<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1994
REGISTRATION NO. 33-54151
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
AZTAR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 86-0636534
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2390 EAST CAMELBACK ROAD, SUITE 400
PHOENIX, ARIZONA 85016
(602) 381-4100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ROBERT M. HADDOCK
AZTAR CORPORATION
2390 EAST CAMELBACK ROAD, SUITE 400
PHOENIX, ARIZONA 85016
(602) 381-4100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S AGENT FOR SERVICE OF PROCESS)
----------------
COPIES TO:
BRIAN G. CARTWRIGHT, ESQ. ALLAN G. SPERLING, ESQ.
LATHAM & WATKINS CLEARY, GOTTLIEB, STEEN & HAMILTON
633 WEST FIFTH STREET, SUITE 4000 ONE LIBERTY PLAZA
LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10006
(213) 485-1234 (212) 225-2000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
AUGUST 26, 1994
PROSPECTUS
$180,000,000
AZTAR CORPORATION
% SENIOR SUBORDINATED NOTES DUE 2004
The % Senior Subordinated Notes Due 2004 (the "Notes") will be issued by
Aztar Corporation ("Aztar" or the "Company") and will mature on , 2004.
Interest on the Notes will be payable semi-annually on and , beginning
, 1995. The Notes will be redeemable at the election of the Company, in
whole or in part, on or after , 1999, at the redemption prices set forth
herein. Upon a Change of Control (as hereinafter defined), each holder of the
Notes will have the right to require the Company to repurchase such holder's
Notes at par. In addition, upon a Change of Control, the Company will have the
right to redeem the Notes at the redemption prices set forth herein.
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all present and future Senior Indebtedness
(as hereinafter defined) of the Company, will rank pari passu with the
Company's 11% Senior Subordinated Notes Due 2002 (the "11% Notes") (of which
$200 million aggregate principal amount is outstanding) and will be effectively
subordinated to liabilities of the Company's subsidiaries. As of June 30, 1994,
the Company's Senior Indebtedness (as adjusted for the offering of the Notes
and the use of proceeds thereof) was approximately $26 million and the
Company's subsidiaries had aggregate liabilities (including trade payables and
accrued liabilities and excluding amounts guaranteed by the Company) of
approximately $45 million. THERE IS CURRENTLY NO INDEBTEDNESS (AS HEREINAFTER
DEFINED) OF THE COMPANY OUTSTANDING THAT IS SUBORDINATED TO THE NOTES, AND THE
COMPANY HAS NO CURRENT PLANS TO ISSUE ANY INDEBTEDNESS THAT WOULD BE
SUBORDINATED TO THE NOTES.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS TO BE CONSIDERED BY
PURCHASERS OF THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
NEITHER THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD,
THE NEW JERSEY CASINO CONTROL COMMISSION, THE MISSOURI GAMING COMMISSION NOR
THE INDIANA GAMING COMMISSION HAS PASSED UPON THE ACCURACY, ADEQUACY OR
INVESTMENT MERITS OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT COMPANY (1)(2)
<S> <C> <C> <C>
Per Note............................... % % %
Total.................................. $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from , 1994 to the date of delivery.
(2) Before deducting expenses, estimated to be $ .
The Notes are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Notes will be made at the office of Salomon Brothers Inc,
Seven World Trade Center, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1994.
SALOMON BROTHERS INC
BT SECURITIES CORPORATION
CS FIRST BOSTON
The date of this Prospectus is , 1994.
<PAGE>
LOGO
[Ramada Express
Logo]
Ramada Express
Hotel and Casino, [Photo of Ramada Express Exterior--night]
Laughlin, Nevada,
"The Gambling Train
of Laughlin,' was
expanded in 1993 to
1,500 rooms and
50,000 square feet
of casino space.
[Tropicana Logo]
Tropicana Resort
and Casino, "The [Photo of Tropicana Exterior--Night]
Island of Las
Vegas,' is at "The
New Four Corners'
of the Strip.
[TropWorld Logo]
TropWorld Casino
and Entertainment [Photo of TropWorld exterior--Day]
Resort, "The Gaming
World of Atlantic
City,' utilizes a
theme celebrating
the heyday of the
Boardwalk.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (collectively with any
amendments thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Notes offered by
this Prospectus. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto, to which
reference is hereby made. Statements made in this Prospectus as to the contents
of any contract, agreement or other document referred to are not necessarily
complete; with respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to the exhibit
for a more complete description of the matter involved.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports, proxy statements and other information with
the Commission. The Registration Statement and the exhibits thereto filed with
the Commission, as well as periodic reports, proxy statements and other
information filed by the Company with the Commission, may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Company's common stock, par
value $.01 per share (the "Common Stock"), is listed on the New York Stock
Exchange. Such reports, proxy statements and other information concerning the
Company may also be inspected at the offices of the New York Stock Exchange at
20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus: (a) Current Report on Form 8-K
dated July 9, 1993, (b) Annual Report on Form 10-K for the fiscal year ended
December 30, 1993, (c) Proxy Statement dated March 28, 1994 (except the
information set forth under the captions "Board Compensation Committee Report"
and "Comparative Stock Price Performance Graph"), (d) Quarterly Report on Form
10-Q for the fiscal quarter ended March 31, 1994 and (e) Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1994.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering of the Notes (the "Offering") shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of the filing of such documents. Any statement contained
in a document incorporated by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed incorporated document or in
any accompanying prospectus supplement modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents incorporated by reference as a part of the Prospectus and
Registration Statement, other than exhibits to such documents unless such
exhibits are specifically incorporated by reference therein. Requests should be
directed to Aztar Corporation, 2390 East Camelback Road, Suite 400, Phoenix,
Arizona 85016, Attention: Corporate Communications Office, telephone (602) 381-
4111.
3
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
PROSPECTUS SUMMARY
This summary information is qualified in its entirety by the more detailed
information and financial statements (including notes thereto) appearing
elsewhere in this Prospectus.
THE COMPANY
Aztar Corporation ("Aztar" or the "Company") is one of the leading casino
entertainment companies in the United States. The Company operates TropWorld in
Atlantic City, New Jersey, Tropicana in Las Vegas, Nevada and Ramada Express in
Laughlin, Nevada.
The strategy of the Company has been to develop facilities with distinctive
themes that are "must-see" attractions in their respective gaming markets and
provide a full entertainment experience to attract gaming patrons. The Company
targets customers in the high end of the middle market, with particular
emphasis on slot customers.
The Company uses a database marketing system to create a loyal following of
repeat customers in its current markets. This technology will be expanded to
new facilities as they are opened. This marketing approach, which is based on a
combination of computerized card reader technology and a "frequent flier"
marketing concept, allows the Company to control marketing costs and to
optimize the profit contribution of its targeted casino patrons.
The Company believes it is well-positioned to expand its operations as
additional states and local jurisdictions adopt legislation to promote the
development of casino entertainment. Aztar has more than ten years of
experience operating casino entertainment facilities in Las Vegas and Atlantic
City, the two largest gaming markets in the country. Management believes that
its experience in developing and operating a wide range of successful casino
entertainment facilities is a distinct advantage as it enters new markets.
TropWorld
TropWorld Casino and Entertainment Resort ("TropWorld") recalls the heyday of
the Atlantic City Boardwalk piers with their amusement rides, carnival games
and strolling entertainers. The facility encompasses 10 acres and has ocean
beach frontage of 220 yards along the Boardwalk. TropWorld's 92,191-square-foot
casino contains 93 table games and approximately 2,800 slot machines. The
TropWorld complex comprises 1,020 hotel rooms, 80,000 square feet of meeting,
convention and banquet space, a 1,700-seat theatrical showroom, the largest in
Atlantic City, parking facilities for over 2,700 vehicles, gourmet restaurants,
several medium-priced restaurants and a food court, indoor and outdoor swimming
pools, tennis courts, a health and fitness club and a jogging track. The
Company is currently considering the construction of a third hotel tower of
approximately 600 rooms.
Tropicana
Tropicana Resort and Casino ("Tropicana") is located on a 34-acre site on the
southeast corner of Las Vegas Boulevard (the "Strip") and Tropicana Avenue in
Las Vegas, Nevada. Tropicana, which has a tropical island theme and is promoted
as "The Island of Las Vegas," has one of the world's largest swimming pools as
well as a five-acre water park and tropical garden enlivened by a collection of
tropical birds and fish. The casino, which occupies approximately 45,000 square
feet, contains over 1,550 slot machines and over 50 table games. The hotel has
1,907 hotel rooms and suites as well as approximately 100,000 square feet of
convention and exhibit space.
5
<PAGE>
In past years, Tropicana's casino revenue mix was dominated by table games,
particularly premium table games such as baccarat. Management's decision to
emphasize the slot segment and to implement the Company's database marketing
system at Tropicana has resulted in a substantial increase in slot revenue.
The opening of two large casino hotels near Tropicana during the fourth
quarter of 1993 has substantially increased hotel capacity near the
intersection of Tropicana Avenue and the Strip, now known as "The New Four
Corners." The increase in total casino and hotel capacity at this location has
increased the level of activity and visitor traffic around Tropicana.
Pedestrian traffic has been made faster, safer and more convenient as a result
of the recent construction by the State of Nevada of pedestrian skywalks
connecting the four corners of this intersection as well as the construction by
the Company of an additional pedestrian bridge connecting one of the skywalks
directly to the Tropicana casino. Management believes that the increased
activity has stimulated and will continue to stimulate additional walk-in
traffic that provides more opportunities for Tropicana to attract its target
customers and retain them through its database marketing system. There can be
no assurance, however, that the increased competition from these additional
properties will not have an adverse effect on Tropicana.
Ramada Express
Ramada Express Hotel and Casino ("Ramada Express") is located on 28 acres in
Laughlin, Nevada. Laughlin is situated on the Colorado River at Nevada's
southern tip. The facility features a Victorian-era railroad theme, including a
train that carries guests between the parking areas and the casino hotel. In
September 1993, the Company completed a $75 million expansion of Ramada
Express, on schedule and within budget. The expansion of Ramada Express
included a new 1,100-room tower, increasing the total to 1,500 rooms; a casino
expansion of 20,000 square feet, bringing the total to 50,000 square feet; a
1,100-vehicle parking garage, bringing the total parking capacity to 2,300
vehicles; and additional restaurant, special event and retail space. The
expanded casino contains 36 gaming tables and 1,620 slot machines. Since the
expansion, total revenue and operating income have increased significantly. For
the six months ended June 30, 1994, total revenue and operating income were
$42.3 million and $10.3 million, respectively, compared to $24.9 million and
$4.6 million, respectively, for the six months ended July 1, 1993.
New Markets
Aztar's primary efforts in emerging gaming markets are currently taking place
in the riverboat casino markets in Caruthersville, Missouri, and Evansville,
Indiana. The Company executed an agreement in September 1993 with the City of
Caruthersville, Missouri, to operate a casino riverboat, and filed an
application with the Missouri Gaming Commission for a gaming license to operate
the Caruthersville facility. Caruthersville is located on the Mississippi River
approximately 80 miles north of Memphis, Tennessee. Approximately 2.2 million
people live within 100 miles of Caruthersville. In January 1994, the Company
took delivery and began renovation on a vessel intended to be used in
Caruthersville. The Company hopes to begin operations in Caruthersville in
1995. However, commencement of operations is dependent on several factors that
are beyond the Company's control, including the granting of a gaming license by
the Missouri Gaming Commission. The Missouri Gaming Commission has commenced
its formal investigation of the Company's application. In addition, a number of
other approvals would also be required, including those of the U.S. Army Corps
of Engineers and the U.S. Coast Guard. "Games of skill" are permitted in
Missouri; however, as a result of a Missouri Supreme Court decision in early
1994, the use of slot machines and other "games of chance" is currently not
permitted in Missouri. The Company intends to proceed with this project
utilizing electronic machines and gaming tables as approved by the Missouri
Gaming Commission.
6
<PAGE>
Aztar has submitted a proposal to the City of Evansville, Indiana, for a
casino riverboat and has filed an application for a riverboat gaming license
with the Indiana Gaming Commission. The Company was named by the City of
Evansville in June 1994 as its choice to develop and operate the only riverboat
gaming facility that will be permitted in the Evansville market. Evansville,
located on the Ohio River in southwestern Indiana, has 2.5 million people
living within a 100-mile area, which includes a portion of metropolitan
Louisville, Kentucky. The Company and the City of Evansville have signed a
development agreement, and the City of Evansville will endorse the Company's
license request to the Indiana Gaming Commission. In addition, a number of
other approvals would also be required, including those of the U.S. Army Corps
of Engineers and the U.S. Coast Guard. Furthermore, a state trial court has
ruled that portions of the Indiana riverboat gaming law conflict with the state
constitution. Under this ruling, the Indiana Gaming Commission is precluded
from awarding licenses. The trial court decision is being appealed directly to
the Indiana Supreme Court, which is handling the case on an expedited basis.
Oral arguments in the case are currently scheduled for August 30, 1994.
The Company's principal executive offices are located at 2390 East Camelback
Road, Suite 400, Phoenix, Arizona 85016 and its telephone number is (602) 381-
4100.
RISK FACTORS
Prospective purchasers of the Notes should carefully read the specific
factors set forth under "RISK FACTORS" as well as the other information set
forth in this Prospectus.
7
<PAGE>
THE OFFERING
Issuer.......................... Aztar Corporation.
Securities Offered.............. $180 million principal amount of % Senior
Subordinated Notes Due 2004 (the "Notes"). The
Notes will be general unsecured obligations of
the Company issued pursuant to an Indenture
dated as of , 1994 (the "Indenture") by
and between the Company and American Bank
National Association, as trustee.
Interest........................ Interest will accrue and be paid in cash on
each and , commencing , 1995, until
maturity, at a rate of % per annum.
Subordination...................
The Notes will be subordinated in right of
payment to all present and future Senior
Indebtedness (as hereinafter defined) of the
Company and will be effectively subordinated
to liabilities of the Company's subsidiaries.
As of June 30, 1994, the Company's Senior
Indebtedness (as adjusted for the Offering and
the use of proceeds thereof) was approximately
$26 million and the Company's subsidiaries had
aggregate liabilities (including trade
payables and accrued liabilities and excluding
amounts guaranteed by the Company) of
approximately $45 million. In addition, the
Notes will rank pari passu in right of payment
to the 11% Notes. As of June 30, 1994, $200
million principal amount of the 11% Notes was
outstanding. There is currently no
Indebtedness (as hereinafter defined) of the
Company outstanding that is subordinated to
the Notes.
Optional Redemption............. The Notes will be redeemable at the option of
the Company, in whole or part, at any time on
or after , 1999 at the redemption prices
set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption.
Special Redemption.............. The Notes will be subject to the redemption
requirements imposed by gaming laws and
regulations in the States of New Jersey and
Nevada, which are included in the Company's
Restated Certificate of Incorporation, and to
any redemption requirements of any other
jurisdictions in which the Company may have
future gaming operations.
Repurchase or Redemption Upon a
Change of Control..............
If a Change of Control (as hereinafter
defined) occurs, each holder of the Notes will
have the right to require the Company to
repurchase such holder's Notes at par, plus
accrued and unpaid interest, if any, to the
date of repurchase, subject to certain
conditions described herein. In addition, upon
a Change of Control, the Company will have the
right to redeem the Notes at the redemption
prices set forth herein, plus accrued and
unpaid interest, if
8
<PAGE>
any, to the date of redemption. See
"DESCRIPTION OF THE NOTES--Certain
Definitions--Change of Control." Under the
terms of certain Indebtedness of the Company
and its subsidiaries, the holders thereof may
have the right to require repayment of such
Indebtedness or its acceleration upon a Change
of Control. The Company's ability to
repurchase the Notes upon a Change of Control
will depend upon the Company having sufficient
funds available to satisfy its other
obligations, including Senior Indebtedness, as
well as the Company's obligations under the
Notes.
Principal Covenants............. The Indenture will contain certain covenants
that, among other things, will restrict the
ability of the Company and its subsidiaries to
incur additional Indebtedness or to grant
liens on their assets, restrict the ability of
the Company to pay dividends or to engage in
mergers, consolidations or sales of assets,
prohibit the Company from incurring any
Indebtedness that is senior to the Notes and
subordinate to Senior Indebtedness and
prohibit certain subsidiaries from restricting
their ability to make certain payments to the
Company and to other subsidiaries of the
Company.
Use of Proceeds................. The net proceeds from the sale of the Notes
will be approximately $174 million. These
funds will be used to redeem the $170 million
principal amount of outstanding 13 1/2% First
Mortgage Notes Due 1996 (the "First Mortgage
Notes") of Aztar Mortgage Funding, Inc., a
wholly owned, special purpose subsidiary of
the Company ("Mortgage Funding").
9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following table summarizes selected consolidated financial information of
the Company and its subsidiaries for the five fiscal years ended December 30,
1993 and the six months ended June 30, 1994 and July 1, 1993. The statement of
operations data and the balance sheet data are derived from the consolidated
financial statements of the Company. The unaudited data for the six-month
periods reflect all adjustments, such adjustments being normal recurring
accruals, which are necessary, in the opinion of management, for the fair
presentation of the results of such periods; such interim results, however, may
not be indicative of the results for the full year.
The Company was incorporated in 1989 to operate the gaming business (the
"Gaming Business") of Ramada Inc. ("Ramada"), which was transferred to the
Company, along with certain other assets and liabilities of Ramada, in the
restructuring of Ramada (the "Restructuring"). For accounting purposes the
Company is treated as the continuing accounting entity which is the successor
to the historical Ramada and which has discontinued the hotel business (the
"Hotel Business") and the restaurant business (the "Restaurant Business"). This
treatment differs from the treatment of the Restructuring for federal income
tax purposes.
The consolidated financial information is not necessarily indicative of the
Company's future results of operations or financial condition. The information
set forth below should be read in conjunction with "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION" and the Company's
consolidated financial statements and notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
------------------ ------------------------------------------------
JUNE 30, JULY 1,
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT FOR RATIOS)
STATEMENT OF OPERATIONS
DATA:
Revenues................ $266,313 $253,103 $518,762 $512,045 $481,285 $515,060 $522,255
Operating income (loss). 35,644 10,386 37,419 32,609 13,654 (3,574) (33,812)
Interest income......... 1,126 22,985 24,172 28,655 26,245 28,927 22,766
Interest expense........ (23,582) (22,822) (45,363) (31,132) (32,101) (33,407) (43,716)
Income (loss) from
continuing operations
before extraordinary
items and cumulative
effect of accounting
change................. 11,134 5,490 11,382 16,378 2,708 (15,922) (47,689)
Net income (loss)....... 11,134 5,490 11,382 19,805 6,498 (14,959) 79,441
Ratio of earnings to
fixed charges.......... 1.38x 1.19x 1.15x 1.45x 1.06x 0.78x 0.22x
Fixed charges in excess
of earnings............ 14,059 61,172
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 30,258 $ 78,384 $ 39,551 $100,403 $ 77,117 $ 74,132 $ 98,966
Total assets............ 873,984 856,171 877,171 849,565 638,474 641,905 678,476
Long-term debt.......... 393,966 376,926 404,086 378,058 176,693 180,391 181,102
Shareholders' equity.... 357,846 341,363 346,988 333,749 318,900 312,771 338,528
OTHER DATA:
EBITDR*................. $ 58,740 $ 47,649 $ 97,818 $106,941 $ 89,038 $ 67,443 $ 57,656
Net cash provided by
(used in) operating
activities............. 30,570 23,969 50,325 31,783 39,172 15,682 34,468
Net cash provided by
(used in) investing
activities............. (29,123) (45,770) (145,251) (198,720) (27,141) (24,709) (128,279)
Net cash provided by
(used in) financing
activities............. (10,740) (218) 34,074 190,223 (9,046) (15,807) 33,027
Capital expenditures.... 26,181 41,941 77,804 20,607 18,400 21,078 116,382
</TABLE>
- --------
* EBITDR means operating income before net rent plus depreciation and
amortization. EBITDR should not be construed as an alternative to operating
income (as determined in accordance with generally accepted accounting
principles) as an indicator of the Company's operating performance, or to
cash flows from operating activities (as determined in accordance with
generally accepted accounting principles) as a measure of liquidity. EBITDR
information has been included to facilitate comprehension of financial
covenants in the Indenture which are based, in part, on EBITDR.
10
<PAGE>
RISK FACTORS
Before making a decision to purchase any of the Notes, prospective purchasers
should carefully consider the following factors.
LEVERAGE
The Company has substantial fixed charges arising from debt service and
rental payment obligations. As of June 30, 1994, the Company had approximately
$397 million of total Indebtedness. After giving effect to the offering and the
use of net proceeds therefrom, the Company's total outstanding Indebtedness
will increase to approximately $407 million. All of the currently outstanding
debt obligations are required to be retired prior to the maturity of the Notes.
Those debt obligations include $200 million aggregate principal amount of the
11% Notes and $170 million principal amount of the First Mortgage Notes. The
Company plans to use the net proceeds from the sale of the Notes to redeem the
First Mortgage Notes. In addition, the Company has a $50 million credit
facility (of which $25 million was outstanding on June 30, 1994) arranged in
connection with the expansion of Ramada Express that was completed in September
1993, which will mature prior to the maturity of the Notes. The Company is
currently negotiating with a group of banks to enter into an approximately $212
million reducing revolving credit facility maturing on December 31, 1999 (the
"Proposed Credit Facility"). The Company expects to use funds provided by the
Proposed Credit Facility to repay the $25 million outstanding under the $50
million credit facility, which will then be terminated. The remaining funds
under the Proposed Credit Facility would be available for general corporate
purposes, including to fund the expansion of the Company's existing businesses
and to fund the Company's development of businesses in new gaming
jurisdictions, including the properties at Caruthersville and Evansville.
Substantially all the Company's properties are currently or will be pledged as
collateral under long-term debt agreements, including the Proposed Credit
Facility.
As of June 30, 1994, there was approximately $73 million of bank financing
outstanding of Tropicana Enterprises (as hereinafter defined), the partnership
that owns the land and improvements constituting Tropicana, which, among other
things, requires quarterly payments of $170,000 and a final payment of $71
million upon maturity in 1996. Hotel Ramada of Nevada ("HRN"), a wholly-owned
subsidiary of the Company, leases Tropicana pursuant to the Tropicana Lease (as
hereinafter defined). HRN's lease payments under the Tropicana Lease finance
the payments required under the Tropicana Loan, and certain property of HRN,
including furniture, fixtures and equipment, is pledged as collateral for the
Tropicana Loan pursuant to the Tropicana Lease. The Company has guaranteed the
performance of HRN's obligations under the Tropicana Lease, including the
payment of rent. See "CERTAIN CONTRACTUAL ARRANGEMENTS." Concurrently with
entering into the Proposed Credit Facility, the same group of banks is expected
to enter into an approximately $73 million term loan with Tropicana Enterprises
maturing on December 31, 1999, which will refinance the Tropicana Loan (as
hereinafter defined). There can be no assurance that the Proposed Credit
Facility or the term loan will be completed, or if completed, will be in the
amounts or have the terms currently contemplated.
The Company's ability to service its debt and rental obligations, including
the Notes, or to refinance its obligations, will be dependent upon the future
performance of the Company's operations, in particular those of TropWorld. This
performance will be influenced by prevailing economic conditions and
competitive and other factors, many of which are beyond the Company's control.
SUBORDINATION
The Notes will be subordinated in right of payment to all present and future
Senior Indebtedness of the Company (approximately $26 million at June 30, 1994
as adjusted for the Offering and the use of proceeds thereof). There is
currently no Indebtedness of the Company outstanding that is subordinated
11
<PAGE>
to the Notes. Therefore, in the event of bankruptcy, liquidation or
reorganization of the Company, the assets of the Company will be available to
pay obligations on the Notes and the 11% Notes only after all Senior
Indebtedness has been paid in full, and there may not be sufficient assets
remaining to pay any or all amounts due on the Notes then outstanding. In
addition, substantially all of the remaining Indebtedness of the Company, as
well as Indebtedness of Tropicana Enterprises, is secured by assets of the
Company's subsidiaries. The Notes will be general unsecured obligations of the
Company. In the event of any payment or distribution of assets of the Company
in any foreclosure, dissolution, winding up, liquidation or reorganization, the
holders of secured Indebtedness will also have a secured prior claim with
respect to substantially all of the assets of the Company and its subsidiaries.
The operations of the Company are conducted through its subsidiaries and,
therefore, the Company is dependent on the earnings and cash flow of its
subsidiaries to meet its debt obligations, including its obligations with
respect to the Notes. Because the assets of the Company's subsidiaries
constitute a substantial portion of the assets of the Company, and because
these subsidiaries do not guaranty the payment of principal and interest on the
Notes, the Notes will be effectively subordinated in right of payment to
liabilities of the Company's subsidiaries. As of June 30, 1994, the Company's
subsidiaries had aggregate liabilities (including trade payables and accrued
liabilities and excluding amounts guaranteed by the Company) of approximately
$45 million.
In the event of a Change of Control, each holder of Notes will have the right
to require the Company to repurchase such holder's Notes at par, plus accrued
interest. Under the terms of certain Indebtedness of the Company, the holders
thereof may require repayment or its acceleration upon a Change of Control. The
subordination of the Notes may limit the ability of the Company to repurchase
the Notes, depending upon the funds available to the Company at such time. See
"DESCRIPTION OF THE NOTES--Repurchase or Redemption Upon a Change of Control."
DEPENDENCE ON RESULTS OF TROPWORLD
Approximately 63% and 57%, respectively, of the Company's consolidated
revenues for the year ended December 30, 1993 and for the six months ended June
30, 1994 were derived from the operations of TropWorld in Atlantic City, New
Jersey. Because of TropWorld's importance to the Company's consolidated
operating results, poor performance at TropWorld could have a material adverse
effect on the Company. TropWorld experiences seasonal fluctuations in casino
play that management believes are typical of casino hotel operations in
Atlantic City. Operating results indicate that casino play is seasonally higher
from May through October; consequently, the Company's revenues during the first
and fourth quarters have generally been lower than for the second and third
quarters, and from time to time the Company has experienced losses in the first
and fourth quarters. Because TropWorld's operating results are especially
dependent upon operations in the summer months, any event that adversely
affects the operating results of TropWorld during such period could have a
material adverse effect on the Company's operations and financial condition.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION--Operating Results."
COMPETITION
Although the Company has been able to compete successfully in its gaming
markets in the past, there can be no assurance that the Company will be able to
continue to compete successfully in these markets.
The Company faces intense competition in each of the markets in which its
gaming facilities are located from other companies in the gaming industry, some
of which have significantly greater financial resources than the Company. Such
competition results, in part, from the geographic concentration of competitors.
All of the Company's casinos primarily compete with other casinos in their
immediate
12
<PAGE>
geographic area and, to a lesser extent, with casinos in other locations,
including Native American lands, and on cruise ships and riverboats, and with
other forms of legalized gaming in the United States, including state sponsored
lotteries, off-track wagering and card parlors. Certain states have recently
legalized, and several other states are currently considering legalizing,
casino gaming in specific geographic areas within those states. Legalization of
large-scale, unlimited casino gaming in or near any major metropolitan area or
increased gaming in other areas could have an adverse economic impact on the
business of any or all of the Company's gaming facilities. In particular, the
Atlantic City market faces competition from the legalization of gaming on
Native American lands in Connecticut and the possibility of competition from
the potential legalization of casino gaming in Delaware, Maryland, New York and
Pennsylvania.
Three major casino hotels recently have been constructed on the Strip. Two of
the new casinos, the 5,000-room MGM Grand and Circus Circus' 2,500-room Luxor,
are located adjacent to Tropicana near the intersection of Tropicana Avenue and
the Strip. The third casino, Mirage's 3,000-room Treasure Island, is located in
the middle of the Strip. These additional casinos have added a total of
approximately 10,500 rooms to an existing Las Vegas market base of
approximately 77,000 rooms, representing an increase of 14%. In addition, there
has been a significant increase in room supply and casino space in recent
years, including the opening of the 3,000-room Mirage in November 1989 and the
4,000-room Excalibur in June 1990. While the management of the Company believes
that MGM Grand and Luxor have stimulated and will continue to stimulate
additional walk-in traffic, there can be no assurance that the increased
competition from the new casinos will not have an adverse effect on Tropicana.
In 1994, plans were announced for several new projects in Las Vegas, including
three new casino resorts on the Strip that are expected to add approximately
335,000 square feet of casino space and 8,000 hotel rooms. Additional projects
have been announced in the Laughlin, Nevada market and expansion plans have
been announced in Atlantic City, New Jersey. See "BUSINESS--Competition and
Seasonality--Competition."
NEW GAMING JURISDICTIONS
The Company intends to continue to evaluate and pursue new gaming
opportunities in current and emerging markets, potentially including land-
based, dockside, riverboat and Indian gaming. The realization of such
opportunities is dependent in part on the legalization of casino gaming in
various states and the establishment of gaming on Native American lands. The
recent trend toward legalization of casino gaming may not continue. Legislation
relating to gaming has failed to pass in the legislatures of a number of
states. The Supreme Court of Missouri recently held that certain provisions of
the Missouri Gaming Law are invalid under the Missouri State Constitution, and
an Indiana state trial court has ruled that portions of the Indiana riverboat
gaming law conflict with the state constitution. See "BUSINESS--New Markets"
and "REGULATION--Regulation and Licensing--Missouri" and""--Regulation and
Licensing--Indiana."
The Company is pursuing potential gaming opportunities in certain
jurisdictions where gaming has recently been legalized, as well as
jurisdictions where gaming is not yet legalized. There can be no assurance that
legislation to legalize gaming will be enacted in any additional jurisdictions,
that any properties in which the Company may have invested will be compatible
with any gaming legislation so enacted, that legalized gaming will continue to
be authorized in any jurisdiction or that the Company will be able to obtain
the required licenses in any jurisdiction. Furthermore, competition for the
development of new gaming opportunities has intensified as established and
newly organized gaming companies compete for a limited number of sites and
licenses. There can be no assurance that attractive opportunities to develop
new gaming operations will be available to the Company or that the Company will
be able to recover its investment in any such opportunity. See "BUSINESS--New
Markets."
13
<PAGE>
CONSTRUCTION AND OPERATIONAL RISKS
Any new facilities opened by the Company will be subject to the many risks
inherent in the establishment of a new business enterprise, including
unanticipated design, construction, regulatory and operating problems, and the
significant risks commonly associated with implementing a marketing strategy in
new markets.
The Company has taken delivery and begun renovation of a boat intended to be
used for its proposed facility in Caruthersville, and construction of a boat
intended to be used for its proposed facility in Evansville has commenced. At
this time, the anticipated costs and completion dates of these projects are
based on the Company's estimates, and such cost estimates and projected
completion dates may change significantly as the projects progress. In
addition, each of these projects entails significant construction risks,
including shortages of materials or skilled labor, unforeseen environmental or
engineering problems, work stoppages, weather interference, floods,
unanticipated cost increases and other problems, any of which could have a
material adverse effect on the projects. While the Company expects that the
funds available under the Proposed Credit Facility will be sufficient to fund
the Company's currently planned expansion projects, there can be no assurance
that the Company will be able to obtain additional financing if the cost of
these projects increases substantially beyond the Company's current estimates.
The operation of such facilities may also be subject to additional risks.
Notable differences may exist between the operation of the Company's existing
land-based facilities and the operation of the Company's proposed riverboat
facilities. For example, riverboat gaming in Missouri and Indiana may be
subject to different gaming regulations and legislation from that which exists
in Nevada and New Jersey. In addition, riverboat facilities are subject to
operational disruptions, including casualty, mechanical failure, extended or
extraordinary maintenance, periodic U.S. Coast Guard inspection and flood or
other severe weather conditions.
LACK OF PUBLIC MARKET FOR THE NOTES
Prior to this offering, there has not been any market for the Notes, and
there can be no assurance as to the liquidity of any markets that may develop
for the Notes, the ability of holders of the Notes to sell their Notes, or the
prices at which holders of the Notes may be able to sell their Notes. Future
trading prices of the Notes will depend upon many factors, including, among
other things, prevailing interest rates, the Company's consolidated operating
results, and the market for similar securities, which market is subject to
various pressures, including, but not limited to, fluctuating interest rates.
The Company does not presently intend to list the Notes on a national
securities exchange, although it may apply to list the Notes in the future. The
Company has been advised by Salomon Brothers Inc, BT Securities Corporation and
CS First Boston Corporation (collectively, the "Underwriters") that the
Underwriters intend to make a market in the Notes; however, none of the
Underwriters is obligated to do so, and any market making activities may be
discontinued at any time without notice.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be approximately $174
million. The Company will loan the net proceeds from the sale of the Notes plus
additional funds to Mortgage Funding. Such funds will be used by Mortgage
Funding to redeem the $170 million principal amount of outstanding First
Mortgage Notes at a redemption price of 100% of principal amount plus accrued
interest to the redemption date. The First Mortgage Notes bear interest at a
rate of 13 1/2% and have a maturity date of September 15, 1996.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table summarizes selected consolidated financial information of
the Company and its subsidiaries for the five fiscal years ended December 30,
1993 and the six months ended June 30, 1994 and July 1, 1993. The statement of
operations data and the balance sheet data are derived from the consolidated
financial statements of the Company. The unaudited data for the six-month
periods reflect all adjustments, such adjustments being normal recurring
accruals, which are necessary, in the opinion of management, for the fair
presentation of the results of such periods; such interim results, however, may
not be indicative of the results for the full year.
The Company was incorporated in 1989 to operate the Gaming Business of
Ramada, which was transferred to the Company, along with certain other assets
and liabilities of Ramada, in the Restructuring. For accounting purposes the
Company is treated as the continuing accounting entity which is the successor
to the historical Ramada and which has discontinued the Hotel Business and the
Restaurant Business. This treatment differs from the treatment of the
Restructuring for federal income tax purposes.
The consolidated financial information is not necessarily indicative of the
Company's future results of operations or financial condition. The information
set forth below should be read in conjunction with "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION" and the Company's
consolidated financial statements and notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
------------------ ------------------------------------------------
JUNE 30, JULY 1,
1994 1993 1993 1992 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Revenues(a)............ $266,313 $253,103 $518,762 $512,045 $481,285 $515,060 $522,255
======== ======== ======== ======== ======== ======== ========
Operating income
(loss)(b)(c).......... $ 35,644 $ 10,386 $ 37,419 $ 32,609 $ 13,654 $ (3,574) $(33,812)
Interest income(c)..... 1,126 22,985 24,172 28,655 26,245 28,927 22,766
Interest expense....... (23,582) (22,822) (45,363) (31,132) (32,101) (33,407) (43,716)
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations
before other items,
income taxes,
extraordinary items
and cumulative effect
of accounting change.. 13,188 10,549 16,228 30,132 7,798 (8,054) (54,762)
Equity in
unconsolidated
partnerships' losses.. (1,928) (1,929) (3,822) (4,125) (5,030) (5,911) (6,436)
Minority interests(d).. -- -- -- -- -- (994) (986)
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations
before income taxes,
extraordinary items
and cumulative effect
of accounting change.. 11,260 8,620 12,406 26,007 2,768 (14,959) (62,184)
Income taxes........... (126) (3,130) (1,024) (9,629) (60) (963) 14,495
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations
before extraordinary
items and cumulative
effect of accounting
change................ 11,134 5,490 11,382 16,378 2,708 (15,922) (47,689)
Discontinued
operations(e)......... -- -- -- 1,262 2,553 -- 127,130
Extraordinary items(f). -- -- -- (5,335) 1,237 963 --
Cumulative effect of
accounting change(g).. -- -- -- 7,500 -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)...... $ 11,134 $ 5,490 $ 11,382 $ 19,805 $ 6,498 $(14,959) $ 79,441
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges(h)...... 1.38x 1.19x 1.15x 1.45x 1.06x 0.78x 0.22x
======== ======== ======== ======== ======== ======== ========
Fixed charges in excess
of earnings........... $ 14,059 $ 61,172
======== ========
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 30,258 $ 78,384 $ 39,551 $100,403 $ 77,117 $ 74,132 $ 98,966
Total assets........... 873,984 856,171 877,171 849,565 638,474 641,905 678,476
Long-term debt......... 393,966 376,926 404,086 378,058 176,693 180,391 181,102
Preferred stock........ 4,323 3,460 3,905 2,998 2,059 1,056 --
Shareholders' equity... 357,846 341,363 346,988 333,749 318,900 312,771 338,528
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
----------------- ----------------------------------------------
JUNE 30, JULY 1,
1994 1993 1993 1992 1991 1990 1989
-------- ------- -------- -------- ------- ------- --------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
EBITDR(i).............. $58,740 $47,649 $ 97,818 $106,941 $89,038 $67,443 $ 57,656
Net cash provided by
(used in) operating
activities............ 30,570 23,969 50,325 31,783 39,172 15,682 34,468
Net cash provided by
(used in) investing
activities............ (29,123) (45,770) (145,251) (198,720) (27,141) (24,709) (128,279)
Net cash provided by
(used in) financing
activities............ (10,740) (218) 34,074 190,223 (9,046) (15,807) 33,027
Capital expenditures... 26,181 41,941 77,804 20,607 18,400 21,078 116,382
</TABLE>
NOTES TO SELECTED CONSOLIDATED FINANCIAL INFORMATION
(a) In 1990, the Company realized a $6,828,000 pretax gain on the sale of a
leasehold interest in the Tropicana golf course.
(b) In 1990, operating income reflects a $34,338,000 pretax expense resulting
from the conclusion of litigation commenced against Ramada in connection
with the 1979 acquisition of Tropicana.
(c) In July 1993, the Company acquired the partnership interests in Ambassador
Real Estate Investors, L.P. ("AREI") and Ambassador General Partnership
("AGP"). AREI owned a 99.9% general partnership interest in AGP, which
acquired a substantial interest in TropWorld in a sale-leaseback
transaction in 1984. Cash paid by Aztar and notes receivable from AGP were
replaced on Aztar's balance sheet by the assets acquired, which consisted
primarily of building and equipment. Most of the reduction in Aztar
interest income from the replacement of the AGP notes receivable is offset
by a reduction in rent expense. Aztar's net income is affected negatively
primarily by an increase in depreciation expense.
(d) Minority interests were eliminated in 1991 when the Company redeemed the
outstanding shares of Convertible Class A Preferred Stock of Ramada New
Jersey Holdings Corporation, a subsidiary of the Company.
(e) In 1989, the Company disposed of its hotel and restaurant businesses and
the following items are related to those discontinued operations. In 1992,
the Company reached a settlement with Canadian tax authorities in relation
to the 1988 and 1989 income tax returns of Ramada and received a refund of
$1,262,000. The amount in 1991 represents income tax benefits resulting
from the settlement of certain income tax issues related to the
discontinued operations. The amount in 1989 is the combined net gain on
disposal of the Restaurant Business and the Hotel Business and is
presented net of an income tax provision of $31,528,000.
(f) In connection with the AGP debt redemption in 1992, the Company paid a
prepayment premium and expensed its remaining deferred financing costs
(see Notes 5 and 15 to the Consolidated Financial Statements of the
Company for the year ended December 30, 1993). These items were reflected
as an extraordinary loss of $5,335,000, net of an income tax benefit of
$2,749,000. The Company has a net operating loss carryforward from 1989. A
portion of the tax benefit of the 1989 loss was offset against the 1991
and 1990 provisions for income taxes as an extraordinary item because the
tax benefit of the 1989 loss could not have been recorded previously.
(g) In February 1992, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes ("SFAS 109"), which superseded Statement of Financial Accounting
Standards No. 96 with the same title ("SFAS 96"). SFAS 96 was never
adopted by the Company. The Company adopted the provisions of SFAS 109 in
the first quarter of 1992 and elected not to restate prior year financial
statements. The effect from prior years of adopting SFAS 109 as of the
beginning of 1992 was a net deferred income tax benefit of $7,500,000.
(h) For purposes of determining the ratio of earnings to fixed charges, the
term "earnings" represents income (loss) from continuing operations before
income taxes, extraordinary items and cumulative effect of accounting
changes, plus fixed charges excluding capitalized interest. The term
"fixed charges" represents interest expense (including amortization of
debt issuance expense), capitalized interest and the portion of operating
lease rental expense considered to be representative of an interest
factor.
(i) EBITDR means operating income before net rent plus depreciation and
amortization. EBITDR should not be construed as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles) as an indicator of the Company's operating
performance, or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) as a measure of
liquidity. EBITDR information has been included to facilitate
comprehension of financial covenants in the Indenture which are based, in
part, on EBITDR.
16
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
as of June 30, 1994, and as adjusted to give effect to the sale of the Notes
and the application of the net proceeds therefrom as set forth in "USE OF
PROCEEDS." See the consolidated financial statements of the Company included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1994
------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents................................... $ 30.3 $ 28.0
====== ======
Current maturities of long-term debt........................ $ 2.5 $ 0.5
------ ------
Long-term debt (excluding current portion)
13 1/2% First Mortgage Notes Due 1996(a).................. 167.3 --
11% Senior Subordinated Notes Due 2002.................... 200.0 200.0
% Senior Subordinated Notes Due 2004.................... -- 180.0
Revolving credit facility (floating rate); matures June
30, 1996................................................. 25.0 25.0
Other mortgage loans; 7%; maturities to 1999.............. 0.7 0.7
Notes payable, other; 7%; maturities to 1999.............. 0.1 0.1
Obligations under capital leases.......................... 0.9 0.9
------ ------
Total long-term debt...................................... 394.0 406.7
------ ------
Total debt.............................................. 396.5 407.2
Preferred stock............................................. 4.3 4.3
Shareholders' equity(b)..................................... 357.8 355.1
------ ------
Total capitalization.................................... $758.6 $766.6
====== ======
</TABLE>
- --------
(a) Represents $170 million principal amount outstanding less current maturity
of $2.0 million and unamortized discount of $0.7 million.
(b) The reduction reflects unamortized debt issuance costs and unamortized
discount of the 13 1/2% First Mortgage Notes Due 1996 net of income tax
benefit.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
OPERATING RESULTS
The following table sets forth the Company's revenues, operating expenses and
operating income on a consolidated basis and portions thereof generated by each
of the Company's three casino properties.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
---------------- ----------------------
JUNE 30, JULY 1,
1994 1993 1993 1992 1991
-------- ------- ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUES:
TropWorld............................ $151.7 $162.3 $327.7 $334.3 $310.3
Tropicana............................ 72.3 65.9 134.9 130.9 129.4
Ramada Express....................... 42.3 24.9 56.2 46.8 41.6
------ ------ ------ ------ ------
Consolidated....................... 266.3 253.1 518.8 512.0 481.3
OPERATING EXPENSES:
TropWorld............................ $128.4 $155.3 $294.2 $306.6 $298.1
Tropicana............................ 65.5 62.8 127.7 126.6 126.2
Ramada Express....................... 32.0 20.3 50.7 38.1 35.6
Corporate............................ 4.8 4.3 8.8 8.1 7.7
------ ------ ------ ------ ------
Consolidated....................... 230.7 242.7 481.4 479.4 467.6
OPERATING INCOME:
TropWorld............................ $ 23.3 $ 7.0 $ 33.5 $ 27.7 $ 12.2
Tropicana............................ 6.8 3.1 7.2 4.3 3.2
Ramada Express....................... 10.3 4.6 5.5 8.7 6.0
Corporate............................ (4.8) (4.3) (8.8) (8.1) (7.7)
------ ------ ------ ------ ------
Consolidated....................... 35.6 10.4 37.4 32.6 13.7
</TABLE>
Six Months 1994 Versus Six Months 1993
The Company's consolidated revenues for the first half of 1994 were $266.3
million, a 5% increase over $253.1 million for the first half of 1993, as
increases in total revenues at Ramada Express and Tropicana more than offset a
decrease in total revenues at TropWorld. The primary reason for the increase in
consolidated revenues was due to the major expansion completed in September
1993 of the Ramada Express facility. Consolidated operating income was $35.6
million in the 1994 six-month period compared with $10.4 million in the 1993
six-month period. The primary reason for the increase in consolidated operating
income was a reduction in net rent at TropWorld. This reduction was principally
caused by the purchase in July 1993 of the partnership interests in AREI and
AGP. AREI owned a 99.9% general partnership interest in AGP, which acquired a
substantial interest in TropWorld in a sale-leaseback transaction in 1984. The
reduction in consolidated net rent was partially offset by an increase in
consolidated depreciation and amortization that was caused in large part by
this purchase, combined with higher depreciation and amortization at Ramada
Express due to the major expansion of that facility. The Ramada Express
expansion was the primary cause for an increase in the consolidated utilities
expense in the 1994 six-month period. Consolidated repairs and maintenance
expense was lower in the 1994 six-month period compared to last year's six-
month period primarily due to a reduction in the number of special facility
maintenance projects at TropWorld. The consolidated provision for doubtful
accounts was higher in the 1994 six-month period, due in part to a favorable
18
<PAGE>
adjustment in the 1993 six-month period in connection with a large account
receivable at TropWorld. In addition, at TropWorld, there was a small decline
in the collection rate on accounts receivable in the 1994 six-month period
compared to the 1993 six-month period. Consolidated casino costs were lower in
the first half of 1994 compared to the same period last year, largely as a
result of a reduction in coin redemptions and complimentaries at TropWorld.
Consolidated interest income was $21.9 million lower in the 1994 six-month
period compared to the 1993 six-month period, principally as a result of the
replacement on Aztar's balance sheet of the AGP notes receivable with the
assets acquired in the AREI/AGP acquisition.
For a discussion of income taxes, refer to Note 4 to the Consolidated
Financial Statements of the Company for the six months ended June 30, 1994.
Ramada Express. At Ramada Express, revenues and operating income for the 1994
six-month period increased substantially over last year's six-month period due
to the major expansion of that facility completed in September 1993. Total
revenues were $42.3 million for the first half of 1994, a 70% increase over
$24.9 million for the first half of 1993, reflecting increases in all revenue
components. Hotel occupancy was 91% on a 1,500-room base for the 1994 first
half compared to 95% on a 400-room base for the 1993 first half.
Operating income was $10.3 million in the 1994 six-month period compared to
$4.6 million in last year's six-month period, a 122% increase. Operating income
is after net rent and depreciation and amortization expenses. Net rent was
insignificant in both six-month periods. As a result of the expanded facility,
depreciation and amortization increased to $3.7 million in the 1994 six-month
period from$2.1 million in the 1993 six-month period.
Tropicana. Total revenues at Tropicana were $72.3 million in the first half
of 1994, up 10% from $65.9 million in the first half of 1993. The increase in
revenues reflects significant pedestrian walk-in business being generated by
the new properties recently opened at the intersection of Las Vegas Boulevard
and Tropicana Avenue, commonly referred to as The New Four Corners of Las
Vegas.
Rooms revenue was 22% higher in the 1994 six-month period compared to the
1993 six-month period principally because of higher room rates and higher
occupancies, combined with a reduction in the use of complimentary rooms as a
means of promoting casino activity. The higher hotel occupancies, combined with
the additional pedestrian walk-in business mentioned previously, caused a 14%
increase in food and beverage revenue.
Tropicana's operating income improved 122% to $6.8 million for the first half
of 1994 from $3.1 million for the first half of 1993. Operating income is after
net rent and depreciation and amortization expenses. Net rent was $3.8 million
in the 1994 six-month period versus $3.4 million in the 1993 six-month period.
Depreciation and amortization was $3.1 million in the 1994 six-month period
compared to $3.2 million in the 1993 six-month period. Total costs and expenses
increased by a modest 4% in comparison to the 10% increase in total revenues.
TropWorld. Total revenues at TropWorld were $151.7 million in the 1994 six-
month period compared to $162.3 million in the 1993 six-month period, a 7%
decrease that was primarily the result of lower casino revenue. The decline in
casino revenue was caused by a decrease in coin redemptions in this year's
first half compared to last year's first half. In addition, there was a
reduction in the use of complimentary rooms and food and beverage service as a
means of promoting casino activity. Severe weather conditions in the East were,
in large part, the cause of declines in the market's growth rate for casino
revenue during January and February 1994.
TropWorld had operating income of $23.3 million in the first half of 1994
compared to $7.0 million in the first half of last year. The increase in
TropWorld's operating income was largely due to the effects
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of the AREI/AGP acquisition, which resulted in a reduction in net rent expense,
partially offset by higher depreciation and amortization expense. Net rent
declined from $19.7 million in the 1993 six-month period to $0.7 million in the
1994 six-month period. Depreciation and amortization increased from
$8.4 million in the 1993 six-month period to $11.4 million in the 1994 six-
month period. In addition to the effects of the AREI/AGP acquisition, operating
costs decreased at TropWorld due in large part to a $10.6 million or 14%
reduction in casino costs attributable to the decrease in coin redemptions and
complimentaries. Repairs and maintenance expense was lower in this year's six-
month period compared to last year's six-month period due to a reduction in the
number of special facility maintenance projects. These decreases in operating
expenses were partially offset by an increase in the provision for doubtful
accounts as described in the above discussion of the consolidated results.
1993 Versus 1992
The Company's consolidated revenues were $518.8 million for 1993, an increase
of 1% from $512.0 million in 1992. The increase came primarily from an increase
in casino revenue resulting from the expansion at Ramada Express and improved
market share in the slot segment at Tropicana. Casino revenue at TropWorld was
lower in 1993 than in 1992, partially resulting from a $5.3 million year-over-
year decrease in the reversal of progressive jackpot accruals. The trend in the
mix of consolidated casino revenue that existed in 1992 continued into 1993
whereby the table games revenue was decreasing and the slot revenue was
increasing. Rooms revenue and food and beverage revenue continued to decline in
1993 as a result of a strategy of using rooms and food and beverage service as
a means of promoting casino activity. However, the expansion at Ramada Express
caused consolidated rooms revenue for 1993 to finish approximately even with
1992.
Consolidated operating income was $37.4 million in 1993 compared with $32.6
million in 1992. The primary reason for the increase in consolidated operating
income is the reduction in net rent. This reduction was principally caused by
the purchase of the AREI/AGP partnership interests in July 1993, which
eliminated the rent the Company incurred for the portion of TropWorld that was
owned by AREI/AGP. The net rent reduction was partially offset by the increase
in depreciation and amortization that was caused primarily by this purchase.
Consolidated casino costs were higher because of the increased use of rooms and
food and beverage service as a means of promoting casino activity and increased
coin redemptions at TropWorld. Since there was more credit business associated
with table games revenue than with slot revenue, the decrease in table games
revenue allowed for a decrease of $1.1 million or 40% in the provision for
doubtful accounts. Additional analysis of the performance of each of the
Company's three properties follows.
Tropicana. Tropicana continued to improve in 1993. Once again, an increase in
revenue contributed to improved operating income as Tropicana held the increase
in total operating costs to 1% or less. Total revenues for Tropicana were up 3%
to $134.9 million in 1993 compared to $130.9 million in 1992 and operating
income improved 68% to $7.2 million from $4.3 million. Operating income is
after net rent of $6.8 million in 1993 compared to $7.1 million in 1992 and
depreciation and amortization of $6.5 million in 1993 compared to $7.1 million
in 1992.
Casino revenue was up 7% in 1993 as Tropicana continued its shift in the mix
of table games revenue and slot revenue. Table games revenue was down 8% in
1993 on top of a 7% decrease in 1992. Table games revenue declined over a
period of years as a result of lower baccarat revenue as the Company shifted
from a historical dependence on premium table games to the slot segment of the
business. Baccarat revenue amounted to only 3% of casino revenue in 1993
compared to 7% in 1992 and 10% in 1991. Slot revenue, on the other hand,
increased 19% in 1993 on top of a 25% increase in 1992. The mix of slot revenue
to total casino revenue was 63% in 1993 compared to 56% in 1992 and 49% in
1991. This shift in the revenue mix allowed Tropicana to be a steady producer
of operating income and less subject to the volatility associated with baccarat
revenue.
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The number of rooms occupied in 1993 increased 6% over 1992 but the revenues
from rooms and food and beverage decreased in 1993 from 1992. This situation
was a result of increased complimentaries as the Company made greater use of
its database targeted marketing strategy and as its database increased. The
increased complimentaries resulted in higher casino costs since the Company
charged the cost of complimentaries to the casino department.
Major cost savings in 1993 compared to 1992 occurred in two categories. One
reduction was $1.1 million in marketing costs due to less television
advertising. The other reduction was also $1.1 million and it occurred in the
provision for doubtful accounts. This reduction was a benefit associated with
the mix in revenue toward more slot revenue and less table games revenue. With
regard to staffing, the Company operated in 1993 at about the same level as in
1992. However, its payroll and related taxes and benefits went up about 4% in
1993 compared to 1992 primarily from a 9% increase in taxes and benefits.
TropWorld. TropWorld had a difficult year in 1993 with poor economic
conditions in the Northeast, a very competitive local market and increased
competition from other gaming jurisdictions. The rate of growth for casino
revenue in the Atlantic City market was anemic for the year. As participants
in the market tried to maintain or increase market share in this environment,
the costs associated with attracting revenue went up, which caused pressure on
margins and profits.
TropWorld's revenues decreased 2% to $327.7 million in 1993 from $334.3
million in 1992, while operating income increased 21% to $33.5 million from
$27.7 million. Casino revenue was down $5.1 million or 2% in 1993 compared to
1992. Continuing the trend from prior years, table games revenue in 1993 was
down $10.4 million from 1992 while slot revenue was up $5.3 million in spite
of a year-over-year $5.3 million decrease in the reversal of slot machine
progressive jackpot accruals. The slot revenue percentage of total casino
revenue increased again in 1993 to 76% from 73% in 1992 and 69% in 1991. While
the slot segment of the casino business has a higher gross operating margin
than the table games segment, the Company believes the customers' desired
casino experience includes a certain level of tables games activity. The
Company therefore anticipates that the slot revenue percentage of total casino
revenue will be maintained rather than continue to increase.
The increase in slot revenue came at a high cost. The Company increased
promotional programs in anticipation of a greater market growth rate than what
actually occurred. Specifically, the Company increased the number of rooms
occupied on a complimentary basis by 11%. There was also an increase in coin
redemptions of $4.7 million in 1993 compared to 1992. These two items were the
primary causes of a $4.8 million or 3% increase in casino costs for 1993
compared to 1992.
Since payroll and related taxes and benefits are the Company's largest cost
item, the Company monitors the level of full-time equivalent headcounts. These
costs in 1993 were $0.3 million less than in 1992.
Net rent in 1993 was $20.4 million compared to $38.2 million in 1992 and
depreciation and amortization in 1993 was $20.4 million compared to $17.3
million in 1992. The primary cause of both the decrease in net rent and the
increase in depreciation and amortization was the purchase of the AREI/AGP
partnership interests.
Ramada Express. Ramada Express started 1993 with approximately 400 hotel
rooms, 30,000 square feet of casino space and surface parking for 1,500
vehicles. The facility ended 1993 with approximately 1,500 hotel rooms, 50,000
square feet of casino space, parking for 2,300 vehicles with about one-half in
a garage, additional food and beverage facilities, and additional special
event and retail space.
The expansion began in September 1992 and was completed in September 1993.
Because of this expansion, the operating results for 1993 are not comparable
to 1992. Ramada Express revenues were
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$56.2 million in 1993 compared to $46.8 million in 1992. Operating income was
$5.5 million in 1993 compared to $8.7 million in 1992. Operating income is
after depreciation and amortization of $5.4 million in 1993 compared to $3.9
million in 1992. Net rent was not significant in either year.
All significant revenue components were higher in 1993 than in 1992 and all
significant cost components were higher in 1993 than in 1992. Ramada Express
operating income was lower in 1993 than in 1992 as a result of the disruption
to its operations associated with the construction activities and additional
costs incurred to minimize that disruption. In the third quarter 1993, the
Company expensed $1.4 million of costs associated with the opening of the
expanded facilities.
During December 1993, the Company lowered the Ramada Express room rates in
order to increase occupancy and to build its customer database. This approach
was successful as the Ramada Express occupied room nights more than tripled in
December 1993 compared to December 1992.
New Gaming Jurisdictions. In mid-1993, the Company began pursuing the
development of its business in various gaming jurisdictions. In addition to
those jurisdictions mentioned in the analysis of financial condition, the
Company was one of four finalists but unsuccessful in its proposal to develop
and operate a casino complex in Windsor, Ontario. The Company also investigated
several other locations in Missouri and Indiana. In connection with these
efforts, it expensed approximately $1.3 million in development costs in 1993.
Interest Income and Expense. Interest income declined by $4.5 million in 1993
compared to 1992. The replacement of the AGP notes receivable on Aztar's
balance sheet with the assets acquired in the acquisition of the AREI/AGP
partnership interests in July 1993 caused a net decrease of $2.9 million in
1993. Included in this $2.9 million net decrease was an increase of $7.4
million as a result of a $171 million 12 1/4% First Mortgage note receivable
from AGP. The Company loaned AGP the $171 million in November 1992 so that AGP
could redeem its outstanding 12% First Mortgage Notes Due 1996. This note was
one of the notes receivable that were replaced in the AREI/AGP acquisition.
Interest expense increased by $14.2 million in 1993 compared to 1992.
Interest incurred on the $200 million principal amount of 11% Notes that were
issued in October 1992 was $17.2 million higher in 1993 than in 1992. This
increase in interest expense was offset by $2.4 million of increased interest
being capitalized in 1993 in association with construction projects.
Discontinued Operations. The Company received a refund of $1.2 million in a
settlement in 1992 with Canadian tax authorities related to the 1988 and 1989
income tax returns of Ramada involving the discontinued hotel business.
Extraordinary Items. The Company had an extraordinary loss in 1992 of $5.3
million, net of an income tax benefit of $2.8 million, related to the payment
of a redemption premium and the writeoff of deferred financing costs associated
with the redemption of the $171 million of outstanding 12% First Mortgage Notes
Due 1996 of AGP.
Accounting Change. In 1992, the Company adopted SFAS 109 related to the
reporting of income taxes. The effect of this action and the Company's election
not to restate prior-year financial statements resulted in a net deferred
income tax benefit of $7.5 million.
1992 Versus 1991
The Company's consolidated revenues were $512.0 million for 1992, an increase
of 6% from $481.3 million in 1991, reflecting higher revenues from all three
properties. The increase in revenues was primarily a result of increases in
casino revenue at all three properties resulting from market growth in the slot
segment, added slot machine capacity, improved market shares and the reversal
of $6.0 million of progressive jackpot accruals at TropWorld. Rooms and food
and beverage revenue declined at all three properties, reflecting a continuing
strategy of using rooms and food and beverage service as a means of promoting
casino activity.
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The Company's consolidated operating costs and expenses were $479.4 million
in 1992, a 3% increase from $467.6 million in 1991. The increase primarily
reflects a larger volume of business. Consolidated marketing expenses were
higher, reflecting increased marketing expenses at all three properties, as a
result of increased staffing, higher levels of expenses for entertainers, and
special promotions to stimulate incremental revenue.
Consolidated operating income was $32.6 million in 1992, a 138% improvement
over $13.7 million in 1991, reflecting improved operating results at all three
properties. Increased revenues from the more profitable slot segment combined
with relatively lower increases in costs and expenses resulted in operating
efficiencies that led to higher operating margins at all three properties.
Operating income is after net rent of $45.7 million in 1992, down $1.5 million
from 1991 principally as a result of a $0.9 million decline in the interest
factor at Tropicana due to an overall decline in interest rates in 1992.
TropWorld. TropWorld had a successful year in 1992 despite continuing poor
economic conditions in the Northeast and a very competitive market. TropWorld
revenues rose 8% to $334.3 million in 1992 from $310.3 million in 1991, while
the increase in costs and expenses was proportionally less, 3% to $306.6
million from $298.1 million. The most important source of the resulting
excellent operating flow-throughs was in the casino, where total revenues
increased 9% while associated casino and marketing expenses increased 7%.
TropWorld's use of rooms and food and beverage services as a way to promote
casino activity resulted in a 10% decrease in revenue in those categories, with
a corresponding 9% decrease in rooms and food and beverage costs.
The Atlantic City market recorded strong growth in 1992 with $3.2 billion of
casino win*, an increase of 7.5% from 1991. TropWorld's growth exceeded the
market's with casino revenue up 8% to $310 million, its highest ever, from $287
million in 1991. Slot operations were the driving force at TropWorld in 1992.
Slot win for 1992 was $227.5 million, a 15% increase over $198.4 million in
1991 due to a targeted marketing and product strategy and growth in the market.
The Atlantic City slot market grew 14% during 1992, reaching $2.114 billion in
slot win, up from $1.851 billion in 1991. TropWorld captured 10.8% of the slot
market in 1992, compared with a 10.7% share in 1991 and 10.3% in 1990. Atlantic
City market-wide table games revenue declined approximately 3% in 1992, to
$1.102 billion from $1.140 billion in 1991. TropWorld's table games revenue
dropped to $83 million in 1992, a 7% decrease. The decline in table games
revenue in 1992 was the fourth consecutive year of decline in the Atlantic City
market and the third consecutive year of decline at TropWorld, in both cases
somewhat by design. With the easing of restrictions on the allocation of casino
floor space, operators dedicated more floor space to the more profitable slot
segment, thereby reducing the number of table games units.
TropWorld's improvements in operating efficiencies, partially a result of the
change in the mix of revenue toward higher-margin slots from table games, were
reflected in a 127% improvement in operating income, to $27.7 million from
$12.2 million. The decrease in table games revenue together with the issuance
of less credit allowed for a decrease in the provision for doubtful accounts of
75% to $0.5 million in 1992 from $2.0 million in 1991. Operating income after
net rent was $38.2 million in 1992, down from $38.6 million in 1991.
Depreciation and amortization was $17.3 million in both years. To some extent
the year-over-year comparison favors 1992 because of the negative effects the
Persian Gulf War had on operations at TropWorld in the first quarter of 1991.
Tropicana. Tropicana reported improved results for 1992 despite external
factors including a highly competitive market due to unabsorbed capacity and to
negative economic conditions, particularly in southern California. The Las
Vegas market in 1992 experienced visitor growth that was weak by Las Vegas
standards early in the year, countered in part by a boost due to deep air fare
discounting during the summer.
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*Market comparisons are stated on a calendar basis for the market and property.
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Tropicana revenues for 1992 were $130.9 million, a gain of 1% from $129.4
million in 1991. Casino revenue was 8% higher in 1992 than in 1991. Tropicana
made significant progress in 1992 in the continuing shift from its historical
dependence on premium table games to the slot segment, which has higher growth
rates and better profit margins. Slot revenue growth at Tropicana was
significantly higher than growth in the market as a result of increased slot
machine capacity and improved slot machine product in the casino, coupled with
increased slot marketing efforts. Slot revenue at Tropicana rose 27%* in 1992
while Las Vegas market slot revenues rose 9%. Tropicana win from games
excluding baccarat was down 3% in 1992. Total games revenue, including
baccarat, was down 7%. The games hold percentage was basically unchanged in
1992 from 1991 (19.1% for 1992 versus 19.4% for 1991). The decrease in games
revenue allowed for a decrease in the provision for doubtful accounts of 25%,
to $2.1 million in 1992 from $2.8 million in 1991.
Occupancy at Tropicana was higher in 1992 than in 1991 by more than two
occupancy points. But continuing pressure on room rates in Las Vegas and
greater utilization of Tropicana's rooms to promote its casino games resulted
in an 8% reduction in rooms revenue. Food and beverage revenue was also lower,
by 13%, because of lower demand for banquets and the closing of Tropicana's
buffet. Food and beverage costs were correspondingly 14% lower in 1992 than in
1991.
Cost and expenses were $126.6 million in 1992, less than 1% higher than the
level of $126.2 million in 1991. Costs and expenses in 1992 included $7.1
million of net rent, compared with $8.0 million in 1991, and depreciation and
amortization of $7.1 million in 1992, compared with $6.9 million in 1991.
Operating income was $4.3 million in 1992, an increase of 34% from $3.2
million in 1991.
Ramada Express. Ramada Express revenues for 1992 were $46.8 million, a 13%
increase from $41.6 million in 1991. Costs and expenses rose less than half of
the revenue increase, creating good flow-through to profit and higher overall
operating margins. Costs and expenses included $3.9 million of depreciation
and amortization in 1992, compared with $3.7 million in 1991. Net rent was not
significant in either year. Operating income was $8.7 million in 1992, an
increase of 45% from $6.0 million in 1991.
