<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 1994
REGISTRATION NO. 33-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
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. [_]
----------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
% Senior Subordinated
Notes Due 2004.......... $180,000,000 100% $180,000,000 $62,069
</TABLE>
================================================================================
(1) Estimated solely for purpose of determining the registration fee.
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
JUNE 16, 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 March 31,
1994, the Company's Senior Indebtedness (as adjusted for the offering of the
Notes and the use of proceeds thereof) was approximately $36 million and the
Company's subsidiaries had aggregate liabilities (including trade payables and
accrued liabilities and excluding amounts guaranteed by the Company) of
approximately $42 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 NOR
THE NEW JERSEY CASINO CONTROL 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 the date of original issuance.
(2) Before deducting expenses, estimated to be $ .
The Notes are offered subject to receipt and acceptance by the Underwriter, to
prior sale and to the Underwriter's 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
------------------------------------------------------------------------------
The date of this Prospectus is , 1994.
<PAGE>
[ARTWORK TO COME]
2
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER 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) Annual Report on Form 10-K
for the fiscal year ended December 30, 1993, (b) Proxy Statement dated March
28, 1994 (except the information set forth under the captions "Board
Compensation Committee Report" and "Comparative Stock Price Performance Graph")
and (c) Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
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 EBITDR have increased significantly. For the three
months ended March 31, 1994, total revenue and EBITDR were $21.8 million and
$7.4 million, respectively, compared to $12.8 million and $3.8 million,
respectively, for the three months ended April 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 late
1994. 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. On June 9, 1994, the Missouri Gaming Commission
notified the Company that its application will be among the next three
applications to be considered. 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 citizen
selection committee of the City of Evansville in April 1994 as its first 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 100 miles, which
encompasses the metropolitan Louisville, Kentucky area. Each of the Company and
the second and third choices of the selection committee has engaged in
discussions with the City of Evansville seeking its endorsement to the Indiana
Gaming Commission of the applicant's license request and a development
agreement. 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 holding licensing hearings and
awarding licenses. The trial court decision is being appealed directly to the
Indiana Supreme Court, and the Indiana Gaming Commission, through the Indiana
Attorney General, has requested the Supreme Court to handle the case on an
expedited basis.
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 , 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 March 31, 1994, the Company's Senior
Indebtedness was approximately $36 million (as
adjusted for the Offering and the use of
proceeds thereof) and the Company's
subsidiaries had aggregate liabilities
(including trade payables and accrued
liabilities and excluding amounts guaranteed
by the Company) of approximately $42 million.
In addition, the Notes will rank pari passu in
right of payment to the 11% Notes. As of March
31, 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 $ 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 three months ended March 31, 1994 and April 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 three-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>
THREE MONTHS ENDED YEAR ENDED
------------------- ------------------------------------------------
MARCH 31, APRIL 1,
1994 1993 1993 1992 1991 1990 1989
--------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
STATEMENT OF OPERATIONS
DATA:
Revenues................ $130,566 $122,322 $518,762 $512,045 $481,285 $515,060 $522,255
Operating income (loss). 16,844 3,517 37,419 32,609 13,654 (3,574) (33,812)
Interest income......... 556 11,719 24,172 28,655 26,245 28,927 22,766
Interest expense........ (11,822) (11,727) (45,363) (31,132) (32,101) (33,407) (43,716)
Income (loss) from
continuing operations
before extraordinary
items and cumulative
effect of accounting
change................. 4,553 1,584 11,382 16,378 2,708 (15,922) (47,689)
Net income (loss)....... 4,553 1,584 11,382 19,805 6,498 (14,959) 79,441
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 35,020 $ 79,893 $ 39,551 $100,403 $ 77,117 $ 74,132 $ 98,966
Total assets............ 875,356 835,686 877,171 849,565 638,474 641,905 678,476
Long-term debt.......... 404,033 377,528 404,086 378,058 176,693 180,391 181,102
Shareholders' equity.... 351,403 337,479 346,988 333,749 318,900 312,771 338,528
OTHER DATA:
EBITDR*................. $ 28,475 $ 23,025 $ 97,818 $106,941 $ 89,038 $ 67,443 $ 57,656
Capital expenditures.... 14,140 16,974 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 March 31, 1994, the Company had approximately
$407 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 $419 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 $35 million was outstanding on March 31, 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 Proposed Credit Facility (as hereinafter defined).
