunder and under the RIHF Senior Facility Notes, (iii)
to do or cause to be done all things necessary or appropriate to protect the
RIHF Senior Facility Trust Estate, (iv) to preserve its rights under the New
RIHF Mortgage Indenture, the New RIHF Junior Mortgage Indenture and the Mortgage
Documents defined therein and otherwise to comply with its obligations
thereunder and under the New RIHF Mortgage Notes and the New RIHF Junior
Mortgage Notes, (v) to issue the Indebtedness represented by any other Junior
Mortgage Facility, (vi) to issue Indebtedness represented by the RIHF Senior
Facility, (vii) to incur any other Indebtedness permitted under the RIHF Senior
Facility Indenture, (viii) to do all such acts and deeds necessary in connection
with the Junior Mortgage 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 hereby) 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.
LIMITATION ON SUBSIDIARIES CONSOLIDATED GROUP
The RIHF Senior Facility Indenture will provide that RIHF and RIH will not
have any Subsidiaries except the Subsidiaries existing on the date of the RIHF
Senior Facility Indenture and Subsidiaries acquired by RIHF or RIH in
transactions not prohibited by the other provisions of the RIHF Senior Facility
Indenture which are and shall at all times be wholly owned (directly or
indirectly) by RIHF or RIH.
LIMITATIONS ON LIENS
The RIHF Senior Facility Indenture will provide 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 RIHF Senior Facility Trust Estate, other than (a) Permitted
Encumbrances on the RIHF Senior Facility Trust Estate, (b) liens on the RIHF
Senior Facility 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 Senior Facility Mortgage) or
mechanics' liens so long as RIH is in good faith contesting the validity of such
liens in
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accordance with the provisions of Section 5.09 of the RIH Senior Mortgage to the
extent the matters described in (a) and (b) do not constitute a default under
any Ground Lease or Superior Mortgage (as defined in the RIH Senior Facility
Mortgage).
The RIHF Senior Facility Indenture will also provide that RII will not
create, incur, suffer to exist or permit to be created any mortgage, lien,
charge or encumbrance on or pledge of the Stock Pledge Agreements or the Pledged
Shares, other than the lien on the Pledged Shares created by the Stock Pledge
Agreements.
COMPLIANCE WITH LAWS
The RIHF Senior Facility Indenture will provide that each of RIHF, RIH and
RII 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
RIHF Senior Facility Trust Estate and the Pledged Shares, 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, RII or their
respective Subsidiaries.
PAYMENT OF TAXES AND OTHER CLAIMS
The RIHF Senior Facility Indenture will provide that RIHF, RIH and RII 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, RII or any of their respective Subsidiaries or upon the
RIHF Senior Facility Trust Estate, the Pledged Shares or any portion thereof or
upon the income, profits or property of RIHF, RIH, RII 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 RIHF Senior
Facility Trust Estate, the Pledged Shares or upon any other property of RIHF,
RIH, RII or any of their respective Subsidiaries; provided, however, that RIHF,
RIH and RII 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.
MAINTENANCE OF PROPERTIES
The RIHF Senior Facility Indenture further will provide that each of RIHF
and RIH will cause the RIHF Senior Facility 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.
INSURANCE
The RIHF Senior Facility Indenture will provide 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
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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.
WAIVER OR STAY, EXTENSION OR USURY LAWS
The RIHF Senior Facility Indenture will provide that each of RIHF, RIH and
RII (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, RIH or RII from paying all or any
portion of the principal of, or premium, if any, and interest on the RIHF Senior
Facility Notes, the RIH Senior Facility Note, the RIH Senior Facility Guaranty
or the RII Senior Facility Guaranty, wherever and whenever enacted, or which may
affect the covenants or the performance of the RIHF Senior Facility Indenture or
the RIH Senior Facility Note or the RIH Senior Facility Guaranty; and (to the
extent that it may lawfully do so) RIHF, RIH and RII 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 RIHF Senior Facility
Trustee in the RIHF Senior Facility Indenture and in the Mortgage Documents or
the RII Pledge Agreement, but will suffer and permit the execution of every such
power as though no such law had been enacted. Similar restrictions will apply to
GRI.
TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES
The RIHF Senior Facility Indenture also will provide 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, RIH 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) the New Griffin Services Agreement, (B) the RII Management Contract
or (C) the RII Tax Sharing Agreement.
OTHER COVENANTS
The RIHF Senior Facility Indenture will also contain covenants, similar to
those set forth in the New RIHF Mortgage Indenture and the New RIHF Junior
Mortgage Indenture with such changes as shall be agreed to by the parties to the
RIHF Senior Facility Indenture, limiting the ability of RIH, RIHF, and, in
certain circumstances, RII or its Subsidiaries, to consolidate, merge, and
transfer or lease their respective assets and pay dividends and certain other
Restricted Payments.
EVENTS OF DEFAULT
The following events will constitute "Events of Default" under the RIHF
Senior Facility Indenture:
(a) default in the payment of any interest upon any RIHF Senior Facility
Note when such interest becomes due and payable and continuance of such
default (the deposit with the RIHF Senior Facility 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
RIHF Senior Facility Note at its Maturity;
(c) default in the performance or breach of any covenant of RIHF, RIH,
RII or GRI in the RIHF Senior Facility 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
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Assignment Agreement, the RII Stock Pledge Agreement, the GRI Stock Pledge
Agreement, the Intercreditor 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, the RII Stock Pledge
Agreement, the GRI Stock Pledge Agreement, the Intercreditor 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 Liens" and "Covenants -- Transactions with Stockholders and
Affiliates") after there has been given (i) to RIHF by the RIHF Senior
Facility Trustee, or (ii) to RIHF and the RIHF Senior Facility Trustee by
the Holders of at least 25% in Outstanding Amount of the Outstanding RIHF
Senior Facility 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 RIHF Senior
Facility 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, RIH, RII or GRI in any court of competent jurisdiction,
seeking (i) its liquidation, reorganization, dissolution or winding-up, or
the composition or readjustment or it debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of RIHF, RIH, RII or
GRI or of all or any substantial part of its assets, or (iii) similar relief
in respect of RIHF, RIH, RII or GRI 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, RIH, RII or GRI 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, RIH, RII or GRI 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, RIH, RII or GRI 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 RII or any of their Subsidiaries under
any Indebtedness in an aggregate principal amount in excess of $5,000,000,
pursuant to one or more cross-default or cross-acceleration provisions,
which provisions may be more restrictive than those contained in the New
RIHF Mortgage Note Indenture and the New RIHF Junior Mortgage Note
Indenture, subject to negotiation between the parties to the RIHF Senior
Facility Indenture, or (ii) 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 RIHF Senior Facility 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 RIHF Senior Facility Trust Estate or any
part thereof (unless the lawsuit in question was commenced without effective
service of process upon all of RIHF, RIH, RII and GRI which are intended
parties
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in which case such 30-day period shall not commence until any of RIHF, RIH,
RII and GRI receives notice of such final judgment); or (iii) 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 RIHF Senior Facility 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 (iv) the existence of a final
judgment of a court of competent jurisdiction, regardless of amount, against
RIHF, RIH, RII or the RIHF Senior Facility 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
RIHF Senior Facility Trust Estate or any part thereof senior to the lien of
the RIH Senior Facility Mortgage;
(h) default in the performance, or breach, of any covenant 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 RIHF Senior Facility 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 amount 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.
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 RIHF Senior
Facility Trustee or the Holders of not less than 25% in Outstanding Amount of
the RIHF Senior Facility Notes Outstanding may declare the Outstanding Amount of
all the RIHF Senior Facility Notes to be due and payable immediately, by a
notice in writing to RIHF (and to the RIHF Senior Facility 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 RIHF Senior
Facility 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.
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 RIHF Senior
Facility Notes has been obtained by the RIHF Senior Facility Trustee, the
Holders of a majority in Outstanding Amount of the RIHF Senior Facility Notes
may, by written notice to RIHF and the RIHF Senior Facility Trustee, rescind and
annul such declaration and its consequences if: (a) RIHF has deposited with the
RIHF Senior Facility Trustee a sum sufficient to pay (1) all overdue
installments of interest on all RIHF Senior Facility Notes, (2) the principal of
any RIHF Senior Facility Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates prescribed
therefor in the RIHF Senior Facility Notes, and (3) all sums paid or advanced by
the RIHF Senior Facility Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the RIHF Senior Facility Trustee, its
agents and counsel; and (b) all Events of Default, other than the non-payment of
the
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Outstanding Amount of the RIHF Senior Facility Notes which have become due
solely by such declaration of acceleration, have been cured or have been waived
as provided in the RIHF Senior Facility Indenture. No such rescission and
annulment shall affect any subsequent default or impair any right to consequent
thereon.
LIMITATION ON CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE OF PROPERTY
AND ASSETS
Neither RIHF, RIH nor RII 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, RIH or RII, as the case may be; and neither RIHF with respect
to its assets or RII with respect to the outstanding capital stock of RIHF and
GRI pledged under the RII Pledge Agreement (the "RII Pledged Shares") nor RIH
with respect to the RIHF Senior Facility Trust Estate shall sell, assign, convey
or transfer its interest in such assets or the RII Pledged Shares or the RIHF
Senior Facility Trust Estate, as the case may be, substantially as an entirety
(and notwithstanding anything to the contrary contained in the RIHF Senior
Facility Indenture (including the proviso at the end of this sentence), but
subject to the provisions of the RIH Senior Facility Mortgage regarding
dispositions of the RIHF Senior Facility Trust Estate, neither RIHF with respect
to its assets, RII with respect to the RII Pledged Shares, nor RIH with respect
to the RIHF Senior Facility Trust Estate may sell, assign, convey or transfer
such assets, the RII Pledged Shares or the RIHF Senior Facility Trust Estate, as
the case may be, other than substantially as an entirety) to any other Person or
Persons in one transaction or a series of related transactions, or permit any
other Person or Persons to convey or transfer all or substantially all of its or
their assets, subject to liabilities other than DE MINIMIS liabilities, to RIHF,
RIH or RII; and RIHF, RIH and RII shall not transfer, convey, sell or otherwise
dispose of to any other Person, or issue to any Person, any equity interest in
RIHF, RIH, RII or GRI, 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, RII or
GRI or a direct or indirect wholly owned Subsidiary of RIHF, RIH, RII or GRI,
and (ii) RIHF, RIH, RII or GRI 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, RIH, RII or GRI shall
consolidate, combine or merge with or into another Person or sell, assign,
convey or transfer its assets (including, with respect to RII, the RII Pledged
Shares) or the RIHF Senior Facility 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 RIHF Senior Facility 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 RIHF Senior
Facility Indenture, executed and delivered to (and reasonably satisfactory to)
the RIHF Senior Facility Trustee, the performance and observance of every
covenant, obligation and condition of the RIHF Senior Facility Indenture to be
performed or observed by RIHF, RIH or RII, whichever the case may be; (3) shall
expressly assume, by an instrument executed and delivered to (and reasonably
satisfactory to) the RIHF Senior Facility Trustee, the performance of every
covenant, obligation and condition of the Mortgage Documents, the RII Pledge
Agreement, the Assignment Agreement and the Intercreditor Agreement to be
performed by RIHF, RIH or RII, whichever the case may be; (4) except in the case
of RII, 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 RIHF Senior Facility Indenture or under the RIH Senior
Facility Mortgage, shall have occurred and be continuing; (d) such
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Combination Transaction shall be on such terms as shall not impair the lien and
security and priority of the RIHF Senior Facility Indenture or of the Mortgage
Documents, the RII Pledge Agreement or of the Assignment Agreement and the
rights and powers of the RIHF Senior Facility Trustee and the Holders of the
RIHF Senior Facility Notes thereunder or under the Intercreditor Agreement; and
(e) RIHF, RIH or RII, as the case may be, shall have delivered to the RIHF
Senior Facility 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 RIHF Senior Facility
Indenture and that all conditions precedent provided for in the RIHF Senior
Facility Indenture relating to such transaction have been complied with.
Except as otherwise expressly permitted by the RIH Senior Facility Mortgage
and the RIHF Senior Facility 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 RIHF Senior Facility 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, 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.
Similar restrictions on the ability to consolidate, combine, merge, or sell,
assign or convey assets, including the capital stock of RIH pledged under the
GRI Pledge Agreement, may apply to GRI, subject to negotiation between the
parties to the RIHF Senior Facility Indenture (and the GRI Pledge Agreement).
The foregoing limitations on consolidation, merger, conveyance, transfer or
lease of property and assets shall not apply in connection with an RIH Sale.
DISCHARGE OF RIHF SENIOR FACILITY INDENTURE; DEFEASANCE
RIHF may terminate substantially all obligations under the RIHF Senior
Facility Indenture at any time by delivering all outstanding RIHF Senior
Facility Notes to the RIHF Senior Facility Trustee for cancellation and paying
any other sums payable under the RIHF Senior Facility Indenture.
The RIHF Senior Facility Indenture will also provide that RIHF will be
deemed to have paid and discharged the entire Indebtedness on the RIHF Senior
Facility Notes and the provisions of the RIHF Senior Facility Indenture (except
as to any surviving rights of transfer or exchange of RIHF Senior Facility Notes
provided for in the RIHF Senior Facility Indenture or the RIHF Senior Facility
Notes and any right to receive payments of principal and interest as provided in
this paragraph) and shall have satisfied all obligations under the RIH Senior
Facility Mortgage, the RIH Senior Facility Guaranty, the RII Senior Facility
Guaranty and the Pledge Agreements if: (1) RIHF irrevocably deposits in trust
with the RIHF Senior Facility Trustee, pursuant to an irrevocable trust and
security agreement in form and substance reasonably satisfactory to the RIHF
Senior Facility 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 RIHF Senior Facility
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 RIHF Senior Facility Trustee) delivered to the
RIHF Senior Facility Trustee, to pay reasonable compensation to the RIHF Senior
Facility Trustee under Section 8.07 of the RIHF Senior Facility Indenture and
the principal of and interest on the outstanding RIHF Senior Facility Notes on
the dates on which any such payments are due and payable in accordance with the
terms of the RIHF Senior Facility Indenture and of the RIHF Senior Facility
Notes; (2) such deposits will not cause the RIHF Senior Facility 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 RIHF Senior Facility Indenture;
(4) RIHF will deliver to the RIHF Senior Facility Trustee an
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Opinion of Counsel, or a private ruling of the Internal Revenue Service, in form
and substance satisfactory to the RIHF Senior Facility Trustee, to the effect
that Holders of the RIHF Senior Facility 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 RIHF Senior Facility 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 RIHF Senior
Facility 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 RIHF Senior Facility Notes are to be redeemed
through such irrevocable trust, RIHF must make arrangements satisfactory to the
RIHF Senior Facility Trustee, at the time of such deposit, for the giving of the
notice of such redemption or redemptions by the RIHF Senior Facility Trustee in
the name and at the expense of RIHF.
The RIHF Senior Facility 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 the RIHF Senior Facility Indenture.
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 Senior Facility Mortgage.
"ASSIGNMENT AGREEMENT" means the Assignment of Agreements dated as of the
date of the RIHF Senior Facility Indenture, providing for the assignment of the
RIH Senior Facility Note, the RIH Senior Facility Mortgage and certain of the
other Mortgage Documents securing the RIH Senior Facility Note to the RIHF
Senior Facility Trustee by RIHF, and acknowledgment thereof by RIH, a copy of
which is attached to the RIHF Senior Facility 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
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net income (or loss) 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 Senior Facility
Note, (b) any intercompany indebtedness of RIH issued in connection with
Indebtedness represented by the New RIHF Mortgage Notes and (c) any intercompany
indebtedness of RIH issued in connection with Indebtedness represented by the
New RIHF Junior Mortgage Notes or any other Junior Mortgage 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
Senior Facility Note, (ii) any intercompany indebtedness of RIH issued in
connection with Indebtedness represented by the New RIHF Mortgage Notes and
(iii) any intercompany indebtedness of RIH issued in connection with
Indebtedness represented by the New RIHF Junior Mortgage Notes or any other
Junior Mortgage Facility), without deduction for interest income (other than
cash interest income received from RII in payment of its interest cost on any
the RIHF Senior 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 Senior Facility Mortgage) and other
items constituting Operating Assets (as defined in the RIH Senior Facility
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.
"HOLDER" means a Person in whose name a RIHF Senior Facility 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
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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 RIH Mortgage Guaranty, the RIH Junior
Mortgage Guaranty or the RIH Senior 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 New RIHF 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 RIHF
Senior Facility 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 RIH Junior Mortgage Guaranty.
"MORTGAGE DOCUMENTS" means the RIH Senior Facility Mortgage, the RIH Senior
Facility Guaranty Mortgage, the RIH Senior Facility Note, the Assignment
Agreement, an Assignment of Leases and Rents and an Assignment of Operating
Assets each dated as of the date of the New RIHF Mortgage Indenture by RIH to
RIHF and any other security document to which either RIH or RIHF is a party
relating to the RIHF Senior Facility Notes, which is executed and delivered
pursuant to or in connection with the RIH Senior Facility Mortgage, the RIH
Senior Facility 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 RIHF Senior Facility 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
RIHF Senior Facility Trust Estate for such indebtedness.
"OUTSTANDING" when used with respect to RIHF Senior Facility Notes means, as
of the date of determination, all RIHF Senior Facility Notes theretofore
authenticated and delivered under the RIHF Senior Facility Indenture, except:
(a) RIHF Senior Facility Notes theretofore canceled by the RIHF Senior
Facility Trustee or delivered to the RIHF Senior Facility Trustee for
cancellation;
(b) RIHF Senior Facility Notes for whose payment or redemption money in
the necessary amount has been theretofore deposited with the RIHF Senior
Facility Trustee or any Paying Agent in trust for the Holders of such RIHF
Senior Facility Notes;
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(c) RIHF Senior Facility Notes in exchange for or in lieu of which other
RIHF Senior Facility Notes have been authenticated and delivered under the
RIHF Senior Facility Indenture; and
(d) RIHF Senior Facility Notes alleged to have been destroyed, lost or
stolen which have been paid as provided in the RIHF Senior Facility
Indenture;
provided, however, that in determining whether the Holders of the requisite
principal amount of RIHF Senior Facility Notes Outstanding have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
RIHF Senior Facility Notes owned by RIHF or any other obligor upon the RIHF
Senior Facility Notes or any Affiliate of RIHF or of such other obligor shall be
disregarded and deemed not to be Outstanding. In determining whether the RIHF
Senior Facility Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only RIHF Senior
Facility Notes which the RIHF Senior Facility 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 RII, RIH or RIHF
or any Subsidiary of RII, 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
RII, RIH or RIHF or any Subsidiary of RII, RIH or RIHF (other than purchases,
redemptions, acquisitions or retirement solely from RII, RIH or RIHF or a direct
or indirect wholly owned Subsidiary of RII, 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 RIHF Senior Facility Notes.
"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 RIHF Senior Facility 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 RIHF Senior Facility
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.
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"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.
DESCRIPTION OF NEW EQUITY SECURITIES
GENERAL
RII is a Delaware corporation that, following the Restructuring, will have
two classes of authorized and outstanding common stock. The RII Common Stock
will be issued to the holders of the Old Series Notes as of the Effective Date
pursuant to the Plan. The existing holders of RII Common Stock will continue to
hold their existing shares of RII Common Stock. The RII Class B Common Stock
will be issued as part of the Units to the holders of the Old Series Notes as of
the Effective Date pursuant to the Plan and is essentially a non-participating
stock that entitles its holders to elect the Class B Directors to the RII Board
of Directors. THE RII CLASS B COMMON STOCK MAY NOT BE TRANSFERRED SEPARATELY
FROM THE RELATED NEW RIHF JUNIOR MORTGAGE NOTES. All the outstanding shares of
RII Common Stock are, and any shares of RII Common Stock and RII Class B Common
Stock issued to the holders of Old Series Notes pursuant to the Plan will be,
validly issued, fully paid and non-assessable.
CASINO CONTROL ACT REGULATION
The New RII Common Stock and the RII Class B Common Stock are subject to the
qualification, divestiture and redemption provisions under the Casino Control
Act that are described in "Business of the Company -- Regulation and Gaming
Taxes and Fees -- New Jersey".
DESCRIPTION OF RII COMMON STOCK
NUMBER OF SHARES. Up to 100,000,000 shares of RII Common Stock are
authorized; 20,157,234 shares of RII Common Stock are outstanding as of November
30, 1993, and 17,025,000 shares of RII Common Stock will be issued as of the
Distribution Date pursuant to the Plan (assuming all distributions to be made
under the Plan are made on the Distribution Date and no options and warrants to
purchase RII Common Stock have been exercised). Up to 160,000 additional shares
of RII Common Stock may be issued to holders of Old Plan Disputed Claims if such
claims are allowed by the New Jersey bankruptcy court. The number of shares of
RII Common Stock to be issued pursuant to the Plan would increase to offset the
dilutive effect of the issuance of additional RII Common Stock.
DIVIDENDS. Holders of RII 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 RII 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 RII Common Stock.
LIQUIDATION RIGHTS. In the event of a dissolution, liquidation or winding
up of RII, the holders of RII Common Stock are entitled to share ratably with
the holders of RII 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 RII Common Stock.
ELECTION OF DIRECTORS. Holders of the RII Common Stock are entitled to
elect two-thirds of the RII Board of Directors (or following the Class B
Triggering Event in connection with the New RIHF Junior Mortgage Notes, one less
than half of the RII Board of Directors). The directors are to be divided into
three classes of directors serving staggered three-year terms. Upon redemption
or cancellation of all the outstanding RII Class B Common Stock, holders of the
RII 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 RII 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 RII Class B Common Stock.
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PREEMPTIVE RIGHTS. None.
DESCRIPTION OF RII CLASS B COMMON STOCK
NUMBER OF SHARES. Up to 80,000 shares of RII Class B Common Stock are
authorized; 35,000 shares of RII Class B Common Stock will be issued as of the
Distribution Date pursuant to the Plan (assuming all distributions to be made
under the Plan are made on the Distribution Date). Authorized and unissued
shares of RII 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 New RIHF Junior
Mortgage Notes.
DIVIDENDS. The holders of RII 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 New RIHF Junior Mortgage Notes, RII
will redeem, at a price of $.01 per share, the share of RII Class B Common Stock
issued as a Unit with each $1,000 principal amount of New RIHF Junior Mortgage
Notes. The RII 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 RII Class B Common
Stock.
LIQUIDATION RIGHTS. In the event of a dissolution, liquidation or winding
up of RII, the holders of RII Class B Common Stock are entitled to share ratably
with the holders of the RII 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 RII Class B Common Stock will be
issued as part of a Unit with each $1,000 principal amount of New RIHF Junior
Mortgage Notes and may not be transferred separately from such New RIHF Junior
Mortgage Note.
ELECTION OF DIRECTORS. Holders of the RII 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 New RIHF Junior Mortgage Notes, a
majority of the entire RII Board of Directors).
VOTING RIGHTS. The holders of RII Class B Common Stock are not entitled to
any voting rights, except (i) in the election of directors by the holders of the
RII 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 RII Certificate of Incorporation or the Amended RII
By-laws that would affect the RII Class B Common Stock.
PREEMPTIVE RIGHTS. None.
DESCRIPTION OF PIRL ORDINARY SHARES
The authorized capital stock of PIRL consists of 25,000,000 PIRL Ordinary
Shares, par value $.01 per share, of which 5,000,000 shares will be issued as of
the Distribution Date to the holders of Old Series Notes pursuant to the Plan,
if the SIHL Sale is not consummated on or before the Effective Date (assuming
all distributions to be made under the Plan are made on the Distribution Date).
The holders of PIRL Ordinary Shares are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders, including
the election of directors. Holders of PIRL Ordinary Shares are entitled to share
ratably in such dividends as may be declared by the Board of Directors of PIRL
and paid by PIRL out of funds legally available therefor. In the event of a
dissolution, liquidation, or winding up of PIRL, the holders of the PIRL
Ordinary Shares are entitled to share ratably in all assets remaining after
payment of liabilities and liquidation preferences, if any. Holders of PIRL
Ordinary Shares have no preemptive, subscription, redemption or conversion
rights. All the outstanding shares of PIRL Ordinary Shares are, and any shares
issued to the holders of Old Series Notes pursuant to the Plan will be, validly
issued, fully paid and non-assessable. See "Description of PIRL Standby
Distribution Agreement".
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DESCRIPTION OF PARADISE ISLAND PURCHASE AGREEMENT
GENERAL
The following is a summary of material portions of the Paradise Island
Purchase Agreement, a copy of which has been filed as an exhibit to the
Registration Statement of which this Information Statement/Prospectus is a part.
Capitalized terms used in this section and not defined in this Information
Statement/Prospectus have the meanings ascribed thereto in the Paradise Island
Purchase Agreement.
For the purposes of the following description of the Paradise Island
Purchase Agreement, the following terms have the following meanings:
"Adjusted Cash" means cash and cage cash.
"Adjusted Current Assets" means Current Assets minus Adjusted Cash.
"Adjusted Working Capital" means Adjusted Current Assets minus Current
Liabilities.
"Current Assets" means cash, cage cash, net receivables, prepaid expenses
and inventory.
"Current Liabilities" means accounts payable, accrued liabilities and the
current portion of the capital lease obligations relating to the mini-bars used
in the Paradise Island Business.
"EBITDA Adjustment" means the earnings from operations appearing as a line
item on the Closing Date Operations Statement plus depreciation plus the amount,
if any, paid or accrued with respect to RII management fees to the extent such
fees were deducted in computing earnings from operations, plus any expenses in
excess of $25,000 appearing on the Closing Date Operations Statement that are
attributable to events occurring prior to January 1, 1994, less $275,000 per
month for overhead relating to RII and the U.S. Paradise Island Subsidiaries (to
be prorated for any portion of a month) less capital expenditures; provided that
any item of capital expenditure in excess of $25,000 will not be deducted if not
approved in writing by SIHL.
"Overbid Transaction" means an Acquisition Proposal or a Post Termination
Sale which provides for consideration attributable to, or in the case of a
transaction involving less than all of the Paradise Island Business
consideration that would result in, the entire Paradise Island Business having a
fair market value, as determined by an investment banking firm of international
standing selected by RII and reasonably acceptable to SIHL, in an amount in
excess of $130,000,000.
"Paradise Island Assets" means all the assets, properties, goodwill,
business and other rights of every kind and nature whatsoever, tangible or
intangible, real, personal or mixed, and wherever located, used primarily in
connection with or relating primarily to the Paradise Island Business, including
without limitation any company name, receivables, rights under Contracts,
Intellectual Property, investments, business and goodwill, and including all
property and assets used primarily in connection with or relating primarily to
the Paradise Island Business acquired by RII or any affiliate of RII between
October 11, 1993 and the SIHL Closing Date and not sold, transferred or
otherwise disposed of prior to the SIHL Closing Date in the ordinary course of
business.
"Paradise Island Business" means all the operations and properties conducted
and owned by RII and its affiliates primarily in connection with or relating
primarily to Paradise Island, The Bahamas, including without limitation the
Paradise Island Resorts, approximately 561 acres on Andros Island, the SIHL BDL
Option and other similarly related assets not currently used actively in the
Paradise Island operations.
"Paradise Island Interim Order" means an order in form and substance
reasonably satisfactory to SIHL and its counsel (i) approving the provisions of
and authorizing the performance by RII of its obligations under the Paradise
Island Purchase Agreement described below under "Additional Agreements -- No
Solicitation of Transactions", "Additional Agreements -- SIHL Expense
Reimbursement" and "Termination", (ii) providing that the Bankruptcy Court will
not permit consideration of
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or approve, so long as the Paradise Island Purchase Agreement has not been
terminated, an Acquisition Proposal unless such Acquisition Proposal constitutes
an Overbid Transaction, (iii) subject to applicable bankruptcy law and rules,
approving an amount of SIHL Expense Reimbursement reasonably incurred by SIHL up
to the date of the Paradise Island Interim Order, (iv) approving an escrow
agreement among RII, SIHL and an escrow agent substantially in the form of
Exhibit G to the Paradise Island Purchase Agreement (the "Escrow Agreement"),
and (v) providing that the Paradise Island Interim Order cannot be amended or
modified without the consent of Fidelity and TCW (so long as the funds and
accounts managed by either of them hold in the aggregate at least 20% of the
outstanding Old Series Notes). RII and GRI have agreed to request, and use their
best efforts to obtain, the entry by the Bankruptcy Court of the Paradise Island
Interim Order within five days after the Petition Date.
"Purchase Price" means the SIHL Aggregate Cash Purchase Price plus 2,000,000
SIHL Series A Shares.
"Target Adjusted Cash" means Adjusted Cash of $5 million.
PURCHASE AND SALE OF THE PARADISE ISLAND SHARES AND THE RII PARADISE ASSETS
The Paradise Island Purchase Agreement provides that SIHL will purchase
Paradise Island Shares, constituting 100% of the outstanding shares of capital
stock of RIB, from RII. In addition, certain subsidiaries of SIHL will purchase
the RII Paradise Assets from the U.S. Paradise Island Subsidiaries and RII. As
consideration for the transfer of the Paradise Island Shares and the RII
Paradise Assets, SIHL will cause the Purchase Price to be delivered on the SIHL
Closing Date, on behalf of RII and the U.S. Paradise Island Subsidiaries, to the
Disbursing Agent.
REPRESENTATIONS AND WARRANTIES
RII REPRESENTATIONS AND WARRANTIES. The Paradise Island Purchase Agreement
contains various customary representations and warranties by RII, including
without limitation representations and warranties as to RII's organization and
authority, compliance with certain laws and agreements, consents and required
filings, organization and standing of RIB, its subsidiaries and the U.S.
Paradise Island Subsidiaries, ownership of and title to the Paradise Island
Shares, assets and real property, intellectual property rights, existing
contracts, litigation, insurance, employee benefits, absence of undisclosed
liabilities, accounts receivable, inventory, the absence since June 30, 1993, of
certain events, the accuracy of financial statements relating to the Paradise
Island Business, the equity interests in the subsidiaries of RIB, the accuracy
of this Information Statement/Prospectus, the Plan and information supplied by
RII for inclusion in the SIHL Prospectus and the Registration Statement related
thereto, environmental and labor matters, transactions with affiliates and
certain unlawful payments.
WAIVER OF CERTAIN REPRESENTATIONS AND WARRANTIES. The Paradise Island
Purchase Agreement provides that, except as set forth in the following
paragraph, as of November 30, 1993 SIHL is deemed to have waived all claims,
rights and remedies with respect to any breaches of representations or
warranties of RII contained in the Paradise Island Purchase Agreement on account
of any matter arising before November 30, 1993.
Notwithstanding the foregoing paragraph, SIHL did not waive (i) any claim,
right or remedy with respect to any breaches of representations and warranties
relating to RII's organization, authorization to execute and perform the
Paradise Island Purchase Agreement or ownership of the Paradise Island Shares,
(ii) any claim for damages relating to any breach of the representations and
warranties related to information supplied by RII for use in the SIHL Prospectus
or (iii) any claim, right or remedy with respect to any inaccuracies in or
breaches of the representations or warranties of RII contained in the Paradise
Island Purchase Agreement on account of any matter arising before November 30,
1993 (x) which was known by RII or any of its Affiliates or which would have
been known by RII or any of its Affiliates had they not been grossly negligent
or (y) which was fraudulently or knowingly concealed from SIHL by RII or any of
its Affiliates.
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SIHL REPRESENTATIONS AND WARRANTIES. The Paradise Island Purchase Agreement
contains various customary representations and warranties by SIHL, including,
without limitation, representations and warranties as to SIHL's organization and
authority, compliance with certain laws and agreements, the accuracy of the SIHL
Prospectus and the Registration Statement related thereto and information
supplied by SIHL for inclusion in this Information Statement/Prospectus,
authority to issue the SIHL Series A Shares, the operations of SIHL since its
incorporation, the capital structure of SIHL, the enforceability of a
subscription agreement among SIIL and certain shareholders of SIIL (the "SIIL
Subscription Agreement") and a subscription agreement between SIIL and SIHL (the
"SIHL Subscription Agreement").
HANDLING OF CASH AND WORKING CAPITAL
Within 45 days of the SIHL Closing Date, RII will deliver to SIHL an audited
balance sheet for the Paradise Island Business as of the close of business on
SIHL Closing Date (the "Closing Date Balance Sheet") and an audited statement of
operations for the Paradise Island Business for the period beginning on January
1, 1994, and ending at the end of business on the SIHL Closing Date (the
"Closing Date Operations Statement"), accompanied by an opinion of Ernst & Young
thereon to the effect such balance sheet and statement of operations present
fairly in all material respects the financial position and results of operations
of the Paradise Island Business at such date and for such period. The Paradise
Island Purchase Agreement provides a mechanism pursuant to which SIHL could
disagree with the Closing Date Balance Sheet or Closing Date Operation
Statements. Any such disagreements would be settled through negotiations between
SIHL and RII or by an independent "Big Six" accounting firm. If prior to 35 days
after the SIHL Closing Date there has not been a resolution of the dispute (the
"Union Contract Dispute") between RIB and The Bahamas Hotel Catering and Allied
Workers Union (the "Union") with respect to amounts claimed by the Union to be
owed by RIB through December 31, 1993, under the collective bargaining agreement
dated as of January 7, 1990, between The Bahamas Hotel Employers Association and
the Union, then RII and SIHL shall agree as to the amount they believe SIHL
reasonably would be required to settle the Union Contract Dispute or, in absence
of any agreement between RII and SIHL, such amount will be determined by
Bahamian counsel selected jointly by RII and SIHL (the "Union Contract Dispute
Amount"). The Union Contract Dispute Amount shall appear on the Closing Date
Balance Sheet as a Current Liability and is currently estimated to be
approximately $1,000,000. The Union Contract Dispute arises out of the
non-payment by RIB and all other members of the Bahamas Hotel Employers
Association of certain wage and pension increases due to a downturn in business
experienced by hotels in the area. Any amounts owed by RIB pursuant to a
resolution of the Union Contract Dispute after the SIHL Closing Date shall
remain an obligation of RIB not RII. See "Business of the Company -- Employees".
The Paradise Island Purchase Agreement provides that within three Business
Days after the SIHL Closing Date, SIHL and RII shall jointly prepare a cash
statement setting forth the amount of Adjusted Cash of the Paradise Island
Business as of the SIHL Closing Date. If the Adjusted Cash of the Paradise
Island Business shown on such cash statement is less than the Target Adjusted
Cash, on the fourth Business Day after the SIHL Closing Date, RII shall pay to
SIHL the difference in immediately available funds.
If the Adjusted Working Capital of the Paradise Island Business plus the
Adjusted Cash shown on the Closing Date Balance Sheet plus any amount paid to
SIHL pursuant to the cash adjustment described in the immediately preceding
paragraph shall be greater than $12 million plus the EBITDA Adjustment, then
SIHL shall pay to RII the difference in immediately available funds, together
with interest on such amount at a rate of 7.5% per year from and including the
SIHL Closing Date to but excluding the date of payment. If the Adjusted Working
Capital of the Paradise Island Business plus the Adjusted Cash shown on the
Closing Date Balance Sheet plus any amount paid to SIHL pursuant to the cash
adjustment described in the immediately preceding paragraph shall be less than
$12 million plus the EBITDA Adjustment, then RII shall pay to SIHL the
difference in immediately available funds, together with interest on such amount
at a rate of 7.5% per year from and including the SIHL Closing Date to but
excluding the date of payment.
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ADDITIONAL AGREEMENTS
NO SOLICITATION OF TRANSACTIONS
RII has agreed that neither it nor any of its Affiliates nor any
representative of RII or any of its Affiliates will, directly or indirectly,
enter into any agreement with, enter into or continue any discussions or
negotiations with, or disclose directly or indirectly any information concerning
the Paradise Island Business to, any Third Party (other than SIHL) in connection
with any possible proposal regarding the acquisition of any part of the Paradise
Island Business (each an "Acquisition Proposal"); provided, however, that (i)
prior to the entry of the Paradise Island Interim Order, RII may, to the extent
required by the fiduciary obligations of the Board of Directors of RII, (a) in
response to an unsolicited request therefor, furnish information with respect to
the Paradise Island Business (excluding SIHL or SIHL's plans with respect to the
Paradise Island Business) to any person pursuant to a customary confidentiality
agreement and discuss such information (but not the terms of any Acquisition
Proposal) with such person and (b) upon receipt by RII of an Acquisition
Proposal, following delivery to SIHL of notice thereof, participate in
negotiations regarding such Acquisition Proposal and (ii) after entry of the
Paradise Island Interim Order by the Bankruptcy Court, RII may furnish
information to, and cooperate with, a Third Party that RII reasonably believes
is financially able to and interested in consummating an Overbid Transaction (a
"Qualified Third Party").
The Paradise Island Purchase Agreement further provides that no Acquisition
Proposal shall be considered, approved, adopted or recommended by the Board of
Directors of RII, or presented by RII or its respective Board of Directors or
management, to the stockholders of RII for vote or approval by written consent,
and no meeting of stockholders shall be called or noticed for purposes of taking
stockholder action with respect to any Acquisition Proposal. Notwithstanding the
foregoing, the Paradise Island Purchase Agreement provides that in the exercise
of its fiduciary duties the Board of Directors may consider, approve, adopt or
recommend an Overbid Transaction with a Qualified Third Party or enter into an
agreement with a Qualified Third Person with respect to such Overbid
Transaction, in each case at any time after the third Business Day following
SIHL's receipt of a written notice advising SIHL that RII has received an offer
for an Overbid Transaction, specifying the material terms and conditions thereof
and the Qualified Third Party making such offer. Notwithstanding the foregoing,
RII is not prohibited from supplying TCW and Fidelity with any information
regarding the Paradise Island Business or engaging in discussions related to the
PIRL Spin-Off, or in the event the SIHL Sale does not occur for any reason
whatsoever, from effecting the PIRL Spin-Off.
SUBSCRIPTION AGREEMENT. Immediately prior to Closing, SIIL shall acquire
from SIHL the Series B Ordinary Shares of SIHL for $90,000,000 plus interest at
the rate of 7.5% per year on $65,000,000 from January 1, 1994 pursuant to the
terms of the SIHL Subscription Agreement.
PUT RIGHT. Pursuant to the documents related to the Paradise Island
Purchase Agreement, holders of SIHL Series A Shares will be entitled to require
SIHL to purchase on the fifth anniversary of the SIHL Sale each such SIHL Series
A Share at a price equal to $35 per share pursuant to the Put Right. SIIL will
pledge its sixty percent equity interest in SIHL to secure SIHL's obligation to
make such purchase.
SIHL EXPENSE REIMBURSEMENT. Subject to certain limitations and provided
that SIHL shall not have materially breached any of its obligations under the
Paradise Island Purchase Agreement, RII will reimburse SIHL for all of SIHL's
reasonable out-of-pocket costs and expenses incurred since June 1, 1993, in
connection with the preparation of SIHL's plans for the Paradise Island Business
and the negotiation, execution, delivery and performance of SIHL's obligations
under the Paradise Island Purchase Agreement and the other agreements related
thereto, including without limitation reasonable out-of-pocket costs and
expenses of investors of SIHL and its Affiliates relating to the transactions
contemplated by the Paradise Island Purchase Agreement (the "SIHL Expense
Reimbursement").
The Plan provides that if the PIRL Spin-Off occurs (i) the obligation to pay
the SIHL Expense Reimbursement will be an obligation of PIRL and not RII and
(ii) prior to the consummation of the
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PIRL Spin-Off, PIRL will enter into a security and pledge agreement with SIHL,
pursuant to which PIRL shall pledge assets reasonably acceptable to SIHL and
having a fair market value of $6 million to secure PIRL's obligation to pay the
SIHL Expense Reimbursement.
ESCROW AGREEMENT. Pursuant to the Paradise Island Purchase Agreement, as of
December 1, 1993, SIHL and RII executed and delivered an Escrow Agreement
pursuant to which SIHL deposited with an independent third party escrow agent
(the "Escrow Agent") $5 million ("SIHL's Escrowed Property") and RII deposited
with the Escrow Agent $4 million ("RII's Escrowed Property"). SIHL's Escrowed
Property secures the full and prompt payment and performance, when due, of its
obligation under the Paradise Island Purchase Agreement up to and including the
Closing. RII's Escrowed Property secures the full and prompt payment, when due,
of RII's obligation to pay any SIHL Expense Reimbursement. The Escrow Agent is
not authorized to release any property held by it unless it receives written
instructions signed by both SIHL and RII or a court order directing the release
of such property. The Escrow Agreement contains customary terms relating to the
indemnification of the Escrow Agent.
EMPLOYEE MATTERS. As of the SIHL Closing Date, SIHL shall (directly or
through U.S. subsidiaries) offer employment to each person employed by the U.S.
Paradise Island Subsidiaries whose primary functions relate to the operation of
the Paradise Island Business and certain other employees of RII (a "Paradise
Employee"), except that SIHL may designate within 60 days from the date of the
Paradise Island Purchase Agreement up to 40 Paradise Employees to whom it does
not wish to offer employment (the "Excluded Employees"). SIHL shall not be
required to offer employment to any Excluded Employee and RII has agreed that
all obligations, including obligations under any Benefit Plan or similar
employee benefits, to such Excluded Employees shall remain the responsibility
solely of RII and not of SIHL after the Closing.
Pursuant to the terms of the Paradise Island Purchase Agreement SIHL shall
have no obligation to maintain, continue or assume obligations under any Benefit
Plan of RII. The Paradise Island Purchase Agreement further provides that within
90 days from the date of the Paradise Island Purchase Agreement, SIHL shall
determine whether it shall offer Paradise Employees who accept employment with
SIHL a 401(k) plan. If SIHL determines to offer such a 401(k) plan, then as
promptly as practical after the SIHL Closing Date, RII shall take all actions
necessary to transfer to such new 401(k) plan the account balances in the
Resorts Retirement Savings Plan of all Paradise Employees.
DEVELOPMENT EXPENDITURES
The Paradise Island Purchase Agreement provides that from March 15, 1994,
RII, at the request of SIHL, will cause RIB to incur up to $3,000,000 of
expenditures relating to the Paradise Island Business including without
limitation professional fees, mechanical and electrical repairs and
improvements, construction of mock-up rooms, purchases of material and similar
redevelopment expenditures (the "Development Expenditures"), provided that SIHL
may cause only $250,000 of Development Expenditures to be incurred between March
15, 1994 and March 21, 1994. Any Development Expenditures that would not
otherwise appear on the Preliminary Closing Date Balance Sheet and the Closing
Date Balance Sheet as an Adjusted Current Asset shall be automatically counted
as an Adjusted Current Asset on the Preliminary Closing Date Balance Sheet and
the Closing Date Balance Sheet for the purposes of calculating the adjustments
set forth in Section 2.05 of the PIRL Agreement. In the event that the Closing
does not occur (other than by reason of a breach by SIHL), SIHL will have no
liability for any Development Expenditures incurred by RIB.
TERMINATION
The Paradise Island Purchase Agreement may be terminated at any time prior
to the SIHL Closing Date: (a) by mutual written consent of RII and SIHL at any
time prior to entry of the Confirmation Order; (b) by SIHL or RII, if the
closing shall not have occurred on or before June 30, 1994; (c) automatically in
the event an Acquisition Proposal is approved by the Bankruptcy Court; (d) by
SIHL, if any event or development first occurring or arising after November 30,
1993, either
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alone or taken in the aggregate with other matters arising or occurring after
November 30, 1993, shall have caused inaccuracies or breaches in the
representations and warranties of RII to occur; (e) by SIHL, if it has become
aware that RII will breach its representations and warranties regarding its
organization and authority to perform its obligations under the Paradise Island
Purchase Agreement or as to the good title of the Shares and such breach is not
reasonably capable of being cured by June 30, 1994, or by RII, if it has become
aware that SIHL will breach certain representations and warranties in the
Paradise Island Purchase Agreement or any related document in any material
respect and such breach is not reasonably capable of being cured by June 30,
1994; (f) by SIHL within five Business Days (i) of becoming aware that RII has
materially breached certain covenants contained in the Paradise Island Purchase
Agreement or (ii) after March 21, 1994, if the Bankruptcy Cases shall not have
been filed on or before such date; (g) by SIHL after notifying RII that it is in
material breach of its covenant to provide SIHL access to the Paradise Island
properties and RII has not cured such breach; (h) by RII, if the reorganization
of SIIL described in the Parent Subscription Agreement has not occurred prior to
November 30, 1993; (i) by SIHL, if a Material Adverse Effect occurs as a result
of any fire, flood, hurricane, accident, explosion or other calamity or casualty
or any strike, labor disturbance (excluding a strike or labor disturbance of the
Paradise Island Business employees after November 30, 1993), riot, act of God or
public enemy, or the institution of condemnation proceedings affecting any
material portion of the Real Property or improvements (a "Force Majeure Event")
unless the loss caused by a Force Majeure Event (including the present value of
lost profits) is less than $20 million and there is adequate insurance to cover
such loss; (j) by SIHL or RII in the event a Force Majeure Event occurs and the
loss related thereto (including the present value of lost profits) exceeds $20
million, regardless of whether or not such loss is covered by adequate
insurance; (k) by SIHL, if SIHL reasonably determines that RII will not be able
to deliver good title to a material portion of the Paradise Island Business or
the Shares by June 30, 1994; and (l) by SIHL, if as a result of a breach by RII
of its covenant to operate the Paradise Island Business in the ordinary course,
a Material Adverse Effect has occurred. Failure to obtain the Paradise Island
Interim Order, despite the best efforts of RII and GRI, is not a ground for
termination of the Paradise Island Purchase Agreement.
TRANSFER TAXES
The Paradise Island Purchase Agreement provides that any sales and transfer
taxes applicable to the conveyance and transfer of the Paradise Island Shares
and the RII Paradise Assets shall be borne and paid 50% by SIHL and 50% by RII.
The Bahamian Government has notified SIHL and RII that a transfer tax of
$1,080,000 is payable as a result of the transfer of the Paradise Island Shares.
Such transfer tax will be paid 50% by RII and 50% by SIHL.
AMENDMENT AND WAIVERS
No amendment to the Paradise Island Purchase Agreement will be effective
unless it is in writing signed by RII and SIHL and consented to by Fidelity and
TCW. Any party may waive any provision of the Paradise Island Purchase Agreement
or consent to any departure by any party therefrom; PROVIDED, HOWEVER, that no
such waiver or consent by RII shall be valid unless consented to by Fidelity and
TCW (so long as Fidelity and TCW, in the aggregate, hold at least 20% of the
outstanding Old Series Notes.)
INDEMNIFICATION
INDEMNIFICATION BY RII. Until March 31, 1995, RII has agreed to indemnify
and hold SIHL and its Affiliates harmless from all Losses arising out of or
based upon or caused by the inaccuracy of the representations of RII contained
in the Paradise Island Purchase Agreement relating to its organization and
authority to execute and perform the Paradise Island Purchase Agreement, title
to the Paradise Island Shares, and the accuracy of the information supplied by
RII for inclusion in the SIHL Prospectus. In addition, RII has agreed to
indemnify SIHL and its Affiliates for any Losses resulting from breaches of
certain covenants of RII contained in the Paradise Island Purchase Agreement.
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INDEMNIFICATION BY SIHL. Until March 31, 1995, SIHL has agreed to indemnify
RII and its Affiliates for any Losses arising out of or based upon or caused by
the inaccuracy of the representations of SIHL contained in the Paradise Island
Purchase Agreement relating to its organization, capital structure and authority
to execute and perform the Paradise Island Purchase Agreement and to issue the
SIHL Series A Shares, the accuracy of the information supplied by SIHL for
inclusion in this Information Statement/Prospectus and the operation of SIHL
since its organization. In addition, SIHL has agreed to indemnify RII and its
Affiliates for any Losses resulting from breaches of certain covenants of SIHL
contained in the Paradise Island Purchase Agreement.
DESCRIPTION OF PIRL STANDBY DISTRIBUTION AGREEMENT
GENERAL
The following is a summary of material portions of the PIRL Standby
Distribution Agreement, a copy of which has been filed as an exhibit to the
Registration Statement of which this Information Statement/Prospectus is a part.
Capitalized terms used in this section and not defined in this Information
Statement the Prospectus have the meanings ascribed thereto in the PIRL Standby
Distribution Agreement.
For the purposes of the following description of the PIRL Standby
Distribution Agreement, the following terms have the following meanings:
"Adjusted Cash" means cash and cage cash.
"Adjusted Current Assets" means Current Assets minus Adjusted Cash.
"Adjusted Working Capital" means Adjusted Current Assets minus Current
Liabilities.
"Current Assets" means cash, cage cash, net receivables, prepaid expenses
and inventory.
"Current Liabilities" means accounts payable, accrued liabilities and the
current portion of the capital lease obligations relating to the mini-bars used
in the Paradise Island Business.
"EBITDA Adjustment" means the Earnings from Operations appearing as a line
item on the Closing Date Operations Statements plus depreciation plus the
amount, if any, paid or accrued with respect to RII management fees to the
extent such fees were deducted in computing Earnings from Operations, plus any
expenses in excess of $25,000 appearing on the Closing Date Operations Statement
that are attributable to events occurring prior to January 1, 1994, less
$275,000 per month for overhead relating to RII and the U.S. Paradise Island
Subsidiaries (to be prorated for any portion of a month) less capital
expenditures; provided that any item of capital expenditure in excess of $25,000
will not be deducted if not approved in writing by PIRL.
"Paradise Island Business" means all the operations and properties conducted
and owned by RII and its affiliates primarily in connection with or relating
primarily to Paradise Island, The Bahamas, including without limitation the
Paradise Island Properties, approximately 561 acres on Andros Island and the
PIRL BDL Option to purchase approximately 1,675 acres on Grand Bahama Island and
other similarly related assets not currently used actively in the Paradise
Island operations.
"Target Adjusted Cash" means Adjusted Cash of $5 million.
PURCHASE AND SALE OF THE SHARES AND THE U.S. PARADISE ISLAND ASSETS
The PIRL Standby Distribution Agreement provides that PIRL will purchase the
Paradise Island Shares from RII. In addition, certain U.S. and Bahamian
subsidiaries of PIRL will purchase the RII Paradise Assets from the U.S.
Paradise Island Subsidiaries and RII. As consideration for the transfer of the
Paradise Island Shares, and the RII Paradise Assets, PIRL will cause the PIRL
Ordinary Shares to be delivered on the Closing Date, on behalf of RII and the
U.S. Paradise Island Subsidiaries, to the Disbursing Agent.
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RII REPRESENTATIONS AND WARRANTIES
The PIRL Standby Distribution Agreement contains various customary
representations and warranties by RII, including without limitation
representations and warranties as to RII's organization and authority,
compliance with certain laws and agreements, consents and required filings,
organization and standing of RIB, its subsidiaries and the U.S. Paradise Island
Subsidiaries, ownership of and title to the Paradise Island Shares, assets and
real property, employee benefits, absence of undisclosed liabilities, the
absence since June 30, 1993, of certain events, the accuracy of financial
statements relating to the Paradise Island Business and the equity interests in
the subsidiaries of RIB.
The PIRL Standby Distribution Agreement also contains various customary
representations and warranties by RII regarding PIRL, including representations
and warranties as to PIRL's organization and authority relative to the PIRL
Standby Distribution Agreement and the transactions contemplated thereby,
compliance with certain laws and agreements, authority to issue the PIRL
Ordinary Shares, the operations of PIRL since its incorporation and the capital
structure of PIRL.
HANDLING OF CASH AND WORKING CAPITAL
Within 45 days of the Closing Date, RII will deliver to PIRL an audited
balance sheet for the Paradise Island Business as of the close of business on
the Closing Date (the "Closing Date Balance Sheet") and an audited statement of
operations for the Paradise Island Business for the period beginning on January
1, 1994, and ending at the end of business on the Closing Date (the "Closing
Date Operations Statement"), accompanied by an opinion of Ernst & Young thereon
to the effect that such balance sheet and statement of operations present fairly
in all material respects the financial position and results of operations of the
Paradise Island Business at such date and for such period. The PIRL Standby
Distribution Agreement provides a mechanism pursuant to which PIRL could
disagree with the Closing Date Balance Sheet or Closing Date Operation
Statements. Any such disagreements would be settled through negotiations between
PIRL and RII or by an independent "Big Six" accounting firm. If prior to 35 days
after the Closing Date there has not been a resolution of the Union Contract
Dispute between RIB and the Union with respect to amounts claimed by the Union
to be owed by RIB through December 31, 1993, under the collective bargaining
agreement dated as of January 7, 1990, between The Bahamas Hotel Employers
Association and the Union, then RII and PIRL shall agree as to the amount they
believe to settle the Union Contract Dispute or, in absence of any agreement
between RII and PIRL, such amount will be determined by Bahamian counsel
selected jointly by RII and PIRL (the "Union Contract Dispute Amount"). The
Union Contract Dispute Amount shall appear on the Closing Date Balance Sheet as
a Current Liability and is currently estimated to be approximately $1,000,000.
The Union Contract Dispute arises out of the non-payment by RIB and all other
members of The Bahamas Hotel Employers Association of certain wage and pension
increases due to a downturn in business experienced by hotels in the area. Any
amounts owed by RIB pursuant to a resolution of the Union Contract Dispute after
the Closing shall remain an obligation of RIB and not RII. See "Business of the
Company -- Employees".
The PIRL Standby Distribution Agreement provides that within three Business
Days after the Closing Date, PIRL and RII shall jointly prepare a cash statement
setting forth the amount of Adjusted Cash of the Paradise Island Business as of
the Closing Date. If the Adjusted Cash of the Paradise Island Business shown on
such cash statement is less than the Target Adjusted Cash, on the fourth
Business Day after the Closing Date, RII shall pay to PIRL the difference in
immediately available funds.
If the Adjusted Working Capital of the Paradise Island Business plus the
Adjusted Cash shown on the Closing Date Balance Sheet plus any amount paid to
PIRL pursuant to the cash adjustment described in the immediately preceeding
paragraph shall be greater than the $12 million plus the EBITDA Adjustment, then
PIRL shall pay to RII the difference in immediately available funds, together
with interest on such amount at an annual rate of 7.5% per year from and
including the Closing Date to but excluding the date of payment. If the Adjusted
Working Capital of the Paradise Island Business plus the Adjusted Cash shown on
the Closing Date Balance Sheet plus any amount
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paid to PIRL pursuant to the Cash adjustment described in the immediately
preceeding paragraph shall be less than $12 million plus the EBITDA Adjustment,
then RII shall pay to PIRL the difference in immediately available funds,
together with interest on such amount at a rate of 7.5% per year from and
including the Closing Date to but excluding the date of payment.
ADDITIONAL AGREEMENTS
SIHL EXPENSE REIMBURSEMENT. To the extent and in the circumstances set
forth in the Paradise Island Purchase Agreement. See "Description of Paradise
Island Purchase Agreement -- Additional Agreements -- SIHL Expense
Reimbursement".
The Plan and the PIRL Standby Distribution Agreement provide that if the
PIRL Spin-Off occurs, the obligation to pay the SIHL Expense Reimbursement shall
be an obligation of PIRL (and not RII) pursuant to either of the circumstances
described below:
(1) In the event that the Paradise Island Purchase Agreement is
terminated by RII pursuant to any of the provisions of the Paradise Island
Purchase Agreement or by SIHL as a result of the failure of the closing
thereunder to occur on or before June 30, 1994, and a sale of the Paradise
Island Business or any portion thereof that would reasonably be expected to
generate 50% or more of the revenues of the Paradise Island Business
(whether by merger, purchase of capital stock, purchase of assets, tender
offer or otherwise) is consummated within one year of such termination (a
"Post Termination Sale"), then upon the consummation of such Post
Termination Sale, RII or, if the PIRL Spin-Off shall have already occurred
PIRL, shall pay to SIHL the SIHL Expense Reimbursement up to $4 million in
the event such Post Termination Sale shall constitute an Overbid Transaction
or up to $2 million in the event such Post Termination Sale is not an
Overbid Transaction, in each case less any amounts previously paid to SIHL
pursuant to subparagraphs (i), (ii), (iii), (iv) and (v) of Section 7.02 of
the Paradise Island Purchase Agreement.
(2) In the event that the Paradise Island Purchase Agreement is
terminated by SIHL pursuant to any of the provisions the Paradise Island
Purchase Agreement and a Post Termination Sale which constitutes an Overbid
Transaction occurs within one year of such termination, then upon the
consummation of such Post Termination Sale, RII, or if the PIRL Spin-Off
shall have already occurred, PIRL, shall pay to SIHL the SIHL Expense
Reimbursement up to $4 million less any amounts previously paid to SIHL
pursuant to subparagraphs (i), (ii), (iii), (iv) and (v) of Section 7.02 of
the Paradise Island Purchase Agreement.
Prior to the consummation of the PIRL Spin-Off, PIRL shall enter into a
security and pledge agreement with SIHL, pursuant to which PIRL shall pledge
assets reasonably acceptable to SIHL and having a fair market value of $6
million to secure PIRL's obligation to pay the SIHL Expense Reimbursement.
EMPLOYEE MATTERS. As of the Closing Date, PIRL shall (directly or though
U.S subsidiaries) offer employment to each Paradise Employee, except that PIRL
may designate within 60 days from the date of the PIRL Standby Distribution
Agreement up to 40 Excluded Employees. PIRL shall not be required to offer
employment to any Excluded Employee and RII has agreed that all obligations,
including obligations under any Benefit Plan or similar employee benefits, to
such Excluded Employees shall remain the responsibility solely of RII and not of
PIRL after the Closing.
Pursuant to the terms of the PIRL Standby Distribution Agreement PIRL shall
have no obligation to maintain, continue or assume obligations under any Benefit
Plan of RII. The PIRL Standby Distribution Agreement further provides that
within 90 days from the date of the PIRL Standby Distribution Agreement, PIRL
shall determine whether it shall offer Paradise Employees who accept employment
with PIRL a 401(k) plan. If PIRL determines to offer such a 401(k) plan, then as
promptly as practical after the Closing Date, RII shall take all actions
necessary to transfer to such new 401(k) plan the account balances in the
Resorts Retirement Savings Plan of all Paradise Employees.
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DEVELOPMENT EXPENDITURES
The PIRL Standby Distribution Agreement provides that from March 15, 1994,
RII, at the request of Buyer, will cause RIB to incur up to $3,000,000 of
Development Expenditures, provided that Buyer may cause only $250,000 of
Development Expenditures to be incurred between March 15, 1994 and March 21,
1994. Any Development Expenditures that would not otherwise appear on the
Preliminary Closing Date Balance Sheet and the Closing Date Balance Sheet as an
Adjusted Current Asset shall be automatically counted as an Adjusted Current
Asset on the Preliminary Closing Date Balance Sheet and the Closing Date Balance
Sheet for the purposes of calculating the adjustments set forth in Section 2.05
of the PIRL Standby Distribution Agreement.
TERMINATION
The PIRL Standby Distribution Agreement may be terminated at any time prior
to the Closing Date: (a) by mutual written consent of RII and PIRL at any time
prior to entry of the Confirmation Order; (b) automatically in the event that a
proposal for the sale of the Paradise Island Business by RII or GRI, other than
pursuant to the PIRL Standby Distribution Agreement or the Paradise Island
Purchase Agreement, is approved by the Bankruptcy Court; (c) by PIRL, if a
Material Adverse Effect occurs as a result of any Force Majeure Event unless the
loss caused by the Force Majeure Event (including the present value of lost
profits) is less than $20,000,000 and there is adequate insurance to cover such
loss; (d) by PIRL, if PIRL reasonably determines that RII will not be able to
deliver good title free and clear of encumbrances, other than certain permitted
encumbrances, to a material portion of the Paradise Island Business or 100% of
the outstanding Paradise Island Shares by September 30, 1994; (e) by PIRL, if as
a result of a breach of RII of its covenant to operate the Paradise Island
Business in the ordinary course, a Material Adverse Effect has occurred; (f) by
PIRL, if in Fidelity's and TCW's reasonable judgment (based on advice of legal
counsel), the consummation of the transactions contemplated by the PIRL Standby
Distribution Agreement could be expected to result in the incurrence of any
personal liabilities by the holders of PIRL's capital stock by virtue of their
status as shareholders (excluding any losses resulting solely from a decline in
the economic value of such capital stock); provided, however, that in the event
of a good faith dispute concerning whether PIRL is entitled to terminate the
PIRL Standby Distribution Agreement pursuant to the provisions described in this
clause (f), the matter will be submitted to a court of competent jurisdiction
for a final and binding determination; (g) by PIRL, if RII or any of its
Affiliates propose or support before the Bankruptcy Court any proposal for the
sale or disposition of the Paradise Island Business other than pursuant to the
PIRL Standby Distribution Agreement or the Paradise Island Purchase Agreement;
or (i) automatically in the event that the sale of the Paradise Island Business
by RII to SIHL is consummated pursuant to the Paradise Island Purchase
Agreement.
TRANSFER TAXES
The PIRL Standby Distribution Agreement provides that any sales and transfer
taxes applicable to the conveyance and transfer of the Paradise Island Shares
and the RII Paradise Assets shall be borne and paid 100% by RII. The Bahamian
Government has notified PIRL and RII that a transfer tax of $1,080,000 is
payable as a result of the transfer of the Paradise Island Shares. Such transfer
tax will be paid 100% by RII.
AMENDMENT AND WAIVERS
No amendment to the PIRL Standby Distribution Agreement will be effective
unless it is in writing signed by RII and PIRL and consented to by Fidelity and
TCW. Any party may waive any provision of the PIRL Standby Distribution
Agreement or consent to any departure by any party therefrom; PROVIDED, HOWEVER,
that no such waiver or consent by RII shall be valid unless consented to by
Fidelity and TCW (so long as Fidelity and TCW, in the aggregate, hold at least
20% of the outstanding Old Series Notes).
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INDEMNIFICATION
Until the later of March 31, 1995 or the Closing Date, RII has agreed to
indemnify and hold PIRL and its Affiliates harmless from all Losses arising out
of or based upon or caused by the inaccuracy of the representations of RII
contained in the PIRL Standby Distribution Agreement relating to its
organization and authority to execute and perform the PIRL Standby Distribution
Agreement and title to the Paradise Island Shares.
DESCRIPTION OF THE CAESARS PAYMENT
On the Distribution Date, pursuant to the Plan, RII will distribute to
Caesars World, Inc. the Caesars Payment, which is a cash payment in the amount
of $400,000. This payment arises from a letter agreement, dated August 18, 1993,
by and among Caesars World, Inc., Fidelity and TCW. In conjunction with efforts
by Fidelity and TCW to identify potential permanent management for the Paradise
Island Business in the event of the PIRL Spin-Off, TCW and Fidelity entered into
the letter agreement with Caesars World, Inc. pursuant to which Caesars World,
Inc. agreed to grant an option to the holders of Old Series Notes, exercisable
until December 31, 1994 to cause Caesars World, Inc. to undertake good faith
negotiations with PIRL of agreements under which a subsidiary of Caesars World,
Inc. would provide management services with respect to the Paradise Island
Business, in the event the SIHL Sale is not consummated. In consideration for
this option, Fidelity and TCW agreed to support the inclusion in the Plan of a
provision for the payment by RII to Caesars World, Inc. of the sum of $400,000.
In conjunction with their discussions and negotiations with Fidelity and TCW
concerning the Restructuring and the Plan, and in light of Fidelity's and TCW's
agreement to support the Plan, RII and GRI agreed to make the Caesars Payment on
the Distribution Date if the Plan is consummated.
DESCRIPTION OF DEFERRED CASH
The rights to receive payments from Deferred Cash will be non-transferable,
will be evidenced by the Plan and represent the right to receive payments
resulting from distributions by the Litigation Trust from time to time after the
Effective Date in respect of Litigation Trust Units owned by RII. No separate
evidence will be issued in respect of the rights to receive payments from
Deferred Cash. Each such right is an uncertificated, unsecured and unguaranteed
obligation of RII to pay an amount to a holder of such right to the extent that
RII receives such amount from the Litigation Trust. Such right does not have a
definite term and is non-interest bearing. Distributions to RII in respect of
the Litigation Trust Units received prior to the Effective Date will be treated
as Available Cash and included in the calculation of Excess Cash.
DESCRIPTION OF EXCESS CASH
On the Effective Date, or as soon thereafter as practicable, but in no event
later than 20 days after the Effective Date, pursuant to the Plan, RII will
distribute Excess Cash to the disbursing agent for the holders of Old Series
Notes. Excess Cash equals the Available Cash on the Effective Date minus the sum
of (a) RII Retained Cash of $20 million, (b) the SIHL Target Adjusted Cash or
Standby Target Adjusted Cash, if the SIHL Sale is not consummated, (c) the
Reserved Cash, (d) the Plan Consummation Cash, and (e) the Caesars Payment.
Under the Plan, Available Cash is defined as all cash of RII and its
subsidiaries on the Effective Date, including but not limited to cash deposited
in depository accounts, cash on hand and cage cash, before giving effect to the
SIHL Sale or PIRL Spin-Off, as the case may be, and the distributions under the
Plan, but specifically excluding (a) any cash actually received by RII on or
prior to the Effective Date, from ACS, as tenant under the Showboat Lease, which
has been escrowed by RII to pay its current obligations with respect to the
Showboat Notes, (b) any restricted cash relating to the Litigation Trust and (c)
any portion of the SIHL Aggregate Cash Purchase Price. Available Cash includes
pre-Effective Date distributions to RII in respect of the Litigation Trust
Units.
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Pursuant to the Plan, RII and GRI have agreed not to pay, and not to cause
their subsidiaries to pay, any claim except in the ordinary course of business
and consistent with past practice and to collect, and to cause their
subsidiaries to collect, receivables in the ordinary course of business and
consistent with past practice. On the Effective Date, RII Retained Cash rather
than Plan Consummation Cash shall be used to pay any prepetition Allowed Claims
or post-petition Allowed Administrative Claims which, in the ordinary course of
business and consistent with past practice, would not have been paid by the
Effective Date.
DESCRIPTION OF LITIGATION TRUST UNITS
Under the Old Plan, the Litigation Trust was created pursuant to the
Litigation Trust Agreement dated September 17, 1990. Pursuant to the Litigation
Trust Agreement, various assets of the Old Debtors were assigned to the
Litigation Trust to be liquidated, and the proceeds thereof, less certain
expenses provided for under the Old Plan, distributed by the Litigation Trustee
for the benefit of certain creditors of the Old Debtors, the holders under the
Old Plan of "Allowed Class 3B Claims", "Allowed RII Debenture Claims" and
"Allowed Other Class 3C Claims" (collectively, the "Trust Beneficiaries"). The
Old Plan provided that the aggregate beneficial interests in the Litigation
Trust were to be divided into at least 10,000,000 Litigation Trust Units which
were to be allocated by the Litigation Trustee to the Trust Beneficiaries as
prescribed by the Old Plan. Each Litigation Trust Unit entitles its holder to a
pro rata share of any distribution from the Litigation Trust.
The assets assigned to the Litigation Trust were in the form of various
claims and causes of action (the "Litigation Claims") held by the Old Debtors
and certain of their affiliates against Donald J. Trump and affiliated entities
(collectively, the "Trump Parties"). The Litigation Trustee assessed the
viability of proposed litigation against the Trump Parties and explored
settlement options on behalf of the Trust Beneficiaries. On May 28, 1991, the
Litigation Trustee entered into an agreement with the Trump Parties, Merv
Griffin and affiliated entities, and the Old Debtors and affiliated entities
(the "Settlement Agreement") settling the Litigation Claims on behalf of the
Trust Beneficiaries, subject to their approval. Such approval was solicited and
received by July 15, 1991. Pursuant to the Settlement Agreement, the Trump
Parties settled all Litigation Claims for $12,000,000.
Furthermore, as required by the Old Plan, RII also was required to make
available $5,000,000 to the Litigation Trust to be used to prosecute or
otherwise liquidate the Litigation Claims which the Old Debtors had assigned to
the Litigation Trust. In October 1990, this money was placed in a separate
expense account held on behalf of RII in order to secure RII's obligation to
fund the Litigation Trust's expenses. Under this funding arrangement, interest
earned on the $5,000,000 belongs to RII. The balance of the funds remaining in
the expense account, after the interest earned on the account is returned to RII
and the reasonable expenses incurred by the Litigation Trust are paid in full,
is available for distribution to the Trust Beneficiaries.
Finally, pursuant to the Old Plan, the holders of 1,785,000 Litigation Trust
Units had the right to require RII to purchase their Litigation Trust Units for
approximately $3,880,000 in the aggregate if certain conditions were not met by
September 17, 1991. The $3,880,000 was deposited with the Litigation Trustee in
October 1990. Approximately 1,760,000 Litigation Trust Units were purchased in
October 1991 for $3,831,000. Interest earned on such $3,880,000 was for the
account of the Old Debtors.
As of September 30, 1992, there were net trust funds in the Litigation Trust
in the amount of $12,690,188. Additionally, expenses in the amount of $561,390
incurred by the Litigation Trustee had been paid from the $5,000,000 that RII
had made available to liquidate the Litigation Claims. Having settled or
otherwise definitively resolved the Litigation Claims and reduced them to cash
proceeds being held in the Litigation Trust, the Litigation Trustee is now in a
position to make the distributions of the Litigation Trust funds to the Trust
Beneficiaries as required in the Old Plan. However, the Litigation Trustee has
declined to make distributions until certain aspects of the tax treatment and
allocation of such distribution are clarified.
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Prior to making any distributions to the Trust Beneficiaries, the Trustee
has sought orders from the New Jersey bankruptcy court concerning the tax status
of the Litigation Trust and the proper method of distributing the assets of the
Litigation Trust. The tax status of the Litigation Trust is the subject of a
stipulation which has been executed by all relevant parties. An order approving
this stipulation has been requested from, but not yet been entered by the New
Jersey bankruptcy court. A hearing to consider approval of the stipulation has
been set for February 7, 1994.
Assuming the order with respect to the resolution of the tax proceeding is
entered in February, 1994 as currently anticipated, the method of distributing
the assets of the Litigation Trust has been resolved by a stipulation and order
entered on July 13, 1993. The Trustee has filed an application, which will be
heard by the New Jersey bankruptcy court on February 7, 1994, to approve an
interim distribution of all but $1 million of the Litigation Trust funds.
DESCRIPTION OF NET RESERVED CASH
On the Effective Date, pursuant to the Plan, RII will estimate Reserved
Cash, I.E., the amount of cash RII reasonably estimates will be necessary to
fund any adjustments required under either the Paradise Island Purchase
Agreement or the PIRL Standby Distribution Agreement, as appropriate. As soon as
practicable after the Effective Date, but no later than 90 days after the
Effective Date, RII will distribute Net Reserved Cash. To the extent that
Reserved Cash exceeds the amount of cash actually required for such purposes,
there will exist Net Reserved Cash to be distributed to the former holders of
Old Series Notes.
The rights to receive payments, if any, from Net Reserved Cash will be
non-transferable and will be evidenced by the Plan. No separate evidence will be
issued in respect of the rights to receive payments from Net Reserved Cash. Each
right is an unsecured and unguaranteed obligation of RII to pay an amount to a
holder of such right to the extent that there exists Net Reserved Cash. There
can be no assurance of Net Reserved Cash and, as a result, no assurance of any
payments from Net Reserved Cash. The right to receive Net Reserved Cash will
bear interest thereon at the average rate of return received by RII and its
subsidiaries on invested cash from the Effective Date to but excluding the
Distribution Date.
DESCRIPTION OF NET PLAN CONSUMMATION CASH AND PLAN EXPENSES
On the Effective Date, pursuant to the Plan, RII will estimate Plan
Consummation Cash, I.E., the amount of cash RII reasonably estimates will be
necessary to pay Plan Expenses. "Plan Expenses" include administrative claims,
the claims of RII Classes 1, 4, and 5 and GRI Classes 1 and 3 (whether or not
such claims are Disputed Claims) which by their terms are overdue on the
Effective Date and the payment of which is incapable of being reinstated or
deferred under the Bankruptcy Code, plus (i) any actual payments required to be
made by RII or the RII Paradise Subsidiaries for transfer taxes or federal
alternative minimum taxes incurred solely as a result of the consummation of the
transactions contemplated by the Paradise Island Purchase Agreement or,
alternatively, the PIRL Standby Distribution Agreement (after giving effect to
all available deductions or credits allowed to the affiliated group of which RII
is the common parent for the taxable year in which such transaction occurs), and
for costs and liabilities pursuant to section 6.10 of the Paradise Island
Purchase Agreement or, alternatively, section 5.09 of the PIRL Standby
Distribution Agreement, (ii) costs or expenses incurred in connection with the
implementation and consummation of the Plan for (a) amounts payable to the
Disbursing Agent under the Plan as provided in section 6.11.9 hereof, (b) the
reasonable fees and reasonable expenses of professionals associated with
litigating Disputed Claims or Disputed Interests and implementing and
consummating the Plan. As soon as practicable after the Effective Date, but no
later than 90 days after the Effective Date, RII will determine the amount of
cash actually required for such purposes. To the extent that Plan Consummation
Cash exceeds the amount of cash actually required for such purposes, there will
exist Net Plan Consummation Cash to be distributed to the former holders of Old
Series Notes. Payments of Net Plan Consummation Cash will be made as soon as
practicable, but no later than 90 days after the Effective Date; provided,
however, that if all
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Plan Expenses have not been paid by the 90th day after the Effective Date, RII
and GRI may continue to hold back for an additional 60 days the portion of Net
Plan Consummation Cash deemed by the Bankruptcy Court to be necessary to satisfy
remaining Plan Expenses, after which time the remaining Net Plan Consummation
Cash will be distributed, unless otherwise ordered by the Bankruptcy Court.
Pursuant to the Plan, RII and GRI have agreed not to pay, and not to cause
their subsidiaries to pay, any claim except in the ordinary course of business
and consistent with past practice and to collect, and to cause their
subsidiaries to collect, receivables in the ordinary course of business and
consistent with past practice. On the Effective Date, RII Retained Cash rather
than Plan Consummation Cash will be used to pay any prepetition Allowed Claims
or post-petition Allowed Administrative Claims which, in the ordinary course of
business and consistent with past practice, would not have been paid by the
Effective Date, other than Plan Expenses.
The rights to receive payments, if any, from Net Plan Consummation Cash will
be non-transferable and will be evidenced by the Plan. No separate evidence will
be issued in respect of the rights to receive payments from Net Plan
Consummation Cash. Each right is an unsecured and unguaranteed obligation of RII
to pay an amount to a holder of such right to the extent that there exists Net
Plan Consummation Cash. There can be no assurance of Net Plan Consummation Cash
and, as a result, no assurance of any payments from Net Plan Consummation Cash.
The right to receive Net Plan Consummation Cash will bear interest thereon at
the average rate of return received by RII and its subsidiaries on invested cash
from the Effective Date to but excluding the Distribution Date.
DESCRIPTION OF GRIFFIN WARRANTS
GENERAL
The form of the Griffin Warrants has been filed as an exhibit to the
Registration Statement. See "Available Information".
EXERCISE OF GRIFFIN WARRANTS
Upon issuance, the Griffin Warrants will entitle the holder thereof to
purchase approximately 10% of the RII Common Stock on a fully diluted basis at a
purchase price per share equal to the Griffin Warrant Exercise Price. Once
issued, the holder may exercise the Griffin Warrants, subject to applicable
securities laws, at any time prior to the fourth anniversary of the Effective
Date.
The "Griffin Warrant Exercise Price" shall be the lesser of (i) the average
market price of RII Common Stock for the 20 trading days following the Effective
Date and (ii) $1.875.
If the holder exercises the Griffin Warrants for less than all the shares of
RII Common Stock purchasable thereunder, RII will issue to such holder a RII
warrant certificate evidencing the remaining amount of shares of RII Common
Stock purchasable upon further exercise of the Griffin Warrants. Payment of the
purchase price upon the exercise of the Griffin Warrants may be made in cash or
by certified or official bank or bank cashier's check.
ADJUSTMENTS
Capitalized terms used in this section and not otherwise defined in this
Information Statement/ Prospectus have the meanings ascribed thereto under "--
Certain Definitions" below.
The number of shares of RII Common Stock issuable upon exercise of the
Griffin Warrants are subject to adjustment under certain events, including: (i)
the distribution of additional shares of RII Common Stock to all holders of RII
Common Stock, the subdivision of shares of RII Common Stock and the combination
of shares of RII Common Stock into a smaller number of shares of RII Common
Stock; (ii) the distribution to holders of Common Stock of any Indebtedness
(other than Convertible Securities), shares of capital stock (other than
Convertible Securities or Additional Shares of Common Stock) or any other
securities or property (other than cash) or any warrant or other right to
subscribe for or purchase any Indebtedness (other than Convertible Securities);
(iii) the issuance or sale of any Additional Shares of Common Stock for a
consideration per share less than the Current Market Value
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per share of Common Stock; (iv) the distribution or issuance or sale of warrants
or other rights to subscribe for or purchase any Additional Shares of Common
Stock or any Convertible Securities, whether or not the rights to exercise,
exchange or convert thereunder are immediately exercisable, if the consideration
per share for which Additional Shares of Common Stock at any time thereafter may
be issuable pursuant to the terms of such warrants or other rights or such
Convertible Securities is less than the Current Market Value per share of Common
Stock; and (v) the distribution or issuance or sale of any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, if the consideration per share for which Additional
Shares of Common Stock at any time thereafter may be issuable pursuant to the
terms of such Convertible Securities is less than the Current Market Value per
share of Common Stock. RII is not required to issue fractional shares of RII
Common Stock.
If RII consolidates with or merges with and into another entity or sells or
transfers substantially all its assets, the holders of Griffin Warrants will be
entitled to receive, upon the exercise of the Griffin Warrants, the securities
or property to which the holder of the shares of RII Common Stock or other
securities then deliverable upon the exercise of the Griffin Warrants would have
been entitled upon such consolidation, merger or sale.
LIMITATION ON RIGHT TO VOTE OR RECEIVE DIVIDENDS
No holder of the Griffin Warrants, as such, will be entitled to any rights
as a shareholder of the RII, including the right to vote or to receive dividends
or other distributions with respect to the shares of RII Common Stock, until
such holder has properly exercised the Griffin Warrants in accordance with their
terms.
CERTAIN DEFINITIONS
"Additional Shares of Common Stock" means all shares of Common Stock issued
subsequent to the Effective Date other than (A) shares issued upon exercise of
the Griffin Warrants and (B) any shares of Common Stock issued upon exercise of
any 1990 Stock Option or any option issued under the 1994 Stock Option Plan.
"Capitalized Lease" means, with respect to any Person, any lease or any
other agreement with respect to the use of property that, in accordance with
GAAP, should be capitalized on the lessee's or user's balance sheet.
"Capitalized Lease Obligation" of any Person means, as of any date as of
which the amount thereof is to be determined, the amount of the liability
capitalized in respect of a Capitalized Lease of such Person.
"Common Stock" means RII Common Stock, par value $.01 per share, as
constituted on the Distribution Date and any capital stock into which such
common stock thereafter may be changed on one or more occasions as a result of a
stock split, stock dividend or combination or reclassification of shares, or
through a merger, consolidation, reorganization or recapitalization, or by any
other means, and in addition to such RII Common Stock also includes capital
stock of RII of any other class that is not preferred as to dividends or assets
over any other class of capital stock of RII and that is not subject to
redemption; provided that the shares of Common Stock receivable upon exercise of
the Warrants shall include only shares designated as RII Common Stock on the
Effective Date.
"Convertible Securities" means Indebtedness, shares of stock or other
securities that, with or without payment of additional consideration in cash or
property, are convertible into or exchangeable for Additional Shares of Common
Stock, either immediately or upon the arrival of a specified date or the
happening of a specified event.
"Current Market Value" of a share of Common Stock means, for each trading
day: (A) the closing price for Common Stock as reported on the American Stock
Exchange; (B) if the Common Stock is not listed on the American Stock Exchange,
the closing price as reported on the principal national securities exchange on
which the Common Stock is listed; (C) if the Common Stock is not listed on any
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national securities exchange, the closing price in the over-the-counter market
as reported on the Nasdaq National Market; or (D) if no such closing price is
available, the fair market value as determined in good faith by the Board of
Directors of the Company.
"Current Warrant Price" per share of Common Stock, as of any date, means the
amount equal to the quotient resulting from dividing the Griffin Warrant
Exercise Price per Stock Unit in effect on such date by the number of shares
(including any fractional share) of Common Stock comprising a Stock Unit on such
date.
"GAAP" means United States generally accepted accounting principles.
"Indebtedness" of any Person means, as of any date as of which the amount
thereof is to be determined, (i) all obligations of such Person that, in
accordance with GAAP, would be classified on a balance sheet of such Person as
debt or indebtedness, including all obligations of such Person in respect of
borrowed money or evidenced by bonds, debentures, notes or other evidence of
indebtedness, and (ii) in addition (A) all obligations that are secured by any
Lien existing on property owned by such Person whether or not the obligations
secured thereby shall have been assumed by such Person, (B) all Capitalized
Lease Obligations of such Person, (C) all obligations of such Person to purchase
any materials, supplies or other property, or to obtain the services of any
Person, if the relevant contract or other related document requires that payment
for such materials, supplies or other property, or for such services, shall be
made regardless of whether or not delivery of such materials, supplies or other
property is ever made or tendered or such services are ever performed or
tendered, (D) all obligations of such Person to advance or supply funds to, or
to purchase property or services from, any other Person in order to maintain the
working capital, net worth or any other balance sheet condition of such other
Person or to pay debts, dividends or expenses of such other Person or to assure
such other Person or any third party against any liability or loss and (E)
guarantees, endorsements and other contingent obligations, direct or indirect,
on the part of such Person (other than endorsement of negotiable instruments for
collection in the ordinary course of business) for the payment, discharge or
satisfaction of Indebtedness of others to pay the same or to the owners of such
Indebtedness of others of the character described above, including any
agreement, contingent or otherwise, to (x) purchase such Indebtedness of others,
(y) purchase or sell property or services primarily to permit the debtor in
respect of such Indebtedness of others to pay the same or the owner of such
Indebtedness of others to avoid loss or (z) supply funds to or invest in any
such debtor.
"Lien" means: (i) any interest in property (whether real, personal or mixed
and whether tangible or intangible) that secures an obligation owed to, or a
claim by, a Person other than the owner of such property, whether such interest
is based on the common law, statute or contract, including without limitation
any such interest arising from a Capitalized Lease, arising from a mortgage,
charge, pledge, security agreement, conditional sale or trust receipt, arising
by way of the right of set-off, or deposit in trust, or arising from a lease,
consignment or bailment given for security purposes; (ii) any encumbrances upon
such property that does not secure such an obligation; and (iii) any exception
to or defect in the title to or ownership interest in such property, including
without limitation reservations, rights of entry, possibilities of reverter,
encroachments, easements, right of way, restrictive covenants, leases, licenses
and profits a prendre.
"Person" includes an individual, a corporation, an association, a
partnership, a trust or estate, a government and any agency or political
subdivision thereof or any other entity.
"Stock Unit" means one share of Common Stock until the occurrence of any
adjustment specified in the antidilution section of the Griffin Warrants and
thereafter means such other number of shares of Common Stock as may result from
any one or more of such adjustments.
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DESCRIPTION OF OLD SERIES NOTES
The Old Series Notes were issued pursuant to the Old Series Note Indenture
dated as of September 14, 1990, between RII and Chemical Bank (successor to
Manufacturers Hanover Trust Company), the Old Series Note Trustee. A copy of the
Old Series Note Indenture is filed as an exhibit to the Registration Statement
of which this Information Statement/Prospectus is a part. The terms of the Old
Series Note Indenture also are governed by certain provisions contained in the
TIA.
Wherever particular provisions of the Old Series Note Indenture or Old
Series Notes are referred to, such provisions are incorporated by reference
herein. Capitalized terms used in this section but not defined in this
Information Statement/Prospectus have the meanings ascribed thereto in the Old
Series Note Indenture and are incorporated by reference herein. References to
Sections or Articles refer to Sections or Articles of the Old Series Note
Indenture and references to Paragraphs refer to Paragraphs of the respective Old
Series Notes.
CERTAIN TERMS OF THE OLD SERIES A NOTES
GENERAL
The Old Series A Notes are secured obligations of RII, guaranteed as to
payment of principal and interest by GRI pursuant to the GRI Guaranty and
limited to $187,500,000 in aggregate principal amount plus the principal amount
of Old Series A Notes that may be issued in payment of interest as described
below. As of November 30, 1993, approximately $263,000,000 in aggregate
principal amount of Old Series A Notes were outstanding. The Old Series A Notes
mature on April 15, 1994.
SINKING FUND REQUIREMENTS
None.
INTEREST
The Old Series A Notes paid interest at a rate of 6% per year from April 11,
1990 until April 15, 1991. The interest rate on the Old Series A Notes increased
to 9% on April 15, 1991, to 12% on April 15, 1992, and to 15% on April 15, 1993.
Interest is payable semi-annually on April 15 and October 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. RII is required to pay interest on
overdue principal and, to the extent permitted by law, overdue interest at the
then current rate applicable to the Old Series A Notes plus 2% per year. RII may
pay all or any portion of interest accruing on the Old Series A Notes by issuing
additional Old Series A Notes (valued, for purposes only of determining the
principal amount of additional Old Series A Notes to issue in respect of
interest so paid, at 100% of their principal amount) in lieu of cash in
satisfaction of interest payments due. Interest on the Old Series A Notes may be
paid in cash only if interest on the Old Series B Notes is concurrently paid in
cash in the same proportion of the total interest due. To date, RII has made all
interest payments on the Old Series A Notes by issuing additional Old Series A
Notes.
CERTAIN TERMS OF THE OLD SERIES B NOTES
GENERAL
The Old Series B Notes are secured obligations of RII, limited in aggregate
principal amount to the sum of (a) $137,500,000, plus (b) the principal amount
of Old Series B Notes that were issued in respect of certain general unsecured
claims under the Old Plan, approximately $1,250,000, plus (c) the principal
amount of Old Series B Notes that are issued in payment of interest as described
below. As of November 30, 1993, approximately $219,000,000 in aggregate
principal amount of Old Series B Notes were outstanding. The Old Series B Notes
mature on April 15, 1994. Additional Old Series B Notes not to exceed
approximately $2,500,000 in aggregate principal amount may be issued to holders
of Old Plan Disputed Claims if such claims are allowed by the New Jersey
bankruptcy court.
SINKING FUND REQUIREMENTS
None.
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INTEREST
The Old Series B Notes paid interest at a rate of 11% per annum from May 8,
1990 until April 15, 1991. Thereafter the interest rate on the Old Series B
Notes is 15% per year until maturity. Interest is payable semi-annually on April
15 and October 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. RII is
required to pay interest on overdue principal and, to the extent permitted by
law, overdue interest at the then current rate applicable to the Old Series B
Notes plus 2% per year. RII may pay all or any portion of interest accruing on
the Old Series B Notes by issuing additional Old Series B Notes (valued, for
purposes only of determining the principal amount of additional Old Series B
Notes to issue in respect of interest so paid, at 100% of their principal
amount) in lieu of cash in satisfaction of interest payments due. Interest on
the Old Series B Notes may be paid in cash only if interest on the Old Series A
Notes is concurrently paid in cash in the same proportion of the total interest
due. To date, RII has made all interest payments on the Old Series B Notes by
issuing additional Old Series B Notes.
MANDATORY REDEMPTION
If RII or any of its subsidiaries sells any of their assets listed in a
schedule to the Old Series Note Indenture, any other real property or the
capital stock of any such subsidiary, the Cash Proceeds from such sale are
required to be deposited into the Collateral Account, a custodial account
maintained by the Old Series Note Trustee for the benefit of the holders of the
Old Series Notes, immediately upon receipt thereof (except Cash Proceeds from
the disposition of assets in the ordinary course or in connection with any sale
of all or substantially all the assets of RII). If, as a result of any such
deposit, the balance in the Collateral Account exceeds $15,000,000, RII is
required to redeem the Old Series Notes with the entire balance in the
Collateral Account at 100% of the principal amount thereof plus accrued and
unpaid interest to the date of redemption. The Old Series Note Indenture
requires that any such redemption be made of both the Old Series A Notes and the
Old Series B Notes, pro rata according to the respective principal amounts of
the Old Series Notes of each series then outstanding. (ARTICLE THREE AND
PARAGRAPH 5).
OPTIONAL REDEMPTION
The Old Series Notes are not entitled to any sinking fund.
The Old Series Notes are redeemable at any time in whole, or from time to
time in part, at the election of RII, at a redemption price of 100% of their
principal amount plus accrued interest to the Redemption Date. The Old Series
Note Indenture requires that any such redemption be made of both the Old Series
A Notes and the Old Series B Notes, pro rata according to the respective
principal amounts of the Old Series Notes of each series then outstanding.
(SECTION 3.02).
From and after any Redemption Date, if funds for the redemption of any Old
Series Notes called for redemption shall have been made available on such
Redemption Date, such Old Series 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 3.05 AND PARAGRAPH 5).
The Old Series Note Indenture requires that notice of any optional
redemption of any Old Series Notes be given to holders at their addresses, as
shown in the register, not more than 60 nor less than 30 days prior to the
Redemption Date. The notice of redemption must specify, among other things, the
Redemption Date, the Paying Agent and, in the case of a partial redemption, the
aggregate principal amount of the Old Series A Notes and the Old Series B Notes
to be redeemed and the aggregate principal amount of the Old Series A Notes and
the Old Series B Notes that will be outstanding after such partial redemption.
(SECTION 3.03).
LIMITATION ON OPEN-MARKET PURCHASES
See "-- Restrictive Covenants".
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CASINO CONTROL ACT REGULATION
The Old Series Notes are subject to the qualification, divestiture and
redemption provisions under the Casino Control Act that are described in
"Business of the Company -- Regulation and Gaming Taxes and Fees -- New Jersey".
(SECTION 3.07; PARAGRAPH 6).
PUT OPTION UPON CHANGE OF CONTROL
Each holder of Old Series Notes has the right (the "Change of Control Put
Option") to require RII to purchase such holder's Old Series Notes upon the
occurrence of one or more of the following (unless, in the case of clauses (i)
and (ii) below, RII calls all the Old Series Notes for redemption in connection
therewith pursuant to the terms of the Old Series Note Indenture): (i) the
consolidation or merger of RII with or into another entity in which RII is not
the surviving corporation; (ii) the sale of all or substantially all the assets
of RII, provided that a sale of the stock or substantially all the assets of
either RIB or RIH (but not both) will not constitute such a sale; (iii) the
percentage of the total issued and outstanding voting stock held by Merv Griffin
and his affiliates falls below 15%, other than as a result of issuance by RII of
additional shares of voting stock; or (iv) any person or "group" (as defined in
Rule 13d-5 promulgated under the Exchange Act), other than Merv Griffin, any of
his affiliates or any group of which he or any such affiliate is a member,
acquires 50% or more of the total issued and outstanding voting stock. (SECTION
5.16).
Within 30 business days after any such event, RII is required to give notice
thereof to the holders of the Old Series Notes at their addresses shown in the
register. The notice must specify the nature of the event giving rise to the
right to have the Old Series Notes repurchased, a repurchase date not more than
40 nor less than 30 days after the date of the notice and the instructions a
holder of the Old Series Notes must follow in order to have its Old Series Notes
repurchased. The repurchase price is 100% of the principal amount of the Old
Series Notes repurchased plus accrued and unpaid interest to the date of
repurchase. (SECTION 5.16).
To the extent applicable, RII will be required to comply with Rule 13e-4
under the Exchange Act and any other applicable provisions of federal and state
securities laws in connection with any repurchase of the Old Series Notes
pursuant to the Change of Control Put Option.
The Change of Control Put Option may in certain circumstances make more
difficult or discourage a takeover of RII, and, thus, the removal of incumbent
management.
COLLATERAL
GENERAL
The Old Series Notes are secured by the Collateral pursuant to the Old
Security Documents described below. The Old Series A Notes and the Old Series B
Notes rank PARI PASSU with respect to amounts realized upon the sale or other
disposition of the Collateral. (ARTICLE FOUR).