Ramada Express turned in a strong operating performance in 1992, improving
its market position in a highly competitive atmosphere even as the Company
commenced in September a $75 million expansion of the property. Despite some
negative impact from the woes of the southern California economy, the Laughlin
market grew strongly in 1992. Casino revenues* for the market were $506.9
million for 1992, a 9% increase from $463.4 million in 1991. Slot revenue
growth for the Laughlin market was particularly strong, with slot revenues
growing 12% during 1992, while Ramada Express slot revenue grew 22% in the
same period. Rooms occupancy for the Laughlin market was 91% for 1992 compared
with 90% in 1991. Occupancy at Ramada Express was 90% in 1992, 2.5 occupancy
points higher than the previous year.
Interest Income and Expense. Interest income increased $2.5 million in 1992
from 1991, due principally to the $171 million note receivable from AGP.
Consolidated interest expense in 1992 was $31.1 million, down $1.0 million
from the prior year. The Company incurred $5.2 million of interest expense in
1992 in connection with the $200 million principal amount of 11% Notes issued
in October 1992. That increase was offset by decreases in interest expense
that occurred principally as a result of three factors, the primary factor
being the expiration on December 31, 1991 of an interest rate swap agreement.
The other factors were the payment in January 1992 of a settlement with the
Internal Revenue Service on which interest had been accrued in 1991 and the
capitalization of interest on the Ramada Express expansion.
Unconsolidated Partnership. The Company's loss on its equity share in
Tropicana Enterprises, the partnership that owns the Tropicana land and
improvements, declined as a result of lower interest expense due to an overall
decline in interest rates in 1992 on the floating rate bank financing of
Tropicana Enterprises. Aztar is a noncontrolling 50% partner in Tropicana
Enterprises.
- --------
* Market comparisons are stated on a calendar basis for the market and
property.
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LIQUIDITY AND CAPITAL RESOURCES
Ramada Express Expansion and Financing. One of the Company's three major
capital expenditures in 1993 was the expansion of Ramada Express, which was
completed in September, on schedule and within budget. The expansion included
a new 1,100-room tower; 20,000 square feet of casino space, bringing the total
to 50,000 square feet; a 1,100-vehicle parking garage; additional restaurant,
special event and retail space; and other amenities. The Company spent $60.0
million on this project in 1993 for a total cost of $74.7 million. Financing
was provided primarily out of cash and cash flow. In the fourth quarter of
1993, the Company borrowed $25 million under its $50 million construction and
term loan credit facility that is collateralized by Ramada Express. In
December 1993, the Company entered into the First Amended and Restated Credit
Agreement, which converted the construction and term loan into a $50 million
revolving credit facility that matures in June 1996 (the "Ramada Express
Credit Facility"). This new credit agreement can be used for general corporate
purposes and may be converted into a three-year reducing revolving line of
credit.
Purchase of Third Party Partial Interest in TropWorld. A second major
capital expenditure in 1993 was the purchase in July of the partnership
interests in AREI and AGP. AREI owned a 99.9% general partnership interest in
AGP, which acquired a substantial interest in TropWorld in a sale-leaseback
transaction in 1984. The aggregate consideration, including costs incurred to
complete the transaction, was approximately $62 million. The Company funded
the AREI/AGP acquisition using cash and a $10 million revolving credit
facility (the "AREI/AGP Facility") obtained in July 1993. This acquisition did
not significantly change Aztar's total assets. The cash paid by Aztar and
notes receivable from AGP were replaced on Aztar's balance sheet by the assets
acquired. The additional $10 million of indebtedness incurred by Aztar was
more than offset by a reduction of indebtedness to AGP.
During the first quarter of 1994, the Company, by drawing $10 million on the
Ramada Express Credit Facility, repaid the $10 million that was borrowed under
the AREI/AGP Facility. During June 1994, the Company repaid $10 million of the
Ramada Express Credit Facility leaving a balance of $25 million at June 30,
1994. The Company terminated the AREI/AGP Facility on June 30, 1994.
Tropicana Project. At December 30, 1993, the Company was in the process of
constructing a new main entrance, adding a new building facade that will
create a colorful Caribbean Village motif facing The New Four Corners of Las
Vegas and funding a portion of the construction by the State of Nevada of a
four-way pedestrian skywalk system at the intersection of Las Vegas Boulevard
and Tropicana Avenue. Expenditures in 1993 were approximately $5 million on
this project. This project was substantially completed in May 1994 and the
Company's expenditures were $6.8 million in 1994 through June 30. Funding for
this project was from available cash balances and cash flow.
Stock Options. An additional source of funds in 1993 was $2.1 million from
the exercise of stock options for approximately 339,000 shares of common
stock.
Proposed Credit Facility and Refinancings. The Company's maturities of long-
term debt were $2.2 million in 1993 and, at December 30, 1993, were $2.5
million and $12.5 million for 1994 and 1995, respectively. The 1994 and 1995
maturities of long-term debt include $2 million each year for mandatory
sinking fund payments on the First Mortgage Notes. These notes are redeemable
at par at the option of the Company, in whole or in part, on or after
September 15, 1994 and are expected to be redeemed with proceeds from this
Offering. When the First Mortgage Notes are redeemed, the Company will expense
the remaining unamortized deferred financing costs and unamortized discount.
This expense would be presented as an extraordinary charge and shown net of an
income tax benefit. These unamortized items totaled $4.1 million at June 30,
1994. Also included in the 1995 maturities was $10 million that had been
borrowed under the AREI/AGP Facility.
The Company is currently negotiating with a group of banks to enter into the
Proposed Credit Facility in the amount of approximately $212 million. The
availability of funds under this facility will
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reduce from $212 million quarterly beginning on March 31, 1996 in the annual
amounts of $25 million in 1996 and $35 million in each year thereafter until
maturity. The Proposed Credit Facility will be secured by all the property of
TropWorld and Ramada Express and, with certain exceptions, the stock of the
Company's subsidiaries. The Company expects to use funds provided by the
Proposed Credit Facility to repay the outstanding amount due under the Ramada
Express Credit Facility, which will then be terminated. The remaining funds
under the Proposed Credit Facility would be available for general corporate
purposes, including to fund the expansion of the Company's existing businesses
and to fund the Company's development of businesses in new gaming
jurisdictions, including the properties at Caruthersville and Evansville. See
"BUSINESS--New Markets."
Concurrently with entering into the Proposed Credit Facility, the same group
of banks would enter into an approximately $73 million term loan with Tropicana
Enterprises maturing on December 31, 1999, which would refinance the existing
Tropicana Loan. The term loan is expected to call for principal payments of
between $1.2 million and $3.3 million each year with a final payment of
approximately $57 million due at maturity.The term loan would be secured by the
Tropicana property. The Tropicana Loan is serviced through rent payments made
by the Tropicana operation. The Company is a noncontrolling 50% partner in
Tropicana Enterprises. There can be no assurance that the Proposed Credit
Facility or the term loan will be completed, or if completed, will be in the
amounts or have the terms currently contemplated.
Commitments and On-Going Capital Expenditures. At June 30, 1994 and December
30, 1993, the Company had commitments of approximately $16 million and $13
million, respectively, for the purchase of fixed assets. In 1994, including the
remaining expenditures on the Tropicana project, the Company plans to spend
approximately $36 million on routine capital expenditures at its three land-
based properties and the purchase and renovation of the vessel acquired in
January. In addition to this, expenditures will be required for the
Caruthersville and Evansville facilities; however, the timing of these
expenditures is uncertain. Through June 30, 1994, the Company spent $6.8
million on the Tropicana project, $7.9 million on the purchase and renovation
of the vessel acquired in January and $8.0 million on routine capital
expenditures at its three land based properties. The Company believes that the
proceeds of this Offering, the funds available under the Proposed Credit
Facility, continuing cash flow and cash balances will be sufficient to meet any
anticipated obligations as well as any working capital and liquidity
requirements.
CERTAIN CONTRACTUAL ARRANGEMENTS
Tropicana Enterprises ("Tropicana Enterprises"), which owns Tropicana, is a
general partnership in which an unaffiliated group of persons (the "Jaffe
Family") and Adamar of Nevada ("Adamar of Nevada"), a wholly-owned subsidiary
of the Company, each owns a 50% general partnership interest. Tropicana
Enterprises leases Tropicana to HRN pursuant to the Tropicana Lease, and the
Company guarantees HRN's obligation under the Tropicana Lease.
TROPICANA ENTERPRISES PARTNERSHIP AGREEMENT
Adamar of Nevada and the predecessors in interest of certain members of the
Jaffe Family are partners of Tropicana Enterprises pursuant to an Amended and
Restated Partnership Agreement, dated as of November 1, 1984 (the "Partnership
Agreement"), which expires in 2014. Tropicana Enterprises owns Tropicana.
Tropicana Enterprises leases the real estate and improvements comprising
Tropicana to HRN under the Tropicana Lease, which expires in 2011. Certain
decisions relating to the financing of Tropicana are delegated to Adamar of
Nevada subject to Jaffe Family approval. The Jaffe Family has the right to make
all decisions on behalf of Tropicana Enterprises regarding the enforcement of
the Tropicana Lease. All other material decisions require mutual consent of
Adamar of Nevada and of more than 50% of the individuals and entities
comprising the Jaffe Family. The Partnership Agreement also
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provides that upon a default by HRN under the Tropicana Lease or by Adamar of
Nevada under the Partnership Agreement, certain other partnership decisions now
made jointly or solely by Adamar of Nevada, including with respect to
refinancing the Tropicana Loan, will be made solely by the Jaffe Family.
The Partnership Agreement provides that the monthly rent payments will be
paid and distributed 50% to the Jaffe Family and 50% to Adamar of Nevada. In
the event of the sale of all or any part of the Tropicana Enterprises property
or the liquidation of Tropicana Enterprises the proceeds of all such sales or
liquidations shall be first distributed 50% to the Jaffe Family and 50% to
Adamar of Nevada until the aggregate of all such distributions equals two times
the amount of Adamar of Nevada's initial capital contribution. The remainder of
the proceeds shall be distributed as follows: (a) to the Jaffe Family to the
extent of the Jaffe Family's initial capital contribution (after taking into
account amounts distributed to it by virtue of the preceding sentence) less
$1.0 million, (b) $3.0 million to Adamar of Nevada, (c) $1.0 million to the
Jaffe Family, (d) to Adamar of Nevada for any special capital contributions and
(e) the balance 50% to the Jaffe Family and 50% to Adamar of Nevada.
GUARANTY
The Company has guaranteed (i) HRN's obligations under the Tropicana Lease,
including HRN's obligation to pay base rent and additional rent, (ii) Adamar of
Nevada's obligations under the Partnership Agreement and (iii) the obligations
of certain affiliates of the Company under an agreement with the Jaffe Family
for the use of the "Tropicana" name. The Company has pledged its shares of
Adamar of Nevada to Tropicana Enterprises and the Jaffe Family to secure the
Company's obligations under those guarantees.
TROPICANA LEASE
HRN leases the real estate and improvements comprising Tropicana from
Tropicana Enterprises pursuant to a lease (the "Tropicana Lease"), which
expires in 2011. HRN currently pays Tropicana Enterprises a base rent of
$777,803 per month, to be adjusted periodically for future changes in the
Consumer Price Index. HRN also pays as additional rent the financing costs
associated with the Tropicana Loan, including payments of principal and
interest when due.
The Tropicana Lease requires, under certain circumstances, that HRN deliver
an additional security deposit to Tropicana Enterprises in a minimum amount of
$21 million, which additional security deposit may consist of cash, certain
marketable securities or letters of credit. The additional security deposit
may, however, be reduced or eliminated during any period that the Company
exceeds certain net worth targets and if HRN exceeds a certain cash flow
target. The additional security deposit may be used for the benefit of
Tropicana Enterprises in the event that there is a default in HRN's obligations
under the Tropicana Lease beyond applicable cure periods. HRN has not yet been
required to provide the additional security deposit.
TROPICANA LOAN
Tropicana Enterprises, the entity that owns Tropicana, is a party to a loan
agreement (the "Tropicana Loan") pursuant to which approximately $73 million is
currently outstanding. The Tropicana Loan matures in 1996 at which time a final
payment of approximately $71 million will be due. Such indebtedness is
evidenced by a non-recourse promissory note secured by a first mortgage on
Tropicana. Tropicana Enterprises leases Tropicana to HRN pursuant to the
Tropicana Lease. HRN's lease payments under the Tropicana Lease include
payments with respect to the principal of and interest on the Tropicana Loan.
The Company has guaranteed HRN's obligations under the Tropicana Lease. If not
previously refinanced or repaid, the Tropicana Loan would have to be refinanced
upon its maturity in 1996. Certain property of HRN, including furniture,
fixtures and equipment, is pledged as collateral for the Tropicana Loan
pursuant to the Tropicana Lease.
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Pursuant to the Tropicana Lease and the Partnership Agreement, Tropicana
Enterprises has agreed to refinance the Tropicana Loan upon maturity. Adamar of
Nevada has authority under the Partnership Agreement to make decisions related
to such refinancing, subject to approval by the Jaffe Family. In order to
protect the Company's interests in Tropicana and by virtue of the Company's
guarantees of the obligations of HRN under the Tropicana Lease and of Adamar of
Nevada under the Partnership Agreement, the Company may arrange for such
refinancing by Tropicana Enterprises, cause HRN to pay the final payment or
make a loan to Tropicana Enterprises to pay the final payment. The Indenture
permits the Company to incur indebtedness in connection with such refinancing,
payments or loans. See "DESCRIPTION OF THE NOTES--Covenants--Limitation on
Indebtedness." Failure to pay or refinance the final payment could result in
the lender's foreclosure on Tropicana and in the exercise by the parties of
available rights and remedies under the Partnership Agreement, the Tropicana
Lease and related guarantees.
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BUSINESS
The Company is one of the leading casino entertainment companies in the
United States. The Company operates TropWorld in Atlantic City, New Jersey,
Tropicana in Las Vegas and Ramada Express in Laughlin, Nevada.
The Company was incorporated in Delaware in June 1989 to operate the Gaming
Business of Ramada after the Restructuring of Ramada. The Restructuring, which
was approved by Ramada's board of directors in October 1988 and substantially
completed December 20, 1989, involved the disposition of Ramada's Hotel and
Restaurant Businesses with Ramada's shareholders retaining their interest in
the Gaming Business. As part of the Restructuring, the Gaming Business and
certain other assets and liabilities of Ramada were transferred to the
Company, and a wholly-owned subsidiary of New World Hotels (U.S.A.), Inc. was
merged with Ramada (the "Merger"). In the Merger, each share of Ramada common
stock was converted into the right to receive $1.00 and one share of the
Company's common stock. For accounting purposes the Company is treated as the
continuing accounting entity that is the successor to the historical Ramada
and that has discontinued the Hotel and Restaurant Businesses.
The strategy of the Company has been to develop facilities with distinctive
themes that are "must-see" attractions in their respective gaming markets and
provide a full entertainment experience to attract gaming patrons. The Company
targets customers in the high end of the middle market, with particular
emphasis on slot customers.
The Company uses a database marketing system to create a loyal following of
repeat customers in its current markets. This technology will be expanded to
new facilities as they are opened. This marketing approach, which is based on
a combination of computerized card reader technology and a "frequent flier"
marketing concept, allows the Company to control marketing costs and to
optimize the profit contribution of its targeted casino patrons.
The Company believes it is well-positioned to expand its operations as
additional states and local jurisdictions adopt legislation to promote the
development of casino entertainment. Aztar has more than ten years of
experience operating casino entertainment facilities in Las Vegas and Atlantic
City, the two largest gaming markets in the country. Management believes that
its experience in developing and operating a wide range of successful casino
entertainment facilities is a distinct advantage as it enters new markets.
TROPWORLD
The theme of TropWorld recalls the heyday of the Atlantic City Boardwalk
piers with their amusement rides, carnival games and strolling entertainers.
TropWorld offers daily live musical entertainment in its atrium, which
contains a spectacular four-story-high operating Ferris wheel. TropWorld
boasts an indoor roller coaster, bumper cars and other attractions reminiscent
of the old Boardwalk in Atlantic City.
The TropWorld complex encompasses 10 acres and has 220 yards of ocean beach
frontage along the Boardwalk in Atlantic City. TropWorld's 92,191-square-foot
casino contains approximately 2,800 slot machines, including a wide variety of
progressive jackpot machines and video poker machines, and contains 93 table
games, including blackjack, craps, roulette, baccarat, pai gow poker, big six,
sic bo and red dog. The TropWorld complex contains 1,020 hotel rooms, 80,000
square feet of meeting, convention and banquet space, a 1,700-seat theatrical
showroom (the largest in Atlantic City) and parking facilities for over 2,700
vehicles. There is a wide variety of food and beverage facilities at
TropWorld, including gourmet restaurants, several medium-priced restaurants
and a food court offering a large choice of convenient and moderately priced
items. Recreational facilities at TropWorld include indoor and outdoor
swimming pools, tennis courts, a health and fitness club and a jogging track.
The Company is currently considering the construction of a third hotel tower
of approximately 600 rooms.
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In July 1993, the TropWorld building became wholly-owned by the Company upon
the acquisition by the Company of the partnership interests in AREI and AGP.
AREI owned a 99.9 percent general partnership interest in AGP, which acquired
a substantial interest in TropWorld in a sale-leaseback transaction in 1984.
TROPICANA
Tropicana is located on a 34-acre site on the southeast corner of the Strip
and Tropicana Avenue in Las Vegas, Nevada. The Tropicana casino occupies
45,000 square feet and contains over 1,550 slot machines and over 50 table
games. Tropicana has a tropical island theme and is promoted as The Island of
Las Vegas. It has one of the world's largest swimming pools and a five-acre
water park and tropical garden area. Tropicana has 1,907 hotel rooms and
suites and approximately 100,000 square feet of convention and exhibit space.
The tropical theme is apparent in the decor of the property, which includes a
large collection of tropical birds and fish. Tropicana offers its guests a
variety of entertainment including laser light shows, a comedy club, lounge
shows and the Folies Bergere revue, which is the longest-running production
show in Las Vegas. In May 1994, the Company substantially completed a new main
entrance and a new building facade at Tropicana that created a colorful
Caribbean Village motif.
Throughout most of its history, Tropicana, with its upscale decor and
location as the sole major casino hotel on the southern end of the Strip,
catered to high end table games customers with particular emphasis on
baccarat. This strategy allowed for significant gaming revenues without
substantial walk-in traffic. However, beginning in late 1989 with the opening
of the Mirage, competition for this small group of premium table games
customers, dominated by players from the Far East, increased significantly.
The center portion of the Strip, highlighted by Caesars Palace and the Mirage,
became the focal point of the high end table games market. As heavy promotion
and complimentary expenditures ensued, profit margins in this segment
declined. As a result, management decided to curtail its emphasis on premium
table games and focus on slot revenue from the high end of the middle market.
Tropicana is located at an intersection which is now referred to as The New
Four Corners of Las Vegas. There are three other major casino hotel properties
located at this intersection, two of which, Luxor and MGM Grand, opened during
the fourth quarter of 1993, and the other, Excalibur, opened June 1990. The
increase in total casino and hotel capacity with the opening of Luxor and MGM
Grand has increased the level of activity and visitor traffic around
Tropicana. Pedestrian traffic has been made faster, safer and more convenient
as a result of the recent construction by the State of Nevada of pedestrian
skywalks. The skywalks connect the four corners of the intersection and have
elevators and escalators set back from all four corners. The Company funded a
portion of the construction costs for this project, which was recently
completed. The Company has recently completed construction of an additional
pedestrian bridge connecting one of the skywalks directly to the Tropicana
casino.
Management believes that the new properties located at The New Four Corners
have stimulated and will continue to stimulate additional walk-in traffic that
provides increased opportunities for Tropicana to attract its target customers
and retain them through the Company's database marketing system. There can be
no assurance, however, that the increased competition from these new
properties will not have an adverse effect on Tropicana.
RAMADA EXPRESS
Ramada Express is located on 28 acres in Laughlin, Nevada. Laughlin is
situated on the Colorado River at Nevada's southern tip. The facility features
a Victorian-era railroad theme, including a train that carries guests between
the parking areas and the casino hotel. In September 1993, the Company
completed a $75 million expansion of Ramada Express, on schedule and within
budget. The expansion of Ramada Express included a new 1,100-room tower,
increasing the property to a total of 1,500 rooms;
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a casino expansion of 20,000 square feet, bringing the total to 50,000 square
feet; a 1,100-vehicle parking garage, bringing the total parking capacity to
2,300 vehicles; and additional restaurant, special event and retail space. The
expanded casino contains 36 gaming tables and 1,620 slot machines.
NEW MARKETS
The Company has been pursuing the development of its business in various
gaming jurisdictions. The Company executed an agreement in September 1993 with
the City of Caruthersville, Missouri, to operate a casino riverboat, and filed
an application with the Missouri Gaming Commission for a gaming license to
operate the Caruthersville facility. Caruthersville is located on the
Mississippi River approximately 80 miles north of Memphis, Tennessee.
Approximately 2.2 million people live within 100 miles of Caruthersville. In
January 1994, the Company took delivery and began renovation on a vessel
intended to be used in Caruthersville. The boat is expected to have an
approximately 14,000-square-foot casino with an estimated capacity of 600
passengers and crew. The project would also include, among other things, pre-
boarding facilities such as a restaurant and live entertainment lounges. The
estimated cost of the project is more than $40 million. The Company hopes to
begin operations in Caruthersville in 1995. However, commencement of operations
is dependent on several factors that are beyond the Company's control,
including the granting of a gaming license by the Missouri Gaming Commission.
The Missouri Gaming Commission has commenced its formal investigation of the
Company's application. In addition, certain other approvals are required,
including those of the U.S. Army Corps of Engineers and the U.S. Coast Guard.
"Games of skill" are permitted in Missouri; however, as a result of a Missouri
Supreme Court decision in early 1994, the use of slot machines and other "games
of chance" is currently not permitted in Missouri. On April 5, 1994, voters in
a Missouri statewide election defeated a proposed constitutional amendment that
would have allowed such "games of chance" on riverboats. A petition has been
filed with the Secretary of State of the State of Missouri to place a
referendum on the issue on the ballot for the November 1994 election. The
signatures on the petition have yet to be verified by the Secretary of State of
the State of Missouri. The Company currently intends to proceed with this
project utilizing electronic machines and gaming tables as approved by the
Missouri Gaming Commission.
Aztar has submitted a proposal to the City of Evansville, Indiana, for a
casino riverboat and has filed an application for a riverboat gaming license
with the Indiana Gaming Commission, which prior to the state trial court ruling
discussed below had indicated that it anticipated granting a license for the
Evansville market area this fall. On June 30, 1994, the Company was named by
the City of Evansville as its choice to develop and operate the only riverboat
gaming facility planned to be licensed in the Evansville market. The Company
and the City of Evansville have signed a development agreement, and the City of
Evansville will endorse the Company's license request to the Indiana Gaming
Commission. If the Company is granted a riverboat gaming license, the
development agreement will bind the Company to make a series of payments in the
nature of civic inducements to the City of Evansville and community
organizations that are necessary to the success of the Company's efforts in
Indiana. See "REGULATION--Regulation and Licensing--Indiana." Evansville,
located on the Ohio River in southwestern Indiana, has 2.5 million people
living within a 100-mile area, which includes a portion of metropolitan
Louisville, Kentucky. Aztar's proposed project, at an estimated cost of $110
million, would include a replica of the historic "Robert E. Lee" racing
sidewheel steamboat. The boat will have a 37,000-square-foot casino with 1,250
slot machines and 70 table games and will have a capacity of 2,500 passenger
guests and a crew of 300. The project would also include, among other things, a
250-room hotel and a 44,000-square-foot entertainment complex for pre-boarding
facilities, restaurants, lounge and retail shops. With the boat due for
delivery by April 1995, operations could commence in the summer of 1995
utilizing permanent docking facilities and interim boarding facilities, with
all permanent facilities in place by December 1995. However, a number of legal
and regulatory matters could delay or prevent the opening of the Evansville
facility. A state trial court has ruled that portions of the Indiana riverboat
gaming law conflict with the state constitution. Under this ruling, the
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Indiana Gaming Commission is precluded from awarding licenses. The trial court
decision is being appealed directly to the Indiana Supreme Court, which is
handling the case on an expedited basis. Oral arguments in the case are
currently scheduled for August 30, 1994. Furthermore, a number of approvals are
required, including those of the U.S. Army Corps of Engineers and the U.S.
Coast Guard. There can be no assurance that the necessary licenses and
approvals will be granted or that the Company will proceed with this project.
In the event that the Company is granted approval by the applicable
jurisdictions to proceed with one or both of these riverboat projects,
financing may be required to fund the related capital expenditures. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION--Liquidity and Capital Resources--Proposed Credit Facility and
Refinancings."
The Company is continuing its efforts to explore opportunities in new
jurisdictions in which the likelihood of legalization of gaming in the near
term is high and where the potential markets meet its standards for sound,
meaningful long-term opportunities.
MARKETING APPROACH
The Company's strategy is to target gaming customers in the high end of the
middle market segment. The Company's marketing approach is to develop a loyal
following of repeat customers with a demonstrated interest in gaming. The key
element of this approach is the tailoring of promotional offers to the specific
requirements and circumstances of the Company's targeted customers, with
optimization of profit contribution being the objective. This is achieved
through the use of a database marketing system based on a combination of
computerized card reader technology and the "frequent flier" marketing concept.
Each slot and table games player at one of the Company's casinos is
encouraged to join a players' club. A player's incentive to join the club is to
earn various complimentary services and cash bonuses dependent upon his level
of gaming play. Club members are issued club cards that they may insert in card
readers attached to most slot machines or give to table games personnel for use
in computerized rating systems. The computer systems record valuable
information, which is tracked over time, about the Company's customers: playing
preferences, frequency of play and the gaming revenue they provide.
On the basis of customer-tracked play, the Company's clientele is segmented
by gaming value to the Company. Promotional offers are then made to customers
based on their level of gaming revenue to induce them to frequent the Company's
casinos. The Company's objective is to maximize profit by designing promotional
offers so that the cost bears a favorable economic relationship to the level of
revenues the player is expected to provide given the player's historical gaming
pattern. The promotional offers are conveyed to the players by direct mail and
by telemarketing.
Management believes that the advantages of the database marketing system
permit the Company to compete effectively with the other properties in the
gaming segments in which it competes.
PROPERTIES
The Company owns or leases its three gaming facilities.
TropWorld. TropWorld is located on a 10-acre site in Atlantic City, New
Jersey. In July 1993, TropWorld became wholly-owned by the Company.
Tropicana. Tropicana is located on a 34-acre site in Las Vegas, Nevada.
Tropicana is owned by Tropicana Enterprises and is leased to HRN, which
operates the casino and hotel under the Tropicana
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Lease, which expires in 2011. The Company, through its wholly-owned subsidiary,
Adamar of Nevada, owns a noncontrolling 50% general partnership interest in
Tropicana Enterprises. The remaining 50% general partnership interest in
Tropicana Enterprises is held by various individuals and trusts associated with
the Jaffe Family subject to certain preferences on liquidation. The Company
does not have the right to purchase Tropicana from Tropicana Enterprises and
does not have the right to purchase the remaining partnership interest in
Tropicana Enterprises that is not owned by Adamar of Nevada.
Ramada Express. Ramada Express is located on a 28-acre site in Laughlin,
Nevada. Ramada Express is wholly-owned by the Company. The Company completed in
September 1993 a $75 million expansion of Ramada Express.
New Markets. In connection with the Company's development of its business in
new markets, the Company has options to purchase various parcels of land in
Caruthersville, Missouri and Evansville, Indiana.
General. The Company leases its corporate headquarters located in Phoenix,
Arizona and owns or leases certain other facilities which are not material to
the Company's operations.
Substantially all land, casino hotel buildings, furnishings and equipment
owned by the Company are pledged as collateral under long-term debt agreements.
COMPETITION AND SEASONALITY
Competition
Although the Company has been able to compete successfully in its gaming
markets in the past, there can be no assurance that the Company will be able to
continue to compete successfully in these markets.
The Company faces intense competition in each of the markets in which its
gaming facilities are located from other companies in the gaming industry, some
of which have significantly greater financial resources than the Company. Such
competition results, in part, from the geographic concentration of competitors.
All of the Company's casinos primarily compete with other casinos in their
immediate geographic area and, to a lesser extent, with casinos in other
locations, including Native American lands, and on cruise ships and riverboats,
and with other forms of legalized gaming in the United States, including state-
sponsored lotteries, off-track wagering and card parlors. Certain states have
recently legalized, and several other states are currently considering
legalizing, casino gaming in specific geographic areas within those states.
Legalization of large-scale, unlimited casino gaming in or near any major
metropolitan area or increased gaming in other areas could have an adverse
economic impact on the business of any or all of the Company's gaming
facilities.
As of December 30, 1993, there were 11 casino hotel facilities operating in
Atlantic City in competition with TropWorld. Although no new casinos have been
opened in Atlantic City since April 1990 and there have been no public
announcements concerning new casino openings that have financing in place, the
addition of new casino hotels in the Atlantic City market would increase
competition. A number of the Company's competitors have announced definitive
plans for expansion, including Bally's Grand and Trump Plaza. The Sands Hotel
and Casino, Bally's Park Place, Showboat and the Claridge Hotel and Casino
recently opened expansions of their gaming space. In addition, recently enacted
legislation requires the Casino Reinvestment Development Authority to allocate
$100 million of funds and credits to subsidize the construction of new hotel
rooms by casinos in Atlantic City. In 1992, the Mashantucket Pequot Indian
tribe began operating the Foxwoods High Stakes Casino and Bingo Hall, one of
the largest casinos in the United States, in Ledyard, Connecticut. The adoption
of legislation approving casino gaming in any jurisdiction near New Jersey,
particularly Delaware,
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Maryland, New York or Pennsylvania, could have a material adverse effect on the
Atlantic City market, depending on the form and scope of such gaming.
During 1993, three major casino hotels opened in the Las Vegas market, two of
which, Luxor and MGM Grand, are located adjacent to Tropicana near the
intersection of Tropicana Avenue and the Strip, which is now referred to as The
New Four Corners. Circus Circus opened its 2,500-room Luxor in October 1993.
The 5,000-room MGM Grand opened in December 1993. The third casino, Mirage's
3,000-room Treasure Island, also opened in October 1993 and is located in the
middle of the Strip. These newly opened casinos added a total of approximately
10,500 rooms to an existing Las Vegas market base of approximately 77,000
rooms, representing an increase of 14%. In addition, there has been a
significant increase in room supply and casino space in recent years, including
the opening of the 3,000-room Mirage in November 1989 and the 4,000-room
Excalibur in June 1990. Management believes that MGM Grand and Luxor have
stimulated and will continue to stimulate additional walk-in traffic that
provides increased opportunities for Tropicana to attract its target customers
and retain them through the Company's database marketing system. There can be
no assurance, however, that the increased competition from the new casinos will
not have an adverse effect on Tropicana. In 1994, several construction plans
were announced in Las Vegas. The largest of these are three new casino resorts
on the Strip. ITT Sheraton plans to build a 3,500-room resort hotel with
135,000 square feet of casino space on 34 acres next to the Sheraton Desert Inn
casino on the Strip. This project is scheduled to open in the first quarter of
1997. Mirage Resorts Inc. and Gold Strike Resorts have announced plans to build
a 3,000-room resort hotel with 100,000 square feet of casino space on 43 acres
on the Strip. This joint project is scheduled to open in mid-1996. MGM Grand,
Inc. and Primadonna Corporation have announced plans to build a 1,500-room
resort hotel with 100,000 square feet of casino space on the 18-acre parcel at
the northwest corner of the Strip and Tropicana Avenue. This joint project is
scheduled to open in 1996.
In the Laughlin market, in addition to the Company's expansion completed in
September 1993, the Riverside has begun construction of an approximately 800-
room tower expansion which it expects to open in December 1994, and has
announced a management agreement with the Mojave Indian Tribe to build and
operate a small facility (approximately 250 gaming positions) in Arizona
roughly twenty-five miles south of Laughlin to open in the fall of 1994. The
Mojave Indian Tribe is also constructing a 300-room hotel with approximately
25,000 square feet of casino space in Nevada approximately 8 miles south of
Laughlin that is expected to open in December 1994. In addition, the Mojave
Indian Tribe has signed an agreement allowing a gaming company to build and
operate up to three casino hotels in this same area south of Laughlin. That
gaming company plans to begin construction this fall on one of the facilities.
Separately, the Golden Nugget is reportedly planning to add several hundred
additional hotel rooms. Another entity is reportedly planning two projects in
Laughlin consisting of 1,800 rooms and 70,000 square feet of casino space north
of Ramada Express and 1,000 rooms and 50,000 square feet of casino space south
of Ramada Express. Sewer permits are available for new sewer capacity that was
recently completed and is currently in operation.
Competition involves not only the quality of casino, room, restaurant,
entertainment and convention facilities, but also room, food and beverage
prices. The level of gaming activity also varies significantly from time to
time depending on general economic conditions, marketing efforts, hotel
occupancies and the offering of special events and promotions. The extent and
quality of complimentary services to attract high-stakes players and, in
Atlantic City, casino customers arriving under bus programs, the personal
attention offered to guests and casino customers, advertising, entertainment,
slot machine pay-out rates and credit policies with respect to high-stakes
players are also important competitive factors. As a result, operating results
can be adversely affected by significant cash outlays for advertising and
promotion and complimentary services to patrons, the amount and timing of which
are partially dictated by the policies of competitors. If operating revenues
are insufficient to allow management the flexibility to match the promotions of
competitors, the number of the Company's casino patrons may decline, with an
adverse effect on its financial performance.
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Seasonality
TropWorld experiences seasonal fluctuations in casino play that management
believes are typical of casino hotel operations in Atlantic City. Operating
results indicate that casino play is seasonally higher during the months of May
through October; consequently the Company's revenues during the first and
fourth quarters have generally been lower than for the second and third
quarters and from time to time the Company has experienced losses in the first
and fourth quarters. Because TropWorld's operating results are especially
dependent upon operations in the summer months, any event that adversely
affects the operating results of TropWorld during such period could have a
material adverse effect on the Company's operations and financial condition.
Given Atlantic City's location, it is also subject to occasional adverse
weather conditions such as storms and hurricanes that would impede access to
Atlantic City, thus adversely impacting operations. The gaming markets in Las
Vegas and Laughlin experience a slight decrease in gaming activity in the hot
summer months and during the holiday period between Thanksgiving and Christmas.
CREDIT POLICY AND CONTROL PROCEDURES
As is customary in the gaming industry and necessitated by competitive
factors, the Company's gaming activities are conducted on a credit as well as a
cash basis. Credit policies vary widely from one operator to another and are
largely dependent on the profile of the targeted customers. Table games
players, for example, are typically extended more credit than slot players, and
high-stakes players are typically extended more credit than patrons who tend to
wager lower amounts. The Company currently markets to customers in all gaming
segments; however, its credit policy will vary from facility to facility based
upon the various types of customers at each facility. Gaming debts are legally
enforceable under the current laws of both New Jersey and Nevada; it is not
clear, however, that all other states will honor these policies. The
uncollectibility of gaming receivables could have a material adverse effect on
results of operations. Provisions for estimated uncollectible gaming
receivables have been made in order to reduce gaming receivables to amounts
deemed to be collectible.
Gaming operations at the casinos are subject to risk of substantial loss as a
result of employee or patron dishonesty, credit fraud or illegal slot machine
manipulation. The Company has in place stringent control procedures to minimize
such risks; however, there can be no assurance that losses will not occur.
Current controls include supervision of employees, monitoring by electronic
surveillance equipment and use of two-way mirrors and overhead catwalks. In New
Jersey, the Company's activities are observed and monitored on an ongoing basis
by agents of both the New Jersey Casino Control Commission (the "New Jersey
Commission") and the New Jersey Division of Gaming Enforcement (the "New Jersey
Division"), each of which maintains a staff on the premises of TropWorld.
Similarly, in Nevada the Company's gaming subsidiaries must comply with certain
regulatory requirements concerning casino and game security and surveillance,
and the gaming operations of Tropicana and Ramada Express are subject to
routine audit and supervision by agents of the Nevada State Gaming Control
Board (the "Nevada Board").
REGULATION
GENERAL
Regulatory aspects of the gaming business are pervasive in nature and the
following description should not be construed as a complete summary of all the
regulatory requirements faced by the Company. Gaming authorizations, once
obtained, can be suspended or revoked for a variety of reasons. If the Company
were ever precluded from operating one of its gaming facilities, it would, to
the extent permitted by law, seek to recover its investment by sale of the
property affected, but there can be no
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assurance that the Company would recover its full investment. In addition, the
Nevada Gaming Commission (the "Nevada Commission") and the New Jersey
Commission have the authority to require a holder or beneficial owner of the
Company's securities to be found to be suitable or to qualify under applicable
laws or regulations.
From time to time, legislative and regulatory changes are proposed that could
be adverse to the Company. In addition, from time to time, investigations are
conducted relating to the gaming industry. TropWorld is required to report
certain cash transactions to the U.S. Department of the Treasury pursuant to
the Bank Secrecy Act. Violation of the reporting requirements of the Bank
Secrecy Act could result in civil as well as criminal penalties including fines
and/or imprisonment. The State of Nevada has adopted a regulation similar to
the Bank Secrecy Act which requires the Nevada facilities to document and/or
report certain currency transactions to the Nevada Board. Violation of this
regulation could result in action by the Nevada authorities to fine or revoke,
suspend, condition or fail to renew the Nevada facilities' licenses and/or the
Company's licensing approval. These reporting requirements are not expected to
have any adverse effects on the Company's casino operations.
REGULATION AND LICENSING--NEVADA
The ownership and operation of casino gaming facilities in Nevada are subject
to: (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, "Nevada Act"); and(ii) various local regulation. The
gaming operations of Tropicana and Ramada Express are subject to the licensing
and regulatory control of the Nevada Commission, the Nevada Board and the Clark
County Liquor and Gaming Licensing Board (the "Clark County Board")
(collectively, the "Nevada Gaming Authorities").
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things; (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the prevention of
cheating and fraudulent practices; and (v) the provision of a source of state
and local revenues though taxation and licensing fees. Change in such laws,
regulations and procedures could have an adverse effect on the Company.
HRN is the Company's wholly-owned subsidiary which operates the casino at
Tropicana and Ramada Express, Inc. ("Express") is the Company's wholly-owned
subsidiary which operates the casino at Ramada Express. HRN and Express are
both required to be licensed by the Nevada Gaming Authorities. The gaming
licenses require the periodic payment of fees and taxes and are not
transferable. The Company is registered by the Nevada Commission as a publicly
traded corporation ("Registered Corporation") and as such, it is required
periodically to submit detailed financial and operating reports to the Nevada
Commission and furnish any other information which the Nevada Commission may
require. No person may become a stockholder of, or receive any percentage of
profits from HRN or Express without first obtaining licenses and approvals from
the Nevada Gaming Authorities. The Company, HRN and Express have obtained from
the Nevada Gaming Authorities the various registrations, approvals, permits and
licenses required in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company, HRN or
Express in order to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, directors and
certain key employees of HRN and Express must file applications with the Nevada
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Gaming Authorities and may be required to be licensed or found suitable by the
Nevada Gaming Authorities. Officers, directors and key employees of the Company
who are actively and directly involved in gaming activities of HRN and Express
may be required to be licensed or found suitable by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an application for
licensing for any cause which they deem reasonable. A finding of suitability is
comparable to licensing, and both require submission of detailed personal and
financial information followed by a thorough investigation. The applicant for
licensing or a finding of suitability must pay all the costs of the
investigation. Changes in licensed positions must be reported to the Nevada
Gaming Authorities and in addition to their authority to deny an application
for a finding of suitability or licensure, the Nevada Gaming Authorities have
jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, HRN or Express, the companies involved would
have to sever all relationships with such person. In addition, the Nevada
Commission may require the Company, HRN or Express to terminate the employment
of any person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company, HRN and Express are required to submit detailed financial and
operating reports to the Nevada Commission. Substantially all material loans,
leases, sales of securities and similar financing transactions by HRN and
Express must be reported to, or approved by, the Nevada Commission.
If it were determined that the Nevada Act was violated by HRN or Express, the
gaming licenses held by HRN or Express could be limited, conditioned, suspended
or revoked, subject to compliance with certain statutory and regulatory
procedures. In addition, HRN, Express, the Company and the persons involved
could be subject to substantial fines for each separate violation of the Nevada
Act at the discretion of the Nevada Commission. Further, a supervisor could be
appointed by the Nevada Commission to operate the Company's Nevada gaming
properties and, under certain circumstances, earnings generated during the
supervisor's appointment (except for the reasonable rental value of the
Company's Nevada gaming properties) could be forfeited to the State of Nevada.
Limitation, conditioning or suspension of any gaming license or the appointment
of a supervisor could (and revocation of any gaming license would) materially
adversely affect the Company.
Any beneficial holder of the Company's voting securities, regardless of the
number of shares owned, may be required to file an application, be
investigated, and have his suitability as a beneficial holder of the Company's
voting securities determined if the Nevada Commission has reason to believe
that such ownership would otherwise be inconsistent with the declared policies
of the State of Nevada. The applicant must pay all costs of investigation
incurred by the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of the Company's
voting securities to report the acquisition to the Nevada Commission. The
Nevada Act requires that beneficial owners of more than 10% of the Company's
voting securities apply to the Nevada Commission for a finding of suitability
within thirty days after the Chairman of the Nevada Board mails the written
notice requiring such filing. Under certain circumstances, an "institutional
investor," as defined in the Nevada Act, which acquires more than 10%, but not
more than 15%, of the Company's voting securities may apply to the Nevada
Commission for a waiver of such finding of suitability if such institutional
investor holds the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting securities for
investment purposes unless the voting securities were acquired and are held in
the ordinary course of business as an institutional investor and not for the
purpose of causing, directly or indirectly, the election of a majority of the
members of the board of directors of the Company, any change in the Company's
corporate charter, bylaws, management, policies or operations of the
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Company, or any of its gaming affiliates, or any other action which the Nevada
Commission finds to be inconsistent with holding the Company's voting
securities for investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment purposes only
include: (i) voting on all matters voted on by stockholders; (ii) making
financial and other inquiries of management of the type normally made by
securities analysts for informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent.
If the beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after request,
fails to identify the beneficial owner. Any stockholder found unsuitable and
who holds, directly or indirectly, any beneficial ownership of the common stock
of a Registered Corporation beyond such period of time as may be prescribed by
the Nevada Commission may be guilty of a criminal offense. The Company is
subject to disciplinary action if, after it receives notice that a person is
unsuitable to be a stockholder or to have any other relationship with the
Company, HRN or Express, the Company (i) pays that person any dividend or
interest upon voting securities of the Company, (ii) allows that person to
exercise, directly or indirectly, any voting right conferred through securities
held by that person, (iii) pays remuneration in any form to that person for
services rendered or otherwise, or (iv) fails to pursue all lawful efforts to
require such unsuitable person to relinquish his voting securities for cash at
fair market value. Additionally, the Clark County Board has taken the position
that it has the authority to approve all persons owning or controlling the
stock of any corporation controlling a gaming license.
The Company may be required to disclose to the Nevada Commission upon request
the identities of the holders of the Notes. The Nevada Commission may, in its
discretion, require the holder of any debt security, including the Notes, of a
Registered Corporation such as the Company to file applications, be
investigated and be found suitable to own the debt security of a Registered
Corporation. If the Nevada Commission determines that a person is unsuitable to
own such security, then pursuant to the Nevada Act, the Registered Corporation
can be sanctioned, including the loss of its approvals, if without the prior
approval of the Nevada Commission, it: (i) pays to the unsuitable person any
dividend, interest, or any distribution whatsoever; (ii) recognizes any voting
right by such unsuitable person in connection with such securities; (iii) pays
the unsuitable person remuneration in any form; or (iv) makes any payment to
the unsuitable person by way of principal, redemption, conversion, exchange,
liquidation, or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be
required to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However,
to date, the Nevada Commission has not imposed such a requirement on the
Company.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. On June 23, 1994, the Nevada Commission granted the Company prior
approval to make public offerings for a period of one year, subject to certain
conditions ("Shelf Approval"). However, the Shelf Approval may be rescinded for
good cause without prior notice upon the issuance of an
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interlocutory stop order by the Chairman of the Nevada Board. The Shelf
Approval does not constitute a finding, recommendation or approval by the
Nevada Commission or the Nevada Board as to the accuracy or adequacy of the
prospectus or the investment merits of the securities offered. Any
representation to the contrary is unlawful. Because the proceeds of this
Offering will be used to retire the First Mortgage Notes and not in connection
with gaming facilities in Nevada, approval of the Offering by the Nevada
Commission or the Nevada Board is not required.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby he obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Nevada Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated
and licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licensees and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and(iii) promote a neutral environmental for the orderly governance of
corporate affairs. Approvals are, in certain circumstances, required from the
Nevada Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to the
Registered Corporation's stockholders for the purposes of acquiring control of
the Registered Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments.
Any person who is licensed, required to be licensed, registered, required to
be registered, or is under common control with such persons (a "Licensee," or
collectively, "Licensees"), and who proposes to become involved in a gaming
venture outside of Nevada is required to deposit with the Nevada Board, and
thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation of the Nevada Board of their participation in such
foreign gaming. The revolving fund is subject to increase or decrease in the
discretion of the Nevada Commission. Thereafter, Licensees are required to
comply with certain reporting requirements imposed by the Nevada Act. A
Licensee is also subject to disciplinary action by the Nevada Commission if it
knowingly violates any laws of the foreign jurisdiction pertaining to the
foreign gaming operation, fails to conduct the foreign gaming operation in
accordance with the standards of honesty and integrity required of Nevada
gaming operations, engages in activities that are harmful to the State of
Nevada or its ability to collect gaming taxes and fees, or employs a person in
the foreign operation who has been denied a license or finding of suitability
in Nevada on the ground of personal unsuitability.
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The sale of alcoholic beverages is also subject to licensing, control and
regulation by the Clark County Board. All licenses are revokable and are not
transferable. The Clark County Board has full power to limit, condition,
suspend or revoke any such license and any such disciplinary action could (and
revocation would) have a material adverse effect upon the operations of the
Company.
REGULATION AND LICENSING--NEW JERSEY
The ownership and operation of casino hotel facilities and gaming activities
in Atlantic City, New Jersey, are subject to extensive state regulation under
the New Jersey Casino Control Act (the "New Jersey Act") and the regulations of
the New Jersey Commission. In general, the New Jersey Act and regulations
provide for more extensive controls over a broader scope of gaming-related
activities than does the Nevada regulatory system.
The New Jersey Act and regulations concern primarily the financial stability
and character of casino licensees, their intermediary and holding companies,
their employees, their security holders and others financially interested in
casino operations, the nature of hotel and casino facilities and a wide range
of gaming and non-gaming related operations. The New Jersey Act and regulations
include detailed provisions concerning, among other things, financial and
accounting practices used in connection with casino operations, residence and
equal employment opportunities for employees of casino operators, contractors
for casino facilities and others; rules of games, levels of supervision of
games and methods of selling and redeeming chips; manner of granting credit,
duration of credit and enforceability of gaming debts; manufacture,
distribution and sale of gaming equipment; security standards, management
control procedures, accounting and cash control methods and reports to gaming
authorities; advertising of casinos and standards for entertainment and
distribution of alcoholic beverages in casinos. A number of these provisions
require practices which are different from those in Nevada and some of them
result in casino operating costs being higher than those in comparable
facilities in Nevada.
The New Jersey Act also established the New Jersey Division to investigate
all license applications, enforce the provisions of the New Jersey Act and
attendant regulations and prosecute all proceedings for violations of the New
Jersey Act and regulations before the New Jersey Commission. The New Jersey
Division also conducts audits and continuing reviews of all casino operations.
Adamar of New Jersey, Inc. ("Adamar"), a wholly-owned subsidiary of the
Company, has been licensed (subject to biennial renewal) by the New Jersey
Commission to operate TropWorld. In November 1982, the New Jersey Commission
granted a plenary license to Adamar. In November 1993, the license was renewed
for a period of two years. The Company and Ramada New Jersey Holdings
Corporation ("Holdings"), another of the Company's New Jersey gaming
subsidiaries, have been approved as qualified holding companies for Adamar's
casino license. Officers and directors of the Company and Adamar and employees
who work at casino hotel facilities operated by Adamar also have been or must
be approved or licensed. In addition, all contracts affecting the facilities
have been or must be approved, and all enterprises that conduct business with
Adamar must register with the New Jersey Commission and those enterprises that
conduct gaming related businesses or that conduct business on a regular and
continuing basis, as defined by the regulations under the New Jersey Act, must
be licensed by the New Jersey Commission.
The New Jersey Commission has broad discretion regarding the issuance,
renewal, revocation and suspension of casino licenses. Casino licenses are not
transferable. A casino hotel facility must also continually satisfy certain
requirements concerning, among other things, the number of qualifying sleeping
units and the relationship between the number of qualifying sleeping units and
the square footage of casino space. The Company believes that TropWorld
continues to meet such requirements.
The New Jersey Act further provides that each person who directly or
indirectly holds any beneficial interest or ownership of the securities issued
by a casino licensee or any of its intermediary or holding
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companies, those persons who, in the opinion of the New Jersey Commission,
have the ability to control the casino licensee or its intermediary or holding
companies or elect a majority of the board of directors of said companies,
other than a banking or other licensed lending institution which makes a loan
or holds a mortgage or other lien acquired in the ordinary course of business,
lenders and underwriters of said companies may be required to seek
qualification from the New Jersey Commission. However, because the Company is
a publicly traded holding company, in accordance with the provisions of the
New Jersey Act, a waiver of qualification may be granted by the New Jersey
Commission, with the concurrence of the Director of the Division, if it is
determined that said persons or entities are not significantly involved in the
activities of Adamar and, in the case of security holders, do not have the
ability to control the Company or elect one or more of its directors. There
exists a rebuttable presumption that any person holding 5% or more of the
equity securities of a casino licensee's intermediary or holding company or a
person having the ability to elect one or more of the directors of such a
company has the ability to control the company and thus must obtain
qualification from the New Jersey Commission.
Notwithstanding this presumption of control, the New Jersey Act provides for
a waiver of qualification for passive "institutional investors," as defined by
the New Jersey Act, if the institutional investor purchased the securities for
investment purposes only and where such securities constitute (i) less than
10% of the equity securities of a casino licensee's holding or intermediary
company or(ii) debt securities of a casino licensee's holding or intermediary
company representing a percentage of the outstanding debt of such company not
exceeding 20% or a percentage of any issue of the outstanding debt of such
company not exceeding 50%. The waiver of qualification is subject to certain
conditions including, upon request of the New Jersey Commission, filing a
certified statement that the institutional investor has no intention of
influencing or affecting the affairs of the issuer. Additionally, a waiver of
qualification may also be granted to institutional investors holding a higher
percentage of securities of a casino licensee's holding or intermediary
company upon a showing of good cause.
If the institutional investor is granted such a waiver and subsequently
determines to influence or affect the affairs of the issuer, it must provide
not less than 30 days notice of such intent and file with the New Jersey
Commission an application for qualification before taking any action which may
influence or affect the affairs of the issuer, except that an institutional
investor holding voting securities shall be permitted to vote on matters put
to the vote of the holders of outstanding voting securities. If an
institutional investor that has been granted a waiver subsequently changes its
investment intent, or if the New Jersey Commission finds reasonable cause to
believe that the institutional investor may be found unqualified, no action
other than divestiture shall be taken by the investor with respect to the
security holdings until there has been compliance with the provisions of the
New Jersey Act concerning Interim Casino Authorization. The provisions of the
New Jersey Act concerning Interim Casino Authorization provide that whenever a
security holder of either equity or debt is required to qualify pursuant to
the New Jersey Act, the security holder shall, within 30 days after the New
Jersey Commission determines that qualification is required or declines to
waive qualification, (i) file a completed application for qualification, along
with an executed and approved Trust Agreement, wherein all securities of the
holding or intermediary company held by that security holder are placed in
trust pending qualification, or (ii) file a notice of intent to divest itself
of such securities as the New Jersey Commission may require so as to remove
the need for qualification, which securities must be divested within 120 days
from the date such determination was made.
The New Jersey Act further requires that corporate licensees and their
subsidiaries, intermediaries and holding companies adopt certain provisions in
their certificates of incorporation that require certain remedial action in
the event that an individual owner of any security of such company is found
disqualified under the New Jersey Act. The required certificate of
incorporation provisions vary depending on whether the stock of the company
subject to the requirements of the New Jersey Act is publicly or privately
traded. Pursuant to the New Jersey Act, the certificate of incorporation of a
publicly held company must
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provide that any securities of such corporation are held subject to the
condition that if a holder is found to be disqualified by the New Jersey
Commission pursuant to the New Jersey Act such holder shall dispose of his
interest in such company. The certificate of incorporation of a privately held
company must create the absolute right of the company to repurchase at the
market price or purchase price, whichever is the lesser, any security, share
or other interest in the company in the event the New Jersey Commission
disapproves a transfer in accordance with the provisions of the New Jersey
Act.
The Company is a publicly held company and, accordingly, a provision has
been placed in the Company's Restated Certificate of Incorporation which
provides that a holder of the Company's securities must dispose of such
securities if the holder is found disqualified under the New Jersey Act. In
addition, the Restated Certificate of Incorporation for the Company provides
that the Company may redeem the stock of any holder found to be disqualified.
If, at any time, it is determined that Adamar has violated the New Jersey
Act or regulations, or if any security holder of the Company, Adamar or
Holdings who is required to be qualified under the New Jersey Act is found
disqualified but does not dispose of the securities, Adamar could be subject
to fines or its license could be suspended or revoked. If Adamar's license is
revoked, the New Jersey Commission could appoint a conservator to operate and
to dispose of any casino hotel facilities of Adamar. Net proceeds of a sale by
a conservator and net profits of operations by a conservator (at least up to
an amount equal to a fair return on Adamar's investment which is reasonable
for casinos or hotels) would be paid to Adamar.
The subsidiaries which conduct the Company's gaming operations in Las Vegas
and Laughlin are not required to apply for licensure or qualification under
the New Jersey Act, but their certificates of incorporation are required under
the New Jersey Act to contain a provision granting them an absolute right to
repurchase at the market price or purchase price, whichever is less, any of
their respective securities in the event that the New Jersey Commission
disapproves a transfer of any such securities.
In addition to compliance with the New Jersey Act and regulations relating
to gaming, any facility built in Atlantic City by Adamar or any other
subsidiary of the Company must comply with the New Jersey and Atlantic City
laws and regulations relating to, among other things, the Coastal Area
Facilities Review Act, construction of buildings, environmental
considerations, operation of hotels and the sale of alcoholic beverages.
The New Jersey Commission is authorized to establish fees for the issuance
or renewal of casino licenses. Yearly casino hotel alcoholic beverage license
fees are payable for each facility in any of five specified categories in any
licensed casino hotel. There is also an annual license fee on each slot
machine. The New Jersey Commission is also authorized by regulation to
establish annual fees for the issuance and renewal of licenses other than
casino licenses.
The New Jersey Act imposes an annual tax of eight percent on gross revenues
(as defined in the New Jersey Act). In addition, casino licensees are required
to invest one and one-quarter percent of gross revenues for the purchase of
bonds to be issued by the Casino Reinvestment Development Authority or make
other approved investments equal to that amount; in the event the investment
requirement is not met, the casino licensee is subject to a tax in the amount
of two and one-half percent on gross revenues.
REGULATION AND LICENSING--MISSOURI
On November 3, 1992, a statewide referendum authorized gaming in the state
of Missouri on the Missouri and the Mississippi Rivers. Local approval from
the home dock municipality, as required by the legislation, was also obtained
from the City of Caruthersville in the November 3, 1992 election. On April 29,
1993, Missouri enacted revised legislation (the "Missouri Gaming Law") which
amended the
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existing legislation. The Missouri Gaming Law established the Missouri Gaming
Commission, which is responsible for the licensing and regulation of riverboat
gaming in Missouri and has the discretion to approve license applications for
riverboat gaming facilities. In July 1993, the Company was chosen by the City
of Caruthersville as the preferred applicant to develop a gaming facility, and
on September 20, 1993, the Company, through its subsidiary Aztar Missouri
Gaming Corporation ("Aztar Missouri"), filed its initial application with the
Missouri Gaming Commission. The Missouri Gaming Commission has commenced its
formal investigation of Aztar Missouri's application. If Aztar Missouri is
granted a license, it currently expects to begin operations in Caruthersville,
Missouri in 1995.
Gaming in the state of Missouri is currently limited to games of skill due to
a decision of the Missouri Supreme Court on January 25, 1994 that held that
games of chance, including certain games authorized under the Missouri Gaming
Law, such as bingo and keno, constitute "lotteries" and are therefore
prohibited under the Missouri constitution. The court held that games involving
an element of skill, such as poker and blackjack, are permissible under the
Missouri constitution, but remanded the case to the trial court to determine
whether other games contemplated by the Missouri Gaming Law are permissible
under the Missouri constitution. In so doing, however, the court noted that
traditional slot machines involve no element of skill and have been held in
other states to constitute "lotteries".
In a statewide election held on April 5, 1994, Missouri voters narrowly
defeated the adoption of a constitutional amendment that would have excepted
excursion boats and floating facilities from the constitutional prohibition on
lotteries. Local voters did re-approve gaming in the City of Caruthersville in
the April 5, 1994 election. Following the April 5, 1994 election, the Missouri
legislature amended the existing Missouri Gaming Law to clarify certain
definitions and to resolve some constitutional questions raised in the Missouri
Supreme Court decision. Based upon this revised statute, the Missouri Gaming
Law now permits "games of skill" including poker, blackjack, craps, caribbean
stud, pai gow poker, Texas hold'em, double down stud and any video
representation of such games. Pursuant to the Missouri Gaming Law, as revised,
the Missouri Gaming Commission issued two licenses on May 27, 1994 and two
licenses on June 22, 1994.
Blackjack, craps, and video poker currently are licensed and played in the
four casinos operating in Missouri. The status of certain other games, such as
baccarat and roulette, depends upon a factual determination by the trial court
in Missouri, pursuant to the January 25, 1994 decision of the Missouri Supreme
Court. Games of chance, specifically traditional reel slot machines, will not
be permitted in the state of Missouri unless a constitutional amendment is
approved by the voters. In order for another vote on a constitutional amendment
to permit full-scale gaming to occur in the 1994 calendar year, the amendment
would have to be placed on the ballot via initiative petition. Such a petition
was submitted to the Secretary of State of Missouri by the July 8, 1994
deadline, and the Secretary of State has to make a determination on the
sufficiency of the signatures. There can be no assurance that a constitutional
amendment will be placed on the ballot, either through general assembly action
or the petition process, in any future election or that full-scale gaming will
ever be approved in Missouri.
Opponents to gaming in Missouri have brought several legal challenges to
gaming in the past and are likely to bring legal challenges in the future to
any proposed legislation or constitutional amendment. There can be no
assurances that any future challenges, if brought, would not further delay or
prohibit the commencement of full-scale gaming operations in Missouri,
including the operations of Aztar Missouri.
Under the Missouri Gaming Law, the ownership and operation of riverboat
gaming facilities in Missouri are subject to extensive state and local
regulation. Aztar Missouri, any subsidiaries, and certain of its officers and
employees are and will be subject to certain regulations. As part of the
application and licensing process for a gaming license, the applicant must
submit detailed financial, operating and other reports to the Missouri Gaming
Commission. Each applicant has an ongoing duty to update the information
provided to the Missouri Gaming Commission in the application. In addition to
the information required of the applicant, each director, officer and other key
persons must submit a
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Personal Disclosure Form which includes detailed personal financial information
and is subject to thorough investigation. In addition, certain officers and
directors of Aztar Corporation have been requested to submit a Personal
Disclosure Form to the Missouri Gaming Commission. All gaming employees must
obtain an occupational license issued by the Missouri Gaming Commission.
The operators licenses are issued through application to the Missouri Gaming
Commission, which requires, among other things, (a) investigations into an
applicant's character, financial responsibility and experience qualifications
and (b) that applicants furnish (i) an affirmative action plan for the hiring
and training of minorities and women and (ii) an economic development or impact
report. License fees are a minimum of $50,000 for the initial application, and
$25,000 annually thereafter. Licenses are to last for a term of two years,
except that the first license and subsequent renewal granted to each gaming
operator are to be for terms of one year. Aztar Missouri and its officers and
certain employees have submitted all the requisite licensing applications with
respect to the Caruthersville operation, and Aztar Missouri has no reason to
believe that these applications will not be approved. In addition, certain
officers and directors of Aztar Corporation have been requested to submit
licensing applications to the Missouri Gaming Commission. The Missouri Gaming
Commission has commenced its formal investigation of Aztar Missouri's
application. However, there can be no assurance that Aztar Missouri's
application will be approved in a timely manner or at all.
The Missouri Gaming Commission may revoke or suspend gaming licenses and
impose other penalties for violation of the Missouri Gaming Law and the rules
and regulations promulgated thereunder. Penalties include forfeiture of all
gaming equipment used for improper gaming and fines of up to three times an
operator's highest daily gross adjusted receipts during the preceding twelve
months. The gaming licenses are not transferable, and the Missouri rules bar a
licensee from taking any of the following actions without prior approval by the
Missouri Gaming Commission: (a) a pledge of the license as collateral to other
than a regulated bank or savings and loan association; (b) any individual
transfer of an interest of 5% or greater, either directly or indirectly, in a
publicly traded company which holds a license; or (c) distribution of assets in
excess of 5% of accumulated earnings of a licensee to anyone with an ownership
interest in the licensee. The Company believes that it is the intent of the
Missouri regulators that the restriction on transfer of ownership apply to the
Company as well as the direct licensee, Aztar Missouri. However, the regulation
is not explicit and this provision has not yet been tested in Missouri.
The bulk of the Missouri administrative rules contains detailed requirements
concerning the operation of a licensed excursion gaming boat facility. These
include a charge of two dollars per gaming customer that licensees must pay to
the Missouri Gaming Commission, minimum payout requirements, a 20% tax on
adjusted gross receipts, prohibitions against providing credit to gaming
customers (except for the use of credit cards and cashing checks) and a
requirement that each licensee reimburse the Missouri Gaming Commission for all
costs of any Missouri Gaming Commission staff necessary to protect the public
on the licensee's riverboat. Licensees also must submit audited quarterly
financial reports to the Commission and pay the associated auditing fees. The
Missouri Gaming Law also provides for a loss limit of $500 per person, per
excursion. Other areas of operation which are subject to regulation under the
Missouri rules are the size, denomination and handling of chips and tokens; the
surveillance methods and computer monitoring of electronic games; accounting
and audit methods and procedures; and approval of an extensive internal control
system. The Missouri rules also require that all of an operator's purchases
must be from suppliers licensed by the Missouri Gaming Commission.
Although the Missouri Gaming Law provides no limit on the amount of riverboat
space that may be used for gaming, the Missouri Gaming Commission is empowered
to impose such space limitations through the adoption of rules and regulations.
Additionally, United States Coast Guard safety regulations could affect the
amount of riverboat space that may be devoted to gaming.
With respect to the availability of dockside gaming, which may be more
profitable than cruise gaming, the Missouri Gaming Commission is empowered to
determine on a city and county-specific
44
<PAGE>
basis where such gaming is appropriate and shall be permitted. Dockside gaming
in Missouri may differ from dockside gaming in other states, because the
Missouri Gaming Commission has the ability to require "simulated cruising".
This requirement would permit customers to board dockside riverboats only at
specified times and would prohibit boarding during the period of a simulated
cruise, which is expected to last for two to three hours. However, customers
are permitted to leave the facility at any time. Currently, one floating
facility is operating as continuously docked with a "simulated cruise"
schedule.