The Company expects to use funds provided by the Proposed Credit Facility to
repay the $35 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 Evansville and Caruthersville. 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 March 31, 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. The rent the Company pays under the Tropicana Lease services
the principal and interest on the Tropicana Loan. 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).
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 $36 million at March 31, 1994
as adjusted for the Offering and the use of proceeds thereof). There is
currently no Indebtedness of the Company outstanding that is
11
<PAGE>
subordinated 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 March 31, 1994, the Company's
subsidiaries had aggregate liabilities (including trade payables and accrued
liabilities and excluding amounts guaranteed by the Company) of approximately
$42 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 55%, respectively, of the Company's consolidated
revenues for the year ended December 30, 1993 and for the three months ended
March 31, 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
two new casino resorts on the Strip that are expected to add approximately
235,000 square feet of casino space and 6,500 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--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 ("Salomon" or the
"Underwriter") that Salomon intends to make a market in the Notes; however,
Salomon is not 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 $
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.
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 three months ended March 31, 1994 and April 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 three 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>
THREE MONTHS ENDED YEAR ENDED
------------------- ------------------------------------------------
MARCH 31, APRIL 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)............ $130,566 $122,322 $518,762 $512,045 $481,285 $515,060 $522,255
======== ======== ======== ======== ======== ======== ========
Operating income
(loss)(b)(c).......... $ 16,844 $ 3,517 $ 37,419 $ 32,609 $ 13,654 $ (3,574) $(33,812)
Interest income(c)..... 556 11,719 24,172 28,655 26,245 28,927 22,766
Interest expense....... (11,822) (11,727) (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.. 5,578 3,509 16,228 30,132 7,798 (8,054) (54,762)
Equity in
unconsolidated
partnerships' losses.. (940) (967) (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.. 4,638 2,542 12,406 26,007 2,768 (14,959) (62,184)
Income taxes........... (85) (958) (1,024) (9,629) (60) (963) 14,495
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations
before extraordinary
items and cumulative
effect of accounting
change................ 4,553 1,584 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)...... $ 4,553 $ 1,584 $ 11,382 $ 19,805 $ 6,498 $(14,959) $ 79,441
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges(h)...... 1.32 1.11 1.15 1.45 1.06 -- --
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Cash and cash
equivalents........... $ 35,020 $ 79,893 $ 39,551 $100,403 $ 77,117 $ 74,132 $ 98,966
Total assets........... 875,356 835,686 877,171 849,565 638,474 641,905 678,476
Long-term debt......... 404,033 377,528 404,086 378,058 176,693 180,391 181,102
Preferred stock........ 4,129 3,239 3,905 2,998 2,059 1,056 --
Shareholders' equity... 351,403 337,479 346,988 333,749 318,900 312,771 338,528
OTHER DATA:
EBITDR(i) $ 28,475 $ 23,025 $ 97,818 $106,941 $ 89,038 $ 67,443 $ 57,656
Capital expenditures... 14,140 16,974 77,804 20,607 18,400 21,078 116,382
</TABLE>
15
<PAGE>
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.
Earnings were $14,059,000 and $61,172,000 less than fixed charges in the
years ended 1990 and 1989, respectively.