The Collateral consists of:
(i) The RII Property, consisting of RII's fee and leasehold interests in
substantially all of its real properties, additions or all improvements
constructed thereon (other than the Showboat Lease and the real property
that is subject to the Showboat Lease), pursuant to the RII Mortgage between
RII and the Old Series Note Trustee;
(ii) 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 (other than
certain new facilities such as the proposed new parking garage) and all
furniture, fixtures, machinery, equipment, inventory and accounts of RIH
related thereto, encumbered pursuant to the Old RIH Mortgage between RIH and
the Old Series Note Trustee;
(iii) all of the outstanding capital stock of RIH and GRI and all of
RII's other direct and indirect domestic subsidiaries pledged by RII to the
Old Series Note Trustee pursuant to the Resorts Pledge Agreement between RII
and the Old Series Note Trustee;
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(iv) the RIH Notes in the aggregate principal amount of $325,000,000,
pledged by GRI to the Old Series Note Trustee pursuant to the RIH Pledge
Agreement between GRI and the Old Series Note Trustee;
(v) 66% of the outstanding RIB Stock, pledged by GRI to the Old Series
Note Trustee pursuant to the GRI Pledge Agreement between GRI and the Old
Series Note Trustee; and
(vi) the RIB Note, the RIB Subsidiary Guaranty Agreements and the RIB
Mortgage pledged by RIH to the Old Series Note Trustee pursuant to the RIB
Collateral Assignment Agreement between RIH and the Old Series Note Trustee.
THE RII MORTGAGE AND THE RIH MORTGAGE
The RII Mortgage and the Old RIH Mortgage create a first priority mortgage
lien and security interest (subject to certain permitted liens) in the RII
Property and the Resorts Casino Hotel, respectively. RII and RIH are prohibited
from obtaining the release of, or granting any additional liens on, the RII
Property and the Resorts Casino Hotel, respectively, without the consent of the
holders of at least two-thirds in principal amount of the Old Series A Notes and
the Old Series B Notes, voting together as a single class, and a majority of
each class voting separately, except as permitted by the provisions described
under the captions "-- Negative Pledge Covenant" and "-- Release and
Substitution of Collateral" below.
RII, RIH AND GRI PLEDGE AGREEMENTS
The RII, RIH and GRI Pledge Agreements collectively create a security
interest in all of the outstanding capital stock of RIH, GRI and all of RII's
other direct and indirect domestic subsidiaries and in 66% of the outstanding
voting stock of RIB. Unless an Event of Default under the Old Series Note
Indenture has occurred and is continuing, RII, RIH and GRI will be entitled to
exercise full voting rights of, and may receive any dividends declared on, the
pledged shares.
In addition, the RIH Pledge Agreement creates a security interest in the RIH
Notes, which, as amended, evidence the borrowing by RIH from GRI of the proceeds
from the issuance by GRI of the Old GRI Notes.
THE RIB COLLATERAL
The RIB Collateral includes a promissory note (the "RIB Note") issued by RIB
to RIH to evidence the borrowing by RIB from RIH of $50,000,000 of the proceeds
of the loan to RIH made by GRI out of the proceeds of sale of the 13 1/2% Senior
Secured Reset Notes due 1995 of GRI (the "Reset Notes"). The RIB Note was
assigned by RIH to the Old Series Note Trustee as collateral. The RIB Note is
guaranteed by three subsidiaries of RIB (collectively, the "RIB Subsidiary
Guarantors") and such guarantees (the "RIB Subsidiary Guaranty Agreements") are
secured by first priority mortgages and liens evidenced by indentures of
mortgage (collectively, the "RIB Mortgage"). The RIB Subsidiary Guaranty
Agreements and the RIB Mortgage also were assigned by RIH to the Old Series Note
Trustee as collateral. The RIB Mortgage encumbers the interests of RIB and the
RIB Subsidiary Guarantors in the Paradise Island Resort & Casino, the Ocean
Club, the Paradise Paradise Beach Resort, all additions or improvements
constructed thereon and all furniture, furnishings, fixtures, machinery and
equipment and other personal property forming a part thereof or used in
connection therewith (the "RIB Property"). The RIB Mortgage does not encumber
the golf course, certain undeveloped land owned by such subsidiaries and certain
other properties not used in connection with the hotel operations on Paradise
Island. See "Business of the Company -- The Bahamas" for a description of the
RIB Property.
NEGATIVE PLEDGE COVENANT
RII and its subsidiaries, including RIH, GRI, RIB and the RIB Subsidiary
Guarantors, are prohibited from granting any additional liens, other than
certain permitted liens, on any of their respective assets without the consent
of the holders of at least two-thirds in principal amount of the Old Series A
Notes and the Old Series B Notes, voting together as a single class (which must
include the holders of at least a majority in aggregate principal outstanding of
each such series). (SECTION 5.12).
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RELEASE AND SUBSTITUTION OF COLLATERAL
Subject to certain provisions of the Old Series Note Indenture, real
property Collateral (other than real property constituting all or a portion of
the Resorts Casino Hotel or the RIB Casino Hotel) may be released upon
substitution of other real property Collateral or cash collateral with a fair
value, or in an amount, equal to the fair value of the real property Collateral
released. Cash Collateral may be released for redemptions of Old Series Notes.
Collateral may be released in connection with sales of assets by RII or its
subsidiaries, provided that the cash proceeds from sales of certain specified
assets are deposited into a separate account which proceeds shall, when the
balance in such account equals $15,000,000, be used to redeem Old Series Notes.
See "-- Mandatory Redemption" above. Collateral may be released upon request of
RIH, GRI or RIB, as the case may be, if the holders of at least two-thirds in
aggregate principal amount of the Old Series A Notes and the Old Series B Notes,
voting together as a single class (which must include the holders of at least a
majority in aggregate outstanding principal amount of each such series), consent
to such release in writing. In addition, Collateral sold, assigned, transferred,
licensed or otherwise disposed of in the ordinary course of the business or
abandoned because it is no longer necessary or desirable in, and is not material
to, the conduct of the business will be released, subject, in certain cases, to
receipt by the Old Series Note Trustee of certain reports and to limitations on
the fair value of property so released. All Collateral will be released upon
satisfaction and discharge of RII's obligations under the Old Series Note
Indenture. (ARTICLE FOUR).
LIMITATIONS ON ABILITY TO REALIZE ON COLLATERAL
GENERAL
If there is an Event of Default under the Old Series Note Indenture or the
Old Security Documents, the Old Series Note Trustee, subject to the requirements
of the Casino Control Act and the Gaming Act, may enforce the rights and
remedies arising under the Old Security Documents. The net amount realized in
any foreclosure sale for the benefit of holders of the Old Series Notes will be
only that amount that exceeds all amounts then due and owing to creditors, if
any, having senior security interests and certain costs, taxes and other items.
CERTAIN REGULATORY CONSIDERATIONS
In any foreclosure sale with respect to the Resorts Casino Hotel, the Old
Series Note Trustee could bid the amount of the outstanding Old Series Notes. In
the case of a foreclosure under the RIB Mortgage, the Old Series Note Trustee
could not bid on the RIB Property unless the foreclosure sale is being conducted
by leave or order of a Bahamas court and the court has granted leave to bid, in
which event the Old Series Note Trustee could bid the amount outstanding under
the RIB Note. The Old Series Note Trustee would be required to comply with the
applicable requirements of the Casino Control Act (including obtaining a casino
license) and Gaming Act in any foreclosure sale.
CERTAIN BANKRUPTCY CONSIDERATIONS
In the event of the filing of a petition under the Bankruptcy Code for RIH,
applicable provisions of the Bankruptcy Code, including the automatic stay
provisions of section 362 of the Bankruptcy Code, may operate to prevent the Old
Series Note Trustee from taking action to realize on the Collateral 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 held by RIH
under long-term ground leases. The ground leases do not provide certain
mortgagee protections and, in the event of a default thereunder, the Old Series
Note Trustee may not have the right to cure any such default. However, the Old
Series Note Trustee has the right under the Old Series 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.
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ENFORCEABILITY OF JUDGMENTS WITH RESPECT TO BAHAMAS ASSETS
Since substantially all the assets of RIB and its subsidiaries are outside
the United States, any judgment obtained in the United States, including
judgments with respect to the payment of principal on the Old Series Notes or
with respect to the RIB Note or the RIB Mortgage, might not be collectible
within the United States with respect to such foreign assets. In connection with
the acquisition of RIH by Griffco and the issuance and sale of the Reset Notes
and GRI's 13% Mortgage Notes due 1998, RII was informed by Bahamas counsel,
Dupuch & Turnquest, that (i) foreign (including United States) judgments for
liquidated amounts in civil matters, obtained against RII, GRI or RII after due
trial before a court of competent jurisdiction and which are final and
conclusive as to the issues in contention are actionable in Bahamian courts and
are impeachable only upon the grounds of fraud, public policy and natural
justice, and (ii) there are no other factors under Bahamian law which would
defeat an action brought on the basis of such a judgment of a United States
court under the Old Series Note Indenture, the Old Series Notes or the RIB
Mortgage.
GUARANTY
GRI guarantees payment of principal and interest of the Old Series Notes
pursuant to the GRI Guaranty. GRI's assets consist principally of the RIH Notes
and the capital stock of RIB. RIB and its subsidiaries own the Paradise Island
properties, including the Paradise Island Resort & Casino, the Ocean Club Golf &
Tennis Resort and the Paradise Paradise Beach Resort, and all related furniture,
fixtures, machinery and equipment. The RIH Notes and such Paradise Island
properties, including all additions or improvements to such properties, directly
or indirectly, comprise part of the Collateral securing the Old Series Notes.
The Collateral also includes the lien on the Resorts Casino Hotel, owned by RIH,
together with all additions or improvements thereto.
RANKING
The Old Series Notes are senior secured obligations of RII.
PAYMENT OF NET PROCEEDS OF ASSET SALES
See "-- Mandatory Redemption".
RESTRICTIVE COVENANTS
The Old Series Note Indenture contains certain restrictive covenants on the
part of RII, including without limitation restrictions (subject to certain
exceptions) on: (i) the payment of cash dividends or redemptions of capital
stock by RII (other than as required by the Casino Control Act); (ii) the
repurchase (other than as required by the Casino Control Act) of any Old Series
Notes other than at par unless all interest due on the Old Series Notes on the
immediately preceding interest payment date was paid in cash and the funds used
for the repurchase are not the proceeds of asset sales that are required to be
deposited in the Collateral Account and that have not been so deposited; (iii)
the incurrence of additional indebtedness for borrowed money, with exceptions
for (A) certain purchase money financing not to exceed $15,000,000 in aggregate
principal amount at any time outstanding, (B) financing to develop certain
property in The Bahamas to fulfill RIB's obligation to the government of the
Commonwealth of The Bahamas to construct at least 150 first-class hotel rooms or
(after satisfaction of such obligation) otherwise, not to exceed $20,000,000 in
aggregate principal amount at any time outstanding, and (C) after the sale of
the Paradise Island Business and application of such sale proceeds to prepay the
Old Series Notes such that the aggregate principal amount of the Old Series
Notes remaining outstanding does not exceed $75,000,000, financing for the
construction of new hotel facilities, including a parking garage to serve the
Resorts Casino Hotel in Atlantic City, not to exceed $75,000,000 in aggregate
principal amount at any time outstanding; (iv) transactions with affiliates,
with exceptions for transactions that RII's Board of Directors determines to be
on terms as favorable as could be obtained from a non-affiliated party, certain
transactions in regard to acquisition of and financing for new hotel facilities,
and contribution by RII or any of its subsidiaries of undeveloped land to joint
ventures, provided that neither RII nor any of its subsidiaries may enter into
any of the foregoing transactions in excess of $10,000,000 without a fairness
opinion of an independent financial adviser; (vi) mergers and consolidations
with entities other than affiliates of RII; and (vii) the
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ability of RII and its subsidiaries to sell their respective assets. The Old
Series Note Indenture also requires RII, at all times after December 31, 1990,
to maintain a Tangible Net Worth equal to at least $50,000,000. (ARTICLE FIVE).
EVENTS OF DEFAULT
The following events constitute "Events of Default" under the Old Series
Note Indenture: (i) failure to pay principal of the Old Series A Notes or the
Old Series B Notes when due, whether at maturity, upon redemption, by
declaration, or otherwise; (ii) failure to make any interest payment on the Old
Series A Notes or the Old Series B Notes when due and continuation of such
default for a period of 30 days; (iii) failure on the part of RII to observe or
perform any other covenant or agreement contained in the Old Series Note
Indenture if such failure continues unremedied for 30 days after written notice
given by the Old Series Note Trustee or the holders of at least 25% in aggregate
principal amount of the Old Series Notes then outstanding (except in the case of
default with respect to the maintenance of corporate existence, restrictions on
asset sales and mergers and consolidations, which shall constitute Events of
Default without notice or passage of time); (iv) failure on the part of RII or
any of its subsidiaries to perform any of its obligations under any Old Security
Document to which it is a party (in certain cases where such failure continues
unremedied for a period of time after written notice given by the Old Series
Note Trustee or holders of 25% in aggregate principal amount of the Old Series
Notes then outstanding); (v) certain events involving the subsequent bankruptcy,
insolvency, receivership or reorganization of RII, RIH, GRI or RIB; (vi) any
default under any other Indebtedness of RII, RIH or RIB (other than certain
intercompany indebtedness and the Showboat Notes) in excess (together with other
Indebtedness the maturity of which is so accelerated) of $10,000,000 in
principal amount if such default permits the holders thereof to cause such
Indebtedness to become due prior to its stated maturity and such holders have
caused such Indebtedness to become due prior thereto and have not rescinded or
annulled such action; (vii) the entry of one or more final judgments, no longer
subject to appeal and not covered by insurance, against RII, RIH, GRI or RIB
involving aggregate uninsured liability exceeding $10,000,000, if such judgment
remains undischarged or unstayed for a period of 45 days; and (viii) any
revocation, suspension or loss of any gaming license which results in the
cessation of business at the Resorts Casino Hotel or the Paradise Island Casino
for a period of more than 45 consecutive days. (SECTION 7.01).
If an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency, receivership or reorganization) shall have occurred and
be continuing, the Old Series Note Trustee or the holders of not less than 40%
in aggregate principal amount of the Old Series Notes then outstanding may
declare immediately due and payable all unpaid principal and interest accrued
and unpaid on the Old Series Notes. In case an Event of Default resulting from
certain events of bankruptcy, insolvency, receivership or reorganization shall
occur, all unpaid principal and interest accrued and unpaid shall be due and
payable immediately, without any declaration or other act on the part of the Old
Series Note Trustee or the holders of the Old Series Notes. Subject to certain
conditions, the holders of a majority in aggregate principal amount of the Old
Series Notes then outstanding may rescind a declaration if all Events of Default
are remedied. In certain cases the holders of two-thirds in aggregate principal
amount of the Old Series Notes then outstanding (which must include holders of
at least a majority in aggregate principal amount outstanding of each series)
may waive any past Default and its consequences, except a default in the payment
of principal of or interest on any Old Series Notes. (SECTION 7.02).
LIMITATION ON MERGERS
RII, without the consent of the holders of the Old Series Notes, may
consolidate with or merge into any other entity or convey, transfer or lease all
or substantially all its properties and assets to any person, provided that: (1)
the entity formed by such consolidation or into which RII is merged or the
person which acquires by conveyance or transfer, or which leases, the properties
and assets of RII is a corporation, partnership or trust, organized and existing
under the laws of the United States of America, any State thereof or the
District of Columbia; (2) the successor entity shall expressly assume,
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by a supplemental indenture executed and delivered to the Old Series Note
Trustee, in form satisfactory to the Old Series Note Trustee, the performance of
every covenant of the Old Series Notes, the Old Series Note Indenture and the
Old Security Documents on the part of RII to be performed or observed; (3)
immediately before and immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and (4) RII
or the successor entity shall have a Tangible Net Worth (immediately after
giving effect to such transaction and the assumption contemplated by clause (2)
above) equal to or greater than RII's Tangible Net Worth immediately preceding
such transaction. (SECTION 6.01). Upon compliance with these provisions by a
successor entity, RII would be relieved of its obligations under the Old Series
Notes and the Old Series Note Indenture. (SECTION 6.02).
DISCHARGE OF OLD SERIES NOTE INDENTURE; DEFEASANCE
RII may terminate substantially all obligations under the Old Series Note
Indenture at any time by delivering all outstanding Old Series Notes to the Old
Series Note Trustee for cancellation and paying any other sums payable under the
Old Series Note Indenture. (SECTION 9.02).
The Indenture also provides that RII may elect to defease and be discharged
from any and all obligations with respect to the Old Series Notes and that the
provisions of the Old Series Note Indenture will no longer be in effect with
respect to the Old Series Notes (except for certain obligations, including the
obligations to register the transfer or exchange of the Old Series Notes, to
replace temporary or mutilated, destroyed, lost or stolen Old Series Notes, to
maintain an office or agency in respect of Old Series Notes and to hold funds
for payment in trust).
Such defeasance will take effect only upon the deposit with the Old Series
Note Trustee, in trust for such purpose, of money and/or U.S. Government
Obligations that, through the payment of principal and interest in accordance
with their terms, will provide money, in an amount sufficient to pay the
principal of and interest on the Old Series Notes on the date such payments are
due in accordance with the terms of the Old Series Notes. Such a trust may be
established with respect to the Old Series Notes only upon satisfaction of
certain conditions specified in the Old Series Note Indenture. (ARTICLE NINE).
MODIFICATION OF INDENTURE
The Old Series Note Indenture and any Old Security Document may be amended
or supplemented by RII or the party to such Old Security Document, the Old
Series Note Trustee and the holders of not less than two-thirds in aggregate
principal amount of the Old Series Notes then outstanding (which must include
holders of at least a majority in aggregate principal amount outstanding of each
of the Old Series A Notes and the Old Series B Notes), except that without the
consent of the holder of each Old Series A Note and Old Series B Note affected,
no such modification or alteration may (i) change the stated maturity of such
Note, reduce the principal amount of such Note, reduce the rate or extend the
time of payment of interest on such Note, (ii) modify any redemption provision
of such Note in a manner that would adversely affect the holder of such Note,
(iii) waive a default in the payment of principal of, or interest on, such Note,
or (iv) reduce the aggregate principal amount of the Old Series Notes with
respect to which the consent of the holders is required for an amendment or
supplement to, or a waiver of any provision of, the Old Series Note Indenture.
(ARTICLE TEN).
TRUSTEE
Chemical Bank (successor to Manufacturers Hanover Trust Company) is the Old
Series Note Trustee. Upon the occurrence of an Event of Default (other than
resulting from bankruptcy, insolvency, receivership or reorganization) the Old
Series Note Trustee or the holders of not less than 40% in aggregate principal
amount of the Old Series Notes then outstanding may accelerate their Notes. The
Old Series Note Trustee may require reasonable indemnity before exercising any
of its rights or powers under the Old Series Note Indenture.
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REPORTS TO HOLDERS
RII will furnish the holders of Old Series Notes and the Old Series Note
Trustee with annual reports containing audited financial statements and
quarterly reports containing unaudited financial statements. (SECTION 8.06).
DESCRIPTION OF SHOWBOAT NOTES
The Showboat Notes were issued by RII pursuant to the Showboat Indenture
dated as of September 14, 1990, between RII and Bank of New York, as trustee
(the "Showboat Note Trustee"). A copy of the Showboat Indenture is filed as an
exhibit to the Registration Statement of which this Information
Statement/Prospectus is a part. The terms of the Showboat Indenture also are
governed by certain provisions contained in the TIA.
Wherever particular provisions of the Showboat Notes and Showboat Indenture
are referred to, such provisions are incorporated by reference herein.
Capitalized terms used in this section but not defined in this Information
Statement/Prospectus have the meanings ascribed thereto in the Showboat
Indenture and are incorporated by reference herein. References to Sections and
Articles refer to Sections and Articles of the Showboat Indenture and references
to Paragraphs refer to Paragraphs of the Showboat Notes.
GENERAL
The Showboat Notes are secured, nonrecourse notes, limited in aggregate
principal amount to the sum of $105,333,000. As of November 30, 1993,
$105,333,000 in aggregate principal amount of Showboat Notes were outstanding.
The Showboat Notes will mature on June 30, 2000.
The principal of and interest on the Showboat Notes are payable at the
office of the Showboat Note Trustee in New York, New York or at other offices or
agencies maintained for that purpose. Payment of interest may be made by check
mailed to the address of the person entitled thereto as shown on the register.
Registration of the Showboat Notes is transferable at an office or agency of
the registrar, upon surrender of such Showboat Notes duly endorsed or
accompanied by a written instrument of transfer in form satisfactory to RII duly
executed by the holder thereof or his attorney duly authorized in writing. No
service charge will be made for any such registration of transfer or exchange,
but RII may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. The registrar will not be
required to register the transfer of or exchange Showboat Notes or portions
thereof called for redemption.
RII initially appointed the Showboat Note Trustee as Paying Agent and
Registrar. RII at any time may terminate the appointment of any Paying Agent or
Registrar and appoint additional or other Paying Agents and Registrars. RII
initially will designate the corporate trust office of the Showboat Note Trustee
in New York, New York as the office at which Showboat Notes may be presented and
surrendered. Notice of such termination or appointment and of any change in the
office through which any Paying Agent or Registrar will act will be given to the
Showboat Note Trustee. Until all the Showboat Notes have been delivered to the
Showboat Note Trustee for cancellation, however, RII is required to maintain
offices or agencies where Showboat Notes may be presented for payment and
transfer.
INTEREST
Interest on the Showboat Notes consists of a pass-through (subject to
certain adjustments) of the lease payments actually received by RII or the
Showboat Note Trustee under the Showboat Lease. For a description of certain
terms of the Showboat Lease, see "-- Collateral" below. Interest is payable
based upon lease payments received under the Showboat Lease with respect to
periods commencing on or after July 1, 1990. Interest is payable semi-annually
on January 15 and July 15 in each year to holders of record of the Showboat
Notes at the close of business on the first day of the month in which the
interest payment date occurs. RII's obligation with respect to interest on the
Showboat Notes is
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only to pay to the holders of the Showboat Notes those lease payments which are
actually received by RII or the Showboat Note Trustee under the Showboat Lease.
In the event of a default in the payment of such lease payments by the lessee
under the Showboat Lease, the Showboat Note Trustee and the holders of Showboat
Notes will have no recourse against RII but will have recourse, after a 30-day
grace period following such default, against the collateral described below if
such default is not cured by the lessee under the Showboat Lease or RII.
OPTIONAL REDEMPTION
The Showboat Notes are not entitled to any sinking fund.
The Showboat Notes are redeemable at any time in whole, or from time to time
in part, at the election of RII, at a redemption price of 100% of the principal
amount redeemed plus interest to the date of such redemption (based on lease
payments actually received to the redemption date and, if the redemption date is
not during the first five business days of a calendar month, the amount of rent
accrued under the Showboat Lease but not yet paid in respect of the calendar
month in which the redemption date occurs).
From and after any redemption date, if funds for the redemption of any
Showboat Notes called for redemption shall have been made available for
redemption on such redemption date, such Showboat 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 to such redemption date. (SECTION 3.05 AND
PARAGRAPH 5).
The Showboat Note Indenture requires that notice of any optional redemption
of any Showboat Notes be given to holders at their addresses, as shown in the
register, not more than 60 nor less than 30 days prior to the redemption date.
The notice of redemption must specify, among other things, the redemption date,
the Paying Agent and, in the case of a partial redemption, the aggregate
principal amount of Showboat Notes to be redeemed and the aggregate principal
amount of Showboat Notes that will be outstanding after such partial redemption.
CASINO CONTROL ACT REGULATION
The Showboat Notes are subject to the qualification, divestiture and
redemption provisions under the Casino Control Act that are described in
"Business of the Company -- Regulation and Gaming Taxes and Fees -- New Jersey".
COLLATERAL
The Showboat Notes are secured by a mortgage encumbering the 10.44 acre site
which has been leased to ACS (the "Showboat Property"), by a collateral
assignment of the Showboat Lease (together, such site and the Showboat Lease are
referred to as the "Showboat Mortgage") and by a pledge of any proceeds of the
sale of the Showboat Mortgage. The Showboat Indenture and the Showboat Mortgage
provide that, so long as any of the Showboat Notes are outstanding, lease
payments will be made by the lessee under the Showboat Lease directly to the
Showboat Note Trustee. The Showboat Notes are issued without recourse to RII.
Accordingly, in the event of a default by RII under the terms of the Showboat
Indenture, the sole recourse available to the Showboat Note Trustee and holders
of Showboat Notes will be to proceed against the Showboat Collateral.
The Showboat Lease expires on December 15, 2082. Lease payments are paid in
equal monthly installments on the first day of each month. The annual rental for
the lease year ending March 31, 1994 is $8,118,000. The lease payment is
increased annually as of April 1, based on the changes in the consumer price
index from the previous year. Under the terms of the Showboat Lease, ACS is
required to pay all real estate taxes and other expenses related to its use of
the Showboat Property. The permitted use of the Showboat Property is that of a
first-class hotel casino and related facilities. If such use becomes illegal,
however, the Showboat Property may be used for any lawful purpose consistent
with the urban renewal plan for Atlantic City then in existence. ACS is required
to maintain comprehensive general liability insurance (not less than $1,000,000
combined single limit) and umbrella excess liability insurance (not less than
$200,000,000 combined single limit), all with RII named as an additional
insured. ACS has agreed to indemnify RII to the full limit of any claims in
excess of the insurance coverage provided.
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ACS may transfer its interest in the Showboat Property or sublet the
Showboat Property with RII's written consent so long as any transferee agrees to
assume and be bound by all the obligations of the Showboat Lease. No consent by
RII is required if ACS transfers its interest to a leasehold mortgagee or to an
affiliate of ACS or if a sublease involves less than five percent of the gross
square footage of the Showboat Property.
Under the terms of the Showboat Lease, RII is required, prior to making an
offer to any other parties, to offer to ACS the opportunity to acquire the
Showboat Property.
The Showboat Lease provides that an assignment of the Showboat Property and
the Showboat Lease as collateral (such as contemplated by the Showboat
Indenture) does not trigger any right of first offer in favor of ACS. Moreover,
Resorts does not believe that a foreclosure on the Showboat Collateral by the
Showboat Note Trustee in the event of a default under the Showboat Indenture
would trigger such right of first offer. Any subsequent sale by the Showboat
Note Trustee might be subject to a right of first offer in favor of ACS. Any
sale of the Showboat Property (as well as the ability of the Showboat Note
Trustee to take title thereto) also would require the approval of the Casino
Control Commission, and the necessity of such approval may affect both the
timing of such sale as well as the ultimate price to be obtained.
If RII were for any reason prohibited under New Jersey law from acting as
lessor under the Showboat Lease, including prohibition due to a finding by the
Casino Control Commission that RII is unsuitable to own a casino property, the
Showboat Lease would require RII to appoint a trustee acceptable to Casino
Control Commission to act for RII and collect all lease payments on RII's
behalf. The trustee would be required to sell RII's 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 lease payments to the
date of sale, would be paid to RII, which would in turn remit such proceeds to
the Showboat Note Trustee. If RII were no longer able to act as a lessor, ACS
would have the right to purchase the underlying land leased from RII. The
purchase price would be an amount equal to the greater of $66,000,000 and the
fair market value of the leased acreage, but no more than 11 times the rent then
being paid by ACS. 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 and 11 times the rent being paid by ACS in the year the
option would become effective. If the Showboat Note Trustee takes title to the
Showboat Collateral and becomes the lessor under the Showboat Lease, it
similarly will be subject to the foregoing regulatory provisions.
In the event of the filing of a petition under the Bankruptcy Code for RII,
applicable provisions of the Bankruptcy Code, including the automatic stay
provisions of section 362 of the Bankruptcy Code, may operate to prevent the
Showboat Note Trustee from taking action to realize on the Showboat Collateral
if there is an Event of Default.
CERTAIN COVENANTS
Set forth below is a description of certain covenants by RII in favor of the
holders of the Showboat Notes.
TRANSFER OF SHOWBOAT COLLATERAL; LIENS
The Showboat Indenture provides that RII may sell, assign, transfer or
otherwise dispose of, or create, suffer or permit to be created or exist any
Lien (other than certain permitted liens) on, the Showboat Collateral or any
part thereof only if concurrently therewith or prior thereto all outstanding
Showboat Notes are redeemed. (SECTIONS 5.10 AND 5.11).
PERFORMANCE OF COVENANTS UNDER THE SHOWBOAT LEASE
RII promptly will perform and observe all the terms, covenants and
conditions required to be performed and observed by RII as landlord under the
Showboat Lease. RII promptly will notify the Showboat Note Trustee, in writing,
of the receipt by RII of a notice from ACS asserting or claiming a default by
RII under the Showboat Lease. (SECTION 5.09).
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NOTIFICATION OF DEFAULTS BY ACS UNDER THE SHOWBOAT LEASE AND EXERCISE OF
REMEDIES BY RII
RII will notify the Showboat Note Trustee, in writing, promptly following
the expiration of any applicable grace period for which provision is made in the
Showboat Lease, of any default by ACS in the performance or observance of any of
the terms, covenants or conditions on the part of ACS to be performed or
observed under the Showboat Lease. Similarly, the Showboat Note Trustee will
notify RII, in writing, promptly if the Showboat Note Trustee fails to receive
from ACS, when due, any payment required of ACS under the Showboat Lease. In the
event of any such default, RII diligently will proceed to enforce its rights
under the Showboat Lease. (SECTION 5.09).
TERMINATION OR MODIFICATION OF THE SHOWBOAT LEASE
RII will not consent to or cause any termination of, amendment to or waiver
of any provision of the Showboat Lease that would materially and adversely
affect the interests of the Showboat Note Trustee or the holders of the Showboat
Notes under the Showboat Note Indenture and the Showboat Mortgage without the
prior written consent of the Showboat Note Trustee, which consent is not to be
withheld if the holders of at least two-thirds in aggregate principal amount of
the outstanding Showboat Notes give their consent.
EVENTS OF DEFAULT
The following events constitute "Events of Default" under the Showboat
Indenture: (i) failure to pay principal of the Showboat Notes when due, whether
at maturity, upon redemption, by declaration or otherwise; (ii) at any time that
lease payments under the Showboat Lease are not made directly to the Showboat
Note Trustee, failure by RII to pay interest on the Showboat Notes when due and
such Default continues for 30 days; (iii) failure by the lessee under the
Showboat Lease to make any lease payment due under the Showboat Lease if such
failure continues for 30 days; (iv) failure on the part of RII to observe or
perform any other covenant or agreement contained in the Showboat Indenture or
the Showboat Mortgage if such failure continues unremedied for 30 days after
written notice given by the Showboat Note Trustee or the holders of at least 25%
in aggregate principal amount of the Showboat Notes then outstanding; and (v)
certain events of bankruptcy, insolvency, receivership or reorganization of RII.
If an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency, receivership or reorganization) has occurred and is
continuing, the Showboat Note Trustee or the holders of not less than 40% in
aggregate principal amount of the Showboat Notes then outstanding may declare
immediately due and payable all unpaid principal and interest accrued and unpaid
on the Showboat Notes then outstanding. If an Event of Default resulting from
certain events of bankruptcy, insolvency, receivership or reorganization occurs,
all unpaid principal and interest accrued and unpaid shall be due and payable
immediately, without any declaration or other act on the part of the Showboat
Note Trustee or any of the holders of the Showboat Notes. Subject to certain
conditions, the holders of a majority in aggregate principal amount of the
Showboat Notes then outstanding may waive any past Event of Default and its
consequences, except a default in the payment of principal of or interest on any
of the Showboat Notes.
MODIFICATION OF INDENTURE
The terms of the Showboat Indenture governing modifications and amendments
thereto are substantially similar to the corresponding provisions of the Old
Series Note Indenture. See "Description of the Old Series Notes -- Modification
of Indenture".
REPORTS TO HOLDERS
RII will furnish the holders of Showboat Notes and the Showboat Note Trustee
with annual reports containing audited financial statements and quarterly
reports containing unaudited financial statements.
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LIMITATION ON MERGERS
RII, without the consent of the holders of the Showboat Notes, may
consolidate with or merge into any other entity or convey, transfer or lease all
or substantially all its properties and assets to any person, provided that: (1)
the entity formed by such consolidation or into which RII is merged or the
person which acquires by conveyance or transfer, or which leases, the properties
and assets of RII is a corporation, partnership or trust, organized and existing
under the laws of the United States of America, any State thereof or the
District of Columbia; (2) the successor entity shall expressly assume, by a
supplemental indenture executed and delivered to the Showboat Note Trustee, in
form satisfactory to the Showboat Note Trustee, the performance of every
covenant of the Showboat Notes, the Showboat Note Indenture and the Security
Documents (as defined in the Showboat Indenture) on the part of RII to be
performed or observed; (3) immediately before and immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing; and (4) RII or the successor entity shall have a net worth,
determined in accordance with generally accepted accounting principles, not less
than RII's net worth immediately preceding such transaction. (SECTION 6.01).
Upon compliance with these provisions by a successor entity, RII would be
relieved of its obligations under the Showboat Notes and the Showboat Note
Indenture. (SECTION 6.02).
DISCHARGE OF SHOWBOAT NOTE INDENTURE; DEFEASANCE
RII may terminate substantially all obligations under the Showboat Note
Indenture at any time by delivering all outstanding Showboat Notes to the
Showboat Note Trustee for cancellation and paying any other sums payable under
the Showboat Note Indenture. (SECTION 10.02).
The Indenture also provides that RII may elect to defease and be discharged
from any and all obligations with respect to the Showboat Notes and that the
provisions of the Showboat Note Indenture will no longer be in effect with
respect to the Showboat Notes (except for certain obligations, including the
obligations to register the transfer or exchange of the Showboat Notes, to
replace temporary or mutilated, destroyed, lost or stolen Showboat Notes, to
maintain an office or agency in respect of Showboat Notes and to hold funds for
payment in trust).
Such defeasance will take effect only upon the deposit with the Showboat
Note Trustee, in trust for such purpose, of money and/or U.S. Government
Obligations that, through the payment of principal and interest in accordance
with their terms, will provide money, in an amount sufficient to pay the
principal of and interest on the Showboat Notes on the date such payments are
due in accordance with the terms of the Showboat Notes. Such a trust may be
established with respect to the Showboat Notes only upon satisfaction of certain
conditions specified in the Showboat Note Indenture. (ARTICLE TEN).
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes all the material Federal income tax
consequences of the Restructuring to the Company and to the holders of Old
Series Notes and, to the extent it relates to matters of law and subject to the
qualifications, limitations and assumptions stated herein, constitutes the
opinion of Gibson, Dunn and Crutcher, 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 Old Series Notes as "capital
assets" (generally property held for investment) within the meaning of Section
1221 of the Tax Code, and will hold the RII Common Stock, the SIHL Series A
Shares (or if the SIHL Sale is not consummated on the Effective Date, the PIRL
Ordinary Shares), New RIHF Mortgage Notes, Units comprised of New RIHF Junior
Mortgage Notes and RII Class B Common Stock, and rights to receive payments from
Deferred Cash received in exchange therefor as capital assets.
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The discussion is 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. There can be
no assurance that the Service will not challenge one or more of the tax
consequences of the Restructuring described herein. Moreover, due to the lack of
definitive judicial or administrative authority, substantial uncertainties exist
with respect to many of the tax consequences of the Plan described herein.
The transactions to be undertaken pursuant to the Plan present numerous
issues of law and of fact as to which there is no controlling authority under
current law. Due to the lack of definitive judicial or administrative authority,
substantial uncertainties exist with respect to many of the tax consequences
described herein and as to which Counsel is unable to render an unqualified
legal opinion. The principal Federal income tax issues as to which Counsel is
unable to render an unqualified legal opinion are as follows:
1. whether the New Debt Securities will be treated as indebtedness of RIH
or RIHF;
2. classification of the New Debt Securities as debt rather than equity;
3. whether or not the exchange of the Old Series Notes for the RII Class B
Common Stock and the RII Common Stock will be treated as pursuant to a
recapitalization as such term is defined in Section 368(a)(1)(E) of the Tax
Code;
4. consequences of the rights to receive payments from Deferred Cash, Net
Reserved Cash and Net Plan Consummation Cash;
5. whether the exchange of the Old Series Notes for the RII Common Stock
will qualify for the stock-for-debt exception from the recognition of COD
income; and
6. whether an ownership change within the meaning of Section 382 of the Tax
Code will occur in connection with the Exchange, and, if such an ownership
change were to occur, whether the "bankruptcy exception" contained in Section
382(1)(5) of the Tax Code will apply.
Counsel believes that it is more likely than not that the New RIHF Mortgage
Notes will be treated as debt for Federal income tax purposes, as discussed
below. In each of the other above described instances, Counsel believes that
there is substantial authority for the positions that the Company intends to
take, as more fully described below. However, because of factual uncertainties
and the lack of controlling judicial or regulatory authority, all as described
more fully below, Counsel is unable to opine that such positions are more likely
than not to be upheld if they are litigated. 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.
Except as specifically discussed below (see "Tax Consequences to the Company
- -- Net Operating Loss Carryovers and Limitations," relating to the effect of the
transfer of the RIB stock on the NOLs of the Company), no rulings from the
Service have been or will be requested with respect to any of the tax issues
discussed herein. Moreover, as noted in the discussion, certain of the issues
material to the income tax consequences of certain transactions are inherently
factual in nature, and other issues involve areas of the law that are ambiguous
or with respect to which legal authority is lacking and as to which Counsel only
is able to offer limited guidance. Accordingly, there can be no assurances that
the Service will not challenge one or more of the tax consequences of the
Restructuring described herein.
In addition, Counsel is unable to provide any opinion with respect to the
Bahamian tax consequences as they relate to PIRL and the receipt of dividends
paid on PIRL Ordinary Shares.
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THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ARE COMPLEX, AND, AS
DESCRIBED BELOW, THERE IS UNCERTAINTY WITH RESPECT TO THE TAX TREATMENT OF
CERTAIN ASPECTS OF THE PLAN. THIS SUMMARY DOES NOT PURPORT TO DEAL WITH ALL
ASPECTS OF FEDERAL, STATE, LOCAL OR FOREIGN INCOME TAXATION THAT MAY BE RELEVANT
TO AN INVESTOR'S DECISIONS WITH RESPECT TO THE RESTRUCTURING. THE FEDERAL INCOME
TAX DISCUSSION AND OPINIONS SET FORTH IN THIS SECTION "CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS" ARE BASED UPON THE PROVISIONS OF THE TAX CODE, REGULATIONS,
PROPOSED REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT, ALL OF WHICH
ARE SUBJECT TO CHANGE. ANY SUCH CHANGES MAY BE APPLIED RETROACTIVELY IN A MANNER
THAT COULD ADVERSELY AFFECT INVESTORS. EACH INVESTOR SHOULD CONSULT WITH ITS OWN
TAX ADVISER CONCERNING THE SPECIFIC TAX CONSEQUENCE TO SUCH INVESTOR OF THE
PLAN, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN OR OTHER TAX
LAWS BEFORE VOTING ON THE PLAN.
TREATMENT OF NEW 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. Among the factors examined in determining the identity of the
true obligor for Federal income tax purposes where another party guarantees or
otherwise provides credit support to the nominal obligor are the economic
independence and substance of the obligor and ability of the nominal obligor to
service interest and principal on the debt from its own cash flows. 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 debt 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. With respect to the
New 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
that 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 income tax purposes and the courts have held taxpayers to strict
standards when such taxpayers have sought to disregard the form of transactions
chosen by them. Accordingly, although the issue is not free from doubt, based on
the foregoing factors, the issuance of the RIH Senior Mortgage and the RIH
Junior Mortgage to support the New Debt Securities, the identical terms (when
combined with the RIH Mortgages) of the RIH Promissory Note and the New RIHF
Mortgage Notes, and of the RIH Junior Promissory Note and the New RIHF Junior
Mortgage Notes, the existence of a 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 New Debt Securities, the Company intends to take the
position for Federal income tax purposes that the New 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 IRS were to treat RIHF, the formal obligor of the New Debt
Securities, as the obligor for Federal income tax purposes, such treatment
should not materially adversely affect the treatment of the New RIHF Mortgage
Notes or the New RIHF Junior Mortgage Notes as debt for Federal income tax
purposes as discussed below (see "-- Classification of New Debt Securities as
Debt Rather than Equity").
CLASSIFICATION OF NEW 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. Although courts have used a number of factors to determine the
characterization of an instrument as debt or equity, each situation is different
and must be decided based upon its own set of facts. The following thirteen
factors recently
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have been analyzed by the tax court in determining the characterization of an
instrument: (1) the name given to the instrument; (2) the presence or absence of
a fixed maturity date; (3) the source of principal repayments; (4) the right to
enforce payments; (5) the participation in management as a result of the
advances; (6) the status of the advances in relation to advances made by other
corporate creditors; (7) the intent of the parties; (8) the "thinness" of the
company's capital structure; (9) the identity of interest between creditors and
stockholders; (10) the source of interest payments; (11) the ability of the
corporation to obtain credit from outside sources; (12) the use to which
advances were put; and (13) the failure of the debtor to repay on the due date.
Based upon an analysis of the above factors and the applicable legal
authorities, it is more likely than not that the New RIHF Mortgage Notes will be
treated as debt, and there is substantial authority that the Old Series Notes
and the New RIHF 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 Old Series Notes or the New Debt Securities, however,
there can be no assurance that in any of such cases the Service would not
challenge such treatment, or that a court would not sustain such a challenge. If
it were determined that any of the New Debt Securities constitute equity for
Federal income tax purposes, then (a) payments of interest on such New 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 New 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. Such
determination also could affect the amount, timing and character of income, gain
or loss to be recognized by a holder as a result of the Exchange, or in the
future. The loss of the interest deduction with respect to all or a portion of
the New Debt Securities also would increase the Company's taxable income,
resulting in a greater utilization of the Company's NOL carryovers and,
ultimately, potentially substantially increasing the Company's Federal income
tax liability sooner than currently anticipated.
Except where expressly noted to the contrary, the following discussion
assumes that, at the time of the Exchange, the Old Series Notes and the New Debt
Securities will be treated as debt obligations, and, in the case of the New Debt
Securities, debt obligations of RIH, for Federal income tax purposes.
EXCHANGE OF OLD SERIES NOTES
As discussed below, Counsel believes that there is substantial authority
that the Old Series Notes will not be treated as "securities" within the meaning
of the Tax Code provisions governing reorganizations. Accordingly, the Company
intends to take the position that the receipt of RII Class B Common Stock and
RII Common Stock (including fractional shares and/or odd-lot holdings of RII
Class B Common Stock and RII Common Stock deemed to have been received by a
holder) in exchange for Old Series Notes pursuant to the Plan will not be
treated as the receipt of such stock pursuant to a recapitalization as such term
is defined in Section 368(a)(1)(E) of the Tax Code.
In order for a holder to avoid the recognition of gain or loss in connection
with a recapitalization as defined in Section 368(a)(1)(E) of the Tax Code, such
holder must exchange stock or securities for stock or securities. Whether a debt
instrument constitutes a "security" depends on an overall evaluation of the
nature of the debt instrument, with the term of the debt instrument usually
regarded as the most important factor. Under present law, debt instruments with
a term of five years or less generally have not been treated by the Service or
the courts as securities, whereas debt instruments with a term of ten years or
more generally have been treated as securities. Therefore, because the stated
term of the Old Series Notes is less than five years, Counsel believes that the
Old Series Notes will not be treated as "securities" for Federal income tax
purposes. Accordingly, because no stock or "securities" will be surrendered,
gain (or loss) will be recognized by a holder of Old Series Notes as a result of
the Restructuring to the extent such holder's basis for his Old Series Notes
exchanged is less than (or greater than) the sum of the respective fair market
values (which should be equal to the "issue price",
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determined as discussed below) (see " -- OID With Respect to the New Debt
Securities") of the New Debt Securities, and the aggregate fair market values of
the RII Class B Common Stock, the RII Common Stock, the SIHL Series A Shares and
the SIHL Aggregate Cash Purchase Price (or if the SIHL Sale is not consummated
on the Effective Date, the PIRL Ordinary Shares), Excess Cash and rights to
receive payments from Net Reserved Cash, if any, Net Plan Consummation Cash, if
any, and Deferred Cash received in exchange for such Old Series Notes (except to
the extent that the amount realized is attributable to accrued interest not
previously included in income, which amount will be taxed as ordinary income).
Any gain or loss recognized by a holder will be long-term capital gain or
loss (except to the extent of any accrued market discount, which gain may be
treated as ordinary income (see "Market Discount" below)) if the holding period
with respect to the Old Series Notes exceeds one year, and otherwise will be
short-term capital gain or loss. The ability of a holder to use long-term
capital losses to offset income other than capital gains is subject to
significant limitations. Currently, the maximum tax rate with respect to
long-term capital gains realized by an individual is 28%, and the maximum tax
rate on ordinary income is 39.6%.
A holder's aggregate basis in the New RIHF Junior Mortgage Notes and the RII
Class B Common Stock (allocated between them in accordance with their
respective, relative fair market values), and its respective bases in the New
RIHF Mortgage Notes, the RII Common Stock, the SIHL Series A Shares (or, if the
SIHL Sale is not consummated on the Effective Date, the PIRL Ordinary Shares)
and, although the issue is not free from doubt, the Net Reserved Cash and the
Net Plan Consummation Cash, will be equal to their respective fair market
values. A holder's basis in the right to receive payments from Deferred Cash
will be equal to the "issue price" of such right (see "-- Consequences of the
Rights to Receive Payments from Deferred Cash" below). The holding period with
respect to each instrument will commence on the day after the Exchange.
Although the Company intends to take the position that the Exchange will not
be treated as a recapitalization as defined in Section 368(a)(1)(E) of the Tax
Code, if the Exchange were so treated as a recapitalization no loss would be
recognized by any holder of the Old Series Notes, and gain, if any, would be
recognized only to the extent that a holder receives "boot" (I.E. cash and
property other than stock or securities of the Company) in the Exchange that is
not deemed to be in payment of accrued interest. Any such gain would be
long-term capital gain if the holding period with respect to the Old Series
Notes exceeds one year, and otherwise would be short-term capital gain. In
general, a holder's tax basis in the RII Common Stock and the RII Class B Common
Stock received pursuant to the Exchange would equal the holder's adjusted tax
basis in the Old Debt Securities surrendered in the Exchange decreased by the
value of property other than the RII Common Stock and the RII Class B Common
Stock received, and increased by the gain, if any, recognized as a result of the
Exchange, and a holder's holding period in the RII Common Stock and the RII
Class B Common Stock would include its holding period for the Old Debt
Securities surrendered in the Exchange. In general, a holder's tax basis and
holding period in the property other than the RII Common Stock and the RII Class
B Common Stock received in the Exchange would be determined as discussed in the
preceding paragraph.
EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISER CONCERNING THE
SPECIFIC TAX CONSEQUENCES IN THE EVENT THAT THE EXCHANGE IS TREATED AS A
RECAPITALIZATION.
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. The following discussion assumes that the Exchange will
occur after such date.
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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 periodic 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.
Pursuant to Section 1273(a)(3) of the Tax Code and the Regulations
promulgated thereunder, if the OID with respect to an obligation is 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 obligations are otherwise "traded on an
established market," the "issue price" of the debt obligations will be the fair
market value of such obligations 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 Effective Date, of the
portion of the property deemed to be exchanged therefor (assuming such property
is publicly traded).
In the case of the New RIHF Mortgage Notes, interest will be payable in cash
on a semi-annual basis, commencing on the March 15 or September 15 next
following the Effective Date. Such semi-annual interest payments on the New RIHF
Mortgage Notes should qualify as QSIPs. Therefore, assuming that the New RIHF
Mortgage Notes are, as expected by the Company, listed on the AMEX, whether the
New RIHF Mortgage Notes will be treated as being issued with OID will depend
upon whether the trading price of such Notes is less than, equal to, or in
excess of, the stated redemption price at maturity of such Notes. Moreover, the
New RIHF Mortgage Notes will be treated as issued with OID only if their "issue
price" is less than their face amount by more than the statutory DE MINIMIS
amount. Thus, assuming that the maturity date of the New RIHF Mortgage Notes is
nine years from their issue date, the New RIHF 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 New RIHF Junior Mortgage Notes, interest is
payable on a semi-annual basis commencing on the June 15 or December 15 next
following the Effective Date either 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 New RIHF Junior Mortgage Notes, none of the interest payments on the New
RIHF 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 New Debt Securities. Although the Exchange
involves the transfer of the New Debt Securities as well as other property to
the holders of the Old Series Notes, such exchange is between RII and the
holders, and not between RIHF and such holders. Therefore, at the time of
issuance, the New Debt Securities should not be treated as having been issued as
part of an investment unit for purposes of Section 1273(c)(2) of the Tax Code.
If, however, the provisions of Section 1273(c)(2) of the Tax Code were held to
apply to any of the New
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Debt Securities, 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 a 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 New Debt
Securities should be treated as having been issued as part of an investment unit
for purposes of Section 1273(c)(2) of the Tax Code and calculate and report OID
with respect to the New Debt Securities accordingly, a holder wishing to take a
different position should consult such holder's own tax advisor.)
CONSEQUENCES IF THE NEW DEBT SECURITIES ARE ISSUED WITH OID
If a New 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 New Debt Security,
whether or not the holder actually receives a payment relating to OID in such
year. 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 New Debt Security at the beginning of each
accrual period, multiplied by (ii) the yield to maturity of the New Debt
Security (determined by semi-annual compounding) less (b) the sum of any QSIPs
during the accrual period. The "adjusted issue price" of a New 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 New Debt Security other than a QSIP. The accrual period
for a New Debt Security (except for any initial short period) is each six-month
period which ends on the day in each calendar year corresponding to the maturity
date of the New Debt Security or the date six months before such maturity date.
Therefore, prospective holders of the New Debt Securities should be aware
that a holder will be required to include OID in income as such OID accrues,
regardless of the holder's method of accounting and regardless of when such
holder receives cash payments relating to the OID. A holder's tax basis in a New
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 New 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 New RIHF Junior
Mortgage Notes. Moreover, since each holder of a New RIHF Junior Mortgage Note
will recognize, as ordinary income, through the accrual of OID, the full amount
of interest with respect to the New RIHF 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 New RIHF Junior Mortgage Note and any
additional debt instrument issued with respect thereto as part of the same debt
issue. Accordingly, the adjusted basis and adjusted issue price of a New RIHF
Junior Mortgage Note would be allocated between such instruments and any
additional debt instruments 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 original debt instrument.
A subsequent purchaser of a New 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 at an "acquisition premium") also will be required to include in gross
income the sum of the daily portions of OID on that New Debt Security. In
computing
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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 New
Debt Security on the date of receipt exceeds the Adjusted Issue Price of the New
Debt Security at that time, and the denominator of which is the sum of the daily
portions for that New Debt Security for all days beginning on the date after the
purchase date and ending on the maturity date.
A purchaser of a New Debt Security who purchases the New Debt Security at a
cost greater than its remaining stated redemption price at maturity will be
considered to have purchased the New Debt Security at a premium, and may elect
to amortize such premium under a constant yield method. 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 IRS and to each U.S.
holder information regarding the amount of OID attributable to that year.
CONSEQUENCES OF THE RIGHTS TO RECEIVE PAYMENTS FROM DEFERRED CASH
As noted above, the Company expects to receive a distribution of its share
of the assets of the Litigation Trust early in 1994. See "Description of
Litigation Trust Units." If the Company receives such a distribution, no amount
will be paid in respect of Deferred Cash, and the distribution will be included
in Excess Cash.
The following discussion assumes that amounts remain to be distributed in
respect of Deferred Cash on the Distribution Date.
In 1986, 1987 and 1991, the Service issued proposed regulations under
Section 1275 of the Tax Code relating to contingent debt instruments (the
"Proposed Contingent Debt Regulations"). The Proposed Contingent Debt
Regulations constitute "authority" for purposes of the substantial
understatement penalty provisions of Section 6662 of the Tax Code. Therefore,
the discussion below is based upon the Proposed Contingent Debt Regulations. The
Proposed Contingent Debt Regulations are vague in many respects, however, and do
not address certain issues. Further, there can be no assurance that the final
U.S. Treasury regulations or further clarification from the Service will not
differ materially from the Proposed Contingent Debt Regulations. Accordingly,
the ultimate Federal income tax treatment of the Deferred Cash may differ from
that described below.
The Company intends to take the position that the rights to receive payments
from Deferred Cash constitute valid indebtedness for federal income tax purposes
and that, under the Proposed Contingent Debt Regulations, the payments made by
RII in respect of such rights are contingent payments. Under such regulations, a
holder of a right to receive payments of Deferred Cash will not recognize
interest income with respect to the right until such time as a payment is made
by RII in respect of the right or the holder disposes of the right. Any payments
made by RII to a holder of a right to receive payments of Deferred Cash other
than a payment made at the maturity date of such right, are treated as interest
income to the extent of "interest deemed accrued" with respect to the right for
the current and all prior accrual periods, and principal to the extent of the
balance of the payment amount. For this purpose, "interest deemed accrued"
during an accrual period is the "adjusted issue price" of the right multiplied
by the Federal long-term rate.
The "adjusted issue price" of the right is the "issue price" of the right,
plus the cumulative amount of interest deemed accrued as of the date of the
determination of the adjusted issue price. The "issue price" of a right to
receive payments from Deferred Cash is equal to the excess, if any, of the fair
market value of the Old Debt Securities as of the issue date of such right
(I.E., the trading price of the Old Debt Securities on such date) over the sum
of the respective fair market values, as of such date, of (i) the New RIHF
Junior Mortgage Notes, (ii) the RII Class B Common Stock, (iii) the New RIHF
Mortgage Notes, (iv) the RII Common Stock, (iv) the SIHL Series A Shares and the
SIHL Aggregate Cash Purchase Price (or, if the SIHL Sale is not consummated on
the Effective Date, the PIRL Ordinary Shares), and (v) the Excess Cash.
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Upon the maturity of a right to receive payments from Deferred Cash, if the
"outstanding principal amount" (which is defined as the issue price of the right
reduced by any prior payments treated as principal under the preceding
paragraph) of the right exceeds the final payment, the entire amount of the
final payment is treated as principal. Conversely, if the final payment exceeds
the "outstanding principal amount," the payment is treated as principal to the
extent of such outstanding principal balance and interest income to the extent
of the excess.
CONSEQUENCES OF RIGHTS TO RECEIVE PAYMENTS FROM NET RESERVED CASH AND NET PLAN
CONSUMMATION CASH
Whether any amount ultimately is paid in respect of the Net Reserved Cash
and the Net Plan Consummation Cash is contingent upon the occurrence of future
events, which may or may not occur. Although there is substantial authority for
the position that the right to receive payments from the Net Reserved Cash and
the Net Plan Consummation Cash likely are susceptible to valuation and,
consequently, a holder of Old Series Notes will be treated as receiving an
amount pursuant to the Exchange equal to the respective fair market values of
the right to receive payments from the Net Reserved Cash and the Net Plan
Consummation Cash, because the amount of Reserved Cash and Plan Consummation
Cash is based upon an estimate of amounts required to be expended by the
Company, the Company intends to take the position that the right to receive
payments from the Net Reserved Cash and the Net Plan Consummation Cash will be
treated as having a zero value. Under this position, any amount ultimately
realized with respect to either the right to receive payments from the Net
Reserved Cash or the Net Plan Consummation Cash would result in gain at the time
such amount is realized.
Alternatively, it also is possible that, if a holder or the Service were to
take the position that it is impossible to value the right to receive payments
from the Net Reserved Cash and the Net Plan Consummation Cash at the time of the
Exchange, and such position is sustained, with respect to such holder the entire
Exchange would be treated as an open transaction in making the determination of
the amount of gain or loss, if any, realized by the holder with respect to the
Exchange. Thus, such holder would not recognize any gain (except to the extent
the sum of the respective fair market values of the New Debt Securities, and the
aggregate fair market values of the RII Class B Common Stock, the RII Common
Stock, the SIHL Series A Shares and the SIHL Aggregate Cash Purchase Price (or
if the SIHL Sale is not consummated on the Effective Date, the PIRL Ordinary
Shares), Excess Cash and the right to receive payments from Deferred Cash
received pursuant to the Exchange exceeds such holder's basis in the Old Series
Notes) or loss with respect to the Old Debt Securities until all amounts payable
under the Net Reserved Cash and the Net Plan Consummation Cash have been
received or the right to receive such amounts has been fixed.
CONSEQUENCES OF HOLDING THE RII COMMON STOCK AND THE RII CLASS B COMMON STOCK
Distributions, if any, made on the RII Common Stock and the RII Class B
Common Stock will, to the extent of the current or accumulated earnings and
profits of RII, be treated as a dividend for Federal income tax purposes and be
taxable as ordinary income. Corporate holders receiving such distributions may,
however, be eligible for a dividends received deduction. A distribution not
treated as a dividend first will reduce a holder's tax basis in the stock with
respect to which the distribution is received and the remainder, if any, will be
treated as proceeds received on the sale of such stock.
CONSEQUENCES OF HOLDING THE PIRL ORDINARY SHARES
For purposes of the following discussion, a "United States Holder" means an
individual, citizen or resident of the United States, a corporation organized
under the laws of the United States or of any state or political subdivision
thereof, any partner in a partnership only to the extent that the partnership's
income is subject to United States federal income tax or an estate or trust the
income of which is includible in gross income for United States Federal income
tax purposes regardless of its source. The following discussion also assumes
that no United States Holder will own (directly, indirectly or by attribution)
at any time 10% or more of the total combined voting power of PIRL.
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Dividends with respect to the PIRL Ordinary Shares paid to United States
Holders will be treated as dividend income for U.S. Federal income tax purposes
to the extent of PIRL's undistributed current or accumulated earnings and
profits as computed for U.S. Federal income tax purposes. Such dividends
generally will not be eligible for the dividends received deduction generally
available for United States corporations.
RII believes that PIRL is not a "passive foreign investment company"
("PFIC"), a "foreign personal holding company" ("FPHC") or a "controlled foreign
corporation" ("CFC") for United States Federal income tax purposes, and RII does
not expect PIRL to become a PFIC, a FPHC or a CFC. If PIRL were, or were to
become, a PFIC, a FPHC or a CFC, some or all United States Holders would be
required to include in their taxable income certain undistributed amounts of
PIRL's income, or, in certain circumstances, to pay an interest charge together
with tax calculated at maximum rates on certain "excess distributions" defined
as including gain on the sale of stock. EACH INVESTOR WHO IS A UNITED STATES
HOLDER SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING THE SPECIFIC TAX
CONSEQUENCES IN THE EVENT THAT PIRL IS OR BECOMES A PFIC, FPHC OR CFC.
Any United States person who owns 5% or more (determined on the basis of
value) of the stock of PIRL may be required to file Internal Revenue Service
Form 5471 with respect to PIRL and its non-U.S. subsidiaries to report certain
acquisitions or dispositions of the stock of PIRL. Annual filings of Form 5471
would be required from any United States person owning 50% (by vote or by value)
or more of the stock of PIRL, or if PIRL were a FPHC or a CFC, from certain
United States persons owning 10% or more of the stock of PIRL.
SALE, EXCHANGE OR REDEMPTION
Upon the sale, exchange or redemption of a New Debt Security, RII Class B
Common Stock, RII Common Stock, a right to receive payments from Net Reserved
Cash or Net Plan Consummation Cash, or, if issued, PIRL Ordinary Shares 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 dividends not previously included in
income, which amount will be taxed as ordinary income, or (ii) in the case of a
redemption of RII Common Stock, RII Class B Common Stock or PIRL Ordinary
Shares, 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 New 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 or
exchange, or redemption.
Under the Regulations, an unscheduled payment made on a debt instrument such
as a New Debt Security prior to maturity that results in a substantially 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.
With regard to the sale, exchange or redemption for cash of a right to
receive payments from Deferred Cash, the Company believes that 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 the
right. Assuming that the holder holds the property as a capital asset, any such
loss will be capital loss, and will be long-term capital loss if the property
has been held for more than one year at the time of the sale, exchange or
redemption. However, the Proposed Contingent Debt Regulations do not address the
character of any gain recognized by a holder of a right to receive payments of
Deferred Cash upon
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the sale or exchange of the right (other than a payment made upon the maturity
of the right; see "-- Consequences of the Rights to Receive Payments from
Deferred Cash" above). Thus, it is unclear under current law whether any amount
received by the holder in connection with the sale or exchange of the right
(other than a payment made upon the maturity of the right) that is in excess of
the holder's adjusted basis would be treated as capital gain or as interest
income. Under the Pending Contingent Debt Regulations (which, as noted above,
currently have no force or effect), however, any gain on the sale or exchange of
the right would be treated an interest income.
MARKET DISCOUNT
A holder of a New Debt Security generally will be required to treat any gain
recognized on the sale, exchange, redemption or other disposition of the New
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 New 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 New Debt Security until the holder disposes
of the New Debt Security in a taxable transaction.
"Market discount" can be defined generally as the excess of the stated
redemption price at maturity of a New Debt Security (adjusted to exclude any
unaccrued OID) over the holder's tax basis in the New 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 New 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 New
Debt Security, unless the holder elects to accrue such discount on the basis of
the constant yield method.
A holder of a New 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 New 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.
TAX CONSEQUENCES TO THE COMPANY
CANCELLATION OF INDEBTEDNESS. If a taxpayer satisfies its outstanding debt
obligations for less than its principal amount (or, if the debt obligation was
issued with OID, its adjusted issue price), such taxpayer generally realizes COD
income for federal income tax purposes. In the case of an exchange such as that
contemplated by the Plan, where outstanding indebtedness is canceled in exchange
for newly issued indebtedness (E.G., the New Debt Securities) and other property
(E.G., the RII Common Stock, the RII Class B Common Stock and the PIRL Ordinary
Shares), the amount of such COD income is, in general, equal to the excess of
the adjusted issue price (including accrued but unpaid interest) of the
indebtedness satisfied over the sum of the fair market value of the new debt
obligations and the fair market value of the other property issued therefor.
Section 108(a) of the Tax Code provides an exception to the recognition of
COD income for taxpayers who are insolvent (to the extent of the insolvency) or
who are debtors in a bankruptcy proceeding under the Bankruptcy Code at the time
of discharge. Instead of requiring the recognition of income, Section 108(b) of
the Tax Code provides that certain tax losses and credits of a taxpayer,
including any NOL carryovers, must be reduced by the amount of the taxpayer's
COD income that is excluded under Section 108(a) of the Tax Code. To the extent
that the amount excluded exceeds these tax attributes, the taxpayer's tax basis
in its property will be reduced by the amount of such excluded COD income,
except that such reduction is limited to the excess of the aggregate tax bases
of the property held by the debtor over the aggregate liabilities of the
taxpayer immediately after the transaction. No income is realized, and no
reduction of tax attributes is required, however, to the extent that debt is
discharged by issuing stock qualifying under a special exception applicable to
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certain stock-for-debt exchanges, provided that such stock-for-debt exchange
occurs on or before December 31, 1994. The following discussion assumes that the
Exchange will occur on or before December 31, 1994.
The stock-for-debt exception will be available to RII in an exchange with a
particular holder of Old Series Notes only if (a) the RII Class B Common Stock
and the RII Common Stock issued to the holder is not "nominal or token", and (b)
the ratio of the aggregate value of the RII Common Stock and the RII Class B
Common Stock received by the holder to the amount of such holder's Old Series
Notes exchanged for such stock is not less than 50% of a similar ratio computed
for all such holders participating in the Restructuring. While there are legal
uncertainties involved, assuming that all holders of Old Series Notes receiving
RII Common Stock receive the same consideration for their Old Series Notes as
part of the Exchange, RII intends to take the position that the RII Common Stock
issued in the Restructuring to holders of Old Series Notes will qualify for the
stock-for-debt exception and that no reduction of its tax attributes will be
required with respect to the Old Series Notes deemed exchanged for RII Common
Stock. (Because the RII Class B Common Stock is not separately tradable from the
New RIHF Junior Mortgage Notes, it may be viewed as having a fixed redemption
date or being subject to a right of redemption. Accordingly, the RII Class B
Common Stock is at a substantial risk of being "disqualified stock" and such RII
Class B Common Stock has not been included as stock for purposes of determining
whether the exchange qualifies for the stock-for-debt exception.) There can be
no assurance, however, that the Service would not challenge the availability, in
total or in part, of the stock-for-debt exception.
If the Service were to determine that the stock-for-debt transaction did not
qualify for the stock-for-debt exception described above, to the extent that the
sum of (a) the value of the New Equity Securities, (b) Excess Cash, (c) the
issue price of the rights to receive payments from Deferred Cash (see "--
Consequences of the Rights to Receive Payments from Deferred Cash"), (d) the
issue price of the New Debt Securities (see "-- Original Issue Discount With
Respect to New Debt Securities"), and (e) if the SIHL Sale is consummated on the
Effective Date, the value of SIHL Series A Shares and the SIHL Aggregate Cash
Purchase Price, is less than the adjusted issue price of the Old Series Notes,
RII will realize (but not recognize) COD income equal to such difference. Such
income will be excluded from RII's gross income under Section 108(a) of the Tax
Code, but RII will be required to reduce its tax attributes by such amount as
discussed above.
CREATION AND SPIN-OFF OF PIRL; SIHL SALE. The distribution by GRI to RII of
100% of the stock of RIB will be a taxable distribution. GRI will recognize gain
upon such distribution equal to the difference between the fair market value of
such RIB stock and GRI's basis therefor. RII's basis in the stock of RIB will be
equal to the fair market value of such stock. The gain recognized by GRI (the
"RIB Gain") will be deferred, in accordance with the U.S. Treasury Regulations
promulgated under Section 1502 of the Tax Code, until the earlier of (i) GRI's
ceasing to be a member of the RII group, (ii) the cessation of the RII group, or
(iii) the day no member of the RII group owns the stock of RIB (any of (i),
(ii), or (iii), a "Restoration Event").
Upon the occurrence of a Restoration Event, GRI will include in its gross
income the amount of the RIB Gain. Pursuant to a ruling letter issued by the
Service in connection with certain transactions effected as part of the Old Plan
(the "1990 Letter Ruling"), the RIB Gain will be treated as a "built-in" gain
for purposes of loss limitation provisions of Section 382 of the Tax Code (see
discussion below). Consequently, to the extent that the RII Group's losses for
tax purposes for the year which includes the Effective Date are not sufficient
to offset the RIB Gain, NOL carryovers from taxable years ending on or before
September 30, 1990 will be available to be used to offset such gain,
notwithstanding the fact that such NOL carryovers are otherwise subject to a
Section 382 annual limitation. To the extent that the RIB Gain is offset by NOL
carryovers, such gain will be subject to the alternative minimum tax, at an
effective rate of 2 percent.
In accordance with the Plan, RII will be under a binding obligation to
effect the SIHL Sale, or, if the SIHL Sale is not consummated on the Effective
Date, to distribute 100% of the stock of PIRL to
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the holders of the Old Series Notes on the Effective Date. Because RII will not
be in control of PIRL within the meaning of Section 368(c) of the Tax Code,
RII's contribution of the stock of RIB to PIRL will be a taxable transaction.
However, because such transactions will occur immediately after GRI's
distribution of the stock of RIB to RII in a taxable transaction, no additional
gain or loss should be recognized upon either the contribution of the RIB stock
to PIRL or the SIHL Sale. If the SIHL Sale is consummated on the Effective Date,
the U.S. Paradise Island Subsidiaries will recognize gain (or loss) on the sale
of such subsidiaries' assets to the SIHL subsidiaries equal to the difference
between the amount of consideration allocated to such assets and such selling
subsidiaries' basis in the assets sold. If the SIHL Sale is not consummated,
because the U.S. Paradise Island Subsidiaries will not be in control of the PIRL
subsidiaries within the meaning of Section 368(c) of the Tax Code, each Paradise
Island Subsidiary will recognize gain (or loss) upon the contribution of such
subsidiaries' assets to subsidiaries of PIRL to the extent the fair market value
of the assets of each such corporation exceeds (or is less than) RII's basis
therefor. In the event the SIHL Sale is not consummated on the Effective Date,
RII's basis in the stock of PIRL received in exchange for the stock of RIB, the
RII Real Estate Assets and the assets of the U.S. Paradise Island Subsidiaries
will equal the fair market value of such stock. Accordingly, because such PIRL
Ordinary Shares will be distributed to the holders of the Old Series Notes
immediately after RII acquires it, no additional gain or loss should be
recognized by RII with respect to the PIRL stock upon its distribution to the
holders of the Old Series Notes.
NET OPERATING LOSS CARRYOVERS AND LIMITATIONS. After giving effect to the
recognition of gain with respect to the transactions resulting in the
distribution of the stock of RIB to the holders of the Old Series Notes (but
prior to any reduction of NOLs as discussed below), RII and its subsidiaries
expect to have substantial consolidated NOL carryforwards, totaling
approximately $140,000,000, from their taxable year ended December 31, 1992 and
prior taxable years beginning after September 30, 1990, plus unutilized
unrestricted NOLs from taxable years ending on or before September 30, 1990 of
approximately $18 million, resulting in a total amount of unrestricted NOLs of
approximately $158 million. In addition, RII and its subsidiaries have
approximately $464,000,000 of NOL carryforwards from prior taxable years ending
on or before September 30, 1990, which NOLs are subject to an annual limitation
on use as a result of the ownership change that occurred in connection with the
Old Plan. Moreover, because the RIB Gain is, as described above, a "built-in
gain" for purposes of Section 382 of the Tax Code, and will be recognized within
five years of the date of the change in control caused by the Old Plan, the RIB
Gain will be a "recognized built-in gain" for purposes of Section 382 of the Tax
Code. A corporation, such as RII, that has (i) a recognized built-in gain in a
year and (ii) NOL carryovers that are subject to an annual limitation under
Section 382 of the Tax Code increases the amount of its annual limitation for
such year by the amount of the recognized built-in gain. If the annual
limitation amount is not used fully (for example, because of current losses),
such amount is carried forward and added to the next year's annual limitation
amount. Consequently, to the extent that the RII group's losses for tax purposes
for the year which includes the Effective Date (I.E., "current year losses") are
used to offset the RIB Gain, an equal amount of RII's pre-change NOL carryovers
will, in effect, become free of their Section 382 limitation and be available
for RII's unlimited use in subsequent periods (until their expiration).
The Company intends to take the position that the Exchange that will occur
in connection with the Plan, when combined with prior transfers of the stock of
the Company, will result in the Company undergoing an "ownership change" within
the meaning of Section 382 of the Tax Code.
Section 382 provides that, following an ownership change with respect to a
"loss corporation" such as the Company, unless the Bankruptcy Exception
(described below) applies, the amount of post-ownership change annual taxable
income of the loss corporation that can be offset by the loss corporation's
pre-ownership change NOL carryovers generally cannot exceed an amount equal to
the value of the equity of the loss corporation immediately after the ownership
change (subject to various adjustments) multiplied by a prescribed long-term tax
exempt rate (5.15% for February, 1994) (the "Annual Limitation").
315
<PAGE>
An exception (the "Bankruptcy Exception") to the general rules imposing a
limitation on the ability to utilize losses after an ownership change is set
forth in Section 382(1)(5) of the Tax Code. The Bankruptcy Exception applies if,
immediately after an ownership change, shareholders and qualified creditors of
the old loss corporation (E.G., the Company) own at least 50% of the stock of
the new loss corporation (E.G., the Company post-Restructuring). Qualified
creditors include creditors who held their claim at least 18 months before the
filing of the chapter 11 case (or, if claims are held by the public, certain
public creditors), and ordinary course of business trade creditors.
If the Bankruptcy Exception applies (and no election is made by the loss
corporation for such exception not to apply), the amount of pre-change NOL
carryovers of the old loss corporation that may be carried to a post-change year
are required to be reduced by the amount of the deductions for interest
(including OID) paid or accrued on the indebtedness which was converted into
stock pursuant to the chapter 11 case during (i) any taxable year ending during
the three-year period preceding the taxable year in which the ownership change
occurs or (ii) the portion of the taxable year ending on the change date, but
only to the extent that such deductions generated an NOL for such year or other
period. In addition, if the Bankruptcy Exception applies (and no election is
made for it not to apply), 50% of the amount of unrecognized COD income
(excluding COD income arising from the discharge of any indebtedness for
interest described in the preceding sentence) that would have been applied to
reduce the tax attributes of the Company but for the operation of the
stock-for-debt exception must be applied to reduce such attributes. See "--
Cancellation of Indebtedness". Moreover, if the Bankruptcy Exception applies
(and no election is made for such exception not to apply), and a second
ownership change occurs within a two-year period, the Annual Limitation
following the second ownership change will be zero.
Based on its analysis of the transactions that will occur on the Effective
Date and on information available to the Company with respect to the identity of
the holders of the Old Series Notes, the Company intends to take the position
that the Bankruptcy Exception will apply to the ownership change that the
Company believes will occur as a result of the Exchange that will occur in
connection with the Restructuring. Moreover, assuming the Bankruptcy Exception
does apply, the Company does not intend to elect for it not to apply.
Accordingly, the Company believes that it will have in excess of $194,700,000 in
NOLs available (after taking into account the reductions described above) not
subject to an Annual Limitation, plus an additional $388,500,000 of NOLs that
are subject to an Annual Limitation as a result of the ownership change that
occurred in connection with the Old Plan. In addition, because certain transfers
of the Old Debt Securities may adversely affect the availability of the
Bankruptcy Exception in connection with the Restructuring, RII, with the consent
of TCW and Fidelity, may request the Bankruptcy Court to enter into an order to
enjoin certain transfers while the bankruptcy case is pending if the Company,
TCW and Fidelity determine that such an order is necessary or appropriate in
order to preserve the unrestricted availability of the NOLs available to the
Company.
Because the Company believes that an ownership change will occur in
connection with the Plan, if the Bankruptcy Exception (described above) were not
to apply, the use of the Company's NOL carryovers by the Company after the
Exchange would be subject to the Annual Limitation. The Company estimates that,
based on the current long-term tax exempt rate and the value of the Company
(taking into account the discharge of indebtedness pursuant to the Plan), the
Annual Limitation for the years following the Effective Date would be
approximately $3.6 million. No restrictions on transferability are being imposed
with respect to the RII Common Stock in connection with the Plan. Accordingly,
if an ownership change is determined not to have occurred in connection with the
Plan, the Company's NOL carryovers likely would become subject to the Annual
Limitation as a result of transfers of RII Common Stock after the Effective
Date, at which time the Bankruptcy Exception would not be available.
316
<PAGE>
POTENTIAL APPLICATION OF HIGH YIELD DEBT OBLIGATION RULES
As noted above, the New RIHF Junior Mortgage Notes will be, and the New RIHF
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, rather than interest income, to the holder (provided
the issuer has adequate earnings and profits to support such a dividend). The
New RIHF Junior Mortgage Notes will be issued with significant OID. Accordingly,
depending on interest rates in effect on the Effective Date, it is possible that
the AHYDO rules will apply to accruals of OID on the New RIHF Junior Mortgage
Notes.
BACKUP WITHHOLDING
Under the Tax Code, a holder of a New 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 is
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 New Debt Securities should consult their
tax advisers as to their qualification for exemption from backup withholding and
the procedure for obtaining such an exemption.
CERTAIN BAHAMIAN TAX CONSIDERATIONS
The following discussion, to the extent it relates to matters of law and
subject to the qualifications, limitations and assumptions stated herein,
constitutes the opinion of Harry B. Sands & Company, special Bahamian counsel to
the Company. The discussion is a general summary of certain Bahamian tax matters
as they relate to PIRL and the receipt of dividends paid on PIRL Ordinary
Shares. The discussion is not exhaustive and is based on the laws of The Bahamas
currently in effect.
The Bahamas does not impose any income, capital gains or withholding taxes.
Accordingly, PIRL will not be subject to income tax in The Bahamas, and
dividends paid with respect to the PIRL Ordinary Shares to United States Holders
will not be subject to withholding tax by the Commonwealth of The Bahamas.
LITIGATION
The Company has been named as the nominal defendant in an action (Arthur M.
Friedman suing derivatively on behalf of RESORTS INTERNATIONAL, INC. v. MERV
GRIFFIN ET AL. AND RESORTS INTERNATIONAL, INC., 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. Neither the Company nor, to the Company's knowledge, any of the
defendants has been served with the complaint. The defendants in the action are
Merv Griffin, the Griffin Group, David Hanlon, Antonio Alvarez, Warren Cowan,
Joseph Kordsmeier and Paul Sheeline. Some of the defendants are current and
former officers and directors of the Company. 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
317
<PAGE>
not to repay money he allegedly owed to the Company and (ii) paid defendant
Hanlon excessive compensation. If and when the complaint is served on the
defendants, the Company will have the option of either taking over the
litigation and pursuing the claims on its behalf, asking the court to dismiss
the claims, or permitting Mr. Friedman to prosecute claims on the Company's
behalf.
APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS TO
RESALES OF SECURITIES
Holders of the Old Series Notes will receive the New Debt Securities and the
New Equity Securities under the Plan. Section 1145 of the Bankruptcy Code
creates certain exemptions from the registration and licensing requirements of
federal and state securities laws with respect to the distribution of securities
pursuant to a plan of reorganization as well as resales of the securities by
certain recipients thereof. The discussion set forth below does not cover the
SIHL Series A Shares.
FOR INFORMATION WITH RESPECT TO SIHL, THE SIHL SALE, THE PARADISE ISLAND
PURCHASE AGREEMENT AND THE SIHL SERIES A SHARES, REFERENCE IS MADE TO THE
ACCOMPANYING SIHL PROSPECTUS RELATING TO THE SIHL SERIES A SHARES. RII HAS
SUPPLIED CERTAIN INFORMATION REGARDING THE PARADISE ISLAND BUSINESS (SUCH AS IS
FOUND IN RII'S REPORTS FILED WITH THE COMMISSION), AS WELL AS CERTAIN
INFORMATION CONCERNING THE RESTRUCTURING, TO SIHL SPECIFICALLY FOR ITS USE IN
THE PREPARATION OF THE SIHL PROSPECTUS (AND THE RELATED REGISTRATION STATEMENT
FILED BY SIHL WITH THE COMMISSION UNDER THE SECURITIES ACT). RII AND ITS
ADVISERS DISCLAIM ANY RESPONSIBILITY FOR THE ACCURACY, COMPLETENESS, NATURE AND
FORM OF PRESENTATION OF ANY INFORMATION CONTAINED IN THE SIHL PROSPECTUS (AND
RELATED REGISTRATION STATEMENT), EXCEPT THAT RII HAS MADE IN THE PARADISE ISLAND
PURCHASE AGREEMENT CERTAIN REPRESENTATIONS AND WARRANTIES TO SIHL AS TO THE
ACCURACY OF THE INFORMATION SUPPLIED BY RII SPECIFICALLY FOR INCLUSION IN THE
SUN PROSPECTUS (AND RELATED REGISTRATION STATEMENT).
ISSUANCE OF SECURITIES UNDER THE PLAN
Section 1145 of the Bankruptcy Code exempts the issuance of securities under
a plan of reorganization from registration under the Securities Act, and under
state securities laws if three principal requirements are satisfied: (i) the
securities must be issued "under a plan" of reorganization by the debtor or its
successors under a plan or an affiliate participating in a joint plan of
reorganization with the debtor; (ii) the recipients of the securities must hold
a claim against the debtor, an interest in the debtor or a claim for an
administrative expense against the debtor; and (iii) the securities must be
issued entirely in exchange for the recipient's claim against or interest in the
debtor, or "principally" in such exchange and "partly" for cash or property.
Although the Company believes that the issuance of the New Debt Securities and
the New Equity Securities under the Plan satisfies the requirements of section
1145(a) of the Bankruptcy Code and, therefore, would be exempt from registration
under federal and state securities laws, under certain circumstances subsequent
transfers of the New Debt Securities and the New Equity Securities may be
subject to registration requirements under such securities laws.
TRANSFERS OF SECURITIES
The New Debt Securities and the New Equity Securities to be issued pursuant
to the Plan may be freely transferred by most recipients thereof, and all
resales and subsequent transactions in the New Debt Securities and the New
Equity Securities are exempt from registration under federal and state
securities laws, unless the holder is an "underwriter" with respect to such
securities. Section 1145(b) of the Bankruptcy Code defines four types of
"underwriters":
(i) persons who purchase a claim against, an interest in, or a claim for
administrative expense against the debtor with a view to distributing any
security received or to be received in exchange for such a claim or
interest;
318
<PAGE>
(ii) persons who offer to sell securities offered or sold under the plan
for the holders of such securities;
(iii) persons who offer to buy such securities from the holders of such
securities, if the offer to buy is (a) with a view to distributing such
securities, and (b) made under an agreement made in connection with the
plan, with the consummation of the plan or with the offer or sale of
securities under the plan; and
(iv) a person who is an "issuer" with respect to the securities, as the
term "issuer" is defined in section 2(11) of the Securities Act.
Under section 2(11) of the Securities Act, an "issuer" includes any person
directly or indirectly controlling or controlled by the issuer, or any person
under direct or indirect common control with the issuer. Any person, or group of
persons who act in concert, who receives a substantial amount of securities
pursuant to the Plan may be deemed to be an "issuer" and therefore an
"underwriter" under the foregoing definition.
To the extent that persons deemed to be "underwriters" receive the New Debt
Securities and the New Equity Securities pursuant to the Plan, resales by such
persons would not be exempted by section 1145 of the Bankruptcy Code from
registration under the Securities Act or other applicable law. Persons deemed to
be underwriters under section 1145, however, may be able to sell the New Debt
Securities and the New Equity Securities without registration subject to the
provisions of Rule 144 under the Securities Act, subject to the availability to
the public of current information regarding the issuer and to volume limitations
and certain other conditions. A person deemed to be an "underwriter" under
section 1145 of the Bankruptcy Code may be an "affiliate" for purposes of Rule
144 of the Securities Act. While there is no clear test for determining
"affiliate" status and such determination depends on all the facts and
circumstances, directors, executive officers and holders of 10% or more of a
RII's voting stock or PIRI's voting stock, among others, might under certain
circumstances be deemed "affiliates".
Whether or not any particular person would be deemed to be an "underwriter"
or an "affiliate" with respect to the New Debt Securities and the New Equity
Securities to be issued pursuant to the Plan would depend upon various facts and
circumstances applicable to that person. Accordingly, the Company expresses no
view as to whether any person would be an "underwriter" or an "affiliate" with
respect to the New Debt Securities and the New Equity Securities to be issued
pursuant to the Plan.
GIVEN THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A PARTICULAR
PERSON MAY BE AN UNDERWRITER OR AN AFFILIATE, THE COMPANY MAKES NO
REPRESENTATIONS CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN THE NEW DEBT
SECURITIES AND THE NEW EQUITY SECURITIES TO BE DISTRIBUTED PURSUANT TO THE PLAN.
THE COMPANY RECOMMENDS THAT POTENTIAL RECIPIENTS OF SECURITIES CONSULT THEIR OWN
COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE SUCH SECURITIES.
CERTAIN TRANSACTIONS BY STOCKBROKERS
Under section 1145(a)(4) of the Bankruptcy Code, stockbrokers are required
to deliver a copy of the Information Statement/Prospectus (and supplements
hereto, if any, if ordered by the Bankruptcy Court) at or before the time of
delivery of the New Debt Securities and the New Equity Securities issued under
the Plan to their customers for the first 40 days after the Effective Date. This
requirement specifically applies to trading and other aftermarket transactions
in the New Debt Securities and the New Equity Securities.
319
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
After consummation of the Restructuring pursuant to the Plan, there will be
approximately 46,654,034 shares of RII Common Stock outstanding on a fully
diluted basis, and (if the SIHL Sale is not consummated on the Effective Date)
5,000,000 shares of PIRL Ordinary Shares outstanding (assuming all distributions
to be made under the Plan are made on the Distribution Date). As noted above,
all the shares of RII Common Stock and (if the SIHL Sale is not consummated on
the Effective Date) PIRL Ordinary Shares to be issued pursuant to the Plan will
be freely transferable and will not be subject to further registration under the
Securities Act, unless the holder is an "underwriter" under section 1145 of the
Bankruptcy Code and/or an affiliate for purposes of Rule 144 of the Securities
Act. No precise predictions can be made of the effect, if any, that market sales
of shares or the availability of shares for sale will have on the market prices
of RII Common Stock or (if the SIHL Sale is not consummated on the Effective
Date) PIRL Ordinary Shares prevailing from time to time. Nevertheless, sales of
substantial amounts of RII Common Stock or (if the SIHL Sale is not consummated
on the Effective Date) PIRL Ordinary Shares in the public market could adversely
affect the prevailing market prices of RII Common Stock or (if the SIHL Sale is
not consummated on the Effective Date) PIRL Ordinary Shares and could impair
RII's or (if the SIHL Sale is not consummated on the Effective Date) PIRL's
ability to raise capital at that time through the sale of its equity securities.
LEGAL MATTERS
The validity of the New Debt Securities and the New Equity Securities and
certain legal matters in connection with the Restructuring will be passed upon
for the Company by Gibson, Dunn & Crutcher. Certain matters governed by the laws
of the Commonwealth of The Bahamas will be passed upon for the Company by Harry
B. Sands & Company. The validity of the RIH Mortgage Guaranty and the RIH Junior
Mortgage Guaranty under New Jersey law will be passed upon for the Company by
Ravin, Sarasohn, Cook, Baumgarten, Fisch & Baime.
EXPERTS
The consolidated financial statements and schedules of RII, RIH, and the
combined financial statements and schedules of the PIRL Group at December 31,
1992 and 1991, and for each of the three years in the period ended December 31,
1992, and the balance sheets of RIHF at September 30, 1993 and PIRL at October
15, 1993 appearing in the Registration Statement of which this Information
Statement/Prospectus is a part 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.
320
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PAGE
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<S> <C>
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS OF RESORTS INTERNATIONAL, INC.:
Report of Independent Auditors............................................................................. F-3
Consolidated Balance Sheets at December 31, 1991 and 1992 and September 30, 1993 (unaudited)............... F-4
Consolidated Statements of Operations for the periods January 1, 1990 through August 31, 1990 and September
1, 1990 through December 31, 1990, the years ended December 31, 1991 and 1992, and the three quarters
ended September 30, 1992 and 1993 (unaudited)............................................................. F-5
Consolidated Statements of Cash Flows for the periods January 1, 1990 through August 31, 1990 and September
1, 1990 through December 31, 1990, the years ended December 31, 1991 and 1992, and the three quarters
ended September 30, 1992 and 1993 (unaudited)............................................................. F-6
Consolidated Statements of Changes in Shareholders' Equity (Deficit) for the periods January 1, 1990
through August 31, 1990 and September 1, 1990 through December 31, 1990, the years ended December 31, 1991
and 1992, and the three quarters ended September 30, 1993 (unaudited)..................................... F-7
Notes to Consolidated Financial Statements................................................................. F-8
CONSOLIDATED FINANCIAL STATEMENTS OF RESORTS INTERNATIONAL HOTEL, INC.:
Report of Independent Auditors............................................................................. F-28
Consolidated Balance Sheets at December 31, 1991 and 1992 and September 30, 1993 (unaudited)............... F-29
Consolidated Statements of Operations for the periods January 1, 1990 through August 31, 1990 and September
1, 1990 through December 31, 1990, the years ended December 31, 1991 and 1992, and the three quarters
ended September 30, 1992 and 1993 (unaudited)............................................................. F-30
Consolidated Statements of Cash Flows for the periods January 1, 1990 through August 31, 1990 and September
1, 1990 through December 31, 1990, the years ended December 31, 1991 and 1992, and the three quarters
ended September 30, 1992 and 1993 (unaudited)............................................................. F-31
Consolidated Statements of Changes in Shareholder's Deficit for the periods January 1, 1990 through August
31, 1990 and September 1, 1990 through December 31, 1990, the years ended December 31, 1991 and 1992, and
the three quarters ended September 30, 1993 (unaudited)................................................... F-32
Notes to Consolidated Financial Statements................................................................. F-33
FINANCIAL STATEMENT OF RESORTS INTERNATIONAL HOTEL FINANCING, INC.:
Report of Independent Auditors............................................................................. F-44
Balance Sheet at September 30, 1993........................................................................ F-45
Notes to Balance Sheet..................................................................................... F-46
FINANCIAL STATEMENT OF P. I. RESORTS LIMITED:
Report of Independent Auditors............................................................................. F-48
Balance Sheet at October 15, 1993.......................................................................... F-49
Notes to Balance Sheet..................................................................................... F-50
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
COMBINED FINANCIAL STATEMENTS OF RESORTS INTERNATIONAL (BAHAMAS) 1984 LIMITED, CONSOLIDATED WITH ITS
SUBSIDIARIES; RESORTS INTERNATIONAL DISBURSEMENT, INC.; PARADISE ISLAND VACATIONS, INC.; RESORTS
REPRESENTATION INTERNATIONAL, INC.; INTERNATIONAL SUPPLIERS, INC.; PARADISE ISLAND AIRLINES, INC.; AND
ANTL, INC. (the "PIRL GROUP"):
Report of Independent Auditors............................................................................. F-51
Combined Balance Sheets at December 31, 1991 and 1992, and September 30, 1993 (unaudited).................. F-52
Combined Statements of Operations for the periods January 1, 1990 through August 31, 1990 and September 1,
1990 through December 31, 1990, the years ended December 31, 1991 and 1992, and the three quarters ended
September 30, 1992 and 1993 (unaudited)................................................................... F-53
Combined Statements of Cash Flows for the periods January 1, 1990 through August 31, 1990 and September 1,
1990 through December 31, 1990, the years ended December 31, 1991 and 1992, and the three quarters ended
September 30, 1992 and 1993 (unaudited)................................................................... F-54
Combined Statements of Changes in Shareholders' Equity for the periods January 1, 1990 through August 31,
1990 and September 1, 1990 through December 31, 1990, the years ended December 31, 1991 and 1992, and the
three quarters ended September 30, 1993 (unaudited)....................................................... F-55
Notes to Combined Financial Statements..................................................................... F-56
SUPPLEMENTARY DATA
Consolidated Selected Quarterly Financial Data for Resorts International, Inc. (unaudited)................. F-67
Consolidated Selected Quarterly Financial Data for Resorts International Hotel, Inc. (unaudited)........... F-68
Combined Selected Quarterly Financial Data for PIRL Group (unaudited)...................................... F-69
</TABLE>
F-2
<PAGE>
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, 1992 and 1991, 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, 1992. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As explained in Notes 7 and 15, until the Old Series Notes become due and
payable in April 1994, the Company may satisfy its interest obligations on the
Old Series Notes by issuing additional Old Series Notes. As a result, the
Company expects to have the ability to meet its cash obligations until the Old
Series Notes become due and payable in April 1994. The Company's ability to pay
the Old Series Notes at maturity was premised upon the contemplated sale of the
Company's operations on Paradise Island and of its non-operating real estate
holdings in Atlantic City generating sufficient proceeds to reduce the
obligation under the Old Series Notes to a level that, if refinanced at maturity
in April 1994, could be serviced by cash flow from the remaining operations. It
presently appears unlikely the proceeds from a possible sale of these operations
will provide a reduction of principal to this level. Consequently, the Company
is reviewing other financial alternatives. One such alternative is described in
Note 17. However, specific terms and conditions have not been finalized.