REGULATION AND LICENSING--INDIANA
The ownership and operation of riverboat casinos in designated waters
adjacent to the State of Indiana are subject to extensive state regulation
under the Indiana Riverboat Gambling Act (the "Indiana Act") and regulations
which the Indiana Gaming Commission is authorized to adopt under the Indiana
Act. The Indiana Act and the regulations the Indiana Gaming Commission has
adopted to date and is expected to adopt in the future are significant to the
Company's prospects for successfully securing a license to operate a riverboat
casino in the Evansville, Indiana market and operating it if a license is
secured.
The Indiana Act extends broad and pervasive regulatory powers and authority
to the Indiana Gaming Commission. The Indiana Gaming Commission took office in
September 1993, and, thus far, its activities have been predominantly directed
toward establishing a regulatory and administrative infrastructure for
licensing of prospective applicants for the limited number of riverboat owner's
licenses authorized by the Indiana Act: five for operations docking in Lake
Michigan, one on a landlocked lake in Southwestern Indiana and five on the Ohio
River (the Company is seeking one of the five licenses allocated to Ohio River
counties). The Indiana Gaming Commission has proposed a set of regulations
under the Indiana Act which cover numerous operational matters concerning
riverboat casinos licensed by the Commission. Those regulations have been
formally proposed and are now part of the promulgation process which applies to
all regulations issued by administrative agencies. The process includes
publication and a final comment period before the regulations become final by
approval by the Attorney General and the Governor and filing with the Secretary
of State. Although these initial regulatory proposals have not yet been
finalized and promulgated as operative regulations, the regulatory climate in
Indiana may well end up to be more costly than exists in other states.
Among the regulations proposed is one dealing with riverboat excursions,
routes and public safety. The Indiana Act requires licensed riverboat casinos
to be cruising vessels, and the regulations carry out the legislative intent
with appropriate recognition of public safety needs. The regulations explicitly
preclude "dockside gambling". For purposes of the regulations, dockside
gambling is defined to mean gambling on a vessel which is permanently moored
and not self-propelled and allows unlimited passenger ingress and egress.
Instead, the regulations define the type of excursions riverboats must conduct
based upon location (Lake Michigan or the Ohio River), weather conditions and
other safety factors.
Excursions must have a two- to four-hour duration. An excursion begins at the
time embarkation begins and concludes at the end of disembarkation if gambling
continues during disembarkation. Embarkation and disembarkation may not exceed
thirty minutes each. When the embarkation period ends, a gangway or its
equivalent must be closed so that no further embarkation is possible.
For Ohio River excursions, such as those the Company intends to operate
through its proposed Evansville operation, "full excursions" must be conducted
at all times during a year unless, for safety reasons, a "limited excursion" is
authorized by the master of the riverboat under the regulations. A "full
excursion" is a cruise on the Ohio River; a "limited excursion" is not a cruise
but a simulation where the gangway of a boat is closed with no further ingress
until the end of the designated excursion period. Passengers may disembark
during a limited excursion.
45
<PAGE>
The conditions under which a limited excursion may be conducted include
unsafe water levels, unsafe weather (fog, winds, rain), ice, mechanical or
structural difficulties, unsafe traffic conditions, conditions which would
cause the vessel to travel into waters in which it would violate federal law or
the law of any state, or any other condition which would jeopardize the safety
of the passengers, the vessel or other vessels. The condition relative to
violations of the laws of other states is designed to address the controversy
between the Commonwealth of Kentucky and the State of Indiana with respect to
exercise of the police power over the waters of the Ohio River.
Casino wagering is illegal in Kentucky. Most of the waters of the Ohio River
are, according to a decision of the United States Supreme Court, part of
Kentucky and therefore subject to its police power. Kentucky officials have
threatened to exercise police power and make arrests if Indiana-based
riverboats venture into Kentucky waters to conduct casino wagering operations.
The "limited excursion" regulation would seem to provide a clear basis for an
Indiana riverboat operator to conduct operations without any risk of legal
action from Kentucky. Although it has been reported that Indiana and Kentucky
officials have discussed some kind of compact that would protect Indiana-based
riverboats from action by Kentucky, no agreements have been publicly reported.
The Company, through an Indiana subsidiary, has applied to the Indiana Gaming
Commission for a riverboat owner's license for the Evansville, Indiana market.
Three other enterprises have filed applications for a license to conduct
riverboat casino operations in the Evansville market. It is expected that only
one license will be allocated to the Evansville market area. Initial license
hearings were expected to take place in the early fall of 1994. Litigation
commenced in a Northern Indiana county has resulted in the likelihood that
those hearings will take place on a later timetable.
A riverboat owner's license has an initial effective period of five years but
is subject to an annual renewal requirement. The Indiana Gaming Commission has
broad discretion with respect to the initial issuance of licenses and also with
respect to the renewal, revocation, suspension and control of riverboat owner's
licenses. Officers, directors and principal owners of the actual license holder
and employees who are to work on the riverboat are subject to substantial
disclosure requirements as a part of securing necessary licenses. Significant
contracts are subject to disclosure and approval processes. Suppliers of gaming
equipment and materials must also be licensed under the Indiana Act.
The Indiana Act requires an applicant for a license to disclose to the
Indiana Gaming Commission the identity of all 1% or greater owners of public
companies. The forms the Indiana Gaming Commission has developed for
application for riverboat owners' licenses require a broad and comprehensive
disclosure of financial and operating information on applicants and their
principal officers. There is a continuing disclosure obligation and an updating
requirement. The Company has provided full information and documentation to the
Indiana Gaming Commission in connection with its application for an owner's
license for its proposed Evansville operations.
The Company and the City of Evansville have signed a development agreement,
and the City of Evansville will endorse the Company's license request to the
Indiana Gaming Commission. The endorsement of "host communities" is one of many
factors the Indiana Gaming Commission may consider in awarding licenses.
In addition to securing a license to conduct riverboat casino operations from
the Indiana Gaming Commission, the Company will be required to secure permits
and approvals from the United States Army Corps of Engineers to develop the
facility it proposes to use to conduct operations. Owners of riverboat casinos
are entitled to receive specialized alcoholic beverage permits for riverboat
operations. These permits extend serving privileges far beyond those which
otherwise exist under Indiana law. Landside operations at the Company's
proposed development must secure other alcoholic beverage permits to conduct
operations.
46
<PAGE>
The Indiana Act prescribes a tax on adjusted gross receipts from gambling
games authorized under the Indiana Act at the rate of 20% on adjusted gross
receipts. For this purpose, adjusted gross receipts, means the total of all
cash and property received from gaming operations less cash paid out as
winnings and uncollectible gaming receivables. Indiana corporations are also
subject to the Indiana gross income tax, the Indiana adjusted gross income tax
and the Indiana supplemental corporate net income tax.
If the Company is granted a riverboat gaming license, the development
agreement with the City of Evansville will bind the Company to make a series of
payments to the city and community organizations. These payments are in the
nature of civic inducements that are necessary for the success of the Company's
efforts in Indiana.
EMPLOYEES
The Company employs approximately 8,200 people of which approximately 2,600
employees are represented by unions. Of the approximately 4,200 employees at
TropWorld, approximately 1,200 are covered by collective bargaining contracts.
Substantially all of such employees are covered by a contract that expires on
September 14, 1994 and the remainder are covered by contracts that expire in
1996. The Company is a member of a multi-employer bargaining unit that includes
most of the major Atlantic City casinos. Negotiations have commenced with
regard to a successor contract and a series of meetings have been scheduled to
take place prior to expiration. At Tropicana, approximately 1,400 of the 2,400
employees are covered by collective bargaining contracts. A substantial number
of such employees are covered by a contract that expired on May 31, 1994, and
those employees are currently working without a contract while negotiations
continue. A small number of such employees are covered by a separate contract
that expired on June 1, 1994, but the Company and the union have reached a
tentative agreement for a new contract that will incorporate certain aspects of
the contract still being negotiated, and therefore will not be finalized until
after such negotiations have been concluded. The remainder of such employees
are covered by contracts that expire in 1995. At Ramada Express there are
approximately 1,500 employees, none of which are covered by collective
bargaining agreements.
TRADEMARKS
The Company uses a variety of trade names, service marks and trademarks and
believes it has all the licenses necessary to conduct its business. The Company
has registered several service marks and trademarks with the United States
Patent and Trademark Office or otherwise acquired the licenses to use those
which are material to the conduct of the Company's business as a whole.
The Company and Adamar of Nevada are the beneficiaries of an agreement with
Tropicana Enterprises, the owner of certain properties related to Tropicana,
and the Jaffe Family regarding the use of the name "Tropicana" for the
operation of a casino hotel in Atlantic City and in connection with the
operation of a casino hotel in New York State (if gaming were to be authorized
in New York State). Pursuant to such agreement, the Company has registered the
name under the Lanham Act. Upon the occurrence of certain events, the right to
use the name reverts to Tropicana Enterprises.
Ramada has licensed the Company to use the name "Ramada" in conjunction with
the operation of Ramada Express, and will not use or permit the use of the name
"Ramada" in Laughlin, Nevada by any other person or entity.
The Company has registered the following important service marks: Aztar,
Trop, TropWorld, Trop Park, Tivoli Pier, TropWorld Casino and Entertainment
Resort and The Island of Las Vegas. The Company believes there are no other
trademarks or service marks the use of which is material to the conduct of the
Company's business as a whole.
47
<PAGE>
LEGAL PROCEEDINGS
Aztar and more than 40 other major casino operators, as well as various
manufacturers and distributors of video poker and electronic slot machines,
have been named as defendants in actions entitled William H. Poulos v. Caesars
World, Inc., et al., (filed on April 26, 1994) and William Ahern v. Caesars
World, Inc., et al., (filed on May 10, 1994) (the "Actions") in the United
States District Court for the Middle District of Florida, Orlando Division.
Both Actions were brought under RICO and state common law and seek compensatory
and punitive damages in excess of $1 billion from the defendants. The
complaints allege that the defendants took part in a scheme intended to induce
people to play video poker and electronic slot machines based on false beliefs
concerning how those machines actually operate as well as the extent to which
there is actually an opportunity to win on any given play.
On June 24, 1994, the Company, together with certain other defendants, filed
motions asking the Court to: (i) dismiss the Actions for lack of personal
jurisdiction and improper venue, for failure to state a claim and for failure
to plead fraud with particularity; (ii) abstain from exercising jurisdiction
over the Actions on the grounds of primary jurisdiction; (iii) alternatively,
transfer the Actions to the United States District Court for the District of
Nevada; and (iv) stay discovery pending a ruling on defendants' motions to
dismiss.
During July 1994, the Court issued orders setting time frames for the conduct
of certain pre-trial proceedings, staying discovery as to the merits until
October 31, 1994 and directing that discovery on jurisdictional and class
issues proceed.
The Company believes that plaintiffs' allegations are without merit, and it
intends to defend the Actions vigorously.
The Company is a party to various other claims, legal actions and complaints
arising in the ordinary course of business or asserted by way of defense or
counterclaim in actions filed by the Company. Management believes that its
defenses are substantial in each of these matters and that the legal posture of
the Company can be successfully defended or satisfactorily settled without
material adverse effect on its consolidated financial statements.
48
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning the individuals who are
directors or executive owners of the Company.
<TABLE>
<CAPTION>
YEARS WITH
THE COMPANY AND
NAME AGE POSITIONS RAMADA
---- --- --------- ---------------
<C> <C> <S> <C>
Paul E. Rubeli................. 50 Chairman of the Board, 15
President and Chief
Executive Officer, and
Director (Term as
Director expires 1996)
Robert M. Haddock.............. 49 Executive Vice President 13
and Chief Financial
Officer, and Director
(Term as Director
expires 1997)
Nelson W. Armstrong, Jr. ...... 53 Vice President, 21
Administration and
Secretary
Joe C. Cole.................... 56 Vice President, 6
Corporate
Communications
Meridith P. Sipek.............. 48 Controller 16
Craig F. Sullivan.............. 48 Treasurer 16
John B. Bohle.................. 51 Director (Term expires 2
1996)
Edward M. Carson............... 64 Director (Term expires 19
1995)
A. Sam Gittlin................. 79 Director (Term expires 31
1997)
John R. Norton, III............ 65 Director (Term expires 16
1995)
Robert S. Rosow................ 75 Director (Term expires 25
1995)
Richard Snell.................. 63 Director (Term expires 13
1995)
Vesta Valentine Temen.......... 61 Director (Term expires 11
1996)
Terence W. Thomas.............. 63 Director (Term expires 16
1997)
Carroll V. Willoughby.......... 80 Director (Term expires 24
1996)
</TABLE>
Set forth below is a description of the business occupation, position, office
or employment of each director and executive officer of the Company for the
past five years.
Paul E. Rubeli. Mr. Rubeli joined Ramada in 1979 as Group Vice President,
Industrial Operations. He served as Executive Vice President, Gaming, of Ramada
from 1982 to December 1989, when he was appointed President and Chief Operating
Officer of the Company in the Restructuring. He was appointed Chief Executive
Officer in February 1990 and Chairman of the Board in addition to his other
positions in February 1992.
Robert M. Haddock. Mr. Haddock joined Ramada in 1980 and held various
positions before becoming Executive Vice President and Chief Financial Officer
in March 1987, serving in that capacity until the Restructuring, when he
assumed the same position with the Company.
Nelson W. Armstrong, Jr. Mr. Armstrong joined Ramada in 1973 as an
accounting supervisor and held various positions on the corporate accounting
staff, serving as Vice President and Controller of Ramada and then of the
Company after the Restructuring until he was appointed Vice President,
Administration, and Secretary of the Company in March 1990.
Joe C. Cole. Mr. Cole joined Ramada in March 1988 as Vice President,
Corporate Communications, after having been affiliated with Phoenix Newspapers
Inc. for 26 years as a reporter, columnist and editor. He became Vice
President, Corporate Communications, of the Company in the Restructuring.
49
<PAGE>
Meridith P. Sipek. Mr. Sipek joined Ramada's corporate accounting staff in
1977 as a manager and held various positions in corporate and hotel accounting,
serving as Hotel Group Controller before being named Assistant Corporate
Controller of Ramada and then of the Company after the Restructuring until he
was appointed Controller of the Company in March 1990.
Craig F. Sullivan. Mr. Sullivan joined Ramada in 1978 as a treasury analyst
and held various Treasury Department positions before being named Assistant
Treasurer in May 1982, serving in that capacity in Ramada and in the Company
after the Restructuring until he was appointed Treasurer of the Company in
March 1990.
John B. Bohle. Mr. Bohle is Senior Vice President and Director of Paul R. Ray
and Company, Inc. (executive recruiting services) since 1981.
Edward M. Carson. Mr. Carson has been Chairman of First Interstate Bancorp
since 1990 and was President of First Interstate Bancorp from 1985 to 1990. He
also is a director of Terra Industries, Inc. (agribusiness products).
A. Sam Gittlin. Mr. Gittlin has been Chairman and Chief Executive Officer of
Gittlin Companies, Inc. (manufacturing, distributing and financial services)
since 1946.
John R. Norton, III. Mr. Norton is Chairman and Chief Executive Officer of
J.R. Norton Company (diversified agricultural production). He is also a
director of America West Airlines, Inc., Arizona Public Service Company
(electric utility), Pinnacle West Capital Corporation (holding company) and
Terra Industries, Inc. (agribusiness products).
Robert S. Rosow. Mr. Rosow has been an independent Certified Public
Accountant since 1953.
Richard Snell. Mr. Snell is Chairman, President and Chief Executive Officer
of Pinnacle West Capital Corporation (holding company) and Chairman of Arizona
Public Service Company (electric utility) since February 1990. He is also a
director of Pinnacle West, Arizona Public Service and Banc One Arizona
Corporation (bank holding company). Mr. Snell was previously Chairman,
President and Chief Executive Officer of Ramada from 1981 to December 1989,
Chairman of the Company from December 1989 to February 1992 and Chairman and
Chief Executive Officer of the Company from December 1989 to February 1990.
Vesta Valentine Temen. Mrs. Temen retired in March 1994 from her position as
Vice President of Administration at TropWorld, where she had served in various
capacities since 1982.
Terence W. Thomas. Mr. Thomas has been Chairman of the Board of Arizona
Wholesale Supply Company and National Brands, Inc. (wholesale distributors of
consumer products) since 1984.
Carroll V. Willoughby. Mr. Willoughby is retired. He was a Senior Group Vice
President of Ramada from 1970 to 1981.
50
<PAGE>
SECURITY OWNERSHIP
5% BENEFICIAL OWNERS
The table below sets forth certain information regarding beneficial owners of
more than 5% of the Common Stock as of July 14, 1994, as indicated by documents
on file with the Securities and Exchange Commission. The Company knows of no
other beneficial owner of more than 5 percent of its outstanding Common Stock.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
------------------------ ---------------------- ----------------
<S> <C> <C>
Gabelli Funds, Inc. .............. 3,609,325 9.7%
One Corporate Center
Rye, NY 10580
State of Wisconsin Investment
Board............................ 3,435,700 9.2%
P.O. Box 7842
Madison, WI 53707
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth certain information regarding Directors' and
executive officers' beneficial ownership of Common Stock as of July 14, 1994.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
DIRECTORS BENEFICIALLY OWNED* PERCENT OF CLASS
--------- ----------------------- ----------------
<S> <C> <C>
John B. Bohle.................... 8,000 **
Edward M. Carson................. 9,400 **
A. Sam Gittlin................... 13,100 **
Robert M. Haddock................ 721,405 1.9%
John R. Norton, III.............. 22,500 **
Robert S. Rosow.................. 29,596 **
Paul E. Rubeli................... 844,033 2.3%
Richard Snell.................... 49,000 **
Vesta Valentine Temen............ 39,572 **
Terence W. Thomas................ 11,000 **
Carroll V. Willoughby............ 44,000 **
<CAPTION>
NAMED EXECUTIVE OFFICERS
------------------------
<S> <C> <C>
Nelson W. Armstrong, Jr.......... 93,427 **
Meridith P. Sipek................ 55,851 **
Craig F. Sullivan................ 54,535 **
All Directors and Executive Offi-
cers
as a group (15 persons)......... 2,041,436 5.4%
</TABLE>
- --------
* Including, for Mr. Gittlin, 1,100 shares held by a partnership in which he
is a general partner and as to which he has effective voting and investment
power and 3,000 shares owned by Mrs. Gittlin and as to which Mr. Gittlin
disclaims any beneficial interest; for Mr. Norton, 13,500 shares held by a
self directed 401(k) profit sharing plan; for Mr. Rosow, 400 shares held in
an estate of which Mr. Rosow is the independent executor and in which he
disclaims any beneficial interest; for Messrs. Carson, Gittlin, Norton,
Rosow, Snell, Thomas and Willoughby 9,000 shares each; for Mr. Bohle 8,000
shares; and for Mrs. Temen 37,413 shares, which they may acquire by the
exercise of stock options within 60 days; for Messrs. Haddock, Rubeli,
Armstrong, Sipek, and Sullivan 659,883, 760,416, 86,030, 52,591, and 49,257
shares, respectively, which they may acquire by the exercise of stock
options within 60 days; and for the Directors and executive officers as a
group (15 persons), 1,758,329 shares, which they may acquire by the exercise
of options within 60 days.
** Less than 1% of the outstanding shares of Common Stock.
51
<PAGE>
DESCRIPTION OF THE NOTES
The Notes will be issued under an indenture to be dated as of , 1994 (the
"Indenture"), between the Company and American Bank National Association as
trustee (the "Trustee"). Capitalized terms used herein not otherwise defined
have the respective meanings assigned to them in the Indenture.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 as in
effect on the date of the Indenture (the "Trust Indenture Act"). The Notes are
subject to all such terms, and Holders of the Notes are referred to the
Indenture and the Trust Indenture Act for a statement of those terms. The
statements under this caption relating to the Notes and the Indenture are
summaries and do not purport to be complete. Such summaries make use of certain
terms defined in the Indenture and are qualified in their entirety by express
reference to the Indenture. A copy of the Indenture substantially in the form
in which it is to be executed has been filed with the Commission as an exhibit
to the Registration Statement of which this Prospectus is a part.
The Notes are general unsecured senior subordinated obligations of the
Company. They will be issued in fully registered form only, in denominations of
$1,000 and integral multiples thereof.
PAYMENT TERMS
The Notes will mature , 2004 and will bear interest at a rate of % per
annum until maturity, payable semi-annually on and , of each year,
commencing , 1995 to the persons who are registered Holders thereof at the
close of business on the and , immediately preceding such interest
payment date.
The Indenture provides that interest on the Notes will be computed on the
basis of a 360-day year of twelve 30-day months. Principal and interest will be
payable at the office of the Trustee but, at the option of the Company,
interest may be paid by check mailed to the registered holders at their
registered addresses. Initially, the Trustee will act as Paying Agent and
Registrar. The Notes may be presented for registration of transfer and exchange
at the offices of the Registrar, which initially will be the Trustee's office.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the election of the Company prior to ,
1999. On or after , 1999, the Notes will be redeemable at the election of
the Company, in whole at any time or in part from time to time, on not less
than 30 nor more than 60 days' prior notice, mailed by first-class mail to the
Holders' last addresses as they shall appear in the Register, at the redemption
prices (expressed in percentages of principal amount) specified below plus
accrued and unpaid interest, if any, to the redemption date, if redeemed during
the 12-month period beginning of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999........................................................... %
2000...........................................................
2001...........................................................
2002 and thereafter............................................ 100.00
</TABLE>
If less than all the Notes are to be redeemed, selection of Notes for
redemption will be made by the Trustee, pro rata or by lot or by any other
means the Trustee determines to be fair and appropriate. The Indenture provides
that if any Note is to be redeemed in part only, the notice of redemption
relating to such Note will state the portion of the principal amount (in
integral multiples of $1,000) to be
52
<PAGE>
redeemed and that, on and after the date fixed for redemption, upon surrender
of such Note, a new Note or Notes in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof. On and after
the Redemption Date interest will cease to accrue on Notes or portions of them
called for redemption.
SUBORDINATION OF THE NOTES
The payment of the principal of and interest on the Notes is subordinated in
right of payment, as set forth in the Indenture, to the prior payment in full
of all Senior Indebtedness, whether outstanding on the date of the Indenture or
thereafter created, incurred, issued, assumed or guaranteed. Upon any
distribution of the assets of the Company upon any liquidation, dissolution,
bankruptcy, reorganization or similar proceeding, the holders of Senior
Indebtedness will be entitled to receive payment in full before the Holders of
the Notes are entitled to receive any payment. See "RISK FACTORS--
Subordination."
In the event of any default in the payment of principal of or interest on
Designated Senior Indebtedness pursuant to which the maturity of such
Designated Senior Indebtedness may be accelerated, no payment may be made on or
in respect of the Notes until such default has been cured or waived. During the
continuance of any other event of default with respect to Designated Senior
Indebtedness that permits acceleration of the maturity thereof, no payment may
be made on or in respect of the Notes for a period of 180 days (the "Payment
Blockage Period") commencing on the earlier of (i) the date the Trustee
receives written notice of such default from the Representative with respect
to, or from the holders of a majority in aggregate principal amount of, such
Designated Senior Indebtedness then outstanding or (ii) if such event of
default results from the acceleration of the Notes, the date of such
acceleration (unless such Payment Blockage Period shall be terminated by
written notice to the Trustee from such Representative or such holders). Not
more than one Payment Blockage Period may be commenced with respect to the
Notes during any period of 360 consecutive days. In no event will a Payment
Blockage Period extend beyond 179 days from the date the payment on the Notes
was due, and there must be 180 days in any 360-day period in which no Payment
Blockage Period is in effect. For all purposes of this paragraph, no default or
event of default which existed or was continuing on the date of the
commencement of any Payment Blockage Period with respect to the Designated
Senior Indebtedness initiating such Payment Blockage Period shall be, or be
made, the basis for the commencement of a subsequent Payment Blockage Period by
the Representative or requisite holders of such Designated Senior Indebtedness
whether or not within a period of 360 consecutive days unless such default or
event of default shall have been cured or waived for a period of not less than
90 consecutive days. The failure to make a payment of the principal of or
interest on the Notes because of such restrictions shall not be construed as
preventing the occurrence of an Event of Default and the right to accelerate
the maturity of the Notes upon the occurrence thereof.
REPURCHASE OR REDEMPTION UPON A CHANGE OF CONTROL
Upon a Change of Control of the Company, unless the Company has exercised its
right of redemption as described below, each Holder of the Notes shall have the
right to require that the Company repurchase each such Holder's Notes at a
purchase price in cash equal to the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of repurchase, as provided in, and
subject to the terms of, the Indenture. Within 30 days following any Change of
Control, the Company shall mail a notice to each Holder stating, among other
things, (1) that such Holder has the right to require the Company to repurchase
such Holder's Notes at a purchase price in cash equal to the principal amount
thereof plus accrued and unpaid interest, if any, to the date of repurchase and
that all Notes tendered to the Company by such Holder will be accepted for
payment; (2) the purchase price and the repurchase date (which shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed); and (3) the instructions determined by the Company consistent with
this covenant that a Holder must follow in order to have its Notes repurchased.
53
<PAGE>
Notwithstanding the foregoing, at the option of the Company, upon a Change of
Control, the Company will have the right to redeem all but not part of the
Notes at a purchase price in cash equal to the prices (expressed in percentages
of principal amount) specified below plus accrued and unpaid interest, if any,
to the date of redemption, if redeemed during the 12-month period beginning
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1994.............................. %
1995..............................
1996..............................
1997..............................
1998..............................
1999..............................
2000..............................
2001..............................
2002 and thereafter............... 100.00
</TABLE>
The Company must notify the Trustee of its intent to exercise this right
within 20 Business Days, and must complete the redemption of the Notes within
60 days, after such Change of Control.
In the event of a Change of Control, each holder of the Notes will have the
right to require the Company to repurchase such holder's Notes at par, plus
accrued interest. Under the terms of certain Indebtedness of the Company, the
holders thereof may require repayment or its acceleration upon a Change of
Control. The Proposed Credit Facility is expected to constitute senior debt and
to contain similar provisions regarding a Change of Control. In the event that
holders of the Notes exercised the right to require repurchase of the Notes
upon a Change of Control, such right would be subordinated to the right of the
banks that are party to the Proposed Credit Facility to receive payment, if
such banks exercise their right to require repayment upon a Change of Control.
The subordination of the Notes may limit the ability of the Company to
repurchase the Notes, depending upon the funds available to the Company at such
time. The Change of Control provision may also have the effect of deterring or
delaying certain unsolicited acquisition attempts.
The conveyance, transfer or lease of all or substantially all of the
Company's assets, among other things, would constitute a Change of Control.
Although the amount of assets that will constitute "all or substantially all"
of the Company's assets is not readily quantifiable, a determination as to
whether a Change of Control has occurred will depend on the percentage of
operating assets and total assets transferred, among other measurements, and
the other facts and circumstances of the transaction. In any particular
transfer, the determination of whether a Change of Control has occurred will be
made by the Company, and the Company shall give notice to the Holders of the
Notes of the occurrence of a Change of Control.
The Company will comply with all applicable rules governing tender offers for
the Notes, including but not limited to, Section 14(e) of the Exchange Act and
the rules promulgated thereunder.
MANDATORY DISPOSITION OR REDEMPTION PURSUANT TO GAMING LAWS
The New Jersey and Nevada gaming authorities currently have the authority to
require a Holder or beneficial owner of the Notes to be licensed or found
qualified or suitable under applicable laws and regulations, and it is possible
that gaming authorities in other jurisdictions in which the Company may operate
in the future could be granted similar authority. If, at any time, a Holder or
beneficial owner of Notes is required to be licensed or found qualified or
suitable under any gaming laws or regulations applicable to the Company and
such Holder or such beneficial owner does not become so licensed or is not
found qualified or suitable, the Company, will have the right, at its option,
(i) to require such Holder or such beneficial owner to dispose of all or a
portion of such Holder's or beneficial owner's Notes within 120 days after such
Holder or beneficial owner receives notice of such finding by the applicable
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gaming authorities (or such different time period as may be prescribed by such
authorities) or (ii) to redeem the Notes of such Holder upon not less than 30
nor more than 60 days prior notice by the Company (or such different time
period as may be prescribed by such applicable gaming authorities). If such
Holder or beneficial owner fails to dispose of such Holder's or beneficial
owner's Notes within the prescribed time period, the Company shall have the
right to redeem such Holder's or beneficial owner's Notes on five days notice.
Any redemption by the Company pursuant to this paragraph shall be without
premium and at the lower of (i) the Holder's or beneficial owner's original
purchase price for the Notes and, if permitted by the gaming authorities or by
applicable Gaming Jurisdiction Law, accrued interest to the redemption date,
and (ii) the lowest closing sale price of the Notes between the date of the
notice given by the applicable gaming authorities and the date ten days after
such date unless some other price or terms are required by such gaming
authorities. Each Holder and beneficial owner by accepting the Notes will agree
to such provisions as set forth in the Notes and the Indenture and will agree
to inform the Company upon request of the price at which such Holder or
beneficial owner acquired such Notes. See "REGULATION--Regulation and
Licensing--Nevada" and "--Regulation and Licensing--New Jersey."
CERTAIN DEFINITIONS
Set forth is a summary of certain of the defined terms used in the Indenture.
Reference is made to the Indenture for the full definition of all such terms,
as well as any other terms used herein for which no definition is provided.
"Affiliate" means, with respect to any Person, a Person (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such Person, (ii) which beneficially owns or
holds 10% or more of any class of the Voting Stock of such Person (or a 10% or
greater equity interest in a Person which is not a corporation) or (iii) of
which 10% or more of any class of the Voting Stock (or in the case of a Person
which is not a corporation, 10% or more of the equity interest) is beneficially
owned or held by such Person or any Subsidiary of such Person. The term
"control" means the 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.
"Asset Sale" means the sale or other disposition (including, without
limitation, dispositions pursuant to Sale and Leaseback Transactions) by the
Company or one of its Subsidiaries to any Person other than the Company or one
of its Subsidiaries of (i) any of the Capital Stock of any of the Subsidiaries
of the Company or (ii) any other assets of the Company or any assets of its
Subsidiaries outside the ordinary course of business of the Company or such
Subsidiary.
"Average Life" means, as of the date of determination, with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
(x) the numbers of years from the date of determination to the dates of each
successive scheduled principal payment of such debt security multiplied by (y)
the amount of such principal payment by (ii) the sum of all such principal
payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of capital
stock of such Person and any rights (other than debt securities convertible
into capital stock), warrants or options to acquire such capital stock.
"Capitalized Lease Obligation" means, with respect to any Person, the
obligation of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real or personal Property, which
obligation is required to be classified and accounted for as a capital lease
obligation on a balance sheet of such Person under generally accepted
accounting principles. For purposes of the Indenture, the amount of such
obligation at any date shall be the outstanding amount thereof at such date,
determined in accordance with generally accepted accounting principles.
"Change of Control" means any one or more of the following:
(A) the Company shall consolidate with or merge into any other
corporation or any other corporation shall consolidate with or merge into
the Company (in either case, other than a consolidation or merger with a
Wholly Owned Subsidiary in which all of the Voting Stock of the
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Company outstanding immediately prior to the effectiveness thereof is
changed into or exchanged for substantially the same consideration), in
either case pursuant to a transaction in which substantially all of the
Voting Stock of the Company outstanding immediately prior to the
effectiveness thereof is changed into or exchanged for cash, securities
(other than Voting Stock of the Company) or other property; provided,
however, that the term "Change of Control" shall not include any such
consolidation or merger if, with respect to such consolidation or merger,
(x) substantially all of the Voting Stock of the Company outstanding
immediately prior to the effectiveness thereof is changed into or exchanged
for Voting Stock of the surviving corporation or the ultimate parent of the
surviving corporation (the "Merger Common Stock"), (y) the Merger Common
Stock, immediately following the effectiveness thereof, is listed for
trading on the New York Stock Exchange or the American Stock Exchange or is
quoted on the National Association of Securities Dealers Automated
Quotation System and is designated as a "national market system security"
and (z) immediately after the effectiveness thereof, the Persons who were
holders of Voting Stock of the Company immediately prior to the
effectiveness thereof (excluding Persons who immediately prior to the
effectiveness thereof were Affiliates of the corporation consolidated or
merged with the Company in such consolidation or merger (other than Persons
who were Affiliates solely as a result of the ownership by the Company of
Capital Stock in such consolidated or merged corporation)) hold in the
aggregate more than 50% of the then outstanding Voting Stock of the
surviving corporation (or the ultimate parent of the surviving
corporation);
(B) the Company shall convey, transfer or lease all or substantially all
its assets to any Person or Persons (other than to a Wholly Owned
Subsidiary); provided, however, that the term "Change of Control" shall not
include any such conveyance, transfer or lease of assets (1) pursuant to a
Sale and Leaseback Transaction or (2) if immediately after the
effectiveness thereof, the Persons who were holders of Voting Stock of the
Company immediately prior to the effectiveness thereof (excluding Persons
who immediately prior to the effectiveness thereof were Affiliates of the
transferee of such assets (other than Persons who were such Affiliates
solely as a result of the ownership by the Company of Capital Stock in such
transferee)) hold in the aggregate more than 50% of the then outstanding
common stock of such transferee; or
(C) any Person (other than the Company) or group shall acquire, directly
or indirectly, beneficial ownership, in the aggregate, of 50% or more of
the outstanding shares of Voting Stock of the Company or securities
representing 50% or more of the combined Voting Power of the Company's
Voting Stock (the "Controlling Securities"), in either case outstanding on
the date immediately prior to the date of the last such acquisition by such
Person or group; provided, however, that the term "Change of Control" shall
not include any such acquisition that results in the Company ESOP and
members of management of the Company who have been employed in a management
capacity with the Company for at least eighteen months owning 50% or more
of the Voting Stock of the Company or 50% or more of the Controlling
Securities.
"Consolidated Amortization Expense" means, for any period, amortization
expense of the Company and its Restricted Subsidiaries, on a consolidated
basis, for such period (including, without limitation, any amortization or
write-offs of deferred financing costs by the Company and its Restricted
Subsidiaries during such period).
"Consolidated Depreciation Expense" means, for any period, depreciation
expense of the Company and its Restricted Subsidiaries, on a consolidated
basis, for such period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any Transaction Date,
the ratio of (i) Consolidated Operating Cash Flow for the four consecutive
fiscal quarters for which financial information in respect thereof is available
immediately prior to such Transaction Date to (ii) Consolidated Fixed Charges
which will accrue during the then current fiscal quarter in which such
Transaction Date occurs (beginning on the first day of such quarter) and the
three fiscal quarters immediately subsequent to the end of such current fiscal
quarter, provided that, for the purpose of
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calculating Consolidated Fixed Charges for the period described in this clause
(ii), (A) the interest rate on any Indebtedness bearing interest at a rate that
is adjustable based on market rate levels shall be calculated based on the
assumption that the applicable market rate level in effect on the Transaction
Date shall remain constant throughout such period at the market rate level in
effect on the Transaction Date, (B) adjustments that are reasonably anticipated
to occur during such period to Consolidated Fixed Charges shall be included in
such calculation (including such adjustments that result from the scheduled
maturity of Indebtedness of the Company and its Restricted Subsidiaries) and
(C) Indebtedness shall be included in such calculation that is reasonably
anticipated to be created, incurred, assumed or guaranteed by, or to otherwise
become the obligation of, the Company or any Restricted Subsidiary; provided,
however, that, for purposes of calculating the Consolidated Fixed Charge
Coverage Ratio, Consolidated Operating Cash Flow and Consolidated Fixed Charges
shall (x) include the consolidated operating cash flow and consolidated fixed
charges of any Person to be acquired by the Company or any of its Restricted
Subsidiaries as a Restricted Subsidiary in connection with the transaction
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio, (y) include the consolidated operating cash flow and consolidated fixed
charges of any other Person acquired during the period described in clause (i)
above by the Company or by any of its Restricted Subsidiaries as a Restricted
Subsidiary and (z) exclude the consolidated operating cash flow of any Person
directly attributable to the Property of such Person that was the subject of an
Asset Sale, on a pro forma basis for the four consecutive fiscal quarters for
which financial information in respect thereof is available immediately prior
to such Transaction Date, in the case of calculating Consolidated Operating
Cash Flow, and for the then current fiscal quarter in which such Transaction
Date occurs and the three fiscal quarters immediately subsequent to the end of
such fiscal quarter (on the same basis as described in clause (ii) above), in
the case of calculating Consolidated Fixed Charges. For purposes of the
foregoing proviso, the consolidated operating cash flow and consolidated fixed
charges of any such Person shall be determined on the same basis as such items
are determined for the Company. For purposes of each pro forma determination of
the Consolidated Fixed Charge Coverage Ratio in connection with the "Limitation
on Indebtedness" covenant, the proposed new Indebtedness shall be deemed to be
incurred on the first day of the fiscal quarter in which the relevant
Transaction Date occurs.
"Consolidated Fixed Charges" means, for any period, the sum of Consolidated
Interest Expense plus the Tropicana Payments.
"Consolidated Income Tax Expense" means, for any period, the income tax
expense of the Company and its Restricted Subsidiaries, on a consolidated
basis, for such period (other than income tax expense attributable to Asset
Sales).
"Consolidated Interest Expense" means, for any period, without duplication,
(A) the sum of (i) the aggregate amount of interest recognized by the Company
and its Restricted Subsidiaries during such period in respect of Indebtedness
of the Company and its Restricted Subsidiaries (including, without limitation,
all interest capitalized by the Company and its Restricted Subsidiaries during
such period and all commissions, discounts and other fees and charges owed by
the Company and its Restricted Subsidiaries with respect to letters of credit
and bankers' acceptance financing and the net costs associated with Interest
Swap Obligations of the Company and its Restricted Subsidiaries), (ii) the
aggregate amount of the interest component of rentals in respect of Capitalized
Lease Obligations recognized by the Company and its Restricted Subsidiaries
during such period, (iii) to the extent any Indebtedness of any Person is
guaranteed by the Company or any of its Restricted Subsidiaries, the aggregate
amount of interest paid or accrued by such Person during such period
attributable to any such Indebtedness, (iv) one-third of the rent expense
incurred under noncancelable operating leases (excluding the Tropicana Lease)
during such period and (v) the aggregate amount of Redeemable Dividends
recognized by the Company and its Restricted Subsidiaries, whether or not
declared during such period, less (B) any amortization or write-off of deferred
financing costs by the Company and its Restricted Subsidiaries during such
period; in each case after elimination of intercompany accounts
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among the Company and its Restricted Subsidiaries and as determined in
accordance with generally accepted accounting principles.
"Consolidated Interest Income" means, for any period, interest income from
all sources of the Company and its Restricted Subsidiaries, on a consolidated
basis, for such period.
"Consolidated Net Income" means, for any period, the aggregate net income of
the Company and its Subsidiaries for such period on a consolidated basis,
determined in accordance with generally accepted accounting principles,
provided that there shall be excluded therefrom (i) gains and losses from Asset
Sales or reserves relating thereto, (ii) items classified as extraordinary or
nonrecurring, (iii) the income (or loss) of any Unrestricted Subsidiary or
Joint Venture, except to the extent that the aggregate amount of cash dividends
or other distributions actually paid during such period to the Company or any
Restricted Subsidiary by such Unrestricted Subsidiary or Joint Venture in
respect of its Capital Stock out of funds legally available therefor exceeds
the aggregate amount of new Investments in such Unrestricted Subsidiary or
Joint Venture by the Company or any Restricted Subsidiary during such period,
(iv) except to the extent includable pursuant to clause (iii), the income (or
loss) of any Person accrued or attributable to any period prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any of its Restricted Subsidiaries or that Person's assets (or a
portion thereof) are acquired by the Company or any of its Restricted
Subsidiaries and (v) the income of any Restricted Subsidiary to the extent that
such Restricted Subsidiary is prevented by any Legal Requirement from paying
such income to the Company or another Restricted Subsidiary. Notwithstanding
the foregoing, Consolidated Net Income as used in the "Limitation on Restricted
Payments" covenant shall include gains (or losses) on the sale by the Company
or a Restricted Subsidiary of an Unrestricted Subsidiary.
"Consolidated Net Rent" means, for any period, without duplication, an amount
equal to the total of: (A) the rent expense, net of intercompany rent, incurred
by HRN pursuant to the Tropicana Lease plus (B) two-thirds of the rent expense
incurred under other noncancelable operating leases.
"Consolidated Net Worth" means, as of any date, with respect to any Person,
the sum of the Capital Stock and additional paid-in capital plus retained
earnings (or minus accumulated deficit) of such Person and its Subsidiaries on
a consolidated basis at such date, each item determined in accordance with
generally accepted accounting principles, less amounts attributable to
Redeemable Stock of such Person and its Subsidiaries.
"Consolidated Operating Cash Flow" means, for any period, without
duplication, Consolidated Net Income, plus (i) Consolidated Interest Expense,
plus (ii) Consolidated Income Tax Expense, plus (iii) Consolidated Depreciation
Expense, plus (iv) Consolidated Amortization Expense, plus (v) Consolidated Net
Rent, plus (vi) equity in unconsolidated partnerships' losses, minus (vii)
Consolidated Interest Income, plus (viii) other non-cash items reducing such
Consolidated Net Income, minus (ix) other non-cash items increasing such
Consolidated Net Income, for such period, all as determined in accordance with
generally accepted accounting principles.
"Credit Facility" means any agreement between the Company and/or any of its
Restricted Subsidiaries and one or more banks or other financial institutions
providing for the making of term loans or loans on a revolving basis
(including, in either case, construction loans and lines of credit), the
issuance of letters of credit and the creation of bankers' acceptances, as any
such agreement may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified, including any agreement extending
the maturity, refinancing or restructuring of all or any portion of the
Indebtedness and other obligations under such agreement or any successor
agreement.
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"Currency Agreement" means, with respect to any Person, any foreign exchange
contract, currency swap agreement, option or futures contract or other similar
agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in currency values.
"Designated Senior Indebtedness" means each issue of Senior Indebtedness that
(i) has an outstanding principal amount of not less than $25,000,000 and (ii)
has been designated as Designated Senior Indebtedness pursuant to an Officers'
Certificate of the Company received by the Trustee.
"Effective Date" means , 1994.
"Gaming Jurisdiction Law" means any law, statute, ordinance, code,
regulation, constitutional provision, rule, order, directive or other
enforceable requirement now or hereafter in existence of any Gaming Authority.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any obligation, contingent or otherwise, for 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), (ii) any obligation evidenced by bonds, debentures, notes
or other similar instruments, (iii) any obligation owed for all or any part of
the purchase price of Property, other assets or services or for the cost of
Property or other assets constructed or of improvements thereto (including any
obligation under or in connection with any letter of credit related thereto),
other than accounts payable included in current liabilities and incurred in
respect of Property or services purchased in the ordinary course of business,
(iv) any obligation of such Person under or in connection with any letter of
credit issued for the account of such Person and all drafts drawn or demands
for payment honored thereunder, (v) any obligation under conditional sale or
other title retention agreements relating to purchased Property, (vi) any
obligation issued or assumed as the deferred purchase price of Property (other
than accounts payable incurred in the ordinary course of business), (vii) any
obligation, contingent or otherwise, as set forth in subclauses (i), (ii) and
(iii) of this definition of any other Person secured by any Lien in respect of
Property of such Person even though such Person has not assumed or become
liable for payment of such obligation, (viii) any Capitalized Lease Obligation
or any other obligation pursuant to any Sale and Leaseback Transaction, (ix)
any note payable or draft accepted representing an extension of credit (other
than extensions of credit for Property and services purchased in the ordinary
course of business) whether or not representing an obligation for borrowed
money, (x) the maximum fixed repurchase price of any Redeemable Stock, (xi)
obligations in respect of Interest Swap Obligations and Currency Agreements and
(xii) any obligation which is a guarantee with respect to Indebtedness (of a
kind otherwise described in this definition) of another Person. For purposes of
the preceding sentence, the maximum fixed repurchase price of any Redeemable
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Stock as if such Redeemable Stock
were repurchased on any date on which Indebtedness shall be required to be
determined pursuant to the Indenture; provided, however, that if such
Redeemable Stock is not then permitted to be repurchased, the repurchase price
shall be the book value of such Redeemable Stock. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above, the maximum liability of such
contingent obligations at such date and, in the case of clause (vii), the
lesser of the fair market value at such date of any asset subject to a Lien
securing the Indebtedness of others and the amount of the Indebtedness secured.
"Investment" means, with respect to any Person (such Person being referred to
in this definition as the "Investor"), any amount paid by the Investor,
directly or indirectly, or any transfer of Property, directly or indirectly
(such amount to be the fair market value of such Property at the time of
transfer as determined in good faith by the Board of Directors of the Investor,
whose determination shall be conclusive) by the Investor to any other Person
(i) for Capital Stock of, or other equity interest in, or as
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a capital contribution to, such other Person or (ii) as a direct or indirect
loan or advance to such other Person (other than accounts receivable of the
Investor arising in the ordinary course of business).
"Jaffe Partnership Interest" means the general partnership interest in
Tropicana Enterprises held by members of the Jaffe Family pursuant to the
Amended and Restated Partnership Agreement dated as of November 19, 1984
between the Jaffe Family and Adamar of Nevada, as amended.
"Joint Venture" means any Person (other than a Subsidiary of the Company) in
which any Person other than the Company or any of its Subsidiaries has a joint
or shared equity interest with the Company or any of its Subsidiaries.
"Permitted Liens" means, with respect to any Person, (i) Liens for taxes,
assessments, governmental charges or claims which are not yet due and payable
or are being contested in good faith by such Person by appropriate proceedings
promptly instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in accordance with
generally accepted accounting principles shall have been made by such Person;
(ii) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen, or other like Liens arising in the ordinary
course of business and with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which a reserve or other appropriate provision, if
any, as shall be required in accordance with generally accepted accounting
principles shall have been made by such Person; (iii) Liens incurred or
deposits made by such Person in the ordinary course of business in connection
with worker's compensation, unemployment insurance, medical insurance and other
types of social security and deposits made by such Person in the ordinary
course of business in connection with other kinds of insurance; (iv) Liens
incurred or deposits made by such Person to secure the performance of tenders,
bids, leases, statutory obligations, surety and appeal bonds, government
contracts, performance and return-of-money bonds and other obligations of a
like nature incurred in the ordinary course of business (exclusive of
obligations for the payment of borrowed money); (v) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar
charges or encumbrances not interfering in any material respect with the
business of such Person or any of its Subsidiaries incurred in the ordinary
course of business; (vi) Liens (including extensions and renewals thereof) upon
real or tangible personal property acquired by such Person after the date of
the Indenture; provided that (a) any such Lien is created solely for the
purpose of securing Indebtedness representing, or incurred to finance,
refinance or refund, all costs (including the cost of construction) of the item
of Property subject thereto, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such cost, (c) such Lien does not
extend to or cover any other Property other than such item of Property and any
improvements on such item and (d) the incurrence of such Indebtedness is
permitted by the "Limitation on Indebtedness" covenant; (vii) Liens upon
specific items of inventory or other goods and proceeds of such Person securing
such Person's obligations in respect of bankers' acceptances issued or created
for the account of such Person in the ordinary course of business to facilitate
the purchase, shipment or storage of such inventory or other goods; (viii)
Liens securing reimbursement obligations with respect to commercial letters of
credit issued for the account of such Person which encumber documents and other
Property relating to such commercial letters of credit and the products and
proceeds thereof; (ix) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties in connection
with the importation of goods by such Person; (x) licenses, leases or subleases
granted to others not interfering in any material adverse respect with the
business of such Person or any of its Subsidiaries; (xi) Liens encumbering
Property or assets of such Person under construction arising from progress or
partial payments by a customer of such Person or one of its Subsidiaries
relating to such Property or assets; (xii) Liens encumbering customary initial
deposits and margin accounts, and other Liens incurred in the ordinary course
of business and which are within the general parameters customary in the gaming
industry, in each case securing Interest Swap Obligations or Currency
Agreements; (xiii) Liens encumbering deposits made to secure obligations
arising from statutory or regulatory requirements of such Person or its
Subsidiaries; (xiv) any interest or title of a
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lessor in the Property subject to any Capitalized Lease Obligation or operating
lease which, in each case, is permitted under the Indenture; (xv) Liens
securing obligations to the Trustee pursuant to the compensation and indemnity
provisions of the Indenture; (xvi) purchase money liens securing payables
arising from the purchase by such Person or any of its Subsidiaries of any
equipment or goods in the ordinary course of business, provided that such
payables do not constitute Indebtedness; (xvii) Liens arising out of
consignment or similar arrangements for the sale of goods entered into by such
Person or any of its Subsidiaries in the ordinary course of business; (xviii)
Liens for judgments or orders not giving rise to a Default or Event of Default;
and (xix) Liens not specified in the foregoing and not otherwise permitted by
the covenant on "Limitation on Liens," provided that the aggregate Indebtedness
secured by the Liens under this clause (xix) shall not exceed $5,000,000 at any
time.
"principal" means, with respect to any debt security (including any Note),
the principal of such debt security plus the premium, if any, on any such debt
security.
"Property" means any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
"Qualified Capital Stock" means Capital Stock not constituting Redeemable
Stock.
"Redeemable Dividend" means, for any dividend payable with respect to
Redeemable Stock, (i) to the extent such dividend is fully deductible for
federal income tax purposes, the amount of such dividend and (ii) to the extent
such dividend may not be deductible, the quotient of the amount of such
dividend divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any equity security
issued by such Person that by its terms or otherwise is required to be redeemed
(other than a security that is required to be redeemed only in the event that a
holder of such security fails to qualify or to be found suitable or otherwise
eligible under a Gaming Jurisdiction Law to remain as a holder of such
security) or is redeemable at the option of the holder of such security at any
time prior to the maturity of the Notes.
"Restricted Subsidiary" means any Subsidiary of the Company that (i) has not
been designated by the Board of Directors of the Company as an Unrestricted
Subsidiary or (ii) was an Unrestricted Subsidiary but has been redesignated by
the Board of Directors of the Company as a Restricted Subsidiary, in each case
as provided under the definition of Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party, providing for the
leasing to the Company or a Subsidiary of the Company of any Property, whether
owned at the date of the Indenture or thereafter acquired, which has been or is
to be sold or transferred by the Company or such Subsidiary to such Person or
to any other Person to whom funds have been or are to be advanced by such
Person on the security of such Property if, after giving effect to such
arrangement, the Company or a Subsidiary of the Company operates the business,
if any, located on such Property.
"Senior Indebtedness" means the principal of, interest (including without
limitation, interest at the contract rate subsequent to the commencement of any
bankruptcy, insolvency or similar proceeding with respect to the Company) on
and other amounts due on or in connection with any Indebtedness of the Company
for money borrowed from others, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed, which, at the
date of the Indenture or at the time of any such creation, incurrence,
assumption or guarantee, (i) is by its terms expressly senior to and not
subordinate or subject in right of payment to any other Indebtedness of the
Company, or (ii) is secured by a lien on any Property of the Company or any of
its Subsidiaries; provided, however, that Senior Indebtedness shall not include
any such Indebtedness if (A) the value of the collateral securing such
Indebtedness at time of incurrence is less than the amount of such Indebtedness
or (B) the value of any Property substituted for the collateral securing such
Indebtedness is less than the value of the collateral so released, in either
case as determined by the Company and set forth in an Officer's
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Certificate of the Company received by the Trustee, which certificate shall be
conclusive evidence of the correctness of the matters set forth herein, or
(iii) has been designated Senior Indebtedness pursuant to an Officer's
Certificate of the Company received by the Trustee. Notwithstanding anything
herein to the contrary, Senior Indebtedness shall not mean (a) Indebtedness of
the Company to a Subsidiary of the Company for money borrowed or advances from
such Subsidiary, (b) Indebtedness representing the maximum fixed repurchase
price of any Capital Stock of the Company which by its terms or otherwise is or
may be required to be redeemed or repurchased prior to the Stated Maturity of
the Notes or at the option of the holder thereof, (c) Indebtedness of the
Company to any officer or director thereof, (d) obligations owing under
judgments arising out of obligations that are not Indebtedness for borrowed
money, (e) accounts payable or any other Indebtedness to trade creditors
created or assumed by the Company in the ordinary course of business in
connection with the obtaining of materials or services and (f) any liability
for federal, state, local or other taxes owed or owing by the Company.
"Significant Subsidiary" means any Subsidiary of the Company (i) the revenues
attributable to which for the then most recently completed four fiscal quarters
constituted 5% or more of the consolidated revenues of the Company and its
Subsidiaries for such period, (ii) the assets of which as of the end of such
period constituted 5% or more of the consolidated assets of the Company and its
Subsidiaries as of the end of such period or (iii) that operates, owns or
leases any Property that is material to the business operations of the Company
or any Restricted Subsidiary.
"Stated Maturity" means, with respect to any Note or any installment of
interest thereon, the date specified in such Note as the fixed day on which the
principal on such Note or such installment of interest is due.
"Subsidiary" means, with respect to any Person, (i) a corporation a majority
of whose Capital Stock with voting power, under ordinary circumstances, to
elect directors is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) any other Person (other than a corporation) in
which such Person, one or more Subsidiaries thereof, or such Person and one or
more Subsidiaries thereof, directly or indirectly, at the date of determination
thereof has at least majority ownership interest and the power to direct the
policies, management and affairs thereof. For purposes of this definition, any
directors' qualifying shares mandated by applicable law shall be disregarded in
determining the ownership of a Subsidiary.
"Transaction Date" means the date of the transaction giving rise to the need
to calculate Consolidated Fixed Charge Coverage Ratio or to make any other
determination for purposes of complying with the provisions of the Indenture,
provided that if such transaction is related to or in connection with any
acquisition of any Person, the Transaction Date shall be the date on which the
Company or any of its Subsidiaries enters into an agreement with such Person to
effect such acquisition; provided, however, that if subsequent to the entering
of such agreement the Company or any of its Subsidiaries shall amend the terms
of such acquisition with respect to the consideration payable by the Company or
any of its Subsidiaries in connection with such acquisition, the Transaction
Date shall be the date on which the Company or any of its Subsidiaries enters
into an agreement with such Person to effect such amendment. The second proviso
above shall not be applicable if, as of the Transaction Date with respect to
any acquisition, the Company could incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of the "Limitation on
Indebtedness" covenant when the Consolidated Fixed Charge Coverage Ratio of the
Company is calculated on the basis of the amended terms of such acquisition and
the Indebtedness to be incurred by the Company and its Restricted Subsidiaries
in connection therewith.
"Tropicana Loan Refinancings" means any refinancings or financings of, or
related to, the Tropicana Loan or any refinancings thereof (including, but not
limited to, any Indebtedness owed to the Company or any Restricted Subsidiary
in connection with the Tropicana Loan or any refinancings
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thereof), to the extent that the aggregate amount of such Indebtedness incurred
pursuant to such refinancings or financings or does not exceed the outstanding
principal amount under the Tropicana Loan at the Effective Date.
"Tropicana Payments" means, for any period, that portion of the lease
payments made by HRN to Tropicana Enterprises pursuant to the Tropicana Lease
that represents the sum of interest expense on Indebtedness of Tropicana
Enterprises payable to Persons other than the Company plus amounts distributed
in respect of the Jaffe Partnership Interest.
"Tropicana Security Deposit" means the additional security deposit that HRN
may be required to provide from time to time pursuant to the Tropicana Lease
(as defined under "CERTAIN CONTRACTUAL ARRANGEMENTS--Tropicana Lease") as in
effect on the Effective Date.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company which at
the time of determination shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below) and (2) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the Company
may designate any Subsidiary of the Company (including any newly acquired or
newly formed Subsidiary) to be an Unrestricted Subsidiary (unless such
Subsidiary owns any Capital Stock of or owns or holds any Lien on any Property
of the Company or any other Subsidiary of the Company which is not a Subsidiary
of the Subsidiary to be so designated), provided that either (x) the Subsidiary
to be so designated has total assets of $1,000 or less or (y) immediately after
giving pro forma effect to such designation the Company could incur $1.00 of
additional Indebtedness pursuant to the first paragraph of the "Limitation on
Indebtedness" covenant; and provided, further, that a Subsidiary shall not be
designated as an Unrestricted Subsidiary if the Company or a Restricted
Subsidiary creates, incurs, issues, assumes, guarantees or in any other manner
becomes liable with respect to any obligation of such Subsidiary. The Board of
Directors of the Company may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary, provided that immediately after giving pro forma effect
to such redesignation, the Company could incur $1.00 of additional Indebtedness
pursuant to the first paragraph of the "Limitation on Indebtedness" covenant.
Any such designation or elimination thereof by the Board of Directors of the
Company shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Board of Directors of the Company
giving effect to such designation and an Officers' Certificate certifying that
such designation complies with the foregoing conditions.
"U.S. Government Obligations" are direct noncallable obligations of the
United States of America or guaranteed by the United States of America for the
payment of which the full faith and credit of the United States is pledged.
"Wholly Owned Subsidiary" means any Restricted Subsidiary of the Company of
which 100% of the Capital Stock of, or other ownership interest in, such
Restricted Subsidiary is at the time owned by the Company or a Wholly Owned
Subsidiary.
COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Indebtedness. The Indenture provides that the Company will not,
and will not permit any Restricted Subsidiary to, create, incur, assume,
guarantee or otherwise become liable with respect to, or become responsible for
the payment of, any Indebtedness unless, after giving effect thereto, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 1.9 to
1. (As of June 30, 1994, calculated on a pro forma basis after giving effect to
the offering of the Notes and the use of proceeds therefrom but without giving
effect to the proposed entry by the Company into the Credit Facility and any
refinancings with the proceeds therefrom, the Consolidated Fixed Charge
Coverage Ratio would have been 2.0 to 1.)
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Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may incur, create, assume, guarantee, or otherwise become liable with respect
to, any or all of the following: (i) Indebtedness not otherwise permitted
pursuant to clauses (ii) through (xi) below in an aggregate amount at any time
outstanding of up to $20,000,000, (ii) Indebtedness evidenced by the Notes or
the 11% Notes, (iii) Indebtedness of the Company and its Restricted
Subsidiaries remaining outstanding immediately after the issuance of the Notes
and application of the proceeds thereof, (iv) Indebtedness to the Company or to
a Restricted Subsidiary, (v) Indebtedness incurred by the Company or any
Restricted Subsidiary in connection with (a) the construction of any new
facility or facilities related to the gaming business or any related business
of the Company or any Restricted Subsidiary or in connection with the expansion
by the Company or any Restricted Subsidiary of any of its existing facilities,
provided, however, that the aggregate principal amount of all such Indebtedness
incurred on and subsequent to the Effective Date shall not exceed $100,000,000,
(b) the maintenance, refurbishment or replacement by the Company or any
Restricted Subsidiary in the ordinary course of business of assets related to
the gaming business or any related business of the Company or any Restricted
Subsidiary or (c) the acquisition of slot machines, gaming tables or other
similar gaming equipment, (vi) Indebtedness under any Credit Facilities in an
aggregate amount of up to $212,300,000 (vii) Indebtedness incurred to purchase
Tropicana or the Jaffe Partnership Interest or in connection with any Tropicana
Loan Refinancings, (viii) Indebtedness incurred in respect of the Tropicana
Security Deposit, (ix) Indebtedness under Currency Agreements or Interest Swap
Obligations (including any Interest Swap Obligation, the purpose of which is to
alter or replace, or lengthen or shorten the maturity of, any Interest Swap
Obligation previously incurred pursuant to this clause (ix)), provided that
such Currency Agreements or Interest Swap Obligations are related to payment
obligations on Indebtedness otherwise permitted under the Indenture, (x)
Indebtedness incurred in respect of performance bonds, bankers' acceptances,
letters of credit and surety bonds provided by the Company or any Restricted
Subsidiary in the ordinary course of business and (xi) Indebtedness
("Replacement Indebtedness") the proceeds of which are used to refinance (a)
all or a portion of the Notes, (b) any other permitted Indebtedness of the
Company and its Restricted Subsidiaries or (c) permitted successor or
replacement Indebtedness, in each case in a principal amount (or, if such
Replacement Indebtedness does not require cash payments prior to maturity, with
an original issue price) not to exceed an amount equal to the aggregate of the
principal amount plus any prepayment penalties, premiums and accrued and unpaid
interest on the Indebtedness so refinanced and customary fees, expenses and
costs related to the incurrence of such Replacement Indebtedness, provided
that, in the case of this clause (xi), (1) if the Notes are refinanced in part,
such Replacement Indebtedness is expressly made pari passu or subordinate in
right of payment to the remaining Notes, (2) if the Indebtedness to be
refinanced is subordinate in right of payment to the Notes, such Replacement
Indebtedness is subordinate in right of payment to the Notes at least to the
extent that the Indebtedness to be refinanced is subordinate to the Notes, (3)
if the Indebtedness to be refinanced is pari passu in right of payment to the
Notes, such Replacement Indebtedness is pari passu or subordinate in right of
payment to the Notes at least to the extent that the Indebtedness to be
refinanced is pari passu to the Notes and (4) if the Notes are refinanced in
part or if the Indebtedness to be refinanced is subordinate in right of payment
to the Notes and scheduled to mature after the maturity date of the Notes, such
Replacement Indebtedness determined as of the date of incurrence does not
mature prior to the final scheduled maturity date of the Notes and the Average
Life of such Replacement Indebtedness is equal to or greater than the Average
Life of the remaining Notes.
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend on or make any distribution or
payment on its Capital Stock or to its stockholders (in their capacity as
stockholders) (other than dividends or distributions payable solely in its
Qualified Capital Stock and, in the case of a Restricted Subsidiary, dividends
or distributions payable to the Company or a Wholly Owned Subsidiary), (ii)
purchase, redeem or otherwise acquire or retire for value, any shares of
Capital Stock of the Company (except, in the case of a Restricted Subsidiary,
from the Company) or any Subsidiary
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of the Company (other than a Wholly Owned Subsidiary), (iii) acquire, retire or
redeem any Indebtedness of or otherwise make any Investment in any Affiliate of
the Company (other than Investments in a Restricted Subsidiary) or (iv)
purchase, redeem or otherwise acquire or retire for value, prior to any
scheduled maturity, scheduled repayment or scheduled sinking fund or mandatory
redemption payment, Indebtedness of the Company or of any Affiliate of the
Company that is pari passu or subordinated (whether pursuant to its terms or by
operation of law) in right of payment to the Notes and which is scheduled to
mature (after giving effect to any and all unconditional (other than as to the
giving of notice) options to extend the maturity thereof) on or after the
maturity date of the Notes, if at the time of any such declaration,
distribution, payment, purchase, redemption, acquisition or retirement
(collectively, the "Restricted Payments") and after giving effect thereto
(including, without limitation, in calculating on a pro forma basis, as if such
proposed Restricted Payment had been made, the Consolidated Fixed Charge
Coverage Ratio of the Company for purposes of clause (y) below): (x) any Event
of Default shall have occurred and be continuing; or (y) the Company could not
incur at least $1.00 of additional Indebtedness pursuant to the first paragraph
of the "Limitation on Indebtedness" covenant; or (z) the aggregate amount of
Restricted Payments for all such purposes made subsequent to the Effective Date
would exceed an amount equal to the sum of (i) 50% of aggregate Consolidated
Net Income (or if such aggregate Consolidated Net Income shall be a deficit,
minus 100% of such deficit) accrued on a cumulative basis in the period
commencing on the Effective Date and ending on the last day of the fiscal
quarter immediately preceding the relevant Transaction Date, (ii) the aggregate
net proceeds, including cash and the fair market value of Property other than
cash (as determined in good faith by the Board of Directors of the Company,
whose determination shall be conclusive, and evidenced by a resolution of such
Board of Directors filed with the Trustee) received by the Company from the
issuance or sale to any Person (other than a Subsidiary of the Company) during
the period commencing on the Effective Date and ending on such Transaction Date
of Qualified Capital Stock of the Company (other than Capital Stock of the
Company issued upon conversion of or in exchange for securities of the Company,
except to the extent of any payment to the Company in addition to the
securities of the Company surrendered) and (iii) to the extent not included in
(ii) above, the aggregate net proceeds, including cash and the fair market
value of Property other than cash (as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive, and
evidenced by a resolution of such Board of Directors filed with the Trustee)
received by the Company from the issuance or sale to any Person (other than a
Subsidiary of the Company) during the period commencing on the Effective Date
and ending on such Transaction Date, of any debt securities evidencing
Indebtedness of the Company or of any Redeemable Stock of the Company, if, and
to the extent that, as of such Transaction Date such debt securities or
Redeemable Stock, as the case may be, have been converted into, exchanged for
or satisfied by the issuance of Qualified Capital Stock of the Company;
provided, however, that if the Company and its Restricted Subsidiaries have
made any Investments during the period commencing on the Effective Date and
ending on such Transaction Date, the proceeds of which Investments were used,
directly or indirectly, by the recipients thereof to purchase Qualified Capital
Stock of the Company or other securities that have been converted into,
exchanged for or satisfied by the issuance of Qualified Capital Stock of the
Company, the aggregate amount determined under clauses (ii) and (iii) shall be
net of the aggregate amount of such Investments.