(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 March 31, 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>
MARCH 31, 1994
------------------
ACTUAL AS ADJUSTED
------ -----------
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents................................... $ 35.0 $ 38.7
====== ======
Current maturities of long-term debt........................ $ 2.5 $ 2.5
------ ------
Long-term debt (excluding current portion)
13 1/2% First Mortgage Notes Due 1996(a).................. 167.2 --
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................................................. 35.0 35.0
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.......................... 1.0 1.0
------ ------
Total long-term debt...................................... 404.0 416.8
------ ------
Total debt.............................................. 406.5 419.3
Preferred stock............................................. 4.1 4.1
Shareholders' equity(b)..................................... 351.4 348.5
------ ------
Total capitalization.................................... $762.0 $771.9
====== ======
</TABLE>
- --------
(a) Represents $170 million principal amount outstanding less current maturity
of $2.0 million and unamortized discount of $0.8 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,
operating income and EBITDR, as measured by operating income before net rent
plus depreciation and amortization, on a consolidated basis and portions
thereof generated by each of the Company's three casino properties.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
------------------ ----------------------
MARCH 31, APRIL 1,
1994 1993 1993 1992 1991
--------- -------- ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
REVENUES:
TropWorld.......................... $72.1 $76.5 $327.7 $334.3 $310.3
Tropicana.......................... 36.7 33.0 134.9 130.9 129.4
Ramada Express..................... 21.8 12.8 56.2 46.8 41.6
----- ----- ------ ------ ------
Consolidated..................... 130.6 122.3 518.8 512.0 481.3
OPERATING EXPENSES:
TropWorld.......................... $62.6 $75.7 $294.2 $306.6 $298.1
Tropicana.......................... 32.6 30.8 127.7 126.6 126.2
Ramada Express..................... 16.3 10.1 50.7 38.1 35.6
Corporate.......................... 2.3 2.2 8.8 8.1 7.7
----- ----- ------ ------ ------
Consolidated..................... 113.8 118.8 481.4 479.4 467.6
OPERATING INCOME:
TropWorld.......................... $ 9.5 $ 0.8 $ 33.5 $ 27.7 $ 12.2
Tropicana.......................... 4.1 2.2 7.2 4.3 3.2
Ramada Express..................... 5.5 2.7 5.5 8.7 6.0
Corporate.......................... (2.3) (2.2) (8.8) (8.1) (7.7)
----- ----- ------ ------ ------
Consolidated..................... 16.8 3.5 37.4 32.6 13.7
EBITDR: (a)
TropWorld.......................... $15.5 $15.7 $ 74.3 $ 83.2 $ 68.1
Tropicana.......................... 7.6 5.5 20.5 18.5 18.1
Ramada Express..................... 7.4 3.8 11.1 12.7 9.7
Corporate.......................... (2.1) (2.0) (8.1) (7.5) (6.8)
----- ----- ------ ------ ------
Consolidated..................... 28.4 23.0 97.8 106.9 89.1
</TABLE>
- --------
(a) 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.
18
<PAGE>
Three Months 1994 Versus Three Months 1993
The Company's consolidated revenues were $130.6 million for the 1994 first
quarter, a 7% increase over $122.3 million for the 1993 first quarter, as
increases in total revenues at Ramada Express and Tropicana more than offset a
decrease in total revenues at TropWorld. Consolidated operating income was
$16.8 million in the 1994 first quarter compared with $3.5 million in the 1993
first quarter. The primary reason for the increase in consolidated operating
income is 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 completed in September
1993. The Ramada Express expansion was the primary cause for an increase in the
consolidated utilities expense in the 1994 first quarter. Consolidated casino
costs were lower in the 1994 first quarter compared to last year's first
quarter largely as a result of a reduction in complimentaries and coin
redemptions at TropWorld.
Consolidated interest income was $11.2 million lower in the 1994 first
quarter compared to last year's first quarter 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 three months ended March 31, 1994.
Ramada Express. At Ramada Express, revenues and operating income for the 1994
first quarter increased substantially over last year's first quarter due to the
major expansion of that facility completed in September 1993. Total revenues
were $21.8 million in the 1994 first quarter, a 70% increase over $12.8 million
in the 1993 first quarter, reflecting increases in all revenue components.