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, 1992 and 1991, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1992, in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Philadelphia, Pennsylvania
February 19, 1993 except for
Note 17, as to which the date is
December 29, 1993
F-3
<PAGE>
RESORTS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- SEPTEMBER 30,
1991 1992 1993
----------- ------------ -------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash (including cash equivalents of $23,721, $36,344 and $53,753)..... $ 41,618 $ 56,818 $ 71,026
Restricted cash equivalents........................................... 11,561 10,069 8,076
Receivables, net...................................................... 32,226 25,457 13,961
Inventories........................................................... 8,465 8,531 8,484
Prepaid expenses...................................................... 7,405 7,062 13,492
----------- ------------ -------------
Total current assets................................................ 101,275 107,937 115,039
----------- ------------ -------------
Property and equipment:
Land and land rights, including land held for investment, development
and resale........................................................... 246,520 243,900 243,557
Land improvements and utilities....................................... 21,942 22,519 22,606
Hotels and other buildings............................................ 157,312 170,250 179,609
Furniture, machinery and equipment.................................... 60,700 67,693 77,272
Construction in progress.............................................. 2,796 1,215 6,174
----------- ------------ -------------
489,270 505,577 529,218
Less accumulated depreciation......................................... (29,870) (54,761) (75,163)
----------- ------------ -------------
Net property and equipment.......................................... 459,400 450,816 454,055
Deferred charges and other assets....................................... 7,215 10,197 12,220
----------- ------------ -------------
$ 567,890 $ 568,950 $ 581,314
----------- ------------ -------------
----------- ------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt, net of unamortized discount..... $ 1,571 $ 828 $ 429,500
Accounts payable and accrued liabilities.............................. 84,553 71,672 83,223
----------- ------------ -------------
Total current liabilities........................................... 86,124 72,500 512,723
----------- ------------ -------------
Long-term debt, net of unamortized discount............................. 392,667 460,712 84,541
----------- ------------ -------------
Deferred income taxes................................................... 53,000 53,000 54,000
----------- ------------ -------------
Commitments and contingencies (Note 15)
Shareholders' equity (deficit):
RII Common Stock -- 20,138,688, 20,157,234 and 20,157,234 shares
outstanding -- $.01 par value........................................ 201 202 202
Capital in excess of par.............................................. 102,000 102,092 102,092
Accumulated deficit................................................... (55,102) (108,556) (166,926)
----------- ------------ -------------
47,099 (6,262) (64,632)
Note receivable from related party.................................... (11,000) (11,000) (5,318)
----------- ------------ -------------
Total shareholders' equity (deficit)................................ 36,099 (17,262) (69,950)
----------- ------------ -------------
$ 567,890 $ 568,950 $ 581,314
----------- ------------ -------------
----------- ------------ -------------
</TABLE>
See Notes to Consolidated Financial Statements of RII.
F-4
<PAGE>
RESORTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
1990 FOR THE THREE QUARTERS
------------------------ ENDED SEPTEMBER 30,
THROUGH FROM ----------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
----------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenues:
Casino.......................... $ 182,787 $ 86,199 $ 279,884 $ 299,900 $ 224,681 $ 236,488
Rooms........................... 36,933 12,034 41,247 39,001 30,672 27,992
Food and beverage............... 39,809 16,527 52,459 48,907 37,958 35,933
Other casino/hotel revenues..... 15,532 6,936 21,676 22,028 16,538 17,713
Other operating revenues........ 10,431 5,257 15,435 19,072 14,347 13,704
Real estate related............. 8,480 2,638 7,542 8,026 6,058 6,028
----------- ----------- ---------- ---------- ---------- ----------
293,972 129,591 418,243 436,934 330,254 337,858
----------- ----------- ---------- ---------- ---------- ----------
Expenses:
Casino.......................... 116,763 53,441 166,133 176,119 131,838 141,600
Rooms........................... 8,403 4,343 12,112 11,799 8,949 8,064
Food and beverage............... 32,219 15,824 45,508 42,819 32,883 31,332
Other casino/hotel operating
expenses....................... 41,373 21,424 64,054 64,654 48,502 49,995
Other operating expenses........ 8,411 4,345 12,055 15,549 11,564 11,122
Selling, general and
administrative................. 43,570 23,642 71,732 73,262 55,192 53,835
Provision for doubtful
receivables.................... 3,530 1,692 6,373 4,047 2,803 2,284
Depreciation.................... 20,047 6,232 23,814 25,322 19,011 20,942
Real estate related............. 5,338 625 1,612 1,599 1,320 1,114
Unallocated corporate expense... 778 (763) (1,186) 262 (1,915) (3,110)
----------- ----------- ---------- ---------- ---------- ----------
280,432 130,805 402,207 415,432 310,147 317,178
----------- ----------- ---------- ---------- ---------- ----------
Earnings (loss) from operations... 13,540 (1,214) 16,036 21,502 20,107 20,680
Other income (deductions):
Interest income................. 2,318 1,740 4,824 4,969 2,311 2,485
Interest expense................ (434) (5,476) (31,157) (40,856) (30,795) (38,336)
Amortization of debt discount... (8,581) (32,105) (37,569) (26,509) (37,320)
Recapitalization costs.......... (187,018) (2,848) (2,337) (4,879)
----------- ----------- ---------- ---------- ---------- ----------
Loss before income taxes and
extraordinary item............... (171,594) (13,531) (42,402) (54,802) (37,223) (57,370)
Income tax benefit (expense)...... 831 1,348 (1,000)
----------- ----------- ---------- ---------- ---------- ----------
Loss before extraordinary item.... (171,594) (13,531) (41,571) (53,454) (37,223) (58,370)
Extraordinary item and related
income tax benefit -- gain on
exchange of debt................. 429,809
----------- ----------- ---------- ---------- ---------- ----------
Net earnings (loss)............... $ 258,215 $ (13,531) $ (41,571) $ (53,454) $ (37,223) $ (58,370)
----------- ----------- ---------- ---------- ---------- ----------
----------- ----------- ---------- ---------- ---------- ----------
Net loss per share of RII Common
Stock............................ $ (.68 ) $ (2.07) $ (2.65) $ (1.85) $ (2.90)
----------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ----------
Weighted average number of shares
outstanding...................... 20,000 20,092 20,146 20,143 20,157
----------- ---------- ---------- ---------- ----------
----------- ---------- ---------- ---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements of RII. Note 2 describes
a change in entity and related presentation for periods presented.
F-5
<PAGE>
RESORTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------
FOR THE THREE
1990 QUARTERS ENDED
---------------------- SEPTEMBER 30,
THROUGH FROM --------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
--------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Cash received from customers........... $ 285,238 $ 127,256 $ 411,456 $ 432,212 $ 332,529 $ 343,738
Cash paid to suppliers and employees... (256,474) (122,113) (378,312) (390,012) (293,074) (297,057)
--------- ----------- --------- --------- --------- ---------
Cash flow from operations before
interest and income taxes........... 28,764 5,143 33,144 42,200 39,455 46,681
Interest received...................... 2,337 1,467 4,014 5,211 2,775 3,149
Interest paid.......................... (486) (284) (9,228) (8,463) (8,277) (8,338)
Income taxes refunded (paid), net...... (86) (7) 729 1,484 166 317
--------- ----------- --------- --------- --------- ---------
Net cash provided by operating
activities.......................... 30,529 6,319 28,659 40,432 34,119 41,809
--------- ----------- --------- --------- --------- ---------
Cash flows from investing activities:
Payments for property and equipment.... (22,054) (7,833) (25,587) (19,832) (18,380) (23,876)
Proceeds from sales of property and
equipment............................. 5,272 6,757 147 213 213
Proceeds from prior year sales of
property and equipment................ 1,676 2,484
CRDA deposits and bond purchases....... (1,816) (739) (2,689) (2,871) (2,024) (2,121)
Proceeds from sales of short-term money
market securities with maturities
greater than three months............. 2,083 2,083 1,377
Purchases of short-term money market
securities with maturities greater
than three months..................... (1,200) (1,768) (1,768) (492)
--------- ----------- --------- --------- --------- ---------
Net cash used in investing
activities.......................... (19,798) (1,815) (26,453) (19,691) (19,876) (25,112)
--------- ----------- --------- --------- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of RII Common
Stock................................. 15,000
Collection on note receivable from
related party......................... 3,477
Payments of recapitalization costs..... (7,024) (5,504) (5,883) (5,414) (4,181) (5,748)
Repayments of non-public debt.......... (2,507) (1,570) (2,064) (1,619) (1,358) (2,211)
--------- ----------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities................ (9,531) 7,926 (7,947) (7,033) (5,539) (4,482)
--------- ----------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents............................. 1,200 12,430 (5,741) 13,708 8,704 12,215
Cash and cash equivalents at beginning of
period.................................. 45,290 46,490 58,920 53,179 53,179 66,887
--------- ----------- --------- --------- --------- ---------
Cash and cash equivalents at end of
period.................................. $ 46,490 $ 58,920 $ 53,179 $ 66,887 $ 61,883 $ 79,102
--------- ----------- --------- --------- --------- ---------
--------- ----------- --------- --------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements of RII. Note 2 describes
a change in entity and related presentation for periods presented.
F-6
<PAGE>
RESORTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CAPITAL STOCK
----------------------------------------- CAPITAL IN
RII COMMON EXCESS OF ACCUMULATED NOTES
STOCK CLASS A CLASS B PAR DEFICIT RECEIVABLE
--------------- ----------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1989............ $ 160 $ 713 $ 109,127 $ (320,641) $ (50,000)
Net income for period through August 31,
1990................................... 258,215
Effects of reorganization:
Elimination of accumulated deficit.... (62,426) 62,426
Cancellation of loan to Griffco
Resorts Holding, Inc................. (50,000) 50,000
Cancellation of Class A and Class B
shares............................... (160) (713) 873
Issuance of RII Common Stock.......... $ 200 103,798 (11,000)
----- ----------- ----------- ---------- ------------ ----------
Balance at August 31, 1990.............. 200 -0- -0- 101,372 -0- (11,000)
Net loss for period from September 1,
1990................................... (13,531)
----- ----------- ----------- ---------- ------------ ----------
Balance at December 31, 1990............ 200 -0- -0- 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 -0- -0- 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 -0- -0- 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 three quarters ended
September 30, 1993 (unaudited)......... (58,370)
----- ----------- ----------- ---------- ------------ ----------
Balance at September 30, 1993
(unaudited)............................ $ 202 $ -0- $ -0- $ 102,092 $ (166,926) $ (5,318)
----- ----------- ----------- ---------- ------------ ----------
----- ----------- ----------- ---------- ------------ ----------
</TABLE>
See Notes to Consolidated Financial Statements of RII. Note 2 describes
a change in entity and related presentation for periods presented.
F-7
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial statements and footnote data with respect to September 30, 1993
and the three quarters ended September 30, 1992 and 1993 are unaudited. In the
opinion of management, such unaudited financial statements include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation, in accordance with generally accepted accounting principles.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Resorts
International, Inc. ("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. The term
"Company" as used herein includes RII and/or one or more of its subsidiaries, as
the context may require.
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 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>
1990
----------------------
THROUGH FROM
AUGUST 31 SEPTEMBER 1 1991 1992
--------- ----------- --------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Rooms........................................ $ 2,749 $ 1,200 $ 3,563 $ 3,738
Food and beverage............................ 11,780 6,325 19,254 20,805
Other casino/hotel operations................ 5,587 1,946 5,839 6,408
--------- ----------- --------- ---------
Total allocated to casino................ $ 20,116 $ 9,471 $ 28,656 $ 30,951
--------- ----------- --------- ---------
--------- ----------- --------- ---------
</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-8
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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.
INTEREST ACCRUAL ON SENIOR SECURED REDEEMABLE NOTES DUE APRIL 15, 1994 ("OLD
SERIES NOTES")
When RII elects to issue additional Old Series Notes to satisfy its interest
obligation on such notes, for financial statement purposes interest is accrued
at the estimated market value of the Old Series 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.
The Company accounts for income taxes under the liability method prescribed
by Statement of Financial Accounting Standards No. 96, "Accounting for Income
Taxes", ("SFAS 96"). 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.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes", ("SFAS
109"). SFAS 109 supersedes SFAS 96 but retains the liability method of
accounting for income taxes. One of the principal differences of SFAS 109 from
SFAS 96 is that in measuring deferred tax assets future taxable income may be
considered in evaluating the likelihood of utilizing net operating loss or tax
credit carryforwards. Adoption of SFAS 109 is required for fiscal years
beginning after December 15, 1992. Upon adoption, the principles of SFAS 109 may
be applied retroactively through restatement of previously issued financial
statements, or on a prospective basis. The Company will adopt SFAS 109 for
fiscal 1993 and anticipates no significant impact on the Company's consolidated
financial statements.
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
For the period through August 31, 1990 there was a sole shareholder of RII.
Accordingly, no per share data is disclosed for that period. For the periods
from September 1, 1990 per share data was computed using the weighted average
number of shares of common stock outstanding during those periods.
NOTE 2 -- REORGANIZATION
In November 1989 certain creditors of RII and its former subsidiary, Resorts
International Financing, Inc. ("RIFI"), filed involuntary petitions for relief
under chapter 11 of the United States
F-9
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- REORGANIZATION (CONTINUED)
Bankruptcy Code. In December 1989 RII and RIFI filed consents to the involuntary
petitions and Griffin Resorts Inc. ("GRI"), a subsidiary of RII, and Griffin
Resorts Holding Inc. ("GRH"), another former subsidiary of RII, filed voluntary
petitions for relief under chapter 11 (collectively, the "Old Chapter 11
Cases").
RII, RIFI, GRI and GRH (the "Old Debtors") filed the Second Amended Joint
Plan of Reorganization dated as of May 31, 1990 (the "Old Plan"), which was
confirmed by the New Jersey bankruptcy court in August 1990. On September 17,
1990 (the "Old Effective Date"), all conditions to the effectiveness of the Old
Plan were either met or waived and the Old Plan became effective.
Pursuant to the Old Plan, the previously outstanding public debt issued by
RII, RIFI and GRI (the "Old Debt Securities") was cancelled, the Old Debtors
were discharged from all other claims arising prior to the commencement of the
Old Chapter 11 Cases and all previously outstanding shares of stock of RII were
cancelled. In exchange for the Old Debt Securities, RII issued new debt
securities consisting of $187,500,000 principal amount of Series A Senior
Secured Redeemable Notes due April 15, 1994 ("Old Series A Notes"), $137,500,000
principal amount of Series B Senior Secured Redeemable Notes due April 15, 1994
("Old Series B Notes"), and $105,333,000 principal amount of First Mortgage
Non-Recourse Pass-Through Notes due June 30, 2000 ("Showboat Notes") and
15,100,000 shares of new common stock of RII ("RII Common Stock"). The Old
Series A Notes and the Old Series B Notes are referred to collectively as the
"Old Series Notes". See Note 7 for a description of the Old Series Notes and
Showboat Notes and the collateral therefor.
Further, pursuant to the Old Plan, Merv Griffin acquired 4,400,000 shares of
RII Common Stock for which the Company received $12,345,000 in cash and an
$11,000,000 promissory note secured by a letter of credit issued by a bank. See
Note 8. In addition, pursuant to the Old Plan, in exchange for the tendering of
voluntary releases by holders of Old Debt Securities issued by GRI, Merv Griffin
paid to such tendering holders ("Electing GRI Noteholders") the sum of
$2,655,000 which amount was required to be used by such persons to fund the
purchase of an additional 500,000 shares of RII Common Stock to be distributed
pro rata to the Electing GRI Noteholders.
Additionally, pursuant to the Old Plan, Merv Griffin was released by the Old
Debtors and their affiliates from all claims arising prior to the commencement
of the Old Chapter 11 Cases and Merv Griffin waived certain claims he asserted
against the Old Debtors. Further, Merv Griffin entered into a contract with RII
pursuant to which, for the two years ended September 16, 1992, RII was granted a
non-exclusive license to use his name and likeness to promote its facilities and
operations and Merv 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.
The Old Plan further provided for the establishment of a litigation trust
("the Litigation Trust") to pursue, for the benefit of unsecured creditors of
the Old Debtors, all claims the Old Debtors or certain of their affiliates may
have against Donald Trump, the former Chairman of the Board and controlling
shareholder of RII, and certain of his affiliates. In October 1990, the Company
funded the Litigation Trust by depositing with the trustee under the Litigation
Trust (the "Litigation Trustee") the sum of $5,000,000 which sum is used to
cover expenses of the Litigation Trustee in pursuing such claims, with any
unused balance of such amount to be distributed to the beneficiaries of the
Litigation Trust. Pursuant to the Old Plan, RII had an additional obligation to
repurchase certain beneficial interests in the Litigation Trust in an amount up
to $3,880,000 if certain conditions were not met by September 17, 1991. The
$3,880,000 was deposited with the Litigation Trustee in October 1990 and the
repurchase was made in October 1991.
F-10
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- REORGANIZATION (CONTINUED)
On October 1, 1990 (the "Initial Distribution Date"), among other things,
(i) the indentures governing the Old Debt Securities were cancelled and of no
further force and effect, (ii) the distributions of RII Common Stock and the Old
Series Notes and Showboat Notes provided for under the Old Plan were commenced,
and (iii) Merv Griffin was issued certificates representing 4,400,000 shares of
RII Common Stock and, in addition to the $12,345,000 in cash delivered to RII on
the Old Effective Date, Merv Griffin delivered to RII the promissory note in the
amount of $11,000,000.
FRESH START ACCOUNTING
The Company accounted for the reorganization using "fresh start" accounting.
Accordingly, all assets and liabilities were restated to reflect their estimated
fair values and the accumulated deficit was eliminated. Although the
confirmation date was August 28, 1990, the Company recorded the effects of the
reorganization as of August 31, 1990.
The financial information contained herein relating to RII's 1990
Consolidated Statements of Operations and Cash Flows 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.
The exchange of securities in connection with the reorganization resulted in
a gain of $421,611,000 which, together with the related deferred income tax
benefit of $8,198,000, has been reported as an extraordinary item.
The revaluation of the Company's other assets and liabilities as of August
31, 1990, which was based on independent appraisals, discounted cash flows,
evaluations, estimations, and other studies, resulted in a net loss of
$153,219,000, with the following components:
<TABLE>
<CAPTION>
(IN THOUSANDS OF
DOLLARS)
<S> <C>
Decrease in working capital......................................... $ 3,565
Decrease in property and equipment.................................. 153,132
Decrease in deferred charges and other assets....................... 1,230
Decrease in deferred tax liability.................................. (4,708)
----------
$ 153,219
----------
----------
</TABLE>
The loss on revaluation is included in recapitalization costs in 1990 in the
accompanying Consolidated Statements of Operations along with (i) the accrual of
approximately $9,030,000 of potential liabilities associated with the funding of
the Litigation Trust described above, of which $8,880,000 was deposited with the
Litigation Trustee, and (ii) legal and financial advisory fees and other costs
associated with the reorganization amounting to $24,769,000.
The accumulated deficit at August 31, 1990 of $62,426,000, which included
the effects of the reorganization, was reclassified to capital in excess of par.
Also, $50,000,000 of notes receivable from Griffco Resorts Holding, Inc.
("Griffco"), which were cancelled as part of the Old Plan, were reclassified to
capital in excess of par. Griffco was owned by Merv Griffin and was RII's parent
from November 15, 1988 to immediately prior to the Old Effective Date, at which
time Griffco merged into a subsidiary of RII.
The Company began accruing interest and amortizing discounts on the Old
Series Notes and the Showboat Notes on the Initial Distribution Date.
F-11
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- REORGANIZATION (CONTINUED)
BANKRUPTCY ACCOUNTING
For the period ended August 31, 1990, during which the Company operated
subject to the jurisdiction of the New Jersey bankruptcy court, the Company did
not accrue interest or amortize debt issuance costs on Old Debt Securities.
NOTE 3 -- REVERSE REPURCHASE AGREEMENTS
Cash equivalents and restricted cash equivalents at December 31, 1992
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
securities. These agreements matured January 4, 1993 except for $615,000 with
City National Bank of Florida which matured January 29, 1993.
<TABLE>
<CAPTION>
(IN THOUSANDS OF
DOLLARS)
<S> <C>
Prudential Securities, Inc.......................................... $ 26,621
City National Bank of Florida....................................... $ 6,893
Summit Trust Company................................................ $ 4,969
National Westminster Bank NJ........................................ $ 4,945
First Fidelity Bank N.A., South Jersey.............................. $ 2,185
Bear, Stearns & Co. Inc............................................. $ 1,809
</TABLE>
NOTE 4 -- RESTRICTED CASH EQUIVALENTS
Components of restricted cash equivalents at December 31 were as follows:
<TABLE>
<CAPTION>
1991 1992
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Amount, including interest earned, on deposit with Litigation
Trustee............................................................ $ 5,233 $ 4,969
Showboat Lease payments and interest earned thereon held by trustee
(see Note 11)...................................................... 3,216 3,303
Collateral account for Old Series Notes............................. 1,139 1,183
Cash equivalents securing letters of credit and other guarantees.... 273 614
Escrow for legal settlement......................................... 1,700
--------- ---------
$ 11,561 $ 10,069
--------- ---------
--------- ---------
</TABLE>
F-12
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- RECEIVABLES
Components of receivables at December 31 were as follows:
<TABLE>
<CAPTION>
1991 1992
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Gaming.............................................................. $ 22,707 $ 19,476
Less allowance for doubtful accounts.............................. (8,169) (6,952)
--------- ---------
14,538 12,524
--------- ---------
Non-gaming:
Hotel and related................................................. 6,764 5,850
Interest on note receivable from Merv Griffin..................... 1,154 927
Bahamian duty refunds receivable.................................. 3,766 719
Refundable state income taxes..................................... 436 499
Contracts and notes............................................... 213 211
Other............................................................. 7,064 5,939
--------- ---------
19,397 14,145
Less allowance for doubtful accounts.............................. (1,709) (1,212)
--------- ---------
17,688 12,933
--------- ---------
$ 32,226 $ 25,457
--------- ---------
--------- ---------
</TABLE>
NOTE 6 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Components of accounts payable and accrued liabilities at December 31 were
as follows:
<TABLE>
<CAPTION>
1991 1992
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Accrued payroll and related taxes and benefits...................... $ 15,364 $ 16,178
Accrued interest.................................................... 8,700 9,928
Accrued gaming taxes, fees and related assessments.................. 12,271 8,166
Customer deposits and unearned revenues............................. 11,291 7,976
Trade payables...................................................... 8,923 6,701
Litigation Trust and related expenses............................... 4,768 4,327
Accrued costs of recapitalization................................... 4,613 2,372
Progressive slot liability.......................................... 3,616 877
Other accrued liabilities........................................... 15,007 15,147
--------- ---------
$ 84,553 $ 71,672
--------- ---------
--------- ---------
</TABLE>
F-13
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- LONG-TERM DEBT
The carrying value and fair value by component of long-term debt at December
31 were as follows:
<TABLE>
<CAPTION>
1991 1992
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----------- ----------- ----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Old Series A Notes due 1994............... $ 208,021 $ 120,652 $ 230,410 $ 131,334
Less unamortized discount............... (38,874) (24,636)
----------- -----------
169,147 205,774
----------- -----------
Old Series B Notes due 1994............... 164,525 98,715 190,182 107,453
Less unamortized discount............... (24,025) (19,265)
----------- -----------
140,500 170,917
----------- -----------
Showboat Notes due 2000................... 105,333 76,893 105,333 88,480
Less unamortized discount............... (24,309) (22,485)
----------- -----------
81,024 82,848
Capitalized leases........................ 3,567 3,567 2,001 2,001
----------- ----------- ----------- -----------
394,238 299,827 461,540 329,268
Less due within one year................ (1,571) (1,571) (828) (828)
----------- ----------- ----------- -----------
$ 392,667 $ 298,256 $ 460,712 $ 328,440
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</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, as capitalized leases are not considered material to the
total.
The Old Series Notes are guaranteed as to payment of principal and interest
by GRI, 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 Old Series A Notes and the Old 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 Hotel and Casino 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
Merv Griffin's Resorts Casino Hotel (the "Resorts Casino Hotel") and the
contiguous parking garage which interests are owned by Resorts International
Hotel, Inc. ("RIH"), a subsidiary of RII;
(iii) all of the outstanding capital stock of RIH and GRI 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
Resorts International (Bahamas) 1984 Limited ("RIB"), the Bahamian subsidiary of
GRI which together with its subsidiaries owns and operates the Company's
Bahamian properties; and
F-14
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- LONG-TERM DEBT (CONTINUED)
(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.
The Old Series Notes bear interest as follows:
<TABLE>
<CAPTION>
OLD SERIES A OLD 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 ending April 15, 1993........................................ 12% 15%
Year ending April 15, 1994........................................ 15% 15%
</TABLE>
The Company considered such cost through the Initial Distribution Date to be a
cost of the exchange.
Interest on the Old Series Notes is payable semi-annually on April 15 and
October 15 in each year. RII may pay all or any portion of interest accruing on
Old Series A Notes by issuing additional Old Series A Notes, and may pay all or
any portion of interest accruing on Old Series B Notes by issuing additional Old
Series B Notes (payment in kind or "Old PIK Payments"). Interest on each of the
Old Series Notes may be paid in cash only if interest is concurrently paid in
cash on both series in proportion to the total interest due.
On each interest payment date through October 15, 1992, the Company elected
to satisfy its interest obligations by issuing additional Old Series Notes. The
cumulative principal amounts of Old Series A and Old Series B Notes issued to
satisfy such interest obligations were $42,910,000 and $51,432,000,
respectively. The interest accrued on the Old Series Notes subsequent to October
15, 1992 was calculated as though additional Old Series Notes will be issued to
satisfy RII's interest obligation on April 15, 1993.
The indenture for the Old Series Notes 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 Old
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. The indenture for the Old
Series Notes also requires RII to maintain a consolidated tangible net worth
equal to at least $50,000,000. Consolidated tangible net worth is defined as
consolidated shareholders' equity (deficit) adjusted for, among other things,
cumulative amortization of debt discounts.
The indenture for the Old Series Notes also gives each holder of Old Series
Notes the right to require RII to repurchase such holder's notes at 100% of the
principal amount plus accrued interest in the event of a change in control, as
defined. Such change in control includes, among other events, (i) any person or
group not including Merv Griffin or his affiliates acquiring RII Common Stock
constituting 50% or more of the total voting power of RII and (ii) Merv Griffin
and his affiliates no longer being the beneficial owners of RII Common Stock
constituting more than 15% of the voting power of RII, other than as a result of
the issuance and sale by RII of additional shares of such RII Common Stock.
The Old Plan provided for the issuance of additional Old Series B Notes in
settlement of certain other claims against the Old Debtors which were
outstanding as of the date the Company filed for relief under chapter 11 ("Other
Class 3C Claims"). An additional $1,250,000 principal amount of Old
F-15
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- LONG-TERM DEBT (CONTINUED)
Series B Notes were issued through December 31, 1992 in settlement of such
claims which had been accrued for previously. Additional Old Series B Notes are
expected to be issued in the future in settlement of Other Class 3C Claims.
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 commenced on July 1, 1990 and consists of a
pass-through (subject to certain adjustments) of the lease payments received
under the Showboat Lease. The Company considered such cost through the Initial
Distribution Date to be a cost of the exchange. 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, 1992 were as follows: Old Series A Notes -- 25.0%; Old Series B
Notes -- 25.4%; and Showboat Notes -- 11.1%.
Minimum principal payments of long-term debt outstanding as of December 31,
1992, for the five years thereafter are as follows: 1993 -- $828,000; 1994 --
$421,469,000; 1995 -- $258,000; 1996 -- $38,000; 1997 -- None. If the Company
continues to satisfy interest obligations on the Old Series Notes by issuing
additional Old Series Notes, and if no Old Series Notes are retired from
proceeds of asset sales, the total obligation at maturity in 1994 will amount to
approximately $519,000,000. See Note 15.
NOTE 8 -- SHAREHOLDERS' EQUITY (DEFICIT)
Pursuant to the Old Plan described in Note 2, all previously issued and
outstanding equity securities were cancelled and 50,000,000 shares of RII Common
Stock were authorized. On October 1, 1990, the Initial Distribution Date,
20,000,000 shares of RII Common Stock were issued. The Old Plan calls for
issuance of additional shares of RII Common Stock in settlement of Other Class
3C Claims. An additional 137,234 shares of RII Common Stock were issued through
December 31, 1992 in settlement of such claims. Additional shares are expected
to be issued in the future in settlement of Other Class 3C Claims.
On June 21, 1991, the Company awarded 5,000 shares of RII Common Stock to
each of the four members of the Board of Directors serving as of that date other
than Merv Griffin, Chairman of RII, and David P. Hanlon, President and Chief
Executive Officer of RII. These 20,000 shares were issued on August 15, 1991.
Under the terms of the Old Plan, in September 1990 RII received $12,345,000
in cash and an $11,000,000 promissory note from Merv Griffin (the "Griffin
Note") for the shares purchased by him. The promissory note is secured by a
letter of credit issued by a bank. The note bears interest at the rate of 8% per
annum and is payable on demand.
NOTE 9 -- STOCK OPTION PLAN
As of September 17, 1990, the Company established the Resorts International,
Inc. Senior Management Stock Option Plan (the "1990 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 ten percent (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 five percent
(5%) of
F-16
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- STOCK OPTION PLAN (CONTINUED)
the shares of Common Stock Outstanding may be granted to Mr. Hanlon; the
remaining options may be granted to other eligible employees at the discretion
of a committee appointed by the Board of Directors of RII.
Pursuant to the 1990 Stock Option Plan, the Company granted an option to Mr.
Hanlon to purchase five percent of the Common Stock Outstanding at an exercise
price of $1.875 per share, the fair market value on the date of grant. Having
met certain performance and other criteria, the option was fully exercisable at
December 31, 1992.
In addition to Mr. Hanlon's option, options to purchase the following shares
of RII Common Stock were outstanding at December 31, 1992:
<TABLE>
<CAPTION>
EXERCISE OPTIONS OPTIONS
PRICE OUTSTANDING EXERCISABLE
- --------- ----------- -----------
<S> <C> <C>
$ 1.875 684,000 437,326
$ 1.75 30,000
----------- -----------
714,000 437,326
----------- -----------
----------- -----------
</TABLE>
No options had been exercised as of December 31, 1992.
NOTE 10 -- RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH MERV GRIFFIN
See Note 2 for a description of the impact of the Old Plan on Merv Griffin's
ownership interest and contractual relationship with the Company through
September 16, 1992. The Company is currently engaged in discussions with Mr.
Griffin's representatives concerning the terms and conditions of a potential new
license and services agreement between the Company and The Griffin Group, Inc.
(the "Griffin Group"), a corporation owned by Mr. Griffin. The Company
anticipates that any new agreement would provide for the continued services of
Mr. Griffin, would be effective as of September 17, 1992, and would provide for
compensation payments over a period of several years. Although at this time no
definitive agreement has been reached, in 1992 the Company accrued $521,000 for
the period from September 17 through December 31, 1992 in anticipation of a new
agreement.
See Note 8 for a description of RII's note receivable from Merv Griffin.
The Company reimbursed the Griffin Group $400,000, $358,000 and $211,000 for
charter air services related to Company business rendered in 1990, 1991 and
1992, respectively.
In 1991 and 1992 the Company did business with various subsidiaries of
January Enterprises, Inc., 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 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. The Company received certain
promotional considerations in connection with the television broadcast of these
shows.
LOANS TO GRIFFCO
On November 17, 1988 the Company loaned $50,000,000 to Griffco, under two
non-interest bearing, demand notes. As part of the Old Plan, these notes were
cancelled as of the Old Effective Date.
F-17
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- RELATED PARTY TRANSACTIONS (CONTINUED)
OTHER
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. $2,145,000, $241,000 and $300,000 for financial advisory
services rendered in 1990, 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. $179,000, $147,000 and $128,000 for public relations
services rendered for the Company's Atlantic City and Paradise Island properties
in 1990, 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, 1993, is $7,875,000. 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. Since July 1, 1990, 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 $553,000,
$740,000 and $767,000 in 1990, 1991 and 1992, respectively.
In 1991 the Company recorded a gain of $344,000 resulting from the
settlement of a defined benefit plan (the "Retirement Plan") which was
terminated in 1989. Net periodic pension income for the Retirement Plan for 1990
and 1991 amounted to $156,000 and $121,000, respectively.
The total net pension expense, exclusive of the previously noted settlement
gain, for RII's and its subsidiaries' single-employer pension plans amounted to
$397,000, $619,000 and $767,000 for 1990, 1991 and 1992, respectively.
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
totaled $2,764,000, $2,404,000 and $1,403,000 in 1990, 1991 and 1992,
respectively.
NOTE 13 -- INCOME TAXES
As a result of the application of fresh start accounting in 1990, the
Company's consolidated assets and liabilities were adjusted to their estimated
fair values for financial statement purposes. Such revaluation is not permitted
for income tax return purposes. The resulting basis differences account for
substantially all of the deferred tax liability in the accompanying Consolidated
Balance Sheets.
F-18
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- INCOME TAXES (CONTINUED)
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 was not taxable. A deferred tax benefit resulted
from the elimination of basis differences on the Old Debt Securities, and is
included in the extraordinary item.
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.
Net operating losses were generated for federal tax purposes in 1991 and
1992, so no federal tax provision was recorded in those years to offset benefits
noted above. 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.
The effective income tax rate on the loss before income taxes and
extraordinary item varies from the statutory federal income tax rate as a result
of the following factors:
<TABLE>
<CAPTION>
1990
-------------------------
THROUGH FROM
AUGUST 31 SEPTEMBER 1 1991 1992
---------- ------------ -------- --------
<S> <C> <C> <C> <C>
Statutory federal income
tax rate................ (34.0)% (34.0)% (34.0)% (34.0)%
Net operating losses for
which no tax benefit was
recognized.............. 32.7% 33.6% 33.4% 33.6%
Income taxes refunded.... (2.0)% (2.5)%
Other.................... 1.3% .4% .6% .4%
----- ----- -------- --------
Effective tax expense
(benefit) rate.......... 0 % 0 % (2.0)% (2.5)%
----- ----- -------- --------
----- ----- -------- --------
</TABLE>
Effective with the reorganization, the Company provided deferred taxes on
the unremitted earnings of its Bahamian subsidiaries by allowing for the sale of
the Bahamian assets at their restated value in the SFAS 96 computations. It is
the intention of the Company to sell its Bahamian assets (see Note 15). 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 both federal tax and financial reporting purposes, the Company had net
operating loss carryforwards of approximately $622,000,000 at December 31, 1992.
Of this amount, approximately $140,000,000 is not limited as to use and expires
from 2005 through 2007. Due to the change in ownership of RII resulting from the
reorganization, 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, 1992 RII and its subsidiaries had significant net operating
loss carryforwards in New Jersey, which expire from 1993 to 1999, and in
Florida, which expire from 1994 to 2007.
Also, for both federal tax and financial reporting purposes, the Company had
tax credit carryforwards of $2,800,000 at December 31, 1992 which expire from
1998 through 2007.
F-19
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- INCOME TAXES (CONTINUED)
The source of loss before income taxes and extraordinary item was as
follows:
<TABLE>
<CAPTION>
1990
-------------------------
THROUGH FROM
AUGUST 31 SEPTEMBER 1 1991 1992
------------ ----------- ---------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
U.S. source loss......................... $ (133,865) $ (5,439) $ (30,095) $ (41,526)
Foreign source loss...................... (37,729) (8,092) (12,307) (13,276)
------------ ----------- ---------- ----------
Loss before income taxes and
extraordinary item...................... $ (171,594) $ (13,531) $ (42,402) $ (54,802)
------------ ----------- ---------- ----------
------------ ----------- ---------- ----------
</TABLE>
F-20
<PAGE>
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>
FOR THE YEAR ENDED DECEMBER 31, FOR THE THREE
--------------------------------------------
QUARTERS
1990 ENDED SEPTEMBER 30,
----------------------
THROUGH FROM --------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
--------- ----------- --------- --------- --------- ---------
(IN THOUSANDS OF DOLLARS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Reconciliation of net earnings (loss) to net cash
provided by operating activities:
Net earnings (loss).............................. $ 258,215 $ (13,531) $ (41,571) $ (53,454) $ (37,223) $ (58,370)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities:
Depreciation................................... 20,047 6,232 23,814 25,322 19,011 20,942
Amortization (principally debt discounts)...... 438 8,683 32,415 37,565 26,507 37,349
Interest expense settled by issuance of
long-term debt................................ 765 19,584 31,165 15,445 16,787
Provision for doubtful receivables............. 3,530 1,692 6,373 4,047 2,803 2,284
Provision for discount on CRDA obligations..... 993 504 1,574 1,451 1,117 1,196
Deferred tax provision......................... 1,000
Recapitalization costs......................... 187,018 2,848 2,337 4,879
Stock awards................................... 34
Extraordinary item -- gain on exchange of
debt.......................................... (429,809)
Net (gain) loss on sales of property and
equipment..................................... (878) (59) 533 113 17
Net (increase) decrease in accounts
receivable.................................... 1,430 (2,582) (9,719) 2,744 9,487 8,177
Net (increase) decrease in inventories and
prepaids...................................... (3,492) 1,278 (433) 429 (3,315) (3,297)
Net (increase) decrease in deferred charges and
other assets.................................. 1,090 109 296 (1,499) (1,379) (439)
Net increase (decrease) in accounts payable and
accrued liabilities........................... (8,053) 3,228 (4,241) (10,299) (688) 11,301
--------- ----------- --------- --------- --------- ---------
Net cash provided by operating activities...... $ 30,529 $ 6,319 $ 28,659 $ 40,432 $ 34,119 $ 41,809
--------- ----------- --------- --------- --------- ---------
--------- ----------- --------- --------- --------- ---------
Non-cash investing and financing transactions:
Issuance of RII Common Stock for receivable...... $ 26,000
Issuance of long-term debt (at estimated market
value) in satisfaction of Old Plan
obligations..................................... $ 9,290
Other Class 3C Claims settled for RII Common
Stock and Old Series B Notes.................... $ 1,448 $ 227 $ 227
Reduction in long-term debt resulting from
exchange........................................ $ 536,277
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.................. $ 3,473 $ 1,505 $ 1,180 $ 112 $ 242 $ 843
Reclassifications to deposits and other assets
from receivables and property and equipment..... $ 675 $ 674 $ 337 $ 450
Receivables from sale of property................ $ 1,185 $ 491
</TABLE>
F-21
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 -- COMMITMENTS AND CONTINGENCIES
INTENTION TO SELL PARADISE ISLAND ASSETS
Since the Company's announcement in 1990 of its intention to sell its
Paradise Island assets, including its operations and properties, there has not
been substantial interest on the part of prospective purchasers. In August 1991
the Company received an offer for its Paradise Island assets which would have
netted the Company approximately $150,000,000, if the transaction had been
consummated. However, the Company considers that offer to be terminated and
continues to solicit offers.
The price that was offered in 1991 was far below the Company's expectations
in 1990, when the sale of its Paradise Island assets became an integral part of
the Company's Business Plan, and is well below an amount that would be adequate
to retire sufficient Old Series Notes at par so as to permit the Company's then
remaining Atlantic City operations to service the balance of the debt
outstanding after such a sale. For this reason, prior to or contemporaneously
with completion of a sale of the Paradise Island assets for such a depressed
price, the Company would be required to accomplish in one or more related
transactions significant further reductions in its debt service requirements. In
the absence of further reductions, the Company does not expect that it would be
able to accept a price for its Paradise Island assets in the range that was
offered. See "Servicing of Old Series Notes" below.
Pursuant to the indenture governing the Old Series Notes, in the event of
any sale of its Paradise Island assets, (i) the Company is required to deliver
to the indenture trustee an opinion of an independent financial adviser that the
sales price is not less than the fair market value of the property being sold;
(ii) not less than 85% of the aggregate sales price must be paid in cash
immediately upon closing and the balance in promissory notes with terms
acceptable to the Company's Board of Directors; and (iii) all cash proceeds (and
cash proceeds of non-cash proceeds) must be deposited in a collateral account
and thereafter used to redeem the Old Series Notes pro rata at par. However,
these conditions to a sale can be waived if holders of at least two-thirds in
aggregate principal amount of the outstanding Old Series Notes and holders of at
least the majority in aggregate principal amount of each Series have consented
in writing.
In connection with the approval of the acquisition of RII by Griffco in
November 1988 by the relevant Bahamian governmental authorities, RII granted to
The Hotel Corporation of The Bahamas ("HCB"), a corporation owned by the
Government of The Bahamas, a right of first refusal in respect of any sale of
its principal Bahamian subsidiary for a five year period ending November 15,
1993. Such right is exercisable for a period of ninety days following written
notice from RII to HCB setting forth the terms of a proposed sale. Any sale of
the Company's Paradise Island assets will be dependent upon receipt of necessary
authorizations or waivers from Bahamian governmental authorities.
For information as to revenues and contribution to consolidated loss before
income taxes and extraordinary item of these operations, see the segment tables
included in "Management's Discussion and Analysis of Financial Condition and
Results of Operations." Amounts reported for the Paradise Island segment of such
tables include the operations of certain domestic subsidiaries which provide
support services to the Paradise Island properties, which may or may not be
included in any sale that may be consummated.
SERVICING OF OLD SERIES NOTES
If interest obligations on the Old Series Notes continue to be satisfied by
Old PIK Payments, and assuming there are no principal retirements resulting from
a sale of the Paradise Island assets or any other assets, the April 15, 1993
interest obligation would approximate $28,000,000, the October 15, 1993 interest
obligation would approximate $34,000,000 and the final interest obligation would
approximate $36,000,000. These increases would result in a total obligation of
approximately $519,000,000 at the maturity date, April 15, 1994.
F-22
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
Although, due to Old PIK Payments, the Company is able to service the Old
Series Notes in the near term, in the longer term it must reduce its debt to a
level that can be supported by the cash flow reasonably anticipated on a
continuing basis. The depressed market for asset sales makes it unlikely that
their proceeds would provide a reduction of principal to a level capable of
being serviced by remaining operations. However, failure to achieve such sales
results in an increasing amount of principal outstanding due to Old PIK
Payments, which amount raises substantial uncertainties regarding sources of
repayment or refinancing at maturity in April 1994.
The Company is continuing to pursue a business strategy that combines an
effort to improve the profitability of both its Atlantic City and Paradise
Island operations together with continued efforts to consummate a sale of the
Paradise Island assets at as high a price as can be reasonably achieved.
However, it is evident that the Company must attempt to develop financial
alternatives other than, or in conjunction with, a sale of its Paradise Island
assets.
Thus, the Company is utilizing financial advisers to assist it in the
development and analysis of financial alternatives as well as the development of
a long-term financial plan. In this connection, management of the Company, with
the assistance of its financial advisers, has been engaged in discussions with
representatives of the principal holders of the Old Series Notes in an effort to
reach an agreement as to the terms of a possible restructuring of the Old Series
Notes. Although no definitive agreement has yet been reached, it is anticipated
that any restructuring would involve an exchange of the Old Series Notes for a
combination of cash, new debt, certain operating assets and equity in the
remaining Company. The Company's objective in such a recapitalization would be
to reduce its outstanding debt sufficiently so that it may be serviced from the
Company's continuing operations, while allowing for certain additional
borrowings for capital improvements, working capital and possible expansion. The
specific terms and conditions, and other details, of any restructuring would, of
course, be set forth in definitive agreements, indentures and other documents.
At this time, no representation can be made as to whether, when or on what terms
any such restructuring, or other financial alternative, may be proposed or
effected.
CRDA
The Casino Control Act, as originally adopted, required a licensee to make
investments equal to 2% of the licensee's net casino win (as defined under the
Casino Control Act) (the "investment obligation") for each calendar year,
commencing in 1979, in which such net casino win 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 net casino win. If the investment
obligation is not satisfied, then the licensee will be subject to an investment
alternative tax of 2.5% of net casino win. Since 1985, a licensee has been
required to make quarterly deposits with the CRDA against its current year
investment obligation.
F-23
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 -- COMMITMENTS AND CONTINGENCIES (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 1984-1992 TOTAL
---------- ---------- ----------
(IN THOUSAND OF DOLLARS)
<S> <C> <C> <C>
Investment obligations...................................................... $ (21,637) $ (26,118) $ (47,755)
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 25,454 32,987
---------- ---------- ----------
Remaining investment obligation at December 31, 1992, which was deposited in
January 1993............................................................... $ -0- $ (664) $ (664)
---------- ---------- ----------
---------- ---------- ----------
</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 an audit report issued by an agency acting on behalf of the
Treasury identifying qualifying credits from housing related investments of
$10,165,000. 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's
counsel was recently contacted by the Treasury and expects an update of the
status 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, 1992, RIH had made
CRDA deposits/bond purchases totalling $32,987,000. 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, 1992, RIH had a remaining balance of
$4,873,000 face value of bonds issued by the CRDA and had $9,921,000 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.
F-24
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 -- COMMITMENTS AND CONTINGENCIES (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 1990, 1991 and 1992
for discounts on obligations arising in those years were $1,497,000, $1,574,000
and $1,451,000, 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
extraordinary item and (iii) identifiable assets, depreciation and capital
additions are included in "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
NOTE 17 -- SUBSEQUENT EVENTS
RESTRUCTURING
In April 1993 RII reached an agreement in principle with two representatives
(the "Representatives") of major holders of its Old Series Notes as to terms of
a restructuring of Old Series Notes. Such restructuring was to include the
exchange of the Old Series Notes for, among other things, cash, new debt, an
equity interest in RII and 100% of the equity of RII's Bahamian subsidiaries,
Paradise Island Airlines, Inc. ("PIA") and certain domestic subsidiaries which
support the Bahamian operations (PIA and these other domestic subsidiaries are
hereinafter referred to as the "U.S. Paradise Island Subsidiaries").
Since that time, management of the Company has been cooperating with the
Representatives in negotiating the possible sale to a third party (the
"Purchaser") of a majority of the equity of RII's Bahamian subsidiaries and the
assets and related liabilities of the U.S. Paradise Island Subsidiaries.
Further negotiations among the Company, the Purchaser and the
Representatives have led to the currently proposed restructuring which
contemplates, among other things, the exchange of the Old Series Notes for the
following:
(a) the Company's excess cash, as defined, presently estimated to be not
less than $30,000,000,
(b) $125,000,000 principal amount of nine-year, 11% mortgage notes to be
issued by a subsidiary of RII and to be secured by a mortgage on the Resorts
Casino Hotel and guaranteed by RIH,
(c) $35,000,000 principal amount of ten-year, 11.375%, junior mortgage
notes to be issued by a subsidiary of RII and to be secured by a junior
mortgage on the Resorts Casino Hotel and guaranteed by RIH,
(d) shares of RII Common Stock in an amount representing approximately
40% of the total outstanding shares, and
(e) either (i) $65,000,000 cash and 40% of the equity of a company
formed by the Purchaser to purchase 100% of the equity of RII's Bahamian
subsidiaries and, through subsidiaries, the assets and related liabilities
of the U.S. Paradise Island Subsidiaries or, if that purchase is not
consummated, (ii) 100% of the equity of a holding company formed to own 100%
of the equity of RII's Bahamian subsidiaries and, through subsidiaries, the
assets and related liabilities of the U.S. Paradise Island Subsidiaries.
F-25
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17 -- SUBSEQUENT EVENTS (CONTINUED)
Before any restructuring can be completed, specific terms and conditions
must be finalized and set forth in definitive agreements, indentures and other
documents. Also, any restructuring must be approved by various governmental
agencies, and the proposed restructuring will require certain shareholder and
creditor approvals, as well as confirmation by the Bankruptcy Court. The Company
cannot provide any assurances as to whether or when the proposed restructuring
will be effected, or that the restructuring will be on terms similar to those
described above.
NON-COMPLIANCE WITH INDENTURE FOR OLD SERIES NOTES
As of September 30, 1993 the Company's consolidated tangible net worth (see
Note 7) was below $50,000,000, the balance which the indenture for the Old
Series Notes requires the Company to maintain.
RELATED PARTY TRANSACTIONS
In April 1993, RII, RIH and Griffin Group, entered into a license and
services agreement (the "New Griffin Services Agreement") effective as of
September 17, 1992, upon the expiration of the previous license and services
agreement.
Pursuant to the New 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 Company's facilities and operations. Also pursuant to
the New 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.
The New 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 under "Restructuring" above) 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 New Griffin Services Agreement shall terminate
on that date. The New 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 New 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 New Griffin Services
Agreement, upon signing, the Company paid Griffin Group $4,100,000, representing
compensation for the first two years. Thereafter, the New 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 New Griffin Services Agreement by reducing the amount of the
note receivable from Griffin Group (the "Griffin 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 Griffin Group Note by that amount. In the event of an early
termination of the New 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 New 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. In connection with the events described in "Restructuring" above, RII's
Board of Directors subsequently approved certain revisions to the exercise price
of the
F-26
<PAGE>
RESORTS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 17 -- SUBSEQUENT EVENTS (CONTINUED)
Griffin Warrants. The Griffin Warrants, as amended, 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.
In conjunction with the New Griffin Services Agreement, Mr. Griffin made a
partial payment of $4,100,000 on his note payable to RII, the Griffin Note. The
Griffin Note, which was issued in 1990, had an outstanding balance of
$11,623,333 at September 17, 1992 comprised of the original principal amount of
$11,000,000 and accrued interest of $623,333. After applying Mr. Griffin's
payment, the remaining balance on the Griffin Note was $7,523,333. In accordance
with the New Griffin Services Agreement, the Griffin Note was then cancelled and
a new note from Griffin Group, the Griffin Group Note, in the amount of
$7,523,333 was substituted therefor. As noted above, in September 1993 the
balance of this note was reduced to $5,318,333. The Griffin 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 September 30, 1993.
INCOME TAX ACCOUNTING
Effective January 1, 1993, the Company adopted SFAS 109. There was no effect
on the accompanying Consolidated Statement of Operations for the three quarters
ended September 30, 1993, nor was there a cumulative effect of adopting SFAS
109.
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.
F-27
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Resorts International, Inc.
Resorts International Hotel, Inc.
We have audited the accompanying consolidated balance sheets of Resorts
International Hotel, Inc. as of December 31, 1992 and 1991, and the related
consolidated statements of operations, changes in shareholder's deficit, and
cash flows for each of the three years in the period ended December 31, 1992.
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.
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
and transactions with RII and its affiliates. RII has significant debt which
becomes due and payable in April 1994. Through April 1994, RII may satisfy its
interest obligations on this debt with the issuance of additional debt. RII's
ability to pay this debt at maturity was premised upon the contemplated sale of
RII's operations on Paradise Island and of its non-operating real estate
holdings in Atlantic City generating sufficient proceeds to reduce the
obligations under this debt to a level that, if refinanced at maturity in April
1994, could be serviced by cash flow from the remaining operations. It presently
appears unlikely the proceeds from a possible sale of these operations will
provide a reduction of principal to this level. Consequently, RII is reviewing
other financial alternatives. One such alternative is described in Note 14.
However, specific terms and conditions have not been finalized.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of RIH at
December 31, 1992 and 1991, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1992, in conformity with generally accepted accounting principles.
ERNST & YOUNG
Philadelphia, Pennsylvania
February 19, 1993 except for
Note 14, as to which the date is
December 29, 1993
F-28
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1991 1992
---------- ---------- SEPTEMBER 30,
1993
-------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash (including cash equivalents of $4,769,
$9,728 and $18,792)....................... $ 16,886 $ 22,643 $ 30,820
Receivables, net........................... 6,474 5,406 5,682
Interest receivable from affiliate......... 1,125 4,500 2,813
Note receivable from affiliate............. 50,000 50,000 50,000
Inventories................................ 1,469 1,542 1,464
Prepaid expenses........................... 1,528 1,862 7,260
---------- ---------- -------------
Total current assets..................... 77,482 85,953 98,039
Property and equipment, net of accumulated
depreciation.............................. 151,551 155,689 166,424
Deferred charges and other assets.......... 6,202 8,994 10,888
---------- ---------- -------------
$ 235,235 $ 250,636 $ 275,351
---------- ---------- -------------
---------- ---------- -------------
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current liabilities:
Current maturities of long-term debt....... $ 958 $ 643 $ 81
Accounts payable and accrued liabilities... 27,718 26,073 24,622
Notes payable to affiliate................. 325,000
Due to parent company...................... 60,792 62,374 51,325
---------- ---------- -------------
Total current liabilities................ 89,468 89,090 401,028
---------- ---------- -------------
Notes payable to affiliate................... 325,000 325,000
---------- ----------
Other long-term debt......................... 1,539 904 15
---------- ---------- -------------
Deferred income taxes........................ 19,400
-------------
Commitments and contingencies (Notes 7 and
13)
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) (198,829)
Retained earnings.......................... 18,057 34,471 53,737
---------- ---------- -------------
Total shareholder's deficit.............. (180,772) (164,358) (145,092)
---------- ---------- -------------
$ 235,235 $ 250,636 $ 275,351
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
See Notes to Consolidated Financial Statements of RIH.
F-29
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
1990 FOR THE THREE QUARTERS
-------------------------- ENDED SEPTEMBER 30,
THROUGH FROM ------------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
------------ ------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Casino......................... $ 139,466 $ 66,259 $ 218,881 $ 233,780 $ 180,510 $ 187,803
Rooms.......................... 5,093 2,599 8,074 8,766 6,688 5,370
Food and beverage.............. 10,492 5,320 16,406 16,056 12,801 12,340
Other casino/hotel revenues.... 3,754 2,038 4,113 4,138 3,081 3,301
------------ ------------ ----------- ----------- ----------- -----------
158,805 76,216 247,474 262,740 203,080 208,814
------------ ------------ ----------- ----------- ----------- -----------
Expenses:
Casino......................... 85,473 39,532 123,523 127,847 97,226 105,013
Rooms.......................... 1,974 1,213 3,367 3,582 2,681 2,502
Food and beverage.............. 10,614 6,216 17,679 17,658 13,802 13,430
Other casino/hotel operating
expenses...................... 19,713 10,566 31,499 33,281 25,045 25,748
Selling, general and
administrative................ 24,675 13,582 44,023 46,507 35,441 35,516
Provision for doubtful
receivables................... 1,307 801 3,480 1,414 839 536
Depreciation................... 10,720 1,902 9,084 11,402 8,625 10,264
Real estate related............ 880 100
------------ ------------ ----------- ----------- ----------- -----------
155,356 73,912 232,655 241,691 183,659 193,009
------------ ------------ ----------- ----------- ----------- -----------
Earnings from operations......... 3,449 2,304 14,819 21,049 19,421 15,805
Other income (deductions):
Interest income................ 5,515 2,832 7,505 7,576 5,648 5,631
Interest expense............... (306) (136) (563) (395) (317) (190)
Recapitalization costs......... (119,804) (874) (704) (1,580)
Affiliated bad debt write-
off........................... (98,983)
------------ ------------ ----------- ----------- ----------- -----------
Earnings (loss) before income
taxes and extraordinary item.... (210,129) 5,000 21,761 27,356 24,048 19,666
Income tax expense............... (8,704) (10,942) (9,620) (400)
------------ ------------ ----------- ----------- ----------- -----------
Earnings (loss) before
extraordinary item.............. (210,129) 5,000 13,057 16,414 14,428 19,266
Extraordinary item............... (17,335)
------------ ------------ ----------- ----------- ----------- -----------
Net earnings (loss).............. $ (227,464) $ 5,000 $ 13,057 $ 16,414 $ 14,428 $ 19,266
------------ ------------ ----------- ----------- ----------- -----------
------------ ------------ ----------- ----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements of RIH. Note 2 describes
a change in entity and related presentation for periods presented.
F-30
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------
1990 FOR THE THREE QUARTERS
-------------------------- ENDED SEPTEMBER 30,
THROUGH FROM --------------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers......... $ 155,935 $ 74,485 $ 244,825 $ 261,462 $ 201,624 $ 208,297
Cash paid to suppliers and
employees........................... (144,100) (70,291) (216,805) (229,911) (175,444) (189,019)
------------ ------------ ------------ ------------ ------------ ------------
Cash flow from operations before
interest and income taxes......... 11,835 4,194 28,020 31,551 26,180 19,278
Interest received.................... 4,361 3,966 7,526 4,204 3,951 7,289
Interest paid........................ (318) (136) (563) (395) (317) (190)
Income taxes paid to parent.......... (8,704) (10,942) (9,620)
------------ ------------ ------------ ------------ ------------ ------------
Net cash provided by operating
activities........................ 15,878 8,024 26,279 24,418 20,194 26,377
------------ ------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Payments for property and
equipment........................... (17,454) (4,326) (21,570) (15,495) (14,996) (20,394)
Proceeds from sale of property and
equipment........................... 67
CRDA deposits and bond purchases..... (1,816) (739) (2,689) (2,871) (2,024) (2,121)
------------ ------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities........................ (19,270) (5,065) (24,192) (18,366) (17,020) (22,515)
------------ ------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
Advances from (repayments to) parent
company and affiliates.............. 38,136 (20,286) 2,200 1,582 4,456 7,951
Recapitalization costs paid to
parent.............................. (11,216) (874) (704) (1,580)
Debt repayments...................... (1,844) (1,302) (1,498) (1,003) (889) (2,056)
------------ ------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities.............. 25,076 (21,588) 702 (295) 2,863 4,315
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents...................... 21,684 (18,629) 2,789 5,757 6,037 8,177
Cash and cash equivalents at beginning
of period............................. 11,042 32,726 14,097 16,886 16,886 22,643
------------ ------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of
period................................ $ 32,726 $ 14,097 $ 16,886 $ 22,643 $ 22,923 $ 30,820
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements of RIH. Note 2 describes
a change in entity and related presentation for periods presented.
F-31
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S DEFICIT
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NOTE
EXCESS OF RECEIVABLE
LIABILITIES RETAINED FROM GRIFFCO
CAPITAL IN OVER ASSETS EARNINGS RESORTS
EXCESS OF AT (ACCUMULATED HOLDING,
PAR REORGANIZATION DEFICIT) INC.
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1989............................ $ 180,030 $ (151,395) $ (35,000)
Net loss for period through August 31, 1990............. (227,464)
Effects of reorganization:
Elimination of accumulated deficit.................... (180,030) $ (198,829) 378,859
Cancellation of note receivable from Griffco Resorts
Holding, Inc......................................... 35,000
------------ ------------- ------------ ------------
Balance at August 31, 1990.............................. -0- (198,829) -0- -0-
Net earnings for period from September 1, 1990.......... 5,000
------------ ------------- ------------ ------------
Balance at December 31, 1990............................ -0- (198,829) 5,000 -0-
Net earnings for year 1991.............................. 13,057
------------ ------------- ------------ ------------
Balance at December 31, 1991............................ -0- (198,829) 18,057 -0-
Net earnings for year 1992.............................. 16,414
------------ ------------- ------------ ------------
Balance at December 31, 1992............................ -0- (198,829) 34,471 -0-
Net earnings for three quarters ended September 30, 1993
(unaudited)............................................ 19,266
------------ ------------- ------------ ------------
Balance at September 30, 1993 (unaudited)............... $ -0- $ (198,829) $ 53,737 $ -0-
------------ ------------- ------------ ------------
------------ ------------- ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements of RIH. Note 2 describes
a change in entity and related presentation for periods presented.
F-32
<PAGE>
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.
Financial statements and footnote data with respect to September 30, 1993
and the three quarters ended September 30, 1992 and 1993 are unaudited. In the
opinion of management, such unaudited financial statements include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation, in accordance with generally accepted accounting principles.
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>
1990
------------------------
THROUGH FROM
AUGUST 31 SEPTEMBER 1 1991 1992
--------- ------------- --------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Rooms....................................... $ 2,264 $ 1,019 $ 2,949 $ 3,010
Food and beverage........................... 9,447 5,203 15,963 16,709
Other casino/hotel operations............... 5,495 1,914 5,699 6,174
--------- ------------- --------- ---------
Total allocated to casino................. $ 17,206 $ 8,136 $ 24,611 $ 25,893
--------- ------------- --------- ---------
--------- ------------- --------- ---------
</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-33
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 U.S. federal
income tax returns with RII.
In 1990, RIH provided income taxes based on the liability method prescribed
in Statement of Financial Accounting Standards No. 96, "Accounting For Income
Taxes" ("SFAS 96"). 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. Prior to the reorganization in
1990, RIH's deferred tax liability was transferred to RII.
Commencing in 1991, RIH agreed with RII to provide for federal and state
income taxes using a combined rate of 40%. Material transactions which would be
subject to combined tax rates that are significantly different from the 40% rate
are to be separately tax effected. The resulting liability is settled on a
current basis.
NOTE 2 -- BASIS OF PRESENTATION
During 1989, RII and certain of its subsidiaries (the "Old Debtors") filed
voluntary petitions or consented to involuntary petitions for relief under
chapter 11 of the United States Bankruptcy Code. The Old Debtors filed the
Second Amended Joint Plan of Reorganization dated as of May 31, 1990 (the "Old
Plan") which was confirmed by the New Jersey bankruptcy court in August 1990. On
September 17, 1990 (the "Old Effective Date"), all conditions to effectiveness
of the Old Plan were either met or waived and the Old Plan became effective.
Under the Old Plan, all previously outstanding debt securities of the Old
Debtors were cancelled and exchanged for new debt and equity securities of RII.
Also pursuant to the Old Plan, all previously outstanding shares of stock of RII
were cancelled. As a result of these and other transactions prescribed in the
Old Plan, Merv Griffin, who prior to the reorganization indirectly owned 100% of
RII, owned 22% of RII as of October 1, 1990, the initial distribution date of
the new securities.
RII accounted for the reorganization using "fresh start" accounting.
Accordingly, all assets and liabilities of RII and its subsidiaries were
restated to reflect their estimated fair values and the accumulated deficit was
eliminated. Although the confirmation date was August 28, 1990, RIH recorded the
effects of the reorganization as of August 31, 1990.
In 1990, RIH recorded a charge from the write-off of the remaining balance
of $17,335,000 of deferred debt issuance costs related to certain debt
securities of the Old Debtors that were cancelled pursuant to the Old Plan. This
write-off was reported as an extraordinary item.
RIH also recorded affiliated bad debt write-offs of $98,983,000 in 1990
composed of $63,983,000, the net amount of intercompany receivables from the Old
Debtors cancelled pursuant to the Old Plan,
F-34
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- BASIS OF PRESENTATION (CONTINUED)
and a $35,000,000 note receivable from Griffco Resorts Holding, Inc.
("Griffco"), a company that prior to the Old Effective Date was owned by Merv
Griffin and was RII's parent, which was also cancelled pursuant to the Old Plan.
The revaluation of RIH's other assets and liabilities, which was based on
independent appraisals, discounted cash flows, evaluations, estimations and
other studies, resulted in a net loss of $108,588,000, with the following
components:
<TABLE>
<CAPTION>
(IN THOUSANDS OF
DOLLARS)
<S> <C>
Decrease in working capital......................................... $ 8,355
Decrease in property and equipment.................................. 99,849
Decrease in deferred charges and other assets....................... 384
----------
$ 108,588
----------
----------
</TABLE>
The loss on revaluation was included in recapitalization costs in 1990 in
the accompanying Consolidated Statements of Operations along with RIH's
allocated portion (approximately one-third) of legal and financial advisory fees
and other costs associated with the reorganization amounting to $11,216,000.
The accumulated deficit at August 31, 1990 of $378,859,000, which included
the effects of the reorganization, was eliminated. This deficit was first
reclassified to offset the balance of capital in excess of par, with the
remainder recorded as excess of liabilities over assets at reorganization.
The financial information contained herein relating to RIH's 1990
Consolidated Statements of Operations and Cash Flows 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.
BANKRUPTCY ACCOUNTING
For the period ended August 31, 1990, during which RII operated subject to
the jurisdiction of the New Jersey bankruptcy court, RIH did not accrue interest
on its notes payable to affiliate or amortize debt issuance costs on public debt
outstanding prior to the Old Effective Date of the Old Plan.
NOTE 3 -- RECEIVABLES
Components of receivables at December 31 were as follows:
<TABLE>
<CAPTION>
1991 1992
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Gaming.............................................................. $ 10,912 $ 8,703
Less allowance for doubtful accounts.............................. (5,326) (4,200)
--------- ---------
5,586 4,503
--------- ---------
Non-gaming:
Hotel and related................................................. 566 450
Other............................................................. 649 501
--------- ---------
1,215 951
Less allowance for doubtful accounts.............................. (327) (48)
--------- ---------
888 903
--------- ---------
$ 6,474 $ 5,406
--------- ---------
--------- ---------
</TABLE>
F-35
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- 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 thereof have been assigned as part of the
collateral for the Senior Secured Redeemable Notes due April 15, 1994 (the "Old
Series Notes") issued by RII pursuant to the Old Plan. See Note 7.
NOTE 5 -- PROPERTY AND EQUIPMENT
Components of property and equipment at December 31 were as follows:
<TABLE>
<CAPTION>
1991 1992
----------- -----------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Land and land rights................................................ $ 53,250 $ 53,250
Land improvements................................................... 97 130
Hotel and other buildings........................................... 80,718 93,235
Furniture, machinery and equipment.................................. 26,665 31,168
Construction in progress............................................ 1,848 326
----------- -----------
162,578 178,109
Less accumulated depreciation..................................... (11,027) (22,420)
----------- -----------
$ 151,551 $ 155,689
----------- -----------
----------- -----------
</TABLE>
Substantially all of RIH's property and equipment has been pledged as
collateral for the Old Series Notes issued by RII pursuant to the Old Plan. See
Note 7.
NOTE 6 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Components of accounts payable and accrued liabilities at December 31 were
as follows:
<TABLE>
<CAPTION>
1991 1992
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Accrued payroll and related taxes and benefits...................... $ 9,332 $ 10,530
Accrued gaming taxes, fees and related assessments.................. 6,493 6,556
Customer deposits and unearned revenues............................. 2,520 2,294
Trade payables...................................................... 2,338 1,528
Insurance reserves.................................................. 1,301 1,272
Progressive slot liability.......................................... 3,147 315
Other accrued liabilities........................................... 2,587 3,578
--------- ---------
$ 27,718 $ 26,073
--------- ---------
--------- ---------
</TABLE>
NOTE 7 -- NOTES PAYABLE TO AFFILIATE
In 1988, Griffin Resorts Inc. ("GRI"), a subsidiary of RII, issued
$325,000,000 principal amount of publicly traded notes. GRI loaned the proceeds
of such notes to RIH in exchange for (i) two promissory notes payable to GRI
(the "RIH-GRI Notes"); (ii) a senior 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 4).
F-36
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- NOTES PAYABLE TO AFFILIATE (CONTINUED)
In 1990, the terms of the RIH-GRI Notes were modified and such amended notes
were pledged as collateral for the Old Series Notes issued by RII. In 1992, the
notes were further amended (the "Second Amended RIH-GRI Notes").
The sole purpose of the Second Amended RIH-GRI Notes is to collateralize
RII's Old Series Notes. The Second Amended RIH-GRI Notes are payable on demand
after April 15, 1994 and are non-interest bearing, but the principal due upon
demand by GRI accretes according to a schedule. As of April 15, 1994, the
principal amount of the notes would accrete to $446,150,000. However, GRI and
RIH have entered into an intercompany agreement whereby GRI will not require
payment of the amount in excess of the original $325,000,000 principal amount of
the notes unless GRI is instructed to do so by the indenture trustee or other
collateral pledgee of the Old Series Notes. At December 31, 1992 the accretion
in principal amount of these notes in excess of $325,000,000 amounted to
$73,290,000.
The Second Amended RIH-GRI Notes and the RIB Note described in Note 4 relate
to intercompany loans which were not anticipated to be repaid in the ordinary
course of business. Also, RII is contemplating a restructuring of the Old Series
Notes, which may also affect these and other intercompany relationships among
RII's subsidiaries; however, the terms and effects of any possible restructuring
are uncertain at this time. Thus, it is not practicable 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
5 for a summary of RIH's property and equipment balances.
The indentures for RII's Old Series Notes restrict RIH from the incurrence
of additional indebtedness, with certain exceptions.
NOTE 8 -- OTHER LONG-TERM DEBT
Other long-term debt consists of capitalized lease obligations under which
RIH is the lessee of computer equipment, slot machines and printing equipment.
These leases expire in various years through 1996 and bear interest rates from
8.5% to 33.3%.
F-37
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- RELATED PARTY TRANSACTIONS
RIH recorded the following income and expenses from RII and other
affiliates:
<TABLE>
<CAPTION>
1990
------------------------
THROUGH FROM
AUGUST 31 SEPTEMBER 1 1991 1992
----------- ----------- --------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Income -- Resorts International (Bahamas) 1984
Limited
Interest...................................... $ 4,500 $ 2,250 $ 6,750 $ 6,750
----------- ----------- --------- ---------
----------- ----------- --------- ---------
Expenses:
Resorts International, Inc.
Parent services fee......................... $ 3,200 $ 2,455 $ 8,154 $ 8,629
Property rentals............................ 229 108 325 325
Steeplechase Transport and Parking, Inc.
Parking fees................................ 1,118
Trams Atlantic
Limousine fees.............................. 376
Other......................................... 189
----------- ----------- --------- ---------
$ 5,112 $ 2,563 $ 8,479 $ 8,954
----------- ----------- --------- ---------
----------- ----------- --------- ---------
</TABLE>
For periods through August 31, 1990, RII charged RIH for services provided
based on an allocation of corporate overhead costs incurred by RII. Effective
with the reorganization, RII began charging RIH a fee of three (3) percent of
gross revenues for such services. Also, recapitalization costs reflected on the
Consolidated Statements of Operations include charges of $11,216,000 for 1990
and $874,000 for 1992 representing RIH's allocated portion (approximately
one-third) of RII's consolidated recapitalization costs.
In addition to the above, charges for insurance cost are allocated to RIH
based on relative amounts of operating revenue, payroll, property value, or
other appropriate measures.
Also, see Note 2 for discussion of the write-off of certain affiliated
receivables in 1990.
NOTE 10 -- 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 approximately $492,000, $654,000 and $665,000 in 1990, 1991 and 1992,
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 approximately $661,000, $745,000 and $827,000 in 1990, 1991 and 1992,
respectively.
NOTE 11 -- 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.
F-38
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- INCOME TAXES (CONTINUED)
The effective income tax rate on the earnings (loss) before income taxes and
extraordinary item varies from the statutory federal income tax rate as a result
of the following factors:
<TABLE>
<CAPTION>
1990
--------------------------
THROUGH FROM
AUGUST 31 SEPTEMBER 1
---------- ------------
<S> <C> <C>
Statutory federal income tax rate (benefit)....... (34.0%) 34.0%
Net operating losses utilized..................... (34.1%)
Net operating losses for which no tax benefit was
recognized....................................... 17.5%
Affiliated bad debt write-off..................... 16.0%
Other, net........................................ 0.5% 0.1%
----- -----
0.0% 0.0%
----- -----
----- -----
</TABLE>
As described in Note 1, commencing in 1991 RIH agreed with RII to provide
for federal and state income taxes at a combined rate of 40%. For the years 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, 1992, which expire in 2003 through
2005. These loss carryforwards were produced in periods prior to the 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.
For state tax purposes RIH had net operating loss carryforwards of
approximately $170,000,000 at December 31, 1992, which expire in 1994 through
1997.
F-39
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- 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>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------
FOR THE THREE
1990 QUARTERS ENDED
------------------------ SEPTEMBER 30,
THROUGH FROM --------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
--------- ------------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Reconciliation of net earnings (loss) to net cash
provided by operating activities:
Net earnings (loss).................................. $(227,464) $ 5,000 $ 13,057 $ 16,414 $ 14,428 $ 19,266
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Extraordinary item -- loss on exchange of debt..... 17,335
Recapitalization costs............................. 119,804 874 704 1,580
Deferred tax provision............................. 400
Affiliated bad debt write-off...................... 98,983
Depreciation and amortization...................... 10,956 1,905 9,084 11,398 8,625 10,264
Provision for doubtful receivables................. 1,307 801 3,480 1,414 839 536
Net loss on sale of property....................... 268 8
Provision for discount on CRDA obligations......... 993 504 1,574 1,451 1,117 1,196
Net (increase) decrease in accounts receivable..... (2,115) 44 (2,199) (346) (266) (812)
Net (increase) decrease in interest receivable from
affiliate......................................... (1,125) 1,125 (3,375) (1,688) 1,687
Net (increase) decrease in inventories and prepaid
expenses.......................................... (2,946) 1,439 1,724 (580) (1,208) (5,320)
Net (increase) decrease in deferred charges and
other assets...................................... 449 75 189 (1,309) (1,146) (731)
Net decrease in accounts payable and accrued
liabilities....................................... (299) (2,869) (898) (1,531) (1,211) (1,689)
--------- ------------- --------- --------- --------- ---------
Net cash provided by operating activities............ $ 15,878 $ 8,024 $ 26,279 $ 24,418 $ 20,194 $ 26,377
--------- ------------- --------- --------- --------- ---------
--------- ------------- --------- --------- --------- ---------
Non-cash investing and financing transactions:
Increase in liabilities for additions to property and
equipment and other assets.......................... $ 2,960 $ 912 $ 1,180 $ 112 $ 242 $ 843
--------- ------------- --------- --------- --------- ---------
--------- ------------- --------- --------- --------- ---------
</TABLE>
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
CRDA
The Casino Control Act, as originally adopted, required a licensee to make
investments equal to 2% of the licensee's net casino win (as defined under the
Casino Control Act) (the "investment obligation") for each calendar year,
commencing in 1979, in which such net casino win 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 net casino win. If the investment
obligation is not satisfied, then the licensee will be subject to an investment
alternative tax of 2.5% of net casino win. Since 1985, a licensee has been
required to make quarterly deposits with the CRDA against its current year
investment obligation.
F-40
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- COMMITMENTS AND CONTINGENCIES (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 1984-1992 TOTAL
---------- ---------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Investment obligations...................................................... $ (21,637) $ (26,118) $ (47,755)
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 25,454 32,987
---------- ---------- ----------
Remaining investment obligation at December 31, 1992, which was deposited in
January 1993............................................................... $ -0- $ (664) $ (664)
---------- ---------- ----------
---------- ---------- ----------
</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 an audit report issued by an agency acting on behalf of the Treasury
identifying qualifying credits from housing related investments of $10,165,000.
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, the Company's
counsel was recently contacted by the Treasury and expects an update of the
status 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, 1992, RIH had made
CRDA deposits/bond purchases totalling $32,987,000. 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, 1992, RIH had a remaining balance of
$4,873,000 face value of bonds issued by the CRDA and had $9,921,000 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-41
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- COMMITMENTS AND CONTINGENCIES (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 1990, 1991 and 1992
for discounts on obligations arising in those years were $1,497,000, $1,574,000
and $1,451,000, respectively.
LITIGATION
RIH is a defendant in certain litigation. In the opinion of management, and
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 14 -- SUBSEQUENT EVENTS
RII RESTRUCTURING
In April 1993 RII reached an agreement in principle with two representatives
(the "Representatives") of major holders of its Old Series Notes as to terms of
a restructuring of Old Series Notes. Such restructuring was to include the
exchange of the Old Series Notes for, among other things, cash, new debt, an
equity interest in RII and 100% of the equity of RII's Bahamian subsidiaries,
Paradise Island Airlines, Inc. ("PIA") and certain domestic subsidiaries which
support the Bahamian operations (PIA and these other domestic subsidiaries are
hereinafter referred to as the "U.S. Paradise Island Subsidiaries").
Since that time, management of RII has been cooperating with the
Representatives in negotiating the possible sale to a third party (the
"Purchaser") of a majority of the equity of RII's Bahamian subsidiaries and the
assets and related liabilities of the U.S. Paradise Island Subsidiaries.
Further negotiations among RII, the Purchaser and the Representatives have
led to the currently proposed restructuring which contemplates, among other
things, the exchange of the Old Series Notes for the following:
(a) excess cash, as defined, of RII consolidated with its subsidiaries,
(b) $125,000,000 principal amount of nine-year, 11% mortgage notes to be
issued by a subsidiary of RII and to be secured by a mortgage on the Resorts
Casino Hotel and guaranteed by RIH,
(c) $35,000,000 principal amount of ten-year, 11.375%, junior mortgage
notes to be issued by a subsidiary of RII and to be secured by a junior
mortgage on the Resorts Casino Hotel and guaranteed by RIH,
(d) shares of common stock of RII in an amount representing
approximately 40% of the total outstanding shares, and
(e) either (i) $65,000,000 cash and 40% of the equity of a company
formed by the Purchaser to purchase 100% of the equity of RII's Bahamian
subsidiaries and, through subsidiaries, the assets and related liabilities
of the U.S. Paradise Island Subsidiaries or, if that purchase is not
consummated, (ii) 100% of the equity of a holding company formed to own 100%
of the equity of RII's Bahamian subsidiaries and, through subsidiaries, the
assets and related liabilities of the U.S. Paradise Island Subsidiaries.
Before any restructuring can be completed, specific terms and conditions
must be finalized and set forth in definitive agreements, indentures and other
documents. Also, any restructuring must be approved by various governmental
agencies, and the proposed restructuring will require certain shareholder and
creditor approvals, as well as confirmation by the Bankruptcy Court. RII cannot
provide any assurances as to whether or when the proposed restructuring will be
effected, or that the restructuring will be on terms similar to those described
above.
F-42
<PAGE>
RESORTS INTERNATIONAL HOTEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 -- SUBSEQUENT EVENTS (CONTINUED)
RELATED PARTY TRANSACTIONS
In April 1993, RII, RIH and The Griffin Group, Inc. (the "Griffin Group"), a
corporation owned by Merv Griffin, Chairman of the Board of RII, entered into a
license and services agreement (the "New Griffin Services Agreement") effective
as of September 17, 1992, upon the expiration of the previous license and
services agreement.
Pursuant to the New 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 New 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.
The New 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 under "RII Restructuring" above) 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 New Griffin Services Agreement shall
terminate on that date. The New 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 New 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 New Griffin Services
Agreement, upon signing, RIH paid Griffin Group $4,100,000, representing
compensation for the first two years. Thereafter, the New 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 New 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.
INCOME TAX ACCOUNTING
Effective January 1, 1993 RIH adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes," which supersedes
SFAS 96 but retains the liability method of accounting for income taxes.
Although RIH is a member of a consolidated group for federal income tax
purposes, RIH will be applying SFAS 109 on a separate return basis for financial
reporting purposes.
Effective with the adoption of SFAS 109, RIH will no longer be providing for
federal and state income taxes at the combined rate of 40%, and settling such
liability on a current basis, as had been its practice under an agreement with
RII. Also, in connection with the adoption of SFAS 109, RIH's deferred income
tax liability was transferred to RIH from RII. This liability results primarily
from basis differences on property and equipment, which were restated to their
estimated fair values in 1990 for financial reporting purposes, while such
revaluation was not permitted for income tax return purposes.
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.
F-43
<PAGE>
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 September 30, 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 September 30, 1993, in
conformity with generally accepted accounting principles.
ERNST & YOUNG
Philadelphia, Pennsylvania
December 29, 1993
F-44
<PAGE>
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
---------------------
<S> <C>
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-45
<PAGE>
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. No shares were issued as of the date of the
accompanying Balance Sheet; however, RII purchased one share for $10 in October
1993.
NOTE 2 -- PROPOSED ISSUANCE OF NOTES
In April 1993 RII reached an agreement in principle with two representatives
(the "Representatives") of major holders of its Senior Secured Redeemable Notes
due April 15, 1994 (the "Old Series Notes") as to terms of a restructuring of
Old Series Notes. Such restructuring was to include the exchange of the Old
Series Notes for, among other things, cash, new debt, an equity interest in RII
and 100% of the equity of RII's Bahamian subsidiaries, Paradise Island Airlines,
Inc. ("PIA") and certain domestic subsidiaries which support the Bahamian
operations (PIA and these other domestic subsidiaries are hereinafter referred
to as the "U.S. Paradise Island Subsidiaries").
Since that time, management of RII has been cooperating with the
Representatives in negotiating the possible sale to a third party (the
"Purchaser") of a majority of the equity of RII's Bahamian subsidiaries and the
assets and related liabilities of the U.S. Paradise Island Subsidiaries.
Further negotiations among RII, the Purchaser and the Representatives have
led to the currently proposed restructuring which contemplates, among other
things, the exchange of the Old Series Notes for the following:
(a) excess cash, as defined, of RII consolidated with its subsidiaries,
(b) $125,000,000 principal amount of nine-year, 11% 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,
(c) $35,000,000 principal amount of ten-year, 11.375%, 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,
(d) shares of common stock of RII in an amount representing
approximately 40% of the total outstanding shares, and
(e) either (i) $65,000,000 cash and 40% of the equity of a company
formed by the Purchaser to purchase 100% of the equity of RII's Bahamian
subsidiaries and, through subsidiaries, the assets and related liabilities
of the U.S. Paradise Island Subsidiaries or, if that purchase is not
consummated, (ii) 100% of the equity of a holding company formed to own 100%
of the equity of RII's Bahamian subsidiaries and, through subsidiaries, the
assets and related liabilities of the U.S. Paradise Island Subsidiaries.
The proposed restructuring also contemplates that RIHF will have a senior prime
loan (the "RIHF Senior Facility") of up to $20,000,000 available for drawdown
for twelve months following the restructuring. Such RIHF Senior Facility would
be secured by a first priority lien on Resorts Casino Hotel and would be senior
to both the mortgage notes and the junior mortgage notes. This loan would bear
interest at 11% from drawdown and mature eight years from that date.
In connection with the proposed restructuring, it is also anticipated that
RIHF will obtain notes receivable from RIH with terms that mirror RIHF's debt so
that RIHF will be able to service its debt.
F-46
<PAGE>
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
NOTES TO BALANCE SHEET (CONTINUED)
NOTE 2 -- PROPOSED ISSUANCE OF NOTES (CONTINUED)
Before any restructuring can be completed, specific terms and conditions
must be finalized and set forth in definitive agreements, indentures and other
documents. Also, any restructuring must be approved by various governmental
agencies, and the proposed restructuring will require certain shareholder and
creditor approvals, as well as confirmation by the Bankruptcy Court. RII cannot
provide any assurances as to whether or when the proposed restructuring will be
effected, or that the restructuring will be on terms similar to those described
above.
F-47
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Resorts International, Inc.
P. I. Resorts Limited
We have audited the accompanying balance sheet of P. I. Resorts Limited ("PIRL")
as of October 15, 1993. PIRL, a wholly owned subsidiary of Resorts
International, Inc. ("RII"), was organized for the purpose of effecting a
transfer of ownership of certain of RII's subsidiaries to certain of RII's
creditors in connection with a plan of reorganization of RII. This balance sheet
is the responsibility of PIRL'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 PIRL at October 15, 1993, in
conformity with generally accepted accounting principles.
ERNST & YOUNG
Philadelphia, Pennsylvania
December 29, 1993
F-48
<PAGE>
P. I. RESORTS LIMITED
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
OCTOBER 15, 1993
-----------------
<S> <C>
Due from parent.................................................................................. $ 0.02
-----
-----
SHAREHOLDER'S EQUITY
Shareholder's equity -- Capital stock:
Ordinary -- $.01 par value; 25,000,000 shares authorized; 2 shares issued and outstanding...... $ 0.02
Preference -- $.01 par value; 10,000,000 shares authorized; none issued and outstanding........
-----
$ 0.02
-----
-----
</TABLE>
See Notes to Balance Sheet of PIRL.
F-49
<PAGE>
P. I. RESORTS LIMITED
NOTES TO BALANCE SHEET
NOTE 1 -- ORGANIZATION AND OPERATIONS
P. I. Resorts Limited ("PIRL") was incorporated under the laws of the
Commonwealth of The Bahamas in October 1993 and has had no operations to date.
PIRL, a wholly owned subsidiary of Resorts International, Inc. ("RII"), was
organized for the purpose of effecting a transfer of ownership of certain of
RII's subsidiaries to certain of RII's creditors in connection with a plan of
reorganization of RII.
NOTE 2 -- PROPOSED TRANSACTIONS
In April 1993 RII reached an agreement in principle with two representatives
(the "Representatives") of major holders of its Senior Secured Redeemable Notes
due April 15, 1994 (the "Old Series Notes") as to terms of a restructuring of
Old Series Notes. Such restructuring was to include the exchange of the Old
Series Notes for, among other things, cash, new debt, an equity interest in RII
and 100% of the equity of RII's Bahamian subsidiaries, Paradise Island Airlines,
Inc. ("PIA") and certain domestic subsidiaries which support the Bahamian
operations (PIA and these other domestic subsidiaries are hereinafter referred
to as the "U.S. Paradise Island Subsidiaries").
Since that time, management of RII has been cooperating with the
Representatives in negotiating the possible sale to a third party (the
"Purchaser") of a majority of the equity of RII's Bahamian subsidiaries and the
assets and related liabilities of the U.S. Paradise Island Subsidiaries.
Further negotiations among RII, the Purchaser and the Representatives have
led to the currently proposed restructuring which contemplates, among other
things, the exchange of the Old Series Notes for the following:
(a) excess cash, as defined, of RII consolidated with its subsidiaries,
(b) $125,000,000 principal amount of nine-year, 11% mortgage notes to be
issued by a 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,
(c) $35,000,000 principal amount of ten-year, 11.375%, junior mortgage
notes to be issued by a subsidiary of RII and to be secured by a junior
mortgage on the Resorts Casino Hotel and guaranteed by RIH,
(d) shares of common stock of RII in an amount representing
approximately 40% of the total outstanding shares, and
(e) either (i) $65,000,000 cash and 40% of the equity of a company
formed by the Purchaser to purchase 100% of the equity of RII's Bahamian
subsidiaries and, through subsidiaries, the assets and related liabilities
of the U.S. Paradise Island Subsidiaries or, if that purchase is not
consummated, (ii) 100% of the equity of RII's Bahamian subsidiaries and the
assets and related liabilities of the U.S. Paradise Island Subsidiaries.
In connection with such an exchange including alternative (ii) of (e) above
it is anticipated that all of the equity of RII's Bahamian subsidiaries will be
transferred to PIRL, the assets and liabilities of the U.S. Paradise Island
Subsidiaries will be transferred to subsidiaries of PIRL (none of which
currently exist), and PIRL's ordinary shares will be distributed to holders of
Old Series Notes.
Before any restructuring can be completed, specific terms and conditions
must be finalized and set forth in definitive agreements, indentures and other
documents. Also, any restructuring must be approved by various governmental
agencies, and the proposed restructuring will require certain shareholder and
creditor approvals, as well as confirmation by the Bankruptcy Court. RII cannot
provide any assurance as to whether or when the proposed restructuring will be
effected, or that the restructuring will be on terms similar to those described
above.
F-50
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of Resorts International, Inc.
PIRL Group
We have audited the accompanying combined balance sheets of PIRL Group as of
December 31, 1992 and 1991, and the related combined statements of operations,
changes in shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1992. These financial statements are the
responsibility of the PIRL Group'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.
PIRL Group, as disclosed in the financial statements and related notes, has
extensive intercompany relationships and transactions with Resorts
International, Inc. ("RII") and its affiliates. RII has significant debt which
becomes due and payable in April 1994. Through April 1994, RII may satisfy its
interest obligations on this debt with the issuance of additional debt. RII's
ability to pay this debt at maturity was premised upon the contemplated sale of
RII's operations on Paradise Island and of its non-operating real estate
holdings in Atlantic City generating sufficient proceeds to reduce the
obligations under this debt to a level that, if refinanced at maturity in April
1994, could be serviced by cash flow from the remaining operations. It presently
appears unlikely the proceeds from a possible sale of these operations will
provide a reduction of principal to this level. Consequently, RII is reviewing
other financial alternatives. One such alternative is described in Note 13.
However, specific terms and conditions have not been finalized.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of PIRL Group at December
31, 1992 and 1991, and the combined results of its operations and its cash flows
for each of the three years in the period ended December 31, 1992, in conformity
with generally accepted accounting principles.
ERNST & YOUNG
Philadelphia, Pennsylvania
April 23, 1993 except for
Note 13, as to which the date is
December 29, 1993
F-51
<PAGE>
PIRL GROUP
COMBINED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1991 1992
-------- -------- SEPTEMBER 30,
1993
-------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash (including cash equivalents of $1,983,
$4,674 and $7,657)........................ $ 7,727 $ 12,200 $ 12,870
Restricted cash equivalents................ 236 601 1,099
Receivables, net........................... 22,215 18,013 7,380
Inventories................................ 6,996 6,989 7,020
Prepaid expenses........................... 5,376 4,870 5,221
-------- -------- -------------
Total current assets..................... 42,550 42,673 33,590
Property and equipment, net of accumulated
depreciation................................ 194,195 184,058 176,606
Deferred charges and other assets............ 753 945 1,332
-------- -------- -------------
$237,498 $227,676 $ 211,528
-------- -------- -------------
-------- -------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt....... $ 613 $ 185 $ 130
Accounts payable and accrued liabilities... 26,957 18,440 18,688
Due to parent company...................... 31,421 40,614 35,676
Interest payable to affiliate.............. 1,125 4,500 2,813
Note payable to affiliate.................. 50,000 50,000 50,000
-------- -------- -------------
Total current liabilities................ 110,116 113,739 107,307
-------- -------- -------------
Long-term debt............................... 457 269 169
-------- -------- -------------
Commitments and contingencies (Note 13)
Shareholders' equity:
Capital stock -- shares issued and
outstanding:
Resorts International (Bahamas) 1984
Limited:
Class A -- 500 shares.................. 1 1 1
Class B -- 400 shares.................. 1 1 1
Class C -- 900 shares.................. 3 3 3
Resorts International Disbursement, Inc.
-- 100 shares...........................
Paradise Island Vacations, Inc. -- 1,000
shares.................................. 1 1 1
Resorts Representation International,
Inc. -- 100 shares......................
International Suppliers, Inc. -- 100
shares..................................
Paradise Island Airlines, Inc. -- 10
shares.................................. 26 26 26
ANTL, Inc. -- 100 shares................. 1 1 1
-------- -------- -------------
33 33 33
Capital in excess of par................... 147,546 147,546 147,546
Accumulated deficit........................ (20,654) (33,911) (43,527 )
-------- -------- -------------
Total shareholders' equity............... 126,925 113,668 104,052
-------- -------- -------------
$237,498 $227,676 $ 211,528
-------- -------- -------------
-------- -------- -------------
</TABLE>
See Notes to Combined Financial Statements of PIRL Group.
F-52
<PAGE>
PIRL GROUP
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
1990 FOR THE THREE QUARTERS
------------------------- ENDED SEPTEMBER 30,
THROUGH FROM ------------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
----------- ------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Casino.......................... $ 43,321 $ 19,940 $ 61,003 $ 66,120 $ 44,171 $ 48,685
Rooms........................... 31,840 9,435 33,173 30,235 23,984 22,622
Food and beverage............... 29,317 11,207 36,053 32,851 25,157 23,593
Other casino/hotel revenues..... 11,584 4,895 17,563 17,890 13,457 14,412
Other operating revenues........ 9,630 5,248 15,424 19,072 14,347 13,704
Real estate related............. 3,721 212 213 213
----------- ------------ ----------- ----------- ----------- -----------
129,413 50,937 163,216 166,381 121,329 123,016
----------- ------------ ----------- ----------- ----------- -----------
Expenses:
Casino.......................... 31,293 13,896 42,610 48,272 34,612 36,587
Rooms........................... 6,429 3,130 8,745 8,217 6,268 5,562
Food and beverage............... 21,605 9,608 27,829 25,161 19,081 17,902
Other casino/hotel operating
expenses....................... 21,681 10,859 32,555 31,373 23,457 24,247
Other operating expenses........ 7,203 4,230 12,055 15,549 11,564 11,122
Selling, general and
administrative................. 18,502 10,079 27,711 26,821 19,809 18,327
Provision for doubtful
receivables.................... 2,199 891 2,893 2,633 1,964 1,748
Depreciation.................... 8,963 4,254 14,605 13,792 10,288 10,612
Real estate related............. 3,533 153 230 230
----------- ------------ ----------- ----------- ----------- -----------
121,408 57,100 169,003 172,048 127,273 126,107
----------- ------------ ----------- ----------- ----------- -----------
Earnings (loss) from operations... 8,005 (6,163) (5,787) (5,667) (5,944) (3,091)
Other income (deductions):
Interest income................. 698 208 407 359 310 291
Interest expense................ (4,546) (2,300) (7,019) (6,850) (5,145) (5,097)
Recapitalization costs.......... (41,270) (1,099) (929) (1,719)
Affiliated bad debt write-off... (2,251)
----------- ------------ ----------- ----------- ----------- -----------
Net loss.......................... $ (39,364) $ (8,255) $ (12,399) $ (13,257) $ (11,708) $ (9,616)
----------- ------------ ----------- ----------- ----------- -----------
----------- ------------ ----------- ----------- ----------- -----------
Pro forma net loss per share $ (2.65) $ (1.92)
----------- -----------
----------- -----------
</TABLE>
See Notes to Combined Financial Statements of PIRL Group.
Note 2 describes a change in entity and related presentation for periods
presented.