The Indenture does not prohibit (a) the Company or any Restricted Subsidiary
from paying a dividend on its own Capital Stock within 60 days after the
declaration thereof if, on the date when the dividend was declared, the Company
or such Restricted Subsidiary, as the case may be, could have paid such
dividend in compliance with the other provisions of this covenant, (b) the
Company or any Restricted Subsidiary from redeeming or repurchasing its
securities in the event that the holder of such securities has failed to
qualify or to be found suitable or otherwise eligible under a Gaming
Jurisdiction Law to remain as a holder of such securities, (c) Ramada New
Jersey Holdings Corporation ("Holdings") from redeeming, or the Company or any
Restricted Subsidiary from purchasing, for an amount not exceeding $750,000 in
the aggregate, all or a portion of the shares of preferred stock, Series A, of
Holdings outstanding on the Effective Date, or (d) the Company and its
Restricted
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Subsidiaries from acquiring shares of Capital Stock of the Company solely in
exchange for other shares of Capital Stock of the Company that is not
Redeemable Stock and that is not exchangeable for Redeemable Stock whether upon
conversion or otherwise; provided, however, that the aggregate amount of any
payment, dividend, acquisition, redemption or distribution made by the Company
or any Restricted Subsidiary pursuant to clauses (a) or (b) is included in any
computation pursuant to the first paragraph of this covenant of the aggregate
amount of Restricted Payments made by the Company and its Restricted
Subsidiaries, and the aggregate amount of any payment, dividend, acquisition,
redemption or distribution made by the Company or any Restricted Subsidiary
pursuant to clauses (c) or (d) is not included in any such computation.
So long as no Event of Default has occurred and is continuing, the Indenture
does not prohibit the Company and its Restricted Subsidiaries from (a)
acquiring shares of Capital Stock of the Company (1) to eliminate fractional
shares, (2) from an employee who has purchased or otherwise acquired shares of
Capital Stock of the Company under an employee stock option or employee stock
purchase agreement or other plan or agreement reserving to the Company the
option to repurchase the shares but in no event for a price greater than the
higher of fair market value or the price at which such securities were sold by
the Company and (3) pursuant to a court order, provided that the aggregate
consideration paid by the Company and its Restricted Subsidiaries pursuant to
subclauses (1) and (2) above shall not exceed $250,000 in any fiscal year of
the Company; (b) declaring or paying any dividend on, or redeeming or
repurchasing, shares of the Series B Preferred Stock, provided that the
aggregate amount paid by the Company and its Restricted Subsidiaries in all
such redemptions and repurchases from and after the Effective Date does not
exceed $10,000,000; (c) redeeming or purchasing the Preferred Share Purchase
Rights at a price not exceeding $0.01 per right and $2,000,000 in the
aggregate; (d) acquiring, retiring or redeeming any Indebtedness of, or
otherwise making any Investment in, Tropicana Enterprises in connection with
the Tropicana Security Deposit or the Tropicana Loan, except to the extent that
the aggregate amount of any such Investment in Tropicana Enterprises in
connection with the Tropicana Loan exceeds the outstanding principal amount
owed to third parties under the Tropicana Loan at the Effective Date; (e)
purchasing Tropicana or the Jaffe Partnership Interest; or (f) making any
Restricted Payment not otherwise permitted by the foregoing limitations in an
aggregate amount not to exceed $30,000,000 from and after the Effective Date;
provided, however, that the aggregate amount of any payment, dividend,
acquisition, redemption or distribution made by the Company or any Restricted
Subsidiary pursuant to clauses (a), (b), (c) or (f) is included in any
computation pursuant to the first paragraph of this covenant of the aggregate
amount of Restricted Payments made by the Company and its Restricted
Subsidiaries, and the aggregate amount of any payment, dividend, acquisition,
redemption or distribution made by the Company or any Restricted Subsidiary
pursuant to clauses (d) or (e) is not included in any such computation.
Limitation on Liens. The Company will not, directly or indirectly, create,
incur, assume or suffer to exist, or permit any Restricted Subsidiary to
create, incur, assume or suffer to exist, any Lien on or with respect to any of
its Property or Capital Stock, whether now owned or hereafter acquired, or
assign, or permit any Restricted Subsidiary to assign, any right to receive
income, other than: (i) Liens existing as of the date of the Indenture or
arising hereafter pursuant to the Credit Facility; (ii) Liens securing Senior
Indebtedness; (iii) Liens in favor of the Company; (iv) Liens securing
Indebtedness (including, without limitation, any obligation, contingent or
otherwise, for borrowed money of any Person secured by any Lien in respect of
Property of the Company or any Restricted Subsidiary, even though neither the
Company nor any Restricted Subsidiary has assumed or become liable for the
payment of such obligation) of the Company (other than Senior Indebtedness) or
any Restricted Subsidiary, provided that, with respect to any Indebtedness that
is pari passu with the Notes, the Notes are secured by Liens equal and ratable
to such Liens and, with respect to Indebtedness that is subordinated to the
Notes, the Notes are secured by Liens that are senior to such Liens; and (v)
Permitted Liens. Notwithstanding the foregoing, this provision shall not be
applicable to any Lien on Capital Stock issued by any Restricted Subsidiary
that holds, directly or indirectly, a license, or is a holding company, under
the Nevada Act. HRN and Express each hold a license under the Nevada Act.
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Limitation on Payment Restrictions Affecting Restricted Subsidiaries. The
Indenture provides that the Company will not, and will not permit any
Restricted Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction which by its terms
expressly restricts the ability of any Restricted Subsidiary to (i) pay
dividends or make any other distributions on such Restricted Subsidiary's
Capital Stock or pay any Indebtedness owed to the Company or any Restricted
Subsidiary except that payment of dividends by Adamar of Nevada may be
suspended if required in connection with the Tropicana Lease, (ii) make any
loans or advances to the Company or any Restricted Subsidiary or (iii) transfer
any of its Property to the Company or any Restricted Subsidiary, except that
(A) clauses (ii) and (iii) shall be deemed not to apply to any such
encumbrances or restrictions contained in any agreement or instrument (a)
relating to any Indebtedness of the Company or any Restricted Subsidiary
existing on the Effective Date or to the Credit Facility, (b) relating to any
Property acquired by the Company or any Restricted Subsidiary after the
Effective Date, provided that such encumbrance or restriction relates only to
the Property which is acquired, (c) relating to (x) any industrial revenue or
development bonds, (y) any obligation of the Company or any Restricted
Subsidiary incurred in the ordinary course of business to pay the purchase
price of Property acquired by the Company or such Restricted Subsidiary and (z)
any lease of Property by the Company or any Restricted Subsidiary in the
ordinary course of business, provided that such encumbrance or restriction
relates only to the Property which is the subject of such industrial revenue or
development bond, such Property purchased or such Property leased and any such
lease, as the case may be, (d) relating to any Indebtedness of any Restricted
Subsidiary at the date of acquisition of such Restricted Subsidiary by the
Company or any Restricted Subsidiary, provided that such Indebtedness was not
incurred in connection with or in anticipation of such acquisition and (e)
replacing or refinancing agreements or instruments referred to in clauses (a),
(b) and (c), provided that the provisions relating to such encumbrance or
restriction contained in such replacing or refinancing agreement or instrument
are no more restrictive than the provisions relating to such encumbrance or
restriction contained in the original agreement or instrument, (B) clauses (i),
(ii) and (iii) shall be deemed not to apply to any such encumbrances or
restrictions imposed by the New Jersey Commission, the New Jersey Division, the
Nevada Commission, the Nevada Control Board or any other Gaming Authority and
(C) clause (iii) shall be deemed not to apply to the transfer of Property that
is used to secure Indebtedness, provided that such Indebtedness is permitted to
be incurred under the Indenture.
Restriction on Incurrence of Certain Indebtedness. The Indenture provides
that the Company will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to Senior Indebtedness and senior in any respect in right of payment to
the Notes. The Indenture also provides that the Notes will not be subordinate
in right of payment to any other Indebtedness of the Company, other than Senior
Indebtedness.
Investment Company Act. The Indenture provides that the Company will not, and
the Company will not permit any of its Subsidiaries to, become an investment
company within the meaning of the Investment Company Act of 1940, unless the
Company or such Subsidiary is exempt under such Act from any requirement to
register as an "investment company."
Mergers and Consolidations. The Indenture provides that the Company may not
consolidate or merge with or into any Person or transfer, sell, lease or
otherwise dispose of all or substantially all of its assets as an entirety to
any Person unless (i) the entity formed by or surviving any such consolidation
or merger (if other than the Company), or to which such sale or conveyance
shall have been made, is a corporation organized and existing under the laws of
the United States, any state thereof or the District of Columbia and
unconditionally assumes by a supplemental indenture all of the obligations of
the Company under the Notes and the Indenture and has all Gaming Licenses
required to operate the casino hotels to be owned by the surviving entity; (ii)
immediately before and immediately after giving effect to such transaction, no
Default or Event of Default (as defined below) exists; (iii) immediately after
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giving effect to such transaction on a pro forma basis, the Consolidated Net
Worth of the surviving entity (including the Company) is at least equal to the
Consolidated Net Worth of the Company immediately prior to such transaction;
and (iv) immediately after giving effect to any such transaction involving the
incurrence by the Company or any Subsidiary, directly or indirectly, of
additional Indebtedness (and treating any Indebtedness not previously an
obligation of the Company or any of its Subsidiaries incurred in connection
with or as a result of such transaction as having been incurred at the time of
such transaction), the Company (if it is the continuing corporation) or such
other entity could incur at least $1.00 of additional Indebtedness pursuant to
the first paragraph of the "Limitation on Indebtedness" covenant.
In connection with any consolidation, merger, transfer or lease contemplated
by this provision, the Company shall deliver, or cause to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel stating that such
consolidation, merger, transfer or lease and the supplemental indenture in
respect thereto comply with this provision and that all conditions precedent
herein provided for relating to such transaction have been complied with and an
Accountants' Certificate with respect to the calculation of Consolidated Net
Worth and the Company's ability to incur at least $1.00 of additional
Indebtedness as described in the preceding paragraph.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company, the successor corporation formed by such
consolidation or into which the Company is merged or to which such transfer is
made, shall succeed to, and be substituted for, and may exercise every right
and power of the Company under the Indenture with the same effect as if such
successor corporation had been named as the Company in the Indenture. When a
successor corporation assumes all of the obligations of the Company under the
Notes and the Indenture, the applicable predecessor corporation shall be
released from the obligations so assumed.
Limitation on Capital Stock of Restricted Subsidiaries. The Indenture
provides that the Company will not (i) permit any of its Restricted
Subsidiaries to issue any Capital Stock to any Person (other than the Company
or any Wholly Owned Subsidiary) that shall entitle the holder of such Capital
Stock to a preference in right of payment in the event of liquidation,
dissolution or winding-up of such Restricted Subsidiary or with respect to
dividends of such Restricted Subsidiary or (ii) permit any Person (other than
the Company or any Wholly Owned Subsidiary) to hold any such Capital Stock.
Transactions with Affiliates. The Indenture provides that the Company will
not, and will not permit any of its Restricted Subsidiaries to, enter into any
transaction (including, without limitation, the purchase, sale or exchange of
Property, the making of any Investment, the giving of any guarantee or the
rendering of any service) with any Affiliate of the Company or any Subsidiary
of the Company (other than a Restricted Subsidiary) unless (i) the Board of
Directors of the Company believes, in its reasonable good faith judgment, based
on full disclosure of all relevant facts and circumstances, that such
transaction is in the best interests of the Company or such Restricted
Subsidiary and (ii) such transaction is on terms no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained in a
comparable arm's length transaction with an entity that is not an Affiliate of
the Company or such Restricted Subsidiary; provided, however, that the
foregoing limitation shall not apply for so long as the Company's common stock
is listed for trading on the New York Stock Exchange or the American Stock
Exchange or is quoted on the National Association of Securities Dealers
Automated Quotation System and designated as a "national market system
security."
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default": (i)
default in the payment of interest on any Note for a period of 30 days after
such interest becomes due and payable, (ii) default in the payment of the
principal of any Note when such principal becomes due and payable at maturity,
upon redemption, repayment pursuant to the "Change of Control" covenant or
otherwise, whether or not such payment is prohibited by the subordination
provisions of the Indenture, (iii) failure to observe, conform or comply with
any other covenant contained in the Notes or the Indenture that continues for
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60 days after the Company has received written notice of the default from the
Trustee or the Holders of 25% in principal amount of the then Outstanding
Notes, (iv) a default on Indebtedness of the Company or any of its Restricted
Subsidiaries having an outstanding principal amount of more than $5,000,000
individually or in the aggregate if such Indebtedness has been accelerated (or
has matured), (v) certain events of bankruptcy, insolvency or reorganization
affecting the Company or any Significant Subsidiary, (vi) judgments in an
aggregate amount in excess of $5,000,000 shall have been rendered against the
Company or a Restricted Subsidiary and shall have not been discharged and
either an enforcement proceeding shall have been commenced by any creditor upon
any such judgment or there shall be a period of 90 consecutive days during
which a stay of enforcement of such judgments shall not be in effect, or (vii)
any Gaming License of the Company or any of its Subsidiaries is revoked,
terminated or suspended or otherwise ceases to be effective, resulting in the
cessation or suspension of operation for a period of more than 90 days of the
casino business of any casino hotel owned, leased or operated directly or
indirectly by the Company or any of its Subsidiaries (other than any voluntary
relinquishment of a Gaming License if such relinquishment is, in the judgment
of the Company, both desirable in the conduct of the business of the Company
and its Subsidiaries, taken as a whole, and not disadvantageous in any material
respect to the holders).
The Indenture provides that the Trustee, within 90 days after the occurrence
of any continuing Default or Event of Default that is known to the Trustee,
will give notice thereof to the Holders of the Notes; provided, however, that,
except in the case of a default in payment of principal of or interest on the
Notes, the Trustee may withhold such notice as long as it in good faith
determines that such withholding is in the interest of the Holders of the
Notes.
If an Event of Default (other than an Event of Default resulting from
bankruptcy, insolvency or reorganization) shall have occurred and be
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Outstanding Notes, by notice in writing to the Company, may declare the
principal amount of the Notes, plus accrued but unpaid interest, to be due and
payable immediately. In case an Event of Default resulting from bankruptcy,
insolvency or reorganization shall occur, such amount shall be immediately due
and payable without any declaration or any act on the part of the Trustee or
the Holders of the Notes. Such declaration or acceleration may be rescinded and
certain past defaults may be waived (except, unless theretofore cured or
waived, a default in payment of principal of or interest on the Notes) by the
Holders of a majority in principal amount of the Notes upon conditions provided
in the Indenture. In the event of a declaration of acceleration because an
Event of Default set forth in clause (iv) above has occurred, and is
continuing, such declaration and its consequences shall be automatically
rescinded and annulled if (1) in the case of Indebtedness that has been
accelerated, within 10 days of such declaration, the holders of such
Indebtedness shall have rescinded such declaration and its consequences or in
the case of Indebtedness that has matured, such Indebtedness shall have been
discharged in full, within 10 days following maturity, (2) the Company shall
have delivered an Officers' Certificate certifying such rescission or discharge
to the Trustee and (3) no other Event of Default shall have occurred and be
continuing. Except to enforce the right to receive payment of principal or
interest when due, no Holder of a Note may institute any proceeding with
respect to the Indenture or for any remedy thereunder unless such Holder has
previously given to the Trustee written notice of a continuing Event of
Default, the Holders of at least 25% in principal amount of the Outstanding
Notes have made written request of the Trustee to institute proceedings in
respect of such Event of Default, such Holders have offered the Trustee
reasonable indemnity against loss, liability or expense to be incurred thereby,
the Trustee has failed so to act for 60 days after receipt of such notice and
no direction inconsistent with such written request has been given to the
Trustee by such Holders during such 60-day period. Subject to certain
restrictions, the Holders of a majority in principal amount of the Outstanding
Notes will have the right to direct the time, method, and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee. The Trustee, however, may refuse to follow
any direction
69
<PAGE>
that conflicts with law or the Indenture, that is unduly prejudicial to the
rights of any Holder of a Note or that would subject the Trustee to personal
liability.
The Company is required to deliver to the Trustee, within 90 days after the
end of each fiscal quarter and within 120 days after the end of each fiscal
year, an Officers' Certificate indicating whether the Company has complied with
the terms of the Indenture and whether an Event of Default exists. In addition,
the Company shall promptly deliver to the Trustee notice of any Default or
Event of Default.
SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE
The Company may terminate its obligations under the Indenture at any time by
delivering all Outstanding Notes to the Trustee for cancellation and paying all
other sums payable by the Company under the Indenture. The Company, at its
option, (i) will be discharged, from any and all obligations with respect to
the Notes (except for certain obligations of the Company to register the
transfer or exchange of the Notes, replace stolen, lost or mutilated Notes,
maintain paying agencies, and hold moneys for payment in trust) on the 123rd
day after the satisfaction of the conditions set forth below or (ii) need not
comply with certain restrictive covenants and will not be subject to certain
nonpayment defaults in the Indenture (including those described under
"Covenants" and "Events of Default"), in each case if the Company irrevocably
deposits with the Trustee, in trust, money or U.S. Government Obligations
which, through the payment of interest thereon and principal thereof in
accordance with their terms, will provide money, or a combination of money and
U.S. Government Obligations, in an amount sufficient to pay all the principal
of and interest on the Notes not later than one day before the dates such
payments are due in accordance with the terms of the Notes. To exercise any
such option, the Company is required to deliver to the Trustee (a) irrevocable
instructions to apply such money or the proceeds of such U.S. Government
Obligations to the payment of principal of and interest on the Notes,(b) an
Officers' Certificate and an Opinion of Counsel to the effect that all
conditions precedent to the discharge or defeasance have been complied with,
(c) an Officers' Certificate certifying as to whether the Notes are then listed
on the New York Stock Exchange, (d) an Opinion of Counsel to the effect that,
among other things, the deposit and related defeasance would not cause the
Holders of the Notes to recognize income, gain or loss for federal income tax
purposes and, in the case of a discharge pursuant to clause (i) above,
accompanied by a revenue or private ruling to such effect received from or
published by the Internal Revenue Service and (e) an Opinion of Counsel
regarding certain matters, including a bankruptcy of the Company and, in the
case of a discharge pursuant to clause (i), the irrevocability of the trust.
REPORTS TO HOLDERS OF THE NOTES
The Company will file with the Trustee copies of the annual reports and of
the information, documents and other reports that the Company is required to
file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act
within five days after such annual reports, information, documents and other
reports are required to be filed with the Commission. Upon the request of any
Holder, the Company shall promptly mail such annual reports, information,
documents and other reports to the requesting Holder. In the event the Company
is not required to file any annual reports, information or documents with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, the Company
shall nonetheless file such annual reports, information or documents, with the
Commission and the Trustee on a timely basis, and upon the request of any
Holder shall promptly mail such annual reports, information or documents to the
requesting Holder.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders of the Notes, may amend or supplement the Indenture or the Notes for
certain specified purposes, including curing ambiguities, defects or
inconsistencies and making changes that do not adversely affect the rights of
70
<PAGE>
any Holder. Other modifications and amendments of the Indenture or the Notes
may be made with the written consent of the Holders of a majority in principal
amount of the Outstanding Notes, except that, without the consent of each
Holder of Notes affected thereby, no amendment may reduce the amount of Notes
whose Holders must consent to an amendment; reduce the rate of or change the
time for or manner of, payment of interest on any Note; reduce the principal,
or change the Stated Maturity for the payment of principal, of any Note, or
reduce the Redemption Price of or change the date of redemption or alter any
provision with respect to redemption of the Notes; waive a Default in the
payment of the principal of or interest on or redemption of any Note; make any
Note payable in money other than that stated in the Note; or make any change to
provisions of the Indenture regarding the unconditional right of Holders to
receive principal of and interest on the Notes, waiver of past defaults or
these provisions for modification of the Indenture.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such of the rights and powers vested in it under the
Indenture and use the same degree of care and skill in their exercise as a
prudent Person would exercise under the circumstances in the conduct of such
Person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim
as security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest
(as defined in the Indenture or in the Trust Indenture Act) it must eliminate
such conflict or resign.
71
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") between the Company, on the one hand, and the
Underwriters, on the other hand, the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters severally has agreed to purchase
from the Company, the Notes in the respective principal amounts set forth
below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITER NOTES
----------- -------------------
<S> <C>
Salomon Brothers Inc.................................. $
BT Securities Corporation.............................
CS First Boston Corporation...........................
------------
Total............................................... $180,000,000
============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase the entire principal amount
of the Notes if any Notes are purchased.
The Company has been advised by the Underwriters that the Underwriters
initially propose to offer the Notes to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of % of the principal amount with
respect to the Notes. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of % of the principal amount of the Notes. After
the initial public offering, the public offering prices and such concessions
may be changed from time to time by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters
currently intend to make a market in the Notes; however, the Underwriters are
not obligated to do so and may discontinue any such market making at any time
without notice. No assurance can be given as to the development or liquidity of
any trading markets for the Notes.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or contribute to payments the Underwriters may be required to
make in respect thereof.
Salomon Brothers Inc has performed various investment banking services for
the Company and its affiliates from time to time (in addition to the services
specifically described above), for which it has received customary fees.
Bankers Trust Company, an affiliate of BT Securities Corporation, will be a Co-
Managing Agent and lender under the Proposed Credit Facility and $73 million
term loan for which it will receive customary compensation.
EXPERTS
The consolidated balance sheets as of December 30, 1993 and December 31,
1992, and the consolidated statements of operations, cash flows and
shareholders' equity for each of the three years in the period ended December
30, 1993 of the Company and its subsidiaries included in this Prospectus, and
the financial statement schedules for each of the three years in the period
ended December 30, 1993 incorporated by reference from the Company's 1993
Report on Form 10-K, have been audited by Coopers & Lybrand, independent
accountants, as indicated in their reports, which included an explanatory
paragraph regarding the change in the Company's method of accounting for income
taxes, with respect thereto, and are included herein or incorporated by
reference in reliance upon the authority of said firm as experts in accounting
and auditing.
72
<PAGE>
The combined balance sheets of Ambassador Real Estate Investors, L.P. as of
December 31, 1992 and 1991, and the related combined statements of operations,
cash flows and partners' deficit for each of the three years in the period
ended December 31, 1992 incorporated by reference in this Prospectus from the
Company's Current Report on Form 8-K dated July 9, 1993 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon by Latham &
Watkins, Los Angeles, California, for the Company, and by Cleary, Gottlieb,
Steen & Hamilton, New York, New York, for the Underwriters. Certain legal
matters with respect to Nevada, New Jersey, Indiana and Missouri will be passed
upon by Lionel Sawyer & Collins; Hankin, Sandson & Sandman; McHale, Cook &
Welch; and Thompson & Mitchell, respectively.
73
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets at December 30, 1993 and December 31, 1992.... F-3
Consolidated Statements of Operations for the years ended December 30,
1993, December 31, 1992 and January 2, 1992.............................. F-4
Consolidated Statements of Cash Flows for the years ended December 30,
1993, December 31, 1992 and January 2, 1992.............................. F-5
Consolidated Statements of Shareholders' Equity for the years ended
December 30, 1993, December 31, 1992 and January 2, 1992................. F-6
Notes to Consolidated Financial Statements................................ F-7
Consolidated Balance Sheets at June 30, 1994 and December 30, 1993
(unaudited).............................................................. F-22
Consolidated Statements of Operations for the six months ended June 30,
1994 and July 1, 1993 (unaudited)........................................ F-23
Consolidated Statements of Cash Flows for the six months ended June 30,
1994 and July 1, 1993 (unaudited)........................................ F-24
Consolidated Statements of Shareholders' Equity for the six months ended
June 30, 1994 and July 1, 1993 (unaudited)............................... F-25
Notes to Consolidated Financial Statements (unaudited).................... F-26
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Aztar Corporation
We have audited the consolidated balance sheets of Aztar Corporation and
Subsidiaries as of December 30, 1993 and December 31, 1992, and the related
consolidated statements of operations, cash flows and shareholders' equity for
each of the three years in the period ended December 30, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Aztar Corporation and Subsidiaries as of December 30, 1993 and December 31,
1992, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 30, 1993 in conformity
with generally accepted accounting principles.
As discussed in Note 16 to the consolidated financial statements, the Company
changed its method of accounting for income taxes in 1992.
Coopers & Lybrand
Phoenix, Arizona
February 11, 1994
F-2
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1993 AND DECEMBER 31, 1992
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 39,551 $100,403
Accounts and notes receivable, net....................... 19,170 28,601
Refundable income taxes.................................. 2,062 2,062
Inventories.............................................. 5,564 5,144
Prepaid expenses......................................... 9,206 8,208
Deferred income taxes.................................... 6,566 13,353
-------- --------
Total current assets................................... 82,119 157,771
Investments in and advances to unconsolidated partnership.. 13,776 15,225
Other investments.......................................... 22,131 19,250
Notes receivables.......................................... -- 246,310
Property and equipment:
Buildings and equipment, net............................. 648,139 287,228
Land..................................................... 81,795 78,853
Construction in progress................................. 6,701 15,718
Leased under capital leases, net......................... 1,043 9,262
-------- --------
737,678 391,061
Other assets............................................... 21,467 19,948
-------- --------
$877,171 $849,565
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals............................ $ 39,515 $ 39,749
Accrued payroll and employee benefits.................... 15,823 17,854
Accrued interest payable................................. 13,714 13,365
Income taxes payable..................................... 2,633 2,757
Current portion of long-term debt........................ 2,499 3,508
-------- --------
Total current liabilities.............................. 74,184 77,233
Long-term debt............................................. 404,086 378,058
Other long-term liabilities................................ 21,882 23,334
Deferred income taxes...................................... 26,126 34,193
Contingencies and commitments..............................
Series B ESOP convertible preferred stock
(redemption value $4,295 and $3,118)...................... 3,905 2,998
Shareholders' equity:
Common stock, $.01 par value (37,359,011 and 36,977,662
shares outstanding)..................................... 414 410
Paid-in capital.......................................... 346,965 344,574
Retained earnings........................................ 16,559 5,787
Less:Treasury stock...................................... (16,885) (16,885)
Unearned compensation............................... (65) (137)
-------- --------
Total shareholders' equity............................. 346,988 333,749
-------- --------
$877,171 $849,565
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 30, 1993, DECEMBER 31, 1992 AND JANUARY 2, 1992
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
REVENUES
Casino........................................ $439,294 $431,831 $392,917
Rooms......................................... 32,248 32,651 36,577
Food and beverage............................. 36,357 37,519 42,040
Other......................................... 10,863 10,044 9,751
-------- -------- --------
518,762 512,045 481,285
COSTS AND EXPENSES
Casino........................................ 217,087 202,747 187,189
Rooms......................................... 19,495 19,527 21,598
Food and beverage............................. 34,773 35,008 39,229
Other......................................... 6,737 6,827 7,211
Marketing..................................... 45,427 45,705 41,385
General and administrative.................... 46,849 46,399 46,190
Utilities..................................... 12,328 11,617 11,227
Repairs and maintenance....................... 19,953 18,544 18,064
Provision for doubtful accounts............... 1,566 2,622 4,763
Property taxes and insurance.................. 16,729 16,108 15,391
Net rent...................................... 27,747 45,653 47,193
Depreciation and amortization................. 32,652 28,679 28,191
-------- -------- --------
481,343 479,436 467,631
-------- -------- --------
Operating income................................ 37,419 32,609 13,654
Interest income............................... 24,172 28,655 26,245
Interest expense.............................. (45,363) (31,132) (32,101)
-------- -------- --------
Income from continuing operations before other
items, income taxes, extraordinary items and
cumulative effect of accounting change......... 16,228 30,132 7,798
Equity in unconsolidated partnership's loss... (3,822) (4,125) (5,030)
-------- -------- --------
Income from continuing operations before income
taxes, extraordinary items and cumulative ef-
fect of accounting change...................... 12,406 26,007 2,768
Income taxes.................................. (1,024) (9,629) (60)
-------- -------- --------
Income from continuing operations before ex-
traordinary items and cumulative effect of
accounting change.............................. 11,382 16,378 2,708
Discontinued operations....................... -- 1,262 2,553
Extraordinary items........................... -- (5,335) 1,237
Cumulative effect of accounting change........ -- 7,500 --
-------- -------- --------
Net income...................................... $ 11,382 $ 19,805 $ 6,498
======== ======== ========
Earnings per common and common equivalent share:
Income from continuing operations before ex-
traordinary items and cumulative effect of
accounting change............................ $ .28 $ .41 $ .05
Discontinued operations....................... -- .03 .07
Extraordinary items........................... -- (.14) .03
Cumulative effect of accounting change........ -- .20 --
-------- -------- --------
Net income.................................... $ .28 $ .50 $ .15
======== ======== ========
Earnings per common share assuming full
dilution:
Income from continuing operations before ex-
traordinary items and cumulative effect of
accounting change............................ $ .27 $ .40 $ .05
Discontinued operations....................... -- .03 .06
Extraordinary items........................... -- (.13) .03
Cumulative effect of accounting change........ -- .19 --
-------- -------- --------
Net income.................................... $ .27 $ .49 $ .14
======== ======== ========
Weighted average common shares applicable to:
Earnings per common and common equivalent
share........................................ 38,367 38,212 38,782
Earnings per common share assuming full dilu-
tion......................................... 39,429 39,311 39,939
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 30, 1993, DECEMBER 31, 1992 AND JANUARY 2, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- -------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income........................................ $ 11,382 $ 19,805 $ 6,498
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 34,577 30,639 31,048
Provision for losses on accounts receivable...... 1,566 2,622 4,763
Loss on reinvestment obligation.................. 991 1,103 1,060
Interest income.................................. 1,889 (4,389) (2,144)
Rent expense..................................... (880) (2,537) (2,527)
Distribution in excess of equity in income of
partnership..................................... 1,449 1,355 1,393
Deferred income taxes............................ (1,280) (1,556) (41)
Change in assets and liabilities:
(Increase) decrease in accounts receivable..... (1,442) (1,372) (15)
(Increase) decrease in refundable income taxes. -- (2,062) --
(Increase) decrease in inventories and prepaid
expenses...................................... (1,969) (1,582) (1,332)
Increase (decrease) in accounts payable,
accrued expenses and income taxes payable..... 1,955 (12,745) (2,776)
Other items, net............................... 2,087 2,502 3,245
-------- -------- -------
Net cash provided by (used in) operating
activities.................................. 50,325 31,783 39,172
-------- -------- -------
Cash Flows from Investing Activities
Reduction (increase) in invested funds........... -- 5,075 (5,075)
Payments received on TropWorld second mortgage... 24,400 51,450 45,900
Payments received on other notes receivable...... 2,191 2,383 3,075
Increase in TropWorld second mortgage............ (24,400) (51,450) (45,900)
Increase in other notes receivable............... (419) (174,678) (3,252)
Purchases of property and equipment.............. (77,804) (20,607) (18,400)
Acquisition of AREI/AGP partnership interests,
net of cash acquired............................ (61,859) -- --
Additions to other long-term assets.............. (7,360) (10,893) (3,489)
-------- -------- -------
Net cash provided by (used in) investing
activities.................................. (145,251) (198,720) (27,141)
-------- -------- -------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt......... 35,000 200,000 --
Proceeds from issuance of common stock........... 2,149 261 35
Principal payments on long-term debt............. (2,157) (3,787) (3,902)
Repurchase of common stock....................... -- (5,364) (224)
Preferred stock dividend......................... (787) (797) (800)
Redemption of preferred stock.................... (131) (90) (24)
Redemption of Holdings preferred stock........... -- -- (4,131)
-------- -------- -------
Net cash provided by (used in) financing
activities.................................. 34,074 190,223 (9,046)
-------- -------- -------
Net increase (decrease) in cash and cash
equivalents...................................... (60,852) 23,286 2,985
Cash and cash equivalents at beginning of year.... 100,403 77,117 74,132
-------- -------- -------
Cash and cash equivalents at end of year......... $ 39,551 $100,403 $77,117
======== ======== =======
Supplemental Cash Flow Disclosures
Acquisition of AREI/AGP partnership interests:
Working capital, other than cash................. $ 3,370 $ -- $ --
Notes receivable................................. 242,605 -- --
Building and equipment........................... (307,582) -- --
Capital lease assets, net........................ 6,703 -- --
Long-term debt................................... (5,682) -- --
Other long-term liabilities...................... (1,273) -- --
-------- -------- -------
Net cash used in acquisition................. (61,859) -- --
Summary of non-cash investing and financing
activities:
Capital lease obligations incurred for property
and equipment................................... $ 385 $ 3,687 $ 3,282
Note received in sale of property and equipment.. -- 225 --
Tax benefit from stock options and preferred
stock dividend.................................. 431 290 --
Issuance of restricted stock..................... -- -- 210
Forfeiture of restricted stock................... -- 30 --
Cash paid (refunded) during the year for the
following for continuing and discontinued
operations:
Interest, net of amount capitalized.............. $ 43,160 $ 31,905 $28,883
Income taxes..................................... 1,997 8,165 (408)
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 30, 1993, DECEMBER 31, 1992 AND JANUARY 2, 1992
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
COMMON PAID-IN EARNINGS TREASURY UNEARNED
STOCK CAPITAL (DEFICIT) STOCK COMPENSATION TOTAL
------ -------- --------- -------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 3,
1991................... $409 $343,990 $(19,130) $(11,267) $(1,231) $312,771
Stock options
exercised............ 35 35
Issuance of restricted
stock................ 210 (210) --
Repurchase of common
stock................ (224) (224)
Preferred stock
dividend............. (800) (800)
Amortization of
unearned
compensation......... 620 620
Net income............ 6,498 6,498
---- -------- -------- -------- ------- --------
Balance, January 2,
1992................... 409 344,235 (13,432) (11,491) (821) 318,900
Stock options
exercised............ 1 260 261
Tax benefit from stock
options exercised.... 79 79
Repurchase of common
stock................ (5,364) (5,364)
Preferred stock
dividend, net of
income tax benefit... (586) (586)
Forfeitures of
restricted stock..... (30) 30 --
Amortization of
unearned
compensation......... 654 654
Net income............ 19,805 19,805
---- -------- -------- -------- ------- --------
Balance, December 31,
1992................... 410 344,574 5,787 (16,885) (137) 333,749
Stock options
exercised............ 4 2,145 2,149
Tax benefit from stock
options exercised.... 246 246
Preferred stock
dividend, net of
income tax benefit... (610) (610)
Amortization of
unearned
compensation......... 72 72
Net income............ 11,382 11,382
---- -------- -------- -------- ------- --------
Balance, December 30,
1993................... $414 $346,965 $ 16,559 $(16,885) $ (65) $346,988
==== ======== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATED STATEMENTS
Aztar Corporation ("Aztar" or the "Company") was incorporated in Delaware in
June 1989 to operate the gaming business of Ramada Inc. ("Ramada") after the
restructuring of Ramada (the "Restructuring"). The Restructuring involved the
disposition of Ramada's hotel and restaurant businesses with Ramada's
shareholders retaining their interest in the gaming business. As part of the
Restructuring, the gaming business and certain other assets and liabilities of
Ramada were transferred to Aztar, and a wholly-owned subsidiary of New World
Hotels (U.S.A.), Inc. was merged with Ramada (the "Merger"). In the Merger,
each share of Ramada common stock was converted into the right to receive $1.00
and one share of Aztar common stock. For accounting purposes Aztar is treated
as the continuing accounting entity that is the successor to the historical
Ramada and that has discontinued the hotel and restaurant businesses.
The consolidated financial statements include the accounts of Aztar and all
of its controlled subsidiaries and partnerships. All subsidiary companies are
wholly owned. Ramada New Jersey Holdings Corporation ("Holdings") was majority
owned until January 4, 1991, when it redeemed its outstanding shares of
Convertible Class A Preferred Stock and became wholly owned. In consolidating,
all material intercompany transactions are eliminated. The Company uses a 52/53
week fiscal year ending on the Thursday nearest December 31, which includes 52
weeks in 1993, 1992 and 1991.
CASH AND CASH EQUIVALENTS
Highly liquid investments purchased with an original maturity of three months
or less are classified as cash equivalents. These instruments are stated at
cost, which approximates fair value because of their short maturity.
INVENTORIES
Inventories, which consist primarily of food, beverage and operating
supplies, are stated at the lower of cost or market value. Costs are determined
using the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. During construction, the Company
capitalizes interest and other direct and indirect development costs. Interest
is capitalized monthly by applying the effective interest rate on certain
borrowings to the average balance of expenditures. Capitalized interest was
$3,491,000 in 1993, $1,061,000 in 1992 and $253,000 in 1991.
Depreciation and amortization are computed by the straight-line method based
upon the following useful lives: buildings and improvements, 3-40 years;
furniture and equipment, 3-15 years; and leasehold improvements, shorter of
lease term or asset useful life. Accumulated depreciation and amortization on
buildings and equipment was $139,690,000 at December 30, 1993 and $112,442,000
at December 31, 1992.
Improvements, renewals and extraordinary repairs that extend the life of the
asset are capitalized; other repairs and maintenance are expensed. The cost and
accumulated depreciation applicable to assets retired are removed from the
accounts and the gain or loss, if any, on disposition is recognized in income
as realized.
F-7
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DEFERRED CHARGES
Note and loan issuance costs are amortized using the interest method.
Costs incurred to obtain initial gaming licenses to operate a casino are
capitalized and amortized over ten years; subsequent renewal costs are
amortized over the renewal period.
Preopening costs directly related to the opening of a gaming operation or
major addition to a gaming operation are capitalized as incurred and expensed
in the period the related facility commences operations.
REVENUE RECOGNITION
Casino revenue consists of gaming win net of losses. Revenues exclude the
retail value of complimentary food and beverage, accommodations and other goods
and services provided to customers. The estimated costs of providing such
complimentaries have been classified as casino expenses through
interdepartmental allocations as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Rooms............................................... $18,992 $14,930 $12,130
Food and beverage................................... 33,287 30,568 26,795
Other............................................... 6,666 6,509 6,033
------- ------- -------
$58,945 $52,007 $44,958
======= ======= =======
</TABLE>
INTEREST RATE SWAP AGREEMENT
The differential to be paid or received is recognized in interest expense as
incurred.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the expected future
tax consequences of events that have been included in the financial statements
or income tax returns. Deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax bases of assets and
liabilities using enacted rates expected to apply to taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
EARNINGS PER SHARE
Earnings per common and common equivalent share are computed based on the
weighted average number of common shares outstanding after consideration of the
dilutive effect of stock options. Earnings per common share, assuming full
dilution, are computed based on the weighted average number of common shares
outstanding after consideration of the dilutive effect of stock options and the
assumed conversion of the preferred stock at the stated rate.
In calculating the 1993, 1992 and 1991 earnings per share for both
computations, dividends of $610,000, $586,000 and $800,000, respectively, on
the Series B ESOP Convertible Preferred Stock are deducted in arriving at
income applicable to the common stock. The 1993 and 1992 dividends are net of
income tax benefits of $185,000 and $211,000, respectively.
F-8
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
RECLASSIFICATIONS
Certain reclassifications have been made in the 1992 Consolidated Balance
Sheet in order to be comparable with the 1993 presentation.
NOTE 2. ACCOUNTS RECEIVABLE
The Company's principal operations are conducted in Atlantic City, New
Jersey, at TropWorld and in Las Vegas and Laughlin, Nevada, at Tropicana and
Ramada Express. TropWorld has a concentration of credit risk in the northeast
region of the U.S. Approximately 50% of the receivables at the Nevada
operations are concentrated in Asian and Latin American customers and the
remainder of their receivables are concentrated in California and the southwest
region of the U.S. As a general policy, the Company does not require collateral
for these receivables. At December 30, 1993 and December 31, 1992, the net
receivables at TropWorld were $8,948,000 and $10,372,000, respectively, and the
net receivables at Tropicana and Ramada Express combined were $10,175,000 and
$10,575,000, respectively.
An allowance for doubtful accounts is maintained at a level considered
adequate to provide for possible future losses. At December 30, 1993 and
December 31, 1992, the allowance for doubtful accounts was $9,908,000 and
$13,124,000, respectively.
NOTE 3. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED PARTNERSHIP
The Company's investment in unconsolidated partnership is a noncontrolling
partnership interest of 50% in Tropicana Enterprises, a Nevada general
partnership that owns the real property and certain personal property that the
Company leases in the operation of Tropicana. The Company uses the equity
method of accounting for this investment and in connection with the lease
expensed rents of $12,684,000 in 1993, $12,815,000 in 1992 and $14,545,000 in
1991, of which 50% was eliminated in consolidation.
Summarized balance sheet information and operating results for the
unconsolidated partnership are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Current assets................................... $ 270 $ 272
Noncurrent assets................................ 81,220 83,504
Current liabilities.............................. 1,516 1,320
Noncurrent liabilities........................... 73,033 73,713
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Revenues......................................... $12,815 $12,980 $14,717
Operating expenses............................... (2,755) (2,836) (2,837)
------- ------- -------
Operating income................................. 10,060 10,144 11,880
Interest expense................................. (3,793) (4,318) (6,129)
------- ------- -------
Net income....................................... $ 6,267 $ 5,826 $ 5,751
======= ======= =======
</TABLE>
The Company's share of the above operating results, after intercompany
eliminations, is as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Equity in unconsolidated partnership's loss...... $(3,822) $(4,125) $(5,030)
</TABLE>
F-9
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. OTHER INVESTMENTS
The Company satisfies a New Jersey assessment based upon its casino revenues
by purchasing bonds issued by the Casino Reinvestment Development Authority
("CRDA"). Deposits with the CRDA bear interest at two-thirds of market rates
resulting in a fair value lower than cost. At December 30, 1993 and December
31, 1992, other investments consisted of the Company's deposit with the CRDA of
$31,726,000 and $27,853,000, respectively, net of a valuation allowance of
$9,595,000 and $8,603,000, respectively.
NOTE 5. NOTES RECEIVABLE
At December 30, 1993 and December 31, 1992, notes receivable consisted of (in
thousands):
<TABLE>
<CAPTION>
1993 1992
------- --------
<S> <C> <C>
First Mortgage......................................... $ -- $171,000
Second Mortgage........................................ -- 69,859
FF&E Mortgage.......................................... -- 24,855
------- --------
-- 265,714
Less:
Deferred gain........................................ -- (12,966)
Current portion...................................... -- (6,438)
------- --------
$ -- $246,310
======= ========
</TABLE>
In July 1993, the Company acquired the partnership interests in Ambassador
Real Estate Investors, L.P. ("AREI") and Ambassador General Partnership
("AGP"). AREI owned a 99.9% general partnership interest in AGP, which acquired
a substantial interest in TropWorld in a sale-leaseback transaction in 1984.
The above notes receivable from AGP together with the cash paid by Aztar were
replaced on Aztar's balance sheet by the assets acquired.
In November 1992, the Company loaned $171,000,000 principal amount (the
"First Mortgage") to AGP. AGP used the funds to redeem $171,000,000 of its
outstanding 12% First Mortgage Notes Due 1996. As modified by another
agreement, the First Mortgage bore interest at a rate of 16% and was payable
quarterly. The Second Mortgage bore interest at 16 1/2% payable annually. Under
the terms of the Second Mortgage, the Company advanced funds to AGP and AREI
for cash flow shortfalls, including any unpaid interest on the Second Mortgage.
The Company funded AGP's purchase of replacement furniture, fixtures and
equipment by 5-year loans collateralized by the FF&E Mortgage from AGP. Each
loan accrued interest at the rate of 16 1/2% compounded annually. No principal
or interest payments were made on such loans until maturity. The furniture,
fixtures and equipment were leased back to the Company by AGP under 5-year
leases. At December 31, 1992, the estimated cost for AGP to raise debt in the
public bond markets was approximately 13%. Based on a 13% interest rate, the
approximate fair values as of December 31, 1992 were $179,326,000 for the First
Mortgage, $81,129,000 for the Second Mortgage and $26,274,000 for the FF&E
Mortgage.
F-10
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. LONG-TERM DEBT
At December 30, 1993 and December 31, 1992, long-term debt included (in
thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
13 1/2% First Mortgage Notes Due 1996 ($170,000
principal amount, 13.7% effective interest rate);
redeemable beginning September 15, 1994 at 100.00%;
net of unamortized discount........................... $169,133 $168,882
11% Senior Subordinated Notes Due 2002; redeemable
beginning October 1, 1997 at 103.143%................. 200,000 200,000
$50 million revolving credit note; floating rate, 6.44%
at December 30, 1993; matures June 30, 1996........... 25,000 --
$10 million revolving credit note; floating rate, 6 1/4%
at December 30, 1993; matures December 31, 1994.. 10,000 --
Other mortgage loans; 7%; maturities to 1999........... 907 1,037
Notes payable, other; 7%; maturities to 1999........... 168 196
Obligations under capital leases....................... 1,377 11,451
-------- --------
406,585 381,566
Less current portion................................... (2,499) (3,508)
-------- --------
$404,086 $378,058
======== ========
</TABLE>
Maturities of long-term debt for the five years subsequent to December 30,
1993 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1994............................................................. $ 2,499
1995............................................................. 12,527
1996............................................................. 191,357
1997............................................................. 311
1998............................................................. 331
</TABLE>
On December 20, 1989, the Company, through a wholly-owned, special-purpose
subsidiary, issued $170,000,000 principal amount of 13 1/2% First Mortgage
Notes Due September 15, 1996 (the "First Mortgage Notes"). Interest on the
First Mortgage Notes is payable semiannually on March 15 and September 15. The
First Mortgage Notes are redeemable at par at the option of the Company, in
whole or in part, on or after September 15, 1994. Mandatory annual sinking
fund payments of $2,000,000, commencing September 15, 1994, are calculated to
retire $4,000,000 principal amount of the First Mortgage Notes prior to
maturity. Upon change of control of the Company, the holders of the First
Mortgage Notes would have the right to require the First Mortgage Notes to be
repurchased at par plus accrued interest. Payment of principal and interest on
the First Mortgage Notes is unconditionally guaranteed by the Company and is
collateralized by TropWorld.
On October 8, 1992, the Company issued $200,000,000 principal amount of the
11% Senior Subordinated Notes Due October 1, 2002 (the "Subordinated Notes").
Interest on the Subordinated Notes is payable semiannually on April 1 and
October 1. The Subordinated Notes are redeemable at the option of the Company,
in whole or in part, on or after October 1, 1997, at prices from 103.143% of
the principal amount plus interest declining to 100% plus interest beginning
October 1, 1999. The Subordinated Notes are general unsecured obligations of
the Company and are subordinated in right of payment to all present and future
Senior indebtedness (as defined) of the Company. Upon change
F-11
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
of control of the Company, the holders of the Subordinated Notes would have the
right to require repurchase of the Subordinated Notes at par plus accrued
interest but their rights would be subordinated to the right of the holders of
the First Mortgage Notes to receive payment if the holders of the First
Mortgage Notes exercise their right to require repurchase.
In connection with an expansion of Ramada Express that was completed in
September 1993, the Company converted its construction and term loan credit
facility into a $50 Million Revolving Credit Note pursuant to the terms of the
First Amended and Restated Credit Agreement, dated December 28, 1993 (the "$50
Million Credit Facility"). The maximum principal amount that can be outstanding
may not exceed $50,000,000 at any one time. Interest is payable monthly on the
outstanding principal balance at a rate of prime plus 1/2%. The Company may
elect to pay interest based on a one, two or three month LIBOR rate plus 2
1/4%. The Company incurs a commitment fee of 0.5% per annum on the unused
portion of this credit facility. The $50 Million Credit Facility matures on
June 30, 1996 and is collateralized by Ramada Express. The Company may request
that the maturity date be extended for one-year periods at the lenders'
discretion. At the Company's option, the credit facility can be converted to a
three-year reducing revolving credit facility whereby the maximum principal
amount that can be outstanding will be reduced by 1/12 each quarter.
In connection with the AREI/AGP acquisition, the Company borrowed $10,000,000
under a $10 million Revolving Credit Note pursuant to the Revolving Credit Loan
Agreement, dated July 29, 1993 (the "$10 Million Credit Facility"). Borrowings
under the $10 Million Credit Facility may not exceed $10,000,000 principal
amount at any one time. Interest is payable monthly on the unpaid principal
balance at a rate of prime plus 1/4%. The $10 Million Credit Facility matures
on December 31, 1994.
Certain covenants in the First Mortgage Notes and the Subordinated Notes
limit the ability of the Company to incur indebtedness, sell or encumber any of
the applicable collateral or engage in mergers, consolidations or sales of
assets. A covenant related to the First Mortgage Notes limits the amount of
cash dividends that the Company may pay to $3,814,000 as of December 30, 1993.
At December 30, 1993 and December 31, 1992, based on the bid prices in the
public bond markets, the fair value of the First Mortgage Notes was 105.125%
and 107.25%, respectively, of the principal amount and the fair value of the
Subordinated Notes was 101.75% and 100%, respectively, of the principal amount.
The estimated fair value of both revolving credit notes approximates the
carrying amount due to the short maturity of these notes.
Substantially all of the Company's properties are pledged as collateral under
long-term debt agreements.
NOTE 7. INTEREST RATE SWAP AGREEMENT
The Company had outstanding an interest rate swap agreement with a commercial
bank. This agreement had a notional principal amount of $50,000,000 and matured
on December 31, 1991. Under the terms of the agreement, the Company made annual
interest payments to the bank based on a fixed rate of 12.41%, and the bank
made quarterly interest payments to the Company based on the LIBOR rate.
F-12
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8. LEASE OBLIGATIONS
The Company is a lessee under a number of noncancelable lease agreements
involving land, buildings, leasehold improvements and equipment, some of which
provide for contingent rentals based on the consumer price index and/or
interest rate fluctuations. The leases extend for various periods up to 18
years and generally provide for the payment of executory costs (taxes,
insurance and maintenance) by the Company. Certain of these leases have
provisions for renewal options ranging from 3 to 10 years, primarily under
similar terms, and/or options to purchase at various dates.
Properties leased under capital leases are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
------ -------
<S> <C> <C>
Furniture and equipment..................................... $9,410 $54,751
Less accumulated amortization............................... (8,367) (45,489)
------ -------
$1,043 $ 9,262
====== =======
</TABLE>
Amortization of furniture and equipment leased under capital leases, computed
on a straight-line basis, was $1,899,000 in 1993, $3,533,000 in 1992 and
$3,667,000 in 1991.
Minimum future lease obligations on long-term, noncancelable leases in effect
at December 30, 1993 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR CAPITAL OPERATING
---- ------- ---------
<S> <C> <C>
1994..................................................... $ 425 $ 8,147
1995..................................................... 417 8,000
1996..................................................... 214 7,856
1997..................................................... 146 7,469
1998..................................................... 146 7,347
Thereafter............................................... 330 87,086
------ --------
1,678 $125,905
========
Amount representing interest............................. (301)
------
Net present value........................................ 1,377
Less current portion..................................... (331)
------
Long-term portion........................................ $1,046
======
</TABLE>
The above net present value is computed based on specific interest rates
determined at the inception of the leases.
Net rent expense is detailed as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Minimum rentals.................................. $30,565 $51,647 $51,133
Contingent rentals............................... 7,512 12,377 14,118
Less: Minimum lease income....................... (2,773) (5,544) (5,544)
Maintenance reimbursement.................. (7,557) (12,827) (12,514)
------- ------- -------
$27,747 $45,653 $47,193
======= ======= =======
</TABLE>
F-13
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. OTHER LONG-TERM LIABILITIES
At December 30, 1993 and December 31, 1992, other long-term liabilities
consisted of (in thousands):
<TABLE>
<CAPTION>
1993 1992
------- -------
<S> <C> <C>
Accrued rent expense....................................... $13,684 $15,837
Deferred compensation and retirement plans................. 8,044 7,343
Deferred income............................................ 154 154
------- -------
$21,882 $23,334
======= =======
</TABLE>
NOTE 10. REDEEMABLE PREFERRED STOCK
A series of preferred stock consisting of 100,000 shares has been designated
Series B ESOP Convertible Preferred Stock (the "ESOP Stock") and those shares
were issued on December 20, 1989, to the Company's Employee Stock Ownership
Plan (the "ESOP"). The ESOP purchased the shares for $10,000,000 with funds
borrowed from a subsidiary of the Company. These funds are repayable in even
semiannual payments of principal and interest at 13 1/2% per year over a 10-
year term. During 1993, 1992 and 1991, respectively, 1,203 shares, 878 shares
and 239 shares were redeemed primarily in connection with employee
terminations. The ESOP Stock has an annual dividend rate of $8.00 per share
per annum payable semiannually in arrears. These shares have no voting rights
except under certain limited, specified conditions. Shares not allocated to
participant accounts and those shares not vested may be redeemed at $100 per
share. Shares may be converted into common stock at $9.46 and have a
liquidation preference of $100 per share.
The shares that have been allocated to the ESOP participant accounts and
have vested are redeemable at the higher of appraised value, conversion value
or $100 per share, by the participant upon termination. The excess of the
redemption value of the ESOP Stock over the carrying value is charged to
retained earnings upon redemption. In the event of default in the payment of
dividends on the ESOP Stock for six consecutive semiannual periods, each
outstanding share would have one vote per share of common stock into which the
preferred stock is convertible.
NOTE 11. CAPITAL STOCK
The Company is authorized to issue 10,000,000 shares of preferred stock, par
value $.01 per share, issuable in series as the Board of Directors may
designate. Approximately 40,000 shares of preferred stock have been designated
Series A Junior Participating Preferred Stock but none have been issued.
The Company is authorized to issue 100,000,000 shares of common stock with a
par value of $.01 per share. Shares issued were 41,351,153 at December 30,
1993 and 41,012,323 at December 31, 1992. Common stock outstanding was net of
3,992,142 and 4,034,661 treasury shares at December 30, 1993 and December 31,
1992, respectively. One preferred stock purchase right (a "Right") is attached
to each share of the Company's common stock. Each Right will entitle the
holder, subject to the occurrence of certain events, to purchase a unit with
no par value (a "Unit") consisting of one one-thousandth of a share of Series
A Junior Participating Preferred Stock at a purchase price of $40.00 per Unit
subject to adjustment. The Rights will expire in December 1999 if not earlier
redeemed by the Company at $.01 per Right.
F-14
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company issued 42,000 shares of restricted stock in 1991, on which the
restrictions will lapse over a three-year period, commencing on the date of
issuance, to certain executive officers and key employees. Compensation expense
in connection with these and prior issuances, recognized in 1993, 1992 and
1991, respectively, was $72,000, $654,000 and $620,000.
In accordance with the Merger agreement, 666,572 shares of common stock that
had not been claimed by the shareholders of Ramada were returned to the Company
in December 1990 to be held as treasury shares until claimed. During 1993, 1992
and 1991, respectively, 42,519, 60,179 and 117,117 shares were claimed; the
balance of unclaimed shares was 446,757 as of December 30, 1993.
During 1990, the Board of Directors authorized the Company to make
discretionary repurchases of up to 4,000,000 shares of its common stock from
time to time in the open market or otherwise and at December 30, 1993, there
remains 591,900 shares that could be repurchased under this authority. During
1992 the Company repurchased 1,025,100 shares of common stock. None were
repurchased under this program in 1993 or 1991. During 1991, under a separate
odd-lot buyback program, the Company repurchased 49,857 shares of common stock.
During 1992, 3,779 shares of restricted stock that were issued in 1989 were
forfeited. Repurchased and forfeited shares are stated at cost and held as
treasury shares to be used for general corporate purposes.
Effective July 18, 1990, the Company adopted a stock option plan for
directors who are not employees of the Company ("Nonemployee Director Stock
Option Plan"). As of December 30, 1993, 71,000 common shares were reserved
under the Nonemployee Director Stock Option Plan. During 1993, options were
granted for 9,000 shares at $6.75 per share; during 1992, options were granted
for 5,000 shares at $6.75 per share and 9,000 shares at $5.50 per share; during
1991, options were granted for 8,000 shares at $6.50 per share. All options
granted under the Nonemployee Director Stock Option Plan are immediately
exercisable on the date of grant and expire ten years from the date of grant.
At December 30, 1993, December 31, 1992 and January 2, 1992, common shares
reserved for future grants of options under this plan were 179,000, 188,000 and
202,000, respectively.
Changes in the number of common shares reserved under the Company's employee
stock option plans are as follows (in thousands of shares):
<TABLE>
<CAPTION>
NUMBER OF PRICE RANGE
SHARES OF OPTIONS
--------- -----------
<S> <C> <C>
Balance, January 3, 1991............................. 2,992 $3.19-$8.15
Granted............................................ 900 $5.00
Exercised.......................................... (11) $3.19
Cancelled, expired or surrendered.................. (14) $5.83
-----
Balance, January 2, 1992............................. 3,867 $3.19-$8.15
Granted............................................ 135 $6.88
Exercised.......................................... (82) $3.19
Cancelled, expired or surrendered.................. (87) $3.19-$8.15
-----
Balance, December 31, 1992........................... 3,833 $3.19-$8.15
Granted............................................ 50 $7.63
Exercised.......................................... (339) $3.19-$8.15
Cancelled, expired or surrendered.................. (42) $6.49-$8.15
-----
Balance, December 30, 1993........................... 3,502 $3.19-$8.15
=====
</TABLE>
F-15
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At December 30, 1993, December 31, 1992 and January 2, 1992, options
exercisable under the Company's employee stock option plans were 3,077,000,
3,118,000 and 2,238,000, respectively; shares reserved for future grants were
1,797,000, 1,805,000 and 1,849,000, respectively.
In addition to the common shares reserved under stock option plans at
December 30, 1993, the Company has 1,033,000 common shares reserved for the
conversion of the ESOP Stock. The Company also has 40,563 shares of preferred
stock reserved for exercise of the Rights.
NOTE 12. BENEFIT PLANS
The Company has a defined benefit pension plan, which is not currently
funded, for certain former executive employees. The Company has a nonqualified
defined benefit retirement plan, which is not required to be funded by the
Company, for certain senior executives. The Company has a defined contribution
savings plan that covers substantially all employees who are not covered by a
collective bargaining unit. Contributions to the savings plan are
discretionary. Total pension and savings plan expense was $689,000 for 1993,
$662,000 for 1992 and $900,000 for 1991. The Company also contributed
$1,990,000, $1,834,000 and $1,881,000 in 1993, 1992 and 1991, respectively, to
trusteed pension plans under various collective bargaining agreements.
The Company has a deferred compensation plan for designated executives and a
similar plan for outside directors. The plans provide for the payment of
benefits commencing at retirement. The Company is substantially funding the
plans through the purchase of life insurance. Net expense recognized in 1993,
1992 and 1991 was $180,000, $184,000 and $103,000, respectively.
In connection with Restructuring, the Company adopted the ESOP that covers
substantially all non-union employees. The Company will make contributions to
the ESOP so that, after the dividends are paid on the Company's ESOP Stock, the
ESOP can make its debt service payments to the Company. Cash dividends and
contributions, respectively, paid to the ESOP were $787,000 and $1,088,000 in
1993, $797,000 and $1,078,000 in 1992, and $800,000 and $1,076,000 in 1991.
Compensation expense recognized in 1993, 1992 and 1991, respectively, was
$1,311,000, $1,400,000 and $1,482,000.
NOTE 13. INCOME TAXES
The (provision) benefit for income taxes for continuing operations before
extraordinary items and cumulative effect of accounting change is comprised of
(in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Current:
Federal.......................................... $(2,231) $(3,685) $ 1,136
State............................................ (73) -- --
------- ------- -------
(2,304) (3,685) 1,136
------- ------- -------
Deferred:
Federal.......................................... 378 (5,303) 41
State............................................ 902 (641) --
------- ------- -------
1,280 (5,944) 41
------- ------- -------
Charge in lieu of income taxes.................... -- -- (1,237)
------- ------- -------
$(1,024) $(9,629) $ (60)
======= ======= =======
</TABLE>
F-16
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is responsible, with certain exceptions, for the taxes of Ramada
through December 20, 1989. In 1991, the Company settled the Internal Revenue
Service's examination of Ramada's income tax returns for the years 1984 and
1985 and paid taxes and interest of $17,495,000 in January 1992. The tax
liability was less than that provided and the Company recorded a continuing
operations benefit of $1,264,000 in 1991. The Internal Revenue Service is
examining the income tax returns for the years 1986 through 1991. The New
Jersey Division of Taxation is examining the income tax returns for the years
1983 through 1988. Management believes that adequate provision for income
taxes and interest has been made in the financial statements.
General business credits are taken as a reduction of the provision for
federal income taxes during the year such credits become available. The
following table provides a reconciliation between the federal statutory rates
and the (provision) benefit for income taxes when both are expressed as a
percentage of pretax income.
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Tax (provision) benefit at statutory rate.......... (35.0)% (34.0)% (34.0)%
(Increase) decrease in tax resulting from:
State income taxes............................... 4.3 (6.1) --
Contributions and gifts.......................... (.6) (.5) (6.1)
Disallowance of business meals................... (4.1) (2.2) (11.1)
Capitalized restructuring costs.................. .8 2.3 13.5
Restricted stock and non-qualified stock options. .7 -- (3.1)
Casino license amortization...................... -- -- (3.1)
IRS examination.................................. (7.9) 3.6 42.2
Targeted jobs tax credit......................... 4.2 1.5 --
Change in valuation allowance.................... 30.3 -- --
Other, net....................................... (1.0) (1.6) (.5)
----- ----- -----
(8.3)% (37.0)% (2.2)%
===== ===== =====
</TABLE>
The income tax effects of loss carryforwards, tax credit carryforwards and
temporary differences between financial and income tax reporting that give
rise to the deferred income tax assets and liabilities at December 30, 1993
and December 31, 1992, are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Net operating loss carryforward........................ $ 21,902 $ 26,505
Accrued rent expense................................... 4,818 11,856
Accrued bad debt expense............................... 3,972 6,081
Accrued compensation................................... 5,030 4,737
Accrued liabilities.................................... 2,396 1,205
General business credit carryforward................... 2,887 2,066
-------- --------
Gross deferred tax assets.............................. 41,005 52,450
-------- --------
Deferred tax asset valuation allowance................. (20,974) (24,732)
-------- --------
Other.................................................. (1,528) (1,195)
Partnership investment................................. (5,328) (4,704)
Depreciation and amortization.......................... (12,199) (20,544)
Ramada tax sharing agreement........................... (20,536) (22,115)
-------- --------
Gross deferred tax liabilities......................... (39,591) (48,558)
-------- --------
Net deferred tax liabilities........................... $(19,560) $(20,840)
======== ========
</TABLE>
F-17
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Included in the valuation allowance is $520,000 that will be allocated to
shareholders' equity when recognized.
The deferred tax amounts were adjusted in 1993 for the effect of legislation
that increased the federal income tax rate from 34% to 35%. The net effect of
this change was not significant. The December 31, 1992 valuation allowance was
reduced during 1993 due to the generation of taxable income that resulted in
the utilization of a portion of the net operating loss carryforward. The effect
of this reduction was to decrease the 1993 income tax expense by $3,878,000.
At December 30, 1993, tax benefits are available for federal income tax
purposes as follows (in thousands):
<TABLE>
<S> <C>
Net operating losses............................................. $40,466
General business credits......................................... 2,121
</TABLE>
These tax benefits will expire in the years 2003 through 2008 if not used.