F-53
<PAGE>
PIRL GROUP
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------
1990 FOR THE THREE QUARTERS
-------------------------- ENDED SEPTEMBER 30,
THROUGH FROM --------------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
------------ ------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers.............. $ 123,270 $ 43,497 $ 158,653 $ 163,083 $ 125,183 $ 129,410
Cash paid to suppliers and employees...... (111,194) (44,861) (155,828) (157,615) (116,306) (112,214)
------------ ------------ ------------ ------------ ------------ ------------
Cash flow from operations before
interest............................... 12,076 (1,364) 2,825 5,468 8,877 17,196
Interest received......................... 701 208 408 358 309 291
Interest paid............................. (3,439) (3,425) (7,015) (3,473) (3,456) (6,782)
------------ ------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) operating
activities............................. 9,338 (4,581) (3,782) 2,353 5,730 10,705
------------ ------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Payments for property and equipment....... (4,564) (3,593) (4,007) (4,321) (3,365) (3,460)
Proceeds from sales of property and
equipment................................ 5,272 6,419 147 213 213
Proceeds from prior year sales of property
and equipment............................ 1,676
Proceeds from sale of short-term money
market security with maturity greater
than three months........................ 883 883 1,377
Purchase of short-term money market
security with maturity greater than three
months................................... (1,768) (1,768) (492)
------------ ------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) investing
activities............................. 708 2,826 (2,184) (4,993) (4,037) (2,575)
------------ ------------ ------------ ------------ ------------ ------------
Cash flows from financing activities:
Advances from (repayments to)
affiliates............................... (14,878) 8,774 (1,676) 9,193 (1,912) (4,938)
Recapitalization costs, including payments
to parent................................ (8,356) (1,099) (929) (1,869)
Debt repayments........................... (646) (166) (566) (616) (469) (155)
------------ ------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities............................. (23,880) 8,608 (2,242) 7,478 (3,310) (6,962)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents................................ (13,834) 6,853 (8,208) 4,838 (1,617) 1,168
Cash and cash equivalents at beginning of
period..................................... 23,152 9,318 16,171 7,963 7,963 12,801
------------ ------------ ------------ ------------ ------------ ------------
Cash and cash equivalents at end of
period..................................... $ 9,318 $ 16,171 $ 7,963 $ 12,801 $ 6,346 $ 13,969
------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
See Notes to Combined Financial Statements of PIRL Group.
Note 2 describes a change in entity and related presentation for periods
presented.
F-54
<PAGE>
PIRL GROUP
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CAPITAL STOCK
----------------------------------------------------------------------------
RIB
----------------------------
CLASS A CLASS B CLASS C RIDI PIVI RRII ISI PIA ANTL
-------- -------- -------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares authorized....................... 500 400 900 100 5,000 5,000 1,000 10 100
--- --- --- ------ ------ ------ ------ ------ ------
--- --- --- ------ ------ ------ ------ ------ ------
Balance at December 31, 1989............ $ 1 $ 1 $ 3 $ 1 $ 26 $ 1
Net loss for period through August 31,
1990...................................
Effect of reorganization:
Elimination of accumulated deficit....
--- --- --- ------ ------ ------
--- --- --- ------ ------ ------
Balance at August 31, 1990.............. 1 1 3 1 26 1
Net loss for period from September 1,
1990...................................
--- --- --- ------ ------ ------
Balance at December 31, 1990............ 1 1 3 1 26 1
Net loss for year 1991..................
--- --- --- ------ ------ ------
Balance at December 31, 1991............ 1 1 3 1 26 1
Net loss for year 1992..................
--- --- --- ------ ------ ------
Balance at December 31, 1992............ 1 1 3 1 26 1
Net loss for three quarters ended
September 30, 1993 (unaudited).........
--- --- --- ------ ------ ------
Balance at September 30, 1993
(unaudited)............................ $ 1 $ 1 $ 3 $ 1 $ 26 $ 1
--- --- --- ------ ------ ------
--- --- --- ------ ------ ------
<CAPTION>
CAPITAL
IN EXCESS ACCUMULATED
OF PAR DEFICIT
---------- ------------
<S> <C> <C>
Shares authorized.......................
Balance at December 31, 1989............ $ 273,555 $ (86,645 )
Net loss for period through August 31,
1990................................... (39,364 )
Effect of reorganization:
Elimination of accumulated deficit.... (126,009) 126,009
---------- ------------
---------- ------------
Balance at August 31, 1990.............. 147,546 -0-
Net loss for period from September 1,
1990................................... (8,255 )
---------- ------------
Balance at December 31, 1990............ 147,546 (8,255 )
Net loss for year 1991.................. (12,399 )
---------- ------------
Balance at December 31, 1991............ 147,546 (20,654 )
Net loss for year 1992.................. (13,257 )
---------- ------------
Balance at December 31, 1992............ 147,546 (33,911 )
Net loss for three quarters ended
September 30, 1993 (unaudited)......... (9,616 )
---------- ------------
Balance at September 30, 1993
(unaudited)............................ $ 147,546 $ (43,527 )
---------- ------------
---------- ------------
</TABLE>
See Notes to Combined Financial Statements of PIRL Group.
Note 2 describes a change in entity and related presentation for periods
presented.
F-55
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Resorts International (Bahamas) 1984 Limited ("RIB") is a wholly owned
subsidiary of Griffin Resorts Inc. ("GRI"). GRI, Paradise Island Airlines, Inc.
("PIA"), ANTL, Inc. ("ANTL"), Paradise Island Vacations, Inc. ("PIVI"), Resorts
Representation International, Inc. ("RRII"), International Suppliers, Inc.
("ISI") and Resorts International Disbursement, Inc. ("RIDI") are wholly owned
subsidiaries of Resorts International, Inc. ("RII"). The term "RIB" as used
herein includes RIB and/ or one or more of its subsidiaries, all of which are
wholly owned, as the context may require. The term "PIRL Group" includes all
companies included in the combined group described below under "Principles of
Combination".
RIB, through its subsidiaries, owns and operates the Paradise Island Resort
& Casino, the Ocean Club Golf & Tennis Resort, the Paradise Paradise Beach
Resort, a golf course, a utility plant, a short takeoff and landing ("STOL")
airport facility and other improvements on Paradise Island, The Bahamas.
Subsidiaries of RIB also own land available for sale or development on Paradise
Island and Grand Bahama Island.
PIA provides airline transportation between Paradise Island and Miami, Fort
Lauderdale, West Palm Beach and Orlando, Florida; offers a program of casino
night flights to and from Fort Lauderdale, Florida; and provides scheduled
service between Fort Lauderdale and Marsh Harbor and Treasure Cay in The Abacos.
PIA operates five Dash 7 STOL aircraft, four of which are leased from third
parties and one of which is owned by ANTL.
PIVI and RRII provide travel reservations and wholesale tour services. ISI
provides purchasing services and RIDI provides disbursement services to
affiliated companies.
Financial statements and footnote data with respect to September 30, 1993
and the three quarters ended September 30, 1992 and 1993 are unaudited. In the
opinion of management, such unaudited financial statements include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation, in accordance with generally accepted accounting principles.
PRINCIPLES OF COMBINATION
Negotiations among RII, two representatives (the "Representatives") of major
holders of a certain issue of RII's debt and an unrelated third party (the
"Purchaser") have led to terms of the currently proposed restructuring of that
debt outlined in Note 13. Such terms include the disposition by RII, through one
of two alternatives, of 100% of the equity of RII's Bahamian subsidiaries and
the assets and liabilities of PIA, ANTL, PIVI, RRII, ISI, and RIDI. The combined
financial statements were prepared in anticipation of this restructuring and
include the accounts of RIB and its subsidiaries on a consolidated basis
combined with the accounts of PIA, ANTL, PIVI, RRII, ISI and RIDI. All
significant intercompany transactions and balances have been eliminated in the
consolidation and the combination. RIB and its subsidiaries are incorporated
under the laws of The Bahamas. PIA, ANTL, PIVI, RRII, ISI and RIDI are
incorporated in the United States and are hereinafter referred to as the "U.S.
Paradise Island Subsidiaries." The accounts of the Bahamian companies are
maintained in U.S. dollars.
REVENUE RECOGNITION
The PIRL Group 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. Revenue from
airline operations are recognized when the transportation or other service is
provided.
F-56
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMPLIMENTARY SERVICES
The Combined 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>
1990
------------------------
THROUGH FROM
AUGUST 31 SEPTEMBER 1 1991 1992
----------- ----------- --------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Rooms........................................... $ 485 $ 181 $ 614 $ 728
Food and beverage............................... 2,333 1,122 3,291 4,096
Other casino/hotel operations................... 92 32 140 234
----------- ----------- --------- ---------
Total allocated to casino..................... $ 2,910 $ 1,335 $ 4,045 $ 5,058
----------- ----------- --------- ---------
----------- ----------- --------- ---------
</TABLE>
CASH EQUIVALENTS
The PIRL Group considers all of its short-term money market securities
purchased with maturities of three months or less to be cash equivalents.
Restricted cash equivalents are cash equivalents securing letters of credit and
other guarantees. 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.
INCOME TAXES
The U.S. Paradise Island Subsidiaries file consolidated U.S. federal income
tax returns with RII and its other U.S. subsidiaries.
The companies in the PIRL Group account for income taxes under the liability
method prescribed by Statement of Financial Accounting Standards No. 96,
"Accounting for Income Taxes" ("SFAS 96"). 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.
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes," ("SFAS
109"). SFAS 109 supersedes SFAS 96 but retains the liability method of
accounting for income taxes. The companies composing the PIRL Group will adopt
SFAS 109 for fiscal 1993 and anticipate no significant impact on the PIRL
Group's combined financial statements.
F-57
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
There are no income taxes in The Bahamas and RIB's income is generally not
subject to U.S. federal income taxation until it is distributed to a U.S.
parent. Therefore, no taxes are provided in the accompanying combined financial
statements relative to RIB's earnings.
NOTE 2 -- BASIS OF PRESENTATION
During 1989, RII and certain of its subsidiaries (the "Old Debtors"), none
of which are in the PIRL Group, filed voluntary petitions or consented to
involuntary petitions for relief under chapter 11 of the United States
Bankruptcy Code. The Old Debtors filed the Second Amended Joint Plan of
Reorganization dated as of May 31, 1990 (the "Old Plan") which was confirmed by
the New Jersey bankruptcy court in August 1990. On September 17, 1990 (the "Old
Effective Date"), all conditions to effectiveness of the Old Plan were either
met or waived and the Old Plan became effective.
Under the Old Plan, all previously outstanding debt securities of the Old
Debtors were cancelled and exchanged for new debt and equity securities of RII.
Also pursuant to the Old Plan, all previously outstanding shares of stock of RII
were cancelled. As a result of these and other transactions prescribed in the
Old Plan, Merv Griffin, who prior to the reorganization indirectly owned 100% of
RII, owned 22% of RII as of October 1, 1990, the initial distribution date of
the new securities.
RII accounted for the reorganization using "fresh start" accounting.
Accordingly, all assets and liabilities of RII and its subsidiaries were
restated to reflect their estimated fair values and the accumulated deficit was
eliminated. Although the confirmation date was August 28, 1990, the PIRL Group
recorded the effects of the reorganization as of August 31, 1990.
In 1990, the PIRL Group recorded affiliated bad debt write-offs of
$2,251,000, the net amount of intercompany receivables from the Old Debtors
cancelled pursuant to the Old Plan.
The revaluation of the PIRL Group's other assets and liabilities, which was
based on independent appraisals, discounted cash flows, evaluations, estimations
and other studies, resulted in a net loss of $29,904,000, with the following
components:
<TABLE>
<CAPTION>
(IN THOUSANDS OF
DOLLARS)
------------------------
<S> <C>
Decrease in working capital................................................... $ 3,416
Decrease in property and equipment............................................ 26,413
Decrease in deferred charges and other assets................................. 75
--------
$ 29,904
--------
--------
</TABLE>
The loss on revaluation was included in recapitalization costs in 1990 in
the accompanying Combined Statements of Operations along with PIRL Group's
allocated portion (approximately one-third) of legal and financial advisory fees
and other costs associated with the reorganization amounting to $11,366,000.
The accumulated deficit at August 31, 1990 of $126,009,000 which included
the effects of the reorganization was reclassified to capital in excess of par.
The financial information contained herein relating to the PIRL Group's 1990
Combined Statements of Operations and Cash Flows 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.
F-58
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- RECEIVABLES
Components of receivables at December 31 were as follows:
<TABLE>
<CAPTION>
1991 1992
--------- ---------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Gaming.............................................................. $ 11,795 $ 10,773
Less allowance for doubtful accounts.............................. (2,843) (2,752)
--------- ---------
8,952 8,021
--------- ---------
Non-gaming:
Hotel and related................................................. 6,198 5,400
Bahamian duty refunds receivable.................................. 3,766 719
Other............................................................. 4,681 5,037
--------- ---------
14,645 11,156
Less allowance for doubtful accounts.............................. (1,382) (1,164)
--------- ---------
13,263 9,992
--------- ---------
$ 22,215 $ 18,013
--------- ---------
--------- ---------
</TABLE>
NOTE 4 -- PROPERTY AND EQUIPMENT
Components of property and equipment at December 31 were as follows:
<TABLE>
<CAPTION>
1991 1992
----------- -----------
(IN THOUSANDS OF
DOLLARS)
<S> <C> <C>
Land and land rights, including land held for investment,
development and resale.......................................... $ 80,385 $ 80,249
Land improvements and utilities.................................. 21,845 22,389
Hotels and other buildings....................................... 75,927 76,348
Furniture, machinery and equipment............................... 33,732 36,196
Construction in progress......................................... 948 889
----------- -----------
212,837 216,071
Less accumulated depreciation.................................. (18,642) (32,013)
----------- -----------
$ 194,195 $ 184,058
----------- -----------
----------- -----------
</TABLE>
Substantially all of the PIRL Group's property and equipment has been
pledged as collateral for the Senior Secured Redeemable Notes due April 15, 1994
(the "Old Series Notes") issued by RII.
NOTE 5 -- ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Components of accounts payable and accrued liabilities at December 31 were
as follows:
<TABLE>
<CAPTION>
1991 1992
--------- ---------
<S> <C> <C>
(IN THOUSANDS OF
DOLLARS)
Accrued payroll and related taxes and benefits........................ $ 2,128 $ 2,154
Accrued gaming taxes, fees and related assessments.................... 5,778 1,610
Customer deposits and unearned revenues............................... 8,583 5,682
Trade payables........................................................ 6,138 5,026
Progressive slot liability............................................ 469 562
Other accrued liabilities............................................. 3,861 3,406
--------- ---------
$ 26,957 $ 18,440
--------- ---------
--------- ---------
</TABLE>
F-59
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- NOTE PAYABLE TO AFFILIATE
In 1988, Resorts International Hotel, Inc. ("RIH"), a wholly owned
subsidiary of RII, loaned $50,000,000 to RIB pursuant to a pre-arranged
back-to-back loan in exchange for a promissory 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 promissory note and the mortgages securing payment
thereof have been assigned as part of the collateral for the Old Series Notes.
It was not anticipated that this intercompany promissory note payable be
repaid in the ordinary course of business. Also, RII is contemplating a
restructuring of the Old Series Notes, which may also affect this and other
intercompany relationships among RII's subsidiaries; however, the terms and
effects of any possible restructuring are uncertain at this time. Thus, it is
not practicable to estimate the fair value of this intercompany note without
incurring excessive costs.
NOTE 7 -- LONG-TERM DEBT
The long-term debt consists of capitalized lease obligations under which the
PIRL Group is the lessee of computer and other equipment. These leases expire in
1993 and 1995 and bear interest rates from 9.7% to 10.75%.
NOTE 8 -- RELATED PARTY TRANSACTIONS
The PIRL Group recorded the following income and expense from RII and other
affiliates:
<TABLE>
<CAPTION>
1990
------------------------
THROUGH FROM
AUGUST 31 SEPTEMBER 1 1991 1992
----------- ----------- --------- ---------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Income -- RIH -- Charter flights................................. $ 151
-----------
-----------
Expenses:
RII -- Parent services fee..................................... $ 3,560 $ 1,587 $ 5,126 $ 5,284
-- Building rental.......................................... 29 15 44 44
RIH -- Interest expense........................................ 4,500 2,250 6,750 6,750
----------- ----------- --------- ---------
$ 8,089 $ 3,852 $ 11,920 $ 12,078
----------- ----------- --------- ---------
----------- ----------- --------- ---------
</TABLE>
For periods through August 31, 1990, RII charged the PIRL Group for services
provided based on an allocation of corporate overhead costs incurred by RII.
Effective with the reorganization, RII began charging the PIRL Group a fee of
three (3) percent of certain gross revenues for such services. This three
percent parent services fee compensates RII for accounting, data processing and
other support services which RII provides on behalf of the PIRL Group's
operations (estimated to amount to $1,100,000, $3,900,000 and $3,700,000 for the
period from September 1, 1990 and the years 1991 and 1992, respectively), as
well as a portion of the costs of RII executives and certain corporate office
functions not directly related to the PIRL Group operations. RII believes that
an unaffiliated entity could have obtained these services for approximately the
same cost.
Also, recapitalization costs reflected on the Combined Statements of
Operations include charges of $11,366,000 for 1990 and $1,099,000 for 1992
representing the PIRL Group's allocated portion (approximately one-third) of
RII's consolidated recapitalization costs.
In addition to the above, charges for insurance cost are allocated to the
PIRL Group based on relative amounts of operating revenue, payroll, property
value, or other appropriate measures.
F-60
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- RELATED PARTY TRANSACTIONS (CONTINUED)
Also, see Note 2 for discussion of the write-off of certain affiliated
receivables in 1990.
NOTE 9 -- RETIREMENT PLANS
Certain of the U.S. Paradise Island Subsidiaries participate in a defined
contribution plan covering substantially all of their full-time employees. The
companies make contributions to this plan based on a percentage of eligible
employee contributions. Total pension expense for this plan was $44,000, $35,000
and $47,000 in 1990, 1991 and 1992, respectively.
In addition to the plan described above, union and certain other employees
of Bahamian companies included in the PIRL Group are covered by multi-employer
defined benefit pension plans to which the companies make contributions. Such
contributions totalled $2,074,000, $1,659,000 and $576,000 in 1990, 1991 and
1992, respectively.
NOTE 10 -- INCOME TAXES
No tax provision was recorded for 1990, 1991 and 1992 due to either the
generation of net operating losses or application of net operating loss
carryforwards for federal and state income tax purposes by the U.S. Paradise
Island Subsidiaries. The source of net loss was as follows:
<TABLE>
<CAPTION>
1990
-----------------------
THROUGH FROM
AUGUST 31 SEPTEMBER 1 1991 1992
---------- ----------- ---------- ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
U.S. source earnings (loss)................................... $ (791) $ (163) $ 167 $ 19
Foreign source loss........................................... (38,573) (8,092) (12,566) (13,276)
---------- ----------- ---------- ----------
Net loss...................................................... $ (39,364) $ (8,255) $ (12,399) $ (13,257)
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
</TABLE>
Due to the availability of net operating loss carryforwards and/or tax bases
of assets exceeding the financial reporting bases, through December 31, 1992, no
deferred tax liability was required for any of the U.S. Paradise Island
Subsidiaries. RIB has no deferred tax liability as there is no income tax in The
Bahamas and RIB is generally not subject to U.S. federal income taxation on its
income.
F-61
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- STATEMENTS OF CASH FLOWS
Supplemental disclosures required by Statement of Financial Accounting
Standards No. 95 "Statement of Cash Flows" are presented below.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------
FOR THE THREE
1990 QUARTERS ENDED
------------------------ SEPTEMBER 30,
THROUGH FROM ---------------------
AUGUST 31 SEPTEMBER 1 1991 1992 1992 1993
---------- ------------ ---------- ---------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS OF DOLLARS)
Reconciliation of net loss to net cash
provided by (used in) operating
activities:
Net loss................................. $ (39,364) $ (8,255) $ (12,399) $ (13,257) $ (11,708) $ (9,616)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Recapitalization costs................. 41,270 1,099 929 1,719
Affiliated bad debt write-off.......... 2,251
Depreciation and amortization.......... 9,160 4,354 14,914 13,792 10,288 10,643
Provision for doubtful receivables..... 2,199 891 2,893 2,633 1,964 1,748
Net (gain) loss on sales of property
and equipment......................... (855) (55) 132 116 17
Net (increase) decrease in accounts
receivable............................ 3,635 (2,744) (7,287) 2,791 8,764 7,850
Net (increase) decrease in inventories
and prepaids.......................... (1,420) (504) (2,064) 513 (908) (182)
Net (increase) decrease in deferred
charges and other assets.............. (25) (27) (44) (192) (191) 32
Net increase (decrease) in accounts
payable and accrued liabilities....... (8,638) 2,884 73 (8,517) (5,113) 198
Net increase (decrease) in interest
payable to affiliate.................. 1,125 (1,125) 3,375 1,688 (1,687)
---------- ------------ ---------- ---------- ---------- ---------
Net cash provided by (used in)
operating activities.................. $ 9,338 $ (4,581) $ (3,782) $ 2,353 $ 5,730 $ 10,705
---------- ------------ ---------- ---------- ---------- ---------
---------- ------------ ---------- ---------- ---------- ---------
Non-cash investing and financing
transactions:
Increase in liabilities for additions to
property and equipment.................. $ 513 $ 593
Reclassifications to deposits and other
assets from receivables and property and
equipment............................... $ 675 $ 674 $ 337 $ 450
Receivables from sale of property........ $ 1,185 $ 491
</TABLE>
F-62
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION
Geographic and business segment information for the PIRL Group is as
follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------
1990
-------------------------
THROUGH FROM
AUGUST 31 SEPTEMBER 1 1991 1992
----------- ------------ ----------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Revenues
Paradise Island, The Bahamas:
Casino/hotel:
Casino.................................................. $ 43,321 $ 19,940 $ 61,003 $ 66,120
Rooms................................................... 31,840 9,435 33,173 30,235
Food and beverage....................................... 29,317 11,207 36,053 32,851
Other casino/hotel...................................... 11,584 4,895 17,563 17,890
----------- ------------ ----------- -----------
Total casino/hotel.................................... 116,062 45,477 147,792 147,096
Real estate related....................................... 3,721 212 213
----------- ------------ ----------- -----------
119,783 45,689 147,792 147,309
Airline..................................................... 11,071 6,083 18,234 22,483
Other....................................................... 191 18 86 162
Intersegment eliminations................................... (1,632) (853) (2,896) (3,573)
----------- ------------ ----------- -----------
Revenues from operations.................................. $ 129,413 $ 50,937 $ 163,216 $ 166,381
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Contribution to Combined Loss
Paradise Island, The Bahamas:
Casino/hotel*............................................. $ 7,370 $ (6,166) $ (5,707) $ (5,592)
Real estate related....................................... 188 59 (17)
----------- ------------ ----------- -----------
7,558 (6,107) (5,707) (5,609)
Airline*.................................................... 5 (4) 83 77
Other....................................................... 442 (52) (163) (135)
----------- ------------ ----------- -----------
Earnings (loss) from operations............................. 8,005 (6,163) (5,787) (5,667)
Other income (deductions):
Interest income........................................... 698 208 407 359
Interest expense.......................................... (4,546) (2,300) (7,019) (6,850)
Recapitalization costs.................................... (41,270) (1,099)
Affiliated bad debt write-off............................. (2,251)
----------- ------------ ----------- -----------
Net loss................................................ $ (39,364) $ (8,255) $ (12,399) $ (13,257)
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
</TABLE>
- ------------------------
*The Paradise Island casino/hotel segment subsidized the operation of PIA in the
amount of $1,320,000, $571,000 and $760,000 for the two periods presented for
1990 and the year 1991, respectively. The Paradise Island casino/hotel segment
did not subsidize the operation of PIA in 1992.
F-63
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- GEOGRAPHIC AND BUSINESS SEGMENT INFORMATION (CONTINUED)
Identifiable Assets, Depreciation and Capital Additions (In Thousands of
Dollars)
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
-------------------------------------------
LESS ACCUMULATED
DEPRECIATION AND
VALUATION
GROSS ASSETS ALLOWANCES NET ASSETS DEPRECIATION
------------ ---------------- ---------- ------------
CAPITAL
ADDITIONS
---------
FOR THE YEAR ENDED
DECEMBER 31, 1992 DECEMBER 31, 1992
------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Paradise Island, The
Bahamas:
Casino/hotel........... $ 208,899 $ (33,899) $ 175,000 $ 12,973 $ 4,317
Real estate related.... 33,414 33,414
------------ -------- ---------- ------------ ---------
242,313 (33,899) 208,414 12,973 4,317
Airline.................. 12,923 (1,995) 10,928 805 4
Other.................... 1,542 (34) 1,508 13
Corporate (A)............ 6,827 (1) 6,826 1
------------ -------- ---------- ------------ ---------
$ 263,605 $ (35,929) $ 227,676 $ 13,792 $ 4,321
------------ -------- ---------- ------------ ---------
------------ -------- ---------- ------------ ---------
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1991 DECEMBER 31, 1991
------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Paradise Island, The
Bahamas:
Casino/hotel........... $ 207,924 $ (21,684) $ 186,240 $ 13,782 $ 3,726
Real estate related.... 33,400 33,400
------------ -------- ---------- ------------ ---------
241,324 (21,684) 219,640 13,782 3,726
Airline.................. 11,734 (1,163) 10,571 809 280
Other.................... 1,545 (20) 1,525 14 1
Corporate (A)............ 5,762 5,762
------------ -------- ---------- ------------ ---------
$ 260,365 $ (22,867) $ 237,498 $ 14,605 $ 4,007
------------ -------- ---------- ------------ ---------
------------ -------- ---------- ------------ ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1990
----------------------------------------------
<S> <C> <C> <C>
Paradise Island, The Bahamas:
Casino/hotel.......................... $ 198,825 $ (8,256) $ 190,569
Real estate related................... 34,075 34,075
------------- ------- ----------
232,900 (8,256) 224,644
Airline................................. 11,568 (319) 11,249
Other................................... 1,747 (42) 1,705
Corporate (A)........................... 14,468 14,468
------------- ------- ----------
$ 260,683 $ (8,617) $ 252,066
------------- ------- ----------
------------- ------- ----------
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1990
----------------------------------------------
THROUGH FROM THROUGH FROM
AUGUST 31 SEPTEMBER 1 AUGUST 31 SEPTEMBER 1
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Paradise Island, The Bahamas:
Casino/hotel.......................... $ 8,133 $ 3,878 $ 5,020 $ 4,320
Real estate related...................
--------- ----------- --------- -----------
8,133 3,878 5,020 4,320
Airline................................. 746 370 56 35
Other................................... 84 6
Corporate (A)...........................
--------- ----------- --------- -----------
$ 8,963 $ 4,254 $ 5,076 $ 4,355
--------- ----------- --------- -----------
--------- ----------- --------- -----------
<FN>
- ------------------------
(A) Includes cash equivalents and other corporate assets.
</TABLE>
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
DISPOSITION OF PIRL GROUP
In April 1993 RII reached an agreement in principle with the Representatives
of major holders of its Old Series Notes as to terms of a restructuring of Old
Series Notes. Such restructuring was to include the exchange of the Old Series
Notes for, among other things, cash, new debt, an equity interest in RII and
100% of the equity of the members of the PIRL Group.
Since that time, management of RII has been cooperating with the
Representatives in negotiating the possible sale to the Purchaser of a majority
of the equity of RII's Bahamian subsidiaries and the assets and related
liabilities of the U.S. Paradise Island Subsidiaries.
F-64
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
Further negotiations among RII, the Purchaser and the Representatives have
led to the currently proposed restructuring which contemplates, among other
things, the exchange of the Old Series Notes for the following:
(a) excess cash, as defined, of RII consolidated with its subsidiaries,
(b) $125,000,000 principal amount of nine-year, 11% mortgage notes to be
issued by a 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 RIH,
(c) $35,000,000 principal amount of ten-year, 11.375%, junior mortgage
notes to be issued by a subsidiary of RII and to be secured by a junior
mortgage on the Resorts Casino Hotel and guaranteed by RIH,
(d) shares of common stock of RII in an amount representing
approximately 40% of the total outstanding shares, and
(e) either (i) $65,000,000 cash and 40% of the equity of a company
formed by the Purchaser to purchase 100% of the equity of RII's Bahamian
subsidiaries and, through subsidiaries, the assets and related liabilities
of the U.S. Paradise Island Subsidiaries or, if that purchase is not
consummated, (ii) 100% of the equity of a holding company formed to own 100%
of the equity of RII's Bahamian subsidiaries and, through subsidiaries, the
assets and related liabilities of the U.S. Paradise Island Subsidiaries.
The proposed restructuring also contemplates that RIB's $50,000,000 note payable
to RIH (see Note 6) will be assumed by GRI, thus, relieving RIB of its
obligation thereunder.
Before any restructuring can be completed, specific terms and conditions
must be finalized and set forth in definitive agreements, indentures and other
documents. Also, any restructuring must be approved by various governmental
agencies, and the proposed restructuring will require certain shareholder and
creditor approvals, as well as confirmation by the Bankruptcy Court. RII cannot
provide any assurances as to whether or when the proposed restructuring will be
effected, or that the restructuring will be on terms similar to those described
above.
PRO FORMA NET LOSS PER SHARE DATA
The pro forma net loss per share data was calculated by dividing the
historical net loss by 5,000,000 shares. Although it is not known which of the
two companies described in (e) above may ultimately own 100% of the equity of
RII's Bahamian subsidiaries and, through subsidiaries, the assets and related
liabilities of the U.S. Paradise Island Subsidiaries, each of those companies
proposes to issue 5,000,000 shares in the event its proposed transaction is
consummated.
UNION NEGOTIATIONS
Approximately 1,900 of PIRL Group's Bahamian employees are members of The
Bahamas Catering and Allied Workers Union (the "Union"), whose contract expires
in January 1995. In light of the downturn in business being experienced by
hotels in the Paradise-New Providence Island area, PIRL Group, along with other
affected operators in that area, did not pay wage and pension increases
scheduled for January 1993 as they were negotiating with the Union for certain
concessions under the contract. Since then the Union filed claims against the
employers and, after attempting to mediate the dispute, the Minister of Labour
referred it to arbitrators. The dispute remains unsettled and negotiations among
the parties continue. The accompanying combined financial statements do not
reflect any accrual for unpaid wage and pension increases; however, the
estimated liability for such increases may amount to approximately $750,000 for
the first three quarters of 1993.
F-65
<PAGE>
PIRL GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
LITIGATION
Members of the PIRL Group 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 combined financial statements.
F-66
<PAGE>
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
1991 and 1992 and the first three quarters of 1993.
<TABLE>
<CAPTION>
1991 1992
------------------------------------------ ------------------------------------------
FOR THE QUARTER FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
- ------------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues............ $ 101,429 $ 106,438 $ 113,005 $ 97,371 $ 111,631 $ 106,246 $ 112,377 $ 106,680
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from
operations................... $ 2,893 $ 5,042 $ 11,516 $ (3,415) $ 5,789 $ 4,847 $ 9,471 $ 1,395
Recapitalization costs........ (300) (1,043) (994) (511)
Other income (deductions),
net (A)...................... (13,586) (13,834) (15,356) (15,662) (18,501) (18,748) (17,744) (18,463)
--------- --------- --------- --------- --------- --------- --------- ---------
Loss before income taxes...... (10,693) (8,792) (3,840) (19,077) (13,012) (14,944) (9,267) (17,579)
Income tax benefit (expense).. 831 1,348
--------- --------- --------- --------- --------- --------- --------- ---------
Net loss...................... $ (10,693) $ (8,792) $ (3,840) $ (18,246) $ (13,012) $ (14,944) $ (9,267) $ (16,231)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Net loss per share of RII
Common Stock................. $ (.53) $ (.44) $ (.19) $ (.91) $ (.65) $ (.74) $ (.46) $ (.80)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1993
-------------------------------
FOR THE QUARTER FIRST SECOND THIRD
- ------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Operating revenues............ $ 114,154 $ 106,697 $ 117,007
--------- --------- ---------
--------- --------- ---------
Earnings (loss) from
operations................... $ 9,106 $ 1,791 $ 9,783
Recapitalization costs........ (593) (1,156) (3,130)
Other income (deductions),
net (A)...................... (21,411) (26,003) (25,757)
--------- --------- ---------
Loss before income taxes...... (12,898) (25,368) (19,104)
Income tax benefit (expense).. (1,000)
--------- --------- ---------
Net loss...................... $ (12,898) $ (25,368) $ (20,104)
--------- --------- ---------
--------- --------- ---------
Net loss per share of RII
Common Stock................. $ (.64) $ (1.26) $ (1.00)
--------- --------- ---------
--------- --------- ---------
<FN>
- ------------------------------
(A) Includes interest income, interest expense and amortization of debt
discount.
</TABLE>
F-67
<PAGE>
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
1991 and 1992 and the first three quarters of 1993.
<TABLE>
<CAPTION>
1991 1992
------------------------------------------ ------------------------------------------
FOR THE QUARTER FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues................... $ 53,732 $ 64,682 $ 73,294 $ 55,766 $ 61,587 $ 65,907 $ 75,586 $ 59,660
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from operations...... $ (1,103) $ 4,210 $ 12,109 $ (397) $ 2,159 $ 5,287 $ 11,975 $ 1,628
Recapitalization costs............... (75) (335) (294) (170)
Other income (deductions), net (A)... 1,778 1,746 1,693 1,725 1,735 1,754 1,842 1,850
--------- --------- --------- --------- --------- --------- --------- ---------
Earnings before income taxes......... 675 5,956 13,802 1,328 3,819 6,706 13,523 3,308
Income tax expense................... (2,653) (5,521) (530) (1,529) (2,681) (5,410) (1,322)
--------- --------- --------- --------- --------- --------- --------- ---------
Net earnings......................... $ 675 $ 3,303 $ 8,281 $ 798 $ 2,290 $ 4,025 $ 8,113 $ 1,986
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1993
-------------------------------
FOR THE QUARTER FIRST SECOND THIRD
- ------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Operating revenues................... $ 60,336 $ 67,678 $ 80,800
--------- --------- ---------
--------- --------- ---------
Earnings (loss) from operations...... $ 2,444 $ 2,565 $ 10,796
Recapitalization costs............... (198) (317) (1,065)
Other income (deductions), net (A)... 1,796 1,763 1,882
--------- --------- ---------
Earnings before income taxes......... 4,042 4,011 11,613
Income tax expense................... (400)
--------- --------- ---------
Net earnings......................... $ 4,042 $ 4,011 $ 11,213
--------- --------- ---------
--------- --------- ---------
<FN>
- ------------------------------
(A) Includes interest income and interest expense.
</TABLE>
F-68
<PAGE>
PIRL GROUP
COMBINED SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(IN THOUSANDS OF DOLLARS)
The table below reflects selected quarterly financial data for the years
1991 and 1992 and the first three quarters of 1993.
<TABLE>
<CAPTION>
1991 1992
------------------------------------------ ------------------------------------------
FOR THE QUARTER FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
- ------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues................... $ 45,878 $ 39,850 $ 37,793 $ 39,695 $ 48,136 $ 38,370 $ 34,823 $ 45,052
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
Earnings (loss) from operations...... $ 2,262 $ (758) $ (2,931) $ (4,360) $ 1,336 $ (2,443) $ (4,837) $ 277
Recapitalization costs............... (150) (348) (431) (170)
Other income (deductions), net (A)... (1,658) (1,623) (1,661) (1,670) (1,598) (1,597) (1,640) (1,656)
--------- --------- --------- --------- --------- --------- --------- ---------
Net earnings (loss).................. $ 604 $ (2,381) $ (4,592) $ (6,030) $ (412) $ (4,388) $ (6,908) $ (1,549)
--------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1993
-------------------------------
FOR THE QUARTER FIRST SECOND THIRD
- ------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Operating revenues................... $ 51,849 $ 36,989 $ 34,178
--------- --------- ---------
--------- --------- ---------
Earnings (loss) from operations...... $ 4,063 $ (3,230) $ (3,924)
Recapitalization costs............... (198) (517) (1,004)
Other income (deductions), net (A)... (1,594) (1,617) (1,595)
--------- --------- ---------
Net earnings (loss).................. $ 2,271 $ (5,364) $ (6,523)
--------- --------- ---------
--------- --------- ---------
<FN>
- ------------------------------
(A) Includes interest income and interest expense.
</TABLE>
F-69
<PAGE>
APPENDIX A
PLAN OF REORGANIZATION
<PAGE>
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
<TABLE>
<S> <C>
IN RE CASE NOS.
RESORTS INTERNATIONAL, INC., A AND
DELAWARE CORPORATION, AND GGRI, INC., A
DELAWARE CORPORATION, FORMERLY JOINTLY ADMINISTERED
KNOWN AS GRIFFIN RESORTS, INC., UNDER CASE NO.
DEBTORS. CHAPTER 11
</TABLE>
JOINT PLAN OF REORGANIZATION PROPOSED BY
RESORTS INTERNATIONAL, INC., GGRI, INC.,
RESORTS INTERNATIONAL HOTEL, INC.,
RESORTS INTERNATIONAL HOTEL FINANCING, INC.
AND P.I. RESORTS LIMITED
DATED AS OF , 1994
MICHAEL A. ROSENTHAL, ESQ.
KEITH D. ROSS, ESQ.
GIBSON, DUNN & CRUTCHER
200 Park Avenue
New York, New York 10166
(212) 351-4000
Attorneys for RESORTS INTERNATIONAL,
INC. and GGRI, INC.,
Debtors and Debtors in Possession
and
RESORTS INTERNATIONAL HOTEL, INC.,
RESORTS INTERNATIONAL HOTEL
FINANCING, INC. and P.I. RESORTS
LIMITED
A-i
<PAGE>
JOINT PLAN OF REORGANIZATION
FOR
RESORTS INTERNATIONAL, INC.
AND
GGRI, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C> <C>
ARTICLE I DEFINITIONS AND INTERPRETATION 1
1.1 Definitions............................................................ 1
1.1.1 1990 Stock Option Plan...................................... 1
1.1.2 1990 Stock Options.......................................... 1
1.1.3 1994 Stock Option Plan...................................... 1
1.1.4 Administrative Claim........................................ 2
1.1.5 Affiliate................................................... 2
1.1.6 Allowed, Allowed Claim or Allowed Interest.................. 2
1.1.7 Alternative Closing......................................... 2
1.1.8 Alternative Closing Date.................................... 2
1.1.9 Amended RII Bylaws.......................................... 2
1.1.10 Amended RII Certificate of Incorporation.................... 2
1.1.11 Available Cash.............................................. 2
1.1.12 Bahamian Government......................................... 2
1.1.13 Bankruptcy Code............................................. 2
1.1.14 Bankruptcy Court............................................ 3
1.1.15 Bankruptcy Rules............................................ 3
1.1.16 Business Day................................................ 3
1.1.17 Caesars Payment............................................. 3
1.1.18 Cash........................................................ 3
1.1.19 CCC......................................................... 3
1.1.20 Claim....................................................... 3
1.1.21 Class....................................................... 3
1.1.22 Confirmation................................................ 3
1.1.23 Confirmation Date........................................... 3
1.1.24 Confirmation Hearing........................................ 3
1.1.25 Confirmation Order.......................................... 3
1.1.26 Contingent Claim............................................ 3
1.1.27 Creditor.................................................... 3
1.1.28 Debtors..................................................... 3
1.1.29 Deferred Cash............................................... 3
1.1.30 Disallowed Claim or Disallowed Interest..................... 3
1.1.31 Disbursing Agent............................................ 3
1.1.32 Disbursing Agreement........................................ 4
1.1.33 Disputed Claim or Disputed Interest......................... 4
1.1.34 Distribution Date........................................... 4
1.1.35 Distribution Record Date.................................... 4
1.1.36 Effective Date.............................................. 4
1.1.37 Encumbrances................................................ 4
1.1.38 Entity...................................................... 5
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C> <C>
1.1.39 Estate...................................................... 5
1.1.40 Excess Cash................................................. 5
1.1.41 Fidelity.................................................... 5
1.1.42 Final Order................................................. 5
1.1.43 GRH......................................................... 5
1.1.44 GRI......................................................... 5
1.1.45 GRI Bylaws..................................................
1.1.46 GRI Certificate of Incorporation............................
1.1.47 GRI Common Stock............................................ 5
1.1.48 GRI Guaranty Claims......................................... 5
1.1.49 Griffin Group Note.......................................... 5
1.1.50 Griffin Group Note Proceeds................................. 5
1.1.51 Griffin Warrants............................................ 5
1.1.52 Holder...................................................... 5
1.1.53 Indenture Trustee Charging Liens............................ 6
1.1.54 Interest.................................................... 6
1.1.55 Lien........................................................ 6
1.1.56 Litigation Trust............................................ 6
1.1.57 Litigation Trust Units...................................... 6
1.1.58 National Securities Exchange................................ 6
1.1.59 Net Plan Consummation Cash.................................. 6
1.1.60 Net SIHL Reserved Cash...................................... 6
1.1.61 Net Standby Reserved Cash................................... 6
1.1.62 New Debt Securities......................................... 6
1.1.63 New Equity Securities....................................... 6
1.1.64 New Indentures.............................................. 6
1.1.65 New RIHF Indenture Trustees................................. 6
1.1.66 New RIHF Junior Indenture Trustee........................... 6
1.1.67 New RIHF Junior Mortgage Indenture.......................... 7
1.1.68 New RIHF Junior Mortgage Notes.............................. 7
1.1.69 New RIHF Indenture Trustee.................................. 7
1.1.70 New RIHF Mortgage Indenture................................. 7
1.1.71 New RIHF Mortgage Notes..................................... 7
1.1.72 New RII Common Stock........................................ 7
1.1.73 Old Chapter 11 Cases........................................ 7
1.1.74 Old Debtors................................................. 7
1.1.75 Old Plan.................................................... 7
1.1.76 Old RII Common Stock........................................ 7
1.1.77 Old Security Documents...................................... 7
1.1.78 Old Series Note Indenture................................... 7
1.1.79 Old Series Indenture Trustee................................ 8
1.1.80 Old Series Note Claims...................................... 8
1.1.81 Old Series Notes............................................ 8
1.1.82 Old Series Public Debt Claims............................... 8
1.1.83 Paradise Island Approval Order.............................. 8
1.1.84 Paradise Island Assets...................................... 8
1.1.85 Paradise Island Purchase Agreement.......................... 8
1.1.86 Paradise Island Shares...................................... 8
1.1.87 Paradise Subsidiary Claims.................................. 8
1.1.88 Payments-In-Kind............................................ 8
1.1.89 Petition Date............................................... 8
</TABLE>
A-iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C> <C>
1.1.90 PIRL........................................................ 8
1.1.91 PIRL Aggregate Purchase Price............................... 8
1.1.92 PIRL Articles............................................... 8
1.1.93 PIRL Ordinary Shares........................................ 8
1.1.94 PIRL Spin-Off............................................... 8
1.1.95 PIRL Standby Distribution Agreement......................... 9
1.1.96 PIRL Subsidiaries........................................... 9
1.1.97 PIRL Subsidiaries Certificates of Incorporation............. 9
1.1.98 Plan........................................................ 9
1.1.99 Plan Consummation Cash...................................... 9
1.1.100 Plan Documents.............................................. 9
1.1.101 Plan Expenses............................................... 9
1.1.102 Plan Securities............................................. 9
1.1.103 Prepackaged Chapter 11 Cases................................ 9
1.1.104 Priority Claim.............................................. 9
1.1.105 Priority Tax Claim.......................................... 10
1.1.106 Pro Rata Share.............................................. 10
1.1.107 Professional Persons........................................ 10
1.1.108 Proponents.................................................. 10
1.1.109 Registrar................................................... 10
1.1.110 Registration Statement...................................... 10
1.1.111 Reorganized Debtors......................................... 10
1.1.112 Reorganized GRI............................................. 10
1.1.113 Reorganized RII............................................. 10
1.1.114 Reorganized RII Common Stock................................ 10
1.1.115 Restructuring Transactions.................................. 10
1.1.116 Retiree..................................................... 10
1.1.117 Retiree Administrative Claim................................ 10
1.1.118 Retiree Benefit Plans....................................... 10
1.1.119 RIB......................................................... 10
1.1.120 RIH......................................................... 10
1.1.121 RIHF........................................................ 10
1.1.122 RIHF Senior Facility........................................ 10
1.1.123 RIHF Senior Facility Indenture.............................. 10
1.1.124 RIHF Senior Facility Note Purchase Agreement................
1.1.125 RIHF Senior Facility Notes.................................. 11
1.1.126 RII......................................................... 11
1.1.127 RII Bylaws..................................................
1.1.128 RII Certificate of Incorporation............................
1.1.129 RII Class B Common Stock.................................... 11
1.1.130 RII Intercompany Claim...................................... 11
1.1.131 RII Paradise Assets......................................... 11
1.1.132 RII Paradise Subsidiaries................................... 11
1.1.133 RII Real Estate Assets...................................... 11
1.1.134 RII Retained Cash........................................... 11
1.1.135 Secured Claim............................................... 11
1.1.136 Showboat Note Claim......................................... 11
1.1.137 Showboat Notes.............................................. 11
1.1.138 Showboat Notes Indenture.................................... 12
1.1.139 SIHL........................................................ 12
1.1.140 SIHL Aggregate Cash Purchase Price.......................... 12
</TABLE>
A-iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C> <C>
1.1.141 SIHL Aggregate Purchase Price............................... 12
1.1.142 SIHL Articles............................................... 12
1.1.143 SIHL Buyer Expense Escrow................................... 12
1.1.144 SIHL Closing................................................ 12
1.1.145 SIHL Closing Date........................................... 12
1.1.146 SIHL Escrow................................................. 12
1.1.147 SIHL Escrow Agreement....................................... 12
1.1.148 SIHL Management Agreement................................... 12
1.1.149 SIHL Put Rights............................................. 12
1.1.150 SIHL Reserved Cash.......................................... 12
1.1.151 SIHL Series A Shares........................................ 12
1.1.152 SIHL Subsidiaries........................................... 13
1.1.153 SIHL Target Adjusted Cash................................... 13
1.1.154 Standby Management Agreement................................ 13
1.1.155 Standby Reserved Cash....................................... 13
1.1.156 Standby Target Adjusted Cash................................ 13
1.1.157 Subsidiaries................................................ 13
1.1.158 TCW......................................................... 13
1.1.159 Unsecured Claim............................................. 13
1.2 Interpretation and Rules of Construction............................... 13
1.3 Other Terms............................................................ 13
1.4 Headings............................................................... 13
1.5 Incorporation of Exhibits.............................................. 13
ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS 14
2.1 Claims and Equity Interests Classified................................. 14
2.2 Administrative Claims and Priority Tax Claims.......................... 14
2.3 Claims Against and Equity Interests in RII............................. 14
2.3.1 RII Class 1 Claims.......................................... 14
2.3.2 RII Class 2 Claims.......................................... 14
2.3.3 RII Class 3 Claims.......................................... 14
2.3.4 RII Class 4 Claims.......................................... 14
2.3.5 RII Class 5 Claims.......................................... 14
2.3.6 RII Class 6 Claims.......................................... 14
2.3.7 RII Class 7 Interests....................................... 14
2.3.8 RII Class 8 Interests....................................... 14
2.4 Claims Against and Equity Interests in GRI............................. 14
2.4.1 GRI Class 1 Claims.......................................... 14
2.4.2 GRI Class 2 Claims.......................................... 14
2.4.3 GRI Class 3 Claims.......................................... 14
2.4.4 GRI Class 4 Claims.......................................... 14
2.4.5 GRI Class 5 Interests....................................... 14
ARTICLE III IDENTIFICATION OF IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS
14
3.1 Unimpaired Classes of Claims........................................... 14
3.2 Impaired Classes of Claims and Equity Interests........................ 14
3.3 Impairment Controversies............................................... 15
ARTICLE IV TREATMENT OF ADMINISTRATIVE AND PRIORITY TAX CLAIMS 15
4.1 Payment of Administrative Claims....................................... 15
4.1.1 Treatment of Retiree Administrative Claims.................. 15
4.2 Claim of Old Series Indenture Trustee.................................. 15
</TABLE>
A-v
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C> <C>
4.3 Claims of Fidelity and TCW............................................. 15
4.4 Payment of Priority Tax Claims......................................... 15
ARTICLE V TREATMENT OF CLAIMS AND INTERESTS 16
5.1 Claims Against and Equity Interests in RII............................. 16
5.1.1 RII Class 1................................................. 16
5.1.2 RII Class 2................................................. 16
5.1.3 RII Class 3................................................. 17
5.1.4 RII Class 4................................................. 17
5.1.5 RII Class 5................................................. 17
5.1.6 RII Class 6................................................. 17
5.1.7 RII Class 7................................................. 17
5.1.8 RII Class 8................................................. 17
5.2 Claims Against and Equity Interests in GRI............................. 18
5.2.1 GRI Class 1................................................. 18
5.2.2 GRI Class 2................................................. 18
5.2.3 GRI Class 3................................................. 18
5.2.4 GRI Class 4................................................. 18
5.2.5 GRI Class 5................................................. 18
5.3 No Prepayment of Unimpaired Claims..................................... 18
5.4 Accrual and Payment of Post-Petition Interest and Fees................. 18
5.5 Satisfaction of Claims and Interests................................... 19
ARTICLE VI MEANS FOR EXECUTION OF THE PLAN 19
6.1 Sale of Paradise Island Assets to SIHL................................. 19
6.2 Standby Distribution of Paradise Island Assets......................... 19
6.2.1 Alternative Paradise Island Restructuring Transactions...... 19
6.2.2 PIRL Board of Directors..................................... 19
6.2.3 PIRL Obligations under the Paradise Island Purchase
Agreement................................................... 19
6.3 General Implementation Matters......................................... 20
6.3.1 Other Restructuring Transactions............................ 20
6.3.2 General Corporate Matters................................... 20
6.4 Reorganized RII........................................................ 20
6.4.1 Reconstituted Board of Directors of RII..................... 20
6.4.2 Officers of RII............................................. 20
6.5 Reorganized GRI........................................................ 20
6.5.1 Board of Directors of GRI................................... 20
6.5.2 Officers of GRI............................................. 20
6.6 Approval of 1994 Stock Option Plan..................................... 21
6.7 Corporate Action....................................................... 21
6.8 Sources of Cash for Plan Distribution.................................. 21
6.9 SIHL Reserved Cash, Standby Reserved Cash and Plan Consummation Cash...
21
6.10 New Indentures......................................................... 21
6.11 Distributions.......................................................... 21
6.11.1 Generally................................................... 21
6.11.2 Service of Old Series Indenture Trustee..................... 22
6.11.3 Distribution to be Made to Holders as of the Distribution
Record Date................................................. 22
6.11.4 Distribution To Holders of Old Series Public Debt Claims.... 22
</TABLE>
A-vi
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C> <C>
6.11.5 Procedures for Distribution to Holders of Old Series Public
Debt Claims................................................. 22
6.11.6 Means of Cash Payment....................................... 23
6.11.7 Calculation of Distribution Amounts of Securities........... 23
6.11.8 Delivery of Distributions................................... 24
6.11.9 Fees and Expenses of Disbursing Agents...................... 24
6.11.10 Time Bar to Cash Payments................................... 24
6.12 Vesting of Property of RII............................................. 24
6.13 Vesting of Property of GRI............................................. 24
6.14 Maintenance of Causes of Action........................................ 24
6.15 Assumption of Liabilities.............................................. 25
6.16 RIHF Senior Facility................................................... 25
6.17 Use of RIHF Senior Facility Funds...................................... 25
ARTICLE VII ACCEPTANCE OR REJECTION OF THE PLAN 25
7.1 Classes Entitled to Vote 25
7.2 Class Acceptance Requirement........................................... 25
7.3 Cramdown............................................................... 25
ARTICLE VIII PROCEDURES FOR RESOLVING AND TREATING DISPUTED CLAIMS 26
8.1 Objection Deadline..................................................... 26
8.2 Responsibility for Objection to Disputed Claims........................ 26
8.3 Prosecution of Objections.............................................. 26
8.4 No Distributions Pending Allowance..................................... 26
8.5 Distributions After Allowance.......................................... 26
8.6 Treatment of Contingent Claims......................................... 26
8.7 Estimation of Claims................................................... 26
ARTICLE IX EXECUTORY CONTRACTS 27
9.1 General Treatment...................................................... 27
9.2 Bar to Rejection Damages............................................... 27
9.3 Cure of Defaults for Executory Contracts and Unexpired Leases.......... 27
ARTICLE X RIGHTS AND OBLIGATIONS OF THE DISBURSING AGENT 27
10.1 Exculpation............................................................ 27
10.2 Powers of the Disbursing Agent......................................... 28
10.3 Duties of the Disbursing Agent......................................... 28
ARTICLE XI CONDITIONS PRECEDENT TO CONFIRMATION AND EFFECTIVE DATE
28
11.1 Conditions Precedent to Confirmation of the Plan....................... 28
11.2 Conditions to Effective Date........................................... 29
11.3 Waiver of Conditions................................................... 29
ARTICLE XII EFFECTS OF CONFIRMATION AND EFFECTIVENESS OF PLAN 29
12.1 Discharge of Claims.................................................... 29
12.2 Discharge of Debtors................................................... 29
12.3 Injunction............................................................. 30
12.4 Survival of Indemnification Claims and Obligations..................... 30
12.5 Exculpations and Limitation of Liability............................... 30
12.6 Satisfaction of Intercompany Claims.................................... 30
ARTICLE XIII RETENTION OF JURISDICTION 30
13.1 Scope of Jurisdiction.................................................. 30
13.2 Failure of the Bankruptcy Court to Exercise Jurisdiction............... 31
</TABLE>
A-vii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C> <C>
ARTICLE XIV MISCELLANEOUS PROVISIONS 31
14.1 Compliance with Tax Requirements....................................... 31
14.2 Compliance with All Applicable Laws.................................... 31
14.3 Cancellation of Old Series Note Indenture.............................. 32
14.4 Discharge of Old Series Indenture Trustee.............................. 32
14.5 Payment of Statutory Fees.............................................. 32
14.6 Post-Confirmation Date Fees and Expenses of Professional Persons....... 32
14.7 Binding Effect......................................................... 32
14.8 Governing Law.......................................................... 32
14.9 Filing of Additional Documents......................................... 33
14.10 Amendments and Modifications........................................... 33
14.11 Revocation............................................................. 33
14.12 Severability........................................................... 33
14.13 Notices................................................................ 33
14.14 De Minimis Distributions............................................... 33
14.15 Consent Rights of Fidelity and TCW..................................... 33
SCHEDULES
Schedule 6.1 SIHL Related Restructuring Transactions.............................. 36
Schedule 6.2 PIRL Related Restructuring Transactions.............................. 37
Schedule 6.3 Other Restructuring Transactions..................................... 38
EXHIBITS
Exhibit A Paradise Island Purchase Agreement
Exhibit B PIRL Standby Distribution Agreement
Exhibit C 1994 Stock Option Plan
</TABLE>
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
<TABLE>
<S> <C>
IN RE CASE NOS.
RESORTS INTERNATIONAL, INC., A AND
DELAWARE CORPORATION, AND GGRI, INC., A
DELAWARE CORPORATION, FORMERLY JOINTLY ADMINISTERED
KNOWN AS GRIFFIN RESORTS, INC., UNDER CASE NO.
DEBTORS. CHAPTER 11
</TABLE>
JOINT PLAN OF REORGANIZATION PROPOSED BY
RESORTS INTERNATIONAL, INC., GGRI, INC.,
RESORTS INTERNATIONAL HOTEL, INC.,
RESORTS INTERNATIONAL HOTEL FINANCING, INC.,
AND P.I. RESORTS LIMITED
DATED AS OF JANUARY , 1994
Resorts International, Inc. ("RII") and GGRI, Inc., formerly known as
Griffin Resorts, Inc. ("GRI"), as debtors and debtors in possession (hereinafter
collectively, the "Debtors"), and Resorts International Hotel, Inc. ("RIH"),
Resorts International Hotel Financing, Inc. ("RIHF"), and P. I. Resorts Limited
("PIRL"), non-debtor affiliates of the Debtors, propose the following joint plan
of reorganization (the "Plan") pursuant to chapter 11 of title 11 of the United
States Code (the "Bankruptcy Code").
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS. All capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth below.
1.1.1 "1990 STOCK OPTION PLAN" shall mean the RII Senior Management Stock
Option Plan, dated as of September 17, 1990, created for the benefit of certain
senior management employees of RII pursuant to and in conjunction with the
consummation of the Old Plan.
1.1.2 "1990 STOCK OPTIONS" shall mean the options to purchase shares of Old
RII Common Stock granted pursuant to the 1990 Stock Option Plan.
1.1.3 "1994 STOCK OPTION PLAN" shall mean the new RII Senior Management
Stock Option Plan pursuant to which, in conjunction with the Plan, options to
purchase Reorganized RII Common Stock shall be offered, in the discretion of the
board of directors of Reorganized RII, to certain officers, directors and key
employees of Reorganized RII and its Subsidiaries. The 1994 Stock Option Plan
shall be in substantially the form attached hereto as Exhibit C, and shall
provide for the issuance of options to purchase not more than five percent (5%)
of the total number of shares of issued and outstanding Reorganized RII Common
Stock on the Effective Date, assuming the exercise of the Griffin Warrants,
which options shall be exercisable at 100% of the fair market value of
Reorganized RII Common Stock as of the date of issuance of such options. The
final form of the 1994 Stock Option Plan shall be filed as a Plan Document.
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1.1.4 "ADMINISTRATIVE CLAIM" shall mean a Claim or portion of a Claim which
is a cost or expense of administration of the Debtors' estates allowed under
sections 503(b) or 507(b) of the Bankruptcy Code that is entitled to priority
under section 507(a)(1) of the Bankruptcy Code, including but not limited to (i)
any actual and necessary costs and expenses of preserving the Debtors' estates
and operating the Debtors' businesses, (ii) the fees and expenses of
Professional Persons in such amounts as are allowed by Final Order under section
330 of the Bankruptcy Code, (iii) the fees and expenses (including the fees and
expenses of their Professional Persons) of the Old Series Indenture Trustee,
Fidelity and TCW incurred in connection with the Prepackaged Chapter 11 Cases
and the negotiation, documentation, implementation and consummation of the
transactions contemplated by the Plan in such amounts as determined and awarded
by Final Order of the Bankruptcy Court and (iv) any fees or charges assessed
against the Debtors' estates under section 1930 of title 28 of the United States
Code.
1.1.5 "AFFILIATE" shall mean any Entity that is an "affiliate" of a Debtor
within the meaning of section 101(2) of the Bankruptcy Code.
1.1.6 "ALLOWED", "ALLOWED CLAIM" OR "ALLOWED INTEREST" shall mean, with
reference to any Claim or Interest (i) any Claim against or Interest in any
Debtor, proof of which was filed within the applicable period of limitation
fixed by the Bankruptcy Court in accordance with Bankruptcy Rule 3003(c)(3),
which is not a Disputed Claim or Disputed Interest, (ii) if no proof of claim or
interest was so filed, any Claim against or Interest in any Debtor which has
been listed by such Debtor in its chapter 11 schedules, as such schedules may be
amended from time to time in accordance with Bankruptcy Rule 1009, as liquidated
in amount and not disputed or contingent, or (iii) any Claim allowed hereunder
or by Final Order. An Allowed Claim or Allowed Interest does not include any
Claim or Interest or portion thereof which is a Disallowed Claim or Disallowed
Interest or which has been subsequently withdrawn, disallowed, released or
waived by the Holder thereof or pursuant to a Final Order.
1.1.7 "ALTERNATIVE CLOSING" shall mean the closing under the PIRL Standby
Distribution Agreement.
1.1.8 "ALTERNATIVE CLOSING DATE" shall mean the date on which the
Alternative Closing occurs.
1.1.9 "AMENDED RII BYLAWS" shall mean the Amended and Restated By-Laws of
Reorganized RII substantially in the form attached as Appendix D to the
Registration Statement. The final form of the Amended RII Bylaws shall be filed
as a Plan Document.
1.1.10 "AMENDED RII CERTIFICATE OF INCORPORATION" shall mean the Amended
and Restated Certificate of Incorporation of Reorganized RII substantially in
the form attached as Appendix C to the Registration Statement. The final form of
the Amended RII Certificate of Incorporation shall be filed as a Plan Document.
1.1.11 "AVAILABLE CASH" shall mean all Cash of the Debtors and their
Subsidiaries on the Effective Date, before giving effect to the SIHL Closing or
the Alternative Closing, as the case may be, and the distributions under the
Plan, and shall include, among other things, the SIHL Buyer Expense Escrow, the
SIHL Escrow and the Griffin Group Note Proceeds, but shall specifically exclude
(i) any Cash actually received by RII on or prior to the Effective Date, from
Atlantic City Showboat, Inc. as tenant under the Showboat Lease, which has been
escrowed by RII to pay its current obligations with respect to the Showboat
Notes, (ii) any restricted Cash held by RII on behalf of the beneficiaries of
the Litigation Trust, (iii) the proceeds of the November 1993 sale of the .63
acre tract of land on Paradise Island, The Bahamas which shall be distributed on
the SIHL Closing Date in accordance with the Paradise Island Purchase Agreement
or, alternatively, on the Standby Distribution Date in accordance with the PIRL
Standby Distribution Agreement and (iv) any portion of the SIHL Aggregate Cash
Purchase Price.
1.1.12 "BAHAMIAN GOVERNMENT" shall mean and be the collective reference to
The Commonwealth of The Bahamas and any governmental units or subdivisions
thereof.
1.1.13 "BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of 1978, as
amended, codified at title 11 of the United States Code as the same may from
time to time be in effect and as applicable to the Prepackaged Chapter 11 Cases.
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1.1.14 "BANKRUPTCY COURT" shall mean the United States Bankruptcy Court for
the District of Delaware or, to the extent of any withdrawal of the reference
made pursuant to 28 U.S.C. Section 157, the United States District Court for the
District of Delaware.
1.1.15 "BANKRUPTCY RULES" shall mean the Federal Rules of Bankruptcy
Procedure, as promulgated by the United States Supreme Court pursuant to 28
U.S.C. Section 2075 and, to the extent not inconsistent, the local rules of the
Bankruptcy Court, as amended from time to time.
1.1.16 "BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or
any other day on which commercial banks in the City of New York, State of New
York are required or authorized to close.
1.1.17 "CAESARS PAYMENT" shall mean the Cash payment in the amount of
$400,000.00 to be made to Caesars World, Inc. on the Distribution Date pursuant
to that certain letter agreement, dated August 18, 1993, by and among Caesars
World, Inc., Fidelity and TCW.
1.1.18 "CASH" shall mean legal tender of the United States of America or
cash equivalents, including but not limited to Cash deposited in depository
accounts, Cash on hand and cage Cash.
1.1.19 "CCC" shall mean the New Jersey Casino Control Commission.
1.1.20 "CLAIM" shall mean (1) any right to payment from either of the
Debtors, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured or (2) any right to an equitable remedy
for breach of performance if such breach gives rise to a right of payment from
any of the Debtors, whether or not such right to an equitable remedy is reduced
to judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured, or unsecured.
1.1.21 "CLASS" shall mean a category or group of Holders as designated in
Article II herein pursuant to section 1123(a)(1) of the Bankruptcy Code.
1.1.22 "CONFIRMATION" shall mean entry of the Confirmation Order.
1.1.23 "CONFIRMATION DATE" shall mean the date upon which the Confirmation
Order is entered on the docket by the Clerk of the Bankruptcy Court, within the
meaning of Bankruptcy Rules 5003 and 9021.
1.1.24 "CONFIRMATION HEARING" shall mean the hearing held by the Bankruptcy
Court on the confirmation of the Plan pursuant to section 1128 of the Bankruptcy
Code, as it may be adjourned or continued from time to time.
1.1.25 "CONFIRMATION ORDER" shall mean the order of the Bankruptcy Court
confirming the Plan pursuant to section 1129 of the Bankruptcy Code.
1.1.26 "CONTINGENT CLAIM" shall mean a Claim that is contingent or
unliquidated.
1.1.27 "CREDITOR" shall mean any Entity that holds a Claim against either
RII or GRI (i) that arose at the time of or before the order for relief
concerning the Debtors or (ii) of a kind specified in sections 502(g), 502(h) or
502(i) of the Bankruptcy Code.
1.1.28 "DEBTORS" shall mean RII and GRI, collectively, as debtors and
debtors in possession. "Debtor" shall, where the context requires, refer to
either RII or GRI.
1.1.29 "DEFERRED CASH" shall mean the aggregate amount of Cash received by
Reorganized RII or any of its Subsidiaries from time to time after the Effective
Date in respect of the Litigation Trust Units.
1.1.30 "DISALLOWED CLAIM" OR "DISALLOWED INTEREST" shall mean an alleged
Claim against or Interest in RII or GRI, or any portion thereof, that has been
disallowed by Final Order.
1.1.31 "DISBURSING AGENT" shall mean any Entity designated by the Debtors
(and, with respect to the distributions to Holders of Old Series Public Debt
Claims only, acceptable to Fidelity and TCW) and approved by the Bankruptcy
Court to make distributions required under the Plan which may include, without
limitation, Reorganized RII or Reorganized GRI, the Old Series Indenture Trustee
or any financial institution of recognized standing.
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1.1.32 "DISBURSING AGREEMENT" shall mean, with respect to any Disbursing
Agent (other than Reorganized RII or Reorganized GRI), the agreement referenced
in Article VI of the Plan which shall govern the rights and obligations of such
Disbursing Agent. Each Disbursing Agreement will be filed as a Plan Document, be
subject to the approval of the Bankruptcy Court and, with respect to the
distributions to Holders of Old Series Public Debt Claims, be in substantially
the form approved by the Debtors, TCW and Fidelity.
1.1.33 "DISPUTED CLAIM" OR "DISPUTED INTEREST" shall mean a Claim against
or Interest in GRI or RII, to the extent that a proof of claim or interest has
been filed or deemed filed under applicable law, (i) as to which an objection
has been or may be timely filed and which objection, if so filed, has not been
withdrawn or denied by Final Order and (ii) which Claim or Interest is not a
Disallowed Claim or a Disallowed Interest. If any portion of a Claim or Interest
is disputed, then the entire Claim or Interest shall be a Disputed Claim or
Disputed Interest, as the case may be. Prior to the time that an objection has
been or may be timely filed, for the purposes of the Plan, a Claim or Interest
shall be considered a Disputed Claim or Disputed Interest, as the case may be,
if the amount of the Claim or Interest specified in the proof of claim or
interest exceeds the amount of the Claim or Interest scheduled by the Debtors as
other than disputed, contingent or unliquidated. Until such time as a Contingent
Claim becomes fixed and absolute by Final Order, such Claim shall be treated as
a Disputed Claim for all purposes, including those related to estimations,
allocations, payments and distributions of Cash, Plan Securities and other
property under the Plan.
1.1.34 "DISTRIBUTION DATE" shall mean, (A) for any Claim or Interest that
is an Allowed Claim or Allowed Interest on the Effective Date, the Effective
Date or as soon thereafter as practicable, but in no event later than twenty
(20) days after the Effective Date, and (B) for any Claim or Interest that is a
Disputed Claim or Disputed Interest on the Effective Date, the date as soon as
practicable, but in no event later than thirty (30) days, after the date upon
which such Claim or Interest becomes an Allowed Claim or Allowed Interest.
Notwithstanding the foregoing, the Distribution Date with respect to
distribution to the Disbursing Agent for Holders of Old Series Public Debt
Claims shall be as follows: (i) for the SIHL Aggregate Cash Purchase Price and
Plan Securities, the Distribution Date shall be the Effective Date, (ii) for Net
SIHL Reserved Cash, or Net Standby Reserved Cash, as the case may be, the
Distribution Date shall be as soon as practicable after the Effective Date, but
in no event later than ninety (90) days after the Effective Date, (iii) for Net
Plan Consummation Cash, the Distribution Date shall be as set forth in section
5.1.2 of the Plan, (iv) for Deferred Cash, the Distribution Date shall be as
soon as practicable, but in no event later than three (3) Business Days after
the receipt by Reorganized RII of immediately available funds giving rise to the
Deferred Cash and (v) for Excess Cash, the Distribution Date shall be as soon as
practicable after the Effective Date, but in no event later than twenty (20)
days after the Effective Date; provided, however, that the Disbursing Agent for
Holders of Old Series Public Debt Claims shall be required to make distributions
of the SIHL Aggregate Cash Purchase Price, Plan Securities, Net SIHL Reserved
Cash or Net Standby Reserved Cash, Net Plan Consummation Cash, Deferred Cash and
Excess Cash as provided in section 6.11.4 of the Plan.
1.1.35 "DISTRIBUTION RECORD DATE" shall mean the close of business in the
City of New York, State of New York on the Effective Date.
1.1.36 "EFFECTIVE DATE" shall mean the later of (i) the first Business Day
on which no stay of the Confirmation Order is in effect and that is ten (10)
days (as calculated in accordance with Bankruptcy Rule 9006(a)) after the
Confirmation Date and (ii) the date on which each of the conditions precedent
set forth in section 11.2 hereof have been either satisfied or waived in
accordance with section 11.3 hereof.
1.1.37 "ENCUMBRANCES" shall mean any Lien, imperfection of title, claim,
encumbrance, security interest, option, charge or restriction of any kind.
1.1.38 "ENTITY" shall mean a person, a corporation, a partnership, an
association, a joint stock company, a joint venture, an estate, a trust, an
unincorporated organization, a government or any subdivision thereof or any
other entity.
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1.1.39 "ESTATE" shall mean, with respect to each Debtor, the estate of the
Debtor created by section 541 of the Bankruptcy Code upon the commencement of
the Debtors' Prepackaged Chapter 11 Cases.
1.1.40 "EXCESS CASH" shall mean the Available Cash on the Effective Date
minus the sum of (i) RII Retained Cash, (ii) the SIHL Target Adjusted Cash or,
if applicable, the Standby Target Adjusted Cash, (iii) the SIHL Reserved Cash
or, if applicable, the Standby Reserved Cash, (iv) the Plan Consummation Cash
and (v) the Caesars Payment.
1.1.41 "FIDELITY" shall mean Fidelity Management and Research Company, in
its capacity as investment advisor to various funds which hold Old Series Notes.
1.1.42 "FINAL ORDER" shall mean an order of the Bankruptcy Court (i) as to
which the time to appeal, petition for certiorari or move for reargument or
rehearing has expired and as to which no timely appeal, petition for certiorari
or other proceedings for reargument or rehearing shall then be pending, or (ii)
if a timely appeal, writ of certiorari, reargument or rehearing thereof has been
sought, which shall have been affirmed by the highest court to which such order
was appealed, or certiorari shall have been denied or reargument or rehearing
shall have been denied or resulted in no modification of such order, and the
time to take any further appeal, petition for certiorari or move for reargument
or rehearing shall have expired; provided, however, that the possibility that a
motion under Rule 59 or Rule 60 of the Federal Rules of Civil Procedure, or any
analogous rule under the Bankruptcy Rules, may be filed with respect to such
order shall not cause such order not to be a Final Order.
1.1.43 "GRH" shall mean Griffin Resorts Holding, Inc., a Delaware
corporation.
1.1.44 "GRI" shall mean GGRI, Inc., a Delaware corporation, formerly known
as Griffin Resorts, Inc.
1.1.45 "GRI BYLAWS" shall mean the certain Bylaws of GRI in force on the
day immediately preceding the Petition Date.
1.1.46 "GRI CERTIFICATE OF INCORPORATION" shall mean that certain
Certificate of Incorporation of GRI filed with the Secretary of State of the
State of Delaware on July 8, 1988, as amended from time to time.
1.1.47 "GRI COMMON STOCK" shall mean the authorized common stock, par value
$.01 per share, of GRI issued and outstanding on the Petition Date.
1.1.48 "GRI GUARANTY CLAIMS" shall mean the Claims arising from GRI's
guaranty of RII's obligations with respect to the Old Series Notes, which Claims
shall be Allowed, for the purposes of the Plan, in the aggregate, at the face
amount of the Old Series Notes outstanding together with the amount of the
accrued and unpaid interest thereon and any other costs and expenses of
collection, other than the claims which are governed by section 4.2 of the Plan.
1.1.49 "GRIFFIN GROUP NOTE" shall mean that certain promissory note, dated
September 17, 1992, in the original principal amount of $7,523,333 made by The
Griffin Group, Inc. and payable to RII.
1.1.50 "GRIFFIN GROUP NOTE PROCEEDS" shall mean the aggregate amount of
principal and interest owing under the Griffin Group Note on the earlier of the
date such note is repaid or the Effective Date (after offsetting, on the date
that such note is paid in full, $2,310,000 in fees owed to The Griffin Group,
Inc. under that certain License and Services Agreement, dated as of September
17, 1992, as amended, by and among RII, RIH, The Griffin Group, Inc. and Merv
Griffin), which amount shall be paid to RII by The Griffin Group, Inc. on or
before the Effective Date.
1.1.51 "GRIFFIN WARRANTS" shall mean the warrants issued on the
Distribution Date by Reorganized RII to The Griffin Group, Inc., pursuant to
that certain agreement between RII and The Griffin Group, Inc., dated as of
September 17, 1992, as amended, and substantially in the form attached as
Exhibit 4.21 to the Registration Statement, which warrants shall be exercisable
to purchase 4,665,000 shares of Reorganized RII Common Stock at the lesser of
$1.875 and the average closing trading price of Reorganized RII Common Stock
during the twenty (20) day period following the Effective Date. The final form
of the Griffin Warrants shall be filed as a Plan Document.
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1.1.52 "HOLDER" shall mean an Entity holding a Claim or Interest.
1.1.53 "INDENTURE TRUSTEE CHARGING LIENS" shall mean any Lien or other
priority in payment available to the Old Series Indenture Trustee pursuant to
the Old Series Note Indenture against distributions made to Holders of Allowed
Old Series Note Claims for payment of any fees, costs or disbursements incurred
by such Old Series Indenture Trustee.
1.1.54 "INTEREST" shall mean an equity security interest in either of the
Debtors within the meaning of section 101(16) of the Bankruptcy Code.
1.1.55 "LIEN" shall mean any charge against or interest in property to
secure payment of a debt or performance of an obligation.
1.1.56 "LITIGATION TRUST" shall mean the trust established pursuant to the
Old Plan to pursue, for the benefit of the Old Debtors and certain of their
creditors, all claims the Old Debtors or certain of their affiliates may have
against Donald J. Trump and certain of his affiliates.
1.1.57 "LITIGATION TRUST UNITS" shall mean those units evidencing RII's
beneficial interest in the Litigation Trust.
1.1.58 "NATIONAL SECURITIES EXCHANGE" shall mean any exchange registered
pursuant to section 6(a) of the Securities Exchange Act of 1934, as amended,
including the New York Stock Exchange, the American Stock Exchange and the
National Association of Securities Dealers Automated Quotation System.
1.1.59 "NET PLAN CONSUMMATION CASH" shall mean the aggregate amount of Plan
Consummation Cash held, in an interest bearing segregated account, by RII on the
date when the Plan Expenses have been satisfied, together with interest on Net
Plan Consummation Cash from and including the Effective Date to but excluding
the date of payment received by RII on such Cash.
1.1.60 "NET SIHL RESERVED CASH" shall mean the aggregate amount of SIHL
Reserved Cash held, in an interest bearing segregated account, by RII on the
earlier of (i) the date when all adjustments as set forth in sec tion 2.05(c) of
the Paradise Island Purchase Agreement have been made, or (ii) the ninetieth day
following the Effective Date, together with interest on Net SIHL Reserved Cash
from and including the Effective Date to but excluding the date of payment
received by RII on such Cash.
1.1.61 "NET STANDBY RESERVED CASH" shall mean the aggregate amount of
Standby Reserved Cash held, in an interest bearing segregated account, by RII on
the earlier of (i) the date when all adjustments as set forth in section 2.05(c)
of the PIRL Standby Distribution Agreement have been made, or (ii) the ninetieth
day following the Effective Date, together with interest on Net Standby Reserved
Cash from and including the Effective Date to but excluding the date of payment
received by RII on such Cash.
1.1.62 "NEW DEBT SECURITIES" shall mean, collectively, the New RIHF
Mortgage Notes, the New RIHF Junior Mortgage Notes and, if issued on the
Effective Date, the RIHF Senior Facility Notes.
1.1.63 "NEW EQUITY SECURITIES" shall mean, collectively, the shares of New
RII Common Stock, RII Class B Common Stock and either the SIHL Series A Shares
or the PIRL Ordinary Shares, as the case may be, to be issued pursuant to the
Plan.
1.1.64 "NEW INDENTURES" shall mean, collectively, the New RIHF Mortgage
Indenture and the New RIHF Junior Mortgage Indenture and, if the New RIHF Senior
Facility Notes are issued on the Effective Date, the RIHF Senior Facility
Indenture.
1.1.65 "NEW RIHF INDENTURE TRUSTEES" shall mean, collectively, the New RIHF
Junior Indenture Trustee, the New RIHF Indenture Trustee and, if applicable, the
trustee designated in the RIHF Senior Facility Indenture.
1.1.66 "NEW RIHF JUNIOR INDENTURE TRUSTEE" shall mean U.S. Trust Company of
California, N.A., as trustee under the New RIHF Junior Mortgage Indenture.
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1.1.67 "NEW RIHF JUNIOR MORTGAGE INDENTURE" shall mean that certain
Indenture, dated as of the Effective Date, between RIHF, as issuer, RIH, as
guarantor and U.S. Trust Company of California, N.A., as trustee, substantially
in the form attached as Exhibit 4.05 to the Registration Statement, pursuant to
which the New RIHF Junior Mortgage Notes will be issued. The final form of the
New RIHF Junior Mortgage Indenture shall be filed as a Plan Document.
1.1.68 "NEW RIHF JUNIOR MORTGAGE NOTES" shall mean the 11.375% Junior
Mortgage Notes due 2004 of RIHF, substantially in the form described in the New
RIHF Junior Mortgage Indenture, in the aggregate principal amount of $35,000,000
to be issued by RIHF pursuant to the New RIHF Junior Mortgage Indenture to
Holders of Old Series Public Debt Claims, as provided in Article V of this Plan.
1.1.69 "NEW RIHF INDENTURE TRUSTEE" shall mean State Street Bank and Trust
Company of Connecticut, N.A., as trustee under the New RIHF Mortgage Indenture.
1.1.70 "NEW RIHF MORTGAGE INDENTURE" shall mean that certain Indenture,
dated as of the Effective Date, between RIHF, as issuer, RIH, as guarantor, and
State Street Bank and Trust Company of Connecticut, N.A., as trustee,
substantially in the form attached as Exhibit 4.04 to the Registration
Statement, pursuant to which the New RIHF Mortgage Notes will be issued. The
final form of the New RIHF Mortgage Indenture shall be filed as a Plan Document.
1.1.71 "NEW RIHF MORTGAGE NOTES" shall mean the 11% Mortgage Notes due
2003, substantially in the form described in the New RIHF Mortgage Indenture, in
the aggregate principal amount of $125,000,000 to be issued by RIHF pursuant to
the New RIHF Mortgage Indenture to Holders of Old Series Public Debt Claims, as
provided in Article V of this Plan.
1.1.72 "NEW RII COMMON STOCK" shall mean, collectively, the approximately
17,000,000 shares of common stock, par value $.01 per share, of Reorganized RII
to be issued to the Holders of Old Series Public Debt Claims under the Plan
which, upon issuance, shall constitute 40% of the total number of shares of
issued and outstanding Reorganized RII Common Stock, assuming the exercise of
the Griffin Warrants, and after giving effect to all distributions to be made
under the Plan, but subject to dilution solely as a result of the exercise of
outstanding 1990 Stock Options and the issuance and exercise of options under
the 1994 Stock Option Plan.
1.1.73 "OLD CHAPTER 11 CASES" shall mean collectively the cases resulting
from the involuntary petitions for relief under chapter 11 of the Bankruptcy
Code filed against RII and Resorts International Financing, Inc. on November 12,
1989, and the voluntary petitions for relief under chapter 11 of the Bankruptcy
Code filed by GRH and GRI on December 22, 1989.
1.1.74 "OLD DEBTORS" shall mean collectively RII, Resorts International
Financing, Inc., GRI and GRH in their capacity as debtors in the Old Chapter 11
Cases.
1.1.75 "OLD PLAN" shall mean the Second Amended Joint Plan of
Reorganization dated as of May 31, 1990, for the Old Debtors, which Old Plan was
confirmed by the United States Bankruptcy Court for the District of New Jersey
in August 1990.
1.1.76 "OLD RII COMMON STOCK" shall mean the authorized common stock, par
value $.01 per share, of RII issued and outstanding on the Petition Date.
1.1.77 "OLD SECURITY DOCUMENTS" shall mean collectively the RIH Mortgage,
the RIH Security Agreement, the RIH Pledge Agreement, the RIH Notes Pledge
Agreement, the RIB Note, the RIB Subsidiary Guaranty Agreements, the RIB
Mortgage, the RIB Collateral Assignment Agreement and the RIB Stock Pledge
Agreement (each as defined in the Old Series Note Indenture).
1.1.78 "OLD SERIES NOTE INDENTURE" shall mean that certain Indenture, dated
as of September 14, 1990, between RII, as issuer, and the Old Series Indenture
Trustee pursuant to which the Old Series Notes in an aggregate principal amount
of $325,000,000 were issued by RII under the Old Plan.
1.1.79 "OLD SERIES INDENTURE TRUSTEE" shall mean Chemical Bank as successor
to Manufacturers Hanover Trust Company, as trustee under the Old Series Note
Indenture.
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1.1.80 "OLD SERIES NOTE CLAIMS" shall mean the Claims against RII arising
from the indebtedness evidenced by the Old Series Notes, which Claims shall be
Allowed, for the purposes of the Plan, in the aggregate, at the face amount of
the Old Series Notes outstanding together with the amount of the accrued and
unpaid interest thereon and any other costs and expenses of collection, other
than the claims which are governed by section 4.2 of the Plan.
1.1.81 "OLD SERIES NOTES" shall mean collectively RII's Series A Senior
Secured Redeemable Notes due 1994 and RII's Series B Senior Secured Redeemable
Notes due 1994.
1.1.82 "OLD SERIES PUBLIC DEBT CLAIMS" shall mean Old Series Note Claims
and GRI Guaranty Claims, collectively.
1.1.83 "PARADISE ISLAND APPROVAL ORDER" shall mean that order, which may be
the Confirmation Order, approving the sale of the Paradise Island Assets to SIHL
pursuant to the Paradise Island Purchase Agreement.
1.1.84 "PARADISE ISLAND ASSETS" shall mean the Paradise Island Shares, RII
Paradise Assets, including without limitation the proceeds of the November 1993
sale of the .63 acre tract of land on Paradise Island, The Bahamas, and RII Real
Estate Assets sold pursuant to the Paradise Island Purchase Agreement, which
comprise substantially all of the Paradise Island properties and assets owned by
RII and its Affiliates.
1.1.85 "PARADISE ISLAND PURCHASE AGREEMENT" shall mean that certain
Purchase Agreement, dated as of October 11, 1993, by and between RII and SIHL,
including all exhibits and schedules thereto, relating to the sale of the
Paradise Island Assets, as amended by those certain letter agreements dated as
of November 30, 1993. A copy of the Paradise Island Purchase Agreement, as
amended, is attached hereto as Exhibit A.
1.1.86 "PARADISE ISLAND SHARES" shall have the meaning ascribed to the term
"Shares" in the Paradise Island Purchase Agreement and the PIRL Standby
Distribution Agreement.
1.1.87 "PARADISE SUBSIDIARY CLAIMS" shall mean the Claims held by any of
the RII Paradise Subsidiaries against RII.
1.1.88 "PAYMENTS-IN-KIND" shall mean the distribution(s) to holders of New
RIHF Junior Mortgage Notes of additional New RIHF Junior Mortgage Notes and RII
Class B Common Stock in lieu of cash interest payments due to such holders under
the New RIHF Junior Mortgage Indenture.
1.1.89 "PETITION DATE" shall mean the date on which the Debtors filed their
petitions for relief commencing the Prepackaged Chapter 11 Cases.
1.1.90 "PIRL" shall mean P.I. Resorts Limited, a Bahamian corporation and a
Subsidiary of RII, which has been formed by RII to effect the PIRL Spin-Off.
1.1.91 "PIRL AGGREGATE PURCHASE PRICE" shall mean the Aggregate Purchase
Price as defined in the PIRL Standby Distribution Agreement.
1.1.92 "PIRL ARTICLES" shall mean the Articles of Association for PIRL,
substantially in the form attached as Exhibit 3.09 to the Registration
Statement. The final form of the PIRL Articles shall be filed as a Plan
Document.
1.1.93 "PIRL ORDINARY SHARES" shall mean the estimated five million
ordinary shares, par value $.01 (U.S.) per share, of PIRL issued under the PIRL
Articles which, upon issuance to the Holders of Old Series Public Debt Claims
under the Plan, shall constitute 100% of the issued and outstanding shares of
PIRL.
1.1.94 "PIRL SPIN-OFF" shall mean the transactions contemplated by the PIRL
Standby Distribution Agreement.
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1.1.95 "PIRL STANDBY DISTRIBUTION AGREEMENT" shall mean that certain
Standby Distribution Agreement, dated as of October 15, 1993, between RII and
PIRL, relating to the PIRL Spin-Off, as amended. A copy of the PIRL Standby
Distribution Agreement, as amended, is attached hereto as Exhibit B.
1.1.96 "PIRL SUBSIDIARIES" shall mean the direct or indirect wholly-owned
subsidiaries of PIRL to be formed by PIRL to receive the RII Paradise Assets
from the RII Paradise Subsidiaries and the RII Real Estate Assets from RII
pursuant to the PIRL Standby Distribution Agreement.
1.1.97 "PIRL SUBSIDIARIES CERTIFICATES OF INCORPORATION" shall mean the
Certificates of Incorporation for the PIRL Subsidiaries. The final forms of the
PIRL Subsidiaries Certificates of Incorporation shall be filed as Plan
Documents.
1.1.98 "PLAN" shall mean this Joint Plan of Reorganization proposed by RII,
GRI, RIH, RIHF and PIRL, including the schedules and exhibits hereto, as well as
the Plan Documents, each of which shall constitute provisions of this Joint Plan
of Reorganization as if fully set forth herein, as the same may be amended,
modified or supplemented from time to time by any duly authorized amendment or
modification to the extent permitted herein and by the Bankruptcy Rules, which
Plan will be filed with the Bankruptcy Court within five (5) days after the
Petition Date.
1.1.99 "PLAN CONSUMMATION CASH" shall mean that portion of Available Cash,
to be held in a segregated account, which, on the Effective Date, Reorganized
RII reasonably estimates is necessary to pay Plan Expenses.
1.1.100 "PLAN DOCUMENTS" shall mean the documents that aid in effectuating
the Plan certain of which are specifically identified as such herein, the final
forms of which are subject to the review and approval of Fidelity and TCW and
will be filed with the Bankruptcy Court no later than ten (10) Business Days
prior to commencement of the Confirmation Hearing.
1.1.101 "PLAN EXPENSES" shall mean that portion of the unpaid
Administrative Claims (other than Administrative Claims of Professional Persons,
Fidelity, TCW and the Old Series Indenture Trustee) and RII Classes 1, 4 and 5
and GRI Classes 1 and 3 Claims (whether or not such Claims are Disputed Claims)
which, apart from the filing of the Prepackaged Chapter 11 Cases, would in the
ordinary course of business and consistent with past practice have been paid on
or before the Effective Date plus (i) any actual payments required to be made by
RII or the RII Paradise Subsidiaries for transfer taxes or federal alternative
minimum taxes incurred solely as a result of the consummation of the
transactions contemplated by the Paradise Island Purchase Agreement or,
alternatively, the PIRL Standby Distribution Agreement (after giving effect to
all available deductions or credits allowed to the affiliated group of which RII
is the common parent for the taxable year in which such transaction occurs), and
for costs and liabilities pursuant to section 6.10 of the Paradise Island
Purchase Agreement or, alternatively, section 5.09 of the PIRL Standby
Distribution Agreement, (ii) the Administrative Claims of Professional Persons,
Fidelity, TCW and the Old Series Indenture Trustee and (iii) costs or expenses
incurred in connection with the implementation and consummation of the Plan for
(a) amounts payable to the Disbursing Agent under the Plan as provided in
section 6.11.9 hereof and (b) the reasonable post-Confirmation Date fees and
expenses of Professional Persons, Fidelity, TCW and the Old Series Indenture
Trustee associated with litigating Disputed Claims or Disputed Interests and
implementing and consummating the Plan.
1.1.102 "PLAN SECURITIES" shall mean, collectively, the New Debt Securities
and the New Equity Securities.
1.1.103 "PREPACKAGED CHAPTER 11 CASES" shall mean the voluntary cases to be
commenced by RII and GRI under chapter 11 of the Bankruptcy Code on the Petition
Date.
1.1.104 "PRIORITY CLAIM" shall mean a Claim which is entitled to priority
treatment under sections 507(a)(3), (4), (5), (6) or (8) of the Bankruptcy Code.
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1.1.105 "PRIORITY TAX CLAIM" shall mean any Claim of a governmental unit
specified in section 507(a)(7) of the Bankruptcy Code.
1.1.106 "PRO RATA SHARE" shall mean with reference to any distribution on
account of any Allowed Claim in any particular class of Claims, a distribution
equal in amount to the ratio (expressed as a percentage) that the amount of such
Allowed Claim bears at the time of such distribution to the aggregate amount of
all Claims in such class of Claims, including Disputed Claims, but not including
Disallowed Claims.
1.1.107 "PROFESSIONAL PERSONS" shall mean (i) those professionals retained
in the Prepackaged Chapter 11 Cases pursuant to an order of the Bankruptcy Court
in accordance with sections 327 and 1103 of the Bankruptcy Code, (ii) all
professionals rendering services on behalf of Fidelity or TCW and (iii) all
professionals seeking compensation or reimbursement of expenses pursuant to
section 503(b)(4) of the Bankruptcy Code.
1.1.108 "PROPONENTS" shall mean, collectively, the Debtors, RIHF, RIH and
PIRL.
1.1.109 "REGISTRAR" shall mean the registrar under the Old Series Note
Indenture of transfers and exchanges of Old Series Notes.
1.1.110 "REGISTRATION STATEMENT" shall mean that certain registration
statement of RII, RIHF, RIH and PIRL on Form S-4 filed with the Securities and
Exchange Commission, in accordance with the Securities Act of 1933, on October
25, 1993, as such Registration Statement may be amended, supplemented, or
modified from time to time prior to the date on which it shall become effective,
including but not limited to the Information Statement/Prospectus contained
therein and the exhibits attached thereto.
1.1.111 "REORGANIZED DEBTORS" shall mean Reorganized RII and Reorganized
GRI.
1.1.112 "REORGANIZED GRI" shall mean GRI, as reorganized on and after the
Effective Date.
1.1.113 "REORGANIZED RII" shall mean RII, as reorganized on and after the
Effective Date.
1.1.114 "REORGANIZED RII COMMON STOCK" shall mean the common stock of
Reorganized RII which shall be outstanding on or after the Effective Date,
including the Old RII Common Stock, the New RII Common Stock, common stock of
Reorganized RII to be issued in connection with the 1990 Stock Option Plan or
the 1994 Stock Option Plan, and any common stock of Reorganized RII which may be
issued upon the issuance and exercise of the Griffin Warrants.
1.1.115 "RESTRUCTURING TRANSACTIONS" shall mean, collectively, the
transactions described in Schedules 6.1, 6.2 and 6.3 hereof.
1.1.116 "RETIREE" shall mean a person who retired from employment with the
Debtors before the Petition Date and was and continues to be eligible for
medical, death, and/or insurance benefits provided in the Retiree Benefit Plans
as required by section 1114 of the Bankruptcy Code.
1.1.117 "RETIREE ADMINISTRATIVE CLAIM" shall mean the Claim of a Retiree
under the Retiree Benefit Plans, to the extent such Claim is entitled to
treatment as an Administrative Claim.
1.1.118 "RETIREE BENEFIT PLANS" shall mean any plan or policy of the
Debtors in full force and effect as of the Petition Date pursuant to which
medical, death, and/or insurance benefits are provided to Retirees, as any such
plan or policy may have been modified during the pendency of the Prepackaged
Chapter 11 Cases.
1.1.119 "RIB" shall mean Resorts International (Bahamas) 1984 Limited, a
Bahamian corporation which on the Petition Date was a Subsidiary of RII.
1.1.120 "RIH" shall mean Resorts International Hotel, Inc., a New Jersey
corporation which on the Petition Date was a Subsidiary of RII.
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1.1.121 "RIHF" shall mean Resorts International Hotel Financing, Inc., a
Delaware corporation which on the Petition Date was a Subsidiary of RII.
1.1.122 "RIHF SENIOR FACILITY" shall mean that certain senior secured note
facility which will allow RIHF to borrow up to $20,000,000 in aggregate
principal amount for working capital and other purposes as permitted pursuant to
the RIHF Senior Facility Indenture.
1.1.123 "RIHF SENIOR FACILITY INDENTURE" shall mean that certain Indenture
to be entered into between RIHF, as issuer, RIH, RII and such other Entities as
may become parties thereto from time to time and the designated trustee for the
RIHF Senior Facility Indenture, substantially containing those terms set forth
in the Registration Statement pursuant to which the RIHF Senior Facility Notes
may be issued. The final form of the RIHF Senior Facility Indenture shall be
filed as a Plan Document.
1.1.124 "RIHF SENIOR FACILITY NOTE PURCHASE AGREEMENT" shall mean that
certain Note Purchase Agreement to be entered into on or before the Effective
Date between RIHF, RII, RIH, one or more funds managed by Fidelity and such
other Entities as may become parties thereto from time to time pursuant to which
the RIHF Senior Facility will be established, and substantially containing those
terms set forth in the Registration Statement and such other terms as the
parties thereto shall agree. The final form of the RIHF Senior Facility Note
Purchase Agreement shall be filed as a Plan Document.
1.1.125 "RIHF SENIOR FACILITY NOTES" shall mean the 11% secured notes due
2002, substantially in the form described in the RIHF Senior Facility Indenture,
in the aggregate principal amount not to exceed $20,000,000 which may be issued
by RIHF under the RIHF Senior Facility Indenture.
1.1.126 "RII" shall mean Resorts International, Inc., a Delaware
corporation.
1.1.127 "RII BYLAWS" shall mean the certain Bylaws of RII in force on the
day immediately preceding the Petition Date.
1.1.128 "RII CERTIFICATE OF INCORPORATION" shall mean that certain
Certificate of Incorporation of RII filed with the Secretary of State of the
State of Delaware on October 24, 1958, as amended from time to time.
1.1.129 "RII CLASS B COMMON STOCK" shall mean the 35,000 shares of Class B
common stock, par value $.01 per share, of Reorganized RII issued to the Holders
of Old Series Public Debt Claims pursuant to the terms of the Plan and the New
RIHF Junior Mortgage Indenture, which shall not be independently transferable
except in connection with the New RIHF Junior Mortgage Notes to which they
relate and shall at all times equal 100% of the issued and outstanding shares of
RII Class B Common Stock.
1.1.130 "RII INTERCOMPANY CLAIM" shall mean the Claim of RII against GRI.
1.1.131 "RII PARADISE ASSETS" shall have the meaning ascribed to that term
in the Paradise Island Purchase Agreement and the PIRL Standby Distribution
Agreement and shall include without limitation the proceeds of the November 1993
sale of the .63 acre tract of land on Paradise Island, The Bahamas.
1.1.132 "RII PARADISE SUBSIDIARIES" shall mean, collectively, (i) ANTL,
Inc., a Florida corporation and a Subsidiary of RII, (ii) International
Supplies, Inc., a Florida corporation and a Subsidiary of RII, (iii) Paradise
Island Airlines, Inc., a Florida corporation and a Subsidiary of RII, (iv)
Paradise Island Vacations, Inc., a Florida corporation and a Subsidiary of RII,
(v) Resorts International Disbursement, Inc., a Florida corporation and a
Subsidiary of RII and (vi) Resorts Representation International, Inc., a Florida
corporation and a Subsidiary of RII.
1.1.133 "RII REAL ESTATE ASSETS" shall have the meaning ascribed to that
term in the Paradise Island Purchase Agreement and the PIRL Standby Distribution
Agreement.
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1.1.134 "RII RETAINED CASH" shall mean $20 million of Available Cash to be
retained by Reorganized RII and its Subsidiaries, in the aggregate, as of the
Effective Date.
1.1.135 "SECURED CLAIM" shall mean a Claim that is secured by a Lien on
property in which the Estate has an interest or that is subject to setoff under
section 553 of the Bankruptcy Code, to the extent of the value of the Claim
Holder's interest in the Estate's interest in such property or to the extent of
the amount subject to setoff, as applicable, as determined pursuant to section
506(a) of the Bankruptcy Code; provided, however, that this definition of
Secured Claim shall not include an Old Series Note Claim, GRI Guaranty Claim or
Showboat Note Claim.
1.1.136 "SHOWBOAT NOTE CLAIM" shall mean a Claim arising from the
indebtedness evidenced by the Showboat Notes. The Showboat Note Claims shall be
Allowed, for the purposes of the Plan, in the aggregate, at the face amount of
the Showboat Notes outstanding together with the amount of the accrued and
unpaid interest thereon.
1.1.137 "SHOWBOAT NOTES" shall mean RII's First Mortgage Non-Recourse
Pass-Through Notes due 2000 issued under the Showboat Notes Indenture.
1.1.138 "SHOWBOAT NOTES INDENTURE" shall mean that certain Indenture, dated
as of September 14, 1990, between RII, as issuer, and Bank of New York, as
trustee, pursuant to which the Showboat Notes in an aggregate principal amount
of $105,333,000 were issued by RII.
1.1.139 "SIHL" shall mean Sun International Hotels Limited, a Bahamian
corporation, and the buyer of the Paradise Island Assets under the Paradise
Island Purchase Agreement.
1.1.140 "SIHL AGGREGATE CASH PURCHASE PRICE" shall mean the Cash portion of
the SIHL Aggregate Purchase Price, plus interest on such amount at the
Applicable Rate (as defined in the Paradise Island Purchase Agreement) from and
including January 1, 1994, to but excluding the SIHL Closing Date, payable in
full to the Disbursing Agent for the Holders of Allowed Old Series Public Debt
Claims upon the consummation of the sale of the Paradise Island Assets in
accordance with the Paradise Island Purchase Agreement.
1.1.141 "SIHL AGGREGATE PURCHASE PRICE" shall mean the Aggregate Purchase
Price as defined in the Paradise Island Purchase Agreement.
1.1.142 "SIHL ARTICLES" shall mean the Articles of Association for SIHL in
the form attached as Exhibit A to the Paradise Island Purchase Agreement.
1.1.143 "SIHL BUYER EXPENSE ESCROW" shall mean the U.S. $4,000,000.00
placed in escrow by RII pursuant to the SIHL Escrow Agreement to fund, if
necessary, any obligations of RII with respect to the Buyer Expense
Reimbursement (as defined in the Paradise Island Purchase Agreement) as set
forth in section 7.02 of the Paradise Island Purchase Agreement, including
interest earned on such escrowed funds.
1.1.144 "SIHL CLOSING" shall mean the closing under the Paradise Island
Purchase Agreement.
1.1.145 "SIHL CLOSING DATE" shall mean the date on which the SIHL Closing
occurs.
1.1.146 "SIHL ESCROW" shall mean the U.S. $5,000,000.00 placed in escrow by
SIHL for the benefit of RII pursuant to the SIHL Escrow Agreement, including
interest earned on such escrowed funds.
1.1.147 "SIHL ESCROW AGREEMENT" shall mean that certain Escrow Agreement
dated as of November 24, 1993 by and between RII, SIHL and Citibank, N.A., as
escrow agent, a copy of which is attached as Exhibit G to the Paradise Island
Purchase Agreement. The final form of the SIHL Escrow Agreement shall be filed
as a plan document.
1.1.148 "SIHL MANAGEMENT AGREEMENT" shall mean that certain Management
Agreement, dated as of October 11, 1993, among SIHL and Sun International
Management (U.K.) Ltd., relating to the
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management and operation of the Paradise Island Business after the SIHL Closing
Date, the form of which is attached as Exhibit C to the Paradise Island Purchase
Agreement. The final form of the SIHL Management Agreement shall be filed as a
plan document.
1.1.149 "SIHL PUT RIGHTS" shall mean the rights under the SIHL Articles of
holders of SIHL Series A Shares distributed under the Plan to put all or any
portion of such Shares to SIHL and to receive from SIHL, on or before the fifth
anniversary of the SIHL Closing Date, consideration equal to $35 (U.S.) per
share (assuming the issuance of two million shares of SIHL Series A Shares), as
may be adjusted for any consolidation or division of the SIHL Series A Shares or
other similar alteration to the SIHL Series A Shares after the date of adoption
of the SIHL Articles.
1.1.150 "SIHL RESERVED CASH" shall mean that portion of Available Cash, to
be held in an interest bearing segregated account, which, on the Effective Date,
Reorganized RII reasonably estimates will be required to fund adjustments as set
forth in section 2.05(c) of the Paradise Island Purchase Agreement, plus any
amounts paid by SIHL to RII after the SIHL Closing Date pursuant to section 2.05
of the Paradise Island Purchase Agreement, including any interest paid by SIHL
in connection therewith, plus any interest earned on such SIHL Reserved Cash.
1.1.151 "SIHL SERIES A SHARES" shall mean the Series A Ordinary Shares, par
value $.01 per share, of SIHL issued under the SIHL Articles, which, upon
distribution to the Holders of Old Series Public Debt Claims under the Plan,
shall constitute 40% of the capital stock of SIHL.
1.1.152 "SIHL SUBSIDIARIES" shall mean direct or indirect wholly-owned
subsidiaries of SIHL to be formed by SIHL to receive the RII Paradise Assets and
the RII Real Estate Assets from RII and the RII Paradise Subsidiaries pursuant
to the Paradise Island Purchase Agreement.
1.1.153 "SIHL TARGET ADJUSTED CASH" shall mean $5 million of Available Cash
which constitutes Target Adjusted Cash as defined in the Paradise Island
Purchase Agreement.
1.1.154 "STANDBY MANAGEMENT AGREEMENT" shall mean that certain management
agreement between Reorganized RII and PIRL for the interim management of the
Paradise Island Assets upon consummation of the PIRL Spin-Off substantially in
the form attached as Exhibit D to the PIRL Standby Distribution Agreement. The
final form of the Standby Management Agreement shall be filed as a Plan
Document.
1.1.155 "STANDBY RESERVED CASH" shall mean that portion of Available Cash,
to be held in an interest bearing segregated account, which, on the Effective
Date, Reorganized RII reasonably estimates will be required to fund the
adjustments set forth in section 2.05(c) of the PIRL Standby Distribution
Agreement, plus any Cash paid by PIRL to RII after the Alternative Closing Date
pursuant to section 2.05 of the PIRL Standby Distribution Agreement, plus any
interest on such Standby Reserved Cash.
1.1.156 "STANDBY TARGET ADJUSTED CASH" shall mean $5 million of Available
Cash which constitutes Target Adjusted Cash as defined in the PIRL Standby
Distribution Agreement.
1.1.157 "SUBSIDIARIES" shall mean any and all Entities of which 50% or more
of the outstanding equity having ordinary voting power to elect a majority of
the board of directors or other managers of such Entity is owned directly or
indirectly by either of the Debtors.
1.1.158 "TCW" shall mean TCW Special Credits, in its capacity as investment
advisor to various funds which hold Old Series Notes.
1.1.159 "UNSECURED CLAIM" shall mean any Claim against either of the
Debtors that is not a Showboat Note Claim, an Old Series Public Debt Claim, the
RII Intercompany Claim, or a Paradise Subsidiary Claim, Secured Claim, Priority
Claim, Priority Tax Claim or Administrative Claim.
1.2 INTERPRETATION AND RULES OF CONSTRUCTION. Unless otherwise specified,
all section, article, schedule and exhibit references in the Plan are to the
respective section in, article of,
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or schedule or exhibit to, the Plan, as the same may be amended, waived, or
modified from time to time. The rules of construction contained in section 102
of the Bankruptcy Code shall apply to the construction of the Plan.
1.3 OTHER TERMS. The words "herein," "hereof," "hereto," "hereunder," and
others of similar import refer to the Plan as a whole and not to any particular
section, subsection, or clause contained in the Plan. A capitalized term used
herein that is not defined herein shall have the meaning ascribed to that term,
if any, in the Bankruptcy Code or Bankruptcy Rules.
1.4 HEADINGS. Headings are used in the Plan for convenience of reference
only and shall not constitute a part of the Plan for any other purpose. Headings
shall not limit or otherwise affect the provisions of the Plan.
1.5 INCORPORATION OF EXHIBITS. Each Schedule and Exhibit to the Plan
annexed hereto and each of the Plan Documents and Exhibits attached to the
Registration Statement is incorporated into and is a part of the Plan as if set
forth in full herein.
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
2.1 CLAIMS AND EQUITY INTERESTS CLASSIFIED. For purposes of voting on and
making distributions under the Plan, all Claims (except for Administrative
Claims and Priority Tax Claims) and all Interests shall be classified as set
forth in sections 2.3 and 2.4 of the Plan.
2.2 ADMINISTRATIVE CLAIMS AND PRIORITY TAX CLAIMS. As provided in section
1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims
against the Debtors shall not be classified for purposes of voting on or
receiving distributions under the Plan. Rather, all such Claims shall be treated
separately as unclassified Claims on the terms set forth in Article IV of the
Plan.
2.3 CLAIMS AGAINST AND EQUITY INTERESTS IN RII.
2.3.1 RII CLASS 1 CLAIMS. RII Class 1 consists of all Priority Claims
against RII.
2.3.2 RII CLASS 2 CLAIMS. RII Class 2 consists of all Old Series Note
Claims.
2.3.3 RII CLASS 3 CLAIMS. RII Class 3 consists of all Showboat Note Claims.
2.3.4 RII CLASS 4 CLAIMS. RII Class 4 consists of all Secured Claims
against RII other than Old Series Note Claims and Showboat Note Claims. For
purposes of the Plan, each such Secured Claim shall be deemed a separate
subclass for voting and distribution.
2.3.5 RII CLASS 5 CLAIMS. RII Class 5 consists of all Unsecured Claims
against RII.
2.3.6 RII CLASS 6 CLAIMS. RII Class 6 consists of all Paradise Subsidiary
Claims against RII.
2.3.7 RII CLASS 7 INTERESTS. RII Class 7 consists of all Interests of
Holders of the Old RII Common Stock.
2.3.8 RII CLASS 8 INTERESTS. RII Class 8 consists of all Interests of
Holders of 1990 Stock Options.
2.4 CLAIMS AGAINST AND EQUITY INTERESTS IN GRI.
2.4.1 GRI CLASS 1 CLAIMS. GRI Class 1 consists of all Priority Claims
against GRI.
2.4.2 GRI CLASS 2 CLAIMS. GRI Class 2 consists of all GRI Guaranty Claims.
2.4.3 GRI CLASS 3 CLAIMS. GRI Class 3 consists of all Unsecured Claims
against GRI.
2.4.4 GRI CLASS 4 CLAIMS. GRI Class 4 consists of the RII Intercompany
Claim.
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2.4.5 GRI CLASS 5 INTERESTS. GRI Class 5 consists of the Interest in GRI
held by RII, as the Holder of all of the issued and outstanding GRI Common
Stock.
ARTICLE III
IDENTIFICATION OF IMPAIRED
CLASSES OF CLAIMS AND EQUITY INTERESTS
3.1 UNIMPAIRED CLASSES OF CLAIMS. With the exception of the impaired
classes specified in section 3.2 of the Plan, all classes of Claims are
unimpaired under the Plan.
3.2. IMPAIRED CLASSES OF CLAIMS AND EQUITY INTERESTS. RII Class 2 Claims,
GRI Class 2 Claims, the GRI Class 4 Claim, RII Class 7 Interests, RII Class 8
Interests, and GRI Class 5 Interests are impaired under the Plan.
3.3. IMPAIRMENT CONTROVERSIES. If a controversy arises as to whether any
Claim or Interest, or any class of Claims or class of Interests, is impaired
under the Plan, the Bankruptcy Court shall, after notice and a hearing,
determine such controversy.
ARTICLE IV
TREATMENT OF
ADMINISTRATIVE AND PRIORITY TAX CLAIMS
4.1 PAYMENT OF ADMINISTRATIVE CLAIMS. Subject to the provisions of
sections 330 and 331 of the Bankruptcy Code, each Holder of an Allowed
Administrative Claim against either of the Debtors shall receive on the
Distribution Date from the Debtor liable for such claim, in full satisfaction of
such Allowed Administrative Claim, Cash equal to the amount of such Allowed
Claim, unless such holder shall have agreed to different treatment of such
Claim; PROVIDED, HOWEVER, that Allowed Administrative Claims representing
obligations incurred in the ordinary course of business or otherwise assumed by
either of the Debtors pursuant to the Plan will be paid or performed by such
Debtor in accordance with the terms and conditions of each agreement relating
thereto and consistent with past practice. Notwithstanding the foregoing, all
Administrative Claims of Professional Persons incurred prior to the Confirmation
Date shall be paid in full, in cash, as soon as reasonably practicable, but in
no event later than ten days after such Claim is Allowed by a Final Order and
all Administrative Claims of Professional Persons incurred after the
Confirmation Date shall be paid as provided in section 14.6 hereof.
4.1.1 TREATMENT OF RETIREE ADMINISTRATIVE CLAIMS. Holders of Retiree
Administrative Claims shall continue to receive benefits provided for by the
terms and conditions of the Retiree Benefit Plans to the extent required by
section 1129(a)(13) of the Bankruptcy Code.
4.2 CLAIM OF OLD SERIES INDENTURE TRUSTEE. The Proponents consent to the
compensation and reimbursement of the Old Series Indenture Trustee and its
agents (including Professional Persons) for their reasonable fees and expenses
incurred in the Prepackaged Chapter 11 Cases. The Proponents acknowledge that
the Old Series Indenture Trustee has made and will continue to make a
"substantial contribution" to these cases as that term is used in section 503(b)
of the Bankruptcy Code, and Reorganized RII shall compensate the Old Series
Indenture Trustee, subject to approval of the Bankruptcy Court upon application
made therefor by the Old Series Indenture Trustee, for the reasonable fees and
costs incurred by the Old Series Indenture Trustee (including the reasonable
fees and expenses of its Professional Persons) under the Old Series Note
Indenture. This payment or payments will constitute full satisfaction of the Old
Series Indenture Trustee's Claims for compensation and reimbursement pursuant to
the Old Series Note Indenture, including the Claims secured by the Indenture
Trustee Charging Liens.
4.3 CLAIMS OF FIDELITY AND TCW. The Proponents consent to the compensation
and reimbursement of Fidelity and TCW and their agents (including Professional
Persons) for their
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reasonable fees and expenses incurred on or after the Petition Date (including
the reasonable fees and expenses of their Professional Persons) incurred in
connection with the Prepackaged Chapter 11 Cases, including but not limited to
the negotiation, documentation and preparation of the Plan, the Plan Documents
and the implementation and effectuation of the transactions contemplated thereby
and the conduct or commission of an audit in accordance with section 5.3 of the
Plan. Subject to the approval of the Bankruptcy Court, such fees and expenses
shall be paid in full, in Cash, as soon as practicable but in no event no later
than ten days after such Claims are Allowed by a Final Order. The Proponents
acknowledge that Fidelity and TCW have made and will continue to make a
"substantial contribution" to these cases as that term is used in section 503(b)
of the Bankruptcy Code.
4.4 PAYMENT OF PRIORITY TAX CLAIMS. Unless otherwise agreed between the
Holder of a Priority Tax Claim and the Debtor liable on such Claim, in
accordance with section 1129(a)(9)(c) of the Bankruptcy Code, each Holder of an
Allowed Priority Tax Claim shall be distributed, from the Debtor liable on such
Claim and at the option of such Debtor, either (a) Cash, in the full amount of
such Allowed Priority Tax Claim, on the later of the Distribution Date and the
date such Claim becomes due and payable or (b) deferred payments of Cash in the
full amount of such Allowed Priority Tax Claim, payable in equal annual
principal installments beginning on the first anniversary of the Effective Date
and ending on the earlier of the sixth anniversary of the Effective Date and the
sixth anniversary of the date of the assessment of such Claim, together with
interest (payable quarterly in arrears) on the unpaid balance of such Allowed
Priority Tax Claim at an annual rate equal to the rate applicable to Treasury
Bills on the Confirmation Date or such other rate as may be set by the
Bankruptcy Court at the Confirmation Hearing; provided, however, that
notwithstanding any other provision of this Plan, any distributions of Cash on
account of Priority Tax Claims under subsection (a) or (b) hereinabove shall be
funded from RII Retained Cash. The amount of any Allowed Priority Tax Claim for
which the time for filing a return, if required, under applicable law or under
any authorized extension thereof, has not expired on or prior to the Effective
Date, and the rights of the Holder of such Claim, if any, to payment in respect
thereof shall (a) be determined in the manner in which the amount of such Claim
and the rights of the Holder of such Claim would have been resolved or
adjudicated if the Prepackaged Chapter 11 Cases had not been commenced, (b)
survive the Effective Date and consummation of the Plan as if the Prepackaged
Chapter 11 Cases had not been commenced, and (c) not be discharged pursuant to
section 1141 of the Bankruptcy Code. In accordance with section 1124 of the
Bankruptcy Code, the Plan shall leave unaltered the legal, equitable, and
contractual rights of the Holders of Priority Tax Claims referred to in the
immediately preceding sentence.
ARTICLE V
TREATMENT OF CLAIMS AND INTERESTS
5.1 CLAIMS AGAINST AND EQUITY INTERESTS IN RII.
5.1.1 RII CLASS 1. RII Class 1 Claims are unimpaired. At RII's option, each
Holder of an Allowed Priority Claim under sections 507(a)(3), (4), (5), (6) or
(8) of the Bankruptcy Code shall retain unaltered the legal, equitable and
contractual rights to which such Allowed Priority Claim entitles the Holder
thereof or will be treated in accordance with section 1124(2) of the Bankruptcy
Code.
5.1.2 RII CLASS 2. RII Class 2 Claims are impaired. The Old Series Note
Claims shall be Allowed, for the purposes of voting on and receiving
distributions under the Plan, in the aggregate, at the face amount of the Old
Series Notes outstanding on the Petition Date, together with the amount of the
accrued and unpaid interest thereon and any other costs and expenses of
collection, other than the claims which are governed by section 4.2 of the Plan.
Each Holder of record of an RII Class 2 Claim on the Distribution Record Date
(as reflected in the register maintained by the Registrar) shall receive on the
Distribution Date on account of its Old Series Public Debt Claims, its Pro Rata
Share of (i) $125,000,000 aggregate principal amount of New RIHF Mortgage Notes,
(ii) $35,000,000 aggregate principal amount of New RIHF Junior Mortgage Notes,
(iii) the RII Class B Common Stock, (iv) the SIHL Series A Shares and the SIHL
Aggregate Cash Purchase Price received on the SIHL Closing
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Date in connection with the Paradise Island Purchase Agreement (or,
alternatively, if the SIHL Closing does not occur and the Alternative Closing
occurs, the PIRL Ordinary Shares), (v) the New RII Common Stock, and (vi) Excess
Cash. Additionally, each Holder of record of RII Class 2 Claims on the
Distribution Record Date (as reflected in the register maintained by the
Registrar) shall receive on the Distribution Date, on account of its Old Series
Public Debt Claims, its Pro Rata Share of Net SIHL Reserved Cash (or Net Standby
Reserved Cash, as the case may be), Net Plan Consummation Cash, and the Deferred
Cash. Finally, on the Distribution Date, RII shall make the Caesars Payment.
The Distribution Date with respect to distribution to the Disbursing Agent
for Holders of Old Series Public Debt Claims of Net Plan Consummation Cash shall
be as soon as practicable but no later than 90 days after the Effective Date;
provided, however, that if all Plan Expenses have not been paid by the ninetieth
day after the Effective Date, the Debtors may continue to hold back for an
additional sixty (60) days the portion of Net Plan Consummation Cash deemed by
the Bankruptcy Court to be necessary to satisfy remaining Plan Expenses. After
such sixty (60) day period, the remaining Plan Consummation Cash shall be
distributed, unless otherwise ordered by the Bankruptcy Court. Notwithstanding
the foregoing, the Reorganized Debtors shall not be required to make more than
one distribution to the disbursing agent for the Holders of the Old Series
Public Debt Claims in any given calendar week.
No Holder of an Old Series Public Debt Claim shall receive a distribution
hereunder that would require the issuance of a New RIHF Mortgage Note or a New
RIHF Junior Mortgage Note in a principal amount other than a principal amount of
$1,000 or an integral multiple thereof. Additionally, no fractional shares of
New Equity Securities will be issued. The Disbursing Agent, as soon as
practicable after the Effective Date, shall aggregate and sell all fractional
amounts of New Equity Securities, New RIHF Mortgage Notes and New RIHF Junior
Mortgage Notes at then-prevailing prices and distribute the net proceeds to the
Holders of Old Series Public Debt Claims entitled to such proceeds.
5.1.3 RII CLASS 3. RII Class 3 Claims are unimpaired. At RII's option, each
Holder of an Allowed RII Class 3 Claim shall retain unaltered the legal,
equitable and contractual rights to which such Allowed RII Class 3 Claim
entitles the Holder thereof or will be treated in accordance with section
1124(2) of the Bankruptcy Code. Each Holder of an Allowed RII Class 3 Claim will
also receive on the Distribution Date any amounts payable pursuant to section
5.4 of the Plan.
5.1.4 RII CLASS 4. RII Class 4 Claims are unimpaired. At RII's option, each
Holder of an Allowed RII Class 4 Claim shall retain unaltered the legal,
equitable and contractual rights to which such Allowed RII Class 4 Claim
entitles the holder thereof or will be treated in accordance with section
1124(2) of the Bankruptcy Code. Each Holder of an Allowed RII Class 4 Claim will
also receive on the Distribution Date any amounts payable pursuant to section
5.4 of the Plan.
5.1.5 RII CLASS 5. RII Class 5 Claims are unimpaired. At RII's option, each
Holder of an Allowed RII Class 5 Claim shall retain unaltered the legal,
equitable and contractual rights to which such Allowed RII Class 5 Claim
entitles the Holder thereof or will be treated in accordance with section
1124(2) of the Bankruptcy Code.
5.1.6 RII CLASS 6. RII Class 6 Claims are unimpaired. At RII's option, each
Holder of an Allowed RII Class 6 Claim shall retain unaltered the legal,
equitable and contractual rights to which such Allowed RII Class 6 Claim
entitles the Holder thereof or will be treated in accordance with section
1124(2) of the Bankruptcy Code.
5.1.7 RII CLASS 7. RII Class 7 Interests are impaired. On the Effective
Date, each Holder of an Allowed RII Class 7 Interest shall retain the shares of
Old RII Common Stock held by such Holder. The
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Interests held by the Holders of Allowed RII Class 7 Interests shall be diluted
on the Effective Date by the issuance of New RII Common Stock, the options to be
issued under the 1994 Stock Option Plan and, with respect to voting rights only,
RII Class B Common Stock as provided herein.
5.1.8 RII CLASS 8. RII Class 8 Interests are impaired. On the Effective
Date, each Holder of an Allowed RII Class 8 Interest shall retain the 1990 Stock
Options held by such Holders. The Interests held by the Holders of Allowed RII
Class 8 Interests shall be diluted on the Effective Date by the issuance of New
RII Common Stock, the options to be issued under the 1994 Stock Option Plan,
and, with respect to voting rights only, RII Class B Common Stock as provided
herein. The 1990 Stock Option Plan shall terminate on the Effective Date and the
exercise price for the 1990 Stock Options held by Holders of Allowed RII Class 8
Interests shall thereafter remain fixed at the exercise price at the time of the
grant thereof and shall not be altered.
5.2 CLAIMS AGAINST AND EQUITY INTERESTS IN GRI.
5.2.1 GRI CLASS 1. GRI Class 1 Claims are unimpaired. At GRI's option, each
Holder of an Allowed Priority Claim under sections 507(a)(3), (4), (5), (6) or
(8) of the Bankruptcy Code shall retain unaltered the legal, equitable and
contractual rights to which such Allowed Priority Claim entitles the Holder
thereof or will be treated in accordance with section 1124(2) of the Bankruptcy
Code.
5.2.2 GRI CLASS 2. GRI Class 2 Claims are impaired. The GRI Guaranty Claim
shall be Allowed, for purposes of voting on and receiving distributions under
this Plan only, in the aggregate, at the face amount of the Old Series Notes
outstanding on the Petition Date, together with the amount of the accrued and
unpaid interest thereon and any other costs and expenses of collection, other
than the claims which are governed by section 4.2 of the Plan. Each Holder of
record of a GRI Class 2 Claim on the Distribution Record Date (as reflected in
the register maintained by the Registrar) shall receive on account of such GRI
Class 2 Claim the treatment provided to Holders of RII Class 2 Claims under
section 5.1.2 of the Plan. The distributions made to Holders of GRI Class 2
Claims shall be in full satisfaction, release and discharge of any and all
liabilities and other obligations of GRI to such Holders on account of GRI
Guaranty Claims.
5.2.3 GRI CLASS 3. GRI Class 3 Claims are unimpaired. At GRI's option, each
holder of an Allowed GRI Class 3 Claim shall retain unaltered the legal,
equitable and contractual rights to which such claim entitles the Holder thereof
or will be treated in accordance with section 1124(2) of the Bankruptcy Code.
5.2.4 GRI CLASS 4. GRI Class 4 Claims are impaired. On the Effective Date,
RII, the Holder of the GRI Class 4 Claim, will contribute to GRI the
intercompany obligation of GRI to RII and will be treated in accordance with the
implementation of the Restructuring Transactions.
5.2.5 GRI CLASS 5. GRI Class 5 Interests are impaired. On the Effective
Date, RII, the Holder of GRI Class 5 Interests, will retain the shares of GRI
Common Stock which it then holds and will be treated in accordance with the
implementation of the Restructuring Transactions.
5.3 NO PREPAYMENT OF UNIMPAIRED CLAIMS. Notwithstanding any other
provision in this Plan, the Debtors shall not, and shall not permit their
Subsidiaries to, pay any pre-petition Allowed Claims or post-petition Allowed
Administrative Claims on or before the Effective Date, except in the ordinary
course of business and consistent with past practice, and shall continue to
collect receivables in the ordinary course of business and consistent with past
practice. In addition, neither shall the Debtors permit their Subsidiaries to
pay any claims or other obligation of such Subsidiaries on or before the
Effective Date except in the ordinary course of business and consistent with
past practice or to collect receivables other than in the ordinary course of
business and consistent with past practice. Subject to the foregoing, after the
Effective Date, RII Retained Cash rather than Plan Consummation Cash shall be
used to pay pre-petition Allowed Claims or post-petition Allowed Administrative
Claims as well as claims and other obligations of the Debtors or the Reorganized
Debtors' Subsidiaries which, in the ordinary course of business and consistent
with past practice, would not
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have been paid by the Effective Date. Fidelity and TCW shall have the right to
conduct and commission an audit of the books and records of the Debtors and
their Subsidiaries to insure their compliance with the foregoing. The fees and
expenses attributable to any such audit shall be satisfied in accordance with
section 4.3 of the Plan. With respect to any debts, liabilities or other
obligations, the payment terms of which have been accelerated as a result of the
occurrence of a default, the Debtors shall reinstate the maturities of such
debts, liabilities or other obligations in accordance with section 1124(2) of
the Bankruptcy Code and shall pay out of Plan Consummation Cash only that
portion of such debts, liabilities or other obligations which, in the ordinary
course of business and consistent with past practice, would have been paid on or
before the Effective Date. Nothing herein contained shall prohibit or shall be
deemed to prohibit the Debtors from making any payments, or causing their
Subsidiaries to make any payments, required by any provision of the Paradise
Island Purchase Agreement or the PIRL Standby Distribution Agreement.
5.4 ACCRUAL AND PAYMENT OF POST-PETITION INTEREST AND FEES. Interest on
the Showboat Notes and Allowed RII Class 4 Claims shall continue to accrue
through the Effective Date at the applicable, non-default contractual rate. To
the extent not previously paid when due or otherwise provided for under the
Plan, such interest shall be paid in Cash on the Distribution Date, together
with any additional amounts required to be paid in order to render such Claims
unimpaired pursuant to section 1124(1) or 1124(2) of the Bankruptcy Code.
5.5 SATISFACTION OF CLAIMS AND INTERESTS. The treatment of, and
consideration to be received by, Holders of Allowed Claims and Allowed Interests
pursuant to this Article V of the Plan will be in full satisfaction, release and
discharge of their respective Claims against or Interests in the Debtors.
ARTICLE VI
MEANS FOR EXECUTION OF THE PLAN
6.1 SALE OF PARADISE ISLAND ASSETS TO SIHL. Provided the Paradise Island
Purchase Agreement shall not have been previously terminated in accordance with
its terms, RII shall take all actions necessary or appropriate to the
performance of its duties and obligations thereunder and to implement the terms
of and to effectuate the transactions contemplated by the Paradise Island
Purchase Agreement. If the SIHL Closing occurs on or prior to the Effective
Date, the transactions set forth on Schedule 6.1 hereto or substantially similar
transactions shall be effected on or before the SIHL Closing Date. To the extent
that any provision in the Plan relating to the sale of the Paradise Island
Assets to SIHL or any provision in Schedule 6.1 is inconsistent with the
Paradise Island Purchase Agreement, the Paradise Island Purchase Agreement shall
control.
6.2 STANDBY DISTRIBUTION OF PARADISE ISLAND ASSETS. The following
provisions of this section 6.2 shall apply in the event of the Alternative
Closing.
6.2.1 ALTERNATIVE PARADISE ISLAND RESTRUCTURING TRANSACTIONS. If the
Paradise Island Purchase Agreement shall have been terminated in accordance with
its terms prior to the SIHL Closing Date and the conditions to the consummation
of the PIRL Standby Distribution Agreement shall have been satisfied or waived
in accordance with the terms thereof, the transactions set forth on Schedule 6.2
hereto or substantially similar transactions shall be effected on or prior to
the Alternative Closing Date. If TCW and Fidelity shall reasonably determine
that it is necessary or appropriate to extend the Alternative Closing Date, then
the Alternative Closing shall be extended for a reasonable period not to exceed
thirty (30) days after the later of (i) the date on which all conditions to the
consummation of the Alternative Closing set forth in the PIRL Standby
Distribution Agreement shall have been satisfied and (ii) the date on which the
Paradise Island Purchase Agreement shall have been terminated in accordance with
its terms. To the extent that any provision in the Plan relating to the PIRL
Spin-Off or any provision in Schedule 6.2 is inconsistent with the PIRL Standby
Distribution Agreement, the PIRL Standby Distribution Agreement shall control.
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6.2.2 PIRL BOARD OF DIRECTORS. The classification and composition of the
board of directors of PIRL shall be in accordance with the PIRL Articles. The
initial members of the board of directors and officers of PIRL are or shall be
stated in the Registration Statement or such other filing as may be made by the
Debtors, with the consent of Fidelity and TCW, with the Bankruptcy Court within
ten (10) days prior to the Confirmation Hearing.
6.2.3 PIRL OBLIGATIONS UNDER THE PARADISE ISLAND PURCHASE AGREEMENT. If the
Paradise Island Purchase Agreement shall have been terminated in accordance with
its terms prior to the SIHL Closing Date and the conditions to the consummation
of the PIRL Standby Distribution Agreement shall have been satisfied or waived
in accordance with the terms of thereof, (i) on the Alternative Closing Date,
the obligations of RII pursuant to section 7.02(a)(vi) and (vii) of the Paradise
Island Purchase Agreement shall become obligations of PIRL, and (ii) on or prior
to the Alternative Closing Date, RII shall cause PIRL to enter into a security
and pledge agreement with SIHL, pursuant to which PIRL shall pledge assets
reasonably acceptable to SIHL and having a fair market value of $6 million to
secure PIRL's obligations under section 7.02(a)(vi) and (vii) of the Paradise
Island Purchase Agreement.
6.3 GENERAL IMPLEMENTATION MATTERS.
6.3.1 OTHER RESTRUCTURING TRANSACTIONS. On the Effective Date, each of the
restructuring transactions set forth on Schedule 6.3 hereto or substantially
similar transactions shall be effected in the manner in which scheduled to
occur.
6.3.2 GENERAL CORPORATE MATTERS. Reorganized RII and Reorganized GRI shall
take such action as is necessary under the laws of the State of Delaware,
federal law and other applicable law to effect the terms and provisions of the
Plan. On the Effective Date, Reorganized RII shall file the Amended RII
Certificate of Incorporation with the Secretary of the State of Delaware in
accordance with sections 102 and 103 of the Delaware General Corporation Law.
The Amended RII Certificate of Incorporation shall contain appropriate
provisions consistent with the Plan and other Plan Documents (i) governing the
issuance of the New RII Common Stock and the RII Class B Common Stock, (ii)
prohibiting the issuance of non-voting shares as required by section 1123(a)(6)
of the Bankruptcy Code and (iii) implementing such other matters as the Debtors
believe are necessary and appropriate to effectuate the terms and conditions of
this Plan.
6.4 REORGANIZED RII.
6.4.1 RECONSTITUTED BOARD OF DIRECTORS OF RII. After the Effective Date,
the Board of Directors of Reorganized RII shall remain at six (6) members.
Subject to qualification by the CCC, the initial Board of Directors of
Reorganized RII shall consist of Merv Griffin, Thomas Gallagher, Jay Green, and
William Fallon and, as Class B Directors, Vincent Naimoli and Charles Masson. If
a vacancy among the initial members of the Board of Directors of Reorganized RII
arises, such vacancy shall be filled in accordance the Amended RII Certificate
of Incorporation and Amended RII Bylaws. As specified more particularly in the
Amended RII Certificate of Incorporation and Amended RII Bylaws, commencing with
the first annual meeting of Reorganized RII's stockholders after the Effective
Date, (i) the holders of the Reorganized RII Common Stock, voting as a class,
will elect four directors of Reorganized RII and (ii) the holders of the RII
Class B Common Stock, voting as a class, will elect two Class B directors of
Reorganized RII. As set forth in the Amended RII Certificate of Incorporation,
under certain conditions relating to Payments-in Kind in respect of the New RIHF
Junior Mortgage Notes, the Holders of the RII Class B Common Stock, voting as a
class, shall have the right to convene a meeting of stockholders and elect four
additional Class B Directors.
6.4.2 OFFICERS OF RII. The corporate officers of RII shall serve as the
initial officers of Reorganized RII on the Effective Date. The selection of
officers of Reorganized RII after the Effective Date shall be as provided in the
Amended RII Certificate of Incorporation and Amended RII Bylaws.
6.5 REORGANIZED GRI.
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6.5.1 BOARD OF DIRECTORS OF GRI. On the Effective Date, the Board of
Directors of Reorganized GRI shall consist of the members of the Board of
Directors of GRI immediately prior to the Effective Date. The individuals
designated to serve on the Board of Directors of Reorganized GRI immediately
following the Effective Date shall be identified in a writing filed with the
Bankruptcy Court at least ten (10) days prior to the Confirmation Hearing. If a
vacancy among the initial members of the Board of Directors of Reorganized GRI
arises, such vacancy shall be filled in accordance with applicable law and the
GRI's certificate of incorporation and bylaws.
6.5.2 OFFICERS OF GRI. The corporate officers of GRI shall serve as the
initial officers of Reorganized GRI on the Effective Date. The selection of
officers of Reorganized GRI after the Effective Date shall be as provided in
GRI's certificate of incorporation and bylaws.
6.6 APPROVAL OF 1994 STOCK OPTION PLAN. The 1994 Stock Option Plan for
certain officers, directors and key employees of Reorganized RII and its
Subsidiaries shall be implemented on the Effective Date. The 1994 Stock Option
Plan shall be substantially in the form attached hereto as Exhibit C. The Plan
and the Registration Statement shall be deemed a solicitation to the Holders of
the Old RII Common Stock and to the Holders of the Old Series Notes as
prospective Holders of Reorganized RII Common Stock for approval of the 1994
Stock Option Plan, and the approval of the Plan by such Holders shall constitute
stockholder approval of the 1994 Stock Option Plan for purposes of Rule 16b-3
under the Securities Exchange Act of 1934.
6.7 CORPORATE ACTION. Except as specifically provided in the Plan, the
adoption of the Amended RII Certificate of Incorporation or similar constituent
documents, the amendment of the bylaws for Reorganized RII, the selection of
directors and officers for the Reorganized Debtors, the distribution of Cash,
issuance and distribution of the Plan Securities and the adoption, execution and
delivery of all contracts, instruments, indentures and other agreements related
to any of the foregoing, and the other matters provided for under the Plan
involving corporate action to be taken by or required of the Reorganized Debtors
shall be deemed to have occurred and be effective as provided herein, and shall
be authorized and approved in all respects without any requirement of further
action by stockholders or directors of the Debtors or the Reorganized Debtors,
except to the extent the consent of Fidelity and TCW is required by the Plan or
any of the Plan Documents, or any exhibits or attachments thereto.
6.8 SOURCES OF CASH FOR PLAN DISTRIBUTION. All Cash necessary for the
Reorganized Debtors to make payments pursuant to the Plan on the Distribution
Date shall be obtained from Available Cash, the operations of the Debtors or the
Reorganized Debtors and their Subsidiaries, post-Effective Date borrowings under
the RIHF Senior Facility, or in the case of Old Series Public Debt Claims only,
the SIHL Aggregate Cash Purchase Price. The Reorganized Debtors may also make
such payments on the Distribution Date using Available Cash received from their
Subsidiaries through the Reorganized Debtors' consolidated cash management
system and from advances or dividends from such Subsidiaries in the ordinary
course.
6.9 SIHL RESERVED CASH, STANDBY RESERVED CASH AND PLAN CONSUMMATION
CASH. On the Effective Date, Reorganized RII shall reasonably estimate the
amount of SIHL Reserved Cash or Standby Reserved Cash, as the case may be, and
Plan Consummation Cash, and place all of such Cash in an interest bearing
segregated account. As soon as practicable, but in no event later than ninety
(90) days after the Effective Date, the Reorganized Debtors shall distribute Net
SIHL Reserved Cash or Net Standby Reserved Cash, as the case may be, and Net
Plan Consummation Cash to the Disbursing Agent for the Holders of Old Series
Public Debt Claims in accordance with sections 5.1.2 above and 6.11.4 below.
6.10 NEW INDENTURES. On the Effective Date, RIHF, RIH and the respective
New RIHF Indenture Trustees shall enter into the New RIHF Mortgage Note
Indenture and the New RIHF Junior Mortgage Note Indenture which shall be in the
form attached as exhibits to the Registration Statement and qualified on or
before the Effective Date under the Trust Indenture Act of 1939 with the
Securities and Exchange Commission.
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6.11 DISTRIBUTIONS.
6.11.1 GENERALLY. All distributions required hereunder to Holders of
Allowed Claims shall be made by a Disbursing Agent pursuant to a Disbursing
Agreement, provided however, that no Disbursing Agreement shall be required if
Reorganized RII or Reorganized GRI make such distributions. The Disbursing
Agreement relative to any distribution to a Class of Claims or Interests shall
provide for an appropriate interest bearing segregated account to be maintained
by the Disbursing Agent or Reorganized RII relative to Disputed Claims or
Disputed Interests as of the Distribution Date and to Old Series Notes and Old
RII Common Stock not distributed pursuant to the Old Plan because of failure to
comply with section 7.5(b) thereof.
6.11.2 SERVICE OF OLD SERIES INDENTURE TRUSTEE. The Debtors, with the
consent of Fidelity and TCW, will designate a Disbursing Agent for purposes of
effecting distributions to Holders of Old Series Public Debt Claims pursuant to
this Plan. The Old Series Indenture Trustee may be such Disbursing Agent. In any
such event (except where the context otherwise requires), any reference in this
Plan to "Disbursing Agent" shall instead be deemed to refer to the Old Series
Indenture Trustee. In the event that the Old Series Indenture Trustee is
designated (and approved by the Bankruptcy Court) as the Disbursing Agent with
respect to the Old Series Notes, the Old Series Indenture Trustee shall enter
into a Disbursing Agreement specifying the terms and conditions under which the
Old Series Indenture Trustee is to make distributions to Holders of Old Series
Public Debt Claims under the Plan.
6.11.3 DISTRIBUTIONS TO BE MADE TO HOLDERS AS OF THE DISTRIBUTION RECORD
DATE. Only Holders of record as of the Distribution Record Date shall be
entitled to receive the distributions provided under the Plan. As of the close
of business on the Distribution Record Date, the respective transfer ledgers in
respect of the Old Series Notes shall be closed. The Debtors and the Disbursing
Agent, and their agents, shall have no obligation to recognize any transfer of
Old Series Notes occurring after the Distribution Record Date. The Debtors and
the Disbursing Agent, and their agents, shall be entitled instead to recognize
and, for purposes of making distributions under the Plan, deal only with those
Holders of record stated on the transfer ledgers maintained by the Registrar for
the Old Series Notes as of the close of business on the Distribution Record
Date.
6.11.4 DISTRIBUTION TO HOLDERS OF OLD SERIES PUBLIC DEBT CLAIMS. On the
Effective Date, all Old Series Public Debt Claims shall be settled and
compromised in full by the treatment accorded to such Claims in this Plan.
Distributions to Holders of Old Series Public Debt Claims shall be delivered on
the Distribution Date to the Disbursing Agent, which shall, in turn, deliver the
distributions to the Holders of record of the Old Series Public Debt Claims as
of the Distribution Record Date in accordance with the provisions of the Plan,
the Old Series Note Indenture and the Disbursing Agreement. For purposes of any
distributions by the Debtors to Holders of Old Series Public Debt Claims, the
Disbursing Agent shall be deemed to be the sole holder of all such Old Series
Public Debt Claims. The Disbursing Agreement relative to the distribution to the
Holders of Old Series Public Debt Claims shall provide that the Disbursing Agent
shall distribute to any Holder that has complied with the requirements of
6.11.5(b) or (c) below such Holder's Pro Rata Share of the SIHL Aggregate Cash
Purchase Price, Plan Securities, Excess Cash, Net SIHL Reserved Cash or Net
Standby Reserved Cash, as the case may be, Net Plan Consummation Cash and
Deferred Cash. The Disbursing Agreement shall further provide that distributions
of a Holder's Pro Rata Share of the SIHL Aggregate Cash Purchase Price, Plan
Securities, Excess Cash, Net SIHL Reserved Cash or Net Standby Reserved Cash, as
the case may be, Net Plan Consummation Cash and Deferred Cash shall be made by
the Disbursing Agent as soon as practicable after compliance by such Holder with
the requirements of 6.11.5(b) or (c) below; provided, however, that the
Disbursing Agent shall only be required to make distributions of the Net SIHL
Reserved Cash or Net Standby Reserved Cash, as the case may be, Net Plan
Consummation Cash and Deferred Cash (i) from time to time when the aggregate
amount of such Cash to be distributed exceeds $1 million and (ii) upon receipt
of the final distribution to be made on account of Net SIHL Reserved Cash or Net
Standby Reserved Cash, as the case may be, Net Plan Consummation Cash and
Deferred Cash regardless of the amount of such Cash then held.
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6.11.5 PROCEDURES FOR DISTRIBUTION TO HOLDERS OF OLD SERIES PUBLIC DEBT
CLAIMS.
(a) On the Distribution Date, the Disbursing Agent shall receive from
Reorganized RII (or, in the case of SIHL Series A Shares and the SIHL Aggregate
Cash Purchase Price, SIHL) as applicable (i) certificates representing New RIHF
Mortgage Notes, New RIHF Junior Mortgage Notes, SIHL Series A Shares or PIRL
Ordinary Shares, as the case may be, New RII Common Stock, RII Class B Common
Stock and (ii) Cash. As soon as practicable, the Disbursing Agent, in accordance
with the Disbursing Agreement and this Plan, shall deliver such Cash and
certificates to the Holders of Old Public Debt Claims that have validly
surrendered the Old Series Notes held by such Holders.
(b) As a condition to receiving distributions provided for by the Plan in
respect of the Old Series Notes, any Holder of an Old Series Public Debt Claim
shall be required to surrender such securities, accompanied by duly executed and
completed letters of transmittal, to the Disbursing Agent. All instruments
surrendered to the Disbursing Agent shall be canceled, marked "Compromised and
Settled Only as Provided in the Plan of Reorganization for Resorts
International, Inc. and GGRI, Inc." and delivered to Reorganized RII. The
Disbursing Agent shall make distributions only to Holders of Old Series Notes
that have surrendered such instruments as herein provided. Except as provided in
section 6.11.5(c), no distribution shall be made to any Holder of an Old Series
Note that has not so surrendered such instruments held by it.
(c) Unless waived by the Disbursing Agent, any Holder of an Old Series
Public Debt Claim based upon an Old Series Note which has been lost, stolen,
mutilated or destroyed shall, in lieu of surrendering such Old Series Note as
provided in this section, deliver to the Disbursing Agent (i) evidence
satisfactory to the Disbursing Agent of the loss, theft, mutilation or
destruction of such instrument and (ii) such security or indemnity as may be
reasonably required by Reorganized RII and the Disbursing Agent to hold
Reorganized RII and the Disbursing Agent harmless from any damages, liabilities,
or costs incurred in treating such Entity as a Holder of such Old Series Public
Debt Claim. Thereafter, such Entity shall be treated as the Holder of an Old
Series Public Debt Claim for all purposes of the Plan and shall, for all
purposes under this Plan, be deemed to have surrendered the instrument
representing such Old Series Public Debt Claim.
(d) Any Holder of an Old Series Public Debt Claim who shall not have
surrendered or be deemed to have surrendered the certificates representing its
Old Series Note within twenty-four (24) months after the Effective Date shall
have its Claim based on such Old Series Note disallowed, shall receive no
distributions on such Claim under this Plan and shall be forever barred from
asserting any claim thereon. In such case, the Disbursing Agent shall return to
Reorganized RII (or, in the case of New RIHF Mortgage Notes and New RIHF Junior
Mortgage Notes, RIHF), and Reorganized RII or RIHF, as may be applicable, shall
retain all certificates representing New RIHF Mortgage Notes, New RIHF Junior
Mortgage Notes, RII Class B Common Stock, New RII Common Stock and all Cash
allocable to such non-surrendering Holders. All such certificates representing
New RIHF Mortgage Notes, New RIHF Junior Mortgage Notes, RII Class B Common
Stock, and New RII Common Stock which are so returned to Reorganized RII or, as
applicable, RIHF shall be canceled. All Cash and certificates representing SIHL
Series A Shares or PIRL Ordinary Shares shall be redistributed by the Disbursing
Agent as soon as practicable after the end of the twenty-fourth month after the
Effective Date to the other Holders of Old Series Public Debt Claims as of the
Distribution Record Date who previously surrendered their Old Series Notes.
6.11.6 MEANS OF CASH PAYMENT. Cash payments made pursuant to the Plan shall
be in U.S. funds by check drawn on a domestic bank, or, at Reorganized RII's or
Reorganized GRI's option, by wire transfer from a domestic bank; except that
payments made to foreign trade creditors holding Unsecured Claims or to foreign
governmental units holding Priority Tax Claims shall be in such funds and by
such means as are customary or as may be necessary in a particular foreign
jurisdiction.
6.11.7 CALCULATION OF DISTRIBUTION AMOUNTS OF SECURITIES. No fractional
shares of New RII Common Stock, RII Class B Common Stock or SIHL Series A Shares
or PIRL Ordinary Shares, as the case may be, shall be issued or distributed. The
Disbursing Agent, as soon as practicable after the Effective Date
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and pursuant to the Disbursing Agreement, shall aggregate and sell all
fractional amounts of such securities at then prevailing prices and distribute
the net proceeds to the Holders of Old Series Public Debt Claims entitled to
such proceeds. New RIHF Mortgage Notes and New RIHF Junior Mortgage Notes will
be issued in denominations of $1,000 and integral multiples thereof. The
Disbursing Agent, as soon as practicable after the Effective Date, shall
aggregate and sell all fractional amounts of New RIHF Mortgage Notes and New
RIHF Junior Mortgage Notes at then prevailing prices and distribute the net
proceeds to the Holders of Old Series Public Debt Claims entitled to such
proceeds.
6.11.8 DELIVERY OF DISTRIBUTIONS. Subject to Bankruptcy Rule 9010,
distributions to Holders of Allowed Claims shall be made at the address of each
such Holder as set forth on the Schedules filed with the Bankruptcy Court unless
superseded by the address as set forth on the proofs of Claim or proofs of
Interest filed by such Holders or other writing notifying the Debtors of a
change of address (or at the last known addresses of such a Holder if no proof
of Claim or proof of Interest is filed or if the Debtors have not been notified
in writing of a change of address), or in the case of Holders of Old Series
Public Debt Claims, may be made at the addresses contained in the records of the
Registrar, except as provided below. If any Holder's distribution is returned as
undeliverable, no further distributions to such Holder shall be made unless and
until Reorganized RII or the Disbursing Agent is notified of such Holder's then
current address, at which time all missed distributions shall be made to such
Holder without interest. Amounts in respect of undeliverable distributions made
through the Disbursing Agent shall be returned to the Disbursing Agent making
such distribution until such distributions are claimed. All Claims for
undeliverable distributions shall be made on or before the later of the second
anniversary of the Effective Date and the date ninety (90) days after such Claim
is Allowed. After such date, all unclaimed property shall be returned to the
Reorganized Debtors or their successors or distributed to Holders of Old Series
Public Debt Claims in accordance with section 6.11.5 of the Plan and the Claim
of any Holder with respect to such property shall be discharged and forever
barred.
6.11.9 FEES AND EXPENSES OF DISBURSING AGENTS. Except as otherwise ordered
by the Bankruptcy Court, the amount of any reasonable fees and expenses incurred
by a Disbursing Agent, including but not limited to the Old Series Indenture
Trustee, as the case may be, on or after the Confirmation Date (including, but
not limited to, tax related expenses) and any compensation and expense
reimbursement claims (including reasonable fees and expenses of its agents) made
by such Disbursing Agent shall be paid as a Plan Expense by Reorganized RII in
accordance with the applicable Disbursing Agreement without further order of the
Bankruptcy Court; provided, however, that the Bankruptcy Court will hear and
determine any disputes in respect of such fees and expenses.
6.11.10 TIME BAR TO CASH PAYMENTS. Checks issued by Reorganized RII or
Reorganized GRI in respect of Allowed Claims shall be null and void if not
negotiated within six (6) months after the date of issuance thereof. Except as
otherwise provided in sections 6.11.5 and 6.11.8 of this Plan, any amounts paid
to the Disbursing Agent in respect of such a check shall be promptly returned to
Reorganized RII or Reorganized GRI by the Disbursing Agent. Requests for
reissuance of any check shall be made directly to Reorganized RII or Reorganized
GRI by the Holder of the Allowed Claim with respect to which such check
originally was issued. Any claim in respect of such a voided check shall be made
on or before the later of the second anniversary of the Effective Date and
ninety (90) days after the six month period following the date of issuance of
such check. After such date, all claims in respect of void checks shall be
discharged and forever barred.
6.12 VESTING OF PROPERTY OF RII. Except as otherwise provided in the Plan
or the Confirmation Order, upon the Effective Date all property of RII's estate,
wherever situated, shall vest in Reorganized RII and shall be retained by
Reorganized RII or distributed to Creditors as provided in the Plan. Upon the
Effective Date, all property of RII's estate, whether retained by Reorganized
RII or distributed to Creditors, shall be free and clear of all Claims, Liens,
Encumbrances and interests, except the Claims, Liens, Encumbrances and interests
of Creditors expressly provided for in the Plan.
6.13 VESTING OF PROPERTY OF GRI. Except as otherwise provided in the Plan
or the Confirmation Order, upon the Effective Date all property of GRI's estate,
wherever situated, shall vest
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in Reorganized GRI and shall be retained by Reorganized GRI or distributed to
Creditors as provided in the Plan. Upon the Effective Date, all property of
GRI's estate, whether retained by Reorganized GRI or distributed to Creditors,
shall be free and clear of all Claims, Liens, Encumbrances and interests, except
the Claims, Liens, encumbrances and interests of Creditors expressly provided
for in the Plan.
6.14 MAINTENANCE OF CAUSES OF ACTION. Neither the Debtors nor the
Reorganized Debtors shall commence and/or prosecute any avoidance or recovery
actions under sections 544, 545, 547, 548, 549, 550, 551 and 553 of the
Bankruptcy Code other than such avoidance or recovery actions that have been or
are permitted to be filed in connection with the Old Chapter 11 Cases. On the
Effective Date, all avoidance or recovery causes of action other than such
avoidance or recovery actions that have been or are permitted to be filed in
connection with the Old Chapter 11 Cases shall be deemed waived and released.
6.15 ASSUMPTION OF LIABILITIES. The liability for and obligation to make
the distributions required under the Plan shall be assumed by Reorganized RII
and Reorganized GRI, which shall have the liability for, and obligation to make,
all distributions of Cash, Plan Securities or other instruments to be issued by
Reorganized RII and Reorganized GRI under the Plan.
6.16 RIHF SENIOR FACILITY. RIHF, RIH, RII, one or more funds managed by
Fidelity and such other Entities as may become parties thereto from time to time
shall make reasonable efforts to enter into, on or before the Effective Date,
the RIHF Senior Facility Note Purchase Agreement, the material terms of which
are set forth in the Registration Statement.
6.17 USE OF RIHF SENIOR FACILITY FUNDS. Pursuant to the terms of the RIHF
Senior Facility to be entered in between RIHF, RIH, RII, one or more funds
managed by Fidelity and such other Entities as may become parties thereto from
time to time in conjunction with the consummation of the Plan, (i) RIHF shall be
the obligor thereunder, (ii) RIH, RII and such other Entities as may become
parties thereto from time to time shall be joint guarantors thereon, (iii) RIHF
shall be permitted to borrow up to $20 million advanced thereunder, (iv) RIHF
will lend the proceeds borrowed thereunder to RIH, and (v) RIH may, but shall
not be required to, lend all or any part of the proceeds borrowed from RIHF
under the RIHF Senior Facility to RII, and in such cases (as described in (iv)
and (v) above) such funds shall be used by RIH and RII for the purposes set
forth in the RIHF Senior Facility Indenture. Acceptance of the Plan by the Class
of Holders of Old Series Public Debt Claims and the entry of the Confirmation
Order shall constitute the approval of and consent by the Holders of Old Series
Public Debt Claims to the transfer to and use by RIH and RII of such RIHF Senior
Facility funds.
ARTICLE VII
ACCEPTANCE OR REJECTION OF THE PLAN
7.1 CLASSES ENTITLED TO VOTE. Each Holder of an Allowed Claim or Allowed
Interest in an impaired Class of Claims against or Interests in either Debtor
including any Holder of an RII Class 2 Claim, RII Class 7 Interest, RII Class 8
Interests, GRI Class 2 Claim, GRI Class 4 Claim and GRI Class 5 Interests, shall
be entitled to vote separately to accept or reject the Plan. Each Holder of a
Claim in an unimpaired class of Claims, including RII Class 1, RII Class 3, RII
Class 4, RII Class 5, RII Class 6, GRI Class 1 and GRI Class 3, shall be deemed
to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code.
7.2 CLASS ACCEPTANCE REQUIREMENT. An impaired Class of Claims shall have
accepted the Plan if (i) the Holders (other than any Holder designated under
section 1126(e) of the Bankruptcy Code) of at least two-thirds in amount of the
Allowed Claims actually voting in such Class have voted to accept the Plan and
(ii) the Holders (other than any Holder designated under section 1126(e) of the
Bankruptcy Code) of more than one-half in number of the Allowed Claims actually
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voting in such Class have voted to accept the Plan. An impaired Class of
Interests shall have accepted the plan if the Holders (other than any Holder
designated under section 1126(e) of the Bankruptcy Code) of at least two-thirds
in amount of the Allowed Interests actually voting in such Class have voted to
accept the Plan.
7.3 CRAMDOWN. If any impaired Class of Claims or Interests shall fail to
accept the Plan with the requisite statutory majorities in accordance with
section 1126(c) of the Bankruptcy Code, the Debtors reserve the right to (i)
request that the Bankruptcy Court confirm the Plan in accordance with section
1129(b) of the Bankruptcy Code and/or (ii) modify the Plan in accordance with
section 14.10 of the Plan.
ARTICLE VIII
PROCEDURES FOR RESOLVING
AND TREATING DISPUTED CLAIMS
8.1 OBJECTION DEADLINE. As soon as practicable, but in no event later than
sixty days after the Effective Date, objections to Disputed Claims shall be
filed with the Bankruptcy Court and served upon the Holders of each of the
Disputed Claims.
8.2 RESPONSIBILITY FOR OBJECTION TO DISPUTED CLAIMS. Reorganized RII and
Reorganized GRI shall have the exclusive responsibility for objecting to the
allowance of Disputed Claims following the Effective Date, the entire cost of
which, including any fees and expenses of counsel and other Professional
Persons, shall be paid by Reorganized RII and Reorganized GRI from Plan
Consummation Cash during the ninety (90) days following the Effective Date, and,
except to the extent otherwise agreed by Fidelity and TCW and ordered by the
Bankruptcy Court, from RII Retained Cash thereafter.
8.3 PROSECUTION OF OBJECTIONS. On and after the Effective Date, except as
the Bankruptcy Court may otherwise order, the filing, litigation, settlement, or
withdrawal of all objections to Disputed Claims shall be the responsibility of
Reorganized RII and Reorganized GRI.
8.4 NO DISTRIBUTIONS PENDING ALLOWANCE. Notwithstanding any other
provision of the Plan, no payments or distributions shall be made with respect
to a Disputed Claim unless and until all objections to such Disputed Claim have
been determined by Final Order.
8.5 DISTRIBUTIONS AFTER ALLOWANCE. Payments and distributions from
Reorganized RII or Reorganized GRI to each Holder of a Disputed Claim, to the
extent that it ultimately becomes an Allowed Claim, shall be made in accordance
with the provisions of the Plan governing the Class of Claims to which the
Disputed Claim belongs. As soon as practicable after the date the order or
judgment of the Bankruptcy Court allowing such Claim becomes a Final Order, but
in no event later than thirty (30) days after such Claim becomes an Allowed
Claim, any Cash or other consideration that would have been distributed in
respect of the Disputed Claim had it been an Allowed Claim at the Effective Date
shall be distributed, without interest, to the Holder of such Claim.
8.6 TREATMENT OF CONTINGENT CLAIMS. Until such time as a Contingent Claim
becomes fixed and absolute, such Claim shall be treated as a Disputed Claim for
purposes related to estimates, allocations and distributions under the Plan.
8.7 ESTIMATION OF CLAIMS. The Debtors or the Reorganized Debtors may, at
any time, request that the Bankruptcy Court estimate any Contingent Claim
pursuant to section 502(c) of the Bankruptcy Code regardless of whether the
Debtors or the Reorganized Debtors have previously objected to such Claim or
whether the Bankruptcy Court has ruled on any such objection, and the Bankruptcy
Court will retain jurisdiction to estimate any Claim at any time during
litigation concerning any objection to any Claim, including during the pendency
of any appeal relating to any such objection. In the event that the Bankruptcy
Court estimates any Contingent Claim, that estimated
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amount will constitute either the allowed amount of such Claim or a maximum
limitation on such Claim, as determined by the Bankruptcy Court. If the
estimated amount constitutes a maximum limitation on such Claim, the Debtors or
the Reorganized Debtors may elect to pursue any supplemental proceedings to
object to any ultimate payment on such Claim. All of the aforementioned Claims
objection, estimation and resolution procedures are cumulative and not
necessarily exclusive of one another. Claims may be estimated and subsequently
compromised, settled, withdrawn or resolved by any mechanism approved by the
Bankruptcy Court.
ARTICLE IX
EXECUTORY CONTRACTS
9.1 GENERAL TREATMENT. All executory contracts and unexpired leases of RII
shall be assumed by Reorganized RII and all executory contracts and unexpired
leases of GRI shall be assumed by Reorganized GRI upon entry of the Confirmation
Order unless specifically rejected by order entered on or prior to the
Confirmation Date or unless a motion to reject any such executory contract or
unexpired lease is pending before the Bankruptcy Court on the Confirmation Date.
9.2 BAR TO REJECTION DAMAGES. If the rejection of an executory contract or
unexpired lease by the Debtors results in damages to the other party or parties
to such contract or lease, a Claim for such damages, if not previously evidenced
by a filed proof of Claim or barred by a Final Order, shall be forever barred
and shall not be enforceable against the Debtors or the Reorganized Debtors, or
their properties or agents, successors, or assigns, unless a proof of Claim
relating thereto is filed with the Bankruptcy Court within thirty (30) days
after the later of (i) the entry of a Final Order authorizing such rejection and
(ii) the Confirmation Date, or within such shorter period as may be ordered by
the Bankruptcy Court.
9.3 CURE OF DEFAULTS FOR EXECUTORY CONTRACTS AND UNEXPIRED LEASES. Each
executory contract and unexpired lease to be assumed pursuant to the Plan shall
be reinstated and rendered unimpaired in accordance with sections 1124(2) and
365(b)(1) of the Bankruptcy Code. In connection therewith, the Debtor obligated
on each such contract and lease to be assumed pursuant to the Plan shall cure or
provide adequate assurance that the Debtor will cure any monetary default (other
than of the kind specified in section 365(b)(2) of the Bankruptcy Code), by
payment of the default amount in Cash on the Distribution Date or on such other
terms as the parties to such executory contract or unexpired lease may otherwise
agree, compensate, or provide adequate assurance that the applicable Debtor will
promptly compensate, parties other than the Debtor to such contract or lease for
any actual pecuniary loss to such parties resulting from such default and
provide adequate assurance of future performance under such contract or lease.
In the event of a dispute regarding: (i) the amount of any cure payments, (ii)
the ability of Reorganized RII or Reorganized GRI or any of their assignees to
provide "adequate assurance of future performance" (within the meaning of
section 365 of the Bankruptcy Code) under the contract or lease to be assumed,
or (iii) any other matter pertaining to assumption, the cure payments or
performance required by section 365(b)(1) of the Bankruptcy Code shall be made
following the entry of a Final Order resolving the dispute and approving the
assumption.
ARTICLE X
RIGHTS AND OBLIGATIONS
OF THE DISBURSING AGENT
10.1 EXCULPATION. The Disbursing Agent, from and after the Effective Date,
is hereby exculpated by all Entities, Holders of Claims or Interests, and
parties in interest receiving distributions or retaining property under the
Plan, from any and all claims, causes of action, and other assertions of
liability (including breach of fiduciary duty) arising out of the Disbursing
Agent's
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discharge of the powers and duties conferred upon it by the Plan or any order of
the Bankruptcy Court entered pursuant to or in furtherance of the Plan, or
applicable law, except solely for actions or omissions arising out of the
Disbursing Agent's gross negligence or willful misconduct and except as may
otherwise be provided in the Disbursing Agreement. No Holder of a Claim or an
Interest, or representative thereof, shall have or pursue any claim or cause of
action (i) against the Disbursing Agent for making payments in accordance with
the Plan, or for implementing the provisions of the Plan, or (ii) against any
Holder of a Claim or Interest for receiving or retaining payments or other
distributions as provided for by the Plan.
10.2 POWERS OF THE DISBURSING AGENT. Pursuant to the terms and provisions
of the Disbursing Agreement, the Disbursing Agent shall be empowered to (i) take
all steps and execute all instruments and documents necessary to effectuate the
Plan; (ii) make distributions contemplated by the Plan; (iii) comply with the
Plan and the obligations thereunder; (iv) employ, retain, or replace
professionals to represent it with respect to the fulfillment of its
responsibilities under the Plan, the Disbursing Agreement and/or the Old Series
Note Indenture, as applicable; and (v) exercise such other powers as may be
vested in the Disbursing Agent pursuant to order of the Bankruptcy Court or
pursuant to the Plan, or as necessary and proper to carry out the provisions of
the Plan.
10.3 DUTIES OF THE DISBURSING AGENT. Pursuant to and subject to the terms
and provisions of (and except as may otherwise be provided in) the Disbursing
Agreement, the Disbursing Agent shall have the duties of:
(a) carrying out the provisions of the Plan, which shall include taking
or not taking any action which the Disbursing Agent deems to be in
furtherance of the Plan, including, from the date of the Disbursing Agent's
appointment, making payments and conveyances and effecting other transfers
necessary in furtherance of the Plan;
(b) managing property to be distributed in a manner designed to
effectuate the Plan;
(c) making quarterly and other periodic reports regarding the
distributions to be made to the Holders of Claims; and
(d) complying with all tax withholding and reporting requirements
imposed on it by any governmental unit.
The duties of the Disbursing Agent set forth in this section 10.3 shall not
relieve the Debtors of their duties and obligations under the Plan and
applicable law.
ARTICLE XI
CONDITIONS PRECEDENT TO
CONFIRMATION AND EFFECTIVE DATE
11.1 CONDITIONS PRECEDENT TO CONFIRMATION OF THE PLAN. Confirmation of the
Plan will not occur unless all of the following conditions precedent have been
satisfied or waived:
11.1.1 The Confirmation Date shall occur no later than December 31, 1994.
11.1.2 The Confirmation Order shall approve in all respects all of the
provisions, terms, and conditions of the Plan.
11.1.3 The Confirmation Order shall provide for the confirmation of the
Plan as to both RII and GRI.
11.1.4 The Confirmation Order shall be acceptable in form and substance to
the Debtors, TCW, Fidelity and, to the extent provided in the Paradise Island
Purchase Agreement, SIHL.
11.1.5 The Confirmation Order shall contain a finding, supported by
evidence adduced by the Debtors at the Confirmation Hearing, that (i) except as
expressly provided in the Plan, all of the
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property distributed under the Plan shall vest in the recipients thereof free
and clear of all Liens, claims, Encumbrances and interests of any nature
whatsoever (ii) and that consummation of the Plan (including the Restructuring
Transaction and the issuance of Plan Securities) shall not result in a
fraudulent transfer with respect to either of the Debtors or any of their
Affiliates.
11.1.6 The entry of a Bankruptcy Court order, which may be the Confirmation
Order, declaring that, as of the Effective Date, the Old Security Documents,
under which the Liens on the property securing the Old Series Notes were granted
or created, and the underlying obligations relating thereto shall be deemed
released and terminated.
11.2 CONDITIONS TO EFFECTIVE DATE. The Effective Date of the Plan will not
occur unless all of the following conditions precedent have been satisfied or
waived:
11.2.1 The Confirmation Order shall have been duly entered and not be
stayed.
11.2.2 The New RIHF Mortgage Indenture and New RIHF Junior Mortgage
Indenture shall have been qualified under the Trust Indenture Act of 1939 and
the securities to be issued thereunder as well as the RII Class B Common Stock,
New RII Common Stock, and SIHL Series A Shares or PIRL Ordinary Shares, as the
case may be, shall be registered under the Securities Act and accepted or
admitted on a National Securities Exchange.
11.2.3 The Effective Date shall occur no later than January 31, 1995.
11.2.4 All required regulatory approvals shall have been obtained
(including without limitation any regulatory approvals from the CCC, the
Bahamian Government and the U.S. Department of Transportation).
11.2.5 All indentures, mortgages, security agreements and other agreements
and instruments to be delivered under or necessary to effectuate the Plan,
including without limitation the RIHF Senior Facility Note Purchase Agreement,
shall have been executed and delivered.
11.2.6 Either (a) the conditions to the SIHL Closing under the Paradise
Island Purchase Agreement shall have been satisfied or waived in accordance with
the terms thereof, the Paradise Island Approval Order shall have been entered
and the SIHL Closing shall have occurred, or (b) the Paradise Island Purchase
Agreement shall have terminated in accordance with its terms, the conditions to
the consummation of the PIRL Spin-Off pursuant to the PIRL Standby Distribution
Agreement shall have been satisfied or waived in accordance with the terms
thereof and the Alternative Closing shall have occurred.
11.2.7 The Griffin Group Note Proceeds shall have been received, in full,
by RII.
11.3 WAIVER OF CONDITIONS. Except for the condition contained in section
11.2.1 above, the Debtors, with the consent of Fidelity and TCW, may waive any
condition or any portion of any condition set forth in this Article XI, at any
time without notice and without leave of or order of the Bankruptcy Court.
ARTICLE XII
EFFECTS OF CONFIRMATION
AND EFFECTIVENESS OF PLAN
12.1 DISCHARGE OF CLAIMS. Except as otherwise provided herein or in the
Confirmation Order, the rights afforded in the Plan and the payments and
distributions to be made hereunder shall discharge all existing debts and Claims
of any kind, nature, or description whatsoever against the Debtors, any of their
assets or properties or any property dealt with under the Plan to the extent
permitted by section 1141 of the Bankruptcy Code; upon the Effective Date, all
existing Claims against the Debtors shall be and shall be deemed to be
discharged; and all Holders of Claims and Interests shall be precluded from
asserting against the Debtors, any of their assets or properties, or
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any property dealt with under the Plan any other or further Claim based upon any
act or omission, transaction, or other activity of any kind or nature that
occurred prior to the Confirmation Date, whether or not such Holder filed a
proof of Claim.
12.2 DISCHARGE OF DEBTORS. Any consideration distributed under the Plan
shall be in exchange for and in complete satisfaction, discharge, and release of
all Claims of any nature whatsoever against the Debtors or any of their assets
or properties; and, except as otherwise provided herein, upon the Effective
Date, the Debtors shall be deemed discharged and released to the extent
permitted by section 1141 of the Bankruptcy Code from any and all Claims,
including but not limited to demands and liabilities that arose before the
Confirmation Date, and all debts of the kind specified in section 502(g),
502(h), or 502(i) of the Bankruptcy Code, whether or not (i) a proof of Claim
based upon such debt is filed or deemed filed under section 501 of the
Bankruptcy Code; (ii) a Claim based upon such debt is Allowed under section 502
of the Bankruptcy Code; or (iii) the Holder of a Claim based upon such debt has
accepted the Plan. Except as provided herein and therein, the Confirmation Order
shall be a judicial determination of discharge of all liabilities of the
Debtors. As provided in section 524 of the Bankruptcy Code, such discharge shall
void any judgment against the Debtors at any time obtained to the extent it
relates to a Claim discharged, and operates as an injunction against the
commencement or continued prosecution of any action against the Debtors, or the
Debtors' property, to the extent it relates to a Claim discharged.
12.3 INJUNCTION. Except as provided herein or in the Confirmation Order,
from and after the Effective Date, all Holders of Claims against either of the
Debtors' estates are permanently restrained and enjoined from continuing, or
taking any act, to enforce any Claim against Reorganized RII and Reorganized
GRI; PROVIDED, HOWEVER, that each Holder of a Claim may continue to prosecute
its proof of claim in the Bankruptcy Court or such other court to which the
matter may be referred, and all Holders of Claims shall be entitled to enforce
their rights under the Plan.
12.4 SURVIVAL OF INDEMNIFICATION CLAIMS AND OBLIGATIONS. Notwithstanding
any other provision of this Plan, all obligations of the Debtors for
indemnification of current and former officers and directors, and all claims of
such officers and directors related thereto, under the RII or GRI Certificates
of Incorporation or Bylaws or other applicable law or agreements shall expressly
survive confirmation of the Plan and be binding on and enforceable against
Reorganized RII or Reorganized GRI, as may be applicable, irrespective of
whether indemnification is owed in connection with an event occurring before, on
or after the Petition Date.
12.5 EXCULPATIONS AND LIMITATION OF LIABILITY. Notwithstanding any other
provisions of this Plan, none of the directors, officers, employees, agents,
representatives, financial advisors, or attorneys of (i) the Debtors, (ii) any
Subsidiary of the Debtors, (iii) TCW, (iv) Fidelity, or (v) the Old Series
Indenture Trustee, and neither the Debtors, any Subsidiary of the Debtors, TCW,
Fidelity nor the Old Series Indenture Trustee, shall have any liability for
actions taken or omitted to be taken in good faith under or in connection with
this Plan or in connection with the Prepackaged Chapter 11 Cases.
12.6 SATISFACTION OF INTERCOMPANY CLAIMS. On the Effective Date and after
giving effect to the Restructuring Transactions, neither RIHF nor RIH nor any of
their respective Subsidiaries will have any liability or indebtedness to any
then present or former Subsidiary or Affiliate of RII other than to RIH, RIHF or
their own respective Subsidiaries.
ARTICLE XIII
RETENTION OF JURISDICTION
13.1 SCOPE OF JURISDICTION. Pursuant to sections 1334 and 157 of title 28
of the United States Code, from and after the Confirmation Date, the Bankruptcy
Court shall retain and have
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jurisdiction of all matters arising in, arising under, and related to the
Reorganization Cases and the Plan pursuant to, and for the purposes of, sections
105(a) and 1142 of the Bankruptcy Code and for, among other things, the
following purposes:
(a) To hear and determine any and all objections to the allowance of
Claims or actions to equitably subordinate Claims or any controversy as to
the classification of Claims;
(b) To hear and determine any and all adversary proceedings,
applications or litigated matters pending on the Effective Date or brought
after the Effective Date;
(c) To hear and determine any and all applications for substantial
contribution and for compensation and reimbursement of expenses filed by
Professional Persons, Fidelity and TCW;
(d) To hear and determine Claims arising from the rejection of executory
contracts or unexpired leases and disputes arising from the assumption and
assignment of executory contracts and unexpired leases;
(e) To hear and determine, pursuant to the provisions of section 505 of
the Bankruptcy Code, all issues related to the liability of the Debtors for
any tax incurred prior to the Effective Date;
(f) To enable Reorganized RII and Reorganized GRI to commence and
prosecute any and all proceedings relating to claims or causes of action
which arose prior to the Effective Date or to recover any transfers, assets,
properties or damages to which RII or GRI may be entitled under applicable
provisions of the Bankruptcy Code and which are not waived and released
pursuant to section 6.14 hereof;
(g) To liquidate any Disputed or Contingent Claim;
(h) To enforce the provisions of the Plan and to determine any and all
disputes arising under the Plan;
(i) To enter and implement such orders as may be appropriate in the
event Confirmation is for any reason stayed, reversed, revoked, modified or
vacated;
(j) To modify any provision of the Plan to the extent permitted by the
Bankruptcy Code and to correct any defect, cure any omission or reconcile
any inconsistency in the Plan or the Confirmation Order as may be necessary
to carry out the purposes and intent of the Plan;
(k) To enter such orders as may be necessary or appropriate in
furtherance of consummation and implementation of the Plan; and
(l) To hear any disputes regarding the payment of Claims in accordance
with Section 5.3 of the Plan.
13.2 FAILURE OF THE BANKRUPTCY COURT TO EXERCISE JURISDICTION. If the
Bankruptcy Court abstains from exercising, or declines to exercise, jurisdiction
or is otherwise without jurisdiction over any matter arising in, arising under,
or related to the Reorganization Cases, including the matters set forth in
section 13.1 of the Plan, this Article XIII shall have no effect upon and shall
not control, prohibit, or limit the exercise of jurisdiction by any other court
having jurisdiction with respect to such matter.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 COMPLIANCE WITH TAX REQUIREMENTS. In connection with the Plan, the
Debtors and the Reorganized Debtors, as the case may be, and the Disbursing
Agent shall comply with all applicable withholding and reporting requirements
imposed by federal, state, local and foreign taxing
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authorities, and all distributions hereunder shall be subject to such
withholding and reporting requirements. Creditors may be required to provide
certain tax information as a condition to receipt of distributions pursuant to
the Plan.
14.2 COMPLIANCE WITH ALL APPLICABLE LAWS. If notified by any governmental
authority that it is in violation of any applicable law, rule, regulation, or
order of such governmental authority relating to its businesses, the Debtors,
Reorganized RII or Reorganized GRI, as the case may be, shall comply with such
law, rule, regulation, or order; provided, however, that nothing contained
herein shall require such compliance by the Debtors, Reorganized RII or
Reorganized GRI, as the case may be, where the legality or applicability of any
such requirement is being contested in good faith in appropriate proceedings by
the Debtors or the Reorganized Debtors as the case may be, and, if appropriate,
for which an adequate reserve has been set aside on the books of the Debtors or
the Reorganized Debtors, as the case may be.
14.3 CANCELLATION OF OLD SERIES NOTE INDENTURE. On the Effective Date, the
Old Series Note Indenture shall, except for purposes of making distributions
under the Plan, be deemed canceled, terminated, and of no further force or
effect. Except as otherwise provided in the Plan, such cancellation of the Old
Series Note Indenture shall extinguish the rights and obligations of RII and the
Holders of the Old Series Notes under the Old Series Note Indenture and the
rights of the Old Series Note Indenture Trustee to assert any Indenture Trustee
Charging Lien against the distributions to the Holders of Old Series Public Debt
Claims for unpaid fees and expenses. Notwithstanding the foregoing, RII shall be
obligated to pay the reasonable unpaid fees and expenses of the Old Series
Indenture Trustee in accordance with the provisions of section 4.2 of the Plan.
On the Effective Date, all outstanding Old Series Notes shall be canceled on the
books of the Debtors and become settled and compromised solely as provided
herein in consideration for the right to participate in distributions hereunder.
The cancellation of the Old Series Note Indenture and the provision for the
surrender of instruments pursuant to section 6.11.5 of the Plan shall extinguish
the right of any Holder of Old Series Notes to commence any cause of action
against any Entity for unpaid principal and interest thereon. The Old Series
Notes shall not be canceled other than pursuant to section 6.11.5 of the Plan
and, until such cancellation, such Old Series Notes shall be evidence of the
entitlement of the Holder thereof to receive distributions pursuant to the Plan.
14.4 DISCHARGE OF OLD SERIES INDENTURE TRUSTEE. Subsequent to the
performance of the Old Series Indenture Trustee or its agents of its or their
duties and obligations under the provisions of the Plan and the Confirmation
Order, if any, and under the terms of the Old Series Note Indenture, the Old
Series Indenture Trustee and its agents shall be relieved of all obligations
associated with the Old Series Note Indenture.
14.5 PAYMENT OF STATUTORY FEES. All fees payable pursuant to section 1930
of title 28 of the United States Code, as determined by the Bankruptcy Court at
the Confirmation Hearing, shall be paid on or before the Effective Date.
14.6 POST-CONFIRMATION DATE FEES AND EXPENSES OF PROFESSIONAL
PERSONS. After the Confirmation Date, the Debtors and, after the Effective
Date, the Reorganized Debtors shall, in the ordinary course of business and
without the necessity for any approval by the Bankruptcy Court, pay as Plan
Expenses the reasonable fees and reasonable expenses of the Professional Persons
related to implementation and consummation of the Plan; provided, however, that
no such fees and expenses shall be paid except upon receipt by the Debtors or
the Reorganized Debtors, as may be applicable, of a detailed written invoice,
which invoice shall also be served upon the United States Trustee, Fidelity and
TCW, from the Professional Person seeking compensation and expense reimbursement
and provided, further, however, that any such party may, within ten (10) days
after receipt of an invoice for fees and expenses, request that the Bankruptcy
Court determine any such request.
14.7 BINDING EFFECT. The Plan shall be binding upon and inure to the
benefit of the Debtors, the Holders of Claims, the Holders of Interests, and
their respective successors and assigns;
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provided, however, that if the Plan is not confirmed, the Plan shall be deemed
null and void and nothing contained herein shall be deemed (i) to constitute a
waiver or release of any Claims by the Debtors or any other Entity, (ii) to
prejudice in any manner the rights of the Debtors or any other Entity, or (iii)
to constitute any admission by the Debtors or any other Entity.
14.8 GOVERNING LAW. Unless an applicable rule of law or procedure is
supplied by federal law (including the Bankruptcy Code and the Bankruptcy Rules)
or the Delaware General Corporation Law or the law of the jurisdiction of
organization of any entity formed or to be formed pursuant to the Plan, the
internal laws of the State of New York shall govern the construction and
implementation of the Plan and any agreements, documents, and instruments
executed in connection with the Plan or the Reorganization Cases, except as may
otherwise be provided in such agreements, documents, and instruments.
14.9 FILING OF ADDITIONAL DOCUMENTS. On or before the conclusion of the
Confirmation Hearing, the Debtors shall file with the Bankruptcy Court such
agreements and other documents as may be necessary or appropriate to effectuate
and further evidence the terms and conditions of the Plan.
14.10 AMENDMENTS AND MODIFICATIONS. The Debtors may, in accordance with
section 1127(a) of the Bankruptcy Code and Bankruptcy Rule 3019 and subject to
the approval of the Fidelity and TCW, amend or modify this Plan prior to the
entry of the Confirmation Order. After the entry of the Confirmation Order, the
Debtors may, in accordance with section 1127(b) of the Bankruptcy Code and
subject to the approval of Fidelity and TCW, amend or modify this Plan, or
remedy any defect or omission or reconcile any inconsistency in this Plan in
such manner as may be necessary to carry out the purpose and intent of this
Plan.
14.11 REVOCATION. The Debtors reserve the right, subject to the consent of
Fidelity and TCW, to revoke and withdraw this Plan prior to Confirmation. If the
Debtors revoke or withdraw the Plan pursuant to this section 14.11, then the
Plan shall be deemed null and void and, in such event, nothing contained herein
shall be deemed to constitute a waiver or release of any Claims or other rights
by or against the Debtors or any Entity in any further proceedings involving the
Debtors.
14.12 SEVERABILITY. Should any provision in the Plan be determined to be
unenforceable, such determination shall in no way limit or affect the
enforceability and operative effect of any other provisions of the Plan.
14.13 NOTICES. All notices, requests, or demands for payments provided for
in the Plan shall be in writing and shall be deemed to have been given when
personally delivered by hand, or deposited in any general or branch post office
of the United States postal service, or received by telex or telecopier;
PROVIDED, HOWEVER that the Old Series Indenture Trustee shall give any required
notices to the Holders of Old Series Notes in accordance with the terms of the
Old Series Note Indenture. Notices, requests and demands for payments shall be
addressed and sent, postage prepaid, or delivered as follows:
(A) in the case of notices, requests, or demands for payments to the
Debtors or the Reorganized Debtors, at 1133 Boardwalk, Atlantic City, New
Jersey 08401, Attn: Christopher D. Whitney, and at any other address
designated by the Debtors by notice to each Holder of an Allowed Claim or
Interest, with copies to: Gibson, Dunn & Crutcher, 1717 Main Street, Suite
5400, Dallas, Texas 75201, Attn: Michael A. Rosenthal, Esq.,
(B) in the case of notices to Holders of Claims or Interests, at the
last known address according to RII's or Reorganized RII's books and
records, or at any other address designated by a Holder of a Claim or
Interest, by notice to RII or Reorganized RII; PROVIDED, HOWEVER, any notice
of change of address shall be effective only upon receipt. In addition, all
notices to the Holders of Allowed Old Series Public Debt Claims shall also
be given to the Old Series Indenture Trustee as follows: Chemical Bank, 450
W. 33rd Street, New York, New York 10001-2697, Attn: Anne G. Brenner; and
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(C) in the case of notices to Fidelity and TCW, at the offices of Weil,
Gotshal & Manges, 767 Fifth Avenue, New York, New York 10153, Attn: Bruce R.
Zirinsky, Esq. and at any other address designated by Fidelity and TCW.
14.14 DE MINIMIS DISTRIBUTIONS. Notwithstanding any provision to the
contrary contained herein, after the initial distribution to holders of Old
Series Notes and other creditors under the Plan, no distribution of less than
twenty-five dollars ($25) in Cash or less than five (5) shares of New RII Common
Stock shall be made to any Holder of an Allowed Claim. Such undistributed amount
will be retained by Reorganized RII or Reorganized GRI, as the case may be, and
in the case of undistributed New RII Common Stock, held as treasury shares.
14.15 CONSENT RIGHTS OF FIDELITY AND TCW. If, and only if, at any time
prior to the Effective Date, Fidelity and TCW shall cease to beneficially own an
aggregate of at least twenty percent (20%) of the aggregate principal amount of
outstanding Old Series Notes, all the rights of consent, approval, acceptance or
directions granted to Fidelity and TCW under the Plan shall thereupon
automatically cease to exist; provided, however, that nothing in this section
14.15 of the Plan shall limit or otherwise prejudice in any manner any rights
which Fidelity and TCW may have under the Bankruptcy Code and the Bankruptcy
Rules. In addition, if either of TCW and Fidelity shall cease to beneficially
own any Old Series Notes whatsoever (but the other retains an aggregate of at
least twenty percent (20%) of the aggregate principal amount of outstanding Old
Series Notes), then the obligations of the Debtors to obtain consent, approval,
acceptance or directions shall be extinguished solely as to the person ceasing
to own any such Old Series Notes, without prejudice to the rights of the other
hereunder.
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<PAGE>
DATED: NEW YORK, NEW YORK
AS OF ___________, 1994
Respectfully submitted,
RESORTS INTERNATIONAL, INC.
By ___________________________________
Christopher D. Whitney,
Executive Vice President
GGRI, INC.
By ___________________________________
Christopher D. Whitney,
Executive Vice President
RESORTS INTERNATIONAL HOTEL, INC.
By ___________________________________
Christopher D. Whitney,
Executive Vice President
RESORTS INTERNATIONAL HOTEL FINANCING,
INC.
By ___________________________________
Christopher D. Whitney,
Executive Vice President
P. I. RESORTS LIMITED
By ___________________________________
Christopher D. Whitney,
Executive Vice President
OF COUNSEL:
MICHAEL A. ROSENTHAL, ESQ.
KEITH D. ROSS, ESQ.
GIBSON, DUNN & CRUTCHER
200 Park Avenue
New York, New York 10166
(212) 351-4000
Attorneys for RESORTS
INTERNATIONAL, INC. and GGRI, INC.
Debtors and Debtors in Possession
and
RESORTS INTERNATIONAL HOTEL, INC.,
RESORTS INTERNATIONAL HOTEL
FINANCING, INC. AND P. I.
RESORTS LIMITED
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<PAGE>
SCHEDULE 6.1(1)
SIHL RELATED RESTRUCTURING TRANSACTIONS:
The following transactions shall be effected on or prior to the SIHL Closing
Date:
1. GRI shall assume the obligation of RIB to repay the intercompany debt
owed by RIB to RIH ($50,000,000) plus accrued interest thereon, and the
intercompany debt owed by RIB to RII (which as of September 30, 1993 was
$11,192,000). As a result of such assumptions, RIB will have no obligations to
repay any intercompany debt.
2. The transactions contemplated to occur on or before the SIHL Closing
Date in the Parent Subscription Agreement and Buyer Subscription Agreement shall
have occurred.