The Company also has alternative minimum tax credit carryforwards of $766,000
that can be carried forward indefinitely and offset against the regular federal
income tax liability. In addition, the Company has net operating loss
carryforwards for state income tax purposes that will expire in the following
years if not used (in thousands):
<TABLE>
<S> <C>
1994.............................................................. $13,705
1995.............................................................. 26,377
1996.............................................................. 13,300
1997.............................................................. 15,962
1998.............................................................. 6,334
2000.............................................................. 10,307
</TABLE>
A valuation allowance has been established for those federal and state tax
benefits which are not expected to be realized.
NOTE 14. DISCONTINUED OPERATIONS
In 1989, the Company disposed of its hotel business and the following items
are related to this discontinued operation. In 1992, the Company reached a
settlement with Canadian tax authorities in relation to the 1988 and 1989
income tax returns of Ramada Inc. and received a refund of $1,262,000. In 1991,
the Company recorded a tax benefit of $1,861,000 in connection with the
settlement discussed in "Note 13. Income Taxes". In another matter, but also in
1991, the Company reached a settlement with Canadian tax authorities and
received a refund of $692,000.
NOTE 15. EXTRAORDINARY ITEMS
A substantial portion of the proceeds from the issuance of the Subordinated
Notes were loaned to AGP to redeem its 12% First Mortgage Notes Due 1996. In
connection with the debt redemption, the Company paid a prepayment premium and
expensed its remaining deferred financing costs. These items were reflected in
the 1992 Consolidated Statement of Operations as an extraordinary loss of
$5,335,000, net of an income tax benefit of $2,749,000.
The Company has a net operating loss carryforward from 1989. A portion of the
tax benefit of the 1989 loss was offset against the 1991 provision for income
taxes as an extraordinary item because the tax benefit of the 1989 loss could
not have been recorded previously.
F-18
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 16. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
In February 1992, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes ("SFAS 109"), which superseded Statement of Financial Accounting
Standards No. 96 with the same title ("SFAS 96"). SFAS 96 was never adopted by
the Company. The Company adopted the provisions of SFAS 109 in the first
quarter of 1992 and elected not to restate prior year financial statements.
The effect from prior years of adopting SFAS 109 as of the beginning of fiscal
1992 was a net deferred income tax benefit of $7,500,000 and it was reflected
in the 1992 Consolidated Statement of Operations as the Cumulative effect of
accounting change.
The income tax effects of loss carryforwards, tax credit carryforwards and
temporary differences between financial and income tax reporting that give
rise to the deferred income tax assets and liabilities at January 2, 1992,
under the provisions of SFAS 109, are as follows (in thousands):
<TABLE>
<CAPTION>
DEFERRED INCOME TAX
--------------------
ASSETS LIABILITIES
------- -----------
<S> <C> <C>
Net operating loss carryforward........................ $26,058
Accrued rent expense................................... 12,914
Accrued bad debt expense............................... 5,770
Accrued compensation................................... 3,572
Accrued liabilities.................................... 2,199
General business credit carryforward................... 1,407
Other.................................................. 618
Partnership investment................................. $ 4,963
Depreciation and amortization.......................... 14,472
Ramada tax sharing agreement........................... 22,437
------- -------
52,538 $41,872
=======
Valuation allowance.................................... (25,562)
-------
$26,976
=======
</TABLE>
Included in the valuation allowance is $505,000 that will be allocated to
shareholders' equity when recognized.
NOTE 17. CONTINGENCIES AND COMMITMENTS
The Company agreed to indemnify Ramada against all monetary judgments in
lawsuits pending against Ramada and its subsidiaries as of the conclusion of
the Restructuring on December 20, 1989, as well as all related attorneys' fees
and expenses not paid at that time, except for any judgments, fees or expenses
accrued on the hotel business balance sheet and except for any unaccrued and
unreserved aggregate amount up to $5,000,000 of judgments, fees or expenses
related exclusively to the hotel business. Aztar is entitled to the benefit of
any crossclaims or counterclaims related to such lawsuits and of any insurance
proceeds received. In addition, the Company agreed to indemnify Ramada for
various lease guarantees made by Ramada relating to the restaurant business
conducted through its Marie Callender Pie Shops, Inc. ("MCPSI") subsidiary. In
connection with these matters the Company has an accrued liability of
$3,980,000 and $4,256,000 at December 30, 1993 and December 31, 1992,
respectively.
F-19
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is a party to various other claims, legal actions and complaints
arising in the ordinary course of business or asserted by way of defense or
counterclaim in actions filed by the Company. Management believes that its
defenses are substantial in each of these matters and that the Company's legal
posture can be successfully defended without material adverse effect on its
consolidated financial statements.
The Company had commitments for capital expenditures of approximately
$13,000,000 at December 30, 1993.
NOTE 18. ACQUISITION
In July 1993, the Company acquired the partnership interests in AREI and AGP.
AREI owned a 99.9% general partnership interest in AGP, which acquired a
substantial interest in TropWorld in a sale-leaseback transaction in 1984.
The acquisition has been accounted for as a purchase by the Company. The
aggregate consideration, including costs incurred to complete the transaction,
was approximately $62,000,000 in cash. The Company obtained the $10 Million
Credit Facility to fund a portion of the purchase price. This acquisition did
not significantly change Aztar's total assets. The cash paid by Aztar and notes
receivable from AGP were replaced on Aztar's balance sheet by the assets
acquired, which consisted primarily of building and equipment. The additional
$10,000,000 of indebtedness incurred by Aztar was more than offset by a
reduction of indebtedness to AGP.
The Company's consolidated statement of operations for the year ended
December 30, 1993 includes the results of AGP since its acquisition. After
intercompany eliminations, the acquisition has the following effects on
consolidated results: Most of the reduction in Aztar interest income from the
replacement of the AGP notes receivable is offset by a reduction in rent
expense. Aztar's net income is affected negatively primarily by an increase in
depreciation expense.
If the acquisition had occurred at the beginning of each of the years ended
December 30, 1993 and December 31, 1992, the Company's results of operations
would have been as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1993 1992
-------- --------
(UNAUDITED)
<S> <C> <C>
Revenues................................................. $518,762 $512,045
Income from continuing operations before extraordinary
item and cumulative effect of accounting change......... 7,846 8,332
Net income............................................... 7,846 11,759
Earnings per common and common equivalent share:
Income from continuing operations before extraordinary
item and cumulative effect of accounting change....... $ .19 $ .20
Net income............................................. .19 .29
Earnings per common share assuming full dilution:
Income from continuing operations before extraordinary
item and cumulative effect of accounting change....... $ .18 $ .20
Net income............................................. .18 .28
</TABLE>
F-20
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 19. UNAUDITED QUARTERLY RESULTS/COMMON STOCK PRICES
The following unaudited information shows selected items in thousands, except
per share data, for each quarter in the years ended December 30, 1993 and
December 31, 1992. The Company's common stock is listed on the New York Stock
Exchange.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1993
- ----
Revenues............................... $122,322 $130,781 $144,038 $121,621
Operating income....................... 3,517 6,869 19,576 7,457
Income (loss) before income taxes...... 2,542 6,078 8,859 (5,073)
Income taxes........................... (958) (2,172) (3,526) 5,632
Net income............................. 1,584 3,906 5,333 559
Earnings per common and common equiva-
lent share:
Net income........................... .04 .10 .13 .01
Earnings per common share assuming full
dilution:
Net income........................... .04 .09 .13 .01
1992
- ----
Revenues............................... $117,669 $131,646 $141,225 $121,505
Operating income....................... 2,995 10,400 15,147 4,067
Income from continuing operations be-
fore income taxes, extraordinary item
and cumulative effect of accounting
change................................ 1,549 9,210 13,888 1,360
Income taxes........................... (629) (3,158) (5,382) (460)
Discontinued operations................ -- -- -- 1,262
Extraordinary item..................... -- -- -- (5,335)
Cumulative effect of accounting change. 7,500 -- -- --
Net income (loss)...................... 8,420 6,052 8,506 (3,173)
Earnings per common and common equiva-
lent share:
Income from continuing operations be-
fore extraordinary item and cumula-
tive effect of accounting change.... .02 .16 .22 .02
Net income (loss).................... .21 .16 .22 (.09)
Earnings per common share assuming full
dilution:
Income from continuing operations be-
fore extraordinary item and cumula-
tive effect of accounting change.... .02 .15 .22 .02
Net income (loss).................... .21 .15 .22 (.09)
Common Stock Prices
1993--High............................. $ 8.88 $ 10.13 $ 9.63 $ 7.88
--Low.............................. 6.63 6.25 7.00 6.00
1992--High............................. 7.50 6.50 7.13 7.63
--Low.............................. 5.00 4.63 5.00 6.13
</TABLE>
F-21
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 30,
1994 1993
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 30,258 $ 39,551
Accounts receivable, net.............................. 19,228 19,170
Refundable income taxes............................... 31 2,062
Inventories........................................... 5,445 5,564
Prepaid expenses...................................... 8,792 9,206
Deferred income taxes................................. 6,512 6,566
-------- --------
Total current assets................................ 70,266 82,119
Investments in and advances to unconsolidated partner-
ship................................................... 13,149 13,776
Other investments....................................... 23,393 22,131
Property and equipment:
Buildings and equipment, net.......................... 646,782 648,139
Land.................................................. 81,795 81,795
Construction in progress.............................. 17,053 6,701
Leased under capital leases, net...................... 901 1,043
-------- --------
746,531 737,678
Other assets............................................ 20,645 21,467
-------- --------
$873,984 $877,171
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals......................... $ 35,063 $ 39,515
Accrued payroll and employee benefits................. 17,601 15,823
Accrued interest payable.............................. 13,719 13,714
Income taxes payable.................................. 2,623 2,633
Current portion of long-term debt..................... 2,509 2,499
-------- --------
Total current liabilities........................... 71,515 74,184
Long-term debt.......................................... 393,966 404,086
Other long-term liabilities............................. 22,860 21,882
Deferred income taxes................................... 23,474 26,126
Contingencies and commitments
Series B ESOP convertible preferred stock (redemption
value $4,474 and $4,295)............................... 4,323 3,905
Shareholders' equity:
Common stock, $.01 par value (37,372,909 and
37,359,011 shares outstanding)....................... 414 414
Paid-in capital....................................... 346,965 346,965
Retained earnings..................................... 27,382 16,559
Less:Treasury stock................................... (16,885) (16,885)
Unearned compensation............................ (30) (65)
-------- --------
Total shareholders' equity.......................... 357,846 346,988
-------- --------
$873,984 $877,171
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE PERIODS ENDED JUNE 30, 1994 AND JULY 1, 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
------------------
1994 1993
-------- --------
<S> <C> <C>
REVENUES
Casino.................................................... $217,080 $216,313
Rooms..................................................... 20,966 14,730
Food and beverage......................................... 21,886 17,478
Other..................................................... 6,381 4,582
-------- --------
266,313 253,103
COSTS AND EXPENSES
Casino.................................................... 99,524 107,301
Rooms..................................................... 12,630 8,567
Food and beverage......................................... 19,759 16,376
Other..................................................... 3,539 3,040
Marketing................................................. 22,899 22,680
General and administrative................................ 23,302 22,320
Utilities................................................. 6,490 5,566
Repairs and maintenance................................... 9,431 10,771
Provision for doubtful accounts........................... 1,639 459
Property taxes and insurance.............................. 8,360 8,374
Net rent.................................................. 4,715 23,340
Depreciation and amortization............................. 18,381 13,923
-------- --------
230,669 242,717
-------- --------
Operating income............................................ 35,644 10,386
Interest income........................................... 1,126 22,985
Interest expense.......................................... (23,582) (22,822)
-------- --------
Income before other items and income taxes.................. 13,188 10,549
Equity in unconsolidated partnership's loss............... (1,928) (1,929)
-------- --------
Income before income taxes.................................. 11,260 8,620
Income taxes.............................................. (126) (3,130)
-------- --------
Net income.................................................. $ 11,134 $ 5,490
======== ========
Net income per common and common equivalent share........... $ .28 $ .14
Net income per common share assuming full dilution.......... $ .28 $ .13
Weighted average common shares applicable to:
Net income per common and common equivalent share......... 38,223 38,383
Net income per common share assuming full dilution........ 39,252 39,539
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE PERIODS ENDED JUNE 30, 1994 AND JULY 1, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
----------------
1994 1993
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net income.................................................... $11,134 $ 5,490
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 19,605 14,846
Provision for losses on accounts receivable................. 1,639 459
Loss on reinvestment obligation............................. 486 515
Interest income............................................. -- 1,889
Rent expense................................................ 484 (1,565)
Distribution in excess of equity in income of partnership... 627 646
Deferred income taxes....................................... (2,598) 2,267
Change in assets and liabilities:
(Increase) decrease in accounts receivable................ (1,915) 355
(Increase) decrease in refundable income taxes............ 2,031 38
(Increase) decrease in inventories and prepaid expenses... 365 574
Increase (decrease) in accounts payable, accrued expenses
and income taxes payable................................. (1,735) (2,116)
Other items, net.......................................... 447 571
------- -------
Net cash provided by (used in) operating activities..... 30,570 23,969
------- -------
Cash Flows from Investing Activities
Payments received on TropWorld second mortgage.............. -- 24,400
Payments received on other notes receivable................. 472 1,732
Increase in invested funds.................................. -- (1,493)
Increase in TropWorld second mortgage....................... -- (24,400)
Increase in other notes receivable.......................... -- (418)
Purchases of property and equipment......................... (26,181) (41,941)
Additions to other long-term assets......................... (3,414) (3,650)
------- -------
Net cash provided by (used in) investing activities..... (29,123) (45,770)
------- -------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt.................... 10,000 --
Proceeds from issuance of common stock...................... -- 2,149
Principal payments on long-term debt........................ (20,249) (1,917)
Preferred stock dividend.................................... (389) (395)
Redemption of preferred stock............................... (102) (55)
------- -------
Net cash provided by (used in) financing activities..... (10,740) (218)
------- -------
Net increase (decrease) in cash and cash equivalents........ (9,293) (22,019)
Cash and cash equivalents at beginning of period............ 39,551 100,403
------- -------
Cash and cash equivalents at end of period.............. $30,258 $78,384
======= =======
Supplemental Cash Flow Disclosures
Summary of non-cash investing and financing activities:
Capital lease obligations incurred for property and
equipment.................................................. $ -- $ 385
Tax benefit from stock options and preferred stock dividend. 83 335
Cash paid during the period for the following:
Interest, net of amount capitalized......................... $22,389 $21,500
Income taxes................................................ 620 480
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE PERIODS ENDED JUNE 30, 1994 AND JULY 1, 1993
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
SIX MONTHS
------------------
1994 1993
-------- --------
<S> <C> <C>
Common stock:
Beginning balance........................................ $ 414 $ 410
Stock options exercised for 338,830 shares in 1993....... -- 4
-------- --------
Ending balance......................................... 414 414
-------- --------
Paid-in capital:
Beginning balance........................................ 346,965 344,574
Stock options exercised.................................. -- 2,145
Tax benefit from stock options exercised................. -- 246
-------- --------
Ending balance......................................... 346,965 346,965
-------- --------
Retained earnings:
Beginning balance........................................ 16,559 5,787
Preferred stock dividend, net of income tax benefit of
$83 and $89............................................. (311) (308)
Net income............................................... 11,134 5,490
-------- --------
Ending balance......................................... 27,382 10,969
-------- --------
Treasury stock:
Beginning and ending balance............................. (16,885) (16,885)
-------- --------
Unearned compensation:
Beginning balance........................................ (65) (137)
Amortization............................................. 35 37
-------- --------
Ending balance......................................... (30) (100)
-------- --------
$357,846 $341,363
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1: GENERAL
The consolidated financial statements reflect all adjustments, such
adjustments being normal recurring accruals, which are necessary, in the
opinion of management, for the fair presentation of the results of the interim
periods; interim results, however, may not be indicative of the results for the
full year.
The notes to the interim consolidated financial statements are presented to
enhance the understanding of the financial statements and do not necessarily
represent complete disclosures required by generally accepted accounting
principles. Capitalized interest was $1,267,000 for the period ended June 30,
1994 and $2,000,000 for the period ended July 1, 1993. For additional
information regarding significant accounting policies, long-term debt, lease
obligations, and other matters applicable to the Company, reference should be
made to the Company's Annual Report to Shareholders for the year ended December
30, 1993.
NOTE 2: INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED PARTNERSHIP
Following are summarized operating results for the Company's unconsolidated
partnership, accounted for using the equity method for the periods ended June
30, 1994 and July 1, 1993 (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
--------------
1994 1993
------ ------
<S> <C> <C>
Revenues........................................................ $7,257 $6,282
Operating expenses.............................................. (1,381) (1,678)
------ ------
Operating income................................................ 5,876 4,604
Interest expense................................................ (1,928) (1,631)
------ ------
Net income.................................................... $3,948 $2,973
====== ======
</TABLE>
NOTE 3: OTHER LONG-TERM LIABILITIES
At June 30, 1994 and December 30, 1993, other long-term liabilities consisted
of (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Accrued rent expense........................................... $14,168 $13,684
Deferred compensation and retirement plans..................... 8,538 8,044
Deferred income................................................ 154 154
------- -------
$22,860 $21,882
======= =======
</TABLE>
NOTE 4: INCOME TAXES
The Company is responsible, with certain exceptions, for the taxes of Ramada
through December 20, 1989. The Internal Revenue Service has completed its
examination of the years 1986 and 1987. Ramada has signed a partial agreement
for those two years and has filed a petition with the U.S. Tax Court for two
remaining issues. The Internal Revenue Service is examining the income tax
returns for the years 1988 through 1991. The New Jersey Division of Taxation is
examining the income tax returns for the years 1983 through 1988. Management
believes that adequate provision for income taxes and interest has been made in
the financial statements.
F-26
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(UNAUDITED) (CONTINUED)
The December 30, 1993 valuation allowance was reduced during the 1994 six-
month period due to the generation of taxable income that resulted in the
utilization of a portion of the net operating loss carryforward. The effect of
this reduction was to decrease income tax expense for the 1994 six-month period
by $3,974,000.
NOTE 5: NET INCOME PER SHARE
Net income per common and common equivalent share is computed based on the
weighted average number of common shares outstanding after consideration of the
dilutive effect of stock options. Net income per common share, assuming full
dilution, is computed based on the weighted average number of common shares
outstanding after consideration of the dilutive effect of stock options and the
assumed conversion of the preferred stock at the stated rate. Net income for
both computations is adjusted for dividends on the preferred stock.
NOTE 6: CONTINGENCIES AND COMMITMENTS
The Company agreed to indemnify Ramada against all monetary judgments in
lawsuits pending against Ramada and its subsidiaries as of the conclusion of
the Restructuring of Ramada on December 20, 1989, as well as all related
attorneys' fees and expenses not paid at that time, except for any judgments,
fees or expenses accrued on the hotel business balance sheet and except for any
unaccrued and unreserved aggregate amount up to $5 million of judgments, fees
or expenses related exclusively to the hotel business. Aztar is entitled to the
benefit of any crossclaims or counterclaims related to such lawsuits and of any
insurance proceeds received. In addition, the Company agreed to indemnify
Ramada for various lease guarantees made by Ramada relating to the restaurant
business conducted through its MCPSI subsidiary. In connection with these
matters, the Company has an accrued liability of $3,974,000 and $3,980,000 at
June 30, 1994 and December 30, 1993, respectively.
The Company is a party to various other claims, legal actions and complaints
arising in the ordinary course of business or asserted by way of defense or
counterclaim in actions filed by the Company. Management believes that its
defenses are substantial in each of these matters and that the Company's legal
posture can be successfully defended without material adverse effect on its
consolidated financial statements.
The Company had commitments for capital expenditures of approximately
$16,000,000 at June 30, 1994.
F-27
<PAGE>
LOGO
[Ramada Express
Logo]
Ramada Express'
Victorian-era
[Photo of Ramada Express -- train in station] railroad theme
includes a train
that guests can
ride from parking
to Casino Station,
where they can
enter the casino
directly.
[Tropicana Logo]
The new facades at
Tropicana utilize a
[Photo of Tropicana -- new facade] colorful Caribbean
decor, with
elements that
elaborate on
Tropicana's
tropical island
theme.
[TropWorld Logo]
A four-story high
Ferris wheel is a
[Photo of TropWorld -- Ferris signature feature
wheel] of Tivoli Pier,
TropWorld's two-
acre indoor
entertainment
attraction.
<PAGE>
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 11
Use of Proceeds........................................................... 14
Selected Consolidated Financial Information............................... 15
Capitalization............................................................ 17
Management's Discussion and Analysis of Results of Operations and
Financial Condition...................................................... 18
Certain Contractual Arrangements.......................................... 26
Business.................................................................. 29
Credit Policy and Control Procedures...................................... 35
Regulation................................................................ 35
Employees................................................................. 47
Trademarks................................................................ 47
Legal Proceedings......................................................... 48
Management................................................................ 49
Security Ownership........................................................ 51
Description of the Notes.................................................. 52
Underwriting.............................................................. 72
Experts................................................................... 72
Legal Matters............................................................. 73
Index to Financial Statements............................................. F-1
</TABLE>
$180,000,000
AZTAR CORPORATION
% SENIOR SUBORDINATED
NOTES DUE 2004
SALOMON BROTHERS INC
BT SECURITIES CORPORATION
CS FIRST BOSTON
PROSPECTUS
DATED , 1994
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................. $ 62,069
NASD filing fee..................................................... 18,500
Printing and engraving.............................................. 150,000
Accounting fees and expenses........................................ 150,000
Legal fees and expenses (other than Blue Sky)....................... 400,000
Rating Agencies..................................................... 100,000
Blue Sky fees and expenses, including legal fees.................... 15,000
Trustee fees and expenses........................................... 18,000
Miscellaneous....................................................... 150,000
----------
Total .............................................................. $1,063,569
==========
</TABLE>
- --------
*Expenses other than filing fees are estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Eighth of the Company's Restated Certificate of Incorporation, which
is incorporated by reference in this Registration Statement, provides that the
Company shall indemnify to the full extent authorized or permitted by law any
person made, or threatened to be made a party or witness to any action, suit or
proceeding by reason of the fact that he, his testator or intestate, is or was
a director or an officer of the Company or by reason of the fact that such
person, at the request of the Company, is or was serving any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
in any capacity.
Pursuant to Section 145 of the General Corporation Law of Delaware (the
"Delaware Corporation Law"), Article VIII of the By-laws of the Company, which
are incorporated by reference in this Registration Statement, provides that the
Company shall indemnify any person in connection with the defense or settlement
of any threatened, pending or completed legal proceeding (other than a legal
proceeding by or in the right of the Company) by reason of the fact that he,
his testator or intestate, is or was a director or officer of the Company or is
or was a director or officer of the Company serving at the request of the
Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with the defense
or settlement of such legal proceedings if he acted in good faith and in a
manner that he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, if he had no reasonable cause to believe that his conduct was
unlawful. If the legal proceeding, however, is by or in the right of the
Company, the director or officer may be indemnified by the Company against
expenses (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such legal proceedings 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 Company; except that he may not be indemnified in
respect of any claim, issue or matter as to which he shall have been adjudged
to be liable to the Company unless a Court determines otherwise.
Article VIII of the Company's By-laws allows the Company to maintain director
and officer liability insurance on behalf of any person who is or was a
director or officer of the Company or such person who serves or served as a
director, officer, agent or employee, at another corporation, partnership or
other enterprise at the request of the Company.
II-1
<PAGE>
Pursuant to Section 102(b)(7) of the Delaware Corporation Law, Article Eighth
of the Restated Certificate of Incorporation of the Company provides that no
director of the Company shall be personally liable to the Company or its
stockholders for monetary damages for any breach of his fiduciary duty as a
director, provided, however, that such clause shall not apply to any liability
of a director (i) for any breach of the director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions that are not in good
faith or which involve intentional misconduct or a knowing violation of the
law, (iii) pursuant to Section 174 of the Delaware Corporation Law or (iv) for
any transaction from which the director derived an improper personal benefit.
ITEM 16. EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
**1. Form of Underwriting Agreement relating to the Notes.
4.1 Rights Agreement between Aztar Corporation and First Interstate Bank of
Arizona, N.A. as Rights Agent, filed as Exhibit 4.1 to Aztar
Corporation's Registration Statement No. 33-51008 and incorporated
herein by reference.
4.2 Indenture, dated as of December 15, 1989, among Aztar Mortgage Funding,
Inc., Ramada Inc., as guarantor, and First Interstate Bank of Arizona,
N.A., as Trustee, relating to the First Mortgage Notes Due 1996, filed
as Exhibit 4.2 to Aztar Corporation's Registration Statement No. 33-
51008 and incorporated herein by reference.
4.3 Instrument of Appointment and Acceptance of Successor Trustee dated as
of January 26, 1993, among Aztar Mortgage Funding, Inc., as Issuer,
Aztar Corporation, as Guarantor, First Interstate Bank of Arizona,
N.A., as resigning Trustee, and First Bank National Association, as
successor Trustee, filed as Exhibit 4.2(b) to Aztar Corporation's 1993
Form 10-K and incorporated herein by reference.
4.4 Indenture dated as of October 8, 1992, between Aztar Corporation and
Bank of America National Trust and Savings Association, as Trustee,
relating to the Senior Subordinated Notes Due 2002 of Aztar
Corporation, filed as Exhibit 4.1 to Aztar Corporation's form 10-Q for
the quarter ended October 1, 1992 and incorporated herein by reference.
**4.5 Form of Indenture to be entered into between Aztar Corporation and
American Bank National Association, as Trustee, relating to the Senior
Subordinated Notes Due 2004 of Aztar Corporation.
**5. Opinion of Latham & Watkins as to the validity of the securities being
registered hereby.
**12. Computation of Ratio of Earnings to Fixed Charges.
**23.1 Consent of Latham & Watkins. Reference is hereby made to Exhibit 5
hereto.
**23.2 Consent of Coopers & Lybrand L.L.P. with respect to financial
statements of the Company.
**23.3 Consent of Ernst & Young LLP with respect to financial statements of
Ambassador Real Estate Investors, L.P.
+24.1 Powers of Attorney for John B. Bohle, Edward M. Carson, A. Sam Gittlin,
John R. Norton, III, Robert S. Rosow, Richard Snell, Carroll V.
Willoughby and Meridith P. Sipek (included in the signature page on
page II-4 of this Registration Statement).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
+24.2 Power of Attorney for Terence W. Thomas.
**24.3 Power of Attorney for Vesta Valentine Temen.
+25. Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939.
</TABLE>
- --------
+ Previously filed
** Filed herewith
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the Registration Statement shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Phoenix, State of Arizona, on the
26th day of August, 1994.
AZTAR CORPORATION
PAUL E. RUBELI
By___________________________________
Paul E. Rubeli Chairman of the
Board President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated:
SIGNATURE TITLE DATE
PAUL E. RUBELI Director, Chairman
- ------------------------------------- of the Board, August 26, 1994
Paul E. Rubeli President and Chief
Executive Officer
ROBERT M. HADDOCK Director, Executive
- ------------------------------------- Vice President and August 26, 1994
Robert M. Haddock Chief Financial
Officer
* Director
- ------------------------------------- August 26, 1994
John B. Bohle
* Director
- ------------------------------------- August 26, 1994
Edward M. Carson
* Director
- ------------------------------------- August 26, 1994
A. Sam Gittlin
* Director
- ------------------------------------- August 26, 1994
John R. Norton, III
II-4
<PAGE>
SIGNATURE TITLE DATE
* Director
- ------------------------------------- August 26, 1994
Robert S. Rosow
* Director
- ------------------------------------- August 26, 1994
Richard Snell
Director
* August 26, 1994
- -------------------------------------
Vesta Valentine Temen
* Director
- ------------------------------------- August 26, 1994
Terence W. Thomas
* Director
- ------------------------------------- August 26, 1994
Carroll V. Willoughby
MERIDITH P. SIPEK Controller
- ------------------------------------- August 26, 1994
Meridith P. Sipek
*By: ROBERT M. HADDOCK
----------------------------------
Robert M. Haddock
II-5
<PAGE>
GRAPHICS APPENDIX LIST
PAGE WHERE GRAPHIC
APPEARS DESCRIPTION OF GRAPHIC OR CROSS-REFERENCE
- ------------------ ---------------------------------------------------------
INSIDE FRONT COVER Ramada Express Hotel and Casino logo
Photograph of exterior of Ramada Express Hotel and Casino
at night
Tropicana Resort and Casino logo
Photograph of exterior of Tropicana Resort and Casino at
night
TropWorld Casino and Entertainment Resort logo
Photograph of TropWorld exterior in daylight
INSIDE BACK COVER Ramada Express Hotel and Casino logo
Photograph of Ramada Express train in station
Tropicana Resort and Casino logo
Photograph of new facade of Tropicana Resort and Casino
TropWorld Casino and Entertainment Resort logo
Photograph of indoor Ferris wheel at TropWorld Casino
and Entertainment Resort
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
**1. Form of Underwriting Agreement relating to the Notes.
4.1 Rights Agreement between Aztar Corporation and First Interstate Bank of
Arizona, N.A. as Rights Agent, filed as Exhibit 4.1 to Aztar
Corporation's Registration Statement No. 33-51008 and incorporated
herein by reference.
4.2 Indenture, dated as of December 15, 1989, among Aztar Mortgage Funding,
Inc., Ramada Inc., as guarantor, and First Interstate Bank of Arizona,
N.A., as Trustee, relating to the First Mortgage Notes Due 1996, filed
as Exhibit 4.2 to Aztar Corporation's Registration Statement No. 33-
51008 and incorporated herein by reference.
4.3 Instrument of Appointment and Acceptance of Successor Trustee dated as
of January 26, 1993, among Aztar Mortgage Funding, Inc., as Issuer,
Aztar Corporation, as Guarantor, First Interstate Bank of Arizona,
N.A., as resigning Trustee, and First Bank National Association, as
successor Trustee, filed as Exhibit 4.2(b) to Aztar Corporation's 1993
Form 10-K and incorporated herein by reference.
4.4 Indenture dated as of October 8, 1992, between Aztar Corporation and
Bank of America National Trust and Savings Association, as Trustee,
relating to the Senior Subordinated Notes Due 2002 of Aztar
Corporation, filed as Exhibit 4.1 to Aztar Corporation's form 10-Q for
the quarter ended October 1, 1992 and incorporated herein by reference.
**4.5 Form of Indenture to be entered into between Aztar Corporation and
American Bank National Association, as Trustee, relating to the Senior
Subordinated Notes Due 2004 of Aztar Corporation.
**5. Opinion of Latham & Watkins as to the validity of the securities being
registered hereby.
**12. Computation of Ratio of Earnings to Fixed Charges.
**23.1 Consent of Latham & Watkins. Reference is hereby made to Exhibit 5
hereto.
**23.2 Consent of Coopers & Lybrand L.L.P. with respect to financial
statements of the Company.
**23.3 Consent of Ernst & Young LLP with respect to financial statements of
Ambassador Real Estate Investors, L.P.
+24.1 Powers of Attorney for John B. Bohle, Edward M. Carson, A. Sam Gittlin,
John R. Norton, III, Robert S. Rosow, Richard Snell, Carroll V.
Willoughby and Meridith P. Sipek (included in the signature page on
page II-4 of this Registration Statement).
+24.2 Power of Attorney for Terence W. Thomas.
**24.3 Power of Attorney for Vesta Valentine Temen.
+25. Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939.
</TABLE>
- --------
+ Previously filed
** Filed herewith
<PAGE>
Exhibit 1
Aztar Corporation
$180,000,000
__% Senior Subordinated Notes Due 2004
Underwriting Agreement
New York, New York
____________, 1994
Salomon Brothers Inc
As Representative of the
several Underwriters
c/o Salomon Brothers Inc
Seven World Trade Center
New York, New York 10048
Ladies and Gentlemen:
Aztar Corporation, a Delaware corporation (the "Company"), proposes to
sell to the underwriters named in Schedule I hereto (the "Underwriters"), for
whom you are acting as representative (the "Representative") $180,000,000
principal amount of its __% Senior Subordinated Notes Due 2004 (the
"Securities"), to be issued under an indenture (the "Indenture") to be dated as
of __________, 1994, by and among the Company and American Bank National
Association, as trustee (the "Trustee").
1. Representations and Warranties. The Company represents and
warrants to, and agrees with, each Underwriter as set forth below in this
Section 1. Certain terms used in this Section 1 are defined in paragraph (c)
hereof.
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933 (the "Act") and has filed with the Securities and
Exchange Commission (the "Commission") a registration statement (file
number 33-54151) on such Form,
<PAGE>
including a related preliminary prospectus, for the registration under the
Act of the offering and sale of the Securities. The Company may have filed
one or more amendments thereto, including the related preliminary
prospectus, each of which has previously been furnished to you. The Company
will next file with the Commission one of the following: (i) prior to
effectiveness of such registration statement, a further amendment to such
registration statement (including the form of final prospectus) or (ii)
after effectiveness of such registration statement a final prospectus in
accordance with Rules 430A and 424(b)(1) or (4). In the case of clause
(ii), the Company has included in such registration statement, as amended
at the Effective Date, all information (other than Rule 430A Information)
required by the Act and the rules thereunder to be included in the
Prospectus with respect to the Securities and the offering thereof. As
filed, such amendment and form of final prospectus, or such final
prospectus, shall contain all Rule 430A Information, together with all
other such required information, with respect to the Securities and the
offering thereof and, except to the extent you shall agree in writing to a
modification, shall be in all substantive respects in the form furnished to
you prior to the Execution Time or, to the extent not completed at the
Execution Time, shall contain only such specific additional information and
other changes (beyond that contained in the latest Preliminary Prospectus)
as the Company has advised you, prior to the Execution Time, will be
included or made therein.
(b) On the Effective Date, the Registration Statement did or will, and
when the Prospectus is first filed (if required) in accordance with Rule
424(b) and on the Closing Date, the Prospectus (and any supplements
thereto) will, comply in all material respects with the applicable
requirements of the Act and the Securities Exchange Act of 1934 (the
"Exchange Act") and the Trust Indenture Act of 1939 (the "Trust Indenture
Act") and the respective rules thereunder; on the Effective Date, the
Registration Statement did not or will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; on the Effective Date and on the Closing Date the Indenture did
or will comply in all material respects with the requirements of the Trust
Indenture Act and the rules thereunder; and, on the Effective Date, the
Prospectus, if not
2
<PAGE>
filed pursuant to Rule 424(b), did not or will not, and on the date of any
filing pursuant to Rule 424(b) and on the Closing Date, the Prospectus
(together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the
Company makes no representations or warranties as to (i) that part of the
Registration Statement which shall constitute the Statement of Eligibility
and Qualification of the Trustee ("Form T-1") under the Trust Indenture Act
or (ii) the information contained in or omitted from the Registration
Statement or the Prospectus (or any supplement thereto) in reliance upon
and in conformity with information furnished in writing to the Company by
or on behalf of any Underwriter (through the Representative) specifically
for inclusion in the Registration Statement or the Prospectus (or any
supplement thereto).
(c) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "the Effective Date" shall mean each date
that the Registration Statement and any post-effective amendment or
amendments thereto became or become effective. "Execution Time" shall mean
the date and time that this Agreement is executed and delivered by the
parties hereto. "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in paragraph (a) above and any preliminary
prospectus included in the Registration Statement at the Effective Date
that omits Rule 430A Information. "Prospectus" shall mean the prospectus
relating to the Securities that is first filed pursuant to Rule 424(b)
after the Execution Time or, if no filing pursuant to Rule 424(b) is
required, shall mean the form of final prospectus relating to the
Securities included in the Registration Statement at the Effective Date.
"Registration Statement" shall mean the registration statement referred to
in paragraph (a) above, including incorporated documents, exhibits and
financial statements, as amended at the Execution Time (or, if not
effective at the Execution Time, in the form in which it shall become
effective) and, in the event any post-effective amendment thereto becomes
effective prior to the Closing Date (as hereinafter defined), shall also
mean such registration statement as so amended. Such term shall
3
<PAGE>
include any Rule 430A Information deemed to be included therein at the
Effective Date as provided by Rule 430A. "Rule 424" and "Rule 430A" refer
to such rules under the Act. "Rule 430A Information" means information with
respect to the Securities and the offering thereof permitted to be omitted
from the Registration Statement when it becomes effective pursuant to Rule
430A. Any reference herein to the Registration Statement, a Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
which were filed under the Exchange Act on or before the Effective Date of
the Registration Statement or the issue date of such Preliminary Prospectus
or the Prospectus, as the case may be; and any reference herein to the
terms "amend", "amendment" or "supplement" with respect to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the filing of any document under the Exchange Act
after the Effective Date of the Registration Statement, or the issue date
of any Preliminary Prospectus or the Prospectus, as the case may be, deemed
to be incorporated therein by reference.
(d) Coopers & Lybrand, whose report on the consolidated balance sheets
and the consolidated statements of operations, cash flows and shareholders'
equity of the Company and its consolidated subsidiaries (the
"Subsidiaries") is being filed with the Commission as part of the
Registration Statement, are independent public accountants with respect to
the Company and its Subsidiaries as required by the Act and the rules
thereunder.
(e) The consolidated financial statements (including the related notes
and schedules) of the Company and its Subsidiaries included or incorporated
in the Registration Statement and the Prospectus comply in all material
respects with the requirements of the Act and the Exchange Act and the
rules thereunder and present fairly the consolidated financial position,
results of operations and changes in cash flows and shareholders' equity of
the Company and its Subsidiaries taken as a whole, in each case as of the
dates and for the periods specified therein. Such consolidated financial
statements (including the related notes and schedules) of the Company and
its Subsidiaries have been prepared in accordance with
4
<PAGE>
generally accepted accounting principles applied on a consistent basis
throughout the periods specified therein except as disclosed in the
Registration Statement and the Prospectus. The financial information and
statistical data set forth in the Prospectus have been prepared on a basis
consistent with such financial statements and fairly present the
information described therein.
(f) Except as set forth in the Registration Statement and the
Prospectus, subsequent to the date of the most recent financial statements
included in the Prospectus, (x) there has not been any material adverse
change in the business, properties, operations, condition (financial or
other) or results of operations of the Company and its Subsidiaries, taken
as a whole, whether or not arising from transactions in the ordinary course
of business, and (y) since such date, neither the Company nor any of its
Subsidiaries has incurred or undertaken any liabilities or obligations,
direct or contingent, that are material to the Company and its
Subsidiaries, taken as a whole, other than liabilities or obligations which
were incurred or undertaken in the ordinary course of business.
(g) This Agreement has been duly authorized, executed and delivered by
the Company.
(h) The authorized and outstanding equity capitalization of the
Company is as set forth in the Prospectus; and the Indenture and the
Securities conform to the descriptions thereof contained in the Prospectus.
(i) The Indenture has been duly authorized by the Company, has been
qualified under the Trust Indenture Act and, when executed and delivered by
the Company, will constitute a valid and binding instrument enforceable
against the Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or equity).
5
<PAGE>
(j) The Securities have been duly authorized by the Company and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered and paid for pursuant to this Agreement, will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms and entitled to the
benefits of the Indenture, except to the extent that enforcement thereof
may be limited by (i) bankruptcy, insolvency, reorganization, fraudulent
conveyance, fraudulent transfer, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or equity).
(k) The Company has full corporate power and authority to execute,
deliver and perform its obligations under each of this Agreement, the
Indenture and the Securities, respectively, and to issue, sell and deliver
the Securities.
(l) Neither the execution, delivery and performance of this Agreement,
the Indenture and the Securities nor the consummation of the transactions
contemplated hereby or thereby, including the issuance, sale and delivery
of the Securities, will (i) conflict with, or result in a breach or
violation of, any of the terms and provisions of, or constitute a default
(or an event which with notice or lapse of time, or both, would constitute
a default) or require consent under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company or any of its Subsidiaries pursuant to the terms of, any
agreement, instrument, franchise, license or permit to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective properties or assets may be bound
or subject, (ii) violate or conflict with any provision of the charter or
by-laws or Partnership Agreement, as the case may be, of the Company or any
of its Subsidiaries or any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or
body having jurisdiction over any of them or any of their respective
properties or assets or (iii) require any consent, approval, authorization,
order, registration, filing, qualification, license or permit
6
<PAGE>
of or with any court or any public, governmental or regulatory agency or
body having jurisdiction over the Company or any of its Subsidiaries or any
of their respective properties or assets, including, without limitation,
the approvals of the New Jersey Casino Control Commission, the Nevada
Gaming Commission, the Nevada State Gaming Control Board, the Clark County
Liquor and Gaming License Board, the Indiana Gaming Commission and the
Missouri Gaming Commission (collectively, the "Gaming Authorities") except
(A) the registration under the Act of the Securities, (B) the qualification
of the Indenture under the Trust Indenture Act and (C) such consents,
approvals, authorizations, orders, registrations, filings, qualifications,
licenses and permits as (i) have already been obtained or (ii) as may be
required under state securities or blue sky laws in connection with the
purchase and distribution of the Securities by you.
(m) (i) None of the Company or any of its Subsidiaries is in violation
of its charter or by-laws or Partnership Agreement, as the case may be
(other than violations that would not, in the aggregate, have a material
adverse effect on the business, properties, operations, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries, taken as a whole), and (ii) except as otherwise set forth in
the Prospectus, none of the Company or any of its Subsidiaries is in breach
or violation of or in default under the terms of any indenture, contract,
lease, mortgage, deed of trust, note agreement or other evidence of
indebtedness or other agreement, obligation, condition, covenant or
instrument to which the Company or any of its Subsidiaries or any of their
respective properties or assets is bound or subject, or any statute, law,
decree, order, rule or regulation applicable to the Company or any of its
Subsidiaries of any court or regulatory, administrative or governmental
agency, body or authority having jurisdiction over the Company or any of
its Subsidiaries or their respective properties or assets (including,
without limitation, the Act and the rules promulgated thereunder), except
in the case of clause (ii) where any such default, breach or violation
would not, in the aggregate, have a materially adverse effect on the
business, properties, operations, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a
whole.
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(n) Each of the Company and its Subsidiaries organized as a
corporation has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction in which it
is chartered or organized. Each of the Company and its Subsidiaries
organized as a corporation is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction
which requires such qualification wherein it owns or leases material
property or conducts material business.
(o) Tropicana Enterprises has been duly formed and is validly existing
as a partnership in good standing under the laws of Nevada. Ambassador
General Partnership ("AGP") has been duly formed and is validly existing as
a general partnership under the laws of the State of New Jersey.
(p) (i) Each of the Company and its Subsidiaries has all requisite
power and authority, and all necessary consents, approvals, authorizations,
orders, registrations, qualifications, licenses and permits of and from all
public, governmental and regulatory agencies and bodies, to own, lease and
operate its properties and conduct its business as now being conducted and
as described in the Prospectus (the "Licenses"); (ii) no such consent,
approval, authorization, order, registration, qualification, license or
permit contains a materially burdensome restriction that is not adequately
disclosed in the Registration Statement and the Prospectus; and (iii) each
of the Company and its Subsidiaries has conducted and is conducting its
business in compliance with the Licenses and all applicable federal, state
and local laws, rules, regulations, decisions, directives and orders,
except in the case of clauses (i) and (iii) where the failure or failures
to do so would not, in the aggregate, have a materially adverse effect on
the business, properties, operations, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a
whole.
(q) The Company has no reason to believe that any of the Gaming
Authorities is considering modifying, suspending or
8
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revoking any of the Licenses, and, to their knowledge, neither the Gaming
Authorities nor any other governmental agency is investigating the Company
or any of its Subsidiaries or related parties or any director or executive
officer of the Company or any of its Subsidiaries other than in the
ordinary course of administrative review. To the best knowledge of the
Company, there is no existing basis for the Gaming Authorities to deny the
renewal of the current Licenses. The Company and its Subsidiaries have
obtained, or at the Closing Date will have obtained, all governmental
licenses and other authorizations necessary to carry on a gaming business
in New Jersey and Nevada, as such business has been conducted by the
Company and its Subsidiaries and will be conducted by the Company and its
Subsidiaries after the Closing Date, as described in the Prospectus.
(r) Except as otherwise set forth in the Prospectus, the Company
currently owns, either directly or through a wholly owned Subsidiary, all
outstanding shares of capital stock of each of its Subsidiaries organized
as a corporation, a non-controlling 50% equity interest in Tropicana
Enterprises and 100% of the equity interest in AGP, in each case free and
clear of any security interests, claims, liens or encumbrances. All
outstanding shares of capital stock of the Company and each of its
Subsidiaries organized as a corporation have been duly and validly
authorized and issued and fully paid and nonassessable. Except as otherwise
set forth in the Prospectus, there are no outstanding rights, warrants or
options to acquire, or instruments convertible into or exchangeable for, or
agreements or understandings with respect to the sale or issuance of, any
shares of capital stock or other equity interest in the Company or any of
its Subsidiaries.
(s) No order preventing or suspending the use of any Preliminary
Prospectus has been issued and no proceedings for that purpose are pending
or, to the best knowledge of the Company, threatened or contemplated by the
Commission; no order suspending the offering of the Securities in any
jurisdiction designated by you pursuant to paragraph (e) of Section 5 of
this Agreement has been issued and no proceedings for that purpose have
been instituted or, to the best knowledge of the Company, are threatened or
contemplated, and
9
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any request of the Commission for additional information (to be included in
the Registration Statement or Prospectus or otherwise) has been complied
with.
(t) Except as otherwise set forth in the Prospectus, (i) the Company
and its Subsidiaries have good and marketable title in fee simple to all
items of real property and are the legal and beneficial owners of all
personal property owned by each of them, in each case free and clear of any
security interests, liens, encumbrances, equities, claims and other
defects, except such as do not have a material adverse effect on the
business, operations, condition (financial or other) or results of the
Company and its Subsidiaries taken a whole, and (ii) the properties of the
Company and its Subsidiaries are in good repair (reasonable wear and tear
excepted), insured in accordance with existing mortgages and customary and
usual practice in the industry and suitable for their respective uses.
(u) There is no legal or governmental proceeding pending or, to the
best knowledge of the Company, threatened or contemplated to which the
Company or any of its Subsidiaries is or may be a party or of which its
business or property is or may be the subject and that is required to be
disclosed in the Registration Statement and the Prospectus and which is not
so disclosed. There is no contract or document concerning the Company or
any of its Subsidiaries of a character required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit to
the Registration Statement which is not so described or filed as required.
The descriptions in the Registration Statement and the Prospectus of any
such legal and governmental proceedings and contracts and other documents,
insofar as such descriptions or statements constitute summaries of the
proceedings or documents referred to therein, fairly present the
information called for with respect to such proceedings or documents.
(v) Subject to the terms of the Agreement dated as of September 1,
1980 by and among Tropicana Enterprises, Eugene Jaffe, Judith Jaffe Seidel,
Lynn Susan Dooley, Ben S. Jaffe, Betty Weiss, Jean Ann Edwards, Ramada
Inc., Hotel Ramada of Nevada and Adamar of New Jersey, Inc., as currently
in effect, the Company and its Subsidiaries own, or are licensed or
10
<PAGE>
otherwise have, the full and exclusive right to use, all trademarks,
service marks, trade names and copyrights used in or necessary for the
conduct of their businesses, and no claims have been asserted by any person
to the use of such trademarks, service marks, trade names or copyrights,
except where the failure to do so would not have a materially adverse
effect on the business, properties, operations, condition (financial or
other) or results of operations of the Company and its Subsidiaries, taken
as a whole. The use, in connection with the business and operations of the
Company and its Subsidiaries, of such trademarks, service marks, trade
names and copyrights does not, to the best knowledge of the Company,
infringe on or conflict with the rights of any person (other than the
rights to use the name "Aztar Corporation" in Arizona), and none of the
Company or any of its Subsidiaries has received any notice of infringement
of or conflict with asserted rights of others with respect to any such
trademarks, service marks, trade names or copyrights (other than the right
to use the name "Aztar Corporation" in Arizona) which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a materially adverse effect on the business, properties,
operations, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries, taken as a whole.
(w) No holders of securities of the Company or any of its Subsidiaries
have rights to the registration of such securities under the Registration
Statement.
(x) None of the Company or any of its Subsidiaries is required to make
any filing or to register under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), or is or will become a "holding
company" or a "subsidiary company" of a "registered holding company", as
defined in the Public Utility Holding Company Act of 1935, as amended.
2. Purchase and Sale. Subject to the terms and conditions and in
reliance upon the representations and warranties herein set forth, the Company
agrees to sell, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of ___% of the principal amount
thereof, plus accrued interest, if any, on the Securities from ___________,
1994,
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<PAGE>
to the Closing Date, the principal amount of the Securities set forth opposite
such Underwriter's name in Schedule I hereto.
3. Delivery and Payment. Delivery of and payment for the Securities
shall be made at 10:00 AM, New York City time, on __________, 1994, or such
later date (not later than ___________, 1994) as you shall designate, which date
and time may be postponed by agreement between you and the Company or as
provided in Section 9 hereof (such date and time of delivery and payment for the
Securities being herein called the "Closing Date"). Delivery of the Securities
shall be made to you for the respective accounts of the several Underwriters
against payment by the several Underwriters through you of the purchase price
thereof to or upon the order of the Company by certified or official bank check
or checks drawn on or by a New York Clearing House bank and payable in next day
funds. Delivery of the Securities shall be made at such location as you shall
reasonably designate at least one business day in advance of the Closing Date
and payment for the Securities shall be made at the office of Cleary, Gottlieb,
Steen and Hamilton, One Liberty Plaza, New York, New York. Certificates for the
Securities shall be registered in such names and in such denominations as you
may request not less than three full business days in advance of the Closing
Date.
The Company agrees to have the Securities available for inspection,
checking and packaging by you in New York, New York, not later than 1:00 PM on
the business day prior to the Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Securities for sale to the public as set forth
in the Prospectus.
5. Agreements. The Company agrees with the several Underwriters
----------
that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment
thereof, to become effective. Prior to the termination of the offering of
the Securities, the Company will not file any amendment of the Registration
Statement or supplement to the Prospectus without your prior consent.
Subject to the foregoing sentence, if the
12
<PAGE>
Registration Statement has become or becomes effective pursuant to Rule
430A, or filing of the Prospectus is otherwise required under Rule 424(b),
the Company will cause the Prospectus, properly completed, and any
supplement thereto to be filed with the Commission pursuant to the
applicable paragraph of Rule 424(b) within the time period prescribed and
will provide evidence satisfactory to you of such timely filing. The
Company will promptly advise you (i) when the Registration Statement, if
not effective at the Execution Time, and any amendment thereto, shall have
become effective, (ii) when the Prospectus, and any supplement thereto,
shall have been filed (if required) with the Commission pursuant to Rule
424(b), (iii) when, prior to termination of the offering of the Securities,
any amendment to the Registration Statement shall have been filed or become
effective, (iv) of any request by the Commission for any amendment of the
Registration Statement or supplement to the Prospectus or for any
additional information, (v) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (vi) of
the receipt by the Company or any of its Subsidiaries of any notification
with respect to the suspension of the qualification of the Securities for
sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose. The Company will use its best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as
possible the withdrawal thereof.
(b) If, at any time when a prospectus relating to the Securities is
required to be delivered under the Act, any event occurs as a result of
which the Prospectus as then supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein in the light of the circumstances under
which they were made not misleading, or if it shall be necessary to amend
the Registration Statement or supplement the Prospectus to comply with the
Act or the Exchange Act or the respective rules thereunder, the Company
promptly will prepare and file with the Commission, subject to the second
sentence of paragraph (a) of this Section 5, an amendment or supplement
which will correct such statement or omission or effect such compliance.
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<PAGE>
(c) As soon as practicable, the Company will make generally available
to their security holders and to you an earnings statement or statements of
the Company and its Subsidiaries which will satisfy the provisions of
Section 11(a) of the Act and Rule 158 under the Act.
(d) The Company will furnish to you and counsel for the Underwriters,
without charge, signed copies of the Registration Statement (including
exhibits thereto) and to each other Underwriter a copy of the Registration
Statement (without exhibits thereto) and, so long as delivery of a
prospectus by an Underwriter or a dealer may be required by the Act, as
many copies of each Preliminary Prospectus and the Prospectus and any
supplement thereto as you may reasonably request. The Company will pay the
expenses of printing or other production of all documents relating to the
offering.
(e) The Company will arrange for the qualification of the Securities
for sale under the laws of such jurisdictions as you may designate, will
maintain such qualifications in effect so long as required for the
distribution of the Securities, will arrange for the determination of the
legality of the Securities for purchase by institutional investors and will
pay the fee of the National Association of Securities Dealers, Inc. in
connection with its review of the offering.
(f) The Company will not, until the first business day following the
Closing Date, without your prior written consent, offer, sell or contract
to sell, or otherwise dispose of, directly or indirectly, or announce the
offering of, any debt securities issued or guaranteed by the Company (other
than the Securities) .
(g) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter 92-
198, An Act Relating to Disclosure of Doing Business with Cuba, and the
Company further agrees that if it commences engaging in business with the
government of Cuba or with any person or affiliate located in Cuba after
the date the Registration Statement becomes or has become effective with
the Commission or with the Florida Department of Banking and Finance (the
"Department"), whichever date is later, or if the information reported in
the Prospectus, if
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<PAGE>
any, concerning the Company's business with Cuba or with any person or
affiliate located in Cuba changes in any material way, the Company will
provide the Department notice of such business or change, as appropriate,
in a form acceptable to the Department, provided that the obligation to
provide such updated information shall terminate when the distribution of
the Securities is completed.
6. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Securities shall be subject to
the accuracy of the representations and warranties on the part of the Company
contained herein as of the Execution Time and the Closing Date, to the accuracy
of the statements of the Company made in any certificates pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions:
(a) If the Registration Statement has not become effective prior to
the Execution Time, unless you agree in writing to a later time, the
Registration Statement will become effective not later than (i) 6:00 PM New
York City time on the date of determination of the public offering price,
if such determination occurred at or prior to 3:00 PM New York City time on
such date or (ii) 12:00 Noon on the business day following the day on which
the public offering price was determined, if such determination occurred
after 3:00 PM New York City time on such date; if filing of the Prospectus,
or any supplement thereto, is required pursuant to Rule 424(b), the
Prospectus, and any such supplement, will be filed in the manner and within
the time period required by Rule 424(b); and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or threatened;
(b) The Company shall have furnished to you the opinion of Latham &
Watkins, counsel for the Company, dated the Closing Date, to the effect
that:
(i) the Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Delaware, with
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus;
15
<PAGE>
the Company is qualified to do business and is in good standing as a
foreign corporation in the States of New Jersey, Nevada, Indiana and
Missouri, and the opinion of such counsel in this paragraph may be
expressed solely upon its review of certificates of public officials
of such jurisdictions and may be in each case as of the date of such
certificates;
(ii) the Company has full corporate power and authority to
execute, deliver and perform its obligations under this Agreement, the
Indenture and the Securities, respectively, and to issue, sell and
deliver the Securities;
(iii) the Company's authorized equity capitalization consists of
100,000,000 shares of Common Stock and 10,000,000 shares of Preferred
Stock; and based solely on a certificate of the transfer agent of the
Company and only as of the date of such certificate, such counsel
shall confirm the number of shares of Common Stock and Preferred Stock
that are outstanding;
(iv) the Securities conform in all material respects to the
description thereof contained in the Prospectus;
(v) the Indenture has been duly authorized, executed and delivered
by the Company and (assuming due authorization, execution and delivery
by the Trustee) is the legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms;
(vi) the Indenture has been duly qualified under the Trust
Indenture Act;
(vii) the sale and the issuance of the Securities have been duly
authorized by all requisite corporate action on the part of the
Company, and the Securities, when executed and duly authenticated in
accordance with the terms of the Indenture and delivered to and paid
for by the Underwriters in accordance with the terms of
16
<PAGE>
this Agreement, will be legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their
terms and entitled to the benefits of the Indenture;
(viii) the Underwriting Agreement has been duly authorized,
executed and delivered by the Company; the issuance and sale of the
Securities by the Company pursuant to the Underwriting Agreement will
not result in the violation by the Company of its Certificate of
Incorporation or By-Laws or any federal or New York statute, rule or
regulation (other than federal or state securities laws, which will be
specifically addressed elsewhere in such opinion) or in the breach of
or a default under the terms of any indenture or other agreement or
instrument filed as an exhibit to the Registration Statement (the
"Material Agreements"), or court and administrative orders, writs,
judgments and decrees applicable to the Company or any of its
Subsidiaries and known to such counsel that are material to the
Company and its Subsidiaries taken as a whole; and no consent,
approval, authorization or order of, or filing with, any federal or
New York court or governmental agency or body is required for the
consummation of the issuance and sale of the Securities by the Company
pursuant to the Underwriting Agreement, except such as have been
obtained under the Act and such as may be required under state
securities laws in connection with the purchase and distribution of
such Securities by the Underwriters and such other approvals as have
been obtained;
(ix) the Registration Statement has become effective under the
Act and, to the best knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued under the Act and no proceedings therefor have been initiated
or threatened by the Commission; and any required filing of the
Prospectus, and any supplements thereto, pursuant to Rule 424(b) under
the Act has been made in accordance with Rule 424(b) and 430A under
the Act;
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<PAGE>
(x) the Registration Statement and the Prospectus (other than the
financial statements, schedules and other financial and statistical
data included in the Registration Statement or the Prospectus or with
respect to the Form T-1 as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements for registration statements on Form S-3 under the Act,
the Trust Indenture Act and the rules and regulations of the
Commission thereunder; and in passing upon the compliance as to form
of the Registration Statement and the Prospectus, such counsel shall
have assumed that the statements made and incorporated by reference
therein are correct and complete;
(xi) to the best knowledge of such counsel, there are no federal
or New York statutes or legal or governmental proceedings required to
be described in the Prospectus that are not described as required, or
contracts or documents of a character required to be described in the
Registration Statement or Prospectus (or required to be filed under
the Exchange Act, if upon such filing they would be incorporated by
reference therein) or to be filed as exhibits to the Registration
Statement that are not described and filed as required; and
(xii) to the best knowledge of such counsel, no holders of
securities of the Company have rights to the registration of such
securities under the Registration Statement.
In addition, such counsel shall state that because the
primary purpose of such counsel's professional engagement was not to
establish or confirm factual matters or financial, accounting or
statistical matters, and because of the wholly or partially non-legal
character of many of the statements contained in the Registration
Statement, the Prospectus and the Form T-1, such counsel are not
passing upon, do not assume any responsibility for and have not
independently verified the accuracy, completeness or fairness of the
financial statements, notes thereto, supporting
18
<PAGE>
schedules and other financial and statistical data included in the
Registration Statement or the Prospectus or with respect to the Form
1, and such counsel have not examined the accounting, financial or
statistical records from which such financial statements, notes,
schedules and data are derived. Such counsel shall note that, while
certain portions of the Registration Statement and the Form T-1
(including financial statements, notes thereto, supporting schedules
and other financial and statistical data) have been included therein
on the authority of "experts" within the meaning of the Act, such
counsel are not such experts with respect to any portion of the
Registration Statement or the Form T-1, including without limitation
such financial statements, notes, schedules or other financial or
statistical data included therein. Subject to the foregoing, such
counsel shall note that they have participated in conferences with
officers and other representatives of the Company, representatives of
the independent public accountants of the Company and representatives
and counsel of the Underwriters, at which conferences the contents of
the Registration Statement and the Prospectus and related matters were
discussed and, although such counsel are not passing upon, and do not
assume any responsibility for, the accuracy, completeness or fairness
of the statements contained in the Registration Statement and the
Prospectus and have not made any independent check or verification
thereof, during the course of such participation (relying as to the
factual matters underlying the determination of materiality to a large
extent upon the statements of officers and other representatives of
the Company), no facts came to such counsel's attention that caused
such counsel to believe that the Registration Statement, at the time
it became effective, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (other than
information omitted therefrom in reliance on Rule 430A under the Act),
or the Prospectus, as of its date or as of the Closing Date, contained
an untrue statement of a material fact or omitted to state a
19
<PAGE>
material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
The opinions rendered in paragraphs (v) and (vii) of such
opinion, relating to the enforceability of the Indenture and the
Securities respectively, shall be subject to the following exceptions,
limitations and qualifications: (i) the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other
similar laws now or hereafter in effect relating to or affecting the
rights and remedies of creditors; (ii) the effect of general
principles of equity, whether enforcement is considered in a
proceeding in equity or law, and the discretion of the court before
which any proceeding therefor may be brought; (iii) the
unenforceability under certain circumstances under law or court
decisions of provisions providing for the indemnification of or
contribution to a party with respect to a liability where such
indemnification or contribution is contrary to public policy; and (iv)
such counsel shall not express any opinion concerning the
enforceability of the waiver of rights or defenses contained in
Section 717 of the Indenture.
To the extent that the obligations of the Company under the
Indenture may be dependent upon such matters, such counsel shall
assume that the Trustee under the Indenture is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization; that the Trustee is duly qualified to engage in the
activities contemplated by the Indenture; that the Indenture shall
have been duly authorized, executed and delivered by the Trustee and
shall constitute a legal, valid and binding obligation of the Trustee
enforceable against the Trustee in accordance with its terms; and the
Trustee is in compliance, generally and with respect to acting as
trustee under the Indenture, with all applicable laws and regulations;
and that the Trustee has the requisite organizational and legal power
and authority to perform its obligations under the Indenture.
20
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The opinions set forth in paragraph (viii) above shall be
based upon such counsel's consideration of only those statutes, rules
and regulations which, in such counsel's experience, are normally
applicable to securities underwriting transactions.
In rendering the opinions expressed in paragraph (viii)
regarding any breach of or default under the Material Agreements, such
counsel shall have relied with your permission on a certificate of a
responsible officer of the Company as to all financial ratios or tests
or other financial, statistical, numerical or accounting quantities or
concepts.
In rendering the opinions expressed in paragraph (viii) insofar
as they require interpretation of the Material Agreements (i) such
counsel shall have assumed with your permission that all courts of
competent jurisdiction would enforce such agreements as written but
would apply the internal laws of the State of New York without giving
effect to any choice of law provisions contained therein or any choice
of law principles which would result in application of the internal
laws of any other state, and (ii) to the extent that any questions of
legality or legal construction have arisen in connection with such
counsel's review, such counsel shall have applied the laws of the
State of New York in resolving such questions and (iii) such counsel
shall express no opinion with respect to the effect of any action or
inaction by the Company under the Material Agreements which may result
in a breach or default under any Material Agreement. Such counsel
shall state that certain of the Material Agreements may be governed by
other laws, that such laws may vary substantially from the law assumed
to govern for purposes of this opinion, and that such opinion may not
be relied upon as to whether or not a breach or default would occur
under the law actually governing such Material Agreements.
Such opinion shall be limited to the federal laws of the United
States, the internal laws of the State of New York and the General
Corporation Law of the State
21
<PAGE>
of Delaware. Such opinion shall take further exceptions that shall be
reasonably acceptable to the Underwriters. As to matters of fact, to
the extent they deem proper, such counsel may rely on certificates of
responsible officers of the Company and public officials. References
to the Prospectus in this paragraph (b) include any supplements
thereto at the Closing Date.