3. The following transactions shall be effected on the SIHL Closing Date:
a. GRI will distribute to its immediate parent, RII, the RIB Shares that
are owned by GRI.
b. In accordance with the terms of the Paradise Island Purchase Agreement,
in exchange for 2,000,000 SIHL Series A Shares and the SIHL Aggregate
Cash Purchase Price, (i) SIHL will purchase from RII all of the RIB
Shares free and clear of all Encumbrances, other than those Encumbrances
arising from acts of SIHL or its Affiliates and other than any applicable
Transfer Taxes, and (ii) directly or through subsidiaries of SIHL will
purchase the RII Real Estate Assets and all right, title and interest of
each RII Paradise Subsidiary in the RII Paradise Assets, free and clear
of all Encumbrances, other than Permitted Encumbrances, those
Encumbrances arising from acts of SIHL or its Affiliates and any
applicable Transfer Taxes.
c. In accordance with the terms of the Paradise Island Purchase Agreement,
SIHL shall cause (or if SIHL shall fail to so cause, Parent, pursuant to
the Parent Purchase Guaranty, shall cause) the SIHL Aggregate Cash
Purchase Price and the SIHL Series A Shares to be delivered to the
Disbursing Agent for distribution to Holders of Old Series Public Debt
Claims pursuant to sections 5.1.2, 5.2.2 and 6.11 of the Plan.
d. In accordance with the terms of the Paradise Island Purchase Agreement,
RII shall and shall cause the RII Paradise Subsidiaries to deliver to the
Buyer Subsidiaries such specific assignments, bills of sale,
endorsements, deeds and other good and sufficient instruments of
conveyance and transfer, in form and substance reasonably satisfactory to
SIHL and its counsel, as shall be effective to vest in the Buyer
Subsidiaries title to all the RII Paradise Assets and the RII Real Estate
Assets.
e. In accordance with the terms of the Paradise Island Purchase Agreement,
SIHL shall cause designated Buyer Subsidiaries to severally assume the
Assumed Liabilities and shall cause each designated Buyer Subsidiary to
execute an Assumption Agreement relating to the Assumed Liabilities
assumed by such designated Buyer Subsidiary.
f. SIHL shall file the SIHL Articles with the Commonwealth of The Bahamas
and such SIHL Articles shall be in full force and effect.
g. The Non-Recourse Guarantee shall be executed and shall be in full force
and effect.
h. SIHL, Fidelity and TCW shall execute and deliver the Registration Rights
Agreement and such Registration Rights Agreement shall be in full force
and effect.
i. Each suspensive condition contained in Article 17 of the Management
Agreement shall have been satisfied or waived by each party authorized to
waive such condition thereunder.
j. The Management Agreement and the Heads of Agreement shall be in full
force and effect.
- ------------------------
(1) Each capitalized term in this Schedule 6.1, not otherwise defined in Article
I of the Plan, shall have the meaning ascribed to such term in the Paradise
Island Purchase Agreement.
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SCHEDULE 6.2(2)
PIRL RELATED RESTRUCTURING TRANSACTIONS:
The following transactions shall be effected on or prior to the Alternative
Closing Date:
1. GRI shall assume the obligation of RIB to repay the intercompany debt
owed by RIB to RIH ($50,000,000), plus accrued interest thereon, and the
intercompany debt owed by RIB to RII (which as of September 30, 1993 was
$11,192,000). As a result of such assumptions, RIB will have no obligations to
repay any intercompany debt.
2. RII shall cause PIRL to form the PIRL Subsidiaries and to file the PIRL
Subsidiaries Certificates of Incorporation with the Commonwealth of the Bahamas.
3. The following transactions shall be effected on the Alternative Closing
Date:
a. GRI will distribute to RII the RIB Shares owned by GRI.
b. In accordance with the terms of the PIRL Standby Distribution Agreement,
(i) RII will contribute all of the RIB Shares then directly owned by RII
to the capital of PIRL in exchange for PIRL Ordinary Shares (which, when
added to the PIRL Ordinary Shares already owned by RII shall equal all of
the issued and outstanding PIRL Ordinary Shares which are to be
distributed to the Holders of Old Series Notes on the Distribution Date)
free and clear of all Encumbrances except as otherwise provided in the
PIRL Standby Distribution Agreement and (ii) subsidiaries of PIRL
designated by PIRL, with the consent of Fidelity and TCW, will acquire
all right, title and interest of RII in the RII Real Estate Assets and
all right, title and interest of each RII Paradise Subsidiary in the RII
Paradise Assets, free and clear of all Encumbrances except as otherwise
provided in the PIRL Standby Distribution Agreement.
c. In accordance with the terms of the PIRL Standby Distribution Agreement,
PIRL shall cause the PIRL Ordinary Shares to be delivered to the
Disbursing Agent for distribution to Holders of Old Series Public Debt
Claims pursuant to sections 5.1.2, 5.2.2 and 6.11 of the Plan.
d. In accordance with the terms of the PIRL Standby Distribution Agreement,
RII shall and shall cause the RII Paradise Subsidiaries to deliver to the
PIRL Subsidiaries such specific assignments, bills of sale, endorsements,
deeds and other good and sufficient instruments of conveyance and
transfer, in a form reasonably satisfactory to TCW, Fidelity and RII, and
their counsel, as shall be effective to vest in the PIRL Subsidiaries
title to all the RII Paradise Assets and the RII Real Estate Assets.
e. In accordance with the terms of the Purchase Agreement, PIRL shall cause
designated PIRL Subsidiaries to severally assume the Assumed Liabilities
and shall cause each designated PIRL Subsidiary to execute an Assumption
Agreement relating to the Assumed Liabilities assumed by such designated
PIRL Subsidiary.
f. PIRL shall file the PIRL Articles with the Commonwealth of The Bahamas
and such PIRL Articles shall be in full force and effect.
g. PIRL, Fidelity and TCW shall execute and deliver the Registration Rights
Agreement and such Registration Rights Agreement shall be in full force
and effect.
h. RII and PIRL shall execute and deliver the Standby Management Agreement
and the Standby Management Agreement shall be in full force and effect.
- ------------------------
(2) Each capitalized term in this Schedule 6.2, not otherwise defined in Article
I of the Plan, shall have the meaning ascribed to such term in the PIRL
Standby Distribution Agreement.
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SCHEDULE 6.3 (3)
OTHER RESTRUCTURING TRANSACTIONS:
The following transactions shall be effected on the Effective Date in the
order set forth below:
1. RIHF, RIH, RII and the New RIHF Indenture Trustees, as may be
appropriate, shall execute the operative documents relative to the New RIHF
Mortgage Indenture and the New RIHF Junior Mortgage Indenture.
2. RII shall issue 17,025,000 shares of New RII Common Stock and 35,000
shares of RII Class B Common Stock.
3. RIH will distribute the RIH Promissory Note and the RIH Junior
Promissory Note, secured by the RIH Mortgage and the RIH Junior Mortgage,
respectively, and certain other security documents to RII in repayment of the
intercompany debt owed to RII by RIH (which as of September 30, 1993 was
$51,325,000) and as a distribution to RII as a shareholder of RIH.
4. RII will exchange the RIH Promissory Note and the RIH Junior Promissory
Note, together with the related RIH Mortgage, RIH Assignment of Leases and
Rents, RIH Assignment of Operating Assets, RIH Junior Mortgage, RIH Junior
Assignment of Leases and Rents, and RIH Junior Assignment of Operating Assets,
for the New RIHF Mortgage Notes and the New RIHF Junior Mortgage Notes to be
issued by RIHF.
5. RII will deliver the New RIHF Mortgage Notes, the New RIHF Junior
Mortgage Notes and an appropriate number of shares of New RII Common Stock and
the RII Class B Common Stock to the Disbursing Agent for distribution to Holders
of Old Series Public Debt Claims in accordance with the Plan, and RIHF will
assign to the New RIHF Indenture Trustee and the New RIHF Junior Indenture
Trustee, as may be appropriate, the RIH Promissory Note, the RIH Junior
Promissory Note, the RIH Mortgage, the RIH Junior Mortgage and certain other
security documents.
6. RII will contribute to GRI the intercompany obligation of GRI to RII
(which as of September 30, 1993 was $51,388,000 plus $11,192,000).
7. Upon termination and release of the RIH Pledge Agreement, GRI will
exchange with RIH the $325,000,000 of non-interest bearing RIH Notes for an
amount of stock representing, on a fully diluted basis, ninety-nine and
ninety-nine one-hundredths percent (99.99%) of the issued and outstanding common
stock of RIH.
8. RII will contribute to the capital of GRI the remaining one-hundredth
percent (.01%) of the issued and outstanding stock of RIH held by RII prior to
the Effective Date. RIH will become a wholly-owned first-tier subsidiary of GRI
and an indirect subsidiary of RII. RIH will then distribute to GRI, as a return
of surplus, the intercompany debt of $50,000,000 plus accrued interest thereon
assumed by GRI pursuant either to paragraph 1 of Schedule 6.1 hereof or
paragraph 1 of Schedule 6.2 hereof.
9. RIHF, as issuer, RIH, RII and such other Entities as may become parties
thereto from time to time, as guarantors, and , as trustee,
shall execute the operative documents relative to the RIHF Senior Facility Note
Purchase Agreement.
10. To secure its obligations under the RIHF Senior Facility Notes, RIHF,
pursuant to the RIHF Senior Facility Assignment of Agreements, shall assign the
RIH Senior Facility Note, RIH Senior Facility Mortgage, RIH Senior Facility
Assignment of Leases and Rents, and RIH Senior Facility Assignment of Operating
Assets to the Collateral Agent on behalf of the RIHF Senior Facility Trustee.
11. To secure its guaranty of the RIHF Senior Facility Notes, RIH will
execute and deliver the RIH Senior Facility First Mortgage, RIH Senior Facility
First Assignment of Leases and Rents, and RIH Senior Facility First Assignment
of Operating Assets to the Collateral Agent on behalf of the RIHF Senior
Facility Trustee.
- ------------------------
(3) Each capitalized term in this Schedule 6.3, not otherwise defined in Article
I of the Plan, shall have the meaning ascribed to such term in the
Registration Statement.
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<PAGE>
Exhibit A -- Paradise Island Purchase Agreement
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PURCHASE AGREEMENT
BETWEEN
RESORTS INTERNATIONAL, INC.
AND
SUN INTERNATIONAL HOTELS LIMITED
-----------------------------------
DATED AS OF OCTOBER 11, 1993
-----------------------------------
PURCHASE OF STOCK OF RESORTS INTERNATIONAL (BAHAMAS)
1984 LIMITED, AND CERTAIN ASSETS OF RII AND
RII PARADISE SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions..................................................................... 2
ARTICLE II
PURCHASE AND SALE OF THE SHARES
AND THE RII PARADISE ASSETS
SECTION 2.01. Transfer of the Shares.......................................................... 2
SECTION 2.02. Purchase and Sale of the Shares, the RII Real Estate Assets and the RII Paradise 2
Assets.........................................................................
SECTION 2.03. Delivery of Certificates and Other Instruments of Transfer...................... 2
SECTION 2.04. Aggregate Purchase Price........................................................ 3
SECTION 2.05. Preparation of the Closing Date Balance Sheet and Operations Statement; 3
Adjustments....................................................................
SECTION 2.06. Closing......................................................................... 6
SECTION 2.07. Third-Party Consents............................................................ 6
SECTION 2.08. Further Assurances.............................................................. 6
SECTION 2.09 Power of Attorney, etc.......................................................... 7
ARTICLE III
ASSUMPTION OF CERTAIN LIABILITIES
SECTION 3.01. Assumed Liabilities............................................................. 8
SECTION 3.02. Liabilities Not Assumed......................................................... 8
SECTION 3.03. No Successor.................................................................... 8
SECTION 3.04. Indemnification................................................................. 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RII
SECTION 4.01. Organization and Good Standing.................................................. 10
SECTION 4.02. Authorization................................................................... 10
SECTION 4.03. No Conflict; Required Filings and Consents...................................... 11
SECTION 4.04. Capital Stock of the Company and Subsidiaries................................... 12
SECTION 4.05. Financial Statements............................................................ 13
SECTION 4.06. Absence of Undisclosed Liabilities and Liens.................................... 13
SECTION 4.07. Real Property and Improvements.................................................. 14
SECTION 4.08. Personal Property............................................................... 15
SECTION 4.09. Intellectual Property........................................................... 16
SECTION 4.10. Litigation...................................................................... 16
SECTION 4.11. Insurance....................................................................... 17
SECTION 4.12. United States Benefit Plans..................................................... 17
SECTION 4.12A. Bahamas Benefit Plans........................................................... 19
SECTION 4.13. Absence of Changes of Events.................................................... 21
SECTION 4.14. Compliance with Applicable Environmental Laws................................... 21
SECTION 4.15. Compliance with Laws; Licenses and Permits...................................... 23
SECTION 4.16. The Shares; Entire Business..................................................... 23
SECTION 4.17. Contracts....................................................................... 24
SECTION 4.18. Inventory....................................................................... 24
</TABLE>
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<TABLE>
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SECTION 4.19. Receivables; Payables........................................................... 25
<S> <C> <C>
SECTION 4.20. Employees....................................................................... 25
SECTION 4.21. Tax Returns and Payments........................................................ 26
SECTION 4.22. Brokers......................................................................... 27
SECTION 4.23. Transactions with Affiliates.................................................... 27
SECTION 4.24. Payments........................................................................ 27
SECTION 4.25 Buyer Registration Statement; Buyer Prospectus.................................. 28
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 5.01. Organization and Good Standing.................................................. 29
SECTION 5.02. Authorization................................................................... 29
SECTION 5.03. No Conflict; Required Filings and Consents...................................... 30
SECTION 5.04. Reorganization Plan Solicitation Documents...................................... 30
SECTION 5.05. Brokers......................................................................... 31
SECTION 5.06. Buyer Series A Shares........................................................... 31
SECTION 5.07. Buyer Registration Statement; Buyer Prospectus.................................. 31
SECTION 5.08. Operation of Buyer.............................................................. 32
SECTION 5.09. Capital Structure of Buyer...................................................... 32
SECTION 5.10. Subscription Agreements......................................................... 33
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Conduct of Paradise Island Business Pending the Closing......................... 33
SECTION 6.02. Securities Laws................................................................. 36
SECTION 6.03. Documents and Motions to Be Filed by RII and GRI................................ 36
SECTION 6.04. Reorganization Proceedings...................................................... 37
SECTION 6.05. Access to Information; Confidentiality.......................................... 38
SECTION 6.06. Notification of Certain Matters................................................. 38
SECTION 6.07. Further Action; Reasonable Efforts.............................................. 39
SECTION 6.08. Public Announcements............................................................ 39
SECTION 6.09. Employee Benefit Matters........................................................ 39
SECTION 6.10. Bulk Transfer Laws.............................................................. 41
SECTION 6.11. Intercompany Accounts, Contracts, Guaranties and Indebtedness................... 41
SECTION 6.12. Reorganization Plan Solicitation Documents...................................... 42
SECTION 6.13. Reorganization Proceedings...................................................... 42
SECTION 6.14. Waiver of Certain Representations and Warranties................................ 43
SECTION 6.15. Certain Obligations of Buyer.................................................... 43
SECTION 6.16. Bank Facility................................................................... 44
SECTION 6.17. Airline Governmental Consents................................................... 44
SECTION 6.18. Comfort Letter.................................................................. 45
SECTION 6.19. Escrow Agreement................................................................ 45
SECTION 6.20. Insurance Proceeds.............................................................. 45
</TABLE>
2
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ARTICLE VII
NO SHOP; BUYER'S FEES
<S> <C> <C>
SECTION 7.01. No Shop......................................................................... 45
SECTION 7.02. Buyer Expense Reimbursement..................................................... 47
SECTION 7.03. Attorneys' Fees................................................................. 48
SECTION 7.04. Transfer Taxes.................................................................. 48
ARTICLE VIII
CONDITIONS TO THE CLOSING
SECTION 8.01. Conditions to Obligations of Buyer.............................................. 49
SECTION 8.02. Conditions to Obligations of RII................................................ 51
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.01. Survival of Representations..................................................... 52
SECTION 9.02. Indemnification by RII.......................................................... 53
SECTION 9.03. Indemnification by Buyer........................................................ 53
SECTION 9.04. Notice, etc..................................................................... 54
SECTION 9.05. Reimbursement of Costs.......................................................... 54
SECTION 9.06. Time Limitations................................................................ 55
SECTION 9.07. Sole and Exclusive Remedy....................................................... 55
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. Termination..................................................................... 55
SECTION 10.02. Rights of Termination........................................................... 57
SECTION 10.03. Effect of Termination........................................................... 57
SECTION 10.04. Waiver, Exercise of Rights...................................................... 57
SECTION 10.05. Amendments...................................................................... 58
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Notices......................................................................... 58
SECTION 11.02. Entire Agreement; Assignment.................................................... 60
SECTION 11.03. Parties in Interest............................................................. 60
SECTION 11.04. GOVERNING LAW................................................................... 60
SECTION 11.05. Headings........................................................................ 60
SECTION 11.06. Counterparts.................................................................... 61
SECTION 11.07. Specific Performance............................................................ 61
SECTION 11.08. JURISDICTION.................................................................... 61
SECTION 11.09. Approvals; Knowledge............................................................ 61
SECTION 11.10. Parent Guaranty................................................................. 62
EXHIBITS
Exhibit A Form of Articles of Association of Buyer........................................
Exhibit B Form of Registration Rights Agreement...........................................
</TABLE>
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<TABLE>
<CAPTION>
PAGE
---------
Exhibit C Form of Management Agreement....................................................
<S> <C> <C>
Exhibit D Form of Non-Recourse Guaranty and Pledge Agreement..............................
Exhibit E Form of Commitment Letter.......................................................
Exhibit F Form of Comfort Letter..........................................................
Exhibit G Form of Escrow Agreement........................................................
Exhibit H Form of Parent Guaranty.........................................................
Exhibit I Buyer Subscription Agreement....................................................
SCHEDULES
Schedule 2.04 Purchase Price Allocation.......................................................
Schedule 3.01 Assumed Liabilities.............................................................
Schedule 4.01 Qualification...................................................................
Schedule 4.04 Subsidiaries and Equity Ownership...............................................
Schedule 4.05 Paradise Island Financial Statements............................................
Schedule 4.06(a) Liabilities and Indebtedness to be Discharged...................................
Schedule 4.06(b) Liaibilities and Indebtedness to Stay with Company..............................
Schedule 4.07 Real Property...................................................................
Schedule 4.08 Personal Property...............................................................
Schedule 4.09 Intellectual Property...........................................................
Schedule 4.10 Litigation......................................................................
Schedule 4.11 Insurance.......................................................................
Schedule 4.12 Benefit Plans...................................................................
Schedule 4.12A Bahamas Benefit Plans...........................................................
Schedule 4.14 Environmental Matters...........................................................
Schedule 4.16(a) Agreements Affecting the Shares.................................................
Schedule 4.16(b) Shared Facilities/Contracts.....................................................
Schedule 4.17 Material Contracts..............................................................
Schedule 4.18 Inventory.......................................................................
Schedule 4.19 Receivables/Payables............................................................
Schedule 4.20 Employee Claims/Stoppages.......................................................
Schedule 4.21 Tax Matters.....................................................................
Schedule 4.22 RII Brokers.....................................................................
Schedule 4.23 Affiliate Transactions..........................................................
Schedule 5.05 Buyer Brokers...................................................................
Schedule 5.08 Parent Expenses.................................................................
Schedule 6.09 Certain RII Employees...........................................................
Schedule 6.09(a) Paradise Employees..............................................................
Schedule 6.09(c) Certain Officers and Directors..................................................
Schedule 10.01(n) Material Contract Consents......................................................
</TABLE>
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PURCHASE AGREEMENT
PURCHASE AGREEMENT dated as of October 11, 1993 (this "Agreement"),
between RESORTS INTERNATIONAL, INC., a Delaware corporation ("RII"), and
SUN INTERNATIONAL HOTELS LIMITED, a Bahamian corporation ("Buyer").
WHEREAS, Buyer desires to acquire the Shares from RII, and RII desires to
sell the Shares to Buyer on the terms and conditions set forth herein (such
purchase, the "Stock Acquisition");
WHEREAS, in connection with the Stock Acquisition, Buyer desires to cause
the Buyer Subsidiaries to acquire the RII Paradise Assets from the RII Paradise
Subsidiaries and the RII Real Estate Assets from RII, and RII desires to sell
the RII Real Estate Assets, and to cause the RII Paradise Subsidiaries to sell
the RII Paradise Assets, to the Buyer Subsidiaries on the terms and conditions
set forth herein (such purchase, the "Asset Acquisition");
WHEREAS, in connection with the Stock Acquisition and the Asset Acquisition,
RII and GRI will file the Reorganization Plan with the Bankruptcy Court,
providing, INTER ALIA, under certain terms and conditions to be set forth in the
Reorganization Plan, for the (i) sale of the Shares to Buyer, (ii) sale of the
RII Paradise Assets and the RII Real Estate Assets to the Buyer Subsidiaries,
(iii) distribution to holders of the Old Series Notes of RII (as defined in the
Reorganization Plan) of RII of the Aggregate Cash Purchase Price and the Buyer
Series A Shares paid by Buyer and the Buyer Subsidiaries for the Shares and the
RII Paradise Assets and the RII Real Estate Assets and (iv) the other
distributions to holders of the Old Series Notes of RII to be made pursuant to
the Reorganization Plan;
WHEREAS, the respective Boards of Directors of Buyer and RII deem it
advisable and in the best interests of such corporations that the Stock
Acquisition and Asset Acquisition occur upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, representations and warranties herein contained, and subject to the
conditions hereinafter set forth, and for the purpose of prescribing the terms
and conditions of the Stock Acquisition and Asset Acquisition, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used but not defined herein
shall have the meanings set forth in Appendix A.
ARTICLE II
Purchase and Sale of the Shares
and the RII Paradise Assets
SECTION 2.01. TRANSFER OF THE SHARES. Prior to Closing, RII shall cause
GRI to transfer the Shares to RII in a transaction reasonably acceptable to
Buyer and its counsel.
SECTION 2.02. PURCHASE AND SALE OF THE SHARES, THE RII REAL ESTATE ASSETS
AND THE RII PARADISE ASSETS. On the terms and subject to the conditions of this
Agreement, on the Closing Date (a) RII agrees to sell, transfer and deliver to
Buyer, and Buyer agrees to purchase and accept from RII, the Shares, free and
clear of all Encumbrances, other than those Encumbrances arising from acts of
Buyer or its Affiliates and other than any applicable Transfer Taxes, and (b)
RII shall, and shall cause each RII Paradise Subsidiary to, sell, convey,
assign, transfer and deliver to a Buyer Subsidiary designated by Buyer, and
Buyer shall cause each such Buyer Subsidiary to purchase and accept from RII and
each such RII Paradise Subsidiary, all right, title and interest of RII in the
RII Real Estate Assets and all right, title and interest of each such RII
Paradise Subsidiary in the RII Paradise Assets, free and clear of all
Encumbrances except Permitted Encumbrances and those Encumbrances arising from
acts of Buyer or its Affiliates and other than any applicable Transfer Taxes.
SECTION 2.03. DELIVERY OF CERTIFICATES AND OTHER INSTRUMENTS OF
TRANSFER. On the Closing Date (a) RII shall deliver to Buyer certificates
representing the Shares together with stock powers
<PAGE>
executed in blank and (b) RII shall, and shall cause the RII Paradise
Subsidiaries to, deliver to the Buyer Subsidiaries such specific assignments,
bills of sale (to be in a form reasonably satisfactory to Buyer and RII),
endorsements, deeds and other good and sufficient instruments of conveyance and
transfer, in form and substance reasonably satisfactory to Buyer and its
counsel, as shall be effective to vest in the Buyer Subsidiaries title to all
the RII Paradise Assets and the RII Real Estate Assets. All right, title and
interest of RII in the RII Real Estate Assets and of the RII Paradise
Subsidiaries in the RII Paradise Assets shall pass and delivery of the RII Real
Estate Assets and the RII Paradise Assets shall take place in such location or
locations as Buyer and RII shall determine.
SECTION 2.04. AGGREGATE PURCHASE PRICE. As full consideration for the
transfer of the Shares and the RII Real Estate Assets and the RII Paradise
Assets, Buyer shall cause on the Closing Date (a) the Aggregate Purchase Price
to be delivered, on behalf of RII and the RII Paradise Subsidiaries, to the
disbursing agent designated pursuant to the Reorganization Plan or pursuant to
an order of the Bankruptcy Court for purposes of making distributions thereunder
to holders of the Old Series Notes of RII (as defined in the Reorganization
Plan) and (b) the Buyer Subsidiaries to assume the Assumed Liabilities in
accordance with Article III hereof. The Aggregate Purchase Price shall be
allocated as set forth on Schedule 2.04.
SECTION 2.05. PREPARATION OF THE CLOSING DATE BALANCE SHEET AND OPERATIONS
STATEMENT; ADJUSTMENTS. (a) Within 45 days after the Closing Date, RII shall
cause to be prepared, in accordance with the books and records of account of the
Paradise Island Business and a physical inventory, and shall deliver, an audited
balance sheet for the Paradise Island Business as of the Closing Date (the
"Preliminary Closing Date Balance Sheet") and an audited statement of operations
for the Paradise Island Business for the period beginning at 12:01 a.m. on
January 1, 1994, and ending at the close of business on the Closing Date (the
"Preliminary Closing Date Operations Statement"), accompanied by an opinion of
Ernst & Young thereon to the effect that such balance sheet and statement of
operations present fairly in all material respects the financial position and
results of operation of the Paradise Island Business at such date and for such
period in conformity with GAAP and the preparation of the June 30 Balance Sheet
and the statement of operations for the six months ending June 30, 1993.
Representatives of Buyer's auditors, Arthur Andersen & Co., shall be entitled to
review the scope of the audit in advance thereof as well as the work of Ernst &
Young as it progresses and all drafts of the Preliminary Closing Date Balance
Sheet and the Preliminary Closing Date Operations Statement. Within 10 days
after the delivery to Buyer of the Preliminary Closing Date Balance Sheet and
the Preliminary Closing Date Operations Statement, Buyer shall notify RII if it
disagrees in any respect with such Preliminary Closing Date Balance Sheet or
Preliminary Closing Date Operations Statement. If Buyer does disagree, Buyer and
RII shall promptly attempt to settle such disagreement. If Buyer and RII are
unable to resolve such disagreement within 7 days after such notice, such
disagreement shall be referred to the Accounting Arbitrator for a determination,
which shall be final and binding on the parties hereto for all purposes of this
Agreement. The fees of the Accounting Arbitrator shall be allocated between
Buyer and RII by the Accounting Arbitrator based on its good faith view as to
which party's positions were more reasonable. The Preliminary Closing Date
Balance Sheet and Preliminary Closing Date Operations Statement as agreed to by
the parties or as adjusted pursuant to the determination of the Accounting
Arbitrator are herein referred to as the "Closing Date Balance Sheet" and the
"Closing Date Operations Statement". Buyer and RII agree that if prior to 35
days after the Closing Date there has not been a resolution of the dispute (the
"Union Contract Dispute") between the Company and The Bahamas Hotel Catering and
Allied Workers Union (the "Union") with respect to amounts claimed by the Union
to be owed by the Company through December 31, 1993, under the collective
bargaining agreement dated as of January 7, 1990, between The Bahamas Hotel
Employers Association and the Union, then RII and Buyer shall agree as to the
amount they believe it would reasonably take to settle the Union Contract
Dispute (the "Union Contract Dispute Amount"). If Buyer and Seller are unable to
agree on the Union Contract Dispute Amount by the 40th after the Closing Date,
then the Union Contract Arbitrator shall determine such amount prior to the
sixtieth day after the Closing Date, and such determination shall be final and
binding on the parties hereto. The Union Contract Dispute Amount, as agreed to
by the parties or
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determined by the Union Contract Arbitrator, shall appear on the Preliminary
Closing Date Balance Sheet and the Closing Date Balance Sheet as a Current
Liability. Prior to the Closing Date, RII shall, as between the parties, control
the resolution of the Union Contract Dispute; PROVIDED, HOWEVER, it shall
consult with Buyer with respect thereto and allow a representative of Buyer to
be present when reasonable in all material negotiations in connection therewith.
(b) Within three Business Days after the Closing Date, Buyer and RII shall
jointly prepare a cash statement setting forth the amount of Adjusted Cash of
the Paradise Island Business as of the Closing Date. If the Adjusted Cash of the
Paradise Island Business shown on such cash statement shall be less than the
Target Adjusted Cash, on the fourth Business Day after the Closing Date RII
shall pay to Buyer the difference in immediately available funds.
(c) If the Adjusted Working Capital of the Paradise Island Business plus any
Adjusted Cash in excess of $5 million shown on the Closing Date Balance Sheet
shall be greater than the Target Adjusted Working Capital plus the EBITDA
Adjustment, on the Adjustment Date (as defined below) Buyer shall pay to RII the
difference in immediately available funds, together with interest on such amount
at the Applicable Rate from and including the Closing Date to but excluding the
Adjustment Date. If the Adjusted Working Capital of the Paradise Island Business
plus any Adjusted Cash in excess of $5 million shown on the Closing Date Balance
Sheet shall be less than the Target Adjusted Working Capital plus the EBITDA
Adjustment, on the Adjustment Date RII shall pay to Buyer the difference in
immediately available funds, together with interest on such amount at the
Applicable Rate from and including the Closing Date to but excluding the
Adjustment Date. For purposes of the foregoing, "Adjustment Date" shall mean (i)
if Buyer does not disagree in any respect with the Preliminary Closing Date
Balance Sheet, the 10th day following Buyer's receipt of the Preliminary Closing
Balance Sheet or (ii) if Buyer shall disagree in any respect with the
Preliminary Closing Balance Sheet, the third Business Day following either the
resolution of such disagreement by the parties or a final determination by the
Accounting Arbitrator in accordance with Section 2.05(a).
SECTION 2.06. CLOSING. The Closing of the transactions contemplated by
this Agreement shall take place at the offices of Gibson Dunn & Crutcher, 200
Park Avenue, New York, NY, on a date to be agreed upon by RII and Buyer, as
promptly as practicable following the satisfaction or waiver of all of the
conditions set forth in Article VIII hereof, but in no event later than 10
Business Days thereafter.
SECTION 2.07. THIRD-PARTY CONSENTS. To the extent that any Contract
relating to the RII Paradise Assets to be assumed by a Buyer Subsidiary for
which assignment to such Buyer Subsidiary is provided for herein is not
assignable without the consent of another party (a "Non-Assignable Contract"),
this Agreement shall not constitute an assignment or an attempted assignment
thereof if such assignment or attempted assignment would constitute a breach
thereof. RII and Buyer agree to use their best efforts (without the payment of
money) to obtain the consent of such other party to the assignment of any such
Contract to the relevant Buyer Subsidiary in all cases in which such consent is
or may be required for such assignment. If any such consent shall not be
obtained, RII agrees to cooperate with Buyer in any reasonable arrangement (at
the cost and for the account of such Buyer Subsidiary) designed to provide for
the relevant Buyer Subsidiary the benefits intended to be assigned to such Buyer
Subsidiary under the relevant Contract, including enforcement of any and all
rights of the relevant RII Paradise Subsidiary against the other party thereto
arising out of the breach or cancellation thereof by such other party or
otherwise. If and to the extent that such arrangement cannot be made, except as
provided in the next sentence, neither Buyer nor any Buyer Subsidiary shall have
any obligation with respect to any such Contract. If PIA is unable to assign to
a designated Buyer Subsidiary the Ft. Lauderdale Ground Space Lease (Hangar)
with Broward County, Florida (the "Hangar Lease"), or is otherwise unable to
arrange for such designated Buyer Subsidiary to obtain the benefits of the
Hangar Lease, then (i) PIA shall use its reasonable best efforts to sub-lease
the Hangar Lease and (ii) Buyer and PIA shall each be responsible for 50% of the
obligations of lessee under the Hangar Lease and shall each be entitled to
receive 50% of the proceeds relating to any sublease of the Hangar Lease.
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<PAGE>
SECTION 2.08. FURTHER ASSURANCES. (a) From and after the Closing, upon
request of Buyer, RII shall, and shall cause any of its Affiliates formerly
owning an interest in the Paradise Island Assets to, execute, acknowledge and
deliver all such further acts, assurances, deeds, assignments, transfers,
conveyances and other instruments and papers as may be reasonably required to
sell, assign, transfer, convey and deliver (at Buyer's expense, unless otherwise
provided in this Agreement) to and vest in Buyer, the Company or its
Subsidiaries or the Buyer Subsidiaries, as the case may be, and more fully
protect their respective right, title and interest in and employment of, the
Shares and all the Paradise Island Assets and the RII Real Estate Assets and as
otherwise may be appropriate to carry out the transactions contemplated in this
Agreement.
(b) From and after the Closing, upon request of RII, Buyer shall, and shall
cause any of the Buyer Subsidiaries, Parent or any Subsidiaries of Buyer or
Parent to, execute, acknowledge and deliver all such further acts, assurances,
assumptions and other instruments and papers as may be reasonably required (i)
in respect of the assumption by the Buyer Subsidiaries of the Assumed
Liabilities, and (ii) as otherwise may be appropriate to carry out the
transactions contemplated in this Agreement.
SECTION 2.09. POWER OF ATTORNEY, ETC. (a) Effective on the Closing Date,
RII shall cause each RII Paradise Subsidiary to constitute and appoint, and will
cause any Affiliate owning an interest in any RII Paradise Assets to constitute
and appoint, the applicable Buyer Subsidiary designated by Buyer and its
successors, legal representatives and assigns, the true and lawful attorneys of
such RII Paradise Subsidiary and such Affiliates, with full power of
substitution, in the name of such RII Paradise Subsidiary and such Affiliates,
but on behalf of and for the benefit of such Buyer Subsidiary and its
successors, legal representatives and assigns, and at the expense of such Buyer
Subsidiary: (i) to demand and receive from time to time any and all of the RII
Paradise Assets and to make endorsements and give receipts and releases for and
in respect of the same and any part thereof; (ii) to institute, prosecute,
compromise and settle any and all proceedings at law, in equity or otherwise
that any Buyer Subsidiary and its successors, legal representatives or assigns
may deem proper in order to collect, assert or enforce any claim, right or title
of any kind in or to the RII Paradise Assets; (iii) to defend or compromise any
or all actions, suits or proceedings in respect of any of the RII Paradise
Assets; and (iv) to do all such acts and things in relation to the matters set
forth in the preceding clauses (i) through (iii) as each such Buyer Subsidiary
and its successors, legal representatives or assigns shall deem desirable. RII
hereby agrees that the appointment to be hereby made and the powers to be hereby
granted are coupled with an interest and are and shall be irrevocable by it in
any manner or for any reason. RII shall cause each RII Paradise Subsidiary to
deliver to the applicable Buyer Subsidiary designated by Buyer at Closing an
acknowledged power of attorney to the foregoing effect executed by each such RII
Paradise Subsidiary and any Affiliate selling any of the Paradise Island Assets.
Buyer agrees to indemnify and hold RII and its Affiliates harmless from and
against any Losses resulting from Buyer's improper use of the power of attorney
described in this Section 2.09(a).
(b) Effective upon the Closing Date Buyer and the Buyer Subsidiaries shall
have the right to receive and open all mail, packages and other communications
which relate to the Paradise Island Business addressed to any of the RII
Paradise Subsidiaries. RII agrees promptly to deliver to Buyer and the Buyer
Subsidiaries any mail, packages or other communications received directly or
indirectly by RII or any of its Affiliates that relate to the Paradise Island
Business. Buyer and the Buyer Subsidiaries shall have the right and authority to
collect, for its own account, all receivables and other items which shall be
transferred or are intended to be transferred to Buyer and the Buyer
Subsidiaries as provided in this Agreement, and to endorse with the name of RII
or any of its Affiliates any checks or drafts received on account of any such
receivables or other items, and RII shall promptly transfer or deliver, or cause
its Affiliates to transfer or deliver, to Buyer and the Buyer Subsidiaries any
cash or other property received directly or indirectly by RII or any of its
Affiliates in respect of such receivables or other items including any amounts
payable as interest. Buyer and the Buyer Subsidiaries shall promptly deliver to
RII packages and other communications received by them which relate to RII or
any of its Affiliates but do not relate to the Paradise Island Business.
4
<PAGE>
ARTICLE III
ASSUMPTION OF CERTAIN LIABILITIES
SECTION 3.01. ASSUMED LIABILITIES. Buyer shall cause designated Buyer
Subsidiaries to severally assume on the Closing Date the Assumed Liabilities,
and shall cause each designated Buyer Subsidiary to execute an Assumption
Agreement relating to the Assumed Liabilities assumed by such designated Buyer
Subsidiary.
SECTION 3.02. LIABILITIES NOT ASSUMED. Except for the Assumed Liabilities
and as provided in Section 3.04, neither Buyer nor any Buyer Subsidiary,
pursuant to this Agreement or the Assumption Agreements or otherwise, assumes,
agrees to perform, pay, discharge or indemnify RII or any of its Affiliates
against, or otherwise agrees to have any responsibility for, any liabilities or
obligations of RII, GRI or any RII Paradise Subsidiary, fixed, contingent or
otherwise, known or unknown, relating to or arising out of the RII Paradise
Assets, whether arising prior to, on or after the Closing.
SECTION 3.03. NO SUCCESSOR. It is expressly understood that the parties
intend that neither the Buyer nor any Buyer Subsidiary shall be considered a
successor to any RII Paradise Subsidiary and that neither Buyer nor any Buyer
Subsidiary shall have any liability except as otherwise provided in this
Agreement or the Assumption Agreements. Without limiting the generality of the
foregoing, neither Buyer nor any Buyer Subsidiary, pursuant to this Agreement,
the Assumption Agreements or otherwise, assumes (a) any liability for or
obligation with respect to (i) any Indebtedness of RII or its Affiliates or (ii)
any Taxes relating to RII or its Affiliates (except Assumed Taxes), (b) any
liabilities or obligations owed to RII or any of its Affiliates (except for
liabilities owed to RII or any of its Affiliates under this Agreement or any
agreements, certificates or other instruments delivered by Buyer or the Buyer
Subsidiaries pursuant to this Agreement) or (c) any liabilities that do not
constitute Assumed Liabilities.
SECTION 3.04. INDEMNIFICATION. (a) From and after the Closing Date, RII
and the RII Paradise Subsidiaries shall indemnify Buyer, the Buyer Subsidiaries
and their respective Affiliates (each a "Buyer Indemnified Party") against, and
hold them harmless from, any Losses with respect to the ownership, use or
operation of the RII Paradise Assets prior to the Closing Date (other than the
Assumed Liabilities), which any Buyer Indemnified Party may be requested to pay,
perform or discharge at any time. No Buyer Indemnified Party shall be entitled
to indemnification under this Section 3.04(a) until the date on which the
aggregate amount of the claims made by Buyer Indemnified Parties is at least
equal to $25,000, at which time claims may be asserted by any Buyer Indemnified
Party against the indemnifying parties regardless of amount.
(b) From and after the Closing Date, Buyer and the Buyer Subsidiaries shall
indemnify RII, the RII Paradise Subsidiaries and their respective Affiliates
(each an "RII Indemnified Party") against, and hold them harmless from, any
Losses with respect to (i) the Assumed Liabilities, (ii) the ownership, use or
operation of the RII Paradise Assets on or after the Closing Date, and (iii) any
liability or obligation of the Company or any of its Subsidiaries (fixed,
contingent or otherwise, known or unknown (except to the extent such liability
or obligation was incurred after the date of this Agreement and in breach of
Section 6.01)), which any RII Indemnified Party may be requested to pay, perform
or discharge at any time. No RII Indemnified Party shall be entitled to
indemnification under this Section 3.04(b) until the date on which the aggregate
amount of the claims made by RII Indemnified Parties is at least equal to
$25,000, at which time claims may be asserted by any RII Indemnified Party
against the indemnifying parties regardless of the amount.
(c) The provisions of Section 9.04 and 9.05 shall apply to any
indemnification under this Section 3.04.
(d) The indemnification obligations of the applicable parties under this
Section 3.04 shall constitute the sole and exclusive remedies of the applicable
Buyer Indemnified Parties and RII Indemnified Parties, as the case may be, with
respect to the matters described in this Section 3.04.
5
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RII
RII represents and warrants to Buyer as follows:
SECTION 4.01. ORGANIZATION AND GOOD STANDING. Each of RII, the Company,
each Subsidiary of the Company and each RII Paradise Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The Company, each Subsidiary of the Company
and each RII Paradise Subsidiary is duly qualified to do business in each
jurisdiction in which the ownership, leasing or operation of its assets or the
conduct of the Paradise Island Business requires such qualification, except
where the failure so to qualify would not have a Material Adverse Effect. Each
jurisdiction in which each of the Company, any Subsidiary of the Company or any
RII Paradise Subsidiary is so qualified is set forth in Schedule 4.01.
SECTION 4.02. AUTHORIZATION. RII has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by RII and the sale of
the Shares by RII and the sale of the RII Paradise Assets by the RII Paradise
Subsidiaries have been duly and validly authorized by all corporate action on
the part of RII and the RII Paradise Subsidiaries, and no other corporate
proceedings or shareholder actions (other than the Reorganization Solicitation)
on the part of RII or the RII Paradise Subsidiaries are necessary to authorize
this Agreement or the sale of the Shares and the RII Paradise Assets. This
Agreement has been duly and validly executed and delivered by RII and, assuming
the due authorization, execution and delivery by Buyer, this Agreement
constitutes the legal, valid and binding obligation of RII, enforceable against
RII in accordance with its terms (subject as to enforcement to applicable
bankruptcy, reorganization, insolvency, fraudulent transfer and moratorium and
similar laws from time to time in effect affecting creditors' rights generally
and to legal and equitable limitations on availability of specific performance
and other equitable remedies).
SECTION 4.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by RII does not, and the performance of
this Agreement by RII will not, (i) conflict with or violate the articles of
incorporation or by-laws or equivalent organizational documents of RII, GRI, the
Company, any Subsidiary of the Company or any RII Paradise Subsidiary, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to RII, GRI, the Company, any Subsidiary of the Company or any RII
Paradise Subsidiary or by which any of the Paradise Island Assets is bound or
affected or (iii) other than breaches or defaults which would be cured or
discharged by reason of the effectiveness of the Reorganization Plan, result in
any breach of or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any Encumbrance on any of the Paradise Island Assets pursuant to,
any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which RII, GRI, the
Company, any Subsidiary of the Company or any RII Paradise Subsidiary is a party
or by which RII, GRI, the Company, any Subsidiary of the Company or any RII
Paradise Subsidiary or any of the Paradise Island Assets is bound or affected,
except, in the case of this clause (iii) and clause (ii) above, for any such
breaches, defaults or other occurrences which would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by RII does not, and the
performance of this Agreement by RII will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority except for (i) the Confirmation Order and any other notices, motions
or approvals required by the Bankruptcy Court or the Bankruptcy Code and the
rules thereunder, (ii) the filing by Buyer and RII of premerger notification
with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the HSR Act, (iii) consents and approvals
contemplated by the Heads of Agreement or any approvals for exchange controls
required to be received from the Exchange Control Department of the Central Bank
of The
6
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Bahamas(" Exchange Control Approval"), (iv) consents of the New Jersey Casino
Control Commission and under the New Jersey Casino Control Act, (v) filings
required by the Securities Act, the Exchange Act and relevant state "blue sky"
laws, (vi) approval by the U.S. Department of Transportation and the U.S.
Federal Aviation Administration ("Airline Governmental Consents") and (vii)
where failure to obtain such consents, approvals, authorizations or permits, or
to make such filings or notifications, would not prevent or materially delay
consummation of the transactions contemplated hereby, or otherwise prevent RII
from performing its obligations under this Agreement. The consents, applications
and approvals listed in clauses (iii), (iv) and (v) above shall be hereinafter
referred to as the "Governmental Consents."
SECTION 4.04. CAPITAL STOCK OF THE COMPANY AND SUBSIDIARIES. The
authorized capital stock of the Company consists of 500 shares of Class A Common
Stock, B$2.86 par value per share, 400 shares of Class B Common Stock, B$2.86
par value per share, and 900 shares of Non-Voting Class C Common Stock, B$2.86
par value per share, of which 500 shares of Class A Common Stock, 400 shares of
Class B Common Stock and 900 shares of Class C Common Stock, constituting the
Shares, are duly authorized and validly issued and outstanding, fully paid and
nonassessable. As of the date hereof, GRI is the registered holder of the
Shares. In accordance with Section 2.01, RII shall become the registered holder
of the Shares prior to Closing. The Shares have not been issued in violation of,
and are not subject to, any preemptive or subscription rights. Except as set
forth above, there are no shares of capital stock or other equity securities of
the Company outstanding. Except as set forth in Schedule 4.04, there are no
outstanding warrants, options, agreements, convertible or exchangeable
securities or other commitments (other than this Agreement) pursuant to which
RII or any of its Affiliates is or may become obligated to issue, sell,
purchase, return or redeem any shares of capital stock or other securities of
the Company or any Subsidiary of the Company, and there are not any equity
securities of the Company or any Subsidiary of the Company reserved for issuance
for any purpose. Schedule 4.04 sets forth a list of all the Subsidiaries of the
Company. Except for Encumbrances disclosed in Schedule 4.04, which Encumbrances
shall be released upon Closing, the Company directly has good and valid title to
all the outstanding shares of capital stock of each Subsidiary of the Company,
free and clear of Encumbrances, and all such shares are duly authorized and
validly issued and outstanding, fully paid and nonassessable. Except as
disclosed in Schedule 4.04, the Company does not directly or indirectly own any
capital stock of or other equity interests in any corporation, partnership or
other entity.
SECTION 4.05. FINANCIAL STATEMENTS. The Paradise Island Financial
Statements are the financial statements of the Paradise Island Business. The
Paradise Island Financial Statements, true, correct and complete copies of which
are set forth on Schedule 4.05, (a) are in accordance with the books of account
and records of the Paradise Island Business, (b) are fair presentations in all
material respects of the financial position and results of operations of the
Paradise Island Business as of the dates and for the periods indicated and (c)
were prepared in conformity with GAAP applied on a consistent basis throughout
the periods covered thereby.
SECTION 4.06. ABSENCE OF UNDISCLOSED LIABILITIES AND LIENS. At June 30,
1993, and at the date of this Agreement and the Closing Date, neither the
Company nor any Subsidiary of the Company did, does or will have any
indebtedness, obligation or liability (including any liability for Taxes),
absolute or contingent required to be reflected on or adequately provided for in
a balance sheet prepared in accordance with GAAP and consistent with past
practice, which is not reflected in or adequately provided for in the June 30
Balance Sheet, except for liabilities or obligations incurred in the ordinary
course since June 30, 1993, consistent with past practice and not in violation
of this Agreement. Except as disclosed on Schedules 4.06(a) and 4.06(b), neither
the Company nor any Subsidiary of the Company is or will be directly or
indirectly liable upon or with respect to (by discount, repurchase agreement or
otherwise) or obligated in any other way to provide funds in respect of, or to
guarantee or assume, any debt, obligation or dividend of any person except
endorsements in the ordinary course of business in connection with the deposit
of items for collection. Except
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for Indebtedness disclosed on Schedule 4.06(a), which shall be extinguished upon
the Closing, and Indebtedness described on Schedule 4.06(b), neither the Company
nor any of its Subsidiaries has any Indebtedness.
SECTION 4.07. REAL PROPERTY AND IMPROVEMENTS. Schedule 4.07 contains a
complete list, by deed reference or otherwise, of all real property and
interests in real property (the "Real Property") (a) owned or leased by the
Company or any Subsidiary of the Company, (b) owned by RII in the State of
Florida and used in connection with the Paradise Island Business (the "RII Real
Estate Assets") or (c) owned or leased by any RII Paradise Subsidiary in
connection with the Paradise Island Business. The Paradise Island Business does
not use any material real property not listed on Schedule 4.07. Except as set
forth on Schedule 4.07, RII, the Company, a Subsidiary of the Company or a RII
Paradise Subsidiary has good and marketable title in fee simple to the Real
Property listed on Schedule 4.07 as being owned by them, in each case free and
clear of all liens (including liens for Taxes), mortgages, security interests,
charges, claims, leases, survey exceptions, options, rights of first refusal or
first offer, easements, restrictions, rights-of-way or other encumbrances of any
nature whatsoever, except for Permitted Encumbrances or encumbrances described
on Schedule 4.07. The buildings, facilities, and other improvements located on
the Real Property (the "Improvements") are, and as of the Closing will be, in
operating condition and fit for operation in the usual course of business,
ordinary wear and tear excepted. The uses for which the Improvements are zoned
do not materially restrict, or in any material manner impair, the use of the
Improvements for purposes of the Paradise Island Business and to the knowledge
of RII the construction of the Improvements complied at the time thereof in all
material respects with all applicable building and zoning codes, deed
restrictions, ordinances and rules, or appropriate variances therefrom were
obtained. The Company, a Subsidiary of the Company or a RII Paradise Subsidiary,
is the lessee of each of the leasehold estates listed in Schedule 4.07 as being
leased by any of them, and, except as set forth in Schedule 4.07, are in
possession of each of the premises so leased and have marketable title to each
of such leasehold estates. Except as set forth in Schedule 4.07 and for
Permitted Encumbrances, there exists no asserted claim (including any lien for
Taxes) which is adverse to the rights of the Company, any Subsidiary of the
Company or any RII Paradise Subsidiary in any such leasehold estate. Except as
disclosed on Schedule 4.07, each such lease pursuant to which such leasehold
estate is granted is valid without any material default thereunder by the
lessee. Such leases are the only leases of real property to which RII or any of
its Affiliates are parties pertaining to the Paradise Island Business. Each
lease pursuant to which a leasehold estate is granted to any RII Paradise
Subsidiary may be assigned to the corresponding Buyer Subsidiary without any
restriction or required consent or other approval, except as provided in
Schedule 4.07. Except as disclosed in Schedule 4.07, there is no pending, or, to
the knowledge of RII or any of its Affiliates, threatened, condemnation, eminent
domain or similar proceeding with respect to the Real Property or the
Improvements. True, complete and correct copies of the deeds, title insurance
policies, surveys, parcel maps, mortgages, agreements, leases and other
documents granting or relating to the ownership or leasing of the Real Property
and the Improvements that are in the possession of RII or its Affiliates have
been delivered to Buyer.
SECTION 4.08. PERSONAL PROPERTY. All machinery, equipment and other
tangible personal property (the "Personal Property") (a) owned, leased or used
by the Company or any Subsidiary of the Company or (b) owned, leased or used by
any RII Paradise Subsidiary in connection with the Paradise Island Business is
in operating condition and fit for operation in the usual course of business,
ordinary wear and tear excepted. Except as disclosed in Schedule 4.08, the
Company, any Subsidiary of the Company or any RII Paradise Subsidiary has and
will have on the Closing Date good title to the Personal Property reflected in
the June 30 Balance Sheet as being owned by them, free and clear of
Encumbrances, except for Permitted Encumbrances. The Company, any Subsidiary of
the Company or any RII Paradise Subsidiary is the lessee of all the leasehold
estates pertaining to Personal Property granted by the leases reflected in the
June 30 Balance Sheet and their possession thereof has not been disturbed, nor
has any claim been asserted against them (including any liens for Taxes) adverse
to their rights in such leasehold estates. Each such lease or agreement pursuant
to which any RII
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Paradise Subsidiary leases any material Personal Property may be assigned to the
corresponding Buyer Subsidiary without any restriction or required consent or
other approval, except as provided in Schedule 4.08.
SECTION 4.09. INTELLECTUAL PROPERTY. (a) Schedule 4.09 lists all
Intellectual Property.
(b) Except as disclosed on Schedule 4.09, the Intellectual Property is owned
by the Company, a Subsidiary of the Company or a RII Paradise Subsidiary free
and clear of any Encumbrances, and (if required) has been or will be duly
registered or registration applied for, where applicable, with the necessary
jurisdictions. Except as disclosed on Schedule 4.09, neither RII nor any of its
Affiliates has received any notice from, and neither RII nor any of its
Affiliates has knowledge of, any other person challenging or questioning the
right of the Company, any Subsidiary of the Company or any RII Paradise
Subsidiary to use any Intellectual Property.
(c) The Intellectual Property constitutes all of the patents, trademarks,
trade names, service marks, service names, brand names, copyrights and similar
intellectual property rights used in the conduct of the Paradise Island
Business, other than Excluded Assets.
(d) Except as disclosed in Schedule 4.09, neither RII nor any of its
Affiliates has received any written notice alleging any infringement or improper
use of any patent, right, invention, copyright, trademark, service mark, trade
secret, trade right or trade name of any other person or entity, registered or
unregistered, and no claim is pending, has been made or, to the knowledge of RII
or any of its Affiliates, is threatened to such effect which, if true, would
have, alone or in the aggregate, a Material Adverse Effect.
SECTION 4.10. LITIGATION. Disclosed on Schedule 4.10 is a list as of the
date of this Agreement of all pending and, to the knowledge of RII or any of its
Affiliates, threatened Material Cases. Except as disclosed on Schedule 4.10,
there are no pending or, to the knowledge of RII or any of its Affiliates,
threatened Material Cases which are not covered by insurance (subject to
customary deductibles). None of the Company, any of its Subsidiaries or any RII
Paradise Subsidiary with respect to the RII Paradise Assets is in default under
any judgment, order or decree of any Governmental Authority applicable to it or
any of its respective properties, assets, operations or business which default
would have a Material Adverse Effect.
SECTION 4.11. INSURANCE. Disclosed on Schedule 4.11 is a true and correct
list as of the date of this Agreement of all insurance policies held by RII, the
Company, any of its Subsidiaries or any RII Paradise Subsidiary with respect to
the RII Paradise Assets, including, without limitation, policies of fire, life,
theft, product and public liability, property damage, other casualty, workers'
compensation, property and liability insurance. Schedule 4.11 indicates as of
the date of this Agreement, in respect of each such policy, the type of
coverage, the name of the insured, the insurer, the premium, all deductibles,
the expiration date and the amount of the coverage thereof. All such policies
are in full force and effect and none of RII or any of its Affiliates has
received notice in respect of any such policy regarding the termination thereof,
proposing to change the terms thereof in any material respect or claiming
material defects or deficiencies or requiring the performance of any material
repairs, replacements, alterations or other work in respect of the property
insured thereunder.
SECTION 4.12. UNITED STATES BENEFIT PLANS. (a) Schedule 4.12 contains a
list and brief description 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 or other
employee fringe benefit plan maintained, contributed to or required to be
maintained or contributed to by RII or an RII Paradise Subsidiary for the
benefit of any current or former employee of any RII Paradise Subsidiary or
their beneficiaries (all of the foregoing being herein called "Benefit Plans").
RII has delivered or made available to Buyer 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
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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, (4) each
trust agreement and insurance or annuity contract funding any Benefit Plan and
(5) other similar information in its control regarding any Benefit Plan, upon
the reasonable request of Buyer. Except as disclosed in Schedule 4.12, each
Benefit Plan is maintained or contributed to by RII or an RII Paradise
Subsidiary for the benefit of their employees and not the employees of the
Company or its Subsidiaries, and neither the Company nor any of its Subsidiaries
maintains, contributes to, or has any obligations or liabilities with respect
to, a Benefit Plan.
(b) Except as disclosed in Schedule 4.12, all contributions to the Benefit
Plans that were required to be made by RII or an RII Paradise Subsidiary in
accordance with the Benefit Plans have been timely made.
(c) Except as disclosed in Schedule 4.12, any Benefit Plan that is a Pension
Plan, other than a multiemployer plan as defined in Section 4001(a)(3) of ERISA,
has received a determination letter from the Internal Revenue Service to the
effect that such Pension Plan is qualified and exempt from Federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code, and no such
determination letter has been revoked nor, to the knowledge of RII or any RII
Paradise Subsidiary, 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.
(d) Schedule 4.12 contains a list and brief description 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 Buyer 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, and no ERISA Affiliate has incurred any material liability to any such RII
Affiliate Pension Plan or to the PBGC.
(f) Except as disclosed on Schedule 4.12, no ERISA Affiliate has incurred
any withdrawal liability, within the meaning of Section 4201 of 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.
(g) Except as disclosed in Schedule 4.12, no ERISA Affiliate has engaged in
a transaction described in Section 4069 of ERISA that could subject the Company
or any of its Subsidiaries to material liability at any time after the date
hereof.
(h) With respect to each Welfare Plan that is a "group health plan" (as such
term is defined in Section 5000(b)(1) of the Code), RII and the RII Paradise
Subsidiaries comply in all material respects with the applicable requirements of
Section 4980B(f) of the Code.
SECTION 4.12A. BAHAMAS BENEFIT PLANS. (a) Schedule 4.12A contains a list
and a brief description of all non-governmental pension funds or plans,
retirement savings plans, retirement income funds, employee profit sharing
plans, deferred profit sharing plans, trust funds, insurance plans, bonuses,
deferred compensation, incentive or other material compensation plans or
arrangements and other material employee fringe benefit plans maintained or
contributed to by the Company or any of its Subsidiaries for the benefit of
current or former employees of the Paradise Island Business (all the foregoing
being herein called "Bahamas Benefit Plans"). RII has delivered or made
available to Buyer true, correct and complete copies of (1) each Bahamas Benefit
Plan (or in the case of any unwritten Bahamas Benefit Plans, descriptions
thereof), (2) the most recent summary plan description for each Bahamas Benefit
Plan for which a summary plan description has been prepared and (3) each trust
agreement or other funding arrangement relating to any Bahamas Benefit Plan.
Except as disclosed in Schedule 4.12A, each Bahamas Benefit Plan that is not
maintained pursuant to a collective bargaining agreement is maintained or
established solely under, and regulated solely by, the laws of The Bahamas.
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(b) Each Bahamas Benefit Plan that is not maintained pursuant to a
collective bargaining agreement has been administered in all material respects
in accordance with its terms. With respect to all Bahamas Benefit Plans, the
Company and its Subsidiaries are in compliance in all material respects with any
applicable laws, regulations or provisions contained in any applicable
collective bargaining agreement as such agreement may have been duly amended or
modified. Except as disclosed in Schedule 4.12A, there are no investigations by
any governmental agency or other claims (except claims for benefits payable in
the normal operation of the Bahamas Benefit Plans), suits or proceedings against
or involving any Bahamas Benefit Plan that is not maintained pursuant to a
collective bargaining agreement or asserting any rights or claims to benefits
under any such Bahamas Benefit Plan that could give rise to any material
liability, and, to the knowledge of RII, the Company or its Subsidiaries, there
are not any facts that could give rise to any material liability in the event of
any such investigation, claim, suit or proceeding.
(c) Neither the Company nor any of its Subsidiaries has any obligation to
create any additional Bahamas Benefit Plans or any similar arrangements, or to
make contributions or to increase future contributions to any Bahamas Benefit
Plan other than those obligations contained in the Bahamas Benefit Plan
documents or in any related participation agreement and in any applicable
collective bargaining agreement provided to Buyer.
(d) RII has provided or made available to Buyer the most recent actuarial
report or valuation (if any) with respect to each Bahamas Benefit Plan. The
information supplied by RII, the Company and its Subsidiaries for use in
preparing those reports or valuations was complete and accurate in all material
respects and neither RII, the Company nor any of its Subsidiaries have reason to
believe that the information provided by all other contributing employers for
use in, or the conclusions expressed in, those reports or valuations are
inaccurate in any material respect.
(e) None of the Company or any of its Subsidiaries has any current or
projected liability or contingent obligation, under any Bahamas Benefit Plan in
respect of medical or other benefits (l) for retired or former employees of the
Company or any of its Subsidiaries or any predecessor thereof or (2) for current
employees of the Company or any of its Subsidiaries or any predecessor thereof
in the event of the termination or retirement of any current employee.
(f) No employee or former employee of the Company or any of its
Subsidiaries, or any beneficiary thereof, will become entitled as a result of
the transactions contemplated hereby (1) to any additional material benefits,
acceleration of the time of payment or vesting of benefits, bonus, retirement,
severance, job security or similar benefit or any enhanced benefit under any
Bahamas Benefit Plan or (2) any non-material benefits otherwise described in
clause (1) that, when aggregated together, are material.
(g) The Company and its Subsidiaries have timely made all contributions
required to be made under applicable law to the Bahamian National Insurance
Board (the "NIB"), and neither the Company nor any of its Subsidiaries has any
liability, or is aware of any facts that might give rise to liability, to the
NIB or any current or former employee with respect to such contributions.
(h) No RII Paradise Subsidiary has any obligation, formal or informal, to
provide any material employee benefits to any employee of the Company or its
Subsidiaries. Neither the Company nor any of its Subsidiaries has any
obligation, formal or informal, to provide any employee benefits to any person
who is not an employee of the Company or its Subsidiaries or any beneficiary
thereof.
SECTION 4.13. ABSENCE OF CHANGES OF EVENTS. Since June 30, 1993, the
Paradise Island Business has been conducted only in the ordinary course,
consistent with past practice and the provisions of Section 6.01, and no
Material Adverse Effect has occurred.
SECTION 4.14. COMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS. Except as
disclosed in Schedule 4.14 or except where a Material Adverse Effect would not
occur as a result thereof:
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(a) The Company, each of its Subsidiaries and each RII Paradise Subsidiary
and the operation of the Paradise Island Business is in compliance in all
material respects with all applicable Environmental Laws.
(b) Neither RII nor any of its Affiliates has received any written
communication from a Governmental Authority that alleges that the Company, any
of its Subsidiaries or any RII Paradise Subsidiary is not in compliance, in any
material respect, with any applicable Environmental Law.
(c) To the knowledge of RII, none of the operations or properties of the
Paradise Island Business is the subject of foreign, federal, state or local
investigation respecting (i) Environmental Laws, (ii) Remedial Action or (iii)
any Environmental Claim arising from a release of any Hazardous Substance into
the environment.
(d) The Company, its Subsidiaries and the RII Paradise Subsidiaries have
filed all notices required to be filed under all applicable Environmental Laws
indicating past or present treatment, storage or disposal of a Hazardous
Substance.
(e) The Company, each of its Subsidiaries and each RII Paradise Subsidiary
has filed all notices required to be filed under all Environmental Laws
reporting a spill or release of a Hazardous Substance into the environment.
(f) To the knowledge of RII or any of its Affiliates, none of the Company,
any of its Subsidiaries or any RII Paradise Subsidiary has any liabilities in
connection with any Hazardous Substance.
(g) To the knowledge of RII or any of its Affiliates, there are no
underground nonpropane storage tanks or polychlorinated biphenyls on any Real
Property.
(h) None of the Company, any of its Subsidiaries or any RII Paradise
Subsidiary is subject to any judicial, administrative or arbitral actions,
suits, proceedings, or governmental proceedings alleging the violation of any
Environmental Law or Environment Permit.
(i) To the knowledge of RII or any of its Affiliates, none of the Company,
any of its Subsidiaries or any RII Paradise Subsidiary, as a result of its
respective past and current operations, has caused or permitted any Hazardous
Substances to remain or be disposed of in violation of applicable Environmental
Laws, either on or under any Real Property or on any real property not permitted
to accept, store or dispose of such Hazardous Substances.
SECTION 4.15. COMPLIANCE WITH LAWS; LICENSES AND PERMITS. The Paradise
Island Business is being conducted in compliance in all material respects with
all laws, ordinances, regulations, licensing requirements, rules, decrees,
awards or orders, including, without limitation, any thereof relating to wages,
hours, hiring, promotions, working conditions, use and occupancy of the
Improvements, nondiscrimination, health, safety, trade regulation, antitrust,
warranties and control of foreign exchange, except where failure to so comply
would not have a Material Adverse Effect. The Company, its Subsidiaries and RII
Paradise Subsidiaries have all governmental licenses and permits and other
governmental authorizations and approvals required for the operation of the
Paradise Island Business and the use of the Paradise Island Assets. All
governmental licenses and permits held by such parties are valid and in full
force and effect and there are not pending, or, to the knowledge of RII,
threatened, any proceedings which could result in the termination or impairment
of any such governmental license or permit.
SECTION 4.16. THE SHARES; ENTIRE BUSINESS. (a) As of the Closing Date RII
will directly have good and valid title to the Shares, free and clear of any
Encumbrances. Assuming Buyer has the requisite power and authority to be the
lawful owner of the Shares and The Bahamas Exchange Control Approval has been
received, upon delivery to Buyer at the Closing of certificates representing the
Shares, duly endorsed by RII for transfer to Buyer, and upon payment of the
Aggregate Purchase Price as provided in Section 2.04 and payment of any
applicable Transfer Taxes, good and valid title to the Shares will pass to
Buyer, free and clear of any Encumbrances other than those arising from acts of
Buyer or its Affiliates. Except for the agreements set forth in Schedule
4.16(a), the Shares are not
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subject to any voting trust agreement or other contract, agreement, arrangement,
commitment or understanding, including any such agreement, arrangement,
commitment or understanding restricting or otherwise relating to the voting,
dividend rights or disposition of the Shares, other than this Agreement and any
exchange control approvals that may be required in connection with the
disposition of the Shares by the letter to be issued to Buyer in connection with
the Exchange Control Approval.
(b) RII, the Company, its Subsidiaries and the RII Paradise Subsidiaries
own, lease or license all the Paradise Island Assets. The sale of the Shares by
RII to Buyer and the sale of the RII Paradise Assets and the RII Real Estate
Assets by RII and the RII Paradise Subsidiaries to the Buyer Subsidiaries
pursuant to this Agreement will effectively convey to the Buyer and the Buyer
Subsidiaries the entire Paradise Island Business and all of the Paradise Island
Assets. Except as set forth on Schedule 4.16(b), there are no shared facilities
or Contracts which are used in connection with, or otherwise related to, the
Paradise Island Business and with other operations of RII or any of its
Affiliates.
SECTION 4.17. CONTRACTS. Set forth on Schedule 4.17 is a true and correct
list as of the date of this Agreement of each Material Contract. True and
correct copies of all Material Contracts have been made available to Buyer. Each
Material Contract is valid and binding on, in full force and effect with respect
to, and is enforceable by, RII, the Company, one of its Subsidiaries or one of
the RII Paradise Subsidiaries in accordance with its terms (subject as to
enforcement to applicable bankruptcy, reorganization, insolvency, fraudulent
transfer and moratorium and similar laws from time to time in effect affecting
creditors' rights generally and to legal and equitable limitations on
availability of specific performance and other equitable remedies). Except as
described on Schedule 4.17, each of RII, the Company, its Subsidiaries and each
RII Paradise Subsidiary has performed all material obligations required to be
performed by it to date under the Material Contracts and is not (with or without
the lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder and, to the knowledge of RII or any of its
Affiliates, no other party to any of the Material Contracts is (with or without
the lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder. The Material Contracts of the RII Paradise
Subsidiaries may be assigned to the Buyer Subsidiaries without any restriction
or required consent or other approval, except as provided in Schedule 4.17.
SECTION 4.18. INVENTORY. Except to the extent of the reserves therefor
reflected in the June 30 Balance Sheet or as disclosed on Schedule 4.18,
inventory reflected in the June 30 Balance Sheet and all inventory existing as
of September 30, 1993, are of good, usable and merchantable quality. Such
inventory does not include any obsolete or discontinued items or quantities in
excess of the requirements of the Paradise Island Business in the ordinary
course of business, except as reserved for on the June 30 Balance Sheet or
similar reserves with respect to inventories acquired after June 30, 1993, which
reserves are consistent with past practice. All inventory reflected on the
Paradise Island Financial Statements was valued at the lower of cost or market
on a first-in, first-out basis in accordance with GAAP.
SECTION 4.19. RECEIVABLES; PAYABLES. (a) Except as set forth on Schedule
4.19, all the receivables reflected in the June 30 Balance Sheet and all
receivables existing as of September 30, 1993, to be reflected on a balance
sheet dated as of September 30, 1993 (i) represent bona fide indebtedness, (ii)
arose in the ordinary course of business, (iii) are subject to no prior
assignment, claim, lien or security interest (including any lien for Taxes) and
(iv) to the knowledge of RII or any of its Affiliates are collectible in full
when due in the ordinary course of business, subject to no defenses, setoffs or
counterclaims, except to the extent of the reserves therefor reflected in the
June 30 Balance Sheet, or similar reserves with respect to receivables generated
after June 30, 1993.
(b) Except as set forth on Schedule 4.19, all trade payables and accrued
liabilities reflected in the June 30 Balance Sheet and all trade payables and
accrued liabilities existing as of September 30, 1993,
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to be reflected on a balance sheet dated September 30, 1993, were incurred in
the ordinary course of the Paradise Island Business and were correctly
classified as current, and all payment terms were in accord with consistent past
practice and normal industry practice.
SECTION 4.20. EMPLOYEES. Except as set forth on Schedule 4.20, there are
no current or, to the knowledge of RII or any of its Affiliates, threatened work
stoppages by any of the managers or the employees of the Company, any of its
Subsidiaries or any RII Paradise Subsidiaries with respect to the RII Paradise
Assets. There are no current or, to the knowledge of RII or any of its
Affiliates, threatened work stoppages by any other persons which would, as of
the Closing Date, have a Material Adverse Effect. Except to the extent provided
for in the Paradise Island Financial Statements as of the dates thereof or as
disclosed in Schedule 4.20, there was no material liability arising out of
claims made or suits brought (including, without limitation, workers'
compensation claims and claims or suits for contribution to, or indemnification
of, third parties, occupational health and safety, environmental, consumer
protection or equal employment matters) for injury, sickness, disease, death or
termination of employment of any person to the extent attributable to an event
occurring or a state of facts existing prior to the Closing Date.
SECTION 4.21. TAX RETURNS AND PAYMENTS. (a) None of the Taxpayers is
required to pay any Taxes or file or provide to its shareholders any returns,
forms or reports (other than information provided to RII or any of its
Subsidiaries for the purpose of enabling RII or such Subsidiary to file returns
or reports required to be filed by RII or such Subsidiary) with respect to any
Taxes in any jurisdiction other than The Bahamas. None of the Taxpayers is
jointly or severally liable for any Taxes, or liabilities relating to Taxes, of
any person, corporation or entity other than itself or another Taxpayer.
(b) The Taxpayers have filed or caused to be filed, all Tax returns,
declarations, forms and reports and all information returns and statements
required to be filed by any taxing authority of any jurisdiction (collectively,
"Returns"). All such Returns were filed in a timely fashion. The foregoing
Returns correctly and accurately reflected in all material respects the facts
with respect to which such Returns were filed, the Taxes due for the taxable
periods covered by such Returns and any other information required to be shown
thereon. Each Taxpayer has timely paid, or will timely pay, in full all Taxes
imposed on it which are due and payable for each period ending before the
Closing Date. No tax liens have been filed and no claims are being asserted
against the Taxpayers with respect to any Taxes, except as set forth on Schedule
4.21. Except as set forth on Schedule 4.21, there are no outstanding agreements
or waivers extending the statutory period of limitations applicable to any
Return required to be filed with respect to any Taxpayer, and no Taxpayer, nor
any affiliated group of which any Taxpayer is or has been a member, has
requested any extension of time within which any Return, which Return has not
yet been filed.
(c) Each of the RII Paradise Subsidiaries has paid in full or will timely
pay in full all Taxes relating to the ownership or operation of the Paradise
Island Assets other than the Transfer Taxes. None of the Paradise Island Assets
prior to the Closing Date is subject to a lease made pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986. Neither the
Company nor any of the RII Paradise Subsidiaries is a "United States real
property holding corporation" within the meaning of Section 897 of the Code.
(d) Neither RII nor any of the RII Paradise Subsidiaries is a "foreign
person" within the meaning of Section 1445 of the Code.
SECTION 4.22. BROKERS. No broker, finder or investment banker, other than
those specified on Schedule 4.22, is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated hereby
based upon arrangements made by and on behalf of RII.
SECTION 4.23. TRANSACTIONS WITH AFFILIATES. Since January 1, 1993, except
as disclosed in Schedule 4.23, none of the Company, any Subsidiary of the
Company or any RII Paradise Subsidiary
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has purchased, acquired or leased any material property or material services
from, or sold, transferred or leased any material property or material services
to, or lent or advanced any money to, or borrowed any money from, or guaranteed
or otherwise become liable for any indebtedness or other obligations of, or
acquired any capital stock, obligations or securities of, or made any
management, consulting or similar fee arrangement with, any officer, director or
employee of RII or any of its Affiliates.
SECTION 4.24. PAYMENTS. Neither RII nor any of its Affiliates nor any
officer, agent or employee thereof nor, to the knowledge of RII, any distributor
or licensee thereof nor any other person acting on behalf of RII or any of its
Affiliates, directly or indirectly, has, during the past five years, on behalf
of or with respect to RII or any of its Affiliates, (1) made any unlawful
domestic or foreign political contributions, (2) made any payment or provided
services which were not legal to make or provide or which RII or any of its
Affiliates or any such officer, employee or other person should have known were
not legal for the payee or the recipient of such services to receive, (3)
received any payment or any services which were not legal to receive or which
RII or any of its Affiliates or any such officer, employee or other person
should have known were not legal for the payor or the provider of such services
to make or provide, or (4) had any transactions or payments which are not
recorded in its accounting books and records or disclosed in its financial
statements.
SECTION 4.25. BUYER REGISTRATION STATEMENT; BUYER PROSPECTUS. (a) The
information to be supplied in writing by RII to Buyer specifically for use in
the latest draft Buyer Registration Statement and draft Buyer Prospectus
available on November 30, 1993, will not as of November 30, 1993, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. RII agrees that on November 30, 1993, it
shall deliver a letter to Buyer attaching thereto such latest drafts of the
Buyer Registration Statement and Buyer Prospectus and acknowledging therein the
material supplied in writing by it to Buyer specifically for use in such latest
drafts of the Buyer Registration Statement and Buyer Prospectus.
(b) The information to be supplied in writing by RII to Buyer specifically
for use in the Buyer Registration Statement and the Buyer Prospectus therein
will not (i) at the time the Buyer Prospectus is first distributed pursuant to
the Reorganization Plan, (ii) at the time the Buyer Registration Statement
becomes effective, (iii) on the date of the Bankruptcy Court's hearing with
respect to the Disclosure Statement, (iv) on the date of the confirmation of the
Reorganization Plan by the Bankruptcy Court or (v) at the Closing, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. RII agrees that on each date referred to
in clauses (i), (ii), (iii) and (iv) above, it shall deliver a letter to Buyer
attaching thereto the Buyer Registration Statement and Buyer Prospectus in
effect on such date and acknowledging therein the material supplied in writing
by it to Buyer specifically for use in such Buyer Registration Statement or
Buyer Prospectus.
(c) Notwithstanding the foregoing, RII makes no representation or warranty
with respect to any information included in the draft Buyer Registration
Statement and the draft Buyer Prospectus referred to in Section 4.25(a) or in
the Buyer Registration Statement or the Buyer Prospectus referred to in Section
4.25(b) that is not supplied in writing by RII to Buyer specifically for use
therein. If, at any time prior to the Closing Date, any event relating to RII or
any of its Affiliates, officers or directors actually is discovered by RII or
any of its Affiliates which is required to be set forth in a supplement to the
Buyer Prospectus, RII shall promptly inform Buyer and assist Buyer in preparing,
filing with (and, if required, having approved by) the SEC and the Bankruptcy
Court and disseminating any such supplements.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to RII and GRI that:
SECTION 5.01. ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of The Bahamas. Buyer has made available to RII an accurate and
complete copy of its current memorandum of association and articles of
association. Attached hereto as Exhibit A are Articles of Association of Buyer,
which Articles of Association Buyer will cause to be filed without change on or
before the Closing Date, and on the Closing Date such Articles of Association
shall be in full force and effect and shall supersede any previous Articles of
Association.
SECTION 5.02. AUTHORIZATION. Buyer has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by Buyer and the
purchase of the Shares by Buyer have been, and the purchase of the RII Paradise
Assets by the Buyer Subsidiaries will be at Closing, duly and validly authorized
by all necessary corporate action on the part of Buyer and the Buyer
Subsidiaries and no other corporate proceedings or shareholder actions on the
part of Buyer or the Buyer Subsidiaries are or will be necessary to authorize
this Agreement or to purchase the Shares and the RII Paradise Assets. This
Agreement has been duly and validly executed and delivered by Buyer and,
assuming the due authorization, execution and delivery by RII, constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms (subject as to enforcement to applicable bankruptcy,
reorganization, insolvency, fraudulent transfer and moratorium and similar laws
from time to time in effect affecting creditors' rights generally and to legal
and equitable limitations on availability of specific performance and other
equitable remedies).
SECTION 5.03. NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Buyer does not, and the performance
of this Agreement by Buyer will not, (i) conflict with or violate the memorandum
of association or articles of association or equivalent organizational documents
of Buyer or any Buyer Subsidiary, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Buyer or any Buyer
Subsidiary or by which any of them or their properties is bound or affected or
(iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or result
in the creation of any Encumbrance on any of the property or assets of Buyer or
any Buyer Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Buyer or any Buyer Subsidiary is a party or by which any of them or
their properties is bound or affected, except, in the case of this clause (iii)
and clause (ii) above, for any such breaches, defaults or other occurrences
which would not, individually or in the aggregate, have a material adverse
effect on the business, operations, properties (including intangible
properties), condition (financial or otherwise), assets or liabilities of Buyer
or any Buyer Subsidiary.
(b) The execution and delivery of this Agreement by Buyer does not, and the
performance of this Agreement by Buyer will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority except for (i) the Confirmation Order, (ii) required filings under the
HSR Act, (iii) the Airline Governmental Consents, (iv) the Governmental Consents
and (v) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or
materially delay consummation of the transactions contemplated hereby, or
otherwise prevent Buyer from performing its obligations under this Agreement.
SECTION 5.04. REORGANIZATION PLAN SOLICITATION DOCUMENTS. The information
to be supplied in writing by Buyer to RII specifically for use in the
Registration Statement and the Disclosure Statement will not (i) at the time the
Disclosure Statement is first mailed, (ii) at the time the
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Registration Statement becomes effective, (iii) on the date of the Bankruptcy
Court's hearing with respect to the Disclosure Statement, (iv) on the date of
confirmation of the Reorganization Plan by the Bankruptcy Court or (v) at the
Closing, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Buyer agrees that on
each date referred to in clauses (i), (ii), (iii) and (iv) above, it shall
deliver a letter to RII attaching thereto the Registration Statement and
Disclosure Statement in effect on such date and acknowledging therein the
material supplied in writing by it to RII specifically for use in such
Registration Statement and Disclosure Statement. Notwithstanding the foregoing,
Buyer makes no representation or warranty with respect to any information
included in the Registration Statement or the Disclosure Statement that is not
supplied in writing by Buyer to RII specifically for use therein. If, at any
time prior to the Closing Date, any event relating to Buyer or any of its
Affiliates, officers or directors actually is discovered by Buyer or any of its
Affiliates which is required by the Bankruptcy Court to be set forth in a
supplement to the Disclosure Statement, Buyer will promptly inform RII and
cooperate with RII in preparing, filing with (and, if required, having approved
by) the SEC and the Bankruptcy Court and disseminating any such supplements.
SECTION 5.05. BROKERS. No broker, finder or investment banker, other than
those specified on Schedule 5.05, is entitled to any brokerage, finder's or
other fee or commission in connection with the transaction contemplated hereby
based upon arrangements made by and on behalf of Buyer.
SECTION 5.06. BUYER SERIES A SHARES. The Buyer Series A Shares have been
duly authorized and, upon issuance and delivery in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable.
SECTION 5.07. BUYER REGISTRATION STATEMENT; BUYER PROSPECTUS. Each of the
Buyer Registration Statement and the Buyer Prospectus shall not (i) at the time
the Buyer Prospectus is first distributed pursuant to the Reorganization Plan,
(ii) at the time the Buyer Registration Statement becomes effective, (iii) on
the date of the Bankruptcy Court's hearing with respect to the Disclosure
Statement, (iv) on the date of the confirmation of the Reorganization Plan by
the Bankruptcy Court or (v) at the Closing, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, Buyer makes no representation or
warranty with respect to any information included in the Buyer Registration
Statement or the Buyer Prospectus that was supplied by RII to Buyer specifically
for use therein. If, at any time prior to the Closing Date, any event relating
to Buyer or any of its Affiliates, officers or directors should be discovered by
Buyer or any of its Affiliates which is required to be set forth in a supplement
to the Buyer Prospectus, Buyer will prepare, file with (and, if required, use
its best efforts to have approved by) the SEC, the Bankruptcy Court and the
appropriate authorities of the government of The Bahamas and disseminate any
such supplements. The Buyer Registration Statement and the Buyer Prospectus did,
or shall, as the case may be, comply as to form in all material respects with
the requirements of the Securities Act, and all other laws, rules, regulations,
decrees and orders promulgated thereunder.
SECTION 5.08. OPERATION OF BUYER. Since its inception Buyer has not
engaged, and prior to Closing it shall not engage, in any activity or business
other than those relating to the implementation of this Agreement, preparation
relating thereto and preparation for the implementation of the plans for the
Paradise Island Business contemplated in the Buyer Registration Statement.
Following the Closing, Buyer will promptly reimburse Parent for (i) all
reasonable costs and expenses relating to architecture matters, the Buyer
Prospectus and Buyer Registration Statement and bank financing incurred by
Parent for the benefit of Buyer as and when incurred or which have already been
incurred and (ii) all other reasonable costs and expenses, up to an aggregate
maximum amount of $2 million, incurred by Parent for the benefit of Buyer as and
when incurred or which have already been incurred,
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including without limitation the costs and expenses set forth on Schedule 5.08,
unless otherwise specifically excluded on such Schedule. Except for Indebtedness
contemplated by this Agreement, Buyer has no Indebtedness.
SECTION 5.09. CAPITAL STRUCTURE OF BUYER. The authorized capital stock of
Buyer consists of 3,000,000 Ordinary Shares, of which two shares, constituting
all the issued and outstanding shares (the "Buyer Shares"), are duly authorized
and validly issued and outstanding, fully paid and nonassessable. Parent is the
registered holder of the Buyer Shares. The Buyer Shares have not been issued in
violation of, and are not subject to, any preemptive or subscription rights.
Except as set forth above, there are no shares of capital stock or other equity
securities of Buyer outstanding. There are no outstanding warrants, options,
agreements, convertible or exchangeable securities or other commitments (other
than those contemplated by this Agreement) pursuant to which Buyer is or may
become obligated to issue, sell, purchase, return or redeem any of its shares of
capital stock or other securities and there are not any equity securities of
Buyer reserved for issuance for any purpose. As of the Closing, Buyer will
directly have good and valid title to all the outstanding shares of capital
stock of each Buyer Subsidiary, free and clear of Encumbrances, and all such
shares will have been duly authorized and validly issued and outstanding, fully
paid and nonassessable. Buyer does not directly or indirectly own any capital
stock of or any other equity interests in any corporation, partnership or other
entity.
SECTION 5.10. SUBSCRIPTION AGREEMENTS. Each of (i) the Subscription
Agreement dated as of the date hereof relating to the subscription of shares of
Parent (the "Parent Subscription Agreement"), and (ii) the Subscription
Agreement dated as of the date hereof between Parent and Buyer, a copy of which
is attached hereto as Exhibit I (as in effect as of the date hereof, the "Buyer
Subscription Agreement"), has been executed and delivered by the parties
thereto, is valid and binding on, in full force and effect with respect thereto
and is enforceable by the parties thereto in accordance with its terms (subject
as to enforcement to applicable bankruptcy, reorganization, insolvency,
fraudulent transfer and moratorium and similar laws from time to time in effect
affecting creditors' rights generally and to legal and equitable limitations on
availability of specific performance and other equitable remedies).
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. CONDUCT OF PARADISE ISLAND BUSINESS PENDING THE
CLOSING. Except as contemplated by this Agreement, RII covenants and agrees
that, during the period between the date of this Agreement and through and
including the Closing Date, unless Buyer shall otherwise agree in writing, the
Paradise Island Business shall be conducted only in the ordinary course of
business and in a manner consistent with past practice; and RII and each of its
Affiliates, subject to the applicable provisions of the Bankruptcy Code, shall
use its reasonable efforts (without expense outside of the ordinary course of
business) to preserve substantially intact the business organization of the
Paradise Island Business, to keep available the services of the present
officers, employees and consultants of the Paradise Island Business and to
preserve the present relationships of the Paradise Island Business with
customers, suppliers and other persons with which the Paradise Island Business
has significant business relations; provided that RII shall not be required to
make, or cause any of its Affiliates to make, any additional payments or enter
into or amend any contractual arrangements or understandings to satisfy the
foregoing obligation other than in the ordinary course of business consistent
with past practice. By way of amplification and not limitation, except as
contemplated by this Agreement (including without limitation Section 6.11), none
of the Company or any of its Subsidiaries or any RII Paradise Subsidiary shall,
during the period between the date of this Agreement and through and including
the Closing Date, directly or indirectly do, or propose or commit to do, any of
the following, except with the prior written consent of Buyer:
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(a) amend or otherwise change its Articles of Association or Memorandum of
Association or charter or By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the issuance,
sale, pledge, disposition or encumbrance of, (A) any shares of capital stock of
any class, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of capital stock, or any other ownership
interest, of the Company or any of its Subsidiaries or (B) any Paradise Island
Assets, except for sales in the ordinary course of business and in a manner
consistent with past practice;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock, other than dividends or other distributions of cash if, in the
good faith belief of management of RII, such distributions will not cause the
Paradise Island Business to have, as of the Closing Date, Adjusted Working
Capital materially less than the Target Adjusted Working Capital plus a good
faith estimate of the EBITDA Adjustment or Adjusted Cash materially less than
Targeted Adjusted Cash;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (by merger, consolidation or acquisition of stock or assets)
any corporation, partnership or other business organization or division thereof;
(ii) incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advance, except in the
ordinary course of business and in a manner consistent with past practice; (iii)
enter into any Material Contract other than in the ordinary course of business
and in a manner consistent with past practice; or (iv) enter into or amend any
contract, agreement, commitment or arrangement with respect to any of the
matters set forth in this Section 6.01(e);
(f) increase the compensation payable or to become payable to any of its
officers or employees, except as may be required by the terms of existing
Benefit Plans, Bahamas Benefit Plans, collective bargaining agreements or
individual employment contracts and except for increases in salary or wages of
any officers or employees of the Paradise Island Business whose annual cash
compensation does not exceed $100,000 in the ordinary course of business and in
a manner consistent with past practices, or grant any severance or termination
pay (except with respect to any Excluded Employee) or enter into any employment,
consulting or severance agreement with any present or former director, officer
or other employee of the Paradise Island Business other than, in the case of
severance agreements with any officer or employee whose annual cash compensation
does not exceed $100,000, in the ordinary course of business and in a manner
consistent with past practice, or amend (except as may be required by law),
establish, adopt, enter into any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any directors,
officers or employees;
(g) take any action other than in a manner consistent with past practice
(none of which actions shall be unreasonable or unusual) with respect to
accounting policies or procedures;
(h) make any material tax election, other than in the ordinary course of
business and in a manner consistent with past practice, or settle or compromise
any liability for Taxes in excess of $100,000 (this paragraph (h) shall only
apply to the Company and its Subsidiaries); or
(i) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than (i) the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved against in the
Paradise Island Financial Statements or incurred in the ordinary course of
business and in a manner consistent with past practice, and (ii) the payment,
discharge or satisfaction of any intercompany Indebtedness; PROVIDED, HOWEVER,
such intercompany transactions would not cause the Paradise Island Business to
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have, as of the Closing Date, Adjusted Working Capital materially less than the
Targeted Adjusted Working Capital plus a good faith estimate of the EBITDA
Adjustment, or Adjusted Cash materially less than Targeted Adjusted Cash.
SECTION 6.02. SECURITIES LAWS. Each of RII and Buyer shall make all
filings under the Securities Act and the Exchange Act necessitated by the
provisions of this Agreement. Buyer shall cause the Buyer Series A Shares to be
registered under the Exchange Act and authorized for quotation on the NASDAQ
National Market System. Buyer shall use its reasonable best efforts to file the
Buyer Registration Statement with the SEC as soon as possible.
SECTION 6.03. DOCUMENTS AND MOTIONS TO BE FILED BY RII AND GRI. (a)
Promptly upon completion of the Reorganization Plan Solicitation, and in no
event later than February 15, 1994, RII and GRI shall commence the Bankruptcy
Cases. Notwithstanding anything to the contrary, RII and GRI shall not be under
any obligation to commence the Bankruptcy Cases unless and until RII and GRI
shall have received in the Reorganization Plan Solicitation the requisite number
of acceptances from impaired creditors and the requisite number of consents to
terminate the Old Security Documents (as defined in the Reorganization Plan).
(b) Promptly upon the commencement of the Bankruptcy Cases, and in no event
later than five Business Days thereafter, RII and GRI shall (i) file the
Disclosure Statement and the Reorganization Plan and the certification of votes
for acceptance or rejection of the Reorganization Plan with the Bankruptcy Court
and (ii) seek from the Bankruptcy Court and take all steps necessary to obtain a
hearing at the earliest practicable date for approval of the Disclosure
Statement and confirmation of the Reorganization Plan.
(c) RII shall file, not later than five Business Days after the Bankruptcy
Date, the Interim Motion with the Bankruptcy Court and use its best efforts to
cause the Bankruptcy Court to enter the Interim Order.
(d) RII shall use its reasonable best efforts to file the Registration
Statement with the SEC as soon as possible.
SECTION 6.04. REORGANIZATION PROCEEDINGS. (a) (i) RII shall, and shall
cause GRI to, seek confirmation of the Reorganization Plan by the Bankruptcy
Court using the acceptances of the Reorganization Plan received by RII and GRI
pursuant to the Reorganization Plan Solicitation, (ii) RII shall, and shall
cause GRI to, comply in all material respects with the Bankruptcy Code and all
other laws, rules, regulations, decrees and orders promulgated thereunder in
connection with obtaining confirmation of the Reorganization Plan, (iii) RII
shall, and shall cause GRI to, use its best efforts to obtain, and shall, and
shall cause GRI to, refrain from knowingly taking any action that would be
likely to prevent, materially impede or result in the revocation of, (A) the
entry by the Bankruptcy Court of the Confirmation Order and (B) the vesting upon
the date on which the Reorganization Plan shall become effective of (y) the
property of each of RII and GRI in the reorganized entities and (z) the property
dealt with by the Reorganization Plan in the recipients thereof under the
Reorganization Plan, in each case free and clear of all claims and interests of
creditors and equity securityholders except as provided in and in accordance
with the Reorganization Plan and (iv) RII shall not, and shall cause GRI not to,
consent to any amendment or supplement to, or modification of, the
Reorganization Plan or the Disclosure Statement that purports to change in any
material respect the terms or conditions of the transactions contemplated by
this Agreement without the prior written consent of Buyer.
(b) Buyer shall use its best efforts to assist RII and GRI in performance of
their obligations under Section 6.04(a).
SECTION 6.05. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) From the date
hereof to the Closing Date, RII shall, and shall cause its Affiliates, officers,
directors, employees, auditors and other agents to, (i) afford the officers,
employees, auditors and other agents of Buyer reasonable access at all
reasonable times to its officers, employees, agents, properties, offices, plants
and other facilities and to
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all books and records, and shall furnish Buyer with all financial, operating and
other data and information with respect to the Paradise Island Business as
Buyer, through its officers, employees or agents, or such financing sources may
reasonably request and (ii) furnish, and cause the officers and employees of RII
and its Affiliates to furnish, to Buyer and its authorized representatives such
additional financial and operating data and other information regarding the
Paradise Island Assets and the Paradise Island Business as Buyer shall from time
to time reasonably request including, without limitation, all monthly or other
interim financial and operating reports relating to the Paradise Island Business
prepared by or for officers of RII and its Affiliates. Without limiting the
foregoing, RII agrees to provide representatives of Buyer with offices in
Paradise Island and Miami and such representatives shall be given adequate prior
notice (if time permits) of and allowed to attend all material meetings of RII
and its Subsidiaries relating to the Paradise Island Business.
(b) The confidentiality agreement dated August 11, 1993, between RII and
Parent shall continue in full force and effect until the Closing and shall
survive the termination of this Agreement in the event that no Closing occurs
and the benefits thereof shall be assigned to PIRI upon the Spin-off.
SECTION 6.06. NOTIFICATION OF CERTAIN MATTERS. RII shall give prompt
notice to Buyer, and Buyer shall give prompt notice to RII, of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause a representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect and (ii) any
failure of RII or Buyer, as the case may be, to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any notice
pursuant to this Section 6.06 shall not limit, increase, or otherwise affect the
remedies available hereunder to the party receiving such notice.
SECTION 6.07. FURTHER ACTION; REASONABLE EFFORTS. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use all
reasonable best efforts (without undue expense) 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 laws and regulations to
consummate and make effective the transactions contemplated hereby and by the
Reorganization Plan, including, without limitation, using all reasonable efforts
to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities and parties to Material
Contracts as are necessary for the consummation of the transactions contemplated
hereby and by the Reorganization Plan and to fulfill the conditions to the
Closing.
SECTION 6.08. PUBLIC ANNOUNCEMENTS. Buyer and RII shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to the transactions contemplated hereby and by the Reorganization
Plan and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by law or any
listing agreement with a national securities exchange.
SECTION 6.09. EMPLOYEE BENEFIT MATTERS. (a) As of the Closing Date, Buyer
shall cause the Buyer Subsidiaries to offer employment to each person employed
by the RII Paradise Subsidiaries whose primary functions relate to the operation
of the Paradise Island Business and each person set forth on Schedule 6.09 (a
"Paradise Employee"), except that Buyer may designate in writing within 60 days
from the date of this Agreement up to 40 Paradise Employees to whom it does not
wish to offer employment (the "Excluded Employees"). Schedule 6.09(a) generally
describes severance benefits for Paradise Employees and sets forth a list of
each Paradise Employee and the salary as of the date hereof and the employment
commencement date of each such Paradise Employee. The Buyer Subsidiaries shall
not be required to offer employment to any Excluded Employee and RII hereby
agrees that all obligations, including obligations under any Benefit Plan or
similar employee benefits, to such Excluded Employees shall remain the
responsibility solely of RII. RII shall cooperate with and assist Buyer in any
reasonable manner in hiring Paradise Employees (other than any Excluded
Employees). Buyer agrees that, for a period of one year from the Closing Date,
Buyer will not, without the written
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consent of RII, employ any Excluded Employees, as consultants or otherwise. Any
Paradise Employee who becomes an employee of Buyer or the Buyer Subsidiaries
shall be referred to herein as a "Continuing Employee".
(b) Buyer shall have no obligation to maintain or assume obligations under
any Benefit Plan, or to provide any employee benefits, other than the
obligations contained in this subsection. Within 90 days from the date of this
Agreement, Buyer shall determine whether it shall offer Continuing Employees a
401(k) plan. If Buyer determines to offer Continuing Employees a 401(k) plan,
then on or prior to the Closing, Buyer shall sponsor, or cause one or more of
its Affiliates to sponsor, a plan (the "Successor Plan") that is qualified under
Section 401 of the Code, under which there is established a trust (the
"Successor Trust") that is exempt under Section 501 of the Code, to which the
following transfers shall be made. As promptly as practical after the Closing
Date, RII shall take all actions necessary to transfer to the Successor Trust
the account balances in the Resorts Retirement Savings Plan (the "Savings Plan")
of all Continuing Employees. Such transfers shall be made solely in cash or,
where applicable, in cash plus any loan from an account to a Continuing Employee
that satisfies the requirements of ERISA and the Code. The transfer of the
account balances referred to above shall take place upon receipt by RII of
either (x) a copy of a favorable determination letter or letters from the IRS
that the Successor Plan is qualified under Section 401 of the Code and the
Successor Trust is exempt from taxation under Section 501 of the Code or (y) an
opinion of counsel to Buyer, on which to RII is entitled to rely and which is
reasonably satisfactory to RII, that the Successor Plan is qualified under
Section 401 of the Code and the Successor Trust is exempt from taxation under
Section 501 of the Code.
(c) Schedule 6.09(c) sets forth a list of the officers and directors of the
Company or any of its Subsidiaries who are not directly involved in the business
and operations of the Company and its Subsidiaries. On the Closing Date, RII
shall cause to be delivered to Buyer duly signed (i) resignations (with respect
to their entire association with or employment by the Company or any of its
Subsidiaries) effective as of the Closing Date of all such officers and
directors and (ii) releases of such officers and directors releasing the Company
and its Subsidiaries of all obligations and liabilities relating to such
resignations.
(d) RII and Buyer agree to cooperate in making all appropriate filings and
taking all appropriate actions required to implement this Section 6.09.
SECTION 6.10. BULK TRANSFER LAWS. RII shall cause each RII Paradise
Subsidiary to comply in all material respects with the provisions of any
so-called Bulk Transfer Law of all states of the United States in which any of
the RII Paradise Assets subject to any such Bulk Transfer Law are located in
connection with the sale of the RII Subsidiary Assets to the Buyer Subsidiaries.
RII represents and warrants to Buyer that the list of creditors to be provided
by RII pursuant to such Bulk Transfer Laws will, to RII's knowledge, contain the
names and business addresses of all creditors of the RII Paradise Subsidiaries,
with the amounts of credit listed when known, and also the names of all persons
who are known to RII to assert claims against any RII Paradise Subsidiary even
though such claims are disputed, and that such list will be true, correct and
complete in all material respects and will comply in all material respects with
such Bulk Transfer Laws. As promptly as practicable after the Closing, RII shall
pay and discharge when known all amounts so listed (other than Assumed
Liabilities and claims disputed in good faith).
SECTION 6.11. INTERCOMPANY ACCOUNTS, CONTRACTS, GUARANTIES AND
INDEBTEDNESS. On or prior to the Closing Date, the net amount of all
Indebtedness between RII and any of its Affiliates (other than the Company and
any Subsidiary of the Company), on the one hand, and the Company and any
Subsidiary of the Company, on the other hand, shall be cancelled or contributed
to the capital of the relevant entity. On or prior to the Closing Date, RII
shall cause the Company and each Subsidiary of the Company not to have any
Indebtedness, except for Indebtedness disclosed on Schedule 4.06(b). On or prior
to the Closing Date, RII shall terminate or cause to be terminated all Contracts
between and among RII and its Affiliates and any of the Company, the
Subsidiaries of the Company and the RII
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Paradise Subsidiaries (to the extent such Contracts relate to the Paradise
Island Business), and shall cancel or cause to be cancelled all guarantees and
security interests given by the Company, the Subsidiaries of the Company or the
RII Paradise Subsidiaries on behalf of RII or any of its Affiliates. On or prior
to the Closing Date, RII shall cancel or cause to be cancelled (a) all liens
held by RII or any of its Affiliates on any of the Paradise Island Assets and
(b) all liens held by the Company or any of its Subsidiaries on any of the
assets of RII or any of its Affiliates (other than the Paradise Island Assets)
and (c) all liens on any of the Paradise Island Assets relating to Indebtedness,
except any such liens disclosed on Schedule 4.06(b).
SECTION 6.12. REORGANIZATION PLAN SOLICITATION DOCUMENTS. RII shall use
its reasonable best efforts to prepare each of the Registration Statement and
the Disclosure Statement so that they shall not (i) at the time the Disclosure
Statement is first mailed, (ii) at the time the Registration Statement becomes
effective, (iii) on the date of the Bankruptcy Court's hearing with respect to
the Disclosure Statement, (iv) on the date of the confirmation of the
Reorganization Plan by the Bankruptcy Court or (v) at the Closing, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Notwithstanding the foregoing, RII makes
no such covenant with respect to any information included in the Registration
Statement or the Disclosure Statement that was supplied by Buyer or any holder
of notes issued by RII (or any representative of such holder) to RII
specifically for use therein. If, at any time prior to the Closing Date, any
event relating to RII or any of its Affiliates, officers or directors should be
discovered by RII or any of its Affiliates which is required by the Bankruptcy
Court to be set forth in a supplement to the Disclosure Statement, RII will
prepare, file with (and, if required, use its best efforts to have approved by)
the SEC and the Bankruptcy Court and disseminate any such supplements. RII shall
use its reasonable best efforts to ensure that the Registration Statement and
the Disclosure Statement did, or shall, as the case may be, comply as to form in
all material respects with the requirements of the Securities Act, the Exchange
Act and the Bankruptcy Code and all other laws, rules, regulations, decrees and
orders promulgated thereunder.
SECTION 6.13. REORGANIZATION PROCEEDINGS. Neither RII nor GRI will
knowingly take any action, or fail to take any action, which could reasonably be
expected to prevent, materially impede or result in the revocation of the
confirmation of the Reorganization Plan (as provided in Section 1144 of the
Bankruptcy Code).
SECTION 6.14. WAIVER OF CERTAIN REPRESENTATIONS AND WARRANTIES. (a) Except
as provided in Section 6.14(b), as of 11:59 p.m. on November 30, 1993, Buyer
shall be deemed to have waived and released any and all of Buyer's claims,
rights and remedies of any nature whatsoever (including without limitation
Buyer's ability, if any, to seek damages or to terminate this Agreement) with
respect to any inaccuracies in or breaches of representations or warranties of
RII contained herein on account of any matter arising or occurring on or before
November 30, 1993.
(b) Notwithstanding Section 6.14(a), Buyer does not waive (i) any claim,
right, or remedy whatsoever (including without limitation Buyer's ability, if
any, to seek damages or to terminate this Agreement) with respect to any
breaches of representations and warranties contained in Sections 4.01, 4.02 and
4.16(a), (ii) any claim for damages relating to any breach of the
representations and warranties contained in Section 4.25 or (iii) any claim,
right, or remedy whatsoever (including without limitation Buyer's ability, if
any, to seek damages or to terminate this Agreement) with respect to any
inaccuracies in or breaches of the representations or warranties of RII
contained herein on account of any matter arising or occurring on or before
November 30, 1993 (x) which was known by RII or any of its Affiliates or which
would have been known by RII or any of its Affiliates had they not been grossly
negligent or (y) which was fraudulently or knowingly concealed from Buyer by RII
or any of its Affiliates; PROVIDED, HOWEVER, that as of 11:59 p.m. on November
30, 1993, Buyer shall be deemed to waive all rights otherwise reserved in this
Section 6.14(b) with respect to any matter which was known to Buyer or any of
its Affiliates on or before November 30, 1993.
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(c) As of the later of 11:59 p.m. on November 30, 1993, or, with respect to
breaches by RII of Section 6.01 that Buyer or any of its Affiliates first became
aware of between November 25, 1993, and November 30, 1993, five Business Days
after Buyer or any of its Affiliates became aware of such breach, Buyer shall be
deemed to have waived its right to terminate this Agreement (but not its right
to seek damages) for any breaches by RII of Section 6.01 that were known to
Buyer or would have been known to Buyer or any of its Affiliates had they not
been grossly negligent.
SECTION 6.15. CERTAIN OBLIGATIONS OF BUYER. (a) Prior to or at the
Closing, Buyer shall, and shall use its best efforts to cause its relevant
Affiliates to, execute and deliver, and shall take all actions and perform all
material obligations required to be taken or performed by it or its Affiliates
at or prior to the Closing under, (i) the Heads of Agreement dated August 18,
1993, among Buyer, Parent and the Government of The Bahamas (and Buyer shall use
its best efforts to cause such Heads of Agreement to remain in full force and
effect as of the Closing Date), (ii) the Registration Rights Agreement, in the
form attached hereto as Exhibit B, (iii) the Articles of Association of Buyer,
(iv) the Management Agreement, in the form attached hereto as Exhibit C, and (v)
the Non-Recourse Guaranty and Pledge Agreement, in the form attached hereto as
Exhibit D.
(b) Buyer covenants that upon the Closing, the Buyer Subscription Agreement
shall be consummated in accordance with its terms.
(c) Promptly upon Closing, Buyer shall cause the Articles of Association of
the Company and the Subsidiaries of the Company to be amended so that they are
consistent with the Articles of Association of Buyer, such amendments to be
reasonably acceptable to the independent directors of Buyer.
SECTION 6.16. BANK FACILITY. Buyer shall use its reasonable best efforts
to enter into a definitive loan agreement with a bank or group of banks for the
provision to it of a principal amount of at least $75 million (the "Bank
Facility") substantially on the terms of the commitment letter attached hereto
as Exhibit E.
SECTION 6.17. AIRLINE GOVERNMENTAL CONSENTS. In the event the Airline
Governmental Consents are not obtained before the Closing Date, RII and Buyer
agree that until the earlier of the date such Airline Governmental Consents are
obtained and one year after the Closing Date, RII and Buyer will enter into a
service agreement pursuant to which RII or a Subsidiary of RII will, through
PIA, operate scheduled air service equivalent to that currently operated by PIA,
such scheduled air service to be operated for the account of Buyer. Such service
agreement will be mutually agreed upon by RII and Buyer and shall generally
provide that Buyer will receive all revenues generated by PIA in its provision
of that scheduled air service operated for the account of the Buyer. Such
service agreement shall further provide that Buyer will be responsible for all
expenses related to such scheduled air service. RII will be responsible for
procuring all other services for the airline, including flight crews,
maintenance and catering services, and will receive a commercially reasonable
fee for its participation in such arrangement. In addition, Buyer would
indemnify RII and its Subsidiaries against any losses and liabilities arising
from its participation in such lease arrangement other than losses or
liabilities arising from the gross negligence or willful misconduct of the
indemnified party. This Agreement may not be terminated and, assuming RII has
otherwise used its reasonable best efforts (without the payment of money) to
assist Buyer in obtaining the Airline Governmental Consents, a breach of this
Agreement shall not be deemed to have occurred as a result of a failure to
obtain the Airline Governmental Consents or because RII is prohibited by any
governmental agency from complying with this Section 6.17. This Agreement may
not be terminated nor shall a condition to Closing fail to be satisfied as a
result of RII and Buyer failing to enter into the service agreement referred to
above.
SECTION 6.18. COMFORT LETTER. RII shall cause Ernst & Young to deliver to
Buyer a comfort letter dated a date not more than five Business days before
November 30, 1993, which comfort letter shall be in the form of Exhibit F.
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SECTION 6.19. ESCROW AGREEMENT. (a) On or before December 1, 1993, each of
Buyer and RII shall execute and deliver the Escrow Agreement substantially in
the form attached hereto as Exhibit G, and each of Buyer and RII agrees to
perform its obligations thereunder.
(b) Buyer and RII agree that in the event the Closing is to occur, they
shall execute and deliver to the Escrow Agent under the Escrow Agreement written
instructions directing the Escrow Agent to deliver (i) RII's Escrowed Property
(as defined in the Escrow Agreement) to RII and (ii) Buyer's Escrowed Property
(as defined in the Escrow Agreement) as directed by Buyer.
(c) Buyer and RII agree that if the Bankruptcy Court does not permit RII's
Escrowed Property to be held pursuant to the Escrow Agreement, then RII and
Buyer shall promptly execute and deliver to the Escrow Agent written
instructions directing the Escrow Agent to deliver (i) $4 million of Buyer's
Escrowed Property, plus applicable interest that has accrued with respect to
such $4 million, as directed by Buyer and (ii) RII's Escrowed Property, plus
applicable interest that has accrued with the respect thereto to the extent not
included in RII's Escrowed Property to RII.
SECTION 6.20. INSURANCE PROCEEDS. If any of the Paradise Island Assets are
destroyed or damaged or taken in condemnation, the insurance proceeds or
condemnation award with respect thereto shall be a Paradise Island Asset. At the
Closing, RII shall pay to Buyer any such insurance proceeds or condemnation
awards received by RII on or prior to the Closing and shall assign to or assert
for the benefit of Buyer all of its rights against any insurance companies,
governmental entities and others with respect to such damage, destruction or
condemnation. If and to the extent that there is available insurance under
policies maintained by RII or its Subsidiaries in respect of any Assumed
Liability, except for any such insurance proceeds with respect to which the
insured is directly or indirectly self-insured or has agreed to indemnify the
insurer, RII shall cause such insurance to be applied toward the payment of such
Assumed Liability.
ARTICLE VII
NO SHOP; BUYER'S FEES
SECTION 7.01. NO SHOP. (a) Neither RII nor any of its Affiliates nor any
officer, director, employee, agent (including without limitation, any investment
bankers, financial advisor, attorney or accountant) or other representative of
RII or any of its Affiliates shall, directly or indirectly, initiate any contact
with, solicit, or encourage, negotiate or enter into any agreement with, any
Third Party, or enter into or continue any discussions or negotiations with, or
disclose directly or indirectly any information concerning the Paradise Island
Business to any Third Party in connection with any possible proposal regarding
the acquisition of any part of the Paradise Island Business (whether by merger,
purchase of capital stock, purchase of assets, tender offer or otherwise) (each
an "Acquisition Proposal"); PROVIDED, HOWEVER, (i) prior to the entry of the
Interim Order, RII may, to the extent required by the fiduciary obligations of
the Board of Directors of RII, as determined in good faith by the Board of
Directors based upon advice of outside counsel, (A) in response to an
unsolicited request therefor, furnish information with respect to the Paradise
Island Business (but specifically excluding Buyer or Buyer's plans with respect
to the Paradise Island Business) to any person pursuant to a customary
confidentiality agreement (as determined by RII's independent counsel) and
discuss such information (but not the terms of any Acquisition Proposal) with
such person and (B) upon receipt by RII of an Acquisition Proposal, following
delivery to Buyer of the notice required pursuant to Section 7.01(b),
participate in discussions and negotiations regarding such Acquisition Proposal
and (ii) after entry of the Interim Order, RII may furnish information to, and
cooperate with Qualified Third Parties (as defined below) with regard to
information relating to the Paradise Island Business (but specifically excluding
information regarding Buyer or regarding Buyer's plans with respect to the
Paradise Island Business) to a Third Party, which Third Party RII reasonably
believes is financially able to and interested in consummating an Overbid
Transaction (a "Qualified Third Party"). Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the provisions
above by any executive officer of RII or any of its Affiliates or any investment
banker or attorney of RII
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or any of its Affiliates, whether or not such person is purporting to act on
behalf of RII or any of its Affiliates or otherwise, shall be deemed to be a
breach of this Section 7.01(a) by RII. Notwithstanding anything to the contrary
in this Section 7.01, RII may furnish to any person, including without
limitation any Third Party, copies of any filings made by RII or any of its
Subsidiaries with the SEC or the New Jersey Casino Control Commission.
(b) In the event that RII shall directly or indirectly receive any offer,
proposal or inquiry regarding an Acquisition Proposal, RII shall within two
Business Days notify Buyer of such proposal, offer or inquiry and shall, in any
such notice to Buyer, indicate in reasonable detail the identity of the offeror
and the terms and conditions of any proposal, inquiry or offer. RII agrees not
to modify, or release any Third Party from any confidentiality or standstill
agreement to which RII is a party (exclusive of those in which RII is the
recipient rather than the provider of confidential information).
(c) No Acquisition Proposal shall be considered, approved, adopted or
recommended by the Board of Directors of RII, or presented by RII or its Board
of Directors, to the stockholders of RII for vote or approval by written
consent, and no meeting of stockholders of RII shall be called or noticed for
purposes of taking stockholder action with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the exercise of its fiduciary duties the Board
of Directors may consider, approve, adopt or recommend an Overbid Transaction
with a Qualified Third Party, enter into an agreement with a Qualified Third
Party with respect to such Overbid Transaction, or present such Overbid
Transaction to the stockholders of RII for vote or approval by written consent,
in each case at any time after the third Business Day following Buyer's receipt
of a written notice advising Buyer that RII has received an offer for an Overbid
Transaction, specifying the material terms and conditions thereof and the
Qualified Third Party making such offer. Nothing contained herein shall prohibit
RII from complying with Rule 14e-2(a) of the Exchange Act.
(d) Notwithstanding anything to the contrary contained in this Section 7.01,
(i) the provisions of this Section 7.01 shall not apply to any sale or other
disposition of any Paradise Island Asset in the ordinary course of business and
in a manner consistent with past practice, (ii) RII is not prohibited from
supplying TCW and Fidelity with any information regarding the Paradise Island
Business or engaging in discussions or in negotiating the terms of the Spin-off
(as hereinafter defined) with TCW or Fidelity and entering into a standby
distribution agreement and related documents with PIRI (as hereinafter defined)
in connection therewith or, if the Closing shall not have occurred on the
Effective Date (as defined in the Reorganization Plan) for any reason
whatsoever, from effecting the Spin-off, and (iii) RII is not prohibited from
supplying the party identified prior to the date hereof by RII (the "Identified
Third Party") with respect to any Acquisition Proposal that by its terms shall
not be effective until this Agreement is terminated in accordance with its
terms; PROVIDED, HOWEVER, that while this Agreement is still in effect, RII
shall not supply the Identified Third Party with any information regarding the
Paradise Island Business that is not generally available to the public (unless
required to do so by its fiduciary duties), and that before engaging in any
discussions with the Identified Third Party, RII and the Company shall enter
into a customary confidentiality agreement with the Identified Third Party,
pursuant to which, among other things, the Identified Third Party agrees (x) not
to, directly or indirectly, have any contact with the Government of The Bahamas
or any employees or suppliers of the Paradise Island Business and (y) that it
shall not make any public announcements of its discussion with RII, TCW or
Fidelity, unless otherwise required by law.
SECTION 7.02. BUYER EXPENSE REIMBURSEMENT. (a) To the extent and in the
circumstances set forth below and provided that Buyer shall not have breached
any of its obligations hereunder qualified by materiality and shall not have
materially breached any of its obligations hereunder not so qualified, RII shall
reimburse Buyer for all of Buyer's reasonable out-of-pocket costs and expenses
incurred since June 1, 1993, in connection with the preparation of Buyer's plans
for the Paradise Island Business and the negotiation, execution, delivery and
performance of Buyer's obligations under this Agreement and the other agreements
related hereto, including, without limitation, reasonable out-of-pocket costs
and expenses of investors of Buyer and its Affiliates relating to the
transactions contemplated by this Agreement (the "Buyer Expense Reimbursement"):
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(i) in the event that this Agreement is terminated pursuant to Section
10.01(c) [approval by the Bankruptcy Court of an Acquisition Proposal], then
RII shall promptly upon such termination pay to Buyer the Buyer Expense
Reimbursement up to $4 million;
(ii) in the event that this Agreement is terminated by RII after
November 30, 1993, pursuant to Section 10.01(l) [Force Majeure Event in
excess of $20m], then RII shall promptly upon such termination pay to Buyer
the Buyer Expense Reimbursement up to $4 million;
(iii) in the event that this Agreement is terminated by Buyer after
November 30, 1993, pursuant to Section 10.01(b) [Force Majeure Event in
excess of $20m], then RII shall promptly upon such termination pay to Buyer
the Buyer Expense Reimbursement up to $2 million;
(iv) in the event that this Agreement is terminated pursuant to Section
10.01(m) [RII can not deliver title], then RII shall promptly upon such
termination pay to Buyer the Buyer Expense Reimbursement up to $3 million;
(v) in the event that this Agreement is terminated after November 30,
1993 (or such later date with respect to circumstances where the five
Business Day period referred to in Section 6.14(c) would apply) pursuant to
Section 10.01(o) [breach or ordinary course covenant] or after November 30,
1993, pursuant to Section 10.01(k) [Force Majeure Event less than $20m and
no adequate insurance], then RII shall promptly upon such termination pay to
Buyer the Buyer Expense Reimbursement up to $2 million;
(vi) in the event that this Agreement is terminated by RII pursuant to
any of the provisions of Section 10.01 or by Buyer pursuant to Section
10.01(b) and a sale of the Paradise Island Business or any portion thereof
that would reasonably be expected to generate 50% or more of the revenues of
the Paradise Island Business (whether by merger, purchase of capital stock,
purchase of assets, tender offer or otherwise) is consummated within one
year of such termination (a "Post Termination Sale"), then upon the
consummation of such Post Termination Sale, RII, or if the spin-off
described in the Registration Statement (the "Spin-off") shall have already
occurred, Paradise Island Resorts Limited ("PIRI") shall pay to Buyer the
Buyer Expense Reimbursement up to $4 million in the event such Post
Termination Sale shall constitute an Overbid Transaction or up to $2 million
in the event such Post Termination Sale is not an Overbid Transaction, in
each case less any amounts previously paid to Buyer pursuant to
subparagraphs (i), (ii), (iii), (iv) and (v) above; and
(vii) in the event that this Agreement is terminated by Buyer pursuant
to any of the provisions of Section 10.01 and a Post Termination Sale which
constitutes an Overbid Transaction occurs within one year of such
termination, then upon the consummation of such Post Termination Sale, RII,
or if the Spin-off shall have already occurred, PIRI, shall pay to Buyer the
Buyer Expense Reimbursement up to $4 million less any amounts previously
paid to Buyer pursuant to subparagraphs (i), (ii), (iii), (iv) and (v)
above.
(b) RII and Buyer agree that the Reorganization Plan will provide that if
the Spin-off occurs (i) the obligation to pay the Buyer Expense Reimbursement
pursuant to Sections 7.02(a)(vi) and (vii) of this Agreement shall be an
obligation of PIRI and not RII and (ii) prior to the consummation of the
Spin-off PIRI shall enter into a security and pledge agreement with Buyer,
pursuant to which PIRI shall pledge assets reasonably acceptable to Buyer and
having a fair market value of $6 million to secure PIRI's obligation to pay the
Buyer Expense Reimbursement, such security and pledge agreement to be in a form
modeled after, and to have terms generally consistent with the tenor of those
terms contained in, the Non-Recourse Guarantee and Pledge Agreement. In the
event the Spin-off is to occur, Buyer and RII agree that RII's Escrowed Property
(as defined in the Escrow Agreement) shall not be released until PIRI has
entered into such security and pledge agreement.
(c) RII and Buyer agree and acknowledge, and the Reorganization Plan will
provide, that (i) the Spin-off itself as contemplated by the Reorganization Plan
shall not constitute a Post Termination Sale and (ii) after the Spin-off, the
acquisition of shares of PIRI capital stock by any person (as such
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term is used in Section 13(d) and 14(d)(2) of the Exchange Act) in a transaction
or series of related transactions occurring within one year of the termination
of this Agreement that results in such person beneficially owning in excess of
50% of PIRI's outstanding capital stock shall be deemed a Post Termination Sale.
(d) RII shall include in the Interim Motion a request for approval of all
Buyer Expense Reimbursement items incurred up to and including the date of such
Interim Motion and shall support Buyer's fee application with respect to
reasonable Buyer Expense Reimbursement items incurred after the entry of the
Interim Order.
(e) Upon entry of the Interim Order, from and after the Bankruptcy Date,
until any obligation of RII to pay the Buyer Expense Reimbursement is fully and
indefeasibly discharged, Buyer shall be entitled to an administrative claim
pursuant to Section 503(b) and 507(a)(1) of the Bankruptcy Code in the amount of
the Buyer Expense Reimbursement.
(f) Upon payment by RII to Buyer of Buyer Expense Reimbursement pursuant to
this Section 7.02, Buyer shall deliver to RII the results of its due diligence
investigation.
(g) RII and Buyer agree, and in the event of the Spin-off, PIRI will agree,
that if Buyer is entitled to the Buyer Expense Reimbursement, the amount thereof
shall be finally determined by Arthur Andersen & Co., subject to the overall
limitations contained in this Section 7.02 and, if applicable, to the approval
of the Bankruptcy Court.
(h) Notwithstanding anything contained herein to the contrary, if RII has
complied with its obligation under this Section 7.02, after the consummation of
the Spin-off and upon the assumption by PIRI of the obligation to pay the Buyer
Expense Reimbursement pursuant to Sections 7.02(a)(vi) and (vii), and the
execution by PIRI of the security and pledge agreement referred to in Section
7.02(b), RII shall not have any obligation with respect to the Buyer Expense
Reimbursement.
SECTION 7.03. ATTORNEYS' FEES. In any action by any party to enforce the
terms of this Agreement, the prevailing party shall be entitled to receive
reimbursement of all of its reasonable attorneys' fees and expenses incurred in
such action. Upon entry of the Interim Order, from and after the Bankruptcy
Date, any obligation of RII to pay such fees and expenses shall constitute an
administrative claim pursuant to Section 503(b) and 507(a)(1) of the Bankruptcy
Code. The obligation of either party hereto under this Section 7.03 is not
subject to any amount limitation nor can such obligation be set-off against or
credited towards other payments payable under this Agreement.
SECTION 7.04. TRANSFER TAXES. Any sales, transfer (including any real
property transfer) and other Taxes (excluding gross or net income taxes),
including without limitation any documentary stamp tax, and any filing,
recording or other fees applicable to the conveyance and transfer pursuant to
the provisions of this Agreement of the Company and the Paradise Island Assets
(collectively, the "Transfer Taxes"), shall be borne and paid 50% by Buyer and
50% by RII. The provisions of this Section shall survive the Closing of this
Agreement. RII and Buyer agree to use reasonable best efforts to minimize as
much as possible any Transfer Taxes.
ARTICLE VIII
CONDITIONS TO THE CLOSING
SECTION 8.01. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to effect the Closing shall be subject to the prior fulfillment of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES; AGREEMENTS AND COVENANTS. (i) Each of
the representations and warranties of RII contained in Sections 4.01, 4.02 and
4.16(a) of this Agreement shall be true and correct in all respects, in each
case when made and as of the Closing Date, (ii) RII shall not have failed to
comply with the covenants in Sections 6.01 (unless compliance therewith was
waived by Buyer in accordance with Section 6.14(c)), 6.08, 6.09 and 6.10, where
such failures in the aggregate would have a Material Adverse Effect, (iii) RII
shall have complied in all respects with the covenants contained in
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Section 6.11, (iv) except with respect to the covenants listed in Section
10.01(h) and Section 10.01(i), each of the other agreements and covenants
contained in this Agreement and in any certificate or agreement by RII delivered
pursuant hereto to be performed or complied with by RII, at or before Closing,
shall have been duly performed or complied with in all material respects;
PROVIDED, HOWEVER, that a breach of Section 6.06 would not constitute a failure
of a condition hereunder if the representation, warranty or covenant in question
would not have resulted in a failure of a condition hereunder and (v) Buyer
shall have received a certificate of RII, signed by a Vice President thereof as
to the fulfillment of the conditions set forth in the foregoing clauses (i),
(ii), (iii) and (iv).
(b) HSR ACT. Any waiting period (and any extension thereof) applicable to
the consummation of the transactions contemplated hereby under the HSR Act shall
have expired or been terminated.
(c) CONFIRMATION OF THE REORGANIZATION PLAN AND ENTRY OF THE CONFIRMATION
ORDER; CONSUMMATION OF THE REORGANIZATION PLAN. The Confirmation Order shall
have been entered by the Bankruptcy Court and the Effective Date (as defined in
the Reorganization Plan) shall have occurred, or there shall be no unsatisfied
conditions to the occurrence of the Effective Date other than the Closing, and
such Confirmation Order shall be in full force and effect and shall not then be
stayed, or the consummation of the Acquisitions shall have been approved by
another order of the Bankruptcy Court and such other order shall be in full
force and effect and shall not then be stayed.
(d) CONSENTS. All Governmental Consents shall have been received on or prior
to the Closing Date.
(e) LITIGATION. There shall not be in effect any injunction or restraining
order issued by a court of competent jurisdiction against the consummation of
the sale and purchase of the Shares and the RII Paradise Assets pursuant to this
Agreement.
(f) BANKRUPTCY; INSOLVENCY; ETC. No proceeding shall have been instituted or
consented to by or against any of the Company, any of its Subsidiaries or any
RII Paradise Subsidiary seeking to adjudicate any of them a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of any of their debts under any
law relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of any order for relief or the appointment of a receiver,
trustee, custodian or other similar official for any of them or any substantial
part of any of their property, and such proceeding shall not have been dismissed
or terminated within 60 days of the commencement thereof.
(g) OPINION. Buyer shall have received an opinion of Gibson, Dunn &
Crutcher, counsel to RII, reasonably acceptable to Buyer and its counsel.
(h) REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement shall
have been executed and delivered by the parties thereto and shall be in full
force and effect.
(i) RESIGNATIONS. Buyer shall have received resignations and releases of all
officers and directors of the Company and its Subsidiaries who are not directly
involved in the business and operations of the Company and its Subsidiaries in
accordance with Section 6.09(c).
(j) SECURITY DOCUMENTS. The agreements listed in Schedule 4.16 shall not be
in force and effect.
SECTION 8.02. CONDITIONS TO OBLIGATIONS OF RII. The obligations of RII to
effect the Closing shall be subject to the prior fulfillment of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES; AGREEMENTS AND COVENANTS. (I) Each of
the representations and warranties of Buyer contained in this Agreement and in
any certificate or agreement of Buyer delivered pursuant hereto qualified as to
materiality shall be true and correct in all respects and those not so qualified
shall be true and correct in all material respects, in each case when made and
as of the Closing Date (except representations and warranties that are made as
of a specific date need be true and correct only as of such date), (ii) each of
the agreements and covenants contained in this Agreement and in any certificate
or agreement of Buyer delivered pursuant hereto to be performed or
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complied with by Buyer, at or before the Closing, shall have been duly performed
or complied with in all material respects and (iii) RII shall have received a
certificate of Buyer, signed by a Vice President thereof as to the fulfillment
of the conditions set forth in the foregoing clauses (i) and (ii).
(b) HSR ACT. Any waiting period (and any extension thereof) applicable to
the consummation of the transactions contemplated hereby under the HSR Act shall
have expired or been terminated.
(c) CONFIRMATION OF THE REORGANIZATION PLAN AND ENTRY OF THE CONFIRMATION
ORDER; CONSUMMATION OF THE REORGANIZATION PLAN. The Confirmation Order shall
have been entered by the Bankruptcy Court and the Effective Date (as defined in
the Reorganization Plan) shall have occurred, or there shall be no unsatisfied
conditions to the occurrence of the Effective Date other than the Closing, and
such Confirmation Order shall be in full force and effect and shall not then be
stayed, or the consummation of the Acquisition shall have been approved by
another order of the Bankruptcy Court and such other order shall be in full
force and effect and shall not then be stayed.
(d) CONSENTS. All Governmental Consents shall have been received on or prior
to the Closing Date.
(e) NO INJUNCTIONS. There shall not be in effect any injunction or
restraining order issued by a court of competent jurisdiction against the
consummation of the sale and purchase of the Shares and the RII Paradise Assets
pursuant to this Agreement.
(f) OPINION. RII shall have received an opinion of Cravath, Swaine & Moore,
counsel to Buyer reasonably satisfactory to RII and its counsel.
(g) BANKRUPTCY; INSOLVENCY; ETC. No proceeding shall have been instituted or
consented to by or against any of Buyer, Parent or Sun International Management
Limited seeking to adjudicate any of them a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of any of their debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of any order for relief or the appointment of a receiver, trustee,
custodian or other similar official for any of them or any substantial part of
any of their property.
(h) NO CHANGE IN CONTROL. Shares of each of Parent, Sun International
Management Limited and Buyer carrying a controlling interest exercisable at
general meetings of Parent, Sun International Management (U.K.) Limited and
Buyer shall be directly or indirectly beneficially owned by its current
beneficial owners or any persons affiliated with such entities.
(i) MANAGEMENT AGREEMENT. All conditions under the Management Agreement
shall have been satisfied by the Manager thereunder or waived by Buyer.
(j) SECURITY DOCUMENTS. The agreements listed in Schedule 4.16 shall not be
in force and effect.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.01. SURVIVAL OF REPRESENTATIONS. The representations and
warranties set forth in Sections 4.01, 4.02, 4.16(a), 4.22, 4.25, 5.01, 5.02,
5.05, 5.06, 5.07, 5.08 and 5.09 (the "Surviving Representations"), and the
covenants and agreements contained in this Agreement (except the covenants
contained in Sections 6.12 and 6.13 which shall not survive the Closing), and
the covenants and agreements contained in any agreements, certificates or other
instruments delivered pursuant to this Agreement, shall survive the Closing and
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any party, but subject to all limitations and other provisions
contained in this Agreement or any agreements, certificates or other instruments
delivered pursuant to this Agreement. All representations and warranties
contained in this Agreement and in any agreements, certificates or other
instruments delivered pursuant hereto (other than the Surviving Representations)
shall not survive the Closing and shall not remain in full force and effect.
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SECTION 9.02. INDEMNIFICATION BY RII. Subject to the other provisions of
this Article IX, RII hereby agrees to indemnify and hold Buyer and its
Affiliates harmless from and against any and all claims, damages, liabilities,
liens, losses or other obligations whatsoever, together with reasonable costs
and expenses, including reasonable fees and disbursements of counsel and
expenses of investigation (collectively, "Losses"), arising out of, based upon
or caused by the inaccuracy of any representation or the breach of any warranty
of RII contained in Sections 4.01, 4.02, 4.16(a), 4.22 and 4.25 of this
Agreement.
SECTION 9.03. INDEMNIFICATION BY BUYER. Subject to the other provisions of
this Article IX, Buyer hereby agrees to indemnify and hold RII and its
Affiliates harmless from and against any and all Losses arising out of, based
upon or caused by the inaccuracy of any representation or the breach of any
warranty of Buyer that is a Surviving Representation.
SECTION 9.04. NOTICE, ETC. Each indemnified party agrees to give the
indemnifying party prompt written notice of any action, claim, demand, discovery
of fact, proceeding or suit (collectively, "Claims") for which such indemnified
party intends to assert a right to indemnification under this Agreement;
PROVIDED, HOWEVER, that failure to give such notification shall not affect the
indemnified party's entitlement to indemnification hereunder except to the
extent that the indemnifying party shall have been actually prejudiced as a
result of such failure. The indemnifying party shall have the sole right to
defend, settle or otherwise dispose of any Claim, on such terms as the
indemnifying party, in its sole discretion, shall deem appropriate; PROVIDED,
HOWEVER, that (i) the indemnified party may participate in the defense of any
claim pursuant to which the indemnified party could become subject to injunctive
or other equitable relief or the business of the indemnified party could be
materially and adversely affected in any manner (such participation in the
defense of any claim to be at the indemnified party's expense unless the use of
separate counsel arises by reason of a material conflict of interest between the
indemnifying party and the indemnified party in connection with the defense of
such claim) and (ii) the indemnifying party shall obtain the written consent of
the indemnified party, which shall not be unreasonably withheld or delayed,
prior to ceasing to defend, settling or otherwise disposing of any such Claim,
or taking any course of action or omitting to take a permitted course of action
with respect thereto, if as a result thereof the indemnified party would become
subject to injunctive or other equitable relief.
SECTION 9.05. REIMBURSEMENT OF COSTS. The costs and expenses, including
reasonable fees and disbursements of counsel and expenses of investigation,
incurred by any indemnified party in connection with any claim for which the
indemnified party is entitled to indemnification hereunder shall be reimbursed
on a quarterly basis by the indemnifying party.
SECTION 9.06. TIME LIMITATIONS. Notwithstanding anything to the contrary
contained herein, each party's obligation to indemnify or otherwise hold
harmless the other party and its Affiliates for any Loss arising out of, based
upon or caused by the inaccuracy or breach of any Surviving Representation shall
terminate at 11:59 New York City time, on March 31, 1995, PROVIDED, HOWEVER,
that claims pending on or asserted prior to such date may continue to be
asserted and shall be indemnified against.
SECTION 9.07. SOLE AND EXCLUSIVE REMEDY. The indemnification obligations
of the applicable parties under Sections 9.02 and 9.03 hereof shall constitute
the sole and exclusive remedies of the applicable indemnified parties with
respect to the matters described in Sections 9.02 and 9.03, respectively.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date, notwithstanding the fact that votes may have been
received pursuant to the Reorganization Plan Solicitation:
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(a) by mutual written consent of RII and Buyer at any time prior to entry of
the Confirmation Order;
(b) by Buyer or RII, if the Closing shall not have occurred on or before
June 30, 1994;
(c) in the event an Acquisition Proposal is approved by the Bankruptcy Court
this Agreement will automatically be deemed terminated without the necessity of
providing written notice notwithstanding any provision to the contrary herein;
(d) by Buyer, if any event or development first occurring or arising after
November 30, 1993, either alone or taken in the aggregate with other matters
arising or occurring after November 30, 1993, shall have caused inaccuracies or
breaches in the representations and warranties of RII contained herein to occur,
except the representations contained in Section 4.13, and such inaccuracies or
breaches would have a Material Adverse Effect;
(e) by Buyer, if it has become aware that RII will be unable to comply with
Section 8.01(a) hereof and such inability to so comply is not reasonably capable
of being cured by June 30, 1994, or by RII, if it has become aware that Buyer
will be unable to comply with Section 8.02(a) hereof and such inability to so
comply is not reasonably capable of being cured by June 30, 1994;
(f) by Buyer, on or prior to November 30, 1993, if Buyer reasonably shall
determine, on or prior to such date and so notify RII, that (i) any of the
representations and warranties of RII contained in this Agreement and qualified
as to materiality shall not be true and correct in all respects or that those
not so qualified shall not be true and correct in all material respects, in each
case when made or on November 30, 1993 (except representations and warranties
that are made as of a specific date, which need be true and correct only as of
such date) or (ii) there is a reasonable likelihood that the Company's economic
costs with respect to the Union Contract would be an amount which is materially
different from the amount Buyer expects; PROVIDED, HOWEVER, RII shall have 10
Business Days from the date of notice from Buyer to cure such problems and if
such problems are cured no termination shall occur;
(g) by Buyer or RII, on or prior to November 30, 1993, if on or prior to
such date Buyer has not entered into financing commitment letters with customary
terms and conditions with a bank or group of banks for an amount of at least
$67.5 million;
(h) by Buyer within five Business Days (i) of becoming aware that RII has
materially breached the covenants contained in Sections 6.02, 6.03, 6.04, 6.12,
6.13 and 7.01 or (ii) after February 15, 1994, if the Bankruptcy Cases shall not
have been filed on or before such date;
(i) by Buyer within five Business Days after notifying RII that it is in
material breach of the covenants contained in Section 6.05 and RII has not cured
such breach;
(j) by RII, if the reorganization of Parent described in the Parent
Subscription Agreement has not occurred prior to November 30, 1993;
(k) by Buyer, if a Material Adverse Effect occurs as a result of any fire,
flood, hurricane, accident, explosion or other calamity or casualty or any
strike, labor disturbance, riot, act of God or public enemy, or the institution
of condemnation proceedings affecting any material portion of the Real Property
or Improvements (a "Force Majeure Event"); PROVIDED, HOWEVER, that Buyer shall
not have the right to terminate this Agreement in the event that the loss caused
by a Force Majeure Event (including the present value of lost profits) is less
than $20 million and there is adequate insurance to cover such loss, and
PROVIDED, FURTHER, HOWEVER, that a strike or labor disturbance of the employees
of the Paradise Island Business after November 30, 1993, shall not constitute a
Force Majeure Event;
(l) by Buyer or RII in the event a Force Majeure Event occurs and the loss
related thereto (including the present value of lost profits) exceeds $20
million, regardless of whether or not such loss is covered by adequate
insurance;
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(m) by Buyer, if Buyer reasonably determines that RII will not be able to
deliver good title free and clear of encumbrances, other than Permitted
Encumbrances and those Encumbrances arising from acts of Buyer or its Affiliates
and other than applicable Transfer Taxes, to a material portion of the Paradise
Island Business or the Shares by June 30, 1994;
(n) by Buyer, on or prior to November 30, 1993, if Buyer reasonably
determines that it will be unable to obtain consents to the Material Contracts
set forth on Schedule 10.01(n);
(o) by Buyer, if as a result of a breach by RII of its covenant to operate
the Paradise Island Business in the ordinary course contained in Section 6.01, a
Material Adverse Effect has occurred; PROVIDED, HOWEVER, Buyer shall not have
the right to terminate this Agreement pursuant to this paragraph (o) if it has
waived such termination right pursuant to Section 6.14(c); and
(p) by Buyer or RII, if on or before the close of business on December 1,
1993, the other party has not executed, delivered and performed its obligations
under the Escrow Agreement.
SECTION 10.02. RIGHTS OF TERMINATION. Subject to the provisions of Section
11.09, the right of termination hereunder may be exercised by Buyer or RII, as
the case may be, only by giving written notice, signed on behalf of such party
by its duly authorized officer to the other party; PROVIDED, HOWEVER, any
exercise of such right of termination by RII shall not be valid unless it shall
have been approved in writing by Fidelity and TCW. Notwithstanding anything
herein that is to the contrary, if the Closing shall not have occurred on or
prior to December 31, 1994, the right of RII to terminate this Agreement after
such date shall not require the approval of Fidelity or TCW.
SECTION 10.03. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 10.01, this Agreement shall forthwith become
void and have no effect, but no such termination shall prejudice any party's
rights and remedies against the other for breaches of obligations under this
Agreement, including, without limitation, Buyer's right, if any, to payment of
the Buyer Expense Reimbursement. Notwithstanding anything herein that may be to
the contrary, if this Agreement is terminated pursuant to Section 10.01(c) and
RII has not breached any of its obligations hereunder, Buyer shall not have any
rights or remedies against RII or any of its Affiliates under this Agreement or
otherwise other than Buyer's right, if any, to payment of the Buyer Expense
Reimbursement.
SECTION 10.04. WAIVER, EXERCISE OF RIGHTS. Subject to the provisions of
Section 11.09, at any time prior to the Closing Date, any party hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other party hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein;
PROVIDED, HOWEVER, that no such extension or waiver by RII, and no such exercise
of any other rights of RII hereunder which would materially and adversely affect
the rights of the holders of the Old Series Notes in the transactions
contemplated hereby, shall be valid unless Fidelity and TCW shall have consented
thereto. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party to be bound thereby. Except as
otherwise provided in Section 6.14, the failure of any party to assert any of
its rights hereunder shall not constitute a waiver of any such rights.
SECTION 10.05. AMENDMENTS. Subject to the provisions of Section 11.09, the
parties hereto may, by written agreement signed by such parties, modify any of
the covenants or agreements or extend the time for any performance of any of the
obligations contained in this Agreement or any document delivered pursuant to
this Agreement; PROVIDED, HOWEVER, that no such amendment on behalf of RII shall
be valid unless Fidelity and TCW shall have consented thereto.
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ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
if to Buyer:
c/o Sun International Management (U.K.) Ltd.
Gravel Hill, Badgemore House
Henley-On-Thames
Oxfordshire RG9 4NR,
United Kingdom
Attention: Mr. Howard B. Kernzer
in each case, with copies to:
Cravath, Swaine & Moore
825 Eighth Avenue
New York, NY 10019
Attention: James M. Edwards, Esq.
Fidelity Management and Research Company
82 Devonshire Street
Boston, MA 02109
Attention: Judy Mencher, Esq.
Trust Company of the West
865 South Figueroa Street
Los Angeles, CA 90017
Attention: Mr. Bruce A. Karsh
Weil, Gotshal & Manges
767 Fifth Avenue
New York, NY 10153
Attention: Bruce R. Zirinsky, Esq.
if to RII:
Resorts International, Inc.
1133 Boardwalk
Atlantic City, NJ 08401
Attention: Christopher D. Whitney, Esq.
with copies to:
Gibson, Dunn & Crutcher
200 Park Avenue
New York, NY 10166
Attention: Steven R. Finley, Esq.
Fidelity Management and Research Company
82 Devonshire Street
Boston, MA 02109
Attention: Judy Mencher, Esq.
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Trust Company of the West
865 South Figueroa Street
Los Angeles, CA 90017
Attention: Mr. Bruce A. Karsh
Weil, Gotshal & Manges
767 Fifth Avenue
New York, NY 10153
Attention: Bruce R. Zirinsky, Esq.
SECTION 11.02. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties with respect to the subject matter hereof. This Agreement
shall not be assigned by operation of law or otherwise, except that Buyer may
assign all or any of its rights and obligations hereunder to any wholly owned
Subsidiary of Buyer upon the execution of a written instrument whereby such
assignee agrees to assume all of the assignor's obligations hereunder and be
bound by all the terms and conditions of this Agreement; PROVIDED, that no such
assignment shall relieve the assigning party of its obligations hereunder if
such assignee does not perform such obligations. This Agreement may not be
amended or modified or any provisions hereof waived without the consent of
Fidelity and TCW.
SECTION 11.03. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except to the extent
that the consent or approval of TCW or Fidelity may be required hereunder,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
SECTION 11.04. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAW THEREOF.
SECTION 11.05. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 11.06. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 11.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
SECTION 11.08. JURISDICTION. THE PARTIES HEREBY WAIVE ANY OBJECTION THEY
MAY HAVE TO PERSONAL JURISDICTION AND VENUE IN THE U.S. DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND, WHERE NO DIVERSITY OR OTHER SUBJECT MATTER
JURISDICTION EXISTS IN SUCH U.S. DISTRICT COURT, THE PARTIES WAIVE SUCH
OBJECTIONS IN ANY COURT OF THE STATE OF NEW YORK LOCATED IN THE COUNTY OF NEW
YORK, AS TO LITIGATION RELATING TO THIS AGREEMENT. BUYER HEREBY IRREVOCABLY
APPOINTS AND DESIGNATES AS ITS LAWFUL AGENT AND ATTORNEY FOR RECEIPT AND SERVICE
OF PROCESS IN ANY ACTION ARISING OR TAKEN HEREUNDER BY RII THE LAW FIRM OF
CRAVATH, SWAINE & MOORE, 825 EIGHTH AVENUE, NEW YORK, NEW YORK 10019.
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SECTION 11.09. APPROVALS; KNOWLEDGE. For the purpose of this Agreement
(including the Schedules and appendices hereto), unless the context otherwise
expressly requires, (i) whenever a document or matter is subject to the
"approval", "consent", "satisfaction" or "acceptance" (including any variations
of such terms) of any party to this Agreement or of Fidelity or TCW, such person
shall not unreasonably withhold or delay its approval, consent, satisfaction or
acceptance of such document or matter; PROVIDED, HOWEVER, that the foregoing is
without prejudice to RII's right to seek approval, consent, satisfaction or
acceptance of any documents or matters from the Bankruptcy Court (in Fidelity's
and TCW's stead) upon a showing by RII, and a finding by the Bankruptcy Court,
that any approval, consent, satisfaction or acceptance is being unreasonably
withheld by Fidelity or TCW; and (ii) "knowledge" with respect to any person
(other than an individual) shall mean the knowledge of an executive officer,
director, partner, executor or trustee of such person.
SECTION 11.10. PARENT GUARANTY. On the date of this Agreement, Buyer shall
cause Parent to deliver its guaranty of the obligations of Buyer and Buyer
Subsidiaries hereunder, such guaranty to be in substantially the form of Exhibit
H.
IN WITNESS WHEREOF, Buyer and RII have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.
RESORTS INTERNATIONAL, INC.
By: ____________________________________
Name:
Title:
SUN INTERNATIONAL HOTELS LIMITED
By: ____________________________________
Name:
Title:
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APPENDIX A
DEFINITIONS
"ACCOUNTING ARBITRATOR" means Price Waterhouse, or another "Big 6" firm of
independent certified public accountants mutually acceptable to RII and Buyer.
"ACQUISITION PROPOSAL" shall have the meaning set forth in Section 7.01(a).
"ACQUISITIONS" means the Stock Acquisition and the Asset Acquisition.
"ADJUSTED CASH" means cash and cage cash.
"ADJUSTED CURRENT ASSETS" means Current Assets minus Adjusted Cash.
"ADJUSTED WORKING CAPITAL" means Adjusted Current Assets minus Current
Liabilities.
"ADJUSTMENT DATE" shall have the meaning set forth in Section 2.05(b).
"AFFILIATE" means, with respect to any person, (a) any person controlling,
controlled by or under common control with such person, (b) any person owning or
controlling 10% or more of the outstanding voting interests of such person, (c)
any executive officer, director or partner of any such person or (d) any person
who is an officer, director, partner, trustee or holder of 10% or more of the
voting interest of any person described in clauses (a) through (c) of this
sentence. For the purposes of the foregoing definition, the term "CONTROLS", "IS
CONTROLLED BY" or "IS UNDER COMMON CONTROL WITH" means possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract or otherwise. The term "PERSON" will be interpreted broadly to include,
without limitation, any corporation, company, association, partnership, entity
or individual. "AFFILIATE" with respect to RII or Buyer shall not include
Fidelity or TCW, or any funds or accounts managed or advised by either Fidelity
or TCW or any other creditors of RII.
"AGGREGATE CASH PURCHASE PRICE" means the cash portion of the Aggregate
Purchase Price, equal to $65 million plus interest on such amount at the
Applicable Rate from and including January 1, 1994 to and excluding the Closing
Date payable by Buyer and the Buyer Subsidiaries for the Shares and the RII
Paradise Assets in accordance with Section 2.03.
"AGGREGATE PURCHASE PRICE" means the Aggregate Cash Purchase Price plus the
Buyer Series A Shares payable by Buyer and the Buyer Subsidiaries for the Shares
and the RII Paradise Assets in accordance with Section 2.03.
"AGREEMENT" has the meaning assigned to that term in the introductory
paragraph.
"ANTL" means ANTL, Inc., a Florida corporation and a direct or indirect
wholly owned subsidiary of RII.
"APPLICABLE RATE" shall mean the rate per annum (computed on the basis of a
year of 365 days) equal to 7.5%.
"ASSET ACQUISITION" has the meaning set forth in the second WHEREAS clause.
"ASSUMED LIABILITIES" shall have the meaning set forth on Schedule 3.01.
"ASSUMED TAXES" shall have the meaning set forth on Schedule 3.01.
"ASSUMPTION AGREEMENTS" means the Assumption Agreements dated as of the
Closing Date to be in a form reasonably satisfactory to Buyer and RII, pursuant
to which each Buyer Subsidiary shall assume the Assumed Liabilities of RII (in
the case of the RII Real Estate Assets) and the Assumed Liabilities of its
corresponding RII Paradise Subsidiary.
"BAHAMAS BENEFIT PLANS" shall have the meaning set forth in Section
4.12A(a).
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"BAHAMAS EXCHANGE CONTROL APPROVAL" shall have the meaning set forth in
Section 4.03(b).
"BANK FACILITY" shall have the meaning set forth in Section 6.16.
"BANKRUPTCY CASES" means the cases to be commenced under Chapter 11 of the
Bankruptcy Code by RII and GRI.
"BANKRUPTCY CODE" means Title 11 of the United States Code, as amended.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the District
of Delaware or New Jersey, having jurisdiction over the Bankruptcy Cases.
"BANKRUPTCY DATE" means the date on which the Bankruptcy Cases are
commenced.
"BENEFIT PLANS" shall have the meaning set forth in Section 4.12(a).
"BUSINESS DAY" means a day of the year in which banks are not required or
authorized to close in the Commonwealth of The Bahamas or New York City.
"BUYER" has the meaning assigned to that term in the introductory paragraph.
"BUYER EXPENSE REIMBURSEMENT" shall have the meaning set forth in Section
7.02(a).
"BUYER INDEMNIFIED PARTY" shall have the meaning set forth in Section 3.04.
"BUYER PROSPECTUS" means the prospectus included in the Buyer Registration
Statement.
"BUYER REGISTRATION STATEMENT" means the registration statement of Buyer
with respect to the Buyer Series A Shares on Form F-1 filed or to be filed with
the SEC, together with any pre-or post-effective amendments thereto.
"BUYER SERIES A SHARES" means such number of Series A Ordinary Shares, par
value $.01 per share, of Buyer, that at the Closing Date, after giving effect to
the Closing, shall constitute 40% of the capital stock of Buyer.
"BUYER SHARES" shall have the meaning set forth in Section 5.09.
"BUYER SUBSIDIARIES" means direct or indirect wholly owned Subsidiaries of
Buyer to be formed to buy the RII Paradise Assets from the RII Paradise
Subsidiaries and the RII Real Estate Assets from RII.
"CLOSING" means the Closing of the purchase and sale of the Shares and the
RII Paradise Assets.
"CLOSING DATE" means the date on which the Closing occurs.
"CLOSING DATE BALANCE SHEET" shall have the meaning set forth in Section
2.05(a).
"CLOSING DATE OPERATIONS STATEMENT" shall have the meaning set forth in
Section 2.05(a).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Resorts International (Bahamas) 1984 Limited, a Bahamian
corporation.
"CONFIRMATION ORDER" means an order of the Bankruptcy Court confirming the
Reorganization Plan and approving performance by RII of this Agreement, in form
and substance, with respect to matters relating to the Paradise Island Business,
satisfactory to Buyer.
"CONTRACTS" shall mean leases, rental agreements, insurance policies, sales
orders, collective bargaining agreements, union contracts, licenses, agreements,
permits, purchase orders, registered user agreements, commitments and any and
all other contracts or binding arrangements (including, without limitation,
capital commitments and arrangements with respect to construction in progress),
whether written or oral, express or implied.
"CONTINUING EMPLOYEES" shall have the meaning set forth in Section 6.09(a).
2
<PAGE>
"CURRENT ASSETS" means cash, cage cash, net receivables, prepaid expenses,
and inventory.
"CURRENT LIABILITIES" means accounts payable, accrued liabilities and the
current portion of the capital lease obligations relating to the mini bars used
in the Paradise Island Business.
"DISCLOSURE STATEMENT" means the information statement/prospectus included
in the Registration Statement and presented to the Bankruptcy Court for approval
pursuant to Section 1125 of the Bankruptcy Code, as the same may be supplemented
or amended.
"EBITDA ADJUSTMENT" means the Earnings from Operations appearing as a line
item on the Closing Date Operations Statement PLUS depreciation PLUS the amount,
if any, paid or accrued with respect to RII management fees to the extent such
fees were deducted in computing Earnings from Operations, PLUS any expenses in
excess of $25,000 appearing on the Closing Date Operations Statement that are
attributable to events occurring prior to January 1, 1994, LESS $275,000 per
month for overhead relating to RII and the RII Paradise Subsidiaries (to be
prorated for any portion of a month) LESS capital expenditures; provided that
any item of capital expenditure in excess of $25,000 shall not be deducted if
not approved in writing by Buyer.
"ENCUMBRANCE" means any lien, imperfection of title, claim, encumbrance,
security interest, option, charge or restriction of any kind.
"ENVIRONMENTAL CLAIM" means any notice of violation, action, claim, lien,
demand or order or direction by any Governmental Authority or any person for
personal injury (including sickness, disease or death), tangible or intangible
property damage, damage to the environment, nuisance, pollution, contamination
or other adverse effects on the environment, or for fines or penalties resulting
from or based upon (a) the existence, or the continuation of the existence, of
an Environmental Release (including, without limitation, sudden or nonsudden
accidental or non-accidental Environmental Release) of, or exposure to, any
Hazardous Substance or other chemical, material, pollutant, contaminant, odor,
or other Environmental Release in, into or onto the environment (including,
without limitation, the air, soil, surface water or groundwater) at, in, by,
from or related to the property or any activities conducted thereon; (b) the
environmental aspects of the transportation, storage, treatment or disposal of
Hazardous Substances in connection with the Company's or any Subsidiary's
operations; or (c) the violation, or alleged violation, of any Environmental
Laws, orders or Environmental Permits of or from any Governmental Authority
relating to environmental matters connected with the property.
"ENVIRONMENTAL LAW" means any applicable foreign, federal, state or local
law (including common law), statute, code, ordinance, rule or regulation
concerning Environmental Releases into any part of the natural environment, or
activities that might result in damage to the natural environment, or relating
to the environment and/or protecting or improving the quality of the natural
environment or protecting public and employee health and safety, including in
the case of the United States, but not limited to, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C.
SectionSection 9601 ET SEQ.), the Hazardous Materials Transportation Act (49
U.S.C. SectionSection 1801 ET SEQ.), the Resource Conservation and Recovery Act
(42 U.S.C. SectionSection 6901 ET SEQ.), the Clean Water Act (33 U.S.C.
SectionSection 1251 ET SEQ.), the Clean Air Act (33 U.S.C. SectionSection 2601
ET SEQ.), the Toxic Substances Control Act (15 U.S.C. SectionSection 2601 ET
SEQ.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
SectionSection 136 ET SEQ.) and the Occupational Safety and Health Act (29
U.S.C. SectionSection 651 ET SEQ.), as such laws have been amended or
supplemented, and the regulations promulgated pursuant thereto, and any and all
analogous state or local statutes.
"ENVIRONMENTAL LIEN" means any Encumbrance in favor of any Governmental
Authority for Environmental Claims and/or Remedial Actions.
"ENVIRONMENTAL PERMIT" means any permit, approval, authorization, license,
variance, registration or permission required under any applicable Environmental
Laws.
3
<PAGE>
"ENVIRONMENTAL RELEASE" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, leaching, or
migration into the indoor or outdoor environment, or into or out of any
Property, including the movement of any Hazardous Substances or other materials
through or in the air, soil, surface water, groundwater or property.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any person or entity that, together with the
Company, is treated as a single employer under Section 414(b), (c) or (m) of the
Code.
"EXCLUDED ASSETS" means: (i) the corporate records of the RII Paradise
Subsidiaries; (ii) any tax refunds relating to any of the RII Paradise
Subsidiaries; (iii) the names "Resorts", "Merv Griffin" and "Griffin", any
variation thereof, any right to the use thereof and any trademark, trade name,
service mark and similar intellectual property rights used in connection
therewith; (iv) the Non-Assignable Contracts for which consents to assignment
thereof to the Buyer Subsidiaries have not been obtained as of the Closing Date;
(v) assets and properties (including financial, personnel and other books,
records and data) owned or held by RII or any of its Affiliates which do not
relate primarily to the Paradise Island Business and which relate to the
business of RII and its Affiliates other than the Paradise Island Business; and
(vi) intercompany receivables.
"EXCLUDED EMPLOYEE" shall have the meaning set forth in Section 6.09(a).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FIDELITY" means Fidelity Management and Research Company.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect on the date of this Agreement, or with respect to
financial statements prepared as of a date prior to this Agreement, as in effect
on the date such financial statements were prepared.
"GOVERNMENTAL AUTHORITY" means any government or governmental or regulatory
body thereof, or any political subdivision thereof, whether foreign, federal,
state or local, or any agency, commission, instrumentality or authority thereof,
or any court or arbitrator.
"GOVERNMENTAL CONSENTS" shall have the meaning set forth in Section 4.03(b).
"GRI" means GRI, Inc., a Delaware corporation and a direct or indirect
wholly owned Subsidiary of RII and formerly known as Griffin Resorts, Inc.
"HAZARDOUS SUBSTANCES" mean any substance, material or waste which is
regulated by any local Governmental Authority, Governmental Authority in the
jurisdictions in which the Paradise Island Business operates, or the United
States, including, without limitation, any material or substance which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste" or "restricted hazardous waste," "subject waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, including, but not limited to, petroleum products, asbestos
and polychlorinated biphenyls.
"HEADS OF AGREEMENT" means the Heads of Agreement dated August 18, 1993,
among Parent, Buyer and the Commonwealth of The Bahamas.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"INDEBTEDNESS" means, with respect to any person, any liability or
obligation of such person (whether incurred by such person directly or by
assumption or otherwise and whether outstanding on the date of execution of this
Agreement or thereafter created, incurred or assumed) (a) for money borrowed,
(b) arising under guarantees by such person of indebtedness for money borrowed
by any other person, (c) for purchase money indebtedness evidenced by notes,
lease-purchase agreements or similar instruments for the payment of which such
person is responsible or liable, by guarantees or
4
<PAGE>
otherwise, (d) under any agreement to lease, or lease of, any real or personal
property which is required to be capitalized in accordance with GAAP or (e)
arising under modifications, renewals, extensions or refundings of any such
liability or obligation.
"INTELLECTUAL PROPERTY" means all patents, trademarks, trade names, service
marks, copyrights and similar intellectual property rights used in the conduct
of the Paradise Island Business, but specifically excluding the Excluded Assets.
"INTERIM MOTION" means a motion filed with the Bankruptcy Court by RII to
enter the Interim Order.
"INTERIM ORDER" means an order in form and substance reasonably satisfactory
to Buyer and its counsel (i) approving the provisions of and authorizing the
performance by RII of its obligations under Sections 6.05, 7.01, 7.02 and 7.03
and Article X, (ii) providing that the Bankruptcy Court shall not permit
consideration of or approve, so long as this Agreement has not been terminated,
an Acquisition Proposal unless such Acquisition Proposal constitutes an Overbid
Transaction, (iii) subject to applicable Bankruptcy law and rules approving
under the terms and conditions set forth in Section 7.02, an amount of Buyer
Expense Reimbursement reasonably incurred by Buyer up to the date of the Interim
Order, (iv) approving the Escrow Agreement and (v) providing that such Interim
order cannot be amended or modified without the consent of Fidelity and TCW.
"IRS" means the Unites States Internal Revenue Service.
"ISI" means International Suppliers, Inc., a Florida corporation and a
direct or indirect wholly owned subsidiary of RII.
"JUNE 30 BALANCE SHEET" means the unaudited combined balance sheet of the
Paradise Island Business as of June 30, 1993, as set forth in Schedule 4.05.
"LOSSES" shall have the meaning set forth in Section 9.02.
"MATERIAL ADVERSE EFFECT" means any change in, or effect on, the Paradise
Island Business that is materially adverse to the business, assets, results of
operations or financial condition of the Paradise Island Business, excluding
changes resulting from general economic conditions or economic conditions
relating specifically to the gaming or hotel industry.
"MATERIAL CASES" means all lawsuits, claims, proceedings or investigations
by or against or affecting (i) the Company or any of its Subsidiaries, (ii) any
RII Paradise Subsidiaries with respect to the RII Paradise Assets, (iii) any of
the Paradise Island Assets or (iv) the Paradise Island Business, in each case as
to which there is a reasonable likelihood of adverse determination and which
would, if determined in a manner adverse to the Company, any of its Subsidiaries
or any RII Paradise Subsidiary with respect to the RII Paradise Assets,
individually or in the aggregate, result in a monetary judgment in excess of
$100,000 or which would otherwise materially limit the ability of the Company,
its Subsidiaries and the RII Paradise Subsidiaries to conduct the Paradise
Island Business.
"MATERIAL CONTRACT", means any Contract relating to the Paradise Island
Business (a) which has an aggregate future liability in excess of $100,000, or
(b) which is not terminable by notice of not more than 60 days for a cost of
less than $50,000.
"NON-ASSIGNABLE CONTRACT" shall have the meaning set forth in Section 2.07.
"OVERBID TRANSACTION" means an Acquisition Proposal or a Post Termination
Sale which provides for consideration attributable to, or in the case of
transaction involving less than all of the Paradise Island Business,
consideration that would result in, the entire Paradise Island Business having a
fair market value, as determined by an investment banking firm of international
standing selected by RII and reasonably acceptable to Buyer, in an amount in
excess of $130,000,000.
"PARADISE EMPLOYEE" shall have the meaning set forth in Section 6.09(a).
5
<PAGE>
"PARADISE ISLAND ASSETS" means all the assets, properties, goodwill,
business and other rights of every kind and nature whatsoever, tangible or
intangible, real, personal or mixed, and wherever located, used primarily in
connection with or relating primarily to the Paradise Island Business,
including, without limitation, any company name, receivables, rights under
Contracts, Intellectual Property, investments, business and goodwill, and
including all property and assets used primarily in connection with or relating
primarily to the Paradise Island Business acquired by RII or any Affiliate of
RII between the date of this Agreement and the Closing Date and not sold,
transferred or otherwise disposed of prior to the Closing Date in the ordinary
course of business and in accordance with the terms hereof. The Paradise Island
Assets include the RII Real Estate Assets. The Paradise Island Assets shall not
include any of the Excluded Assets or cash, except to the extent provided in
Section 2.05.
"PARADISE ISLAND BUSINESS" means all the operations and properties conducted
and owned by RII and its Affiliates relating primarily to Paradise Island, the
Bahamas and as described in the Registration Statement, including, without
limitation, the Paradise Island Resort & Casino, Ocean Club Golf & Tennis
Resort, Paradise Paradise Beach Resort, and approximately 219 acres of land on
Paradise Island not used in the Company's operations, approximately 1675 acres
on Grand Bahama Island , approximately 561 acres on Andros Island and other
similarly related assets not currently used actively in the Paradise Island
operations, but excluding any business relating to Excluded Assets.
"PARADISE ISLAND FINANCIAL STATEMENTS" means with respect to the Paradise
Island Business (i) the audited combined statements of operations for the fiscal
years ending December 31, 1990, December 31, 1991, and December 31, 1992, and
the unaudited combined statements of operations for the six months ending June
30, 1993, and 1992 and (ii) the audited combined balance sheets as of December
31, 1991, and December 31, 1992, and the unaudited combined balance sheet as of
June 30, 1993, copies of which are included in Schedule 4.05.
"PARENT" means Sun International Investments Limited, a British Virgin
Islands corporation and parent of Buyer.
"PARENT SUBSCRIPTION AGREEMENT" shall have the meaning set forth in Section
5.10.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED ENCUMBRANCES" means Encumbrances incurred by the Company, its
Subsidiaries or the RII Paradise Subsidiaries in connection with (a) mechanics',
carriers', workmen's, repairmen's or other like liens arising or incurred in the
ordinary course of business, liens arising under purchase price conditional
sales contracts and equipment leases with third parties entered into in the
ordinary course of business, (b) liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings, (c) liens imposed by law
securing obligations which are not overdue, or, if due, are being contested in
good faith by appropriate proceedings, (d) liens upon leases and contracts
included in the Paradise Island Assets or upon property subject to such leases
and contracts granted by lessors or parties to such leases or contracts other
than RII or any of its Affiliates (e) assessments, servitudes and rights-of-way
of record or in actual or apparent use or restrictive covenants for any approved
subdivision, and (f) other Encumbrances, if any, which other Encumbrances do
not, individually or in the aggregate, materially impair the continued use and
operation of the assets to which they relate in the Paradise Island Business, as
presently conducted or, in the case of material assets, do not materially
detract from the value of such assets.
"PIA" means Paradise Island Airlines, Inc., a Florida corporation and a
direct or indirect wholly owned subsidiary of RII.
"PIV" means Paradise Island Vacations, Inc., a Florida corporation and a
direct or indirect wholly owned subsidiary of RII.
"POST TERMINATION SALE" shall have the meaning set forth in Section 7.02.
6
<PAGE>
"PRELIMINARY CLOSING DATE BALANCE SHEET" has the meaning set forth in
Section 2.05(a).
"PRELIMINARY CLOSING DATE OPERATIONS STATEMENT" shall have the meaning set
forth in Section 2.05(a).
"QUALIFIED THIRD PARTY" shall have the meaning set forth in Section 7.01(a).
"REAL PROPERTY" shall have the meaning set forth in Section 4.07.
"REGISTRATION STATEMENT" means the registration statement of RII and certain
of its Subsidiaries on Form S-4 filed or to be filed with the SEC, together with
any pre-or post-effective amendments thereto.
"REMEDIAL ACTION" means all actions, including, without limitation, any
capital expenditures, required or voluntarily undertaken to (a) clean up,
remove, treat, or in any other way address any Hazardous Substance or other
material in the indoor or outdoor environment; (b) prevent the release or threat
of release, or minimize the further release of any Hazardous Substance or other
material so it does not migrate or endanger or threaten to endanger public
health or welfare of the indoor or outdoor environment; (c) perform pre-remedial
studies and investigations or post-remedial monitoring and care; or (d) bring
the properties into compliance with all applicable Environmental Laws and
Environmental Permits.
"REORGANIZATION PLAN" means the joint plan of reorganization substantially
in the form approved by Fidelity and TCW, and with respect to matters relating
to the Paradise Island Business, approved by Buyer, and attached to the
Disclosure Statement to be filed by RII and GRI with the Bankruptcy Court on the
Bankruptcy Date, which shall include as exhibits thereto, inter alia, this
Agreement.
"REORGANIZATION PLAN SOLICITATION" means the RII's and GRI's solicitation of
acceptances of the Reorganization Plan pursuant to Section 1126(b) of the
Bankruptcy Code.
"RIDI" means Resorts International Disbursement, Inc., a Florida corporation
and a direct or indirect wholly owned subsidiary of RII.
"RII INDEMNIFIED PARTY" shall have the meaning set forth in Section 3.04.
"RII" has the meaning assigned to that term in the introductory paragraph.
"RII PARADISE ASSETS" means all the assets, properties, goodwill, business
and other rights of every kind and nature whatsoever, tangible or intangible,
real, personal or mixed, and wherever located, owned by the RII Paradise
Subsidiaries and used primarily in connection with or relating primarily to the
Paradise Island Business, including, without limitation, any company name,
receivables, rights under Contracts, Intellectual Property, investments,
business and goodwill, and including all property and assets used primarily in
connection with or relating primarily to the Paradise Island Business acquired
by the RII Paradise Subsidiaries between the date of this Agreement and the
Closing Date and not sold, transferred or otherwise disposed of prior to the
Closing Date in the ordinary course of business and in accordance with the terms
hereof. RII Paradise Assets include the RII Real Estate Assets. RII Paradise
Assets shall not include any of the Excluded Assets or cash, except to the
extent provided in Section 2.05.
"RII PARADISE SUBSIDIARIES" means RIDI, PIV, RRII, ISI, PIA and ANTL.
"RII REAL ESTATE ASSETS" shall have the meaning set forth in Section
4.07(a).
"RRII" means Resorts Representation International, Inc., a Florida
corporation and a direct or indirect wholly owned subsidiary of RII.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
7
<PAGE>
"SHARES" means 500 shares of Class A Common Stock, B$2.86 par value per
share, 400 shares of Class B Common Stock, B$2.86 par value per share, and 900
shares of Non-Voting Class C Common Stock, B$2.86 par value per share of the
Company, such shares constituting all of the issued and outstanding shares of
capital stock of the Company.
"STOCK ACQUISITION" has the meaning set forth in the first WHEREAS clause.
"SUBSIDIARY" OF A PERSON means any corporation or other entity of which 50%
or more of the outstanding capital stock or other equity having ordinary voting
power to elect a majority of the board of directors or other managers of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation will or might have voting power upon the
occurrence of any contingency) or other entity is at that time directly or
indirectly owned by such person, by such person and one or more of its other
Subsidiaries or by one or more of such person's other Subsidiaries.
"TARGET ADJUSTED CASH" means Adjusted Cash of $5,000,000.
"TARGET ADJUSTED WORKING CAPITAL" means Adjusted Working Capital of
$5,000,000.
"TAXES" means all federal, state, local and foreign taxes and assessments,
including all interest, penalties and additions to tax imposed with respect to
such amounts, imposed by any taxing authority, domestic or foreign.
"TAXPAYERS" shall mean the Company and its Subsidiaries and any predecessor
thereof.
"TCW" means TCW Special Credits.
"THIRD PARTY" means any corporation, partnership, person or other entity or
group other than Buyer or RII.
"TRANSFER TAXES" has the meaning set forth in Section 7.04.
"UNION" shall have the meaning set forth in Section 2.05(a).
"UNION CONTRACT ARBITRATOR" shall mean Keith M. Duncombe of Harry B. Sands &
Company.
"UNION CONTRACT DISPUTE" shall have the meaning set forth in Section
2.05(a).
"UNION CONTRACT DISPUTE AMOUNT" shall have the meaning set forth in Section
2.05(a).
8
<PAGE>
Exhibits and Schedules to Sun Purchase Agreement
contained in Exhibit 10.55 to RII's Registration Statement
(Registration No. 33-50733) on file with the SEC.
<PAGE>
Exhibit B -- PIRL Standby Distribution Agreement
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STANDBY DISTRIBUTION AGREEMENT
BETWEEN
RESORTS INTERNATIONAL, INC.
AND
P.I. RESORTS LIMITED
----------------------------
DATED AS OF OCTOBER 15, 1993
-----------------------------------
PURCHASE OF STOCK OF RESORTS INTERNATIONAL (BAHAMAS)
1984 LIMITED, AND CERTAIN ASSETS OF
RII PARADISE SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
2
Definitions.....................................................
SECTION 1.01. Definitions..................................................... 2
ARTICLE II Purchase and Sale of the Shares and the RII Paradise Assets..... 3
SECTION 2.01. Transfer of the Shares.......................................... 3
SECTION 2.02. Purchase and Sale of the Shares, the RII Real Estate Assets and 3
the RII Paradise Assets........................................
SECTION 2.03. Delivery of Certificates and Other Instruments of Transfer...... 3
SECTION 2.04. Purchase Price.................................................. 4
SECTION 2.05. Preparation of the Closing Date Balance Sheet and Operations 4
Statement; Adjustments.........................................
SECTION 2.06. Closing......................................................... 6
SECTION 2.07. Third-Party Consents............................................ 6
SECTION 2.08. Further Assurances.............................................. 7
SECTION 2.09. Power of Attorney, etc.......................................... 8
ARTICLE III Assumption of Certain Liabilities............................... 9
SECTION 3.01. Assumed Liabilities............................................. 9
SECTION 3.02. Liabilities Not Assumed......................................... 9
SECTION 3.03. No Successor.................................................... 10
SECTION 3.04. Indemnification................................................. 10
ARTICLE IV Representations and Warranties of RII........................... 11
SECTION 4.01. Incorporation of Representations and Warranties................. 11
SECTION 4.02. Organization and Good Standing of Buyer......................... 12
SECTION 4.03. Authorization of Buyer.......................................... 12
SECTION 4.04. Buyer: No Conflict; Required Filings and Consents............... 12
SECTION 4.05. Buyer Shares.................................................... 13
ARTICLE V Additional Agreements........................................... 14
SECTION 5.01. Conduct of Paradise Island Business Pending the Closing......... 14
SECTION 5.02. Securities Laws................................................. 14
SECTION 5.03. Documents and Motions to be Filed by RII and GRI................ 15
SECTION 5.04. Reorganization Proceedings...................................... 15
SECTION 5.05. Access to Information........................................... 16
SECTION 5.06. Notification of Certain Matters................................. 16
SECTION 5.07. Further Action; Reasonable Efforts.............................. 17
SECTION 5.08. Employee Benefit Matters........................................ 17
SECTION 5.09. Bulk Transfer Laws.............................................. 19
SECTION 5.10. Intercompany Accounts, Contracts Guaranties and Indebtedness.... 19
SECTION 5.11. Reorganization Plan Solicitation Documents...................... 20
SECTION 5.12. Reorganization Proceedings...................................... 20
SECTION 5.13. Airline Governmental Consents................................... 21
SECTION 5.14. Comfort Letter.................................................. 22
SECTION 5.15. Attorneys Fees.................................................. 22
SECTION 5.16. Transfer Taxes.................................................. 22
SECTION 5.17. Actions on Behalf of Buyer; Knowledge of Buyer.................. 22
SECTION 5.18. Articles of Association......................................... 23
SECTION 5.19. Representations and Warranties.................................. 23
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 5.20. Operation of Buyer and Buyer Subsidiaries....................... 23
SECTION 5.21. Insurance Proceeds.............................................. 23
SECTION 5.22. Acquisition Proposals........................................... 24
ARTICLE VI Conditions to the Closing....................................... 24
SECTION 6.01. Conditions to Obligations of Buyer.............................. 24
SECTION 6.02. Conditions to Obligations of RII................................ 27
ARTICLE VII Survival and Indemnification.................................... 27
SECTION 7.01. Survival of Representations..................................... 27
SECTION 7.02. Indemnification by RII.......................................... 28
SECTION 7.03. Notice, etc..................................................... 28
SECTION 7.04. Reimbursement of Costs.......................................... 29
SECTION 7.05. Time Limitations................................................ 29
SECTION 7.06. Sole and Exclusive Remedy....................................... 29
ARTICLE VIII Termination, Amendment And Waiver............................... 30
SECTION 8.01. Termination..................................................... 30
SECTION 8.02. Rights of Termination........................................... 31
SECTION 8.03. Effect of Termination........................................... 31
SECTION 8.04. Waiver.......................................................... 31
SECTION 8.05. Amendments...................................................... 32
ARTICLE IX General Provisions.............................................. 32
SECTION 9.01. Notices......................................................... 32
SECTION 9.02. Entire Agreement; Assignment.................................... 33
SECTION 9.03. Parties in Interest............................................. 34
SECTION 9.04. GOVERNING LAW................................................... 34
SECTION 9.05. Headings........................................................ 34
SECTION 9.06. Counterparts.................................................... 34
SECTION 9.07. Specific Performance............................................ 34
SECTION 9.08. JURISDICTION.................................................... 34
SECTION 9.09. Knowledge or Consents........................................... 35
SECTION 9.10. Rights of Fidelity and TCW...................................... 35
EXHIBITS
Exhibit A Comfort Letter
Exhibit B Articles of Association of Buyer
Exhibit C Form of Opinion of Gibson, Dunn & Crutcher
Exhibit D Management Agreement
</TABLE>
2
<PAGE>
STANDBY DISTRIBUTION AGREEMENT
STANDBY DISTRIBUTION AGREEMENT dated as of October 15, 1993 (this
"Agreement"), between RESORTS INTERNATIONAL, INC., a Delaware
corporation ("RII"), and P.I. RESORTS LIMITED, a Bahamian corporation
("Buyer").
WHEREAS, RII has entered into that certain Purchase Agreement, dated as of
October 11, 1993 (the "Sun Purchase Agreement"), by and between RII and Sun
International Hotels Limited ("SIHL") providing for the sale of the Shares to
SIHL on the terms and conditions set forth therein;
WHEREAS, in connection with the proposed sale of the Shares to SIHL, the Sun
Purchase Agreement further contemplates that SIHL will cause certain
subsidiaries thereof to acquire the RII Real Estate Assets from RII and the RII
Paradise Assets from the RII Paradise Subsidiaries on the terms and conditions
set forth therein;
WHEREAS, Buyer is, as of the date hereof, a wholly-owned subsidiary of RII;
WHEREAS, if and only if the transactions contemplated by the Sun Purchase
Agreement are not consummated in accordance with the terms thereof and the Sun
Purchase Agreement is terminated in accordance with the terms thereof, Buyer
desires to acquire the Shares from RII, and RII desires to sell the Shares to
Buyer on the terms and conditions set forth herein (such purchase, the "Stock
Acquisition");
WHEREAS, in connection with the Stock Acquisition, Buyer desires to cause
the Buyer Subsidiaries to acquire the RII Real Estate Assets from RII and the
RII Paradise Assets from the RII Paradise Subsidiaries, and RII desires to sell
the RII Real Estate Assets and to cause the RII Paradise Subsidiaries to sell
the RII Paradise Assets to the Buyer Subsidiaries on the terms and conditions
set forth herein (such purchase, the "Asset Acquisition");
WHEREAS, in connection with the Stock Acquisition and the Asset Acquisition
(collectively, the "Acquisitions"), RII and GRI will file the Reorganization
Plan with the Bankruptcy Court, providing, INTER ALIA, under certain terms and
conditions to be set forth in the Reorganization Plan (including the condition
that the Sun Purchase Agreement shall have terminated in accordance with the
terms thereof), for the (i) sale of the Shares to Buyer, (ii) sale of the RII
Paradise Assets and the RII Real Estate Assets to the Buyer Subsidiaries, (iii)
distribution to holders of the Old Series Notes (as defined in the
Reorganization Plan) of RII of the Buyer Shares and (iv) the other distributions
to holders of the Old Series Notes of RII to be made pursuant to the
Reorganization Plan;
WHEREAS, the respective Boards of Directors of each of RII and Buyer deem it
advisable and in the best interests of such corporations that, if the Sun
Purchase Agreement terminates in accordance with its terms, the Stock
Acquisition and Asset Acquisition occur upon the terms and subject to the
conditions set forth herein and in the Reorganization Plan;
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, representations and warranties herein contained, and subject to the
conditions hereinafter set forth, and for the purpose of prescribing the terms
and conditions of the Stock Acquisition and Asset Acquisition, if the Sun
Purchase Agreement terminates in accordance with its terms, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used but not defined herein
shall have the meanings ascribed to those terms in Appendix A to the Sun
Purchase Agreement or elsewhere in the Sun Purchase Agreement, except that (a)
all references to "Buyer" therein and herein shall be deemed to refer to
Paradise Island Resorts Limited, (b) all references therein and herein to "Buyer
Subsidiaries" shall be deemed to refer to direct or indirect wholly-owned
Subsidiaries of Paradise Island Resorts Limited to be formed to buy the RII
Paradise Assets from the RII Paradise Subsidiaries
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and the RII Real Estate Assets from RII, (c) all references herein to the
"Closing" shall be deemed to refer to the closing of the Acquisitions under this
Agreement and (d) as otherwise expressly required by the context hereof.
ARTICLE II
PURCHASE AND SALE OF THE SHARES
AND THE RII PARADISE ASSETS
SECTION 2.01. TRANSFER OF THE SHARES. Prior to Closing, RII may, with the
consent of Fidelity and TCW, cause GRI to transfer the Shares to RII in a
transaction reasonably acceptable to Fidelity and TCW and their counsel.
SECTION 2.02. PURCHASE AND SALE OF THE SHARES, THE RII REAL ESTATE ASSETS
AND THE RII PARADISE ASSETS. On the terms and subject to the conditions of this
Agreement, on the Closing Date (a) RII agrees to sell, transfer and deliver, or
cause GRI to sell, transfer and deliver, to Buyer, and Buyer agrees to purchase
and accept from RII or GRI, as applicable, the Shares, free and clear of all
Encumbrances, other than those Encumbrances arising from acts of Buyer or its
Affiliates from and after (but not prior to) the Closing and (b) RII shall, and
shall cause each RII Paradise Subsidiary to, sell, convey, assign, transfer and
deliver to a Buyer Subsidiary designated by Buyer, and Buyer shall cause each
such Buyer Subsidiary to purchase and accept from RII and each such RII Paradise
Subsidiary, all right, title and interest of RII in the RII Real Estate Assets
and all right, title and interest of each such RII Paradise Subsidiary in the
RII Paradise Assets, free and clear of all Encumbrances except Permitted
Encumbrances and those Encumbrances arising from acts of Buyer or its Affiliates
from and after (but not prior to) the Closing.
SECTION 2.03. DELIVERY OF CERTIFICATES AND OTHER INSTRUMENTS OF
TRANSFER. On the Closing Date (a) RII or GRI, as applicable, shall deliver to
Buyer certificates representing the Shares together with stock powers executed
in blank and (b) RII shall, and shall cause the RII Paradise Subsidiaries to,
deliver to the Buyer Subsidiaries such specific assignments, bills of sale (to
be in a form reasonably satisfactory to Fidelity, TCW and RII), endorsements,
deeds and other good and sufficient instruments of conveyance and transfer, in
form and substance reasonably satisfactory to Fidelity and TCW and their
counsel, as shall be effective to vest in the Buyer Subsidiaries title to all
the RII Paradise Assets and the RII Real Estate Assets. All right, title and
interest of RII in the RII Real Estate Assets and of the RII Paradise
Subsidiaries in the RII Paradise Assets shall pass and delivery of the RII Real
Estate Assets and the RII Paradise Assets shall take place in such location or
locations as Fidelity, TCW and RII shall determine.
SECTION 2.04. PURCHASE PRICE. As consideration for the transfer of the
Shares, the RII Real Estate Assets and the RII Paradise Assets (the "Purchase
Price"), Buyer shall cause on the Closing Date (a) the 5,000,000 Ordinary
Shares, par value $.01 per share, of Buyer (the "Buyer Shares") to be delivered,
on behalf of RII and the RII Paradise Subsidiaries, to the Disbursing Agent
designated pursuant to the Reorganization Plan or pursuant to an order of the
Bankruptcy Court for purposes of making distributions thereunder to the holders
of the Old Series Notes of RII and (b) the Buyer Subsidiaries to assume the
Assumed Liabilities in accordance with Article III hereof. The Purchase Price
shall be allocated as set forth on Schedule 2.04 to the Sun Purchase Agreement.
SECTION 2.05. PREPARATION OF THE CLOSING DATE BALANCE SHEET AND OPERATIONS
STATEMENT; ADJUSTMENTS. (a) Within 45 days after the Closing Date, RII shall
cause to be prepared, in accordance with the books and records of account of the
Paradise Island Business and a physical inventory, and shall deliver, an audited
balance sheet for the Paradise Island Business as of the Closing Date (the
"Preliminary Closing Date Balance Sheet") and an audited statement of operations
for the Paradise Island Business for the period beginning at 12:01 a.m. on
January 1, 1994, and ending at the close of business on the Closing Date (the
"Preliminary Closing Date Operations Statement"), accompanied by an opinion of
Ernst & Young thereon to the effect that such balance sheet and statement of
operations present fairly in all material respects the financial position and
results of operation of the
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Paradise Island Business at such date and for such period in conformity with
GAAP and the preparation of the June 30 Balance Sheet and the statement of
operations for the six months ending June 30, 1993. Representatives of Buyer's
auditors, which will be a nationally-recognized firm of independent accountants,
shall be entitled to review the scope of the audit in advance thereof as well as
the work of Ernst & Young as it progresses and all drafts of the Preliminary
Closing Date Balance Sheet and the Preliminary Closing Date Operations
Statement. Within 10 days after the delivery to Buyer of the Preliminary Closing
Date Balance Sheet and the Preliminary Closing Date Operations Statement, Buyer
shall notify RII if it disagrees in any respect with such Preliminary Closing
Date Balance Sheet or Preliminary Closing Date Operations Statement. If Buyer
does disagree, Buyer and RII shall promptly attempt to settle such disagreement.
If Buyer and RII are unable to resolve such disagreement within 7 days after
such notice, such disagreement shall be referred to the Accounting Arbitrator
for a determination, which shall be final and binding on the parties hereto for
all purposes of this Agreement. The fees of the Accounting Arbitrator shall be
allocated between Buyer and RII by the Accounting Arbitrator based on its good
faith view as to which party's positions were more reasonable. The Preliminary
Closing Date Balance Sheet and Preliminary Closing Date Operations Statement as
agreed to by the parties or as adjusted pursuant to the determination of the
Accounting Arbitrator are herein referred to as the "Closing Date Balance Sheet"
and the "Closing Date Operations Statement". Buyer and RII agree that if prior
to 35 days after the Closing Date there has not been a resolution of the dispute
(the "Union Contract Dispute") between the Company and the Bahamas Hotel
Catering and Allied Workers Union (the "Union") with respect to amounts claimed
by the Union to be owed by the Company through December 31, 1993, under the
collective bargaining agreement dated as of January 7, 1990, between the Bahamas
Hotel Employers Association and the Union, then RII and Buyer shall agree as to
the amount they believe it would reasonably take to settle the Union Contract
Dispute (the "Union Contract Dispute Amount"). If Buyer and Seller are unable to
agree on the Union Contract Dispute Amount by the fortieth day after the Closing
Date, then the Union Contract Arbitrator shall determine such amount prior to
the sixtieth day after the Closing Date, and such determination shall be final
and binding on the parties hereto. The Union Contract Dispute Amount, as agreed
to by the parties or determined by the Union Contract Arbitrator, shall appear
on the Preliminary Closing Date Balance Sheet and the Closing Date Balance Sheet
as a Current Liability. Prior to the Closing Date, RII shall, as between the
parties, control the resolution of the Union Contract Dispute; PROVIDED,
HOWEVER, RII shall consult with Fidelity and TCW with respect thereto and allow
a representative of Fidelity or TCW to be present when reasonable in all
material negotiations in connection therewith.
(b) Within three Business Days after the Closing Date, Buyer and RII shall
jointly prepare a cash statement setting forth the amount of Adjusted Cash of
the Paradise Island Business as of the Closing Date. If the Adjusted Cash of the
Paradise Island Business shown on such cash statement shall be less than the
Target Adjusted Cash, on the fourth Business Day after the Closing Date RII
shall pay to Buyer the difference in immediately available funds.
(c) If the Adjusted Working Capital of the Paradise Island Business plus any
Adjusted Cash in excess of $5 million shown on the Closing Date Balance Sheet
shall be greater than the Target Adjusted Working Capital plus the EBITDA
Adjustment, on the Adjustment Date (as defined below) Buyer shall pay to RII the
difference in immediately available funds, together with interest on such amount
at the Applicable Rate from and including the Closing Date to but excluding the
Adjustment Date. If the Adjusted Working Capital of the Paradise Island Business
plus any Adjusted Cash in excess of $5 million shown on the Closing Date Balance
Sheet shall be less than the Targeted Adjusted Working Capital plus the EBITDA
Adjustment, on the Adjustment Date RII shall pay to Buyer the difference in
immediately available funds, together with interest on such amount at the
Applicable Rate from and including the Closing Date to but excluding the
Adjustment Date. For purposes of the foregoing, "Adjustment Date" shall mean (i)
if Buyer does not disagree in any respect with the Preliminary Closing Date
Balance Sheet, the 10th day following Buyer's receipt of the Preliminary
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Closing Date Balance Sheet or (ii) if Buyer shall disagree in any respect with
the Preliminary Closing Date Balance Sheet, the third Business Day following
either the resolution of such disagreement by the parties or a final
determination by the Accounting Arbitrator in accordance with Section 2.05(a).
SECTION 2.06. CLOSING. The Closing of the transactions contemplated by
this Agreement shall take place at the offices of Gibson Dunn & Crutcher, 200
Park Avenue, New York, New York, on a date to be agreed upon by RII, Fidelity
and TCW, as promptly as practicable following the satisfaction or waiver of all
of the conditions set forth in Article VI hereof, but in no event later than 10
Business Days thereafter.