(c) The Company shall have furnished to you the opinion of Hankin,
Sandson & Sandman, special New Jersey counsel for the Company, dated the
Closing Date, to the effect that:
(i) each of Ramada New Jersey Holdings, Inc. ("Holdings"),
Adamar of New Jersey, Inc. ("Adamar of New Jersey"), Atlantic-
Deauville, Inc. ("Atlantic-Deauville") and Adamar Garage Corporation
("Adamar Garage") has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of New
Jersey, with full corporate power and authority to own its properties
and conduct its business as described in the Prospectus;
(ii) AGP has been duly formed and is validly existing as a general
partnership in good standing under the laws of the State of New Jersey
and has full partnership power and authority to own its properties and
conduct its business;
(iii) all outstanding shares of capital stock of Holdings, Adamar
of New Jersey, Atlantic-Deauville and Adamar Garage have been duly and
validly authorized and issued, and are fully paid and nonassessable;
(iv) the statements in the Prospectus under the headings "CREDIT
POLICY AND CONTROL PROCEDURES", "REGULATION -- Regulation and
Licensing -- New Jersey" and "DESCRIPTION OF THE NOTES -- Mandatory
Disposition or Redemption Pursuant to Gaming Laws", insofar as such
statements purport to summarize certain provisions of
22
<PAGE>
the requirements under the New Jersey Casino Control Act and any other
laws of the State of New Jersey, as applicable to the Company,
Holdings, Adamar of New Jersey, Atlantic-Deauville, Adamar Garage
and AGP, provide a fair summary of such provisions and requirements;
(v) neither the issuance and sale of the Securities, nor the
compliance with or fulfillment of the provisions hereof or of the
Indenture by the Company nor the consummation of any other of the
transactions contemplated herein or therein require the consent,
approval, authorization, registration, order or qualification of or
with the New Jersey Casino Control Commission, the New Jersey Division
of Gaming Enforcement or any other New Jersey governmental authority,
except such as have been obtained by __________ and are in full force
and effect, or except as may be required under state securities law,
including New Jersey state securities law, as to which such counsel
need not express any opinion;
(vi) neither the issuance and sale of the Securities, nor the
compliance with or fulfillment of the provisions hereof or of the
Indenture by the Company nor the consummation of the other
transactions contemplated herein or therein would result in a breach
or violation of, or constitute a default under, any law of the State
of New Jersey (except that such counsel need not express any opinion
with respect to any blue sky laws) or the charter, by-laws or
Partnership Agreement or the terms of any indenture or other agreement
or instrument known to such counsel and as to which any of the
Company, Holdings, Adamar of New Jersey, Atlantic-Deauville, Adamar
Garage or AGP is a party or bound, or any judgment, order or decree
known to such counsel to be applicable to any of them of any court,
regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over any of them; and
(vii) such counsel knows of no legal or governmental proceeding
pending to which any of the
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Company, Holdings, Adamar of New Jersey, Atlantic-Deauville, Adamar
Garage or AGP is a party, or threatened against any of them, required
to be disclosed in the Prospectus; provided that for this purpose such
counsel need not regard any legal or governmental proceedings to be
"threatened" unless the potential litigant or governmental authority
has manifested to the management of any of the Company, Holdings,
Adamar of New Jersey, Atlantic-Deauville, Adamar Garage, or AGP or to
such counsel, a present intention to initiate such proceedings.
(d) The Company shall have furnished to you the opinion of Lionel
Sawyer & Collins, special Nevada counsel for the Company, dated the Closing
Date, to the effect that:
(i) each of Adamar of Nevada, Hotel Ramada of Nevada, Inc.
("HRN") and Ramada Express, Inc. ("Ramada Express") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Nevada, with full corporate power to
own its properties and conduct its business as described in the
Prospectus;
(ii) Tropicana Enterprises has been duly formed and is validly
existing as a partnership in good standing under the laws of the State
of Nevada, and has full partnership power and authority to own its
properties and conduct its business as and to the extent described in
the Prospectus;
(iii) all outstanding shares of capital stock of Adamar of Nevada,
HRN and Ramada Express have been duly and validly authorized and
issued, and are fully paid and nonassessable;
(iv) the statements in the Prospectus under the caption "CREDIT
POLICY AND CONTROL PROCEDURES", REGULATION -- Regulation and
Licensing -- Nevada" and "DESCRIPTION OF THE NOTES -- Mandatory
Disposition or Redemption Pursuant to Gaming Laws", insofar as
such statements purport to summarize certain provisions of and
requirements under the Nevada Gaming Control Act
24
<PAGE>
and the Regulations of the Nevada Gaming Commission, as applicable to
the Company, Adamar of Nevada, HRN, Ramada Express and Tropicana
Enterprises, provide a fair summary of such provisions and
requirements;
(v) neither the issuance and sale of the Securities, the
compliance with or fulfillment of the other provisions hereof or of
the Indenture by the Company nor the consummation of the other
transactions contemplated herein or therein require the consent,
approval, authorization, registration, order or qualification of or
with the Nevada Gaming Commission, the Nevada State Gaming Control
Board, the Clark County Liquor and Gaming License Board, or with any
other Nevada governmental authority, except such as have been obtained
by __________ and are in full force and effect, or except as may be
required under state securities law, including Nevada state securities
law, as to which such counsel need not express any opinion;
(vi) neither the issuance and sale of the Securities, the
compliance with or fulfillment of the other provisions hereof or of
the Indenture by the Company nor the consummation of the other
transactions contemplated herein or therein would result in a breach
or violation of, or constitute a default under, any law of the State
of Nevada (except that such counsel need not express any opinion with
respect to any blue sky laws) or the charter, by-laws or Partnership
Agreement or the terms of any indenture or other agreement or
instrument known to such counsel and as to which any of the Company,
Adamar of Nevada, HRN, Ramada Express or Tropicana Enterprises is a
party or bound, or any judgment, order or decree known to such counsel
to be applicable to any of them of any court, regulatory body,
administrative agency, governmental body or arbitrator having
jurisdiction over any of them; and
(vii) such counsel knows of no legal or governmental proceeding
pending to which any of the Company, Adamar of Nevada, HRN, Ramada
Express or Tropicana Enterprises is a party, or threatened against any
of them, required to be disclosed in the
25
<PAGE>
Prospectus; provided that for this purpose such counsel need not
regard any legal or governmental proceedings to be "threatened" unless
the potential litigant or governmental authority has manifested to the
management of any of the Company, Adamar of Nevada, HRN, Ramada
Express or Tropicana Enterprises, or to such counsel, a present
intention to initiate such proceedings.
(e) The Company shall have furnished to you the opinion of McHale,
Cook & Welch, Professional Corporation, special Indiana counsel for the
Company, dated the Closing Date, to the effect that:
(i) Aztar Indiana Gaming Corporation ("Aztar Indiana") has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Indiana, with full corporate
power and authority to own its properties and conduct its business;
(ii) all the outstanding shares of capital stock of Aztar Indiana
have been duly and validly authorized and issued and are fully paid
and nonassessable;
(iii) the statements in the Prospectus under the heading
"REGULATION -- Regulation and Licensing --Indiana" fairly summarize
the matters therein described;
(iv) neither the issuance and sale of the Securities, the
compliance with or fulfillment of the other provisions hereof or of
the Indenture by the Company nor the consummation of the other
transactions contemplated herein or therein require the consent,
approval, authorization, registration, order or qualification of or
with the Indiana Gaming Commission, or with any other Indiana
governmental authority, except such as have been obtained and are in
full force and effect, or except as may be required under state
securities law, including Indiana state securities law, as to which
such counsel need not express any opinion;
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<PAGE>
(v) neither the issuance and sale of the Securities, the
compliance with or fulfillment of the other provisions hereof or of
the Indenture by the Company nor the consummation of the other
transactions contemplated herein or therein would result in a breach
or violation of, or constitute a default under, any law of the State
of Indiana (except that such counsel need not express any opinion with
respect to any blue sky laws) or the charter or by-laws or the terms
of any indenture or other agreement or instrument known to such
counsel and as to which the Company or Aztar Indiana is a party or
bound, or any judgment, order or decree known to such counsel to be
applicable to the Company or Aztar Indiana of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over the Company or Aztar Indiana; and
(vi) such counsel knows of no legal or governmental proceeding
pending to which the Company or Aztar Indiana is a party, or
threatened against either of them, required to be disclosed in the
Prospectus; provided that for this purpose such counsel need not
regard any legal or governmental proceedings to be "threatened" unless
the potential litigant or governmental authority has manifested to the
management of the Company or Aztar Indiana, or to such counsel, a
present intention to initiate such proceedings.
(f) The Company shall have furnished to you the opinion of Thompson &
Mitchell, special Missouri counsel for the Company, dated the Closing Date,
to the effect that:
(i) Aztar Missouri Gaming Corporation ("Aztar Missouri") has
been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it is
chartered or organized, with full corporate power and authority to own
its properties and conduct its business;
(ii) all the outstanding shares of capital stock of Aztar Missouri
have been duly and validly authorized and issued and are fully paid
and nonassessable;
27
<PAGE>
(iii) the statements in the Prospectus under the heading
"REGULATION -- Regulation and Licensing --Missouri" fairly summarize
the matters therein described;
(iv) neither the issuance and sale of the Securities, the
compliance with or fulfillment of the other provisions hereof or of
the Indenture by the Company nor the consummation of the other
transactions contemplated herein or therein require the consent,
approval, authorization, registration, order or qualification of or
with the Missouri Gaming Commission, or with any other Missouri
governmental authority, except such as have been obtained and are in
full force and effect, or except as may be required under state
securities law, including Missouri state securities law, as to which
such counsel need not express any opinion;
(v) neither the issuance and sale of the Securities, the
compliance with or fulfillment of the other provisions hereof or of
the Indenture by the Company nor the consummation of the other
transactions contemplated herein or therein would result in a breach
or violation of, or constitute a default under, any law of the State
of Missouri (except that such counsel need not express any opinion
with respect to any blue sky laws) or the charter or by-laws or the
terms of any indenture or other agreement or instrument known to such
counsel and as to which the Company or Aztar Missouri is a party or
bound, or any judgment, order or decree known to such counsel to be
applicable to the Company or Aztar Missouri of any court, regulatory
body, administrative agency, governmental body or arbitrator having
jurisdiction over the Company or Aztar of Missouri; and
(vi) such counsel knows of no legal or governmental proceeding
pending to which the Company or Aztar Missouri is a party, or
threatened against either of them, required to be disclosed in the
Prospectus; provided that for this purpose such counsel need not
regard any legal or governmental proceedings to be
28
<PAGE>
"threatened" unless the potential litigant or governmental authority
has manifested to the management of the Company or Aztar Missouri, or
to such counsel, a present intention to initiate such proceedings.
(g) You shall have received from Cleary, Gottlieb, Steen & Hamilton,
counsel for the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the issuance and sale of the Securities, the
Indenture, the Registration Statement, the Prospectus (together with any
supplement thereto) and other related matters as you may reasonably
require, and the Company shall have furnished to such counsel such
documents as they request for the purpose of enabling them to pass upon
such matters.
(h) The Company shall have furnished to you a certificate, signed by
the Chief Financial Officer and the Controller of the Company, dated the
Closing Date, to the effect that the signer of such certificate has
carefully examined the Registration Statement, the Prospectus, any
supplement to the Prospectus and this Agreement and that:
(i) the representations and warranties of the Company in this
Agreement are true and correct in all material respects on and as of
the Closing Date with the same effect as if made on the Closing Date
and the Company has complied with all the agreements and satisfied all
the conditions on its part to be performed or satisfied at or prior to
the Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or, to the Company's knowledge,
threatened; and
(iii) since the date of the most recent financial statements
included in the Prospectus (exclusive of any supplement thereto),
there has been no material adverse change in the condition (financial
or other), earnings, business or properties of the Company and its
subsidiaries, taken as a whole, whether or not arising from
transactions in the ordinary course of business,
29
<PAGE>
except as set forth in or contemplated by the Prospectus (exclusive of
any supplement thereto).
(i) At the Execution Time and at the Closing Date, Coopers & Lybrand
shall have furnished to you a letter or letters, dated respectively as of
the Execution Time and as of the Closing Date, in form and substance
satisfactory to you, confirming that they are independent accountants
within the meaning of the Act and the Exchange Act and the respective
applicable published rules and regulations thereunder and stating in effect
that:
(i) in their opinion the audited financial statements and
financial statement schedules included or incorporated in the
Registration Statement and the Prospectus and reported on by them
comply in form in all material respects with the applicable accounting
requirements of the Act and the Exchange Act and the related published
rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the Company and its subsidiaries; their
limited review in accordance with standards established by the
American Institute of Certified Public Accountants of the unaudited
interim financial information included in the Registration Statement;
carrying out certain specified procedures (but not an examination in
accordance with generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect to the
comments set forth in such letter; a reading of the minutes of the
meetings of the stockholders, directors and the audit committee of the
Company and its Subsidiaries; and inquiries of certain officials of
the Company who have responsibility for financial and accounting
matters of the Company and its Subsidiaries as to transactions and
events subsequent to December 30, 1993, nothing came to their
attention which caused them to believe that:
(1) any unaudited financial statements included or
incorporated in the Registration Statement and the Prospectus do
not comply in
30
<PAGE>
form in all material respects with applicable accounting
requirements and with the published rules and regulations of the
Commission with respect to financial statements included or
incorporated in quarterly reports on Form 10-Q under the Exchange
Act; and said unaudited financial statements are not in
conformity with generally accepted accounting principles applied
on a basis substantially consistent with that of the audited
financial statements included or incorporated in the Registration
Statement and the Prospectus; or
(2) with respect to the period subsequent to June 30, 1994,
there were any changes, at a specified date not more than five
business days prior to the date of the letter, in the long-term
debt of the Company and its Subsidiaries or decreases in cash and
cash equivalents in an amount greater than $5 million or in total
assets of the Company and its Subsidiaries or in shareholders'
equity of the Company as compared with the amounts shown on the
June 30, 1994 unaudited consolidated balance sheet included in
the Registration Statement and the Prospectus, or for the period
from July 1, 1994 to such specified date there were any increases
in purchases of property and equipment of the Company and its
Subsidiaries in an amount greater than $5 million as compared
with the amount shown on the consolidated statement of cash flow
included in the Registration Statement and the Prospectus, or for
the period from July 1, 1994 to such specified date there were
any decreases, as compared with the corresponding period in the
preceding year, in casino revenue, total revenues, operating
income, income/(loss) before income taxes and cumulative effects
of accounting changes or net income (loss) of the Company and its
Subsidiaries, except in all instances for changes or decreases
set forth in such letter, in which case the letter shall be
accompanied by an explanation by the Company as to the
significance
31
<PAGE>
thereof unless said explanation is not deemed necessary by the
Representative; and
(iii) they have performed certain other specified procedures as a
result of which they determined that certain information of an
accounting, financial or statistical nature (which is limited to
accounting, financial or statistical information derived from the
general accounting records of the Company and its subsidiaries) set
forth in the Registration Statement and the Prospectus and in Exhibit
12 to the Regis tration Statement, including the information set forth
on the cover page of the Prospectus and under the captions "PROSPECTUS
SUMMARY", "RISK FACTORS", "USE OF PROCEEDS", "SELECTED CONSOLIDATED
FINANCIAL INFOR MATION", "CAPITALIZATION", "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDI TION",
"CERTAIN CONTRACTUAL ARRANGEMENTS", "BUSINESS", "CREDIT POLICY AND
CONTROL PROCEDURES", "MANAGEMENT", "SECURITY OWNERSHIP" and
"DESCRIPTION OF THE NOTES", the information included or incorporated
in Items 1, 2, 6, 7 and 11 of the Company's Annual Report on Form 10-
K, incorporated in the Registration Statement and the Prospectus, and
the information included in the "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included or
incorporated in the Company's Quarterly Reports on Form 10-Q,
incorporated in the Registration Statement and the Prospectus, the
information included or incorpor ated in the Company's Current Report
on Form 8-K of July 9, 1993, incorporated in the Registration State
ment and the Prospectus, agrees with the accounting records of the
Company and its Subsidiaries, excluding any questions of legal
interpretation.
References to the Prospectus in this paragraph include any supplement
thereto at the date of the letter.
(j) Subsequent to the Execution Time or, if earlier, the dates as of
which information is given in the Registration Statement (exclusive of any
amendment thereof) and the Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any change or decrease specified in
the
32
<PAGE>
letter or letters referred to in paragraph (i) of this Section 6 or (ii)
any change, or any development involving a prospective change, in or
affecting the business or properties of the Company and its Subsidiaries,
taken as a whole, the effect of which, in any case referred to in clause
(i) or (ii) above, is, in your judgment, so material and adverse as to make
it impractical or inadvisable to proceed with the public offering or the
delivery of the Securities as contemplated by the Registration Statement
(exclusive of any amendment thereof) and the Prospectus (exclusive of any
supplement thereto).
(k) Subsequent to the Execution Time, there shall not have been any
decrease in the ratings by Moody's Investors Service, Inc. or Standard &
Poor's Corporation of the 13-1/2% First Mortgage Notes Due 1996 of Aztar
Mortgage Funding, Inc., the 11% Senior Subordinated Notes Due 2002 of the
Company or the Securities by any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Act) or any
notice given of any intended or potential decrease in any such rating or of
a possible change in any such rating that does not indicate the direction
of the possible change.
(l) Prior to the Closing Date, the Company shall have furnished to you
such further information, certificates and documents as you may reasonably
request.
If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to you and counsel for the Underwriters, this Agreement and all
obligations of the Underwriters hereunder may be canceled at, or at any time
prior to, the Closing Date by you. Notice of such cancellation shall be given to
the Company in writing or by telephone or telegraph confirmed in writing.
7. Reimbursement of Underwriters' Expenses. If the sale of the
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 6 hereof is not satisfied,
because of any termination
33
<PAGE>
pursuant to Section 9 hereof or because of any refusal, inability or failure on
the part of the Company to perform any agreement herein or comply with any
provision hereof other than by reason of a default by any of the Underwriters,
the Company will reimburse the Underwriters severally upon demand for all out-
of-pocket expenses (including reasonable fees and disbursements of counsel) that
shall have been incurred by them in connection with the proposed purchase and
sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person who controls any Underwriter
within the meaning of either the Act or the Exchange Act against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement for the registration of
the Securities as originally filed or in any amendment thereof, or in any
Preliminary Prospectus or the Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that (i) the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any Underwriter through you specifically for
inclusion therein, and (ii) such indemnity with respect to any Preliminary
Prospectus shall not inure to the benefit of any Underwriter (or any person
controlling such Underwriter) from whom the person asserting any such loss,
claim, damage or liability purchased the Securities which are the subject
thereof if such person did not receive a copy of the Prospectus (or the
Prospectus as supplemented) at or prior
34
<PAGE>
to the confirmation of the sale of such Securities to such person in any case
where such delivery is required by the Act and the untrue statement or omission
of a material fact contained in such Preliminary Prospectus was corrected in the
Prospectus (or the Prospectus as supplemented). This indemnity agreement will
be in addition to any liability which the Company may otherwise have.
(b) Each Underwriter severally agrees to indemnify and hold harmless
and reimburse the Company, each of its directors, each of its officers who signs
the Registration Statement, and each person who controls the Company within the
meaning of either the Act or the Exchange Act, to the same extent as the
foregoing indemnity and reimbursement obligation from the Company to each
Underwriter, but only with reference to written information relating to such
Underwriter furnished to the Company by or on behalf of such Underwriter through
you specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability which
any Underwriter may otherwise have. The Company acknowledges that the
statements set forth in the last paragraph of the cover page, the stabilization
legend on the inside cover page and under the heading "Underwriting" in any
Preliminary Prospectus and the Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in any Preliminary Prospectus or the Prospectus, and you, as the Representative,
confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying
35
<PAGE>
party shall not thereafter be responsible for the fees and expenses of any
separate counsel retained by the indemnified party or parties except as set
forth below); provided, however, that such counsel shall be satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriters agree to
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) (collectively "Losses") to which the Company and one or more of
the Underwriters may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Company and by the Underwriters from the
offering
36
<PAGE>
of the Securities; provided, however, that in no case shall any Underwriter
(except as may be provided in the agreement among underwriters relating to the
offering of the Securities) be responsible for any amount in excess of the
underwriting discount applicable to the Securities purchased by such Underwriter
hereunder. If the allocation provided by the immediately preceding sentence is
unavailable for any reason, the Company and the Underwriters shall contribute in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and of the Underwriters in connection
with the statements or omissions which resulted in such Losses as well as any
other relevant equitable considerations. Benefits received by the Company shall
be deemed to be equal to the total net proceeds from the offering (before
deducting expenses), and benefits received by the Underwriters shall be deemed
to be equal to the total underwriting discounts and commissions, in each case as
set forth on the cover page of the Prospectus. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to information provided by the Company or the Underwriters. The Company
and the Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this Section 8, each person
who controls an Underwriter within the meaning of either the Act or the Exchange
Act and each director, officer, employee and agent of an Underwriter shall have
the same rights to contribution as such Underwriter, and each person who
controls the Company within the meaning of either the Act or the Exchange Act,
each officer of the Company who shall have signed the Registration Statement and
each director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d). Any party entitled to contribution will, promptly after receipt
of notice of commencement of any action, suit or proceeding against such party
in respect of which a claim for contribution may be made against another party
or parties under this paragraph (d), notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or parties
shall not relieve the party or parties from whom
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<PAGE>
contribution may be sought from any other obligation it or they may have under
this paragraph (d).
9. Default by an Underwriter. If any one or more Underwriters shall
fail to purchase and pay for any of the Securities agreed to be purchased by
such Underwriter or Underwriters hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall have the right to purchase all, but
shall not be under any obligation to purchase any, of the Securities, and if
such nondefaulting Underwriters do not purchase all the Securities, this
Agreement will terminate without liability to any nondefaulting Underwriter or
the Company. In the event of a default by any Underwriter as set forth in this
Section 9, the Closing Date shall be postponed for such period, not exceeding
seven days, as you shall determine in order that the required changes in the
Registration Statement and the Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall relieve
any defaulting Underwriter of its liability, if any, to the Company and any
nondefaulting Underwriter for damages occasioned by its default hereunder.
10. Termination. This Agreement shall be subject to termination in
your absolute discretion, by notice given to the Company prior to delivery of
and payment for the Securities, if prior to such time (i) trading in the
Company's Common Stock shall have been suspended by the Commission or the New
York Stock Exchange or trading in securities generally on the New York Stock
Exchange shall have been suspended or limited or minimum prices shall have been
established on such Exchange, (ii) a banking moratorium shall have been declared
either by Federal or New York State authorities or (iii) there shall have
occurred any outbreak or escalation of hostilities, declaration by the United
States of a national emergency or war or other calamity or crisis the effect of
which on financial markets is such as to make it, in your judgment,
impracticable or inadvisable to proceed with the offering or delivery of the
Securities as contemplated by the Prospectus (exclusive of any supplement
thereto).
11. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the
38
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Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or the Company or any of the officers, directors or controlling
persons referred to in Section 8 hereof, and will survive delivery of and
payment for the Securities. The provisions of Sections 7 and 8 hereof shall
survive the termination or cancellation of this Agreement.
12. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to the Underwriters, will be mailed,
delivered or telegraphed and confirmed to them, care of Salomon Brothers Inc, at
Seven World Trade Center, New York, New York, 10048; or, if sent to the Company,
will be mailed, delivered or telegraphed and confirmed to it at 2390 East
Camelback Road, Suite 400, Phoenix, Arizona, 85016, Attention: Chief Financial
Officer.
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons referred to in Section 8 hereof, and no
other person will have any right or obligation hereunder.
14. Applicable Law. This Agreement will be governed by and construed
in accordance with the laws of the State of New York.
39
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company and you.
Very truly yours,
Aztar Corporation
By:______________________________
Robert M. Haddock
Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Brothers Inc
By:___________________________
Vice President
For itself and the other several
Underwriters named in Schedule I
to the foregoing agreement.
40
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
of Securities
Underwriters to be Purchased
- ------------ ----------------
<S> <C>
Salomon Brothers Inc.......................... $
BT Securities Corporation..................... $
CS First Boston Corporation................... $
---------------
Total......................................... $180,000,000.00
===============
</TABLE>
41
<PAGE>
Exhibit 4.5
- --------------------------------------------------------------------------------
AZTAR CORPORATION,
as Issuer,
and
AMERICAN BANK NATIONAL ASSOCIATION
as Trustee
---------------
INDENTURE
Dated as of ________, 1994
---------------
__% Senior Subordinated Notes Due 2004
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<TABLE>
<CAPTION>
<S> <C> <C>
(S) 310(a)(1) ..................... 508
(a)(2) ..................... 508
(a)(3) ..................... Not applicable
(a)(4) ..................... Not applicable
(b) ..................... 508, 509
(S) 311(a) ..................... 512
(b) ..................... 512
(c) ..................... Not applicable
(S) 312(a) ..................... 207
(b) ..................... 108
(c) ..................... 108
(S) 313(a) ..................... 513(a)
(b) ..................... 513(b)
(c) ..................... 513(b)
(d) ..................... 513(c)
(S) 314(a) ..................... 713
(a)(2) ..................... 714
(b)(1) ..................... Not applicable
(b)(2) ..................... Not applicable
(c)(1) ..................... 103
(c)(2) ..................... 103
(c)(3) ..................... 103
- ----------------------------
</TABLE>
Note: This Cross-Reference Table shall not for any purpose be
deemed to be a part of the Indenture.
<PAGE>
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<S> <C> <C>
(d) ..................... Not applicable
(e) .................... 103
(S) 315(a) ..................... 501(a), (d)
(b) ..................... 502
(c) ..................... 501(b)
(d) ..................... 501(c)
(d)(1) ..................... 501(a)
(d)(2) ..................... 501(c)(2)
(d)(3) ..................... 501(c)(3)
(e) ..................... 414
(S) 316(a) ..................... 402, 412, 413
(a)(1)(A)..................... 402, 412
(a)(1)(B)..................... 413
(a)(2) ..................... Not applicable
(b) ..................... 408, 602
(S) 317(a)(1) ..................... 403
(a)(2) ..................... 404
(b) ..................... 703
(S) 318(a) ..................... 109
</TABLE>
- ----------------------------
Note: This Cross-Reference Table shall not for any purpose be
deemed to be a part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
Definitions and Other Provisions of General Application
SECTION 101 Definitions............................. 1
SECTION 102 Incorporation by Reference of TIA....... 27
SECTION 103 Compliance Certificates and Opinions.... 27
SECTION 104 Form of Documents Delivered to
Trustee............................... 28
SECTION 105 Acts of Holders......................... 29
SECTION 106 Notices, etc. to Trustee and the Company 30
SECTION 107 Notice to Holders; Waiver............... 31
SECTION 108 Communication by Holders with Other
Holders............................... 31
SECTION 109 Conflict with TIA....................... 31
SECTION 110 Rules by Trustee and Agents............. 32
SECTION 111 No Recourse Against Others.............. 32
SECTION 112 Execution in Counterparts............... 32
SECTION 113 Effect of Headings and Table
of Contents........................... 32
SECTION 114 No Adverse Interpretation of
Other Agreements...................... 32
SECTION 115 Successors and Assigns.................. 32
SECTION 116 Separability Clause..................... 32
SECTION 117 Benefits of Indenture................... 33
SECTION 118 Governing Law and Choice of Forum....... 33
SECTION 119 Legal Holidays.......................... 33
SECTION 120 Incorporation of Exhibit................ 34
ARTICLE TWO
The Notes
SECTION 201 Form.................................... 34
SECTION 202 Title and Terms......................... 35
SECTION 203 Denominations........................... 35
SECTION 204 Execution, Authentication, Delivery,
and Dating............................ 35
i
<PAGE>
Page
----
SECTION 205 Temporary Notes...................... 36
SECTION 206 Registration, Registration of
Transfer and Exchange.............. 37
SECTION 207 Holder Lists......................... 38
SECTION 208 Mutilated, Destroyed, Lost or
Stolen Notes....................... 38
SECTION 209 Payment of Principal and Interest;
Principal and Interest Rights
Preserved.......................... 39
SECTION 210 Persons Deemed Owners................ 41
SECTION 211 Cancellation......................... 41
SECTION 212 Computation of Interest.............. 41
SECTION 213 CUSIP Number......................... 41
ARTICLE THREE
Satisfaction and Discharge; Defeasance
SECTION 301 Satisfaction and Discharge of
Indenture; Defeasance.............. 42
SECTION 302 Application of Trust Money........... 46
SECTION 303 Repayment to the Company............. 47
SECTION 304 Reinstatement........................ 47
SECTION 305 Indemnity............................ 48
ARTICLE FOUR
Defaults and Remedies
SECTION 401 Events of Default.................... 48
SECTION 402 Acceleration of Maturity; Rescission
and Annulment...................... 50
SECTION 403 Collection Suits by Trustee.......... 52
SECTION 404 Trustee May File Proofs of Claim..... 53
SECTION 405 Trustee May Enforce Claims Without
Possession of Notes................ 54
SECTION 406 Application of Money Collected....... 54
SECTION 407 Limitation on Suits.................. 55
ii
<PAGE>
Page
----
SECTION 408 Unconditional Right of Holders to Receive
Principal and Interest.................... 56
SECTION 409 Restoration of Rights and Remedies.......... 56
SECTION 410 Rights and Remedies Cumulative.............. 56
SECTION 411 Delay or Omission Not Waiver................ 56
SECTION 412 Control by Holders.......................... 56
SECTION 413 Waiver of Past Defaults..................... 57
SECTION 414 Undertaking for Costs....................... 58
ARTICLE FIVE
The Trustee
SECTION 501 Certain Duties and Responsibilities......... 58
SECTION 502 Notice of Defaults.......................... 60
SECTION 503 Certain Rights of Trustee................... 60
SECTION 504 Not Responsible for Recitals or
Issuance of Notes......................... 61
SECTION 505 May Hold Notes.............................. 62
SECTION 506 Money Held in Trust......................... 62
SECTION 507 Compensation and Reimbursement.............. 62
SECTION 508 Eligibility; Disqualification............... 63
SECTION 509 Resignation and Removal; Appointment
of Successor.............................. 63
SECTION 510 Acceptance of Appointment by
Successor................................. 65
SECTION 511 Merger, Conversion, Consolidation or
Succession to Business.................... 66
SECTION 512 Preferential Collection of Claims
Against the Company....................... 66
SECTION 513 Reports by Trustee.......................... 67
ARTICLE SIX
Amendments, Supplements and Waivers
SECTION 601 Without Consent of Holders.................. 68
SECTION 602 With Consent................................ 69
SECTION 603 Compliance with Trust Indenture Act......... 70
iii
<PAGE>
Page
----
SECTION 604 Revocation and Effect of Consents......... 70
SECTION 605 Notation on or Exchange of Notes;
Effect of Supplemental Indenture........ 71
SECTION 606 Trustee Protected......................... 71
ARTICLE SEVEN
Covenants
SECTION 701 Payment of Notes.......................... 71
SECTION 702 Maintenance of Office or Agency........... 72
SECTION 703 Money for Note Payments to be
Held in Trust........................... 72
SECTION 704 Limitation on Restricted Payments......... 74
SECTION 705 Limitation on Indebtedness................ 78
SECTION 706 Limitation on Liens....................... 80
SECTION 707 Limitation on Payment Restrictions
Affecting Restricted Subsidiaries....... 80
SECTION 708 Limitation on Capital Stock of
Restricted Subsidiaries................. 82
SECTION 709 Transactions with Affiliates.............. 82
SECTION 710 Restriction on Incurrence of Certain
Indebtedness............................ 82
SECTION 711 Change of Control......................... 83
SECTION 712 SEC Reports............................... 85
SECTION 713 Compliance Certificates................... 85
SECTION 714 Continued Existence and Rights............ 86
SECTION 715 Maintenance of Properties and
Other Matters........................... 86
SECTION 716 Taxes and Claims.......................... 88
SECTION 717 Waiver of Stay, Extension and Usury Laws.. 88
SECTION 718 Investment Company Act.................... 89
ARTICLE EIGHT
Merger, Consolidation and Sale of Assets
SECTION 801 When Company May Merge, etc............... 89
SECTION 802 Successor Corporation Substituted......... 90
iv
<PAGE>
Page
----
ARTICLE NINE
Redemption
SECTION 901 Notices to Trustee....................... 91
SECTION 902 Selection of Notes to Be Redeemed........ 91
SECTION 903 Notice of Redemption..................... 91
SECTION 904 Effect of Notice of Redemption........... 92
SECTION 905 Deposit of Redemption Price.............. 92
SECTION 906 Notes Redeemed in Part................... 93
SECTION 907 Redemption Pursuant to Gaming
Jurisdiction Law....................... 93
ARTICLE TEN
Subordination
SECTION 1001 Agreement to Subordinate................. 95
SECTION 1002 Liquidation; Dissolution;
Bankruptcy............................. 95
SECTION 1003 Default on Senior Indebtedness........... 97
SECTION 1004 When Distribution Must Be Paid Over...... 98
SECTION 1005 Notice by the Company.................... 98
SECTION 1006 Subrogation.............................. 98
SECTION 1007 Relative Rights.......................... 99
SECTION 1008 Subordination May Not Be Impaired
by the Company......................... 99
SECTION 1009 Distribution or Notice to
Representatives........................ 99
SECTION 1010 Rights of Trustee and Paying Agent....... 99
SECTION 1011 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice........ 100
SECTION 1012 Application by Trustee of Monies
Deposited With It...................... 100
SECTION 1013 Trustee's Compensation Not Prejudiced.... 100
SECTION 1014 Officers' Certificate.................... 101
SECTION 1015 Certain Payments......................... 101
SECTION 1016 Names of Representatives................. 101
SECTION 1017 No Fiduciary Duty Created to Holders
of Senior Indebtedness of the Company.. 101
v
<PAGE>
Page
----
SIGNATURES.................................................. 102
EXHIBIT A - Form of Note.................................... A-1
______________
Note: This Table of Contents shall not for any purpose be deemed
to be a part of the Indenture.
vi
<PAGE>
INDENTURE, dated as of ________, 1994, among AZTAR CORPORATION, a
Delaware corporation (the "Company"), and AMERICAN BANK NATIONAL ASSOCIATION, a
national banking association, as trustee (the "Trustee").
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its __% Senior Subordinated Notes Due
2004 (the "Notes").
All covenants and agreements made by the Company herein are for the
benefit of the Holders of the Notes. All things necessary to make this
Indenture a valid agreement of the Company in accordance with its terms have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions. (a) For all purposes of this Indenture,
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(2) all accounting terms not otherwise defined herein have the
meanings assigned to them from time to time in accordance with generally
accepted accounting principles;
(3) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision and all references to Sections refer to
Sections hereof; and
<PAGE>
(4) "or" is not exclusive.
(b) As used herein, the following terms shall have the following
meanings:
"Accountants' Certificate" means a written opinion or verification
from a nationally recognized firm of independent certified public accountants.
"Act" shall have the meaning provided in Section 105.
"Adamar of Nevada" means Adamar of Nevada, a Nevada corporation.
"Affiliate" means, with respect to any Person, a Person (i) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person, (ii) which
beneficially owns or holds 10% or more of any class of the Voting Stock of such
Person (or a 10% or greater equity interest in a Person which is not a
corporation) or (iii) of which 10% or more of any class of the Voting Stock (or
in the case of a Person which is not a corporation, 10% or more of the equity
interest) is beneficially owned or held by such Person or any Subsidiary of such
Person. The term "control" means the 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.
"Agent" means any Registrar or Paying Agent.
"Asset Sale" means the sale or other disposition (including, without
limitation, dispositions pursuant to Sale and Leaseback Transactions) by the
Company or one of its Subsidiaries to any Person other than the Company or one
of its Subsidiaries of (i) any of the Capital Stock of any of the Subsidiaries
of the Company or (ii) any other assets of the Company or any assets of its
Subsidiaries outside the ordinary course of business of the Company or such
Subsidiary.
"Authorized Officer" means, with respect to any Person, the chief
executive officer, president, chief financial officer or treasurer of such
Person.
2
<PAGE>
"Average Life" means, as of the date of determination, with respect to
any debt security, the quotient obtained by dividing (i) the sum of the products
of (x) the numbers of years from the date of determination to the dates of each
successive scheduled principal payment of such debt security multiplied by (y)
the amount of such principal payment by (ii) the sum of all such principal
payments.
"Bankruptcy Law" shall have the meaning provided in Section 401(5).
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any authorized committee of such board.
"Business Day" means a day, other than a Saturday or a Sunday, on
which banks in New York City and the City of Los Angeles are open for business
and not required or authorized to close and, with respect to any place of
payment other than New York City, a day, other than a Saturday or a Sunday, on
which banks in New York City and in the place of such payment are open for
business and not required or authorized to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of capital
stock of such Person and any rights (other than debt securities convertible into
capital stock), warrants or options to acquire such capital stock.
"Capitalized Lease Obligation" means, with respect to any Person, the
obligation of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real or personal Property, which
obligation is required to be classified and accounted for as a capital lease
obligation on a balance sheet of such Person under generally accepted accounting
principles. For purposes of this Indenture, the amount of such obligation at
any date shall be the outstanding amount thereof at such date, determined in
accordance with generally accepted accounting principles.
"Change of Control" means any one or more of the following:
3
<PAGE>
(A) the Company shall consolidate with or merge into any other corporation
or any other corporation shall consolidate with or merge into the Company (in
either case, other than a consolidation or merger with a Wholly Owned Subsidiary
in which all of the Voting Stock of the Company outstanding immediately prior to
the effectiveness thereof is changed into or exchanged for substantially the
same consideration), in either case pursuant to a transaction in which
substantially all of the Voting Stock of the Company outstanding immediately
prior to the effectiveness thereof is changed into or exchanged for cash,
securities (other than Voting Stock of the Company) or other property; provided,
however, that the term "Change of Control" shall not include any such
consolidation or merger if, with respect to such consolidation or merger, (x)
substantially all of the Voting Stock of the Company outstanding immediately
prior to the effectiveness thereof is changed into or exchanged for Voting Stock
of the surviving corporation or the ultimate parent of the surviving corporation
(the "Merger Common Stock"), (y) the Merger Common Stock, immediately following
the effectiveness thereof, is listed for trading on the New York Stock Exchange
or the American Stock Exchange or is quoted on the National Association of
Securities Dealers Automated Quotation System and is designated as a "national
market system security" and (z) immediately after the effectiveness
thereof, the Persons who were holders of Voting Stock of the Company immediately
prior to the effectiveness thereof (excluding Persons who immediately prior to
the effectiveness thereof were Affiliates of the corporation consolidated or
merged with the Company in such consolidation or merger (other than Persons who
were such Affiliates solely as a result of the ownership by the Company of
Capital Stock in such consolidated or merged corporation)) hold in the aggregate
more than 50% of the then outstanding Voting Stock of the surviving corporation
(or the ultimate parent of the surviving corporation);
(B) the Company shall convey, transfer or lease all or substantially all
its assets to any Person or Persons (other than to a Wholly Owned Subsidiary);
provided, however, that the term "Change of Control" shall not include any such
conveyance, transfer or lease of assets (1) pursuant to a
4
<PAGE>
Sale and Leaseback Transaction or (2) if immediately after the
effectiveness thereof, the Persons who were holders of Voting Stock of the
Company immediately prior to the effectiveness thereof (excluding Persons
who immediately prior to the effectiveness thereof were Affiliates of the
transferee of such assets (other than Persons who were such Affiliates
solely as a result of the ownership by the Company of Capital Stock in such
transferee)) hold in the aggregate more than 50% of the then outstanding
common stock of such transferee; or
(C) any Person (other than the Company) or group shall acquire,
directly or indirectly, beneficial ownership, in the aggregate, of 50% or
more of the outstanding shares of Voting Stock of the Company or securities
representing 50% or more of the combined Voting Power of the Company's
Voting Stock (the "Controlling Securities"), in either case, outstanding on
the date immediately prior to the date of the last such acquisition by such
Person or group; provided, however, that the term "Change of Control" shall
not include any such acquisition that results in the Company ESOP and
members of management of the Company who have been employed in a management
capacity with the Company for at least eighteen months owning 50% or more
of the Voting Stock of the Company or 50% or more of the Controlling
Securities.
"Change of Control Offer" shall have the meaning provided in Section
711(a).
"Change of Control Payment Date" shall have the meaning provided in
Section 711(b)(2).
"Company" means Aztar Corporation unless and until a successor
replaces it in accordance with the terms of this Indenture and thereafter means
such successor.
"Company ESOP" means the employee stock ownership plan adopted by the
Company.
"Company Request" or "Company Order" means a written request or order,
respectively, signed in the name of the Company by an Authorized Officer and
delivered to the Trustee.
5
<PAGE>
"Consolidated Amortization Expense" means, for any period,
amortization expense of the Company and its Restricted Subsidiaries, on a
consolidated basis, for such period (including, without limitation, any
amortization or write-offs of deferred financing costs by the Company and its
Restricted Subsidiaries during such period).
"Consolidated Depreciation Expense" means, for any period,
depreciation expense of the Company and its Restricted Subsidiaries, on a
consolidated basis, for such period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any
Transaction Date, the ratio of (i) Consolidated Operating Cash Flow for the four
consecutive fiscal quarters for which financial information in respect thereof
is available immediately prior to such Transaction Date to (ii) Consolidated
Fixed Charges which will accrue during the then current fiscal quarter in which
such Transaction Date occurs (beginning on the first day of such quarter) and
the three fiscal quarters immediately subsequent to the end of such current
fiscal quarter, provided that, for the purpose of calculating Consolidated Fixed
Charges for the period described in this clause (ii), (A) the interest rate on
any Indebtedness bearing interest at a rate that is adjustable based on market
rate levels shall be calculated based on the assumption that the applicable
market rate level in effect on the Transaction Date shall remain constant
throughout such period at the market rate level in effect on the Transaction
Date, (B) adjustments that are reasonably anticipated to occur during such
period to Consolidated Fixed Charges shall be included in such calculation
(including such adjustments that result from the scheduled maturity of
Indebtedness of the Company and its Restricted Subsidiaries) and (C)
Indebtedness shall be included in such calculation that is reasonably
anticipated to be created, incurred, assumed or guaranteed by, or to otherwise
become the obligation of, the Company or any Restricted Subsidiary; provided,
however, that, for purposes of calculating the Consolidated Fixed Charge
Coverage Ratio, Consolidated Operating Cash Flow and Consolidated Fixed Charges
shall (x) include the consolidated operating cash flow and consolidated fixed
charges of any Person to be acquired by the Company or any of its Restricted
Subsidiaries as a Restricted Subsidiary in connection with the transaction
giving rise to the need to calculate the Consolidated Fixed Charge Coverage
Ratio, (y) include the
6
<PAGE>
consolidated operating cash flow and consolidated fixed charges of any other
Person acquired during the period described in clause (i) above by the Company
or by any of its Restricted Subsidiaries as a Restricted Subsidiary and (z)
exclude the consolidated operating cash flow of any Person directly attributable
to the Property of such Person that was the subject of an Asset Sale, on a pro
forma basis for the four consecutive fiscal quarters for which financial
information in respect thereof is available immediately prior to such
Transaction Date, in the case of calculating Consolidated Operating Cash Flow,
and for the then current fiscal quarter in which such Transaction Date occurs
and the three fiscal quarters immediately subsequent to the end of such fiscal
quarter (on the same basis as described in clause (ii) above), in the case of
calculating Consolidated Fixed Charges. For purposes of the foregoing proviso,
the consolidated operating cash flow and consolidated fixed charges of any such
Person shall be determined on the same basis as such items are determined for
the Company. For purposes of each pro forma determination of the Consolidated
Fixed Charge Coverage Ratio in connection with Section 705(a), the proposed new
Indebtedness shall be deemed to be incurred on the first day of the fiscal
quarter in which the relevant Transaction Date occurs.
"Consolidated Fixed Charges" means, for any period, the sum of
Consolidated Interest Expense plus the Tropicana Payments.
"Consolidated Income Tax Expense" means, for any period, the income
tax expense of the Company and its Restricted Subsidiaries, on a consolidated
basis, for such period (other than income tax expense attributable to Asset
Sales).
"Consolidated Interest Expense" means, for any period, without
duplication, (A) the sum of (i) the aggregate amount of interest recognized by
the Company and its Restricted Subsidiaries during such period in respect of
Indebtedness of the Company and its Restricted Subsidiaries (including, without
limitation, all interest capitalized by the Company and its Restricted
Subsidiaries during such period and all commissions, discounts and other fees
and charges owed by the Company and its Restricted Subsidiaries with respect to
letters of credit and bankers' acceptance financing and the net costs associated
with Interest Swap Obligations of the Company and its Restricted Subsidiaries),
(ii) the aggregate amount of the interest
7
<PAGE>
component of rentals in respect of Capitalized Lease Obligations recognized by
the Company and its Restricted Subsidiaries during such period, (iii) to the
extent any Indebtedness of any Person is guaranteed by the Company or any of its
Restricted Subsidiaries, the aggregate amount of interest paid or accrued by
such Person during such period attributable to any such Indebtedness, (iv) one-
third of the rent expense incurred under noncancelable operating leases
(excluding the Tropicana Lease) during such period and (v) the aggregate amount
of Redeemable Dividends recognized by the Company and its Restricted
Subsidiaries, whether or not declared during such period, less (B) any
amortization or write-off of deferred financing costs by the Company and its
Restricted Subsidiaries during such period; in each case after elimination of
intercompany accounts among the Company and its Restricted Subsidiaries and as
determined in accordance with generally accepted accounting principles.
"Consolidated Interest Income" means, for any period, interest income
from all sources of the Company and its Restricted Subsidiaries, on a
consolidated basis, for such period.
"Consolidated Net Income" means, for any period, the aggregate net
income of the Company and its Subsidiaries for such period on a consolidated
basis, determined in accordance with generally accepted accounting principles,
provided that there shall be excluded therefrom (i) gains and losses from Asset
Sales or reserves relating thereto, (ii) items classified as extraordinary or
nonrecurring, (iii) the income (or loss) of any Unrestricted Subsidiary or Joint
Venture, except to the extent that the aggregate amount of cash dividends or
other distributions actually paid during such period to the Company or any
Restricted Subsidiary by such Unrestricted Subsidiary or Joint Venture in
respect of its Capital Stock out of funds legally available therefor exceeds the
aggregate amount of new Investments in such Unrestricted Subsidiary or Joint
Venture by the Company or any Restricted Subsidiary during such period, (iv)
except to the extent includable pursuant to clause (iii), the income (or loss)
of any Person accrued or attributable to any period prior to the date it becomes
a Restricted Subsidiary or is merged into or consolidated with the Company or
any of its Restricted Subsidiaries or that Person's assets (or a portion
thereof) are acquired by the Company or any of its Restricted
8
<PAGE>
Subsidiaries and (v) the income of any Restricted Subsidiary to the extent that
such Restricted Subsidiary is prevented by any Legal Requirement from paying
such income to the Company or another Restricted Subsidiary. Notwithstanding the
foregoing, Consolidated Net Income as used in Section 704 shall include gains
(or losses) on the sale by the Company or a Restricted Subsidiary of an
Unrestricted Subsidiary.
"Consolidated Net Rent" means, for any period, without duplication, an
amount equal to the total of: (A) the rent expense, net of intercompany rent,
incurred by HRN pursuant to the Tropicana Lease plus (B) two-thirds of the rent
expense incurred under other noncancelable operating leases.
"Consolidated Net Worth" means, as of any date, with respect to any
Person, the sum of the Capital Stock and additional paid-in capital plus
retained earnings (or minus accumulated deficit) of such Person and its
Subsidiaries on a consolidated basis at such date, each item determined in
accordance with generally accepted accounting principles, less amounts
attributable to Redeemable Stock of such Person and its Subsidiaries.
"Consolidated Operating Cash Flow" means, for any period, without
duplication, Consolidated Net Income plus (i) Consolidated Interest Expense plus
(ii) Consolidated Income Tax Expense plus (iii) Consolidated Depreciation
Expense plus (iv) Consolidated Amortization Expense plus (v) Consolidated Net
Rent plus (vi) equity in unconsolidated partnerships' losses minus (vii)
Consolidated Interest Income plus (viii) other non-cash items reducing such
Consolidated Net Income, minus (ix) other non-cash items increasing such
Consolidated Net Income, for such period, all as determined in accordance with
generally accepted accounting principles.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be administered, which
office as of the date hereof is located at Corporate Trust Division, 101 E.
Fifth Street, Saint Paul, Minnesota 55101; provided, however, that for the
purposes of presentation of Notes for payment, transfer or exchange, such term
shall mean the office of the Trustee at which it conducts its corporate agency
business, which office as of the
9
<PAGE>
date hereof shall be 701 S. Western Avenue, Glendale, California 91201.
"corporation" means any corporation and any voluntary association,
joint stock company, business trust or similar organization.
"Credit Facility" means any agreement between the Company and/or any
of its Restricted Subsidiaries and one or more banks or other financial
institutions providing for the making of term loans or loans on a revolving
basis (including, in either case, construction loans and lines of credit), the
issuance of letters of credit and the creation of bankers' acceptances, as any
such agreement may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified, including any agreement extending the
maturity, refinancing or restructuring of all or any portion of the Indebtedness
and other obligations under such agreement or any successor agreement.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement, option or futures contract or other
similar agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in currency values.
"Custodian" shall have the meaning provided in Section 401(5)(iii).
"Default" means any event or condition which is, or after giving of
notice or passage of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning provided in Section 209.
"Designated Senior Indebtedness" means each issue of Senior
Indebtedness that (i) has an outstanding principal amount of not less than
$25,000,000 and (ii) has been designated as Designated Senior Indebtedness
pursuant to an Officers' Certificate of the Company received by the Trustee.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire Indebtedness represented by,
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and obligations under, the Notes and to have satisfied all the obligations under
this Indenture relating to the Notes (and the Trustee, at the request and the
expense of the Company, shall execute proper instruments acknowledging the same)
except (a) the rights of the Holders to receive, from the trust fund described
in Section 301(c), payment of the principal of and the interest on such Notes
when such payments are due, (b) the Company's obligations with respect to the
Notes under Sections 206, 207, 208, 302, 509, 510 and 703 so long as any of the
Notes are Outstanding and (c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder; provided, however, that notwithstanding the foregoing,
the obligations of the Company under Sections 303, 304, 305 and 507, together
with the definitions in Article One necessary for the interpretation of such
Sections, shall survive.
"DTC" shall have the meaning provided in Section 711.
"Effective Date" means ________, 1994.
"Event of Default" shall have the meaning provided in Section 401.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Gaming Authority" means the United States federal government or any
state, county, municipality or other political subdivision or any agency or
other governmental authority thereof that now or hereafter has jurisdiction over
all or any portion of the gaming activities of the Company or any of its
Subsidiaries.
"Gaming Jurisdiction Law" means any law, statute, ordinance, code,
regulation, constitutional provision, rule, order, directive or other
enforcement requirement now or hereafter in existence of any Gaming Authority.
"Gaming License" means any license, franchise or other authorization
on the date of this Indenture or thereafter required to own, lease, operate or
otherwise conduct the gaming business of the Company, including, without
limitation, all licenses granted under the New Jersey Act, the Nevada Act, the
regulations of the New Jersey Commission, the New Jersey
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Division, the Nevada Commission and the Nevada Control Board and other Legal
Requirements.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
any governmental or quasi-government unit, whether federal, state, county,
district, city or other political subdivision or otherwise and whether now or
hereafter in existence, or any officer or official of any thereof, including,
without limitation, the New Jersey Commission, the New Jersey Division, the
Nevada Commission, the Nevada Control Board and the Clark County (Nevada) Liquor
and Gaming License Board.
"guarantee" means any direct or indirect obligation, contingent or
otherwise, of a Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person in any manner.
"Holder" means the Person in whose name a Note is registered in the
Register.
"Holdings" means Ramada New Jersey Holdings, a Delaware corporation.
"HRN" means Hotel Ramada of Nevada, a Nevada corporation.
"Indebtedness" means, with respect to any Person, without duplication,
(a) any obligation, contingent or otherwise, for 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) any obligation evidenced by bonds, debentures, notes
or other similar instruments, (c) any obligation owed for all or any part of the
purchase price of Property, other assets or services or for the cost of Property
or other assets constructed or of improvements thereto (including any obligation
under or in connection with any letter of credit related thereto), other than
accounts payable included in current liabilities and incurred in respect of
Property or services purchased in the ordinary course of business, (d) any
obligation of such Person under or in connection with any letter of credit
issued for the account of such Person and all drafts drawn or demands for
payment honored thereunder, (e) any obligation under
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conditional sale or other title retention agreements relating to purchased
Property, (f) any obligation issued or assumed as the deferred purchase price of
Property (other than accounts payable incurred in the ordinary course of
business), (g) any obligation, contingent or otherwise, as set forth in
subclauses (a), (b) and (c) of this definition, of any other Person secured by
any Lien in respect of Property of such Person even though such Person has not
assumed or become liable for payment of such obligation, (h) any Capitalized
Lease Obligation or any other obligation pursuant to any Sale and Leaseback
Transaction, (i) any note payable or draft accepted representing an extension of
credit (other than extensions of credit for Property and services purchased in
the ordinary course of business), whether or not representing an obligation for
borrowed money, (j) the maximum fixed repurchase price of any Redeemable Stock,
(k) obligations in respect of Interest Swap Obligations and Currency Agreements
and (1) any obligation which is a guarantee with respect to Indebtedness (of a
kind otherwise described in this definition) of another Person. For purposes of
the preceding sentence, the maximum fixed repurchase price of any Redeemable
Stock which does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Redeemable Stock as if such Redeemable Stock
were repurchased on any date on which Indebtedness shall be required to be
determined pursuant to this Indenture; provided, however, that if such
Redeemable Stock is not then permitted to be repurchased, the repurchase price
shall be the book value of such Redeemable Stock. The amount of Indebtedness of
any Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above, the maximum liability of such
contingent obligations at such date and, in the case of clause (g), the lesser
of the fair market value at such date of any asset subject to a Lien securing
the Indebtedness of others and the amount of the Indebtedness secured.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Independent" means a Person who (1) is in fact independent, (2) does
not have any direct financial interest or any material indirect financial
interest in the Company or in any other obligor upon the Notes or in any
Affiliate of the Company or of such other obligor and (3) is not connected with
the Company or such other obligor as an officer, employee, promoter,
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underwriter, trustee, partner, director or person performing similar functions.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Notes.
"Interest Swap Obligations" means the obligations of any Person
pursuant to any interest rate swap agreement, interest rate collar agreement or
other similar agreement or arrangement designed to protect such Person or any of
its Subsidiaries against fluctuations in interest rates.
"Investment" means, with respect to any Person (such Person being
referred to in this definition as the "Investor'), any amount paid by the
Investor, directly or indirectly, or any transfer of Property, directly or
indirectly (such amount to be the fair market value of such Property at the time
of transfer as determined in good faith by the Board of Directors of the
Investor, whose determination shall be conclusive) by the Investor to any other
Person (i) for Capital Stock of, or other equity interest in, or as a capital
contribution to, such other Person or (ii) as a direct or indirect loan or
advance to such other Person (other than accounts receivable of the Investor
arising in the ordinary course of business).
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"Jaffe Partnership Interest" means the general partnership interest in
Tropicana Enterprises held by members of the Jaffe family pursuant to the
Amended and Restated Partnership Agreement dated as of November 19, 1984 between
the Jaffe family and Adamar of Nevada, as amended.
"Joint Venture" means any Person (other than a Subsidiary of the
Company) in which any Person other than the Company or any of its Subsidiaries
has a joint or shared equity interest with the Company or any of its
Subsidiaries.
"Legal Holiday" means any day that is not a Business Day.
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"Legal Requirements" means all laws, statutes and ordinances
(including building codes and zoning and environmental laws, regulations and
ordinances) and all rules, orders, rulings, regulations, directives, decrees,
injunctions and requirements of all Governmental Authorities, that are now or
may hereafter be in existence, and that may be applicable to the Company or any
Subsidiary or Affiliate thereof, or the Trustee (including, without limitation,
the New Jersey Act, the Nevada Act and the regulations and supervisory
procedures of the New Jersey Division, the New Jersey Commission, the Nevada
Commission, the Nevada Control Board and the Clark County (Nevada) Liquor and
Gaming License Board, as modified by any variances, special use permits,
waivers, exceptions or other exemptions which may from time to time be
applicable).
"Lien" means any mortgage, pledge, lien, charge, deed of trust,
security interest, conditional sale or other title retention agreement or any
other similar encumbrance (including any agreement to give any security
interest).
"Nevada Act" means the Nevada Gaming Control Act, Nev. Rev. Stat. Ann.
(S)(S) 463.010, et seq., as amended from time to time, or any successor
provision of law.
"Nevada Commission" means the Nevada Gaming Commission or any
successor agency appointed pursuant to the Nevada Act.
"Nevada Control Board" means the Nevada State Gaming Control Board or
any successor agency appointed pursuant to the Nevada Act.
"New Jersey Act" means the New Jersey Casino Control Act, N.J. Stat.
Ann. 5:12-1 et seq., (New Jersey Public Law 1977, L. 110) as amended from time
to time, or any successor provision of law.
"New Jersey Commission" means the New Jersey Casino Control Commission
or any successor agency appointed pursuant to the New Jersey Act.
"New Jersey Division" means the Division of Gaming Enforcement of the
New Jersey Department of Law and Public Safety or any successor division or
agency.
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"Notes" means the notes, as amended or supplemented from time to time,
that are issued under this Indenture.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by an Authorized Officer (other than the treasurer) and by
the treasurer, an assistant treasurer, the secretary or an assistant secretary
of such Person.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Outstanding" means, with respect to the Notes, as of the date of
determination, all Notes theretofore authenticated and delivered under this
Indenture, except:
(i) the Notes theretofore cancelled by the Trustee or delivered to
the Corporate Trust Office of the Trustee for cancellation;
(ii) the Notes for whose payment or redemption money in the necessary
amount has been theretofore deposited (other than pursuant to Article III)
with the Trustee or any Paying Agent (other than the Company or an
Affiliate thereof), provided that, if such Notes are to be redeemed,
notice of such redemption has been duly given pursuant to this Indenture
or provision therefor satisfactory to the Trustee has been made; and
(iii) the Notes in exchange for or in lieu of which other Notes have
been authenticated and delivered pursuant to this Indenture except for
the Notes replaced pursuant to Section 208 if the Trustee has received
proof satisfactory to it that the replaced Note is held by a bona fide
purchaser;
provided, however, that solely for the purpose of determining whether the
Holders of the requisite principal amount of Outstanding Notes have given any
request, demand, authorization, direction, notice, consent or waiver hereunder,
Notes held of record or beneficially owned by the Company or any other obligor
upon the Notes or any Affiliate of the Company or such other obligor shall be
disregarded and deemed not to be Outstanding,
16
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except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent or
waiver, only Notes which the Trustee knows to be so held or owned shall be so
disregarded. Notes so held or owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Company or any other obligor upon the Notes or any Affiliate
of the Company or such other obligor.
"Paying Agent" means any Person authorized by the Company pursuant to
Section 702 to pay the principal of or interest on any Notes on behalf of the
Company. The Trustee shall be the Paying Agent until a successor replaces it.
"Payment Blockage Period" shall have the meaning provided in Section
1003.
"Permitted Liens" means, with respect to any Person, (i) Liens for
taxes, assessments, governmental charges or claims which are not yet due and
payable or are being contested in good faith by such Person by appropriate
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in accordance with
generally accepted accounting principles shall have been made by such Person;
(ii) statutory Liens of landlords and carriers, warehousemen, mechanics,
suppliers, materialmen, repairmen, or other like Liens arising in the ordinary
course of business and with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which a reserve or other appropriate provision, if
any, as shall be required in accordance with generally accepted accounting
principles shall have been made by such Person; (iii) Liens incurred or deposits
made by such Person in the ordinary course of business in connection with
worker's compensation, unemployment insurance, medical insurance and other types
of social security and deposits made by such Person in the ordinary course of
business in connection with other kinds of insurance; (iv) Liens incurred or
deposits made by such Person to secure the performance of tenders, bids, leases,
statutory obligations, surety and appeal bonds, government contracts,
performance and return-of-money
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bonds and other obligations of a like nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (v)
easements, rights-of-way, restrictions, minor defects or irregularities in title
and other similar charges or encumbrances not interfering in any material
respect with the business of such Person or any of its Subsidiaries incurred in
the ordinary course of business; (vi) Liens (including extensions and renewals
thereof) upon real or tangible personal property acquired by such Person after
the date of this Indenture; provided that (a) any such Lien is created solely
for the purpose of securing Indebtedness representing, or incurred to finance,
refinance or refund, all costs (including the cost of construction) of the item
of Property subject thereto, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such cost, (c) such Lien does not
extend to or cover any other Property other than such item of Property and any
improvements on such item and (d) the incurrence of such Indebtedness is
permitted by Section 705; (vii) Liens upon specific items of inventory or other
goods and proceeds of such Person securing such Person's obligations in respect
of bankers' acceptances issued or created for the account of such Person in the
ordinary course of business to facilitate the purchase, shipment or storage of
such inventory or other goods; (viii) Liens securing reimbursement obligations
with respect to commercial letters of credit issued for the account of such
Person which encumber documents and other Property relating to such commercial
letters of credit and the products and proceeds thereof; (ix) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods by such Person; (x)
licenses, leases or subleases granted to others not interfering in any material
adverse respect with the business of such Person or any of its Subsidiaries;
(xi) Liens encumbering Property or assets of such Person under construction
arising from progress or partial payments by a customer of such Person or one of
its Subsidiaries relating to such Property or assets; (xii) Liens encumbering
customary initial deposits and margin accounts, and other Liens incurred in the
ordinary course of business and which are within the general parameters
customary in the gaming industry, in each case securing Interest Swap
Obligations or Currency Agreements; (xiii) Liens encumbering deposits made to
secure obligations arising from statutory or regulatory requirements of such
Person or its Subsidiaries; (xiv) any
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<PAGE>
interest or title of a lessor in the Property subject to any Capitalized Lease
obligation or operating lease which, in each case, is permitted under this
Indenture; (xv) Liens securing obligations to the Trustee pursuant to the
compensation and indemnity provisions of this Indenture; (xvi) purchase money
liens securing payables arising from the purchase by such Person or any of its
Subsidiaries of any equipment or goods in the ordinary course of business,
provided that such payables do not constitute Indebtedness; (xvii) Liens arising
out of consignment or similar arrangements for the sale of goods entered into by
such Person or any of its Subsidiaries in the ordinary course of business;
(xviii) Liens for judgments or orders not giving rise to a Default or Event of
Default; and (xix) Liens not specified in the foregoing and not otherwise
permitted by Section 706, provided that the aggregate Indebtedness secured by
the Liens under this clause (xix) shall not exceed $5,000,000 at any time.
"Person" means any individual, partnership, corporation, venture,
joint venture, unincorporated organization, association, joint-stock company,
trust or Governmental Authority.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note. For the purposes of this definition, any Note
authenticated and delivered under Section 208 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.
"Preferred Share Purchase Rights" shall have the meaning given to the
term "Rights" in the Rights Agreement dated as of December 20, 1989 between the
Company and First Interstate Bank of Arizona, N.A.
"Principal" means, with respect to any debt security (including any
Note), the principal of such debt security plus the premium, if any, on such
debt security.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
19
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"Qualified Capital Stock" means Capital Stock not constituting
Redeemable Stock.
"Ramada" means Ramada Inc., a Delaware corporation.
"Redeemable Dividend" means, for any dividend payable with respect to
Redeemable Stock, (i) to the extent such dividend is fully deductible for
federal income tax purposes, the amount of such dividend and (ii) to the extent
such dividend may not be deductible, the quotient of the amount of such dividend
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Redeemable Stock.
"Redeemable Stock" means, with respect to any Person, any equity
security issued by such Person that by its terms or otherwise is required to be
redeemed (other than a security that is required to be redeemed only in the
event that a holder of such security fails to qualify or to be found suitable or
otherwise eligible under a Gaming Jurisdiction Law to remain as a holder of such
security) or is redeemable at the option of the holder of such security at any
time prior to the maturity of the Notes.
"Redemption Date" means, with respect to any Note to be redeemed, the
date fixed for such redemption pursuant to the terms of this Indenture and the
Notes.
"Redemption Price" means, with respect to any Note to be redeemed, the
price fixed for such redemption pursuant to the terms of this Indenture and the
Notes.
"Register" shall have the meaning provided in Section 206.
"Registrar" shall have the meaning provided in Section 206.
"Regular Record Date" means, for the interest payable on any Interest
Payment Date in respect of a Note, the date so specified in Paragraph 2 of such
Note.
20
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"Replacement Indebtedness" shall have the meaning provided in Section
705.
"Representative" means the indenture trustee or other trustee, agent
or representative for an issue of Senior Indebtedness.
"Restricted Payments" shall have the meaning provided in Section 704.
"Restricted Subsidiary" means any Subsidiary of the Company that (i)
has not been designated by the Board of Directors of the Company as an
Unrestricted Subsidiary or (ii) was an Unrestricted Subsidiary but has been
redesignated by the Board of Directors of the Company as a Restricted
Subsidiary, in each case as provided under the definition of Unrestricted
Subsidiary in this Section 101.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party, providing
for the leasing to the Company or a Subsidiary of the Company of any Property,
whether owned at the date of this Indenture or thereafter acquired, which has
been or is to be sold or transferred by the Company or such Subsidiary to such
Person or to any other Person to whom funds have been or are to be advanced by
such Person on the security of such Property if, after giving effect to such
arrangement, the Company or a Subsidiary of the Company operates the business,
if any, located on such Property.
"SEC" means the Securities and Exchange Commission.
"Senior Indebtedness" means the principal of, interest (including
without limitation, interest at the contract rate subsequent to the commencement
of any bankruptcy, insolvency or similar proceeding with respect to the Company)
on and other amounts due on or in connection with any Indebtedness of the
Company for money borrowed from others, whether outstanding on the date of the
Indenture or thereafter created, incurred, assumed or guaranteed, which, at the
date of the Indenture or at the time of any such creation, incurrence,
assumption or guarantee, (i) is by its terms expressly senior to and not
subordinate or subject in right of payment to any other
21
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Indebtedness of the Company, or (ii) is secured by a lien on any Property of the
Company or any of its Subsidiaries; provided, however, that Senior Indebtedness
shall not include any such Indebtedness if (A) the value of the collateral
securing such Indebtedness at time of incurrence is less than the amount of such
Indebtedness or (B) the value of any Property substituted for the collateral
securing such Indebtedness is less than the value of the collateral so released
in either case as determined by the Company and set forth in an Officer's
Certificate of the Company received by the Trustee, which certificate shall be
conclusive evidence of the correctness of the matters set forth herein, or (iii)
has been designated Senior Indebtedness pursuant to an Officers' Certificate of
the Company received by the Trustee. Notwithstanding anything herein to the
contrary, Senior Indebtedness shall not mean (a) Indebtedness of the Company to
a Subsidiary of the Company for money borrowed or advances from such Subsidiary,
(b) Indebtedness representing the maximum fixed repurchase price of any Capital
Stock of the Company which by its terms or otherwise is or may be required to be
redeemed or repurchased prior to the Stated Maturity of the Notes or at the
option of the holder thereof, (c) Indebtedness of the Company to any officer or
director thereof, (d) obligations owing under judgments arising out of
obligations that are not Indebtedness for borrowed money, (e) accounts payable
or any other Indebtedness to trade creditors created or assumed by the Company
in the ordinary course of business in connection with the obtaining of materials
or services and (f) any liability for federal, state, local or other taxes owed
or owing by the Company.
"Series B Preferred Stock" means shares of the Company's preferred
stock, Series B held by the trustee for the Company ESOP.
"Significant Subsidiary" means any Subsidiary of the Company (i) the
revenues attributable to which for the then most recently completed four fiscal
quarters constituted 5% or more of the consolidated revenues of the Company and
its Subsidiaries for such period, (ii) the assets of which as of the end of such
period constituted 5% or more of the consolidated assets of the Company and its
Subsidiaries as of the end of such period or (iii) that operates, owns or leases
any Property that is material
22
<PAGE>
to the business operations of the Company or any Restricted Subsidiary.
"Special Record Date" means a date fixed by the Trustee pursuant to
Section 209.
"Stated Maturity" means, with respect to any Note or any installment
of interest thereon, the date specified in such Note as the fixed day on which
the principal on such Note or such installment of interest is due.
"Stock Pledge" means the Stock Pledge Security and Intercreditor
Agreement dated as of December 12, 1989 among the Company, Tropicana
Enterprises, the members of the Jaffe Group (as defined in the Tropicana
Enterprises partnership agreement) and Trop C.C., a Nevada general partnership,
pursuant to which the Company pledged all of the stock of Adamar of Nevada to
secure the Company's obligations under various agreements relating to the
Tropicana, as in effect on the Effective Date.
"Subsidiary" means, with respect to any Person, (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person,
by one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) any other Person (other than a corporation) in
which such Person, one or more Subsidiaries thereof, or such Person and one or
more Subsidiaries thereof, directly or indirectly, at the date of determination
thereof has at least majority ownership interest and the power to direct the
policies, management and affairs thereof. For purposes of this definition, any
directors' qualifying shares mandated by applicable law shall be disregarded in
determining the ownership of a Subsidiary.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
(S)(S) 77aaa-bbbb) as in effect on the date of execution of this Indenture,
except as provided in Section 603.
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"Transaction Date" means the date of the transaction giving rise to
the need to calculate the Consolidated Fixed Charge Coverage Ratio or to make
any other determination for purposes of complying with the provisions of this
Indenture, provided that if such transaction is related to or in connection with
any acquisition of any Person, the Transaction Date shall be the date on which
the Company or any of its Subsidiaries enters into an agreement with such Person
to effect such acquisition; provided, however, that if subsequent to the
entering of such agreement the Company or any of its Subsidiaries shall amend
the terms of such acquisition with respect to the consideration payable by the
Company or any of its Subsidiaries in connection with such acquisition, the
Transaction Date shall be the date on which the Company or any of its
Subsidiaries enters into an agreement with such Person to effect such amendment.
The second proviso above shall not be applicable if, as of the Transaction Date
with respect to any acquisition, the Company could incur at least $1.00 of
additional Indebtedness under Section 705(a) when the Consolidated Fixed Charge
Coverage Ratio is calculated on the basis of the amended terms of such
acquisition and the Indebtedness to be incurred by the Company and its
Restricted Subsidiaries in connection therewith.
"Tropicana" means the Las Vegas Tropicana casino hotel operated by HRN
on the date of this Indenture.
"Tropicana Enterprises" means Tropicana Enterprises, a Nevada general
partnership.
"Tropicana Lease" means the Amended and Restated Lease (Tropicana
Hotel/Casino) dated November 1, 1984 between Tropicana Enterprises and HRN, as
amended.
"Tropicana Loan" means the Loan Agreement by and between Tropicana
Enterprises, HRN, Ramada and the Lenders named therein, made and entered into on
November 19, 1984, as in effect at the Effective Date.
"Tropicana Loan Refinancings" means any refinancings or financings of,
or related to, the Tropicana Loan or any refinancings thereof (including, but
not limited to, any Indebtedness owed to the Company or any Restricted
Subsidiary in connection with such Tropicana Loan or any refinancings thereof),
24
<PAGE>
to the extent that the aggregate amount of such Indebtedness incurred pursuant
to such refinancings or financings does not exceed the outstanding principal
amount under the Tropicana Loan at the Effective Date.
"Tropicana Payments" means, for any period, that portion of the lease
payments made by HRN to Tropicana Enterprises pursuant to the Tropicana Lease
that represents the sum of interest expense on Indebtedness of Tropicana
Enterprises payable to Persons other than the Company plus amounts distributed
in respect of the Jaffe Partnership Interest.
"Tropicana Security Deposit" means the additional security deposit
that HRN may be required to provide from time to time pursuant to the Tropicana
Lease (as in effect on the Effective Date).
"Trust Officer" means, with respect to the Trustee, the chairman or
vice chairman of the board of directors, the chairman or vice chairman of the
executive committee of the board of directors, the chairman of the trust
committee, the president, any vice president, any assistant vice president, the
secretary, any assistant secretary, the cashier, any assistant cashier, any
trust officer or assistant trust officer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is specifically referred because
of his or her knowledge of and familiarity with the particular subject.
"Trustee" means American Bank National Association, 101 East Fifth
Street, St. Paul, Minnesota 55101, unless and until a successor replaces it in
accordance with the provisions of this Indenture and thereafter means the
successor.
"Unrestricted Subsidiary" means (1) any Subsidiary of the Company
which at the time of determination shall be an Unrestricted Subsidiary (as
designated by the Board of Directors of the Company, as provided below) and (2)
any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of the
Company may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted
25
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Subsidiary (unless such Subsidiary owns any Capital Stock of or owns or holds
any Lien on any Property of the Company or any other Subsidiary of the Company
which is not a Subsidiary of the Subsidiary to be so designated), provided that
either (x) the Subsidiary to be so designated has total assets of $1,000 or less
or (y) immediately after giving pro forma effect to such designation the Company
could incur $1.00 of additional Indebtedness under Section 705(a); and provided,
further, that a Subsidiary shall not be designated as an Unrestricted Subsidiary
if the Company or a Restricted Subsidiary creates, incurs, issues, assumes,
guarantees or in any other manner becomes liable with respect to any obligation
of such Subsidiary. The Board of Directors of the Company may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary, provided that immediately
after giving pro forma effect to such redesignation, the Company could incur
$1.00 of additional Indebtedness under Section 705(a). Any such designation or
elimination thereof by the Board of Directors of the Company shall be evidenced
to the Trustee by filing with the Trustee a certified copy of the resolution of
the Board of Directors of the Company giving effect to such designation and an
Officers' Certificate certifying that such designation complies with the
foregoing conditions.
"U.S. Government Obligations" are direct noncallable obligations of
the United States of America or guaranteed by the United States of America for
the payment of which the full faith and credit of the United States is pledged.
"Voting Power" means the aggregate number of votes that may be cast
for the election of a corporation's directors (or Persons performing equivalent
functions) by the beneficial owners of all shares of Voting Stock issued by the
Company.
"Voting Stock" means securities of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for corporate directors (or Persons performing
equivalent functions).
"Wholly Owned Subsidiary" means any Restricted Subsidiary of which
100% of the Capital Stock of, or other ownership interest in, such Restricted
Subsidiary is at the time owned by the Company or a Wholly Owned Subsidiary.
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SECTION 102. Incorporation by Reference of TIA. Whenever this
Indenture refers to a provision of the TIA, the provision is incorporated by
reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Company.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rules under the
TIA have the meanings assigned to them thereby.
SECTION 103. Compliance Certificates and Opinions. (a) Upon any
request or application by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with;
(2) an Opinion of Counsel stating that in the opinion of such counsel,
all such conditions precedent, if any, have been complied with; and
(3) other than for the initial request by the Company to the Trustee
to authenticate and issue the Notes, an Accountants' Certificate stating
that, in the opinion of such accountant, such action may be taken under the
Indenture without the occurrence of a Default pursuant to
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Sections 704, 705, 801(a)(4) and 801(a)(5).
In the case of any such application or request as to which the furnishing of any
such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificates
or opinion need be furnished.
(b) Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 104. Form of Documents Delivered to Trustee. (a) In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person or that they be
so certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
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(b) Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated to
form one instrument.
SECTION 105. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided for
by this Indenture to be given or taken by Holders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Holders in person or by agent duly appointed in writing. Except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the Act of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 501)
conclusive in favor of the Trustee and the Company if made in the manner
provided in this Section 105.
(b) The fact and date of the execution by any Person of any
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of notary public or other officer authorized by
law to take acknowledgements of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authorization. The fact and date of the execution of any such instrument
or writing, or the authorization of the Person executing the same, may also be
proved in any other manner which the Trustee deems sufficient.
(c) Ownership of Notes shall be proved by the appearance of a
Person's name in the Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Note shall bind every future Holder
of the same Note and the Holder of
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every Note issued upon the registration of transfer or in exchange therefor or
in lieu thereof, to the same extent as the original Holder, in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such Note.
(e) The Trustee may require such additional proof of any matter
referred to in this Section as it shall deem necessary.
SECTION 106. Notices, etc. to Trustee and the Company. Any request,
demand, authorization, direction, notice, consent, waiver or Act of Holders or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with:
(1) the Trustee shall be sufficient for every purpose hereunder if in
writing and mailed postage prepaid by first class, registered or certified
mail, in each case return receipt requested, or delivered personally, to
the Trustee at its Corporate Trust Division, 101 E. Fifth Street, Saint
Paul, Minnesota 55101, Attention: Corporate Trust Department, or at any
other address previously furnished in writing to the Company; and
(2) the Company shall be sufficient for every purpose hereunder if in
writing and mailed postage prepaid by first class, registered or certified
mail, in each case return receipt requested, or delivered personally, to
the Company, addressed to it at Aztar Corporation, 2390 E. Camelback Road,
Suite 400, Phoenix, Arizona 85016, Attention: Chief Financial Officer or at
any other address previously furnished in writing to the Trustee by the
Company with copies given in one of the foregoing manners to Snell &
Wilmer, One Arizona Center, Phoenix, Arizona 85004-0001, Attention: David
Sprentall, Esq. and to Latham & Watkins, 633 West Fifth Street, Suite 4000,
Los Angeles, California 90071, Attention: Brian G. Cartwright, Esq.
(provided that any failure to furnish such copies shall not affect the
sufficiency of any such request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document with respect to the
Company).
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SECTION 107. Notice to Holders; Waiver. Where this Indenture provides
for notice to Holders of any event, such notice shall be sufficiently given if
in writing and mailed postage prepaid by first-class, registered or certified
mail, in each case return receipt requested, to each Holder affected by such
event, at his address as it appears in the Register, not later than the latest
date and not earlier than the earliest date prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders. Where this Indenture provides for notice in any matter, such
notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case, by reason of suspension of regular mail service, or by reason
of any other cause, it shall be impracticable to give such notice by mail, then
such notification may be given by any other reasonable method of giving such
notice and shall be deemed to be sufficient giving of such notice for every
purpose hereunder.
If a notice or communication is delivered or mailed in the manner
provided above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 108. Communication by Holders with Other Holders. Holders
may communicate pursuant to TIA (S)(S) 312(b) with other Holders with respect to
their rights under this Indenture or the Notes. The Trustee shall comply with
the provisions of TIA (S)(S) 312(b). The Company, the Trustee, the Registrar
and any agent of any of them shall have the protection of TIA (S)(S) 312(c).
SECTION 109. Conflict with TIA. If any provision hereof limits,
qualifies or conflicts or fails to comply with
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another provision which is required to be included in this Indenture by any of
the provisions of the TIA, such required provision shall control.
SECTION 110. Rules by Trustee and Agents. The Trustee may make
reasonable rules for action by or a meeting of Holders. Each of the Registrar
and Paying Agent may make reasonable rules and set reasonable requirements for
its functions.
SECTION 111. No Recourse Against Others. The Notes and the obligations
of the Company under this Indenture are solely obligations of the Company and no
officer, director, employee or stockholder, as such, shall be liable for any
failure by the Company to pay amounts on the Notes when due or perform any such
obligation.
SECTION 112. Execution in Counterparts. This Indenture may be
executed in any number of counterparts, each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
SECTION 113. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 114. No Adverse Interpretation of Other Agreements. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or a Subsidiary of the Company. No such indenture, loan or debt
agreement may be used to interpret this Indenture.
SECTION 115. Successors and Assigns. All covenants and agreements in
this Indenture by the Company and the Trustee shall bind their respective
successors and assigns, whether so expressed or not.
SECTION 116. Separability Clause. In case any provision in this
Indenture or the Notes shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
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SECTION 117. Benefits of Indenture. Nothing in this Indenture or the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors and assigns hereunder, any Paying Agent and the
Holders of Notes, any benefits or any legal or equitable right, remedy or claim
under this Indenture, except to the extent provided in Article Ten with respect
to the holders of Senior Indebtedness.
SECTION 118. Governing Law and Choice of Forum. This Indenture and
each Note shall be deemed to be a contract under the laws of the State of New
York and shall be construed in accordance with and governed by the laws of the
State of New York without regard to principles of conflicts of law. If any
action or proceeding shall be brought by the Trustee or a Holder in order to
enforce any right or remedy under this Indenture or the Notes, the Company
hereby consents and will submit to the jurisdiction of the courts of the State
of New York or any federal court sitting in the Borough of Manhattan in The City
of New York, New York. Any action or proceeding brought by the Company to
enforce any right, assert any claim or obtain any relief whatsoever in
connection with this Indenture or the Notes shall be brought by the Company
exclusively in the courts of the State of New York or in any federal court
sitting in the Borough of Manhattan in The City of New York, New York. The
Trustee hereby consents and agrees to submit to the jurisdiction of the courts
of the State of New York or any federal court sitting in the Borough of
Manhattan in The City of New York, New York in respect of any action or
proceeding under this Indenture or the Notes.
SECTION 119. Legal Holidays. In any case where any Interest Payment
Date, Redemption Date or Stated Maturity of any Notes shall not be a Business
Day, then (notwithstanding any other provision of this Indenture) payment of
interest or principal need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the
Interest Payment Date or Redemption Date or at the Stated Maturity and, if so
made, no interest shall accrue for the period from and after such Interest
Payment Date, Redemption Date or Stated Maturity, as the case may be, until such
Business Day.
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SECTION 120. Incorporation of Exhibit. Exhibit A annexed hereto
shall constitute an integral part of this indenture for all purposes.
ARTICLE TWO
THE NOTES
SECTION 201. Form. The Notes and the Trustee's certificate of
authentication shall be substantially in the form annexed hereto as Exhibit A,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon, as may be required to comply with the rules of any securities exchange
on which the Notes may be listed, or as may, consistently herewith, be
determined by the officers executing such Notes, as evidenced by their execution
of the Notes. Any portion of the text of any Note may be set forth on the
reverse thereof, with an appropriate reference thereto on the face of the Note.
The terms and provisions contained in the Notes shall constitute, and
are expressly made, a part of this Indenture. To the extent applicable, the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
The definitive Notes shall be printed, lithographed or engraved or
produced by any combination of these methods or in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
The principal of and interest on the Notes shall be payable at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, New York maintained for such purpose and at any other office or agency
maintained by the Company for such purpose; provided, however, that at the
option of the Company, interest may be paid by check mailed to the
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address of
the Person entitled thereto as such address shall appear in the Register.
SECTION 202. Title and Terms. The aggregate principal amount of
Notes that may be authenticated and delivered under this Indenture is limited to
$180,000,000, except for Notes authenticated and delivered upon registration of,
transfer of, or in exchange for, or in lieu of other Notes pursuant to Sections
205, 206, 208, 605 and 906.
The Notes shall be known and designated as the " % Senior
Subordinated Notes Due 2004" of Aztar Corporation. Their Stated Maturity for
payment of principal shall be , 2004.
SECTION 203. Denominations. The Notes shall be issuable only as
registered Notes without coupons in minimum denominations of $1,000 and integral
multiples thereof.
SECTION 204. Execution, Authentication, Delivery, and Dating. The
Notes shall be executed on behalf of the Company by the chairman of its board of
directors, its president or one of its vice presidents and attested by its
secretary or one of its assistant secretaries, under its corporate seal, if any,
which may be in facsimile form and be imprinted or otherwise reproduced thereon.
The signature of any of these officers on the Notes may be manual or facsimile.
Notes bearing the manual or facsimile signature of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to be such
prior to the authentication or delivery of such Notes or was not such at the
date of authentication or delivery of such Notes.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Notes executed by the Company together
with a Company Order authorizing authentication thereof to the Trustee for
authentication. The order shall specify the amount of Notes to be authenticated
and the date on which the original issue of Notes is to be authenticated. The
Trustee shall authenticate and deliver such Notes as provided for in this
Indenture and not otherwise.
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Each Note shall be dated as of the date of its authentication.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication in the form provided for herein executed by the
Trustee by the manual signature of one of its authorized signatories, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
SECTION 205. Temporary Notes. Pending the preparation of definitive
Notes, the Company may prepare and execute, and upon a Company Order, the
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any
denomination, substantially of the tenor of the definitive Notes in lieu of
which they are issued and with such variations as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Company will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Company to be
maintained as provided in Section 702, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor one
or more definitive Notes of any authorized denominations of a like initial
aggregate principal amount and Stated Maturity. Until so exchanged the
temporary Notes shall in all respects be entitled to the same benefits under
this Indenture as definitive Notes.
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SECTION 206. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the office or agency maintained pursuant
to Section 702 a register (the "Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Notes and the registration of transfers of Notes. In no case shall there be
more than one Register. The Trustee is hereby appointed "Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided.
If a Person other than the Trustee is appointed by the Company as
Registrar, the Company will give the Trustee prompt written notice of the
appointment of a Registrar and of the location, and any change in the location,
of the Register, and the Trustee shall have the right to inspect the Register at
all reasonable times, to obtain copies of the Register and to rely upon a
certificate executed on behalf of the Registrar by an officer thereof as to the
names and addresses of the Holders of the Notes and the initial principal
amounts and numbers of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Company to be maintained as provided in Section 702, the
Company shall execute, and the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Notes of any
authorized denominations of a like initial aggregate principal amount and Stated
Maturity.
At the option of the Holder, Notes may be exchanged for other Notes of
any authorized denominations of a like initial aggregate principal amount and
Stated Maturity upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Notes are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Notes which the
Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Company evidencing the same debt and
entitled to the same benefits under this Indenture as the Notes surrendered upon
such registration of transfer or exchange.
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Every Note presented or surrendered for registration of transfer or
exchange shall (if so required by the Company or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Trustee duly executed, by the Holder thereof or his attorney duly authorized
in writing.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 205, 605, 711 or 906 not involving any transfer.
The Company shall not be required (i) to issue, register the transfer
of or exchange any Note during a period beginning at the opening of business 15
days before the day of the mailing of a notice of redemption of Notes selected
for redemption and ending at the close of business on the day of such mailing or
(ii) to register the transfer of or exchange any Note so selected for redemption
except, in the case of any Note to be redeemed in part, the portion thereof not
to be redeemed.
SECTION 207. Holder Lists. The Trustee shall preserve in as current
a form as is reasonably practicable the most recent list available to it of the
names and addresses of Holders. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee at least five Business Days prior to each
semi-annual Interest Payment Date and at such other times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
require of the names and addresses of Holders. The Trustee and the Registrar
may rely on the accuracy of such list as the same may be amended from time to
time.
SECTION 208. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Trustee or (ii) the Trustee receives
evidence to its satisfaction of the destruction, loss or theft of any Note and
there is delivered to the Trustee such security or indemnity as may be required
by the Trustee to hold the Company and the Trustee harmless, then the Company
shall execute and upon a Company Request the Trustee shall authenticate and
deliver, in exchange for or in lieu of any
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such mutilated, destroyed, lost or stolen Note, a new Note of the same tenor,
initial principal amount and Stated Maturity, bearing a number not
contemporaneously outstanding; provided, however, that if any such mutilated,
destroyed, lost or stolen Note shall have become or shall be about to become due
and payable, instead of issuing a new Note, the Company may pay such Note
without surrender thereof, except that any mutilated Note shall be surrendered.
Upon the issuance of any new Note under this Section 208, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Note issued pursuant to this Section 208 in lieu of any
mutilated, destroyed, lost or stolen Note shall constitute an original,
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section 208 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 209. Payment of Principal and Interest; Principal and
Interest Rights Preserved. Interest on any Note which is payable, and is paid
or for which payment is duly provided for pursuant to Paragraph 2 of the Notes,
on any Interest Payment Date shall be paid to the Person in whose name that Note
(or one or more Predecessor Notes) is registered at the close of business on the
Regular Record Date for such interest.
Any interest on any Note which is payable, but is not paid or for
which payment is not duly provided for on any Interest Payment Date, is herein
called "Defaulted Interest." Defaulted Interest on any Note shall forthwith
cease to be payable to the Holder on the relevant Regular Record Date by
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virtue then of having been such Holder, and such Defaulted Interest may be paid
by the Company, as follows:
The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Notes (or their respective Predecessor Notes)
are registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee of the amount of Defaulted
Interest proposed to be paid on each Note and the date of the proposed
payment (which payment date shall not be less than 25 or more than 30 days
following the date of delivery of such notice to the Trustee), and at the
same time the Company shall deposit with the Trustee an amount of money
equal to the aggregate amount proposed to be paid in respect of such
Defaulted Interest, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as provided in
this clause. Thereupon, the Trustee shall fix a Special Record Date for the
payment of such Defaulted Interest in respect of Notes which shall be not
more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify
the Company of such Special Record Date and, in the name and at the expense
of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be given to all
Holders in the manner and to the extent provided in Section 107. Notice of
the proposed payment of such Defaulted Interest on the Notes and the
Special Record Date therefor having been so given, such Defaulted Interest
on the Notes shall be paid by the Trustee from the funds deposited therefor
to the Persons in whose names such Notes (or their respective Predecessor
Notes) are registered in the Register at the close of business on such
Special Record Date, on the date for payment of such Defaulted Interest
specified in the Notice.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall
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carry the rights to interest accrued and unpaid, and to accrue, which were
carried by such other Note.
SECTION 210. Persons Deemed Owners. Prior to due presentment for
registration of transfer of any Note, the Company, the Trustee and any agent of
the Company or the Trustee may treat the Person in whose name any Note is
registered as the owner of such Note for the purpose of receiving payments of
principal of and interest on such Note (subject to Section 209) and for all
other purposes whatsoever, whether or not such Note be overdue, and none of the
Company, the Trustee or any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 211. Cancellation. All Notes surrendered to the Trustee for
payment, registration of transfer or exchange (including Notes surrendered to
any Person other than the Trustee which shall be delivered to the Trustee) shall
be promptly cancelled by the Trustee. The Company may at any time deliver to
the Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly cancelled by the Trustee. No Notes shall
be authenticated in lieu of or in exchange for any Notes cancelled as provided
in this Section 211, except as expressly permitted by this Indenture. Subject
to the record retention requirements under the Exchange Act, the Trustee may
destroy cancelled Notes pursuant to a Company Request and furnish a certificate
of such destruction to the Company, unless the Company shall direct by a Company
Order that cancelled Notes be returned to the Company.
SECTION 212. Computation of Interest. Interest on the Notes shall be
computed on the basis of a 360-day year of twelve 30-day months.
SECTION 213. CUSIP Number. The Company in issuing the Notes may use
a "CUSIP" number and if so the Trustee shall use the CUSIP number in notices of
redemption or exchange as a convenience to Holders, provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Notes and that
reliance may be placed only on the other identification
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numbers printed on the Notes. The Company shall promptly notify the Trustee of
any change in the CUSIP number.
ARTICLE THREE
SATISFACTION AND DISCHARGE; DEFEASANCE
SECTION 301. Satisfaction and Discharge of Indenture; Defeasance.
(a) The Company, at any time, may terminate its obligations under this
Indenture by delivering all Outstanding Notes to the Trustee for cancellation
and paying all other sums payable hereunder by the Company; provided, however,
that the obligations of the Company under Sections 303, 304, 305 and 507,
together with the definitions in Article One necessary for the interpretation of
such Sections, shall survive.
(b) At the Company's option, (i) the Company will be Discharged on
the 123rd day after the satisfaction of the conditions set forth in paragraphs
(c) and (d) below or (ii) the Company need not comply with those covenants set
forth in Sections 704, 705, 706, 707, 708, 709, 710, 711 and 716 and the
provisions of Sections 401(3) (but only to the extent that Section 401(3)
relates to such enumerated provisions), 801(a)(4) and 801(a)(5) at any time
after the applicable conditions set forth in paragraphs (c) and (d) below have
been satisfied.
(c) In order to exercise either option in paragraph (b) above,
(1) the Company must irrevocably deposit with the Trustee or a
trustee satisfactory to the Company and the Trustee, in trust, specifically
pledged as security for and dedicated solely to the benefit of the Holders
(A) money, (B) U.S. Government Obligations which, through the payment of
interest thereon and principal thereof in accordance with their terms, will
provide money or (C) a combination of money and U.S. Government
Obligations, in an amount sufficient (without consideration of any
reinvestment of interest on such funds) in the opinion (with respect to (B)
and (C)) of a nationally recognized firm of independent public accountants
expressed in an Accountants' Certificate delivered to the Trustee to pay
and discharge all the
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principal of and interest on the Notes not later than one day before the dates
such payments are due in accordance with the terms of the Notes;
(2) the Company must deliver to the Trustee:
(i) irrevocable instructions to apply such money or the proceeds of
such U.S. Government Obligations to the payment of principal of and interest on
the Notes at maturity or redemption, as the case may be;
(ii) an Officers' Certificate and an Opinion of Counsel, each stating
that all conditions precedent provided in Sections 301(c) and 301(d) have been
complied with;
(iii) an Officers' Certificate certifying as to whether the Notes are
then listed on the New York Stock Exchange;
(iv) if the Notes are then listed on the New York Stock Exchange, the
Company shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Company's exercise of its option under this Section would not cause the
Notes to be delisted;
(v) an Opinion of Counsel to the effect that the deposit and related
defeasance would not cause the Holders of the Notes to recognize income, gain,
or loss for federal income tax purposes and that the Holders will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if the deposit and related defeasance had not
occurred and, in the case of a Discharge pursuant to paragraph (b)(i) above,
accompanied by a revenue or private letter ruling to such effect received from
or published by the Internal Revenue Service; and
(vi) an Opinion of Counsel to the effect that (A) the trust funds will
not be subject to any rights of holders of Senior Indebtedness, including,
without limitation, those rights arising under Article Ten of
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this Indenture; (B) in the case of a Discharge pursuant to paragraph (b)(1)
above and subject to customary exclusions and exceptions reasonably acceptable
to the Trustee, (1) the Company has authorization to establish an irrevocable
trust in favor of the Trustee for the benefit of the Holders under applicable
law and the action in establishing the irrevocable trust has been duly and
properly authorized by the Company and such authorization has not been revoked,
(2) the Trustee is an Independent trustee with respect to the irrevocable trust,
(3) a valid trust is created at the time of such irrevocable deposit and (4) the
Holders will have the sole beneficial ownership interest under applicable law in
the money so deposited in such trust; and (C) if a court of competent
jurisdiction were to rule under any Bankruptcy Laws that the trust funds
remained property of the Company, (1) the Trustee will hold, for the benefit of
the Holders, a valid and first priority perfected security interest in such
trust funds that, after the expiration of any applicable preference period (as
specified in such opinion), is not avoidable under the Bankruptcy Laws of any
jurisdiction, (2) the Holders will be entitled to receive adequate protection of
their interests in such trust funds under 11 U.S.C. (S)(S) 361, 362, 363 and 364
and (3) no property, rights in property or other interests granted to the
Trustee for the benefit of the Holders or to the Holders in exchange for or with
respect to any of such trust funds will be subject to any prior rights of
holders of Senior Indebtedness, including, without limitation, those rights
arising under Article Ten of this Indenture;
For the limited purpose of the Opinion of Counsel referred to in this paragraph
(c)(2)(vi), such opinion may contain (1) either (A) an assumption that the
conclusions contained in a letter by a nationally recognized appraisal firm that
(i) the value of the trust assets is reasonably equivalent to the amount of
Notes then Outstanding, plus accrued and unpaid interest thereon, as of the date
of the deposit and (ii) the Discharge or defeasance pursuant to paragraph (b)
above of the principal amount of the Notes then
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Outstanding, plus accrued and unpaid interest thereon, as of the date of
the transfer, is fair consideration for the transfer of the trust assets to
the trust, are accurate, provided that such letter is also addressed and
delivered to the Trustee, or (B) an assumption that the conclusions
contained in a customary valuation letter by a nationally recognized
appraisal firm, dated as of the date of the deposit and taking into account
such deposit, or, at counsel's option, a customary alternative certificate
reasonably acceptable to the Trustee, to the effect that the Company, as a
result of the transfer, will not (i) be insolvent (either because its
financial condition is such that the sum of its debts is greater than all
of its assets, at a fair valuation, or because the present fair saleable
value of its assets will be less than the amount required to pay its
probable liability on its debts as they become absolute and matured), (ii)
have unreasonably small capital for the business in which it is or will be
engaged or (iii) have incurred or planned to incur debts beyond its ability
to pay as such debts mature, are accurate, provided that (x) such valuation
letter is also addressed and delivered to the Trustee and (y) the Company
delivers to the Trustee a letter by a nationally recognized appraisal firm
to the effect that the value of the trust assets is reasonably equivalent
to the amount of the Notes then Outstanding, plus accrued and unpaid
interest thereon, as of the date of the deposit; or (2) a representation
that (A) the Notes are the legal, valid, binding and enforceable
obligations of the Company, and the Company's payment obligations are not
avoidable under any Bankruptcy Laws, and (B) the trust funds are not
subject to recapture by or on behalf of the Company under any Bankruptcy
Laws;
(3) no Default or Event of Default (including as a result of such deposit)
shall have occurred and be continuing on the date of such deposit and such
deposit will not result in a breach or violation of, or constitute a default
under, any other instrument to which the Company is a party or by which it is
bound, as evidenced to the Trustee
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in an Officers' Certificate delivered to the Trustee concurrently with such
deposit;
(4) the Company shall have paid or duly provided for payment of all sums
payable by the Company under this Indenture and the Notes; and
(5) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that the Company's exercise of its option under this provision
will not result in the Company, the Trustee or the trust to be required to
register as an "investment company" under the Investment Company Act.
(d) It is the intention of the parties hereto that a valid trust for
the benefit of the Holders be created at the time that the Company makes the
deposit pursuant to this Section 301. Solely as protection for the Holders in
the event that a court of competent jurisdiction were to determine in the future
either that (i) such trust had not been validly created or (ii) such trust is
not enforceable, the Company, at the time the Company makes such deposit, will
take any and all acts necessary to create and perfect, in favor of the Holders,
a first-priority security interest in the money so deposited and shall take any
other action and execute and deliver any other documents that may reasonably be
requested by the Trustee to effectuate such security interest, and shall do all
of the above at such appropriate time so that such security interest shall
attach to the deposit at the time such deposit is made.
SECTION 302. Application of Trust Money. All money and U.S.
Government Obligations deposited with the Trustee or such other trustee pursuant
to Section 301 shall be held in trust and applied by the Trustee or such other
trustee, in accordance with the provisions of the Notes and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent),as the Trustee or such other trustee may
determine, to the Persons entitled thereto, of the principal and interest for
whose payments such money and U.S. Government Obligations have been deposited
with the Trustee or such other trustee. All such money and U.S. Government
Obligations shall be segregated and held in a separate trust. Money, U.S.
Government Obligations and proceeds thereof so held in trust, to the extent
allocated for the payment of the
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Notes, shall not be subject to the provisions of Article Ten (other than, in
the case of a defeasance pursuant to Section 301(b)(ii), Section 1001).
SECTION 303. Repayment to the Company. Subject to Section 302, the
Trustee and the Paying Agent shall promptly pay to the Company upon request any
excess money or U.S. Government Obligations held by them at any time and
thereupon shall be relieved from all liability with respect to such money. The
Trustee and the Paying Agent shall pay to the Company upon request any money
held by them for the payment of principal or interest that remains unclaimed for
two years; provided, however, that the Company shall, if requested by the
Trustee or such Paying Agent, give the Trustee or such Paying Agent satisfactory
indemnification against any and all liability which may be incurred by it by
reason of such payment; and provided, further, that the Trustee or such Paying
Agent before being required to make any payment shall at the expense of the
Company cause to be published once in a newspaper of general circulation in The
City of New York and mail to each Holder entitled to such money notice that such
money remains unclaimed and that, after a date specified therein, which shall be
at least 30 days from the date of such publication or mailing, any unclaimed
balance of such money then remaining will be repaid to the Company. After
payment to the Company, Holders entitled to such money must look to the Company
for payment as general creditors unless an applicable law designates another
Person.
SECTION 304. Reinstatement. If the Trustee or Paying Agent is unable
to apply any money or U.S. Government Obligations in accordance with Section 302
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 301 until such time as the Trustee or Paying Agent is permitted to apply
all such money or U.S. Government Obligations in accordance with Section 302;
provided, however, that if the Company has made any payment of interest on or
principal of any Notes because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held by the
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Trustee or Paying Agent.
SECTION 305. Indemnity. The Company shall indemnify the Trustee and
hold it harmless against any tax, fee or other
charge imposed on or assessed against the money or U.S. Government Obligations
deposited with the Trustee under this
Article Three or any interest or other income derived therefrom.
ARTICLE FOUR
DEFAULTS AND REMEDIES
SECTION 401. Events of Default. "Events of Default," wherever used
herein, means any one of the following events:
(1) The Company defaults in the payment of interest on any Note when the
same becomes due and payable and the default continues for a period of 30 days,
whether or not such payment is prohibited by Article Ten;
(2) The Company defaults in the payment of the principal of any Note when
the same becomes due and payable at maturity, upon redemption, repayment
pursuant to Section 711 or otherwise, whether or not such payment is prohibited
by Article Ten;
(3) The Company fails to observe, perform or comply with any of its other
agreements or covenants in or provisions of the Notes or this Indenture and the
failure to observe, perform or comply continues for the period and after the
notice specified below;
(4) A default or defaults occur under any mortgage, indenture, bond, note,
debenture or other instrument under which there may be issued or by which there
may be secured or evidenced any Indebtedness of the Company or any of its
Restricted Subsidiaries, whether such Indebtedness now exists or shall be
created hereafter, and such Indebtedness shall have been accelerated (or shall
have matured); provided that the principal amount of Indebtedness with respect
to which any such default or defaults and acceleration (or maturity) has
occurred and is continuing,
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together with the principal amount of all other
Indebtedness with respect to which such a default or defaults and acceleration
(or maturity) has occurred and is continuing, aggregates $5,000,000 or more;
(5) The Company or any of its Significant Subsidiaries pursuant to or
within the meaning of Title 11 of the United States Code or any similar federal
or state law for the relief of debtors or affecting creditors' rights
(collectively, "Bankruptcy Law"):
(i) commences a voluntary case or any other action or proceeding,
(ii) consents by answer or otherwise to the commencement against it of an
involuntary case or any other action or proceeding,
(iii) seeks or consents to the appointment of a receiver, trustee,
assignee, liquidator, custodian or similar official (collectively, a
"Custodian") of it or for all or substantially all of its Property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is unable to pay its debts as the same become due;
(6) A court of competent jurisdiction enters an order or decree under any
Bankruptcy Law or under any law affecting creditors' rights that is similar to a
Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries in an involuntary case in bankruptcy or any other action or
proceeding for any other relief,
(ii) appoints a Custodian of the Company or any of its Significant
Subsidiaries or for all or substantially all of the Property of the Company or
any of its Significant Subsidiaries, or
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(iii) orders the liquidation of the Company or any of its Significant
Subsidiaries, and in each case the order or decree remains unstayed and in
effect for 60 days, or any dismissal, stay, rescission or termination ceases to
remain in effect;
(7) one or more judgments or orders shall have been rendered against the
Company or any of its Restricted Subsidiaries in an aggregate amount in excess
of $5,000,000 and shall not have been discharged and either (x) an enforcement
proceeding shall have been commenced by any creditor upon any such judgment or
(y) there shall be any period of 90 consecutive days during which a stay of
enforcement of such judgments, by reason of a pending appeal or otherwise, shall
not be in effect; or
(8) Any Gaming License of the Company or any of its Subsidiaries is
revoked, terminated or suspended or otherwise ceases to be effective, resulting
in the cessation or suspension of operation for a period of more than 90 days of
the casino business of any casino hotel owned, leased, or operated directly or
indirectly by the Company or any of its Subsidiaries (other than any voluntary
relinquishment of a Gaming License if such relinquishment is, in the judgment of
the Company, both desirable in the conduct of the business of the Company and
its Subsidiaries, taken as a whole, and not disadvantageous in any material
respect to the holders).
A Default under clause (3) is not an Event of Default until the
Trustee or the Holders of at least 25% in principal amount of the Outstanding
Notes provide written notification to the Company (and the Trustee, in the case
of Holders giving notice) of the Default and the Company does not cure the
Default within 60 days after receipt of the notice. Any notice of Default must
specify the Default, demand that it be remedied and state that the notice is a
'Notice of Default." Such notice shall be given by the Trustee if so requested
by Holders of at least 25% in principal amount of the then Outstanding Notes.
SECTION 402. Acceleration of Maturity; Rescission and Annulment. If
an Event of Default occurs and is continuing (other than an Event of Default as
defined in clauses (5) and (6) of Section 401), then and in every such case the
Trustee or the
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Holders of not less than 25% in principal amount of the
Outstanding Notes may declare the principal of, and all accrued but unpaid
interest on, all the Notes to be due and payable by a notice, in writing, to the
Company (and the Trustee in the case of a notice given by Holders) and upon any
such declaration such principal and accrued interest shall become due and
payable immediately. In case an Event of Default as defined in clauses (5) and
(6) of Section 401 occurs, the principal of and interest on the Notes shall
become immediately due and payable without any declaration or act on the part of
the Holders or the Trustee.
In the event of a declaration of acceleration because an Event of
Default as defined in clause (4) of Section 401 has occurred, and is continuing,
such declaration and its consequences shall be automatically rescinded and
annulled if (x) in the case of Indebtedness that has been accelerated, the
holders of such Indebtedness shall have rescinded the declaration of
acceleration and the consequences thereof within 10 days of such declaration or,
in the case of Indebtedness that has matured, such Indebtedness has been
discharged in full within 10 days following maturity, (y) the Company shall have
delivered an Officers' Certificate certifying such rescission or discharge to
the Trustee and (z) no other Event of Default shall have occurred and be
continuing.
At any time after the Notes have been accelerated and before a
judgment or decree for payment of the money due has been obtained by the Trustee
as hereinafter in this Article Four provided, the Holders of not less than a
majority in principal amount of the Notes Outstanding, by notice to the Company
and the Trustee, may rescind and annul such acceleration and its consequences
if:
(1) there has been paid or deposited with the Trustee a sum sufficient
to pay
(A) all overdue installments of interest on all Notes,
(B) the principal of any Notes which have become due otherwise than by
such declaration of acceleration and interest thereon at the rate borne
by the Notes,
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(C) to the extent the payment of such interest is lawful,
interest upon overdue installments of interest at the rate borne by
the Notes, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel;
(2) all Defaults and Events of Default, other than the non-payment of
the principal of and interest on the Notes that have become due solely by
such acceleration, have been cured or waived as provided in Section 413;
(3) the rescission would not conflict with any judgment or order of a
court of competent jurisdiction; and
(4) in the event of a cure or waiver of a Default or Event of Default
under clause (4) of Section 401, the Trustee shall have received an
Officers' Certificate of the Company and an Opinion of Counsel that the
default giving rise to such Default or Event of Default has been cured or
waived.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 403. Collection Suits by Trustee. If an Event of Default
specified in clause (1) or (2) of Section 401 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Notes for the whole amount of
principal and accrued interest remaining unpaid, together with, to the extent
that payment of such interest is lawful, interest on overdue principal and
interest on overdue installments of interest, in each case at the rate per annum
borne by the Notes and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its
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rights and the rights of the Holders by such appropriate judicial and non-
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture, the Notes or in any other agreement or instrument
or in aid of the exercise of any power granted herein or therein, or to enforce
any other proper remedy.
SECTION 404. Trustee May File Proofs of Claim. (a) In the case of
the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Notes or to the
Property of the Company or of such other obligor, the Trustee (irrespective of
whether the principal of the Notes shall then be due and payable as therein
expressed or by declaration of acceleration or otherwise and irrespective of
whether the Trustee shall have made any demand on the Company or such other
obligor for the payment of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(1) to file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Notes (including post-petition
interest) and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim
for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel) and of the Holders allowed in such
judicial proceeding, and
(2) to collect and receive any monies or other Property payable or
deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 507.
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(b) Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding, except that the Trustee may vote on behalf of the Holders for
the appointment of a trustee in bankruptcy without soliciting or canvassing
any Holder for consent or approval.
SECTION 405. Trustee May Enforce Claims Without Possession of
Notes. All rights of action and claims under this Indenture or the Notes
may be prosecuted and enforced by the Trustee without the possession of any
of the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its
own name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the Holders of the Notes in respect
of which such judgment has been recovered.
SECTION 406. Application of Money Collected. Any money collected
by the Trustee pursuant to this Article Four shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of
the distribution of such money on account of principal or interest, upon
presentation of the Notes and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under
Section 507;
Second: To holders of Senior Indebtedness to the extent required
by Article Ten;
Third: To the payment of the amounts then due and unpaid upon the
Notes for principal and interest, in respect of which or for the
benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Notes for principal and interest, respectively; and
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Fourth: To the Company or any other obligor on the Notes, as their
interests may appear or as a court of competent jurisdiction may direct.
The Trustee may set a record date and payment date for any payment to
Holders pursuant to this Section.
SECTION 407. Limitation on Suits. No Holder shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
(1) such Holder has previously given written notice to the Trustee of
a continuing Event of Default,
(2) the Holders of not less than 25% in principal amount of the
Outstanding Notes have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee
hereunder,
(3) such Holder or Holders have offered to the Trustee reasonable
indemnity against the losses, expenses and liabilities to be incurred in
compliance with such request,
(4) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding, and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of not less
than a majority in principal amount of the Outstanding Notes,
it being understood and intended that no one or more Holders shall have any
right in any manner by virtue of, or by availing itself of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the ratable benefit of all the Holders.
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SECTION 408. Unconditional Right of Holders to Receive Principal and
Interest. Notwithstanding any other provision in this Indenture, the Holder of
any Note shall have the absolute and unconditional right to receive payment of
the principal of and interest on such Note on or after the respective dates
expressed in such Note and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.
SECTION 409. Restoration of Rights and Remedies. If the Trustee or
any Holder has instituted any proceeding to enforce any right or remedy under
this Indenture and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or the Holder after
exhaustion of all rights to appeal, then and in every such case the Company, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 410. Rights and Remedies Cumulative. No right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 411. Delay or Omission Not Waiver. No delay or omission of
the Trustee or of any Holder of any Note to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
SECTION 412. Control by Holders. The Holders of not less than a
majority in principal amount of the Outstanding Notes
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shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or with
this Indenture;
(2) the Trustee shall have the right to decline to follow any such
direction if the Trustee, being advised by counsel, determines that the action
so directed may not lawfully be taken or if the Trustee in good faith shall, by
a Trust Officer or Trust Officers, determine that the proceedings so directed
would involve it in personal liability or be unduly prejudicial to the Holders
not taking part in such direction; and
(3) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 413. Waiver of Past Defaults. The Holders of not less than a
majority in principal amount of the Outstanding Notes may on behalf of the
Holders of all the Notes waive any past Default hereunder and its consequences,
except a Default
(1) in the payment of the principal of or interest on any Note; or
(2) in respect of a covenant or provision hereof which under Article
Six cannot be modified or amended without the consent of the Holder of each
Outstanding Note affected;
provided, however, that no default in the payment of any amount due to the
Trustee under Section 507 or any other provision hereof may be waived by the
Holders without the Trustee's written consent.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture, but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
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SECTION 414. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Trustee for any action taken, suffered or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant, but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by one or more Holders
holding in the aggregate more than 10% in principal amount of the Outstanding
Notes, or to any suit instituted by any Holder pursuant to Section 408.
ARTICLE FIVE
THE TRUSTEE
SECTION 501. Certain Duties and Responsibilities. (a) Except
during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties as
are specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall examine the same to
determine whether or not they appear to conform to the requirements of this
Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and
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powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise as a
prudent Person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) this subsection shall not be construed to limit the effect of
subsection (a) of this Section;
(2) The Trustee shall not be liable for any error of judgment made in good
faith, unless it shall be proved that the Trustee was negligent in ascertaining
the pertinent facts;
(3) The Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Holders of a majority in principal amount of the Outstanding Notes relating to
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture; and
(4) no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(d) The Trustee shall examine any certificates or other documents
furnished to it pursuant to the provisions of this Indenture to determine
whether or not such certificates or other documents conform to the requirements
of such provisions.
(e) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or
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affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 501.
SECTION 502. Notice of Defaults. Within 90 days after the occurrence
of any Default hereunder, the Trustee shall transmit to all Holders notice of
such Default hereunder known to the Trustee in the manner provided in Section
107, unless such Default shall have been cured or waived; provided, however,
that, except in the case of a default in the payment of the principal of or
interest on any Note, the Trustee shall be protected in withholding such notice
if and so long as the Board of Directors and/or Trust Officers of the Trustee in
good faith determine that the withholding of such notice is in the interest of
the Holders.
SECTION 503. Certain Rights of Trustee. Except as otherwise provided
in Section 501:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture or other paper or document believed by it to be genuine and to have
been signed or presented by the proper party or parties;
(b) any request or direction of the Company shall be sufficiently
evidenced by a Company Request;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in good faith on its part, rely upon an
Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders
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pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or document, but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and premises
of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder;
(h) nothing in this Indenture shall require the Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of
any of its duties or the exercise of any of its rights or powers hereunder; and
(i) The Trustee shall have no duty to inquire as to the performance of the
Company's covenants in Article Seven hereof. In addition, the Trustee shall not
be deemed to have knowledge of any Default or Event of Default, except (i)
any Default or Event of Default occurring pursuant to Section 401(1),
401(2) or 701, or (ii) any Default or Event of Default of which the Trustee
shall have received written notification or obtained actual knowledge.
SECTION 504. Not Responsible for Recitals or Issuance of Notes. The
recitals contained herein and in the Notes (except the Trustee's certificate of
authentication) shall be taken as the statements of the Company and the Trustee
assumes no re-
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sponsibility for their correctness. The Trustee makes no
representations as to validity or sufficiency of this Indenture or the Notes.
The Trustee shall not be accountable for the use or application by the Company
of the proceeds from the issuance of the Notes.
SECTION 505. May Hold Notes. The Trustee, any Paying Agent, any
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Notes and, subject to Sections 508
and 512, may otherwise deal with the Company with the same rights it would have
if it were not Trustee, Paying Agent, Registrar or such other agent.
SECTION 506. Money Held in Trust. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required
by law. The Trustee shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed with the Company. The
Trustee shall apply funds deposited with or transferred to it by or on behalf of
the Company for the purposes so deposited or transferred and in accordance with
the terms of this Indenture.
SECTION 507. Compensation and Reimbursement. The Company agrees:
(1) to pay to the Trustee from time to time reasonable compensation for
all services rendered by it hereunder (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of
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or in connection with the acceptance or administration of this
trust, including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder.
The Trustee shall promptly notify the Company of any claim asserted
against the Trustee for which it may seek indemnity.
As security for the performance of the obligations of the Company
under this Section 507, the Trustee shall have a Lien senior and prior to the
Notes upon all Property and funds held or collected by the Trustee as such,
except funds held in trust for the payment of principal of or interest on Notes.
Notwithstanding the satisfaction and discharge of the Indenture, the
obligations of the Company to the Trustee under this Section 507 shall survive.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in clause (5) or (6) of Section 401, the
expenses and the compensation for such services are intended to constitute
expenses of administration under any Bankruptcy Law.
SECTION 508. Eligibility; Disqualification. This Indenture shall
always have a Trustee who satisfies the requirements of TIA (S) 310(a)(1) and
shall always have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition. If the Trustee
has or shall acquire any "conflicting interest" within the meaning of
Section 310(b) of the TIA, the Trustee and the Company shall in all respects
comply with the provisions of Section 310(b) of the TIA.
SECTION 509. Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article Five shall become effective until the
acceptance of appointment by the successor Trustee under Section 510.
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(b) The Trustee may resign at any time by giving written notice
thereof to the Company, the New Jersey Commission, the New Jersey Division, the
Nevada Commission and the Nevada Control Board and any other Gaming Authority at
least 30 days prior to the proposed resignation.
(c) The Trustee may be removed at any time by an Act
of the Holders of a majority in principal amount of the
Outstanding Notes, delivered to the Trustee and to the Company.
(d) The Company, by action of an Authorized Officer, may remove the
Trustee at any time if:
(1) the Trustee fails to comply with Section 508;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Trustee or its
Property;
(4) the Trustee becomes incapable of acting; or
(5) the Trustee becomes disqualified under any applicable provision
of the New Jersey Act or is found unsuitable under any applicable provision of
the Nevada Act, or the Trustee's relationship with the Company may, in the
Company's discretion, jeopardize any material Gaming License or franchise or
right or approval granted thereto.
(e) If the Trustee fails to comply with Section 508, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
(f) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by action of an Authorized Officer, shall promptly appoint a successor
Trustee. Within one year after such resignation, removal or incapability, or
the occurrence of such vacancy, a successor Trustee to replace the successor
Trustee appointed by the Company may be appointed by an
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Act of the Holders of a majority in principal amount of the Outstanding Notes
delivered to the Company and the retiring Trustee. If, within 30 days after
the retiring Trustee resigns or is removed, no successor Trustee shall have
been so appointed by the Company or the Holders and accepted appointment in
the manner provided in Section 510, the retiring Trustee, the Company or the
Holders of at least 10% in aggregate principal amount of the then Outstanding
Notes may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(g) The Company shall give notice to all Holders in accordance with
Section 107 of each resignation and each removal of the Trustee and each
appointment of a successor Trustee. Each notice shall include the name of the
successor Trustee and the address of its Corporate Trust Office.
SECTION 510. Acceptance of Appointment by Successor. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the
Company and to the retiring Trustee an instrument accepting such appointment,
and the successor Trustee and the Company shall enter into a supplemental
indenture, pursuant to Section 601 hereof, evidencing the appointment of the
successor Trustee. Thereupon, the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee. On request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee. The retiring Trustee shall promptly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder, subject to the Lien, if any, provided
for in Section 507. Upon request of any such successor Trustee, the Company
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Trustee all such rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article Five and under the TIA.
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Notwithstanding the replacement of the Trustee pursuant to this
Section 510, the Company's obligations under Section 507 hereof shall continue
for the benefit of the retiring Trustee in connection with its rights and duties
hereunder prior to such replacement.
SECTION 511. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article Five, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Notes shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
Trustee by merger, conversion or consolidation to such authenticating Trustee
may adopt such authentication and deliver the Notes so authenticated with the
same effect as if such successor Trustee had itself authenticated such Notes.
SECTION 512. Preferential Collection of Claims Against the Company.
(a) The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
(b) For the purposes of interpreting TIA (S) 311 under this Section
512 only:
(1) The term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand; and
(2) The term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing,
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shipment, storage or sales of goods, wares or merchandise and which is
secured by documents evidencing title to, possession of, or a Lien upon,
the goods, wares or merchandise or the receivables or proceeds arising from
the sale of the goods, wares or merchandise previously constituting the
security, provided the security is received by the Trustee simultaneously
with the creation of the creditor relationship with the Company arising
from the making, drawing, negotiation or incurring of the draft, bill of
exchange, acceptance or obligation.
SECTION 513. Reports by Trustee. (a) Within 60 days after May 15 of
each year, the Trustee shall transmit by mail to all Holders of Notes, as
provided in Subsection (c) of this Section, a brief report dated as of such May
15 if and to the extent required under TIA (S) 313(a).
(b) The Trustee shall also comply with TIA (S) 313(b) and (c).
(c) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Notes are listed, and with the SEC and the Company. The Company will
notify the Trustee when the Notes are listed on any stock exchange.
(d) The Trustee shall report the names of all Holders to the New
Jersey Division, the New Jersey Commission, the Nevada Control Board, the Nevada
Commission and, if requested in writing by the Company, each other Gaming
Authority so requested by the Company promptly after the initial issuance of the
Notes. The Trustee shall provide to the New Jersey Division, the New Jersey
Commission, the Nevada Control Board, the Nevada Commission and, if requested in
writing by the Company, each other Gaming Authority so requested by the Company
copies of all written communications from the Trustee to all Holders, notice of
any Default, notice of any transfer or assignment of the Trustee's rights under
this Indenture within five Business Days thereof, a copy of any amendment to
this Indenture or the Notes and notice of any rescission, annulment or waiver in
respect of an Event of Default under this Indenture.
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(e) The Trustee shall cooperate with the Company in providing
information relating to the Notes or the Holders to any Governmental Authority
pursuant to any Legal Requirement.
ARTICLE SIX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 601. Without Consent of Holders. The Company, when duly
authorized by resolutions of its Board of Directors, and the Trustee, may amend
or supplement this Indenture or the Notes for the benefit of the Holders without
notice to or consent of any Holder:
(1) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the covenants of the Company
contained herein and in the Notes;
(2) to evidence the succession of another Trustee, and the assumption
by any such successor Trustee of the obligations of the Trustee hereunder;
(3) to add to the covenants of the Company, for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company;
(4) to cure any ambiguity, to correct or supplement any provision
herein or in the Notes which may be inconsistent with any other provision
herein or to make any other provisions with respect to matters or questions
arising under this Indenture or the Notes which shall not be inconsistent
with the provisions of this Indenture or the Notes;
(5) to provide for uncertificated Notes in addition to or in place of
certificated Notes; or
(6) to comply with any requirement of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA, as contemplated
by Section 109. Notwithstanding the above, the Trustee and the Company may
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not make any change that adversely affects the legal rights of any Holder
hereunder or under the Notes.
SECTION 602. With Consent. Subject to Section 408, the Company, when
duly authorized by resolution of its Board of Directors, and the Trustee may
amend this Indenture or the Notes with the written consent of the Holders of at
least a majority in principal amount of the then Outstanding Notes.
Notwithstanding the provisions of this Section 602, without the
consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 413, may not:
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
(2) reduce the rate of or change the time for or the manner of,
payment of interest, including Defaulted Interest, on any Note;
(3) reduce the principal, or change the Stated Maturity for the
payment of principal, of any Note, or reduce the Redemption Price of or
change the date on which any Note may be subject to redemption or alter any
other provision with respect to redemption pursuant to the terms of the
Notes;
(4) waive a Default in the payment of the principal of or interest on
or redemption of any Note;
(5) make any Note payable in money other than that stated in the
Note; or
(6) make any change in Section 408, 413 or this Section 602.
It shall not be necessary under this Section 602 for the consent of
the Holders to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
An amendment under Section 601 or 602 may not make any change that
adversely affects the rights under Article Ten of any
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holder of an issue of Senior Indebtedness unless the holders of such issue
pursuant to its terms consent to the change or the change is otherwise
permissible.
After an amendment under this Section 602 becomes effective, the
Company shall mail to Holders a notice briefly describing the amendment.
SECTION 603. Compliance with Trust Indenture Act. Every amendment to
this Indenture or the Notes shall be set forth in a supplemental indenture that
complies with the TIA as then in effect.
SECTION 604. Revocation and Effect of Consents. (a) Until an
amendment or waiver becomes effective, a consent to it by a Holder of a Note is
a continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as the consenting Holder's Note,
even if notation of the consent is not made on any Note. However, any such
Holder or subsequent Holder may revoke the consent as to his Note or portion of
a Note if the Trustee receives written notice of revocation before the date on
which the Trustee receives an Officers' Certificate from the Company certifying
that the Holders of the requisite principal amount of Notes have consented to
such amendment or waiver. An amendment or waiver becomes effective upon receipt
by the Trustee of such Officers' Certificate and the written consents from the
Holders of the requisite percentage in principal amount of Notes.
(b) The Company may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment
or waiver. If a record date is fixed, then notwithstanding the second and third
sentence of paragraph (a) of this Section 604, those Persons who were Holders at
such record date (or their duly designated proxies), and only those Persons,
shall be entitled to consent to such amendment or waiver or to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 120 days after such record date.
(c) After an amendment or waiver becomes effective, it shall bind
every Holder.
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SECTION 605. Notation on or Exchange of Notes; Effect of Supplemental
Indenture. If an amendment, supplement or waiver changes the terms of the Notes,
the Trustee may require the Holders to deliver the Notes to the Trustee. The
Trustee may place an appropriate notation on the Notes concerning such changed
terms and return them to the Holders and the Trustee may place an appropriate
notation on any Note thereafter authenticated. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Notes shall issue and
the Trustee shall authenticate new Notes that reflect such changed terms.
Upon the execution of any supplemental indenture under this Article Six,
this Indenture and, to the extent applicable, the Notes, shall be modified
thereby, and every Holder of any Note authenticated and delivered hereunder,
whether before or after the execution of such supplemental indenture, shall be
bound by this Indenture, as so amended, modified or supplemented.
SECTION 606. Trustee Protected. The Trustee shall sign all supplemental
indentures, except that the Trustee need not sign any supplemental indenture
that adversely affects its rights. In signing or refusing to sign such amendment
or supplemental indenture, the Trustee shall be entitled to receive and, subject
to Section 501, shall be fully protected in relying upon, an Officers'
Certificate of the Company and an Opinion of Counsel as conclusive evidence that
such amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, that all conditions precedent
to the execution thereof have been met, that it will be valid and binding upon
the Company in accordance with its terms and that, after the execution thereof,
the Company will not be in Default and no Event of Default will have occurred
and be continuing.
ARTICLE SEVEN
COVENANTS
SECTION 701. Payment of Notes. The Company shall pay the principal of and
interest on the Notes on the dates and in the manner provided in the Notes. An
installment of principal or
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interest shall be considered paid on the date due if the Trustee or Paying Agent
holds on that date money designated for and sufficient to pay such installment
and is not prohibited from paying such money to the Holders pursuant to the
terms of this Indenture.
The Company shall pay interest on overdue principal at the rate borne by
the Notes; it shall pay interest on overdue installments of interest at the same
rate, to the extent lawful.
SECTION 702. Maintenance of Office or Agency. The Company will maintain in
the Borough of Manhattan, The City of New York, an office or agency where Notes
may be surrendered for presentation for payment, registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company will give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations or surrenders may be made or served at the Corporate
Trust Office in the City of Minneapolis as the office of the Company for
purposes of this paragraph. The Company may also from time to time designate one
or more other offices or agencies where the Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York where Notes may be surrendered
for presentation for payment, for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of any such designation or rescission and of any change in the location
of any such other office or agency.
SECTION 703. Money for Note Payments to be Held in Trust. If the Company
(or any other obligor on the Notes) or any Affiliate of the Company (or any such
other obligor) shall at any time act as the Company's Paying Agent, it will, on
or before each due date of the principal of or interest on any of the Notes,
segregate and hold in trust for the benefit of the Persons
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entitled thereto a sum sufficient to pay the principal or interest so becoming
due until such sums shall be paid to such Persons or otherwise disposed of as
herein provided, and will promptly notify the Trustee of its action or failure
so to act.
Whenever the Company shall have one or more Paying Agents, it will, prior
to each due date of the principal of or interest on any Notes, appoint a lead
Paying Agent and deposit with such lead Paying Agent a sum sufficient to pay the
principal or interest so becoming due, such sum to be held in trust for the
benefit of the Persons entitled to such principal or interest, and (unless such
lead Paying Agent is the Trustee) the Company will promptly notify the Trustee
of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent will agree
with the Trustee, subject to the provisions of this Section 703, that such
Paying Agent will:
(1) hold all sums held by it for the payment of the principal of or
interest on the Notes in trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or otherwise disposed of as
herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Notes including the Company) in the making of any payment in
respect of principal or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held
in trust by such Paying Agent.
For the purpose of obtaining the satisfaction and discharge of this
Indenture pursuant to Article Three or for any other purpose, the Company may at
any time pay, or by a Company Request direct any Paying Agent to pay, to the
Trustee all sums held in trust by the Company or such Paying Agent,
respectively. Such sums are to be held by the Trustee upon the same trusts as
those upon which such sums were held by the Company or such
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Paying Agent. Upon any such payment, the Company and any such Paying Agent shall
be released from all further liability with respect to such money.