SECTION 2.07. THIRD-PARTY CONSENTS. To the extent that any Contract
relating to the RII Paradise Assets to be assumed by a Buyer Subsidiary for
which assignment to such Buyer Subsidiary is provided for herein is not
assignable without the consent of another party (a "Non-Assignable Contract"),
this Agreement shall not constitute an assignment or an attempted assignment
thereof if such assignment or attempted assignment would constitute a breach
thereof. RII and Buyer agree to use their best efforts (without the payment of
money) to obtain the consent of such other party to the assignment of any such
Contract to the relevant Buyer Subsidiary in all cases in which such consent is
or may be required for such assignment. If any such consent shall not be
obtained, RII agrees to cooperate with Buyer in any reasonable arrangement (at
the cost and for the account of such Buyer Subsidiary) designed to provide for
the relevant Buyer Subsidiary the benefits intended to be assigned to such Buyer
Subsidiary under the relevant Contract, including enforcement of any and all
rights of the relevant RII Paradise Subsidiary against the other party thereto
arising out of the breach or cancellation thereof by such other party or
otherwise. If and to the extent that such arrangement cannot be made, except as
provided in the next sentence, neither Buyer nor any Buyer Subsidiary shall have
any obligation with respect to any such Contract. If PIA is unable to assign to
a designated Buyer Subsidiary the Ft. Lauderdale Ground Space Lease (Hangar)
with Broward County, Florida (the "Hangar Lease"), or is otherwise unable to
arrange for such designated Buyer Subsidiary to obtain the benefits of the
Hangar Lease, then (i) PIA shall use its reasonable best efforts to sub-lease
the Hangar Lease and (ii) Buyer and PIA shall each be responsible for 50% of the
obligations of lessee under the Hangar Lease and shall each be entitled to
receive 50% of the proceeds relating to any sublease of the Hangar Lease.
SECTION 2.08. FURTHER ASSURANCES. From and after the Closing, upon request
of Buyer, RII shall, and shall cause any of its Affiliates formerly owning an
interest in the Paradise Island Assets to, execute, acknowledge and deliver all
such further acts, assurances, deeds, assignments, transfers, conveyances and
other instruments and papers as may be reasonably required to sell, assign,
transfer, convey and deliver (at Buyer's expense, unless otherwise provided in
this Agreement) to and vest in Buyer, the Company or its Subsidiaries or the
Buyer Subsidiaries, as the case may be, and more fully protect their respective
right, title and interest in and employment of, the Shares and all the Paradise
Island Assets and the RII Real Estate Assets and as otherwise may be appropriate
to carry out the transactions contemplated in this Agreement.
(b) From and after the Closing, upon request of RII, Buyer shall, and shall
cause any of the Buyer Subsidiaries or any Subsidiaries of Buyer to, execute,
acknowledge and deliver all such further acts, assurance, assumptions and other
instruments and papers as may be reasonably required (i) in respect of the
assumption by the Buyer Subsidiaries of the Assumed Liabilities, and (ii) as
otherwise may be appropriate to carry out the transactions contemplated in this
Agreement.
SECTION 2.09. POWER OF ATTORNEY, ETC. (a) Effective on the Closing Date,
RII shall cause each RII Paradise Subsidiary to constitute and appoint, and will
cause any Affiliate owning an interest in any RII Paradise Assets to constitute
and appoint, the applicable Buyer Subsidiary designated by Buyer and its
successors, legal representatives and assigns, the true and lawful attorneys of
such RII Paradise Subsidiary and such Affiliates, with full power of
substitution, in the name of such RII Paradise Subsidiary and such Affiliates,
but on behalf of and for the benefit of such Buyer Subsidiary and its
successors, legal representatives and assigns, and at the expense of such Buyer
Subsidiary:
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(i) to demand and receive from time to time any and all of the RII Paradise
Assets and to make endorsements and give receipts and releases for and in
respect of the same and any part thereof; (ii) to institute, prosecute,
compromise and settle any and all proceedings at law, in equity or otherwise
that any Buyer Subsidiary and its successors, legal representatives or assigns
may deem proper in order to collect, assert or enforce any claim, right or title
of any kind in or to the RII Paradise Assets; (iii) to defend or compromise any
or all actions, suits or proceedings in respect of any of the RII Paradise
Assets; and (iv) to do all such acts and things in relation to the matters set
forth in the preceding clauses (i) through (iii) as each such Buyer Subsidiary
and its successors, legal representatives or assigns shall deem desirable. RII
hereby agrees that the appointment to be hereby made and the powers to be hereby
granted are coupled with an interest and are and shall be irrevocable by it in
any manner or for any reason. RII shall cause each RII Paradise Subsidiary to
deliver to the applicable Buyer Subsidiary designated by Buyer at Closing an
acknowledged power of attorney to the foregoing effect executed by each such RII
Paradise Subsidiary and any Affiliate selling any of the Paradise Island Assets.
Buyer agrees to indemnify and hold RII and its Affiliates harmless from and
against any Losses resulting from Buyer's improper use of the power of attorney
described in this Section 2.09(a).
(b) Effective upon the Closing Date Buyer and the Buyer Subsidiaries shall
have the right to receive and open all mail, packages and other communications
which relate to the Paradise Island Business addressed to any of the RII
Paradise Subsidiaries. RII agrees promptly to deliver to Buyer and the Buyer
Subsidiaries any mail, packages or other communications received directly or
indirectly by RII or any of its Affiliates that relate to the Paradise Island
Business. Buyer and the Buyer Subsidiaries shall have the right and authority to
collect, for its own account, all receivables and other items which shall be
transferred or are intended to be transferred to Buyer and the Buyer
Subsidiaries as provided in this Agreement, and to endorse with the name of RII
or any of its Affiliates any checks or drafts received on account of any such
receivables or other items, and RII shall promptly transfer or deliver, or cause
its Affiliates to transfer or deliver, to Buyer and the Buyer Subsidiaries any
cash or other property received directly or indirectly by RII or any of its
Affiliates in respect of such receivables or other items including any amounts
payable as interest. Buyer and the Buyer Subsidiaries shall promptly deliver to
RII packages and other communications received by them which relate to RII or
any of its Affiliates but do not relate to the Paradise Island Business.
ARTICLE III
ASSUMPTION OF CERTAIN LIABILITIES
SECTION 3.01. ASSUMED LIABILITIES. Buyer shall cause designated Buyer
Subsidiaries to severally assume on the Closing Date the Assumed Liabilities,
and shall cause each designated Buyer Subsidiary to execute an Assumption
Agreement relating to the Assumed Liabilities assumed by such designated Buyer
Subsidiary. On the Closing Date, Buyer shall assume the obligations of RII under
Sections 7.02(a)(vi) and (vii) of the Sun Purchase Agreement.
SECTION 3.02. LIABILITIES NOT ASSUMED. Except for the Assumed Liabilities
and as provided in Section 3.04 and the last sentence of Section 3.01, neither
Buyer nor any Buyer Subsidiary, pursuant to this Agreement or the Assumption
Agreements or otherwise, assumes, agrees to perform, pay, discharge or indemnify
RII or any of its Affiliates against, or otherwise agrees to have any
responsibility for, any liabilities or obligations of RII, GRI or any RII
Paradise Subsidiary, fixed, contingent or otherwise, known or unknown, relating
to or arising out of the RII Paradise Assets, whether arising prior to, on or
after the Closing.
SECTION 3.03. NO SUCCESSOR. It is expressly understood that the parties
intend that neither the Buyer nor any Buyer Subsidiary shall be considered a
successor to any RII Paradise Subsidiary and that neither Buyer nor any Buyer
Subsidiary shall have any liability except as otherwise provided in this
Agreement or the Assumption Agreements. Without limiting the generality of the
foregoing, neither Buyer nor any Buyer Subsidiary, pursuant to this Agreement,
the Assumption Agreements or otherwise, assumes (a) any liability for or
obligation with respect to (i) any Indebtedness of RII or its
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Affiliates or (ii) any Taxes relating to RII or its Affiliates (except Assumed
Taxes), (b) any liabilities or obligations owed to RII or any of its Affiliates
(except for liabilities owed to RII or any of its Affiliates under this
Agreement or any agreements, certificates or other instruments delivered by
Buyer or the Buyer Subsidiaries pursuant to this Agreement), and (c) any
liabilities that do not constitute Assumed Liabilities.
SECTION 3.04. INDEMNIFICATION. (a) From and after the Closing Date, RII
and the RII Paradise Subsidiaries shall indemnify Buyer, the Buyer Subsidiaries
and their respective Affiliates (each a "Buyer Indemnified Party") against, and
hold them harmless from, any Losses with respect to the ownership, use or
operation of the RII Paradise Assets prior to the Closing Date (other than the
Assumed Liabilities), which any Buyer Indemnified Party may be requested to pay,
perform or discharge at any time. No Buyer Indemnified Party shall be entitled
to indemnification under this Section 3.04(a) until the date on which the
aggregate amount of the claims made by Buyer Indemnified Parties is at least
equal to $25,000, at which time claims may be asserted by any Buyer Indemnified
Party against the indemnifying parties regardless of amount.
(b) From and after the Closing Date, Buyer and the Buyer Subsidiaries shall
indemnify RII, the RII Paradise Subsidiaries and their respective Affiliates
(each an "RII Indemnified Party") against, and hold them harmless from, any
Losses with respect to (i) the Assumed Liabilities, (ii) the ownership, use or
operation of the RII Paradise Assets on or after the Closing Date, (iii) any
liability or obligation of the Company or any of its Subsidiaries (fixed,
contingent or otherwise, known or unknown (except to the extent such liability
or obligation was incurred after the date of this Agreement and in breach of
Section 5.01)), which any RII Indemnified Party may be requested to pay, perform
or discharge at any time and (iv) the obligations assumed by Buyer as
contemplated by the last sentence of Section 3.01 hereof to pay any Buyer
Expense Reimbursement to SIHL under the Sun Purchase Agreement. No RII
Indemnified Party shall be entitled to indemnification under this Section
3.04(b) until the date on which the aggregate amount of the claims made by RII
Indemnified Parties is at least equal to $25,000, at which time claims may be
asserted by any RII Indemnified Party against the indemnifying parties
regardless of the amount.
(c) The provisions of Sections 7.03 and 7.04 shall apply to any
indemnification under this Section 3.04.
(d) The indemnification obligations of the applicable parties under this
Section 3.04 shall constitute the sole and exclusive remedies of the applicable
Buyer Indemnified Parties and RII Indemnified Parties, as the case may be, with
respect to the matters described in this Section 3.04.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RII
RII represents and warrants to Buyer as follows:
SECTION 4.01. INCORPORATION OF REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by RII to SIHL in Sections 4.01, 4.02, 4.03,
4.04, 4.13, 4.16 and 4.22 of the Sun Purchase Agreement (but not any other
representations or warranties contained in Article IV thereof) is hereby made by
RII in favor of Buyer for all purposes as if such representations and warranties
were fully set forth herein; PROVIDED, HOWEVER, that any such representation or
warranty relating to the delivery of documents, information schedules or other
materials to Buyer shall not be deemed to be satisfied hereunder unless and
until RII shall have delivered such documents, information schedules or other
materials to Fidelity and TCW; and PROVIDED, FURTHER, that for purposes of this
Agreement clause (iii) of Section 4.03(b) of the Sun Purchase Agreement shall be
deemed to have been stricken in its entirety and replaced by the following:
"(iii) consents and approvals required to be obtained by Buyer or RII from the
government of the Commonwealth of The Bahamas in order to effectuate the
transactions contemplated hereby, to operate the Paradise Island Business or to
permit the public trading of the Buyer Shares when they are distributed in
accordance with the Reorganization Plan,
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including without limitation any approvals for exchange controls required to be
received from the Exchange Control Department of the Central Bank of The Bahamas
(the "Bahamas Exchange Control Approval"),".
SECTION 4.02. ORGANIZATION AND GOOD STANDING OF BUYER. Buyer is, and each
of the Buyer Subsidiaries will be at Closing, a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of the
Bahamas.
SECTION 4.03. AUTHORIZATION OF BUYER. Buyer has all necessary corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by Buyer and
the purchase of the Shares by Buyer have been, and the purchase of the RII
Paradise Assets by the Buyer Subsidiaries will be at Closing, duly and validly
authorized by all necessary corporate action on the part of Buyer and the Buyer
Subsidiaries and no other corporate proceedings or shareholder actions on the
part of Buyer or the Buyer Subsidiaries are or will be necessary to authorize
this Agreement or to purchase the Shares and the RII Paradise Assets. This
Agreement has been duly and validly executed and delivered by Buyer and,
assuming the due authorization, execution and delivery by RII, constitutes the
legal, valid and binding obligation of Buyer, enforceable against Buyer in
accordance with its terms (subject as to enforcement to applicable bankruptcy,
reorganization, insolvency, fraudulent transfer and moratorium and similar laws
from time to time in effect affecting creditors' rights generally and to legal
and equitable limitations on availability of specific performance and other
equitable remedies).
SECTION 4.04. BUYER: NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The
execution and delivery of this Agreement by Buyer does not (and in the case of
the Buyer Subsidiaries will not at Closing), and the performance of this
Agreement by Buyer and each Buyer Subsidiary will not, (i) conflict with or
violate the memorandum of association or articles of association or equivalent
organizational documents of Buyer or any Buyer Subsidiary, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to Buyer
or any Buyer Subsidiary or by which any of them or their properties is bound or
affected or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any Encumbrance on any of the
property or assets of Buyer or any Buyer Subsidiary pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Buyer or any Buyer Subsidiary is a party
or by which any of them or their properties is bound or affected, except, in the
case of this clause (iii) and clause (ii) above, for any such breaches, defaults
or other occurrences which would not, individually or in the aggregate, have a
Material Adverse Effect.
(b) The execution and delivery of this Agreement by Buyer does not, and the
performance of this Agreement by Buyer will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority except for (i) the Confirmation Order, (ii) required filings under the
HSR Act, (iii) the Airline Governmental Consents, (iv) the Governmental Consents
and (v) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or
materially delay consummation of the transactions contemplated hereby, or
otherwise prevent Buyer from performing its obligations under this Agreement.
SECTION 4.05. BUYER SHARES. The authorized capital stock of Buyer consists
of 25,000,000 Ordinary Shares, $.01 par value per share, of which two shares are
duly authorized and validly issued and outstanding, fully paid and
non-assessable (the "Founder's Shares") and 10,000,000 Preference Shares, $.01
par value per share, of which no shares are issued and outstanding. As of the
date hereof, RII is the registered holder of one of the Founder's Shares. RII is
the sole beneficial owner of both of the Founder's Shares. The Buyer Shares upon
issuance and delivery in accordance with the terms of this Agreement will be
duly authorized, validly issued and outstanding, fully paid and non-assessable.
The Founder's Share has not been, and the Buyer Shares will not be, issued in
violation of, and are not
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subject to, any preemptive or subscription rights. Except as set forth above,
there are no shares of capital stock or other equity securities of Buyer
outstanding. Except for the agreements and instruments described in Schedule
4.16(a) of the Sun Purchase Agreement, there are no outstanding warrants,
options, agreements, convertible or exchangeable securities or other commitments
(other than this Agreement) pursuant to which RII or any of its Affiliates is or
may become obligated to issue, sell, purchase, return or redeem any shares of
capital stock or other securities of Buyer or any Subsidiary of Buyer, and there
are not any equity securities of Buyer or any Subsidiary of Buyer reserved for
issuance for any purpose (other than the Buyer Shares). Prior to the Closing,
RII will have caused Buyer to form, under the laws of the Commonwealth of The
Bahamas, the Buyer Subsidiaries, and there will be one Buyer Subsidiary to
purchase the assets of each RII Paradise Subsidiary hereunder. At the Closing,
Buyer directly will have good and valid title to all of the outstanding shares
of capital stock of each Subsidiary of Buyer, free and clear of Encumbrances,
and all such shares will be duly authorized and validly issued and outstanding,
fully paid and non-assessable. Buyer does not directly or indirectly own any
capital stock of or other equity interests in any corporation, partnership or
other entity other than the Buyer Subsidiaries.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. CONDUCT OF PARADISE ISLAND BUSINESS PENDING THE
CLOSING. Each of the covenants and agreements made by RII to SIHL in Section
6.01 of the Sun Purchase Agreement is hereby made by RII in favor of Buyer for
all purposes as if such covenants and agreements were fully set forth herein;
PROVIDED, HOWEVER, that any consents required to be obtained from Buyer
thereunder shall not be deemed to have been granted unless and until Fidelity
and TCW shall have consented thereto in writing.
SECTION 5.02. SECURITIES LAWS. Each of RII and Buyer shall make all
filings under the Securities Act and the Exchange Act necessitated by the
provisions of this Agreement. RII shall cause the Buyer Shares to be registered
under the Exchange Act and listed on the American Stock Exchange or authorized
for quotation on the NASDAQ National Market System.
SECTION 5.03. DOCUMENTS AND MOTIONS TO BE FILED BY RII AND GRI. (a)
Promptly upon completion of the Reorganization Plan Solicitation and in no event
later than February 15, 1994, RII and GRI shall commence the Bankruptcy Cases.
Notwithstanding anything to the contrary, RII and GRI shall not be under any
obligation to commence the Bankruptcy Cases unless and until RII and GRI shall
have received in the Reorganization Plan Solicitation the requisite number of
acceptances from impaired creditors and the requisite number of consents to
terminate the Old Security Documents (as defined in the Reorganization Plan).
(b) Promptly upon the commencement of the Bankruptcy Cases, and in no event
later than five Business Days thereafter, RII and GRI shall (i) file the
Disclosure Statement and the Reorganization Plan and the certification of votes
for acceptance or rejection of the Reorganization Plan with the Bankruptcy Court
and (ii) seek from the Bankruptcy Court and take all steps necessary to obtain a
hearing at the earliest practicable date for approval of the Disclosure
Statement and confirmation of the Reorganization Plan.
(c) RII shall use its reasonable best efforts to file the Registration
Statement with the SEC as soon as possible.
SECTION 5.04. REORGANIZATION PROCEEDINGS. (i) RII shall, and shall cause
GRI to, seek confirmation of the Reorganization Plan by the Bankruptcy Court
using the acceptances of the Reorganization Plan received by RII and GRI
pursuant to the Reorganization Plan Solicitation, (ii) RII shall, and shall
cause GRI to, comply in all material respects with the Bankruptcy Code and all
other laws, rules, regulations, decrees and orders promulgated thereunder in
connection with obtaining confirmation of the Reorganization Plan, (iii) RII
shall, and shall cause GRI to, use its best efforts to obtain, and shall,
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and shall cause GRI to, refrain from knowingly taking any action that would be
likely to prevent, materially impede or result in the revocation of, (A) the
entry by the Bankruptcy Court of the Confirmation Order and (B) the vesting upon
the date on which the Reorganization Plan shall become effective of (y) the
property of each of RII and GRI in the reorganized entities and (z) the property
dealt with by the Reorganization Plan in the recipients thereof under the
Reorganization Plan, in each case free and clear of all claims and interests of
creditors and equity securityholders except as provided in and in accordance
with the Reorganization Plan and (iv) RII shall not, and shall cause GRI not to,
consent to any amendment or supplement to, or modification of, the
Reorganization Plan or the Disclosure Statement that purports to change in any
material respect the terms or conditions of the transactions contemplated by
this Agreement without the prior written consent of Fidelity and TCW.
SECTION 5.05. ACCESS TO INFORMATION. From the date hereof to the Closing
Date, RII shall, and shall cause its Affiliates, officers, directors, employees,
auditors and other agents to, (i) afford the officers, employees, auditors and
other agents of Fidelity and TCW reasonable access at all reasonable times to
its officers, employees, agents, properties, offices, plants and other
facilities and to all books and records, and shall furnish Fidelity and TCW with
all financial, operating and other data and information with respect to the
Paradise Island Business as Fidelity and TCW, through their officers, employees
or agents, may reasonably request and (ii) furnish, and cause the officers and
employees of RII and its Affiliates to furnish, to Fidelity and TCW and their
authorized representatives such additional financial and operating data and
other information regarding the Paradise Island Assets and the Paradise Island
Business as Fidelity or TCW shall from time to time reasonably request
including, without limitation, all monthly or other interim financial and
operating reports relating to the Paradise Island Business prepared by or for
officers of RII and its Affiliates. Without limiting the foregoing, RII agrees
to provide representatives of Fidelity and TCW with offices in Paradise Island
and Miami and such representatives shall be given adequate prior notice (if time
permits) of and allowed to attend all material meetings of RII and its
Subsidiaries relating to the Paradise Island Business. Notwithstanding the
foregoing, RII shall not be obligated to provide Fidelity or TCW or any of their
authorized representatives with any material confidential information or any
material nonpublic information unless Fidelity and TCW shall have entered into
reasonable confidentiality arrangements with respect to such confidential or
nonpublic information, subject to reasonable and customary exceptions.
SECTION 5.06. NOTIFICATION OF CERTAIN MATTERS. RII shall give prompt
notice to Fidelity and TCW of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause a
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect and (ii) any failure of RII or Buyer to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER,
that the delivery of any notice pursuant to this Section 5.06 shall not limit,
increase or otherwise affect the remedies available hereunder to the party
receiving such notice.
SECTION 5.07. FURTHER ACTION; REASONABLE EFFORTS. Upon the terms and
subject to the conditions hereof, each of RII and Buyer shall use all reasonable
best efforts (without undue expense) 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 laws and regulations to
consummate and make effective the transactions contemplated hereby and by the
Reorganization Plan, including, without limitation, using all reasonable efforts
to obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities and parties to Material
Contracts as are necessary for the consummation of the transactions contemplated
hereby and by the Reorganization Plan and to fulfill the conditions to the
Closing.
SECTION 5.08. EMPLOYEE BENEFIT MATTERS. (a) As of the Closing Date, Buyer
shall cause the Buyer Subsidiaries to offer employment to each person employed
by the RII Paradise Subsidiaries whose primary functions relate to the operation
of the Paradise Island Business and each person set forth on Schedule 6.09 to
the Sun Purchase Agreement (a "Paradise Employee"), except that Buyer may
designate in writing within 60 days from the date of this Agreement up to 40
Paradise Employees
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to whom it does not wish to offer employment (the "Excluded Employees").
Schedule 6.09(a) to the Sun Purchase Agreement generally describes severance
benefits for Paradise Island Employees and sets forth a list of each Paradise
Employee and the salary as of the date hereof and the employment commencement
date of each such Paradise Employee. The Buyer Subsidiaries shall not be
required to offer employment to any Excluded Employee and RII hereby agrees that
all obligations, including obligations under any Benefit Plan or similar
employee benefits, to such Excluded Employees shall remain the responsibility
solely of RII. RII shall cooperate with and assist Buyer in any reasonable
manner in hiring Paradise Employees (other than any Excluded Employee). Buyer
agrees that, for a period of one year from the Closing Date, Buyer will not,
without the written consent of RII, employ any Excluded Employees, as
consultants or otherwise. Any Paradise Employee who becomes an employee of Buyer
or the Buyer Subsidiaries shall be referred to herein as a "Continuing
Employee".
(b) Buyer shall have no obligation to maintain or assume obligations under
any Benefit Plan, or to provide any employee benefits, other than the
obligations contained in this subsection. Within 90 days from the date of this
Agreement, Buyer shall determine whether it shall offer Continuing Employees a
401(k) plan. If Buyer determines to offer Continuing Employees a 401(k) plan,
then on or prior to the Closing, Buyer shall sponsor, or cause one or more of
its Affiliates to sponsor, a plan (the "Successor Plan") that is qualified under
Section 401 of the Code, under which there is established a trust (the
"Successor Trust") that is exempt under Section 501 of the Code, to which the
following transfers shall be made. As promptly as practical after the Closing
Date, RII shall take all actions necessary to transfer to the Successor Trust
the account balances in the Resorts Retirement Savings Plan (the "Savings Plan")
of all Continuing Employees. Such transfers shall be made solely in cash or,
where applicable, in cash plus any loan from an account to a Continuing Employee
that satisfies the requirements of ERISA and the Code. The transfer of the
account balances referred to above shall take place upon receipt by RII of
either (x) a copy of a favorable determination letter or letters from the IRS
that the Successor Plan is qualified under Section 401 of the Code and the
Successor Trust is exempt from taxation under Section 501 of the Code or (y) an
opinion of counsel to Buyer, on which RII is entitled to rely and which is
reasonably satisfactory to RII, that the Successor Plan is qualified under
Section 401 of the Code and the Successor Trust is exempt from taxation under
Section 501 of the Code.
(c) Schedule 6.09(c) to the Sun Purchase Agreement sets forth a list of the
officers and directors of the Company or any of its Subsidiaries who are not
directly involved in the business and operations of the Company and its
Subsidiaries. On the Closing Date, RII shall cause to be delivered to Buyer duly
signed (i) resignations (with respect to their entire association with or
employment by the Company or any of its Subsidiaries) effective as of the
Closing Date of all such officers and directors and (ii) releases of such
officers and directors releasing the Company and its Subsidiaries of all
obligations and liabilities relating to such resignations.
(d) RII and Buyer agree to cooperate in making all appropriate filings and
taking all appropriate actions required to implement this Section 5.08.
SECTION 5.09. BULK TRANSFER LAWS. RII shall cause each RII Paradise
Subsidiary to comply in all material respects with the provisions of any
so-called Bulk Transfer Law of all states of the United States in which any of
the RII Paradise Assets subject to any such Bulk Transfer Law are located in
connection with the sale of the RII Subsidiary Assets to the Buyer Subsidiaries.
RII represents and warrants to Buyer that the list of creditors to be provided
by RII pursuant to such Bulk Transfer Laws will, to RII's knowledge, contain the
names and business addresses of all creditors of the RII Paradise Subsidiaries,
with the amounts of credit listed when known, and also the names of all persons
who are known to RII to assert claims against any RII Paradise Subsidiary even
though such claims are dis-puted, and that such list will be true, correct and
complete in all material respects and will comply in all material respects with
such Bulk Transfer Laws. As promptly as practicable after the Closing, RII shall
pay and discharge when known all amounts so listed (other than Assumed
Liabilities and claims disputed in good faith).
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SECTION 5.10. INTERCOMPANY ACCOUNTS, CONTRACTS GUARANTIES AND
INDEBTEDNESS. On or prior to the Closing Date, the net amount of all
Indebtedness between RII and any of its Affiliates (other than the Company and
any Subsidiary of the Company), on the one hand, and the Company and any
Subsidiary of the Company, on the other hand, shall be cancelled or contributed
to the capital of the relevant entity. On or prior to the Closing Date, RII
shall cause the Company and each Subsidiary of the Company not to have any
Indebtedness, except for Indebtedness disclosed on Schedule 4.06(b) to the Sun
Purchase Agreement. On or prior to the Closing Date, RII shall terminate or
cause to be terminated all Contracts between and among RII and its Affiliates
and any of the Company, the Subsidiaries of the Company and the RII Paradise
Subsidiaries (to the extent such Contracts relate to the Paradise Island
Business), and shall cancel or cause to be cancelled all guarantees and security
interests given by the Company, the Subsidiaries of the Company or the RII
Paradise Subsidiaries on behalf of RII or any of its Affiliates. On or prior to
the Closing Date, RII shall cancel or cause to be cancelled (a) all liens held
by RII or any of its Affiliates on any of the Paradise Island Assets and (b) all
liens held by the Company or any of its Subsidiaries on any of the assets of RII
or any of its Affiliates (other than the Paradise Island Assets) and (c) all
liens on any of the Paradise Island Assets relating to Indebtedness, except any
such liens disclosed on Schedule 4.06(b) to the Sun Purchase Agreement.
SECTION 5.11. REORGANIZATION PLAN SOLICITATION DOCUMENTS. RII shall use
its reasonable best efforts to prepare each of the Registration Statement and
the Disclosure Statement so that they shall not (i) at the time the Disclosure
Statement is first mailed, (ii) at the time the Registration Statement becomes
effective, (iii) on the date of the Bankruptcy Court's hearing with respect to
the Disclosure Statement, (iv) on the date of the confirmation of the
Reorganization Plan by the Bankruptcy Court or (v) at the Closing, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. Notwithstanding the foregoing, RII makes
no such covenant with respect to any information included in the Registration
Statement or the Disclosure Statement that was supplied in writing to RII by
Fidelity or TCW (or any representative of Fidelity or TCW) specifically for use
therein. If, at any time prior to the Closing Date, any event relating to RII or
any of its Affiliates, officers or directors should be discovered by RII or any
of its Affiliates which is required by the Bankruptcy Court to be set forth in a
supplement to the Disclosure Statement, RII will prepare, file with (and, if
required, use its best efforts to have approved by) the SEC and the Bankruptcy
Court and disseminate any such supplements. RII shall use its reasonable best
efforts to ensure that the Registration Statement and the Disclosure Statement
did, or shall, as the case may be, comply as to form in all material respects
with the requirements of the Securities Act, the Exchange Act and the Bankruptcy
Code and all other laws, rules, regulations, decrees and orders promulgated
thereunder.
SECTION 5.12. REORGANIZATION PROCEEDINGS. Neither RII nor GRI will
knowingly take any action, or fail to take any action, which could reasonably be
expected to prevent, materially impede or result in the revocation of the
confirmation of the Reorganization Plan (as provided in Section 1144 of the
Bankruptcy Code).
SECTION 5.13. AIRLINE GOVERNMENTAL CONSENTS. In the event the Airline
Governmental Consents are not obtained before the Closing Date, RII and Buyer
agree that until the earlier of the date such Airline Governmental Consents are
obtained and one year after the Closing Date, RII and Buyer will enter into a
service agreement pursuant to which RII or a Subsidiary of RII will, through
PIA, operate scheduled air service equivalent to that currently operated by PIA,
such scheduled air service to be operated for the account of Buyer. Such service
agreement will be mutually agreed upon by RII and Buyer and shall generally
provide that Buyer will receive all revenues generated by PIA in its provision
of that scheduled air service operated for the account of the Buyer. Such
service agreement shall further provide that Buyer will be responsible for all
expenses related to such scheduled air service. RII will be responsible for
procuring all other services for the airline, including flight crews,
maintenance and catering services, and will receive a commercially reasonable
fee for its participation in such arrangement. In addition, Buyer would
indemnify RII and its Subsidiaries against any losses and liabilities arising
from its participation in such lease arrangement other than losses or
liabilities
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arising from the gross negligence or willful misconduct of the indemnified
party. This Agreement may not be terminated and, assuming RII has otherwise used
its reasonable best efforts (without the payment of money) to assist Buyer in
obtaining the Airline Governmental Consents, a breach of this Agreement shall
not be deemed to have occurred as a result of a failure to obtain the Airline
Governmental Consents or because RII is prohibited by any governmental agency
from complying with this Section 5.13. This Agreement may not be terminated nor
shall a condition to Closing fail to be satisfied as a result of RII and Buyer
failing to enter into the service agreement referred to above; PROVIDED,
HOWEVER, that if RII and Buyer shall fail to enter into the service agreement
referred to above, Fidelity and TCW shall be entitled, in their discretion, (a)
to cause RII to sell all or substantially all of the assets of PIA or all of the
issued and outstanding capital stock of PIA to a third party purchaser
designated by Fidelity and TCW on terms negotiated by Fidelity and TCW and
reasonably acceptable to RII (in lieu of selling such assets to a Buyer
Subsidiary), and, as determined by Fidelity and TCW, to pay, or direct the
payment of, the purchase price payable in connection with any such sale either
to Buyer or to the Disbursing Agent designated pursuant to the Reorganization
Plan or pursuant to an order of the Bankruptcy Court for purposes of making
distributions thereunder to the holders of Old Series Notes of RII or (b) to
make alternative arrangements, reasonably acceptable to RII, pursuant to which a
third party manager shall enter into a service agreement with RII and Buyer and
shall operate scheduled air service, through PIA, for the account of Buyer until
the earlier of the date the Airline Governmental Consents are obtained and one
year after the Closing Date, and to cause RII to execute such documents or take
such actions as may be reasonably required to effectuate such alternative
arrangements (provided that either of such alternative arrangements shall not
result in any out-of-pocket costs or expenses, other than DE MINIMIS costs or
expenses, that would not have been incurred hereunder), to RII or any of its
Affiliates after the Closing Date).
SECTION 5.14. COMFORT LETTER. RII shall cause Ernst & Young to deliver to
Buyer a comfort letter dated a date not more than five Business Days before
November 30, 1993, which Comfort Letter shall be in the form of Exhibit A.
SECTION 5.15. ATTORNEYS FEES. In any action by any party to enforce the
terms of this Agreement, the prevailing party shall be entitled to receive
reimbursement of all of its reasonable attorneys fees and expenses incurred in
such action.
SECTION 5.16. TRANSFER TAXES. Any sales, transfer (including any real
property transfer) and other Taxes (excluding gross or net income taxes),
including without limitation any documentary stamp tax, and any filing,
recording or other fees applicable to the conveyance and transfer pursuant to
the provisions of this Agreement of the Shares, the RII Real Estate Assets and
the Paradise Island Assets (collectively, the "Transfer Taxes"), shall be borne
and paid by RII. The provisions of this Section shall survive the Closing of
this Agreement.
SECTION 5.17. ACTIONS ON BEHALF OF BUYER; KNOWLEDGE OF BUYER. RII shall
not cause Buyer to take any actions in respect of any amendments to or waivers
or actions under this Agreement except as are agreed to or directed by Fidelity
and TCW, and Fidelity and TCW may, in their reasonable judgment, cause Buyer to
take any actions that Buyer may take under this Agreement; PROVIDED, HOWEVER,
that Fidelity and TCW shall not act so as to prevent Buyer from performing any
of its affirmative obligations, agreements or covenants hereunder. No knowledge
of any facts shall be imputed to the Buyer under this Agreement unless such
facts are known to Fidelity and TCW.
SECTION 5.18. ARTICLES OF ASSOCIATION. The Articles of Association of
Buyer are attached hereto as Exhibit B, and RII shall cause such Articles to
remain in full force and effect and not to be amended prior to or on the Closing
unless consent thereto shall be granted by Fidelity and TCW.
SECTION 5.19. REPRESENTATIONS AND WARRANTIES. If any representation or
warranty contained in Article IV shall be, or shall become, inaccurate or shall
be breached by RII at any time prior to Closing, RII will, promptly upon
discovering such inaccuracy or breach, (i) notify Fidelity and TCW and (ii) use
its best efforts to cure such breach or inaccuracy as soon as is reasonably
practicable and prior to the Closing.
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SECTION 5.20. OPERATION OF BUYER AND BUYER SUBSIDIARIES. RII agrees that,
since their respective inceptions and as of the Closing Date, (a) neither Buyer
nor any of the Buyer Subsidiaries shall have engaged in any activity or business
other than those relating to the implementation of this Agreement and
preparation relating thereto, in each case as shall have been agreed to in
writing by Fidelity and TCW, and (b) neither Buyer nor any of the Buyer
Subsidiaries shall have Indebtedness.
SECTION 5.21. INSURANCE PROCEEDS. If any of the Paradise Island Assets are
destroyed or damaged or taken in condemnation, the insurance proceeds or
condemnation award with respect thereto shall be a Paradise Island Asset. At the
Closing, RII shall pay to Buyer any such insurance proceeds or condemnation
awards received by RII on or prior to the Closing and shall assign to or assert
for the benefit of Buyer all of its rights against any insurance companies,
governmental entities and others with respect to such damage, destruction or
condemnation. If and to the extent that there is available insurance under
policies maintained by RII or its Subsidiaries in respect of any Assumed
Liability, except for any such insurance proceeds with respect to which the
insured is directly or indirectly self-insured or has agreed to indemnify the
insurer, RII shall cause such insurance to be applied toward the payment of such
Assumed Liability.
SECTION 5.22. ACQUISITION PROPOSALS. Neither RII nor any of its Affiliates
shall propose or support before the Bankruptcy Court any proposal for the sale
or disposition of the Paradise Island Business, other than the Acquisitions or
as contemplated by the Sun Purchase Agreement, without the prior written consent
of Fidelity and TCW.
ARTICLE VI
CONDITIONS TO THE CLOSING
SECTION 6.01. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
to effect the Closing shall be subject to the prior fulfillment of each of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES; AGREEMENTS AND COVENANTS. (i) Each of
the representations and warranties of RII contained in Section 4.02, 4.03, 4.04
and 4.05 hereof and each of the representations and warranties incorporated from
the Sun Purchase Agreement pursuant to Section 4.01 qualified as to materiality
shall be true and correct in all respects and those not so qualified shall be
true and correct in all material respects, in each case when made and as of the
Closing Date, (ii) RII shall not have failed to comply with the covenants in
Sections 5.01 and 5.09, where such failures in the aggregate would have a
Material Adverse Effect, (iii) RII shall have complied in all respects with the
covenants contained in Sections 5.10 and 5.20, (iv) except for the covenants
contained in Sections 5.03, 5.04, 5.11 and 5.12, each of the other agreements
and covenants contained in this Agreement and in any certificate or agreement by
RII delivered pursuant hereto to be performed or complied with by RII, at or
before Closing, shall have been duly performed or complied with in all material
respects, PROVIDED, HOWEVER, that a breach of Section 5.06 would not constitute
a failure of a condition hereunder, if the representation, warranty or covenant
in question would not have resulted in a failure of a condition hereunder, and
(v) Buyer shall have received a certificate of RII, signed by a Vice President
thereof as to the fulfillment of the conditions set forth in the foregoing
clauses (i), (ii), (iii) and (iv).
(b) SUN PURCHASE AGREEMENT. The Sun Purchase Agreement shall have been
terminated in accordance with its terms.
(c) HSR ACT. Any waiting period (and any extension thereof) applicable to
the consummation of the transactions contemplated hereby under the HSR Act shall
have expired or been terminated.
(d) CONFIRMATION OF THE REORGANIZATION PLAN AND ENTRY OF THE CONFIRMATION
ORDER; CONSUMMATION OF THE REORGANIZATION PLAN. The Confirmation Order shall
have been entered by the Bankruptcy Court and the Effective Date (as defined in
the Reorganization Plan) shall have occurred, or there shall be no unsatisfied
conditions to the occurrence of the Effective Date other than the Closing, and
such Confirmation Order shall be in full force and effect and shall not then be
stayed.
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(e) GOVERNMENTAL CONSENTS. All Governmental Consents shall have been
received on or prior to the Closing Date.
(f) NO INJUNCTIONS. There shall not be in effect any injunction or
restraining order issued by a court of competent jurisdiction against the
consummation of the sale and purchase of the Shares, the RII Real Estate Assets
and the RII Paradise Assets pursuant to this Agreement.
(g) BANKRUPTCY; INSOLVENCY; ETC. No proceeding shall have been instituted
or consented to by or against any of the Company, any of its Subsidiaries or any
RII Paradise Subsidiary seeking to adjudicate any of them a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of any of their debts under any
law relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of any order for relief or the appointment of a receiver,
trustee, custodian or other similar official for any of them or any substantial
part of any of their property, and such proceeding shall not have been dismissed
or terminated within 60 days of the commencement thereof.
(h) OPINIONS. Buyer shall have received an opinion of Gibson, Dunn &
Crutcher, counsel to RII, in form and content reasonably acceptable to Fidelity
and TCW, as to matters set forth on Exhibit C hereto and opinions of Florida
counsel reasonably acceptable to Buyer and Harry B. Sands & Co. in form and
content reasonably acceptable to Fidelity and TCW.
(i) RESIGNATIONS. Buyer shall have received resignations and releases of
all officers and directors of the Company and its Subsidiaries who are not
directly involved in the business and operations of the Company and its
Subsidiaries in accordance with Section 5.08(c).
(j) SECURITY DOCUMENTS. The agreements listed in Schedule 4.16 to the Sun
Purchase Agreement shall not be in full force and effect.
(k) MANAGEMENT AGREEMENT. At the election of Buyer, RII and Buyer shall
have entered into a Management Agreement in substantially the form attached
hereto as Exhibit D, and all conditions under the Management Agreement shall
have been satisfied by RII or waived by Buyer.
(l) REGISTRATION RIGHTS AGREEMENT. RII and Buyer shall have taken such
action, including granting such registration rights, as may be necessary to
ensure that all shares of the capital stock of Buyer issued upon consummation of
the transactions contemplated hereby may be re-sold publicly, without
restriction under the Securities Act by the recipients thereof following the
disbursement of such shares by the Disbursing Agent as contemplated by Section
2.04.
(m) SUN SECURITY INTEREST. RII shall have caused Buyer to have granted a
security interest to Sun International Investments Limited as contemplated by
Section 7.02(b) of the Sun Purchase Agreement (the "Permitted Sun Lien"), and
RII shall have caused Buyer to assume its obligations to pay the Buyer Expense
Reimbursement to SIHL pursuant to Sections 7.02(a)(vi) and (vii) of the Sun
Purchase Agreement.
(n) ADDITIONAL TIME. If Fidelity and TCW reasonably shall have determined
that it is necessary and appropriate for the time of the Closing to be extended
(including without limitation to allow time for the completion of their due
diligence investigation of the Paradise Island Business) beyond the date when
the other conditions set forth in this Section 6.01 have been satisfied, a
reasonable period of additional time (not to exceed 30 days) shall have elapsed
from the date when such other conditions were satisfied.
SECTION 6.02. CONDITIONS TO OBLIGATIONS OF RII. The obligations of RII to
effect the Closing shall be subject to the prior fulfillment of each of the
following conditions:
(a) HSR ACT. Any waiting period (and any exten-sion thereof) applicable to
the consummation of the transactions contemplated hereby under the HSR Act shall
have expired or been terminated.
(b) CONFIRMATION OF THE REORGANIZATION PLAN AND ENTRY OF THE CONFIRMATION
ORDER; CONSUMMATION OF THE REORGANIZATION PLAN. The Confirmation Order shall
have been entered by the Bankruptcy
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Court and the Effective Date (as defined in the Reorganization Plan) shall have
occurred, or there shall be no unsatisfied conditions to the occurrence of the
Effective Date other than the Closing, and such Confirmation Order shall be in
full force and effect and shall not then been stayed.
(c) CONSENTS. All Governmental Consents shall have been received on or
prior to the Closing Date.
(d) NO INJUNCTIONS. There shall not be in effect any injunction or
restraining order issued by a court of competent jurisdiction against the
consummation of the sale and purchase of the Shares, the RII Real Estate Assets
and the RII Paradise Assets pursuant to this Agreement.
(e) SUN PURCHASE AGREEMENT. The Sun Purchase Agreement shall have been
terminated in accordance with its terms.
(f) SECURITY DOCUMENTS. The agreements listed in Schedule 4.16 to the Sun
Purchase Agreement shall not be in full force and effect.
ARTICLE VII
SURVIVAL AND INDEMNIFICATION
SECTION 7.01. SURVIVAL OF REPRESENTATIONS. The representations and
warranties of RII set forth in Sections 4.02, 4.03, 4.04 and 4.05 hereof and the
representations and warranties incorporated from Sections 4.01, 4.02, 4.03(a),
4.04, 4.16(a) and 4.22 of the Sun Purchase Agreement (the "Surviving
Representations") and the covenants and agreements contained in this Agreement
(except the covenants contained in Sections 5.11 and 5.12 which shall not
survive the Closing), and the covenants and agreements contained in any
agreements, certificates or other instruments delivered pursuant to this
Agreement, shall survive the Closing and shall remain in full force and effect,
regardless of any investigation made by or on behalf of any party, but subject
to all limitations and other provisions contained in this Agreement or any
agreements, certificates or other instruments delivered pursuant to this
Agreement. All representations and warranties set forth herein and in any
agreements, certificates or other instruments delivered pursuant hereto (other
than the Surviving Representations) shall not survive the Closing and shall not
remain in full force and effect; PROVIDED, HOWEVER, that no representation or
warranty shall be deemed not to have survived the Closing if any breach or
inaccuracy thereof was knowingly or fraudulently concealed by RII or any of its
Subsidiaries prior to the Closing and such breach or inaccuracy was not actually
known to TCW and Fidelity prior to the Closing.
SECTION 7.02. INDEMNIFICATION BY RII. Subject to the other provisions of
this Article VII, RII hereby agrees to indemnify and hold Buyer and its
Affiliates harmless from and against any and all claims, damages, liabilities,
liens, losses or other obligations whatsoever, together with reasonable costs
and expenses, including reasonable fees and disbursements of counsel and
expenses of investigation (collectively, "Losses"), arising out of, based upon
or caused by the inaccuracy of any representation or the breach of any warranty
of RII contained in the Surviving Representations.
SECTION 7.03. NOTICE, ETC. Each indemnified party agrees to give the
indemnifying party prompt written notice of any action, claim, demand, discovery
of fact, proceeding or suit (collectively, "Claims") for which such indemnified
party intends to assert a right to indemnification under this Agreement;
PROVIDED, HOWEVER, that failure to give such notification shall not affect the
indemnified party's entitlement to indemnification hereunder except to the
extent that the indemnifying party shall have been actually prejudiced as a
result of such failure. The indemnifying party shall have the sole right to
defend, settle or otherwise dispose of any Claim, on such terms as the
indemnifying party, in its sole discretion, shall deem appropriate; PROVIDED,
HOWEVER, that (i) the indemnified party may participate in the defense of any
claim pursuant to which the indemnified party could become subject to injunctive
or other equitable relief or the business of the indemnified party could be
materially and adversely affected in any manner (such participation in the
defense of any claim to be at the indemnified party's expense unless the use of
separate counsel arises by reason of a material conflict of interest
15
<PAGE>
between the indemnifying party and the indemnified party in connection with the
defense of such claim) and (ii) the indemnifying party shall obtain the written
consent of the indemnified party, which shall not be unreasonably withheld or
delayed, prior to ceasing to defend, settling or otherwise disposing of any such
Claim, or taking any course of action or omitting to take a permitted course of
action with respect thereto, if as a result thereof the indemnified party would
become subject to injunctive or other equitable relief.
SECTION 7.04. REIMBURSEMENT OF COSTS. The costs and expenses, including
reasonable fees and disbursements of counsel and expenses of investigation,
incurred by any indemnified party in connection with any claim for which the
indemnified party is entitled to indemnification hereunder shall be reimbursed
on a quarterly basis by the indemnifying party.
SECTION 7.05. TIME LIMITATIONS. Notwithstanding anything to the contrary
contained herein, each party's obligation to indemnify or otherwise hold
harmless the other party and its Affiliates for any Loss arising out of, based
upon or caused by the inaccuracy or breach of any Surviving Representation
shall, terminate at 11:59 p.m. New York City time, on the later of March 31,
1995 or the first anniversary of the Closing Date; PROVIDED, HOWEVER, that
claims pending on, or asserted prior to such date may continue to be asserted
and shall be indemnified against.
SECTION 7.06. SOLE AND EXCLUSIVE REMEDY. The indemnification obligations
of the applicable parties under Section 7.02 hereof shall constitute the sole
and exclusive remedies of the indemnified party with respect to the matters
described in Section 7.02.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date, notwith-standing the fact that votes may have been
received pursuant to the Reorganization Plan Solicitation:
(a) by mutual written consent of RII and Buyer at any time prior to entry
the Confirmation Order;
(b) in the event that a proposal for the sale of the Paradise Island
Business by RII or GRI, other than the Acquisitions or the transactions
contemplated by the Sun Purchase Agreement, is approved by the Bankruptcy Court
this Agreement will automatically be deemed terminated without the necessity of
providing written notice notwithstanding any provision to the contrary herein;
(c) by Buyer, if a Material Adverse Effect occurs as a result of any fire,
flood, hurricane, accident, explosion or other calamity or casualty or any
strike, labor disturbance, riot, act of God or public enemy, or the institution
of condemnation proceedings affecting any material portion of the Real Property
or Improvements (a "Force Majeure Event"), PROVIDED, HOWEVER, that Buyer shall
not have the right to terminate this Agreement in the event that the loss caused
by the Force Majeure Event (including the present value of lost profits) is less
than $20 million and there is adequate insurance to cover such loss;
(d) by Buyer, if Buyer reasonably determines that RII will not be able to
deliver good title free and clear of encumbrances other than Permitted
Encumbrances and the Permitted Sun Lien, to a material portion of the Paradise
Island Business or the Shares by September 30, 1994;
(e) by Buyer, if as a result of a breach of RII of its covenant to operate
the Paradise Island Business in the ordinary course contained in Section 5.01, a
Material Adverse Effect has occurred;
(f) by Buyer, if the Sun Purchase Agreement shall have been terminated by
SIHL, after November 30, 1993, pursuant to Section 6.14(b)(iii) thereof on
account of any matter arising or occurring on or before November 30, 1993 (x)
which was known by RII or any of its Affiliates or which would have been known
by RII or any of its Affiliates had they not been grossly negligent or (y) which
was fraudulently or knowingly concealed from SIHL by RII or any of its
Affiliates;
16
<PAGE>
(g) by Buyer, if in Fidelity's and TCW's reasonable judgment (based on the
advice of legal counsel), the consummation of the transactions contemplated
hereby could be expected to result in the incurrence of any personal liabilities
by the holders of Buyer's capital stock by virtue of their status as
shareholders (and expressly not including any losses resulting solely from a
decline in the economic value of such capital stock); PROVIDED, HOWEVER, that in
the event of a good faith dispute concerning whether Buyer is entitled to
terminate the Agreement under this subparagraph (g), the matter shall be
submitted to a court of competent jurisdiction for resolution, and the
determination of such court shall be final and binding upon the parties;
(h) by Buyer, if RII or any of its Affiliates shall have breached the
covenant set forth in Section 5.22 hereof; or
(i) in the event that the sale of the Paradise Island Business by RII and
the RII Paradise Subsidiaries to SIHL is consummated pursuant to the Sun
Purchase Agreement, this Agreement will automatically be deemed terminated
without the necessity of providing written notice notwithstanding any provision
to the contrary herein.
SECTION 8.02. RIGHTS OF TERMINATION. The right of termination hereunder
may be exercised by Buyer or RII, as the case may be, only by giving written
notice, signed on behalf of such party to the other party. A right of
termination may be exercised on Buyer's behalf only by Fidelity and TCW.
SECTION 8.03. EFFECT OF TERMINATION. In the event of the termination of
this Agreement pursuant to Section 8.01, this Agreement shall forthwith become
void and have no effect, but no such termination shall prejudice any party's
rights and remedies against the other for breaches of obligations under this
Agreement.
SECTION 8.04. WAIVER. Subject to Section 5.17, at any time prior to the
Closing Date, any party hereto may (a) extend the time for the performance of
any of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party to be bound
thereby. The failure of any party to assert any of its rights hereunder shall
not constitute a waiver of any such rights. The rights of Buyer hereunder may be
exercised on its behalf only by Fidelity and TCW.
SECTION 8.05. AMENDMENTS. The parties hereto may, by written agreement
signed by such parties, modify any of the covenants or agreements or extend the
time for any performance of any of the obligations contained in this Agreement
or any document delivered pursuant to this Agreement. No such written agreement
shall be signed on behalf of Buyer or shall be valid without the written consent
thereto of Fidelity and TCW.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
if to Buyer:
P.I. Resorts Limited
c/o Resorts International, Inc.
1133 Boardwalk
Atlantic City, NJ 08401
Attention: Christopher D. Whitney, Esq.
17
<PAGE>
with a copy to:
Fidelity Management and Research Company
82 Devonshire Street
Boston, MA 02109
Attention: Judy Mencher, Esq.
Trust Company of the West
865 South Figueora Street
Suite 1800
Los Angeles, CA 90017
Attention: Bruce Karsh
Weil, Gotshal & Manges
767 Fifth Avenue
New York, NY 10153
Attention: Bruce R. Zirinsky, Esq.
if to RII:
Resorts International, Inc.
1133 Boardwalk
Atlantic City, NJ 08401
Attention: Christopher D. Whitney, Esq.
with a copy to:
Gibson, Dunn & Crutcher
200 Park Avenue
New York, NY 10166
Attention: Steven R. Finley, Esq.
SECTION 9.02. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties with respect to the subject matter hereof. This Agreement shall not
be assigned by operation of law or otherwise, except that Buyer may assign all
or any of its rights and obligations hereunder to any wholly owned Subsidiary of
Buyer upon the execution of a written instrument whereby such assignee agrees to
assume all of the assignor's obligations hereunder and be bound by all the terms
and conditions of this Agreement; PROVIDED, that no such assignment shall
relieve the assigning party of its obligations hereunder if such assignee does
not perform such obligations.
SECTION 9.03. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except to the extent
that consent or approval of Fidelity and TCW may be required hereunder (E.G.,
Sections 5.17, 8.02, 8.04 and 8.05 hereof), nothing in this Agreement, express
or implied, is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.04. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF
THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF
LAW THEREOF.
SECTION 9.05. HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
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SECTION 9.06. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 9.07. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not to be performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
SECTION 9.08. JURISDICTION. THE PARTIES HEREBY WAIVE ANY OBJECTION THEY
MAY HAVE TO PERSONAL JURISDICTION AND VENUE IN THE U.S. DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK AND, WHERE NO DIVERSITY OR OTHER SUBJECT MATTER
JURISDICTION EXISTS IN SUCH U.S. DISTRICT COURT, THE PARTIES WAIVE SUCH
OBJECTIONS IN ANY COURT OF THE STATE OF NEW YORK LOCATED IN THE COUNTY OF NEW
YORK, AS TO LITIGATION RELATING TO THIS AGREEMENT. BUYER HEREBY IRREVOCABLY
APPOINTS AND DESIGNATES AS ITS LAWFUL AGENT AND ATTORNEY FOR RECEIPT AND SERVICE
OF PROCESS IN ANY ACTION ARISING OR TAKEN HEREUNDER BY RII THE PRENTICE-HALL
CORPORATION SYSTEM, INC., 15 COLUMBUS CIRCLE, NEW YORK, NEW YORK 10023.
SECTION 9.09. KNOWLEDGE OR CONSENTS. For the purpose of this Agreement
(including the Schedules hereto), unless the context otherwise expressly
requires, whenever a document or matter is subject to the "approval", "consent",
"satisfaction" or "acceptance" (including any variation of such terms) of any
party to this Agreement or Fidelity or TCW, such person, shall not unreasonably
withhold or delay its approval, consent, satisfaction or acceptance of such
document or matter; PROVIDED, HOWEVER, that the foregoing is without prejudice
to RII's right to seek approval, consent, satisfaction or acceptance of any
documents or matters from the Bankruptcy Court (in Fidelity's and TCW's stead)
upon a showing by RII, and a finding by the Bankruptcy Court, that any consent,
approval, satisfaction or acceptance is being unreasonably withheld by Fidelity
or TCW. For the purpose of this Agreement (including the Schedules hereto) and
subject to Section 5.17 hereof, unless the context otherwise expressly requires,
"knowledge" with respect to any person (other than an individual) shall mean the
knowledge of an executive officer, director, partner, executor or trustee of
such person.
SECTION 9.10. RIGHTS OF FIDELITY AND TCW. If, and only if, at any time
prior to the Closing Date, Fidelity and TCW shall cease to beneficially own an
aggregate of at least twenty percent (20%) of the aggregate principal amount of
the outstanding Old Series Notes, then all the rights of consent, approval,
acceptance or direction granted to Fidelity and TCW hereunder shall thereupon
cease to exist; PROVIDED, HOWEVER, that nothing in this Section 9.10 shall limit
or otherwise prejudice in any manner any rights which Fidelity and TCW may have
under the Bankruptcy Code and the Bankruptcy Rules. In addition, if either of
Fidelity or TCW shall cease to beneficially own any Old Series Notes whatsoever
(but the other retains an aggregate of at least twenty percent (20%) of the
aggregate principal amount of the outstanding Old Series Notes), then the rights
described above shall be extinguished solely as to the person ceasing to own any
such Old Series Notes, without prejudice to the rights of the other hereunder.
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<PAGE>
IN WITNESS WHEREOF, Buyer and RII have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.
RESORTS INTERNATIONAL, INC.
By: ____________________________________
Name:
Title:
P.I. RESORTS LIMITED
By: ____________________________________
Name:
Title:
20
<PAGE>
Exhibits to PIRL Standby Distribution Agreement
contained in Exhibit 10.59 to RII's Registration Statement
(Registration No. 33-50733) on file with the SEC.
<PAGE>
Exhibit C -- 1994 Stock Option Plan
<PAGE>
FORM
OF
RESORTS INTERNATIONAL, INC.
1994 STOCK OPTION PLAN
1. PURPOSE
Resorts International, Inc., a Delaware corporation ("RII"), by means of
this Stock Option Plan (the "Plan"), desires to afford certain of its directors,
officers, and key employees, and the officers and key employees of any
subsidiary thereof now existing or hereafter formed or acquired, an opportunity
to acquire a proprietary interest in RII, and thus to create in such persons an
increased interest in and a greater concern for the welfare of RII and any
subsidiary. As used in the Plan, the term "subsidiary" shall mean any entity in
which RII, directly or indirectly, owns a controlling interest.
The stock options described in Sections 6 and 7 (the "Options"), and the
shares of common stock, $.01 par value per share, of RII (the "Common Stock")
acquired pursuant to the exercise of such Options are a matter of separate
inducement and are not in lieu of any salary or other compensation for services.
The Options granted under Section 6 are intended to be either incentive
stock options ("Incentive Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options that do not
meet the requirements for Incentive Options ("Non-Qualified Options"), but RII
makes no warranty as to the qualification of any Option as an Incentive Option.
2. ADMINISTRATION
The Plan shall be administered by the Option Committee, or any successor
thereto, of the Board of Directors of RII or by such other committee as
determined by the Board (the "Committee"). The Committee shall consist of not
less than two members of the Board of Directors of RII, each of whom shall
qualify as a "disinterested person" to administer the Plan within the meaning of
Rule 16b-3, as amended, or other applicable rules under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and each of
whom shall qualify as an "outside director" within the meaning of Section 162(m)
of the Code. The Committee shall administer the Plan so as to conform at all
times with the provisions of Section 16(b) of the Exchange Act and Rule 16b-3
promulgated thereunder. A majority of the Committee shall constitute a quorum,
and subject to the provisions of Section 5 the acts of a majority of the members
present at any meeting at which a quorum is present, or acts approved
unanimously in writing by the Committee, shall be the acts of the Committee.
The Committee may delegate to one or more of its members, or to one or more
agents, such administrative duties as it may deem advisable, and the Committee
or any person to whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility the Committee
or such person may have under the Plan. The Committee may employ attorneys,
consultants, accountants, or other persons and the Committee, RII and its
officers and directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all persons who have received grants under the Plan, RII and all other
interested persons. No member or agent of the Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan and all members and agents of the Committee shall be fully
protected by RII in respect of any such action, determination or interpretation.
3. SHARES AVAILABLE
Subject to the adjustments provided in Section 9, the maximum aggregate
number of shares of Common Stock which may be purchased pursuant to the exercise
of Options granted under the Plan shall not exceed 5% of the fully diluted
shares of Common Stock to be issued and outstanding as contemplated by the Joint
Plan of Reorganization under Chapter 11 of the Bankruptcy Code Proposed by
Resorts International, Inc., GGRI, Inc., Resorts International Hotel, Inc.,
Resorts International Hotel Financing, Inc., and P. I. Resorts Limited, as
modified, and confirmed by order, entered _____,
<PAGE>
1994, of the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Plan") . If, for any reason, any shares as to which Options have
been granted cease to be subject to purchase thereunder, including without
limitation the expiration of such Options, the termination of such Options prior
to exercise or the forfeiture of such Options, such shares thereafter shall be
available for grants to such individual or other individuals under the Plan
unless such shares, if so made available, would not be exempt under Section
16(b) of the Exchange Act pursuant to Rule 16b-3. Options granted under the Plan
may be fulfilled in accordance with the terms of the Plan with either authorized
and unissued shares of Common Stock or issued shares of such Common Stock held
in RII's treasury or both, at the discretion of RII.
4. ELIGIBILITY AND BASES OF PARTICIPATION
Grants under the Plan (i) may be made, pursuant to Section 6, to key
employees and officers (but not to any officer and director who is not also an
employee) of RII or any subsidiary thereof who are regularly employed on a
salaried basis and who are so employed on the date of such grant (the "Officer
and Key Employee Participants"), (ii) may be made, pursuant to Section 6, to
directors of RII, other than Committee Participants (as defined below), who are
not employees and who are retained by RII in such capacity on the date of such
grant (the "Director Participants") (the Officer and Key Employee Participants
and Director Participants, collectively, the "Grant Participants") and (iii) may
be made, pursuant to Section 7, to individuals who serve on the Committee or
have been named to serve on the Committee in the future (the "Committee
Participants").
5. AUTHORITY OF COMMITTEE
Subject to and not inconsistent with the express provisions of the Plan and
the Code, the Committee shall have plenary authority, in its sole discretion,
to:
a. other than with respect to Committee Participants, determine the persons
to whom Options shall be granted, the time when such Options shall be
granted, the number of Options, the purchase price or exercise price of
each Option, the restrictions to be applicable to Options and the other
terms and provisions thereof (which need not be identical);
b. provide an arrangement through registered broker-dealers whereby
temporary financing may be made available to an optionee by the
broker-dealer, under the rules and regulations of the Federal Reserve
Board, for the purpose of assisting the optionee in the exercise of an
Option, such authority to include the payment by RII of the commissions,
fees and charges of the broker-dealer;
c. establish procedures for an optionee to pay the exercise price of an
Option in whole or in part by delivering that number of shares owned by
such optionee or by withholding from the shares otherwise issuable upon
the exercise of the Option that number of shares having a Fair Market
Value on the date preceding the date of exercise which shall equal the
Option exercise price for the number of shares of Common Stock as to
which the optionee desires to exercise the Option;
d. establish procedures for the collection of any taxes required by any
government to be withheld or otherwise deducted and paid by RII or any
subsidiary in respect of the issuance or disposition of Common Stock
acquired pursuant to the exercise of an Option granted hereunder, which
procedures may include payment in whole or in part through the delivery
of shares of Common Stock owned by the optionee or withholding from the
shares otherwise issuable upon exercise of the Option, valued on the
basis of the Fair Market Value on the date preceding such exercise;
e. prescribe, amend, modify and rescind rules and regulations relating to
the Plan;
f. make all determinations specified in or permitted by the Plan or deemed
necessary or desirable for its administration or for the conduct of the
Committee's business; and
2
<PAGE>
g. establish any procedures determined to be appropriate in discharging its
responsibilities under the Plan.
6. STOCK OPTIONS FOR GRANT PARTICIPANTS
The Committee shall have the authority, in its sole discretion, to grant
Incentive Options or Non-Qualified Options or both Incentive Options and
Non-Qualified Options to Grant Participants (any such Options, the "Participant
Options") during the period beginning on the effective date of the Bankruptcy
Plan (the "Effective Date") and ending on the tenth anniversary of the Effective
Date (the "Termination Date"). Notwithstanding anything contained herein to the
contrary, Incentive Options may be granted only to Officer and Key Employee
Participants. As a condition to the granting of any Option, the Committee shall
require that the person receiving such Option agree not to sell or otherwise
dispose of such Option, any Common Stock acquired pursuant to such Option or any
other "derivative security" (as defined by Rule 16a-1(c) under the Exchange Act)
for a period of six months following the later of (A) the date of the grant of
such Option or (B) the date when the exercise price of such Option is fixed if
such exercise price is not fixed at the date of grant of such Option. The terms
and conditions of the Participant Options shall be determined from time to time
by the Committee; PROVIDED, HOWEVER, that the Participant Options granted under
the Plan shall be subject to the following:
a. EXERCISE PRICE. The exercise price for each share of Common Stock
purchasable under any Participant Option granted hereunder shall be such
amount as the Committee, in its best judgment, shall determine to be not
less than 100% of the Fair Market Value per share at the date the
Participant Option is granted; PROVIDED, HOWEVER, that in the case of an
Incentive Option granted to a person who, at the time such Incentive
Option is granted, owns shares of capital stock of RII, or of any
subsidiary of RII, having more than 10% of the total combined voting
power of all classes of shares of capital stock of RII or of such
subsidiary, the exercise price for each share shall be not less than 110%
of the Fair Market Value per share (as determined by the Committee) at
the date the Incentive Option is granted. In determining the stock
ownership of a person for purposes of this Section 6, the rules of
Section 424(d) of the Code shall be applied and the Committee may rely on
representations of fact made to it by such person and believed by it to
be true. The exercise price of the Participant Options will be subject to
adjustment in accordance with the provisions of Section 9.
b. PAYMENT. The exercise price per share of Common Stock with respect to
each Participant Option shall be payable at the time the Participant
Option is exercised. Such price shall be payable in cash, which may be
paid by wire transfer in immediately available funds, by check, by a
commitment by a broker-dealer to pay to RII that portion of any sale
proceeds receivable by the optionee upon exercise of a Participant Option
or by any other instrument acceptable to RII or, in the discretion of the
Committee, by delivery to RII of shares of Common Stock or by any other
method permitted pursuant to Section 5. Shares delivered to or withheld
by RII in payment of the exercise price shall be valued at the Fair
Market Value of the Common Stock on the day preceding the date of the
exercise of the Participant Option.
c. LIMIT ON ANNUAL OPTION GRANTS. No Officer and Key Employee Participant
may be granted in any fiscal year Participant Options under the Plan
cumulatively exercisable for more than 10% of the maximum number of
shares of Common Stock which under Section 3 may be purchased pursuant to
the exercise of options granted under the Plan.
d. CONTINUATION OF EMPLOYMENT. Notwithstanding anything else contained
herein, each Option granted to an Officer and Key Employee Participant by
its terms shall require the optionee to remain in the continuous employ
of RII or any subsidiary for at least six months (or three months in case
of an Incentive Option or such other time period as may apply pursuant to
Section 6.f. or 6.g.) from the date of grant of the Option, before the
right to exercise any part of the Option will accrue.
3
<PAGE>
e. EXERCISABILITY OF PARTICIPANT OPTIONS. Subject to this Section 6 and
Section 8, each Participant Option shall vest and become exercisable on
the dates and in the amounts set forth in the particular stock option
agreement between RII and the optionee, PROVIDED, HOWEVER, that a
Participant Option shall expire not later than ten years from the date
such Option is granted; and PROVIDED, FURTHER, HOWEVER, that in the case
of an Incentive Option granted to a person who, at the time such
Incentive Option is granted, owns shares of capital stock of RII, or of
any subsidiary of RII, having more than 10% of the total combined voting
power of all classes of shares of capital stock of RII or of such
subsidiary, such Incentive Option shall expire not later than five years
from the date such Option is granted. The right to purchase shares shall
be cumulative so that when the right to purchase any shares has accrued
such shares or any part thereof may be purchased at any time thereafter
until the expiration or termination of the Participant Option.
f. DEATH. In the event of the death of an optionee, all Participant Options
held by such optionee on the date of such death shall vest in full and
become immediately exercisable. Upon such death, the legal representative
of such optionee, or such person who acquired such Participant Options by
bequest or inheritance or by reason of the death of the optionee, shall
have the right for one year after the date of death (but not after the
expiration or termination of the Participant Options), to exercise such
optionee's Participant Options with respect to all or any part of the
shares of Common Stock subject thereto.
g. DISABILITY. If the employment of an optionee is terminated because of
Disability (as defined in Section 11), all Participant Options held by
such optionee on the date of such termination shall vest in full and
become immediately exercisable. Such optionee shall have the right for
one year after the date of such termination (but not after the expiration
or termination of the Participant Options), to exercise such optionee's
Participant Options with respect to all or any part of the shares of
Common Stock subject thereto.
h. RETIREMENT. In the event the employment of an Officer and Key Employee
Participant is terminated by reason of the Retirement of the optionee,
all Participant Options held by such optionee on the date of such
termination shall vest in full and become immediately exercisable. Such
optionee shall have the right for three months after the date of such
termination (but not after the expiration or termination of the
Participant Options), to exercise such optionee's Participant Options
with respect to all or any part of the shares of Common Stock subject
thereto, except that if such optionee at the time of Retirement serves as
a director of RII such options shall remain exercisable as provided in
Section 6.j. The Committee, in its discretion, shall determine whether an
optionee's employment was terminated by reason of Retirement and whether
such optionee is entitled to the treatment afforded by this subsection h.
i. OTHER TERMINATION OR FOR CAUSE. If the employment of an Officer and Key
Employee Participant is terminated for any reason other than those
specified in subsections f., g. and h. of this Section 6, such optionee
shall have the right for three months after the date of such termination
(but not after the expiration or termination of the Participant Options),
to exercise such optionee's Participant Options with respect to all or
any part of the shares of Common Stock which such optionee was entitled
to purchase immediately prior to the time of such termination, except
that if such optionee at the time of such termination serves as a
director of RII such options shall remain exercisable as provided in
Section 6.j and if such optionee employment was terminated by RII or any
subsidiary for good cause, such optionee immediately shall forfeit all
rights under his or her Participant Options except as to the shares of
Common Stock already purchased. For the purposes of the Plan, the term
"for good cause" shall mean: (a) with respect to an optionee who is a
party to a written employment agreement with RII or any subsidiary which
contains a definition of "for good cause" or "for cause" (or words of
like import) for purposes of termination of employment thereunder by RII,
"for good cause" or "for cause" as defined therein; or (b) in all other
cases as determined, in its sole discretion, by
4
<PAGE>
the Committee or the Board of Directors: (i) the wanton or willful
commission by an optionee of an act, or the wanton or willful omission or
failure to act, that causes substantial damage (by reason, without
limitation, of financial exposure or loss or damage to reputation or
goodwill) to RII or any subsidiary; (ii) the commission by the optionee
of an act of fraud, intentional misrepresentation, embezzlement,
misappropriation or conversion in the performance of such optionee's
duties on behalf of RII or any subsidiary; (iii) conviction of the
optionee for commission of a felony; or (iv) the continuing failure of an
optionee to perform the material duties of such optionee to RII or any
subsidiary.
j. CESSATION OF DIRECTORSHIP. In the event a Grant Participant shall cease
to be a director of RII, such optionee shall have the right for one year
after the date of such cessation (but not after the expiration or
termination of the Participant Options), to exercise such optionee's
Participant Options with respect to all or any part of the shares of
Common Stock subject thereto.
k. MAXIMUM EXERCISE. To the extent the aggregate Fair Market Value of
Common Stock (determined at the time of the grant) with respect to which
Incentive Options are exercisable for the first time by an optionee
during any calendar year under all plans of RII or any subsidiary,
exceeds $100,000, or such other amount as may be prescribed under Section
422 of the Code or applicable regulations or rulings from time to time,
the excess thereof shall be treated as Non-Qualified Options and not as
Incentive Options.
7. STOCK OPTION GRANTS TO COMMITTEE PARTICIPANTS
During the term of the Plan, on the date that a director of RII commences
service on the Committee (which in the case of the initial members of the
Committee shall be deemed to be at least twenty trading days following the
Effective Date), such Committee Participant automatically shall be granted a
Non-Qualified Option to purchase 10,000 shares of Common Stock, which
Non-Qualified Option except as otherwise provided in this Section 7 or Section 8
shall be exercisable upon grant as to 50% of the shares covered thereby and
shall be exercisable as to the remaining 50% of the shares covered thereby on
the first anniversary of being granted. During the term of the Plan on the third
business day following the date of any annual meeting of the holders of the
Common Stock at which directors are elected, each person who on such day is a
Committee Participant automatically shall be granted a Non-Qualified Option to
purchase 5,000 shares of Common Stock, which Non-Qualified Option, except as
otherwise provided in this Section 7 or Section 8, shall be fully exercisable
upon grant as to all of the shares covered thereby. A Non-Qualified Option
granted to a Committee Participant pursuant to this Section 7 is referred to as
an "Committee Option". If, on any date upon which Committee Options are to be
granted hereunder, the number of shares of Common Stock remaining available for
issuance under the Plan is insufficient for the grant of the total number of
Committee Options to all Committee Participants otherwise entitled thereto
pursuant to this Section 7, each Committee Participant shall receive Committee
Options to purchase a proportionate number of the available number of shares
remaining (rounded down to the greatest number of whole shares of Common Stock
available). As a condition to the granting of any Option, the person receiving
such Option shall agree not to sell or otherwise dispose of such Option, any
Common Stock acquired pursuant to such Option or any other "derivative security"
(as defined in Rule 16a-1(c) under the Exchange Act) for a period of six months
following the later of (A) the date of the grant of such Option or (B) the date
when the exercise price of such Option is fixed if such exercise price is not
fixed at the date of grant of such Option. The terms and conditions of the
Committee Options shall be as follows:
a. OPTION PRICE. The exercise price of each share of Common Stock
purchasable under any Committee Options shall be such amount as the
Committee, in its best judgment, shall determine to be 100% of the Fair
Market Value per share at the date the Committee Option is granted.
5
<PAGE>
b. PAYMENT. The exercise price per share of Common Stock with respect to
each Committee Option and any withholding tax due in connection with such
exercise may be paid by any of the methods described under Sections 6.b.
and 5.d., respectively, unless RII at the time is prohibited from
purchasing or acquiring shares of its Common Stock.
c. EXERCISABILITY. Notwithstanding anything to the contrary in the Plan, no
Committee Option shall be exercisable after the earlier of (i) the
expiration of ten years from the date such Option is granted and (ii) one
year after such Committee Participant ceases for any reason to be a
director of RII. The right to purchase shares under any Committee Option
shall be cumulative so that when the right to purchase any shares has
accrued such shares or any part thereof may be purchased at any time
thereafter until the expiration or termination of the Committee Option.
d. DEATH. In the event of the death of any Committee Participant, all
Committee Options held by such Committee Participant on the date of death
shall vest in full and become immediately exercisable. Upon such death,
the estate of the Committee Participant shall have the right for one year
after the date of death (but not after the expiration or termination of
such Committee Options), to exercise such Committee Participant's
Committee Options with respect to all or any part of the shares of Common
Stock subject thereto.
e. AMENDMENT. The provisions of this Section 7 shall not be amended more
than one time in any six month period, other than to comport with the
amendments to the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules and regulations thereunder.
8. CHANGE OF CONTROL
Notwithstanding any provision herein to the contrary, upon the occurrence of
an event constituting a Change of Control (as defined in Section 11), all
Options granted under the Plan immediately shall become fully exercisable.
9. ADJUSTMENT OF SHARES
In the event the outstanding shares of Common Stock shall be increased or
decreased or changed into or exchanged for a different number or kind of shares
of stock or other securities of RII or another corporation by reason of any
consolidation, merger, combination, liquidation, reorganization,
recapitalization, stock dividend, stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares or other like change in capital
structure of RII, the number or kind of shares or interests subject to an Option
and the per share price or value thereof shall be appropriately adjusted by the
Committee at the time of such event, provided that each optionee's position with
respect to the Option and the per share price or value thereof, as a result of
such adjustment, shall not be worse than it had been immediately prior to such
event. Any fractional shares or interests resulting from such adjustment shall
be eliminated. Notwithstanding the foregoing, (i) each such adjustment with
respect to an Incentive Option shall comply with the rules of Section 424(a) of
the Code and (ii) in no event shall any adjustment be made that would render any
Incentive Option other than an "incentive stock option" for purposes of Section
422 of the Code. In addition, in such event the Board of Directors of RII shall
appropriately adjust the number of shares of Common Stock for which Options may
be granted under the Plan.
10. MISCELLANEOUS PROVISIONS
a. ASSIGNMENT OR TRANSFER. No grant of any "derivative security" (as
defined by Rule 16a-l(c) under the Exchange Act) made under the Plan or
any rights or interests therein shall be assignable or transferable by an
optionee except by will or the laws of descent and distribution or,
except as to Incentive Options, pursuant to a qualified domestic
relations order as defined in the Code. During the lifetime of an
optionee, Options granted hereunder shall be exercisable only by the
optionee or the optionee's guardian or legal representative.
6
<PAGE>
b. INVESTMENT REPRESENTATION. If a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect
to the Common Stock issuable upon exercise of an Option is not in effect
at the time such Option is exercised, RII may require, for the sole
purpose of complying with the Securities Act, that prior to delivering
such Common Stock to the exercising optionee such optionee must deliver
to the Secretary of RII a written statement (i) representing that such
Common Stock is being acquired for investment only and not with a view to
the resale or distribution thereof, (ii) acknowledging that such Common
Stock may not be sold unless registered for sale under the Securities Act
or pursuant to an exemption from such registration and (iii) agreeing
that the certificates representing such Common Stock shall bear a legend
to the foregoing effect.
c. COSTS AND EXPENSES. The costs and expenses of administering the Plan
shall be borne by RII and shall not be charged against any Option nor to
any employee receiving an Option.
d. FUNDING OF PLAN. The Plan shall be unfunded. RII shall not be required
to make any segregation of assets to assure the satisfaction of any
Option under the Plan.
e. OTHER INCENTIVE PLANS. The adoption of the Plan does not preclude the
adoption by appropriate means of any other incentive plan for employees.
f. EFFECT ON EMPLOYMENT. Nothing contained in the Plan or any agreement
related hereto or referred to herein shall affect, or be construed as
affecting, the terms of employment of any Grant Participants except to
the extent specifically provided herein or therein. Nothing contained in
the Plan or any agreement related hereto or referred to herein shall
impose, or be construed as imposing, an obligation on (i) RII or any
subsidiary to continue the employment of any Grant Participant or (ii)
any Grant Participant to remain in the employ of RII or any subsidiary.
g. TERMINATION OR SUSPENSION OF THE PLAN. The Board of Directors may at any
time suspend or terminate the Plan. The Plan, unless sooner terminated
under Section 12 of the Plan or by action of the Board of Directors,
shall terminate at the close of business on the Termination Date. Options
may not be granted while the Plan is suspended or after it is terminated.
Rights and obligations under any Option granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Option was
granted. The power of the Committee to construe and administer any Option
granted prior to the termination or suspension of the Plan nevertheless
shall continue after such termination or during such suspension.
h. SAVINGS PROVISION. With respect to persons subject to Section 16 of the
Exchange Act, the transactions under the Plan are intended to comply with
all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the
Committee fails so to comply, it shall be deemed null and void to the
extent permitted by law.
i. GOVERNING LAW. The Plan, such Options as may be granted hereunder and
all related matters shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware.
j. PARTIAL INVALIDITY. The invalidity or illegality of any provision herein
shall not be deemed to affect the validity of any other provision.
11. DEFINITIONS
a. "Fair Market Value", as it relates to the Common Stock, shall mean the
average of the high and low sale prices of such Common Stock on the date
such determination is required herein, or if there were no sales on such
date, the average closing bid and asked prices, as reported on the
national securities exchange on which RII's Common Stock is listed or in
the absence of
7
<PAGE>
such listing on the Nasdaq National Market or if such Common Stock is not
at the time listed on a national securities exchange or traded on the
Nasdaq National Market, the value of such Common Stock on such date as
determined in good faith by the Committee.
b. "Disability" shall have the meaning set forth in Section 22(c)(3) of the
Code.
c. "Change of Control" shall be deemed to have occurred if, subsequent to
the Effective Date of this Plan, (A) any "person" (as such term is
defined in Section 13(d) of the Exchange Act) becomes the beneficial
owner, directly or indirectly, of either (x) a majority of the Common
Stock or (y) securities of RII representing a majority of the combined
voting power of RII's then outstanding voting securities, or (B) during
any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of RII, at any time after
the beginning of such period, for any reason, cease to constitute a
majority of the Board of Directors of RII unless the election of each new
director was nominated or ratified by at least two-thirds of the
directors still in office who were directors at the beginning of such two
year period; PROVIDED, HOWEVER, that in the case of Director Participants
and Committee Participants, the failure of a Committee Participant or
Director Participant nominated for re-election by management to be
re-elected in a contested proxy contest also shall constitute a Change of
Control as to such Committee Participant or Director Participant. For the
purposes of the Plan, a Class B Triggering Event (as defined in RII's
Form S-4, Registration No. 33-50733, filed with the Securities and
Exchange Commission) shall not constitute a Change of Control.
d. "Retirement" shall mean the date upon which an Grant Participant, having
attained an age of not less than 59-1/2 or such other age as may be
determined by the Committee in its sole discretion, terminates his
employment with RII or any subsidiary, provided that such Grant
Participant has been employed by RII or any subsidiary.
12. AMENDMENT OF PLAN
The Board of Directors of RII shall have the right to amend, modify, suspend
or terminate the Plan at any time, provided that no amendment shall be made
without stockholder approval which shall (i) increase the total number of shares
of the Common Stock of RII which may be issued and sold pursuant to Options
granted under the Plan (except for increases due to adjustments in accordance
with Section 9), (ii) materially increase the benefits accruing to participants
under the Plan, (iii) decrease the minimum exercise price in the case of an
Incentive Option or (iv) materially modify the provisions of the Plan relating
to eligibility with respect to Options. In no event may the Plan be amended in
any way that would retroactively impair the Committee's discretion. The Board of
Directors shall be authorized to amend the Plan and the Options granted
thereunder (A) to qualify such Options as "incentive stock options" within the
meaning of Section 422 of the Code or (B) to comply with Rule 16b-3 (or any
successor rule) under the Exchange Act. No amendment, modification, suspension
or termination of the Plan, without the consent of the holder thereof, shall
adversely alter or impair any Options previously granted under the Plan.
13. EFFECTIVE DATE
The Plan shall become effective at 9:00 A.M., Atlantic City, New Jersey
time, on the Effective Date, the Plan having been, and having been deemed to be,
approved by a vote of the stockholders of RII by written consent within 12
months before the Effective Date pursuant to section 6.6 of the Bankruptcy Plan.
Subject to the preceding sentence and the right of the Board of Directors to
terminate the Plan at any time pursuant to Section 12 hereof, the Plan shall
remain in effect until the earlier of (i) the date that Options covering all
shares of Common Stock issuable under the Plan have been granted or (ii) the
Termination Date.
8
<PAGE>
APPENDIX B
LIQUIDATION ANALYSIS
<PAGE>
APPENDIX B
RESORTS INTERNATIONAL, INC.
AND GGRI, INC.
NOTES TO ESTIMATED LIQUIDATION VALUE
AS OF OCTOBER 15, 1993
PRINCIPAL ASSETS OF THE DEBTORS
1. The principal assets of RII, other than GRI, and other than those
associated with the Showboat Casino consist of (i) RIH, which owns the Company's
casino gaming, resort and hotel facilities and operations in Atlantic City,
elsewhere herein defined as the Resorts Casino Hotel, (ii) certain real estate
related to RII's Paradise Island business, elsewhere herein defined as the RII
Real Estate Assets, (iii) the U.S. Paradise Island Subsidiaries, (iv) Atlantic
City undeveloped real estate, (v) cash, and (vi) intercompany obligations of
various direct and indirect subsidiaries. RII has pledged all of the capital
stock of RIH, GRI and all RII's other direct and indirect subsidiaries to secure
its obligations under the Old Series Notes. Additionally, RII has pledged the
Resorts Casino Hotel and the Atlantic City undeveloped real estate to secure
such obligations.
2. The principal assets of GRI consist of (i) RIB which through
subsidiaries owns the Company's casino gaming, resort and hotel facilities and
operations and associated real estate in The Bahamas, elsewhere defined herein
as the Paradise Island Business and (ii) the RIH Notes. GRI has guaranteed the
Old Series Notes. The RIH Notes and 66% of the capital stock of RIB have been
pledged by GRI to secure the GRI Guaranty.
KEY ASSUMPTIONS
In estimating the liquidation values of their assets, RII and GRI (the
"Debtors") have made the following assumptions:
1. Liquidation would occur under the direction of a court appointed trustee
in the context of a chapter 7 case.
2. The trustee would complete the sale of all of the Debtors' assets within
six months beginning October 15, 1993.
3. Distributions by the chapter 7 trustee would not be made to creditors
until April 15, 1994 when the sale of the assets is complete.
4. The Resorts Casino Hotel and the Paradise Island Business will be
liquidated as going concerns.
5. In a chapter 7 liquidation, the going concern values of the Resorts
Casino Hotel and the Paradise Island Business would be discounted by potential
acquirors by an adjustment factor attributable to the limited time given to sell
the component businesses, the limited representations and warranties provided by
the trustee in a chapter 7 liquidation, and such other factors and uncertainties
which are likely to give interested purchasers negotiating leverage and may
therefore reduce the potentially realizable value of these assets. Among these
factors and uncertainties is the possibility that a protracted sale process
and/or potential litigation arising in the context of a chapter 7 case could
make it difficult to continue to operate the Resorts Casino Hotel and the
Paradise Island Business as going concerns.
6. The adjustment factor impacting the sale of the Resorts Casino Hotel and
the Paradise Island Business would be a discount of approximately 35% and 40%,
respectively, from the estimated going concern value of these operations.
B-1
<PAGE>
7. A loss of casino licenses or a significant disruption in the operations
could cause the adjustment factor to be higher than the approximately 35% and
40% assumed in the liquidation analysis for the Resorts Casino Hotel and the
Paradise Island Business, respectively.
8. Atlantic City undeveloped real estate is assumed to be sold for $3.3
million which reflects a discount of approximately 35% from what might be
realized over a period of several years time due to the continuing low level of
activity in the Atlantic City real estate market.
9. Excess cash on hand as of April 15, 1994 is estimated to be
approximately $43.3 million and includes cash estimated to be accumulated
through continuing earnings up until that time.
10. The present value as of October 15, 1993 of the proceeds of asset sales
and the amount of excess cash expected to be on hand on April 15, 1994 is
determined using an annual discount rate of 15%.
11. Total liquidation expenses will be $14.2 million, including those of the
trustee, investment bankers retained to sell the Resorts Casino Hotel and the
Paradise Island Business, and legal counsel. Such liquidation expenses include,
but are not limited to the following: trustee expenses -- $8.0 million,
investment banking fees of $2.2 million and legal and other expenses of $4.0
million.
12. In a liquidation, the RIH Notes provide no equity value to GRI because
the RIH Notes are pledged to collateralize the Old Series Notes.
13. In a liquidation, the common equity of RIB owned by GRI provides no
equity value to GRI in view of (i) the pledge of 66% of such common equity to
secure the Old Series Notes and (ii) the GRI Guaranty.
B-2
<PAGE>
RESORTS INTERNATIONAL, INC.
AND GGRI, INC.
ESTIMATED LIQUIDATION VALUE OF KEY OPERATING ASSETS AND CASH
AS OF OCTOBER 15, 1993 ($ MILLIONS)
<TABLE>
<CAPTION>
ESTIMATED
ESTIMATED NET PRESENT VALUE
LIQUIDATION OF LIQUIDATION
ASSETS PROCEEDS PROCEEDS
- -------------------------------------------------------------------------- ----------- -----------------
<S> <C> <C> <C>
Cash...................................................................... $ 43.3 $ 40.4
Resorts Casino Hotel...................................................... 143.2 133.5
Atlantic City Undeveloped Real Estate..................................... 3.3 3.0
Paradise Island Business.................................................. 75.0 69.9
Other..................................................................... 0.2 0.2
----------- -------
Total................................................................. 265.0 247.0
----------- -------
ESTIMATED LIQUIDATION EXPENSES
- --------------------------------------------------------------------------
Trustee Expenses.......................................................... 3.0% 8.0 7.4
Investment Banking Fees................................................... 1.0% 2.2 2.0
Legal & Other Expenses.................................................... 1.5% 4.0 3.8
--
----------- -------
Total................................................................. 14.2 13.2
----------- -------
Total Net Proceeds........................................................ $ 250.8 $ 233.8
----------- -------
----------- -------
</TABLE>
ESTIMATED NET PRESENT LIQUIDATION VALUE OF DISTRIBUTIONS TO CLASSES OF IMPAIRED
AND POTENTIALLY
NON-ACCEPTING CREDITORS AND EQUITY INTEREST HOLDERS(1) AS OF OCTOBER 15, 1993 ($
MILLIONS)
<TABLE>
<CAPTION>
ESTIMATED
NET
PRESENT
VALUE
ESTIMATED OF IMPUTED
CLAIM ESTIMATED LIQUIDATION IMPUTED
AMOUNT LIQUIDATION IMPUTED DISTRIBUTION NPV
CLASS UNDER PLAN TYPE OF CH. 7 CLAIM @ 10/15/93 DISTRIBUTION RECOVERY @ 10/15/93 RECOVERY
- ------------------------- ------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
RII Class 2.............. Old Series Notes (2) $ 482.0 $ 250.8 52.0% $ 233.8 48.5%
RII Class 7 and 8........ Equity--RII Common
Stock and 1990 Stock
Options N/A None N/A None N/A
GRI Class 2.............. General Unsecured--
GRI Guaranty RECOVERY IMPLIED IN RECOVERY OF RII CLASS 2
</TABLE>
<TABLE>
<S> <C>
<FN>
- ------------------------
(1) The GRI Class 4 Claim consists of a single claim held by RII and the GRI
Class 5 Interests consist of the common stock of GRI, all of which is
owned by RII. The GRI Class 4 Claims and the GRI Class 5 Interests will be
voted in favor of the Plan.
(2) Recovery by RII Class 2 claimants may be reduced below that estimated here
to the extent that RII Class 5 Claims share distributions with any RII
Class 2 deficiency claims arising from any assets of RII which are not
subject to the security interests benefitting the RII Class 2 Claims. RII
Class 5 will not be impaired under the Plan. However, RII Class 5 Claims
will not be paid in full in a chapter 7 context, but will rank pari passu
with any RII Class 2 deficiency claims and will obtain recoveries based
upon the level of assets at RII which are not subject to the security
interests benefitting the RII Class 2 Claims.
</TABLE>
B-3
<PAGE>
APPENDIX C
AMENDED RII CERTIFICATE OF INCORPORATION
<PAGE>
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. [ ].
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 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 [ ], consisting of (i) [ ] shares of Preferred Stock,
par value $.01 per share (the "Preferred Stock"), and (ii) [ ] shares of
common stock, consisting of [ ] shares of Common Stock, par value $.01
per share (the "Common Stock"), and [ ] 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.
C-1
<PAGE>
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 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 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
C-2
<PAGE>
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 1123 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 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 and 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 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 V 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
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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
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.
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.
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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. 5:12-1 ET 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 151(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 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 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 120 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 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 of 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.
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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>
[ ] I Common Stock Director
[ ] I Class B Director
[ ] II Common Stock Director
[ ] II Class B Director
[ ] III Common Stock Director
[ ] III Common Stock Director
</TABLE>
D. REMOVAL OF DIRECTORS. Subject to Paragraph F below, any director, may
be removed from office at any time, 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 four directors, who shall be elected by the holders of Common
Stock.
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.
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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.
"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 [ ], 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 [ ], 1994.
"Plan" shall mean the Plan of Reorganization of the Corporation, dated
[ ], 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
OFFICE OF THE PRESIDENT
EXECUTIVE VICE PRESIDENT AND SECRETARY
BY: __________________________________
Matthew B. Kearney
OFFICE OF THE PRESIDENT,
EXECUTIVE VICE PRESIDENT-FINANCE AND TREASURER
[Corporate Seal]
Attest:
By: __________________________________
Christopher D. Whitney
SECRETARY
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APPENDIX D
AMENDED RII BY-LAWS
<PAGE>
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
Board 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 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
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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 hall 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 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
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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 ballot 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 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 determined by the
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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.
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.
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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.
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 may be 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
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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 Corporations 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.
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.
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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: (1) in the case of determination of
stockholders entitled to vote at any meeting of stockholders of 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: (1) 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 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.
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
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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.
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.
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RESORTS INTERNATIONAL, INC.
IMPORTANT
Any holder of Old Series Notes, RII Common Stock or 1990 Stock Options who
wishes to vote with respect to the Plan should complete and sign the applicable
Ballot or Master Ballot in accordance with the instructions set forth in this
Information Statement/Prospectus and return such Ballot or Master Ballot in
accordance with the instructions set forth thereon. See "Solicitation --
Procedures for Voting on the Plan".
SOLICITATION AGENT:
Hill and Knowlton
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<S> <C>
By Hand Delivery or Overnight Courier: By Mail:
Hill and Knowlton Hill and Knowlton
Ballot Tabulation Department P.O. Box 5508
420 Lexington Avenue, 12th Floor Grand Central Station
New York, New York 10017 New York, New York 10164-0552
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TELEPHONE:
(212) 210-8850
ADDITIONAL COPIES
Requests for additional copies of this Information Statement/Prospectus should
be directed to the Solicitation Agent. You also may contact your local broker,
dealer, commercial bank or trust company for assistance concerning the
Solicitation.