SECTION 704. Limitation on Restricted Payments. (a) The Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly, (i)
declare or pay any dividend on or make any distribution or payment on its
Capital Stock or to its stockholders (in their capacity as stockholders) (other
than dividends or distributions payable solely in its Qualified Capital Stock
and, in the case of a Restricted Subsidiary, dividends or distributions payable
to the Company or a Wholly Owned Subsidiary), (ii) purchase, redeem or otherwise
acquire or retire for value, any shares of Capital Stock of the Company (except,
in the case of a Restricted Subsidiary, from the Company) or any Subsidiary of
the Company (other than a Wholly Owned Subsidiary), (iii) acquire, retire or
redeem any Indebtedness of or otherwise make any Investment in any Affiliate of
the Company (other than Investments in a Restricted Subsidiary) or (iv)
purchase, redeem or otherwise acquire or retire for value, prior to any
scheduled maturity, scheduled repayment or scheduled sinking fund or mandatory
redemption payment, Indebtedness of the Company or of any Affiliate of the
Company that is pari passu or subordinated (whether pursuant to its terms or by
operation of law) in right of payment to the Notes and which is scheduled to
mature (after giving effect to any and all unconditional (other than as to the
giving of notice) options to extend the maturity thereof) on or after the
maturity date of the Notes, if at the time of any such declaration,
distribution, payment, purchase, redemption, acquisition or retirement
(collectively, the "Restricted Payments") and after giving effect thereto
(including, without limitation, in calculating on a pro forma basis, as if such
proposed Restricted Payment had been made, the Consolidated Fixed Charge
Coverage Ratio of the Company for purposes of clause (y) below):
(x) any Event of Default shall have occurred and be continuing; or
(y) the Company could not incur at least $1.00 of additional Indebtedness
pursuant to Section 705(a); or
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(z) the aggregate amount of Restricted Payments for all such purposes made
subsequent to the Effective Date would exceed an amount equal to the sum of (i)
50% of aggregate Consolidated Net Income (or if such aggregate Consolidated Net
Income shall be a deficit, minus 100% of such deficit) accrued on a cumulative
basis in the period commencing on the Effective Date and ending on the last day
of the fiscal quarter immediately preceding the relevant Transaction Date, (ii)
the aggregate net proceeds, including cash and the fair market value of Property
other than cash (as determined in good faith by the Board of Directors of the
Company, whose determination shall be conclusive, and evidenced by a resolution
of such Board of Directors filed with the Trustee) received by the Company from
the issuance or sale to any Person (other than a Subsidiary of the Company)
during the period commencing on the Effective Date and ending on such
Transaction Date of Qualified Capital Stock of the Company (other than Capital
Stock of the Company issued upon conversion of or in exchange for securities of
the Company, except to the extent of any payment to the Company in addition to
the securities of the Company surrendered) and (iii) to the extent not included
in (ii) above, the aggregate net proceeds, including cash and the fair market
value of Property other than cash (as determined in good faith by the Board of
Directors of the Company, whose determination shall be conclusive, and evidenced
by a resolution of such Board of Directors filed with the Trustee) received by
the Company from the issuance or sale to any Person (other than a Subsidiary of
the Company) during the period commencing on the Effective Date and ending on
such Transaction Date, of any debt securities evidencing Indebtedness of the
Company or of any Redeemable Stock of the Company, if, and to the extent that,
as of such Transaction Date such debt securities or Redeemable Stock, as the
case may be, have been converted into, exchanged for or satisfied by the
issuance of Qualified Capital Stock of the Company; provided, however, that, if
the Company and its Restricted Subsidiaries have made any Investments during the
period commencing on the Effective Date and ending on such Transaction Date, the
proceeds of which Investments were used, directly or indirectly, by the
recipients thereof to purchase Qualified Capital Stock of the Company or other
securities that have been converted into, exchanged for or
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satisfied by the issuance of Qualified Capital Stock of the Company, the
aggregate amount determined under clauses (ii) and (iii) shall be net of the
aggregate amount of such Investments.
(b) The provisions of this Section 704 shall not prohibit:
(i) the Company or any Restricted Subsidiary from paying a dividend on its
own Capital Stock within 60 days after the declaration thereof if, on the date
when the dividend was declared, the Company or such Restricted Subsidiary, as
the case may be, could have paid such dividend in compliance with the other
provisions of this Section 704;
(ii) the Company or any Restricted Subsidiary from redeeming or
repurchasing its securities in the event that the holder of such securities
has failed to qualify or to be found suitable or otherwise eligible under a
Gaming Jurisdiction Law to remain as a holder of such securities;
(iii) Holdings from redeeming, or the Company or any Restricted Subsidiary
from purchasing, for an amount not exceeding $750,000 in the aggregate, all or
a portion of the shares of preferred stock, Series A, of Holdings outstanding
on the Effective Date; or
(iv) the Company and its Restricted Subsidiaries from acquiring shares of
Capital Stock of the Company solely in exchange for other shares of Capital
Stock of the Company that is not Redeemable Stock and that is not exchangeable
for Redeemable Stock whether upon conversion or otherwise;
provided, however, that the aggregate amount of any payment, dividend,
acquisition, redemption or distribution made by the Company or any Restricted
Subsidiary pursuant to subsection (b)(i) or (ii) shall be included in any
computation under Section 704(a) of the aggregate amount of Restricted Payments
made by the Company and its Restricted Subsidiaries, and the aggregate amount of
any payment, dividend, acquisition, redemption or distribution made by the
Company or any Restricted Subsidiary pursuant to
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subsection (b)(iii) or (iv) shall not be included in any such computation.
(c) So long as no Event of Default shall have occurred and be continuing,
the provisions of this Section 704 shall not prohibit the Company and its
Restricted Subsidiaries from:
(i) acquiring shares of Capital Stock of the Company (A) to eliminate
fractional shares, (B) from an employee who has purchased or otherwise
acquired shares of Capital Stock of the Company under an employee stock option
or employee stock purchase agreement or other plan or agreement reserving to
the Company the option to repurchase the shares but in no event for a price
greater than the higher of fair market value or the price at which such
securities were sold by the Company and (C) pursuant to a court order,
provided that the aggregate consideration paid by the Company and its
Restricted Subsidiaries pursuant to subclauses (A) and (B) above shall not
exceed $250,000 in any fiscal year of the Company;
(ii) declaring or paying any dividend on, or redeeming or repurchasing,
shares of the Series B Preferred Stock, provided that the aggregate amount
paid by the Company and its Restricted Subsidiaries in all such redemptions
and repurchases from and after the Effective Date shall not exceed
$10,000,000;
(iii) redeeming or purchasing the Preferred Share Purchase Rights at a
price not exceeding $0.01 per right and $2,000,000 in the aggregate;
(iv) acquiring, retiring or redeeming any Indebtedness of, or otherwise
making any Investment in, Tropicana Enterprises in connection with the
Tropicana Security Deposit or the Tropicana Loan, except to the extent that
the aggregate amount of any such Investment in Tropicana Enterprises in
connection with the Tropicana Loan exceeds the outstanding principal amount
owed to third parties under the Tropicana Loan at the Effective Date;
(v) purchasing the Tropicana or the Jaffe Partnership Interest; or
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(vi) making any Restricted Payment not otherwise permitted by this Section
704, provided that the aggregate amount of Restricted Payments made pursuant
to this clause (vi) from and after the Effective Date shall not exceed
$30,000,000;
provided, however, that the aggregate amount of any payment, dividend,
acquisition, redemption or distribution made by the
Company or any Restricted Subsidiary pursuant to subsection (C)(i), (ii), (iii)
or (vi) shall be included in any computation under Section 704(a) of the
aggregate amount of Restricted Payments made by the Company and its Restricted
Subsidiaries, and the aggregate amount of any payment, dividend, acquisition,
redemption or distribution made by the Company or any Restricted Subsidiary
pursuant to subsection (c)(iv) or (v) shall not be included in any such
computation.
SECTION 705. Limitation on Indebtedness. (a) The Company will not,
and will not permit any Restricted Subsidiary to, create, incur, assume,
guarantee or otherwise become liable with respect to, or become responsible for
the payment of, any Indebtedness unless, after giving effect thereto, the
Consolidated Fixed Charge Coverage Ratio of the Company is greater than 1.9
to 1.
(b) Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may incur, create, assume, guarantee or otherwise become liable
with respect to any or all of the following: (i) Indebtedness not otherwise
permitted pursuant to clauses (ii) through (xi) below in an aggregate amount at
any time outstanding of up to $20,000,000; (ii) Indebtedness evidenced by the
Notes or the 11% Senior Subordinated Notes Due 2002 of the Company; (iii)
Indebtedness of the Company and its Restricted Subsidiaries remaining
outstanding immediately after the issuance of the Notes and application of the
proceeds thereof; (iv) Indebtedness to the Company or to a Restricted
Subsidiary; (v) Indebtedness incurred by the Company or any Restricted
Subsidiary in connection with (a) the construction of any new facility or
facilities related to the gaming business or any related business of the Company
or any Restricted Subsidiary or in connection with the expansion by the Company
or any Restricted Subsidiary of any of its existing facilities; provided,
however, that the aggregate principal amount of all
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such Indebtedness incurred on and subsequent to the Effective Date shall not
exceed $100,000,000, (b) the maintenance, refurbishment or replacement by the
Company or any Restricted Subsidiary in the ordinary course of business of
assets related to the gaming business or any related business of the Company or
any Restricted Subsidiary or (c) the acquisition of slot machines, gaming tables
or other similar gaming equipment; (vi) Indebtedness under any Credit Facilities
in an aggregate amount of up to $212,300,000; (vii) Indebtedness incurred to
purchase the Tropicana or the Jaffe Partnership Interest or in connection with
any Tropicana Loan Refinancings; (viii) Indebtedness incurred in respect of the
Tropicana Security Deposit; (ix) Indebtedness under Currency Agreements or
Interest Swap Obligations (including any Interest Swap Obligation, the purpose
of which is to alter or replace, or lengthen or shorten the maturity of, any
Interest Swap Obligation previously incurred pursuant to this clause (ix)),
provided that such Currency Agreements or Interest Swap Obligations are related
to payment obligations on Indebtedness otherwise permitted by this Section 705;
(x) Indebtedness incurred in respect of performance bonds, bankers' acceptances,
letters of credit and surety bonds provided by the Company or any Restricted
Subsidiary in the ordinary course of business; and (xi) Indebtedness
("Replacement Indebtedness") the proceeds of which are used to refinance (a) all
or a portion of the Notes, (b) any other permitted Indebtedness of the Company
and its Restricted Subsidiaries or (c) permitted successor or replacement
Indebtedness, in each case in a principal amount (or, if such Replacement
Indebtedness does not require cash payments prior to maturity, with an original
issue price) not to exceed an amount equal to the aggregate of the principal
amount plus any prepayment penalties, premiums and accrued and unpaid interest
on the Indebtedness so refinanced and customary fees, expenses and costs related
to the incurrence of such Replacement Indebtedness, provided that, in the case
of this clause (xi), (1) if the Notes are refinanced in part, such Replacement
Indebtedness is expressly made pari passu or subordinate in right of payment to
the remaining Notes, (2) if the Indebtedness to be refinanced is subordinate in
right of payment to the Notes, such Replacement Indebtedness is subordinate in
right of payment to the Notes at least to the extent that the Indebtedness to be
refinanced is subordinate to the Notes, (3) if the Indebtedness to be refinanced
is pari passu in right of payment to the Notes, such Replacement Indebtedness
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is pari passu or subordinate in right of payment to the Notes at least to the
extent that the Indebtedness to be refinanced is pari passu to the Notes and (4)
if the Notes are refinanced in part or if the Indebtedness to be refinanced is
subordinate in right of payment to the Notes and scheduled to mature after the
maturity date of the Notes, such Replacement Indebtedness determined as of the
date of incurrence does not mature prior to the final scheduled maturity date of
the Notes and the Average Life of such Replacement Indebtedness is equal to or
greater than the Average Life of the remaining Notes.
SECTION 706. Limitation on Liens. The Company will not, directly or
indirectly, create, incur, assume or suffer to exist, or permit any Restricted
Subsidiary to create, incur, assume or suffer to exist, any Lien on or with
respect to any of its Property or Capital Stock, whether now owned or hereafter
acquired, or assign, or permit any Restricted Subsidiary to assign, any right to
receive income, other than: (i) Liens existing as of the date of this Indenture
or arising hereafter pursuant to the Credit Facility; (ii) Liens securing Senior
Indebtedness; (iii) Liens in favor of the Company; (iv) Liens securing
Indebtedness (including, without limitation, any obligation, contingent or
otherwise, for borrowed money of any Person secured by any Lien in respect of
Property of the Company or any Restricted Subsidiary, even though neither the
Company nor any Restricted Subsidiary has assumed or become liable for
payment of such obligation) of the Company (other than Senior Indebtedness) or
any Restricted Subsidiary, provided that, with respect to any Indebtedness that
is pari passu with the Notes, the Notes are secured by Liens equal and ratable
to such Liens and, with respect to Indebtedness that is subordinated to the
Notes, the Notes are secured by Liens that are senior to such Liens; and (v)
Permitted Liens. Notwithstanding the foregoing, this provision shall not be
applicable to any Lien on Capital Stock issued by any Restricted Subsidiary that
holds, directly or indirectly, a license, or is a holding company, under the
Nevada Act.
SECTION 707. Limitation on Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction which by its terms expressly restricts
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the ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions on such Restricted Subsidiary's Capital Stock or pay any
Indebtedness owed to the Company or any Restricted Subsidiary (except that
payment of dividends by Adamar of Nevada may be suspended if required by Section
6.A. of the Stock Pledge), (ii) make any loans or advances to the Company or any
Restricted Subsidiary or (iii) transfer any of its Property to the Company or
any Restricted Subsidiary, except that (A) clauses (ii) and (iii) shall be
deemed not to apply to any such encumbrances or restrictions contained in any
agreement or instrument (a) relating to any Indebtedness of the Company or any
Restricted Subsidiary existing on the Effective Date or to the Credit Facility;
(b) relating to any Property acquired by the Company or any Restricted
Subsidiary after the Effective Date, provided that such encumbrance or
restriction relates only to the Property which is acquired; (c) relating to (x)
any industrial revenue or development bonds, (y) any obligation of the Company
or any Restricted Subsidiary incurred in the ordinary course of business to pay
the purchase price of Property acquired by the Company or such Restricted
Subsidiary and (z) any lease of Property by the Company or any Restricted
Subsidiary in the ordinary course of business, provided that such encumbrance or
restriction relates only to the Property which is the subject of such industrial
revenue or development bond, such Property purchased or such Property leased and
any such lease, as the case may be; (d) relating to any Indebtedness of any
Restricted Subsidiary at the date of acquisition of such Restricted Subsidiary
by the Company or any Restricted Subsidiary, provided that such Indebtedness was
not incurred in connection with or in anticipation of such acquisition; and (e)
replacing or refinancing agreements or instruments referred to in clauses (a),
(b) and (c), provided that the provisions relating to such encumbrance or
restriction contained in such replacing or refinancing agreement or instrument
are no more restrictive than the provisions relating to such encumbrance or
restriction contained in the original agreement or instrument, (B) clauses (i),
(ii) and (iii) shall be deemed not to apply to any such encumbrances or
restrictions imposed by the New Jersey Commission, the New Jersey Division, the
Nevada Commission, the Nevada Control Board or any other Gaming Authority and
(C) clause (iii) shall be deemed not to apply to the transfer of Property that
is used to secure Indebtedness, provided that such Indebtedness is permitted to
be incurred under the Indenture.
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SECTION 708. Limitation on Capital Stock of Restricted Subsidiaries.
The Company will not (i) permit any of its Restricted Subsidiaries to issue any
Capital Stock to any Person (other than the Company or any Wholly Owned
Subsidiary) that shall entitle the holder of such Capital Stock to a preference
in right of payment in the event of liquidation, dissolution or winding-up of
such Restricted Subsidiary or with respect to dividends of such Restricted
Subsidiary or (ii) permit any Person (other than the Company or any Wholly Owned
Subsidiary) to hold any such Capital Stock.
SECTION 709. Transactions with Affiliates. The Company will not, and
will not permit any of its Restricted Subsidiaries to, enter into any
transaction (including, without limitation, the purchase, sale or exchange of
Property, the making of any Investment, the giving of any guarantee or the
rendering of any service) with any Affiliate of the Company or any Subsidiary of
the Company (other than a Restricted Subsidiary) unless (i) the Board of
Directors of the Company believes, in its reasonable good faith judgment, based
on full disclosure of all relevant facts and circumstances, that such
transaction is in the best interests of the Company or such Restricted
Subsidiary and (ii) such transaction is on terms no less favorable to the
Company or such Restricted Subsidiary than those that could be obtained in a
comparable arm's length transaction with an entity that is not an Affiliate of
the Company or such Restricted Subsidiary, provided that this Section 709 shall
not be applicable for so long as the Company's common stock is listed for
trading on the New York Stock Exchange or the American Stock Exchange or is
quoted on the National Association of Securities Dealers Automated Quotation
System and designated as a "national market system security."
SECTION 710. Restriction on Incurrence of Certain Indebtedness. The
Company will not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
Senior Indebtedness and senior in any respect in right of payment to the Notes.
The Company agrees that the Notes will not be subordinate in right of payment to
any other Indebtedness of the Company, other than Senior Indebtedness.
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SECTION 711. Change of Control. (a) Unless the Company has exercised
its right of redemption pursuant to Section 711(d), upon the occurrence of a
Change of Control, each Holder shall have the right to require that the Company
repurchase each such Holder's Notes pursuant to the offer described in
paragraphs (b) and (c) below (the "Change of Control Offer") at a purchase price
in cash equal to the principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of repurchase.
(b) Unless the Company has provided the notice to the Trustee
described in Section 711(d), within 30 days following any Change of Control, the
Company shall mail a notice to each Holder and to the Trustee stating:
(1) that the Change of Control Offer is being made pursuant to this
Section 711, that such Holder has the right to require the Company to
repurchase such Holder's Notes at a purchase price in cash equal to the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase and that all Notes tendered will be accepted for payment;
(2) the purchase price and the purchase date (which shall be no
earlier than 30 days and no later than 60 days from the date such notice is
mailed) (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making repurchase
payments, any Note accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to the
Change of Control Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day prior to the Change of Control
Payment Date; provided, however that in the case of Notes registered in the
name of the
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Depository Trust Company ("DTC") or its nominee, a Note will be deemed
surrendered at the time that it is transferred by DTC to the account of the
Paying Agent by book-entry credit if such Note is physically transferred to the
Paying Agent within five Business Days after such transfer by book-entry credit
in accordance with DTC's normal procedures;
(6) that Holders whose Notes are purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered; and
(7) the CUSIP number, if any, relating to the Notes to be
repurchased.
The notice to Holders shall contain all instructions and materials
necessary to enable such Holders to tender Notes.
(c) Unless the Company has exercised its right of redemption set
forth in Section 711(d), on the Change of Control Payment Date, the Company
shall (i) accept for payment Notes or portions thereof tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to
pay the purchase price of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly mail to the Holder of Notes so
accepted payment in an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail to such Holders a new Note equal in principal
amount to any unpurchased portion of the Note surrendered. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date. For purposes of this
Section 711, only the Trustee or its agent shall act as the Paying Agent.
(d) Notwithstanding anything to the contrary contained herein, upon
the occurrence of a Change of Control, the Company shall have the right to
redeem all but not part of the Notes at a purchase price in cash equal to the
prices (expressed in percentages of principal amount) set forth below plus
accrued and unpaid interest, if any, to the Redemption Date, if redeemed during
the 12-month period beginning ________ of the years indicated below:
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Year Percentage
---- ----------
1994 []%
1995 []
1996 []
1997 []
1998 []
1999 []
2000 []
2001 []
2002 and thereafter 100.000
To exercise such right, the Company must notify the Trustee in writing of such
exercise within twenty Business Days after such Change of Control. The
provisions of Sections 901, 903, 904 and 905 shall apply to any redemption of
Notes by the Company pursuant to this Section 711(d); provided, however, that
(i) the Redemption Date shall be a date that is no later than 60 days from such
Change of Control and (ii) the Company must redeem all Notes Outstanding at such
Redemption Date.
SECTION 712. SEC Reports. The Company shall file with the Trustee copies of
the annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the SEC may by rules and
regulations prescribe) that the Company is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act or otherwise within five
days after such annual reports, information, documents and other reports are
required to be filed with the SEC and, upon request of any Holder, shall
promptly mail such annual reports, information, documents and other reports to
such Holder; provided, however, that if the Company is not subject to Section 13
or 15(d) of the Exchange Act, the Company shall nonetheless file with the SEC
and the Trustee on a timely basis, and, upon request of any Holder, promptly
mail to such Holder, the annual reports, information, documents and other
reports that the Company would be required to file if the Company were subject
to the requirements of Section 13 or 15(d) of the Exchange Act. The Company
shall comply with the provisions of TIA (S) 314(a).
SECTION 713. Compliance Certificates. The Company will deliver to the
Trustee, within 90 days after the end of each fiscal quarter and within 120 days
after the end of each fiscal
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year, an Officers' Certificate stating that a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year has been made
under the supervision of the signing officers with a view to determining whether
the Company has kept, observed, performed and fulfilled its obligations under
this Indenture and further stating, as to each such officer signing such
certificate, that to the best of his knowledge the Company has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture
applicable to it and is not in default in the performance or observance of any
of the terms, provisions and conditions hereof applicable to it (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he may have knowledge) and that to the best of his
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest on the Notes are prohibited.
The Company will deliver to the Trustee forthwith upon becoming aware of
any Default, Event of Default or default in the performance of any covenant,
agreement or condition contained in this Indenture, an Officers' Certificate
specifying such Default, Event of Default or default.
SECTION 714. Continued Existence and Rights. Subject to Article Eight, the
Company will, and the Company will cause each of its Restricted Subsidiaries and
Significant Subsidiaries to, do or cause to be done all things necessary to
preserve and keep in full force and effect its existence as a corporation and
its rights and franchises; provided, however, that nothing in this Section 714
shall prevent the loss of the corporate existence of any such Subsidiary or any
such right or franchise if such loss is, in the judgment of the Company both
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and not disadvantageous in any material respect to the
Holders.
SECTION 715. Maintenance of Properties and Other Matters. The Company will,
and will cause each of its Subsidiaries to, maintain its Properties in good
working order and condition and make all necessary repairs, renewals and
replacements; provided, however, that, subject to Article Eight, nothing in this
Section 715 shall prevent the Company or any of
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its Subsidiaries from discontinuing the operation and maintenance of any of its
Properties, if such discontinuance is, in the judgment of the Company or the
Subsidiary, as the case may be, both desirable in the conduct of its respective
business and not disadvantageous in any material respect to the Holders.
The Company will insure and keep insured, and will cause each Subsidiary to
insure and keep insured, with financially sound and reputable insurers, so much
of their respective Properties and in such amounts as is usually and customarily
insured by companies engaged in a similar business with respect to Properties of
a similar character against loss by fire and the extended coverage perils. None
of the Company or any of its Subsidiaries will maintain a system of self
insurance in lieu of or in combination with the foregoing, provided that
deductibles under the insurance policy or policies of the Company and its
Subsidiaries shall not be considered to be self insurance as long as such
deductibles accord with financially sound and approved practices of companies
owning or operating Properties of a similar character and maintaining similar
insurance coverage. The Trustee shall not be required to see that such insurance
is effected or maintained.
The Company will keep, and will cause each of its Subsidiaries to keep,
proper books and records of accounts in which full and correct entries will be
made of all its business transactions in accordance with generally accepted
accounting principles. The Company shall cause the books and records of accounts
of the Company and its Subsidiaries to be examined, either on a consolidated or
on an individual basis, by one or more firms of independent public accountants
not less frequently than annually. The Company shall, and shall cause each of
its Subsidiaries to, prepare its financial statements in accordance with
generally accepted accounting principles.
The Company will, and will cause each of its Subsidiaries to, comply with
all Legal Requirements and to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership or operation of its
Properties or to the conduct of its business including, without limitation, all
Gaming Licenses.
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Notwithstanding the foregoing provisions in this Section 715, failure
by the Company or any of its Subsidiaries to comply with such provisions shall
not be deemed to be a breach of such provisions to the extent that such failure
would not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole.
SECTION 716. Taxes and Claims. The Company will, and will cause each
of its Subsidiaries to, pay (or, if appropriate, withhold and pay over) prior
to delinquency:
(1) all taxes, assessments and governmental charges or levies
imposed upon it or its Property (or that it is required to withhold and
pay over) and
(2) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which if unpaid might result
in the creation of a Lien upon its Properties;
provided, however, that the foregoing need not be paid while being contested in
good faith (and by appropriate proceedings in the opinion of the Company's
independent counsel in any case involving more than $500,000) if (1) adequate
provision for the foregoing has been made and (2) the failure to make such
payments is not adverse in any material respect to the Holders.
SECTION 717. Waiver of Stay, Extension and Usury Laws. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, and will actively resist any attempts to claim the benefit of,
any stay or extension law or any usury or other law that would prohibit or
forgive the Company from paying all or any portion of the principal of or
interest on the Notes as contemplated herein, wherever enacted, now or at any
time hereafter in force, or that may affect the covenants or the performance of
this Indenture; and (to the extent that it may lawfully do so) the Company
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
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SECTION 718. Investment Company Act. The Company shall not, and the
Company shall not permit any Subsidiary of the Company to, become an investment
company within the meaning of the Investment Company Act as such statute and the
regulations thereunder and any successor statute or regulations thereto may from
time to time be in effect, unless the Company or such Subsidiary is exempted
under the Investment Company Act from any requirement to register as an
"investment company."
ARTICLE EIGHT
MERGER, CONSOLIDATION AND SALE OF ASSETS
SECTION 801. When the Company May Merge, etc. (a) The Company shall
not consolidate or merge with or into any Person, or transfer, sell, lease or
otherwise dispose of all or substantially all of its assets as an entirety to
any Person unless:
(1) the entity formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale or transfer shall
have been made, is a corporation organized and existing under the laws of
the United States, any state thereof or the District of Columbia;
(2) (x) the corporation formed by or surviving any such consolidation
or merger (if other than the Company), or to which such sale or transfer
shall have been made, unconditionally assumes by supplemental indenture all
the obligations of the Company under the Notes and this Indenture and (y)
such corporation has all Gaming Licenses required to operate the casino
hotels to be owned by the surviving entity;
(3) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default exists;
(4) immediately after giving effect to such transaction on a pro
forma basis, as if such transaction had occurred, the Consolidated Net Worth
of the surviving entity
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(including the Company) would be at least equal to the Consolidated Net
Worth of the Company immediately prior to such transaction; and
(5) immediately after giving effect to such trans action involving
the incurrence by the Company or any Subsidiary, directly or indirectly, of
additional Indebtedness (and treating any Indebtedness not previously an
obligation of the Company or any of its Subsidiaries incurred in connection
with or as a result of such transaction as having been incurred at the time
of such transaction), the Company (if it is the continuing corporation) or
such other entity could incur at least $1.00 of additional Indebtedness
pursuant to Section 705(a).
(b) In connection with any consolidation, merger, transfer or
lease contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate of the Company and Opinion of Counsel stating
that such consolidation, merger, transfer or lease and the supplemental
indenture in respect thereto comply with this section and that all conditions
precedent herein provided for relating to such transaction have been complied
with and an Accountants' Certificate with respect to compliance with clauses (4)
and (5) of Section 801(a).
SECTION 802. Successor Corporation Substituted. Upon any
consolidation or merger or any transfer of all or substantially all of the
assets of the Company in accordance with Section 801, the successor corporation
formed by such consolidation or into which the Company is merged or to which
such transfer is made, shall succeed to, and be substituted for, and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor corporation had been named as the Company herein.
When a successor corporation assumes all of the obligations of the Company under
the Notes and this Indenture pursuant to this Article Eight, the applicable
predecessor corporation shall be released from the obligations so assumed.
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ARTICLE NINE
REDEMPTION
SECTION 901. Notices to Trustee. If the Company desires to redeem
Notes in whole or in part in accordance with the terms hereof or thereof, it
shall notify the Trustee in writing of the Redemption Date and the principal
amount of Notes to be so redeemed.
If the Company desires to credit Notes it has not previously delivered
to the Trustee for cancellation against the principal amount of Notes to be
redeemed, it shall so notify the Trustee and it shall deliver the Notes with the
notice.
Except as provided below, the Company shall give each notice provided
for in this Section 901 by a Company Order at least 45 days before the
Redemption Date (except for the notice provided in the event of a Change of
Control pursuant to Section 711 or unless a shorter notice period shall be
satisfactory to the Trustee).
SECTION 902. Selection of Notes to Be Redeemed. If less than all of
the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed
pro rata or by lot or by any other means that the Trustee determines to be fair
and appropriate. The Trustee shall make the selection from the Notes
Outstanding and not previously called for redemption. Notes in denominations of
$1,000 may be redeemed only in whole. The Trustee may select for redemption
portions (equal to $1,000 or any integral multiple thereof) of the principal
amount of Notes that have denominations larger than $1,000. Provisions of this
Indenture that apply to Notes called for redemption in whole also apply to Notes
called for redemption in part.
SECTION 903. Notice of Redemption. At least 30 days but not more
than 60 days before a Redemption Date, the Company shall give notice of
redemption, mailed by first-class mail, to each Holder whose Notes are to be
redeemed at such Holders' last address as it appears upon the Register.
The notice shall identify the Notes to be redeemed and shall state:
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(1) the Redemption Date;
(2) the Redemption Price;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be surrendered to the Paying
Agent to collect the Redemption Price;
(5) that, unless the Company defaults in making the redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders is to receive
payment of the Redemption Price, together with accrued interest to the
Redemption Date, upon surrender to the Trustee of the Notes;
(6) if any Note is being redeemed in part, the portion of the principal
amount (in integral multiples of $1,000) of such Note to be redeemed and that,
on and after the Redemption Date, upon surrender of such Note, a new Note or
Notes in principal amount equal to the unredeemed Portion thereof will be issued
in the name of the Holder thereof;
(7) the provision of the Notes or this Indenture pursuant to which Notes
are being redeemed; and
(8) the CUSIP number, if any, relating to the Notes to be redeemed.
Pursuant to a Company Request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 904. Effect of Notice of Redemption. Once notice of
redemption is given, Notes called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender to the Paying
Agent, such Notes shall be paid at the Redemption Price plus accrued interest to
the Redemption Date.
SECTION 905. Deposit of Redemption Price. Prior to the Redemption
Date, the Company shall deposit with the Paying
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Agent money sufficient to pay the Redemption Price of and accrued interest on
all Notes to be redeemed on the Redemption Date other than Notes or portions
thereof called for redemption on the Redemption Date that have been delivered
by the Company to the Trustee for cancellation.
SECTION 906. Notes Redeemed in Part. Upon surrender of a Note that
is redeemed in part, the Trustee shall authenticate for the Holder a new Note
equal in principal amount to the unredeemed portion of the Note surrendered.
SECTION 907. Redemption Pursuant to Gaming Jurisdiction Law. (a)
Notwithstanding the other provisions of this Article Nine, if the New Jersey
Commission does not waive the requirement that a Holder or beneficial owner of
Notes must be licensed or found qualified or suitable to hold or own the Notes
under the New Jersey Act, and if such Holder or such beneficial owner does not
become so licensed or is not found qualified or suitable within any time period
specified by the New Jersey Commission or the New Jersey Act, or if the Nevada
Commission finds a Holder or beneficial owner to be unsuitable under the Nevada
Act or regulations of the Nevada Commission, or if any other Gaming Authority
requires that Holders or beneficial owners of Notes be licensed or found
qualified or suitable and such Gaming Authority fails to waive such requirement
or any beneficial owner or Holder of Notes does not become so licensed or is not
found qualified or suitable within the applicable time period, the Company shall
have the right, at its option, (i) to require such Holder or beneficial owner to
dispose of all or a portion of such Holder's or beneficial owner's Notes within
120 days after receipt of notice by such Holder or beneficial owner of such
finding by the New Jersey Commission, the Nevada Commission or such other Gaming
Authority, as the case may be (or such different period as may be prescribed by
the New Jersey Commission or the Nevada Commission or such other Gaming
Authority), or (ii) to call for redemption the Notes of such Holder or
beneficial owner, on not less than 30 nor more than 60 days' notice (or such
different period as may be prescribed by the applicable Gaming Authority).
(b) If such Holder or beneficial owner, having been given the
opportunity by the Company to dispose of such Holder's or beneficial owner's
Notes, shall have failed to do so within
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the prescribed time period, the Company shall have the right to redeem such
Holder's or beneficial owner's Notes on five days' notice.
(c) On any redemption of Notes pursuant to this Section 907, the
Redemption Price shall be without premium and the lower of (i) the price at
which such Holder or beneficial owner acquired the Notes, together with (if
permitted by the New Jersey Act or the Nevada Act or other applicable Gaming
Jurisdiction Law, or by the orders of the New Jersey Commission or the Nevada
Commission or other relevant Gaming Authority, as the case may be) accrued
interest to the Redemption Date, and (ii) the lowest closing sale price of the
Notes between the date of the notice given by the New Jersey Commission or the
Nevada Commission or such other Gaming Authority and the date 10 days after such
date, unless a Redemption Price or other payment, remuneration or related terms
or restrictions are required by the New Jersey Commission or the Nevada
Commission or such other Gaming Authority, as the case may be, in which event
such price, terms and restrictions shall be the Redemption Price and terms of
redemption. Each Holder and beneficial owner by accepting a Note agrees to the
provisions of this Section 907 and of Paragraph 7 of the Notes and agrees to
inform the Company upon request made pursuant to this Section 907 of the price
at which such Holder or beneficial owner acquired such Holder's or beneficial
owner's Notes.
(d) Any redemption notice given by the Company under this Section 907
shall also be provided to the Trustee at the same time and shall state (i) that
the Notes are being called for redemption as a result of the Holder's or
beneficial owner's status under the New Jersey Act or with the New Jersey
Commission, or under the Nevada Act or with the Nevada Commission, or under
another Gaming Jurisdiction Law or with the relevant Gaming Authority, as the
case may be, (ii) whether accrued interest is payable to the Holder under the
New Jersey Act or the Nevada Act or such other Gaming Jurisdiction Law and, if
so, the information required by paragraph (5) of Section 903 hereof and (iii)
the information required by paragraphs (1), (2), (3), (4), (7) and (8) of
Section 903.
(e) The Trustee shall have no duty to verify a Holder's or beneficial
owner's status under the New Jersey Act or
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Nevada Act or any other applicable Gaming Jurisdiction Law or to verify the
price at which a Holder or beneficial owner acquired Notes.
ARTICLE TEN
SUBORDINATION
SECTION 1001. Agreement to Subordinate. The Company agrees, and each
Holder by accepting a Note agrees, that the Indebtedness evidenced by the Notes
is subordinated in right of payment, to the extent and in the manner provided in
this Article Ten, to the prior payment in full of all Senior Indebtedness and
that the subordination is for the benefit of the holders of Senior Indebtedness,
and authorizes and directs the Trustee to take such action as may be necessary
or appropriate to acknowledge or effectuate the subordination as provided in
this Article Ten and appoints the Trustee as attorney-in-fact for any and all
such purposes.
This Article Ten shall remain in full force and effect as long as any
Senior Indebtedness is outstanding.
SECTION 1002. Liquidation; Dissolution; Bankruptcy. Upon any payment
or distribution, whether of cash, securities or other Property, to creditors of
the Company in a liquidation (total or partial), reorganization or dissolution
of the Company, whether voluntary or involuntary, or in a bankruptcy,
reorganization, insolvency, receivership, assignment for the benefit of
creditors, marshalling of assets or similar proceeding relating to the Company
or its Property:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full, in cash or cash equivalents, of such Senior Indebtedness
before Holders shall be entitled to receive any payment of principal of,
or interest on, or any other distribution with respect to, the Notes; and
(2) until all Senior Indebtedness is paid in full in cash or cash
equivalents as provided in Section 1002(1), any distribution to which
Holders would be entitled but for this
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Article Ten shall be made to the holders of Senior Indebtedness as their
interests may appear;
in each case except that Holders may receive securities that are subordinated to
Senior Indebtedness to at least the same extent and pursuant to the same or more
stringent terms as are the Notes.
Upon any distribution of assets of the Company referred to in this
Section 1002, the Trustee and the Holders shall be entitled to rely upon any
order or decree of a court of competent jurisdiction in which such bankruptcy,
reorganization, insolvency, receivership, assignment for the benefit of
creditors, marshalling of assets or similar proceeding is pending for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 1002, and the Trustee and the Holders shall
be entitled to rely upon a certificate of the liquidating trustee or agent or
other such Person making any distribution to the Trustee or to the Holders for
the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of Senior Indebtedness, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 1002. The Trustee shall be entitled to
rely on the delivery to it of a written notice by a Person representing himself
to be a Representative or a holder of Senior Indebtedness, as the case may be,
to establish that such notice has been given by a Representative or a holder of
Senior Indebtedness, as the case may be. In the event that the Trustee
determines, in good faith, that further evidence is required with respect to the
right of any Person, as a holder of Senior Indebtedness, to participate in any
payment or distribution pursuant to this Section 1002, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such Person, as to the extent to
which such Person is entitled to participate in such payment or distribution and
as to other facts pertinent to the rights of such Person under this Section
1002, and, if such evidence is not furnished, the Trustee may defer any
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payment to such Person pending judicial determination as to the right of such
Person to receive such payment.
SECTION 1003. Default on Senior Indebtedness. No direct or indirect
payment by or on behalf of the Company of principal of or interest on the Notes,
whether pursuant to the terms of the Notes or upon acceleration or otherwise,
shall be made if at the time of such payment there exists a default in the
payment of all or any portion of principal of or interest on Designated Senior
Indebtedness pursuant to which the maturity of such Designated Senior
Indebtedness may be accelerated (and the Trustee has received written notice
thereof) and such default shall not have been cured or waived or the benefits of
this sentence waived by or on behalf of the holders of such Designated Senior
Indebtedness (and the Trustee has received written notice thereof). In
addition, during the continuance of any other event of default with respect to
Designated Senior Indebtedness pursuant to which the maturity of such Designated
Senior may be accelerated, upon the occurrence of (a) receipt by the Trustee of
written notice from the Representative with respect to, or from the holders of
at least a majority in aggregate principal amount of, such Designated Senior
Indebtedness then outstanding or (b) if such event of default results from the
acceleration of the Notes, such acceleration, no such payment may be made by
the Company upon or in respect of the Notes for a period (a "Payment Blockage
Period") commencing on the earlier of the date of receipt of such notice by the
Trustee or the date of such acceleration and ending 179 days thereafter (unless
such Payment Blockage Period shall be terminated by written notice to the
Trustee from such Representative or such holders). Not more than one Payment
Blockage Period may be commenced with respect to the Notes during any period of
360 consecutive days; in no event will a Payment Blockage Period extend beyond
179 days from the date the payment on the Notes was due; and there must be 180
days in any 360 day period in which no Payment Blockage Period is in effect.
For all purposes of this Section 1003, no default or event of default which
existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period shall be, or be made, the basis for the
commencement of a subsequent Payment Blockage Period by the Representative or
requisite holders of such Designated Senior Indebtedness whether or not within a
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period of 360 consecutive days unless such default or event of default shall
have been cured or waived for a period of not less than 90 consecutive days.
SECTION 1004. When Distribution Must Be Paid Over. In the event that the
Company shall make any payment to the Trustee on account of the principal of or
interest on the Notes at a time when such payment is prohibited by Section 1002
or 1003, such payment shall be held by the Trustee, in trust for the benefit of,
and shall be paid forthwith over and delivered to, the holders of Senior
Indebtedness (pro rata as to each of such holders on the basis of the respective
amounts of Senior Indebtedness held by them) or their Representatives, as their
respective interests may appear, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness.
If a distribution is made to Holders that because of this Article Ten
should not have been made to them, the Holders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness and pay it over to
them as their interests may appear.
SECTION 1005. Notice by the Company. The Company shall promptly notify the
Trustee and any Paying Agent by an appropriate Officers' Certificate of the
Company delivered to a Trust Officer and the Paying Agent of any facts known to
the Company that would cause a payment of principal of or interest on the Notes
to violate this Article Ten, but failure to give such notice shall not affect
the subordination of the Notes to the Senior Indebtedness provided in this
Article Ten.
SECTION 1006. Subrogation. After all Senior Indebtedness is paid in cash or
cash equivalents in full and until the Notes are paid in full, Holders shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness to the extent that distributions
otherwise payable to Holders have been applied to payment of Senior
Indebtedness. A distribution made under this Article Ten to holders of Senior
Indebtedness which otherwise would have been made to Holders is not, as between
the
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Company and the Holders, a payment by the Company on Senior Indebtedness.
SECTION 1007. Relative Rights. This Article Ten defines the relative rights
of Holders and holders of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and the Holders, the obligation of the
Company, which is absolute and unconditional, to pay principal of and interest
on the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of the Company
other than such creditors as are holders of Senior Indebtedness;
(3) prevent the Trustee or any Holder from exercising its available
remedies upon a Default or Event of Default, subject to the rights of holders
of Senior Indebtedness to receive distributions otherwise payable to Holders;
or
(4) create or imply the existence of any commitment on the part of the
holders of Senior Indebtedness to extend credit to the Company, other than as
set forth in the terms governing such Senior Indebtedness.
SECTION 1008. Subordination May Not Be Impaired by the Company. No right of
any present or future holder of Senior Indebtedness to enforce the subordination
of the Indebtedness evidenced by the Notes shall be impaired by any act or
failure to act by the Company or anyone in custody of its assets or property or
by its failure to comply with this Indenture.
SECTION 1009. Distribution or Notice to Representatives. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representatives, if
any.
SECTION 1010. Rights of Trustee and Paying Agent. The Trustee or any Paying
Agent may continue to make payments on the Notes unless, in the case of the
Trustee, a Trust Officer or, in the case of a Paying Agent other than the
Trustee, an officer of
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such Paying Agent, shall have received, at least three Business Days prior to
the date such payments are due and payable, written notice of facts that would
cause a payment of principal of or interest on the Notes to violate this Article
Ten. Only the Company or a Representative with respect to or holders of at least
a majority in principal amount of an issue of Designated Senior Indebtedness may
give such notice. Nothing contained in this Section 1010 shall limit the right
of any holder of Senior Indebtedness to recover payments as contemplated by
Section 1004.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 1011. Trustee Entitled to Assume Payments Not Prohibited in Absence
of Notice. Notwithstanding any of the provisions of this Article Ten or any
other provision of this Indenture, unless a Trust Officer has received a written
notice pursuant to Section 1010, the Trustee shall not at any time be charged
with knowledge of the existence of any facts which would prohibit the making of
any payment to or by the Trustee.
SECTION 1012. Application by Trustee of Monies Deposited With It. Nothing
contained in this Article Ten or elsewhere in this Indenture, or in the Notes,
shall (i) affect the obligation of the Company to make, or prevent the Company
from making, at any time except as specified in Section 1002 or 1003 to the
extent provided therein, payments at any time with respect to the Notes, (ii)
prevent the application by the Trustee or any Paying Agent of any monies held by
the Trustee or such Paying Agent in trust for the benefit of the Holders of
Notes as to which notice of redemption shall have been mailed or published, to
the payment of or on account of the principal of or interest on the Notes if, at
the time of such mailing or publishing, such payment would not have been
prohibited by the foregoing provisions of this Article Ten or (iii) prevent the
application by the Trustee or any Paying Agent of any monies deposited with it
hereunder to the payment of or on account of the Notes if, at the time of such
deposit, such payment would not have been prohibited by the foregoing provisions
of this Article Ten and, if such monies have been deposited by the Company, the
Trustee shall not have received with respect to such monies the written notice
provided for in Section 1010.
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SECTION 1013. Trustee's Compensation Not Prejudiced. Nothing in this
Article Ten shall apply to claims of, or payments to, the Trustee pursuant to
Section 507.
SECTION 1014. Officers' Certificate. If there occurs an event referred to
in Section 1002, the Company shall promptly give to the Trustee an Officers'
Certificate (on which the Trustee may conclusively rely) identifying all holders
of Senior Indebtedness and the principal amount of Senior Indebtedness then
outstanding held by each such holder and stating the reasons why such Officers'
Certificate is being delivered to the Trustee.
SECTION 1015. Certain Payments. Nothing in this Article Ten shall prevent
or delay (i) the Company or any of its Subsidiaries from or in purchasing or
redeeming any of the Notes pursuant to any Legal Requirement relating to the
Company's gaming business or (ii) the receipt by the Holders of payments of
principal of and interest on the Notes as provided in Section 302.
SECTION 1016. Names of Representatives. The Company shall, upon request of
the Trustee, provide to the Trustee an Officers' Certificate setting forth the
name and address of each Representative of all outstanding Senior Indebtedness.
SECTION 1017. No Fiduciary Duty Created to Holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article Ten, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and, subject to the
provisions of Article Five, the Trustee shall not be liable to any holder of
Senior Indebtedness if it shall mistakenly pay over or deliver to
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Holders, the Company or any other Person, monies or assets to which any holder
of Senior Indebtedness shall be entitled by virtue of this Article Ten or
otherwise.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and have caused their respective corporate seals to be hereunto
affixed and attested, all as of the date first written above.
AZTAR CORPORATION
By:___________________________
Name:
Title:
SEAL
Attest:_______________________
AMERICAN BANK NATIONAL
ASSOCIATION
By:_____________________________
Name:
Title:
SEAL
Attest:________________________
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Exhibit A
[Face of Note]
No. $
AZTAR CORPORATION
Incorporated under the laws of the State
of Delaware
_____% Senior Subordinated Note Due 2004
AZTAR CORPORATION promises to pay to ___________________ or registered
assigns, the principal sum of ___________ Dollars on _______________, 2004 and
to pay interest thereon semiannually in arrears at the rate of _____% per annum
on _____________ and _______________ of each year until the principal hereof is
paid or made available for payment. Payment of principal and interest shall be
made in the manner and subject to the terms set forth in provisions appearing on
the reverse hereof, which provisions, in their entirety, shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, AZTAR CORPORATION has caused this instrument to be
duly executed in its corporate name under its corporate seal.
AZTAR CORPORATION
By:
---------------------------------
Attest:
-----------------------------
[SEAL]
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[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the _____% Senior Subordinated Notes Due 2004 issued
under the within-mentioned Indenture.
Dated:
AMERICAN BANK NATIONAL ASSOCIATION,
as Trustee
By:
---------------------------------
Authorized Signature
A-2
<PAGE>
(Back of Note)
AZTAR CORPORATION
__% Senior Subordinated Note Due 2004
1. Interest. AZTAR CORPORATION (the "Company"), a Delaware corporation,
promises to pay interest on the principal amount of this Note at the rate per
annum shown above. The Company will pay interest semiannually in arrears on
________ and _____________ of each year. Interest on this Note will accrue from
the most recent date on which interest has been paid or, if no interest has been
paid, from ________, 1994. The Company will pay interest on overdue principal
and premium, if any, and, to the extent lawful, on overdue installments of
interest at the rate per annum borne by this Note shown above. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on this Note (except
Defaulted Interest) to the Person who is the registered Holder of this Note at
the close of business on the Regular Record Date, which shall be the ________
and ________, as the case may be, next preceding the Interest Payment Date even
though this Note is cancelled after the Regular Record Date and on or before the
Interest Payment Date. Any such interest not so punctually paid or duly provided
for, and any interest payable on such Defaulted Interest (to the extent lawful),
will forthwith cease to be payable to the Holder of this Note on such Regular
Record Date and shall be payable to the Person in whose name this Note is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice of which shall be
given to Holders not less than 15 days prior to such Special Record Date. The
Holder must surrender this Note to a Paying Agent to collect principal payments.
The Company will pay principal, premium, if any, and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts. However, the Company may pay principal, premium, if any, and
interest by check payable in such money. The Company may mail an interest check
to a Holder's registered address. If a payment date is a Legal Holiday at a
place of payment, payment may be made at that place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the intervening
period.
A-3
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3. Paying Agent and Registrar. American Bank National Association (the
"Trustee") will act as Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company may act in
any such capacity.
4. Indenture. The Company has issued the Notes under an indenture dated as
of ________, 1994 (the "Indenture") among the Company and the Trustee. The terms
of the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
77aaa-bbbb) as in effect on the date of the Indenture. The Notes are subject to
all such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Notes are unsecured senior subordinated obligations
of the Company limited to $180,000,000 in aggregate principal amount. Unless
otherwise defined herein, all capitalized terms shall have the meanings assigned
to them in the Indenture.
5. Denominations, Transfer, Exchange. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples thereof. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption. Also, it need not exchange or register the transfer of any Notes for
a period of 15 days before a selection of Notes to be redeemed.
6. Optional Redemption. The Notes may not be redeemed prior to ________,
1999. On or after such date, the Notes may be redeemed at the election of the
Company in whole at any time or in part from time to time at the Redemption
Prices (expressed in percentages of principal amount) set forth below plus
accrued and unpaid interest, if any, to the Redemption Date, if redeemed during
the 12-month period beginning ________ of the years indicated below:
A-4
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<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1999 [ ]%
2000 [ ]
2001 [ ]
2002 and thereafter [ ]
</TABLE>
Notice of redemption will be mailed at least 30 days but not more than 60
days before the Redemption Date to each Holder of Notes to be redeemed, at such
Holder's last address, as it appears on the Register. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000. On and after the Redemption Date interest ceases to accrue on Notes or
portions of them called for redemption.
If less than all the Notes are to be redeemed, selection of the Notes will
be made by the Trustee, pro rata or by lot or by any other means that the
Trustee determines to be fair and appropriate.
7. Redemption Pursuant to Gaming Jurisdiction Law. The Company is subject
to the New Jersey Casino Control Act (the "New Jersey Act") and the Nevada
Gaming Control Act (the "Nevada Act") and may become subject to applicable
gaming laws, statutes, ordinances, codes, regulations, constitutional
provisions, rule, orders, directives or other enforcement requirements in other
jurisdictions in which it from time to time operates (any such jurisdiction,
including New Jersey and Nevada, a "Gaming Jurisdiction" and any such provision,
including the New Jersey Act and the Nevada Act, a "Gaming Jurisdiction Law").
If the New Jersey Casino Control Commission (the "New Jersey Commission") does
not waive the requirement that a Holder or beneficial owner of the Notes must be
licensed or found qualified or suitable to hold or own the Notes under the New
Jersey Act, and if such Holder or such beneficial owner does not become so
licensed or is not found qualified or suitable within any time period specified
by the New Jersey Commission or the New Jersey Act, or if the Nevada Gaming
Commission (the "Nevada Commission") finds a Holder or beneficial owner to be
unsuitable under the Nevada Act or regulations of the Nevada Commission, or if
any other gaming authority of any other Gaming Jurisdiction (a "Gaming
Authority") requires that Holders or beneficial owners of the Notes be licensed
or found qualified or suitable and such Gaming Authority
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fails to waive such requirement or such Holder or beneficial owner does not
become so licensed or is not found qualified or suitable within the applicable
time period, the Company shall have the right, at its option, (i) to require
such Holder or beneficial owner to dispose of all or a portion of such Holder's
or beneficial owner's Notes within 120 days after receipt of notice by such
Holder or beneficial owner of such finding by the New Jersey Commission or the
Nevada Commission or such other Gaming Authority, as the case may be (or such
different period as may be prescribed by the New Jersey Commission or the Nevada
Commission or such other Gaming Authority), or (ii) to call for redemption the
Notes of such Holder or beneficial owner, on not less than 30 nor more than 60
days' notice (or such different period as may be prescribed by the applicable
Gaming Authority). If such Holder or beneficial owner, having been given the
opportunity by the Company to dispose of such Holder's or beneficial owner's
Notes, shall have failed to do so within the prescribed time period, the Company
shall have the right to redeem such Holder's or beneficial owner's Notes on five
days' notice. On any redemption of Notes pursuant to this provision, the
Redemption Price shall be without premium and the lower of (i) the price at
which such Holder or beneficial owner acquired the Notes, together with (if
permitted by the New Jersey Act or the Nevada Act or other applicable Gaming
Jurisdiction Law, or by the orders of the New Jersey Commission or the Nevada
Commission or the relevant Gaming Authority, as the case may be) accrued
interest to the Redemption Date, and (ii) the lowest closing sale price of the
Notes between the date of the notice given by the New Jersey Commission or the
Nevada Commission or such other Gaming Authority and the date 10 days after such
date, unless a Redemption Price or other payment, remuneration or related terms
or restrictions are required by the New Jersey Commission or the Nevada
Commission or such other Gaming Authority, as the case may be, in which event
such price, terms and restrictions shall be the Redemption Price and terms of
redemption. Each Holder and beneficial owner by accepting this Note agrees to
the provisions set forth in this Paragraph and in the Indenture and agrees to
inform the Company upon request of the price at which such Holder or beneficial
owner acquired this Note.
8. Optional Redemption upon Change of Control. The Indenture provides that
after the occurrence of a Change of
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<PAGE>
Control, the Company shall have the right to redeem the Notes as provided in the
Indenture.
9. Persons Deemed Owners. The registered Holder of this Note may be treated
as its owner for all purposes.
10. Amendments and Waivers. Subject to certain exceptions, the Indenture or
the Notes may be amended with the consent of the Holders of at least a majority
in principal amount of the then Outstanding Notes. Without the consent of any
Holder, the Indenture or the Notes may be amended to cure any ambiguity, defect
or inconsistency, to provide for assumption of the Company's obligations to
Holders, to provide for uncertificated Notes or to make any change that does not
adversely affect the rights of any Holder.
11. Defaults and Remedies. An Event of Default, as defined in the
Indenture, is: (i) default for 30 days in payment of interest on the Notes; (ii)
default in payment of principal of, or premium on, the Notes; (iii) failure by
the Company for 60 days after notice to comply with any of its other agreements
or covenants in the Indenture or the Notes; (iv) default under any mortgage,
indenture or other instrument under which there may be secured or evidenced any
other Indebtedness of the Company or any of its Restricted Subsidiaries and such
Indebtedness shall have been accelerated (or shall have matured), provided that
the principal amount of all such Indebtedness with respect to which such events
of default have occurred and are continuing aggregates $5,000,000 or more; (v)
judgments in an aggregate amount in excess of $5,000,000 have been rendered
against the Company or a Restricted Subsidiary and either an enforcement
proceeding shall have been commenced by any creditor upon any judgment or there
shall be a period of 90 consecutive days during which a stay of enforcement of
any such judgment shall not be in effect; (vi) certain events of bankruptcy,
insolvency or reorganization; and (vii) any revocation, suspension or loss (with
certain exceptions) of any Gaming License which results in the cessation or
suspension of operation for a period of more than 90 days of the casino business
of any casino hotel owned, leased or operated directly or indirectly by the
Company or any of its Subsidiaries. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then Outstanding Notes may declare all
A-7
<PAGE>
the Notes to be due and payable immediately, except that in the case of an Event
of Default arising from certain events of bankruptcy, insolvency or
reorganization, all Outstanding Notes shall become due and payable immediately
without further action or notice. In the event of a declaration of acceleration
because an Event of Default as defined in clause (iv) above has occurred, and is
continuing, such declaration and its consequences shall be automatically
rescinded and annulled if (a) in the case of Indebtedness that has been
accelerated, the holders of such Indebtedness shall have rescinded the
declaration of acceleration and the consequences thereof within 10 days of such
declaration or, in the case of Indebtedness that has matured, such Indebtedness
has been discharged in full within 10 days following maturity, (b) the Company
shall have delivered a notice of such rescission or discharge to the Trustee and
(c) no other Event of Default shall have occurred and be continuing. Holders may
not enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of a majority in
principal amount of the then Outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders notice of
any continuing default (except a default in payment of principal or interest) if
it determines that withholding notice is in their interest. The Company must
furnish annual compliance certificates to the Trustee.
12. Discharge or Defeasance Prior to Redemption or Maturity. Subject
to certain conditions, including delivery of an Opinion of Counsel regarding
certain tax matters, if the Company deposits with the Trustee money or U.S.
Government Obligations sufficient to pay principal of, premium, if applicable,
and accrued interest on the Notes to redemption or maturity, the Company will be
Discharged (to the extent provided in the Indenture) from the Notes and the
Indenture or the Company need not comply with certain terms of the Indenture.
13. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, pay
dividends, create or incur Indebtedness, create Liens, merge or consolidate with
any other Person or sell, lease or otherwise transfer any of their properties or
assets.
A-8
<PAGE>
14. Successor Corporation. When a successor Person or other entity
assumes all the obligations of its predecessor under the Notes and the
Indenture, the predecessor Person will be released from those obligations.
15. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or any of its Subsidiaries or Affiliates, and may
otherwise deal with the Company or its Subsidiaries or Affiliates, as if it were
not the Trustee.
16. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issue of the Notes.
17. Unclaimed Money. If money for the payment of principal of or
interest on any Note remains unclaimed for two years after the date on which
such payment shall have come due, the Trustee or Paying Agent will pay the money
back to the Company at the Company's written request. After that, Holders
entitled to this money must look to the Company for payment, unless applicable
law designates another Person.
18. Discharge Upon Redemption or Maturity. Subject to the terms of
the Indenture, the Indenture will be discharged and cancelled upon the payment
of all Notes.
19. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
20. Governing Law. This Note shall be construed in accordance with
and governed by the laws of the State of New York without regard to principles
of conflict of law.
21. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as TEN COM
A-9
<PAGE>
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST
(= Custodian), and UNIF GIFT MIN ACT (= Uniform Gifts to Minors Act).
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture, which has in it the text of this Note,
in larger type. Requests may be made to Aztar Corporation, 2390 E. Camelback
Road, Suite 400, Phoenix, Arizona 85016, Attn: Corporate Secretary.
A-10
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: I or we assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint agent to transfer this Note on
------------------------
the books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your signature:
----------------- ----------------------------------------
- ---------------------- (Sign exactly as your name appears on the other side
of this security)
Signature Guaranteed
By:
----------------------------------------------------
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<PAGE>
OPTION OF HOLDER TO ELECT REPURCHASE
The undersigned hereby irrevocably requests and instructs the Company
to repay this Note pursuant to its terms at a price equal to the principal
amount hereof, together with accrued and unpaid interest to the Change of
Control Payment Date, to the undersigned at ___________________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please print or type name and address of the undersigned)
For this Note to be repaid, the Company must receive this Note with
this "Option of Holder to Elect Repurchase" form duly completed at an office or
agency of the Company maintained for that purpose in the Borough of Manhattan in
The City of New York within the time periods for such repurchase set forth in
the Indenture.
If less than the entire principal of the within Note is to be repaid,
specify the portion thereof (which shall be $1,000 or an integral multiple of
$1,000) which the Holder elects to have repaid:_________________________
Dated:__________________
------------------------------------
Note: The signature must correspond
with the name as written upon the
face of the Note in every particular
without alteration or enlargement.
A-12
<PAGE>
Exhibit 5
---------
[LATHAM & WATKINS LETTERHEAD]
August 26, 1994
Aztar Corporation
2390 East Camelback Road
Suite 400
Phoenix, Arizona 85016
Re: Registration Statement No. 33-54151;
$180,000,000 Aggregate Principal Amount of Senior
Subordinated Notes Due 2004 of Aztar Corporation
-------------------------------------------------
Ladies and Gentlemen:
In connection with the registration of $180,000,000 aggregate principal
amount of __% Senior Subordinated Notes Due 2004 (the "Securities") by Aztar
Corporation, a Delaware corporation (the "Company"), under the Securities Act of
1933, as amended (the "Act"), on Form S-3 filed with the Securities and Exchange
Commission (the "Commission") on June 16, 1994 (File No. 33-54151), as amended
by Amendment No. 1 filed with the Commission on July 21, 1994 and Amendment No.
2 being filed concurrently herewith (collectively, the "Registration
Statement"), you have requested our opinion with respect to the matters set
forth below.
In our capacity as your special counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization and issuance of the
Securities, and for the purposes of this opinion have assumed such proceedings
will be timely completed in the manner presently proposed. In addition, we have
made such legal and factual examinations and inquiries, including an examination
of originals or copies certified or otherwise identified to our satisfaction of
such documents, corporate records and instruments, as we have deemed necessary
or appropriate for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as copies.
<PAGE>
Aztar Corporation
August 26, 1994
Page 2
We are opining herein as to the effect on the subject transaction only of
the internal laws of the State of New York and the General Corporation Law of
the State of Delaware, and we express no opinion with respect to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws, or as to any matters
of municipal law or the laws of any local agencies within the state.
Capitalized terms used herein without definition have the meanings ascribed
to them in the Registration Statement.
Subject to the foregoing and the other matters set forth herein, it is our
opinion that as of the date hereof, the Securities have been duly authorized by
all necessary corporate action of the Company, and when executed, authenticated
and delivered by or on behalf of the Company against payment therefor in
accordance with the terms of the Indenture, will constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms.
The opinion rendered above relating to the enforceability of the
Securities is subject to the following exceptions, limitations and
qualifications: (i) the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors; (ii) the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or law, and the discretion of the court before which any
proceeding therefor may be brought; (iii) the unenforceability under certain
circumstances under law or court decisions of provisions providing for the
indemnification of or contribution to a party with respect to a liability where
such indemnification or contribution is contrary to public policy; and (iv) we
express no opinion concerning the enforceability of the waiver of rights or
defenses contained in Section 717 of the Indenture or the exclusive choice of
forum provisions of Section 118 of the Indenture..
To the extent that the obligations of the Company under the Indenture may
be dependent upon such matters, we assume for purposes of this opinion that the
Trustee is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization; that the Trustee is duly qualified to
engage in the activities contemplated by the Indenture; that the Indenture has
been duly authorized, executed and delivered by the Trustee and constitutes the
legal, valid and binding obligation of the Trustee enforceable against the
Trustee in accordance with its terms; that the Trustee is in compliance,
generally and with respect to acting as a trustee under the Indenture, with all
applicable laws and regulations; and that the Trustee has the requisite
organizational and legal power and authority to perform its obligations under
the Indenture.
<PAGE>
Aztar Corporation
August 26, 1994
Page 3
We consent to your filing this opinion as an exhibit to the Registration
Statement and to the reference to our firm contained under the heading "LEGAL
MATTERS".
Very truly yours,
LATHAM & WATKINS
<PAGE>
Exhibit 12
AZTAR CORPORATION
Ratio of Earnings to Fixed Charges
(in thousands, except ratios)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
--------------------- --------------------------------------------------------
June 30, July 1,
1994 1993 1993 1992 1991 1990 1989
--------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations before income taxes,
extraordinary items and
cumulative effect of accounting
change $11,260 $ 8,620 $12,406 $26,007 $ 2,768 $(14,959) $(62,184)
Fixed charges excluding interest
expense capitalized 25,880 35,282 60,366 56,701 59,895 63,346 78,679
Amortization of previously
capitalized interest 439 433 878 866 892 900 1,012
------- ------- ------- ------- ------- -------- --------
Adjusted earnings $37,579 $44,335 $73,650 $83,574 $63,555 $ 49,287 $ 17,507
======= ======= ======= ======= ======= ======== ========
Fixed charges:
Interest expense $23,582 $22,822 $45,363 $31,132 $32,101 $ 33,407 $ 43,716
Interest portion of rent 2,298 12,460 15,003 25,569 27,794 29,939 34,963
------- ------- ------- ------- ------- -------- --------
25,880 35,282 60,366 56,701 59,895 63,346 78,679
Interest expense capitalized 1,267 2,000 3,491 1,061 253 -- --
------- ------- ------- ------- ------- -------- --------
Total fixed charges $27,147 $37,282 $63,857 $57,762 $60,148 $ 63,346 $ 78,679
======= ======= ======= ======= ======= ======== ========
Ratio of earnings to fixed charges 1.38x 1.19x 1.15x 1.45x 1.06x .78x .22x
======= ======= ======= ======= ======= ======== ========
Fixed charges in excess of earnings $ 14,059 $ 61,172
======== ========
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion and the incorporation by reference in this
registration statement on Amendment No. 2 to Form S-3 (File No. 33-54151) of
our reports, which included an explanatory paragraph regarding the change in
the Company's method of accounting for income taxes, dated February 11, 1994,
on our audit of the consolidated financial statements and financial statement
schedules of Aztar Corporation. We also consent to the reference to our firm
under the caption "Experts".
COOPERS & LYBRAND L.L.P.
Phoenix, Arizona
August 26, 1994
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Amendment No. 2 to Form S-3 No. 33-54151) and related
Prospectus of Aztar Corporation for the registration of $180,000,000 Senior
Subordinated Notes Due 2004 and to the incorporation by reference therein of
our report dated February 12, 1993, except for Note 12, as to which the date is
March 29, 1993, with respect to the combined financial statements of Ambassador
Real Estate Investors, L.P. included in the Current Report on Form 8-K, dated
July 9, 1993, of Aztar Corporation filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
August 24, 1994
<PAGE>
EXHIBIT 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH INDIVIDUAL WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS PAUL E. RUBELI AND ROBERT M. HADDOCK OR ANY OF
THEM, HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS (INCLUDING POST-
EFFECTIVE AMENDMENTS) TO THIS REGISTRATION STATEMENT, AND TO FILE THE SAME WITH
ALL EXHIBITS THERETO, AND ALL DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING SAID ATTORNEY-IN-FACT AND AGENT,
AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT
AND THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS
FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY
RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEY-IN-FACT AND AGENT OR ANY OF
THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO BE
DONE BY VIRTUE HEREOF.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
VESTA VALENTINE TEMEN Director July 22, 1994
- ------------------------------------
Vesta Valentine Temen
</TABLE>