Hotel occupancy was 92% on a 1,500-room base for the 1994 first quarter
compared to 94% on a 400-room base for the 1993 first quarter.
Operating income was $5.5 million in the first quarter of 1994 compared to
$2.7 million in last year's first quarter, a 106% increase. Operating income is
after net rent and depreciation and amortization expenses. Net rent was
insignificant in both quarters. As a result of the expanded facility,
depreciation and amortization was $1.9 million in the 1994 first quarter
compared to $1.1 million in last year's first quarter.
Tropicana. Total revenues at Tropicana were $36.7 million in the 1994 first
quarter, up 11% from $33.0 million in last year's first quarter. 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. Management believes that walk-in business will be further enhanced as a
result of the recent construction by the State of Nevada of pedestrian skywalks
connecting the four corners at 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.
Casino revenues were up 10% primarily as a result of a 16% increase in table
games revenue due to a higher hold percentage (19.8% in the 1994 first quarter
versus 17.3% in the 1993 first quarter). In addition, slot revenue improved 6%
in the 1994 first quarter versus the 1993 first quarter. Rooms revenue was 16%
higher principally because of higher room rates combined with higher
occupancies during the first quarter of 1994 compared to last year's first
quarter. The higher hotel occupancies, combined with the additional pedestrian
walk-in business mentioned previously, caused a 15% increase in food and
beverage revenue.
19
<PAGE>
Tropicana's operating income improved 90% to $4.1 million for the first
quarter of 1994 from $2.2 million for the first quarter of 1993. Operating
income is after net rent and depreciation and amortization expenses. Net rent
was $1.9 million in the 1994 first quarter versus $1.7 million in the 1993
first quarter. Depreciation and amortization was $1.6 million in both quarterly
periods. Total costs and expenses increased by a modest 6% in comparison to the
11% increase in total revenues. Since there is more credit business associated
with table games revenue than with slot revenue, the increase in table games
revenue caused an increase in the provision for doubtful accounts.
TropWorld. Total revenues at TropWorld were $72.1 million in the 1994 first
quarter compared to $76.5 million in the 1993 first quarter, a 6% decrease
primarily as a result of lower casino revenue. The decline in casino revenue
was caused by a reduction in the use of complimentary rooms and food and
beverage service as a means of promoting casino activity. In addition, there
was a decrease in coin redemptions in this year's first quarter compared to
last year's first quarter. 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.
TropWorld had operating income of $9.5 million in the 1994 first quarter
compared to $0.8 million in last year's first quarter. The increase in
TropWorld's operating income was largely due to the effects 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 $10.7
million in the 1993 first quarter to $0.3 million in the 1994 first quarter.
Depreciation and amortization increased from $4.2 million in the 1993 first
quarter to $5.7 million in the 1994 first quarter. In addition to the effects
of the AREI/AGP acquisition, operating costs decreased at TropWorld as a result
of a $5.0 million or 14% reduction in casino costs attributable to the decrease
in complimentaries and coin redemptions.
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
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$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.
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.
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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 $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.
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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.
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
- --------
*Market comparisons are stated on a calendar basis for the market and property.
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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.
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.
- --------
*Market comparisons are stated on a calendar basis for the market and
property.
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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.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flow and Coverage. The Company's operating cash flow (measured by
adding net rent and depreciation and amortization to operating income) was
$97.8 million in 1993 compared to $106.9 million in 1992. Net financing
charges were $48.9 million in 1993 compared to $48.1 million in 1992. Even
with a decrease in operating cash flow, as defined, the Company's coverage of
its net financing charges was 2.0 times.
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 loan
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.
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 and will be approximately $6 million in 1994. Funding for this
project was and will be from available cash balances and cash flow. This
project was substantially completed in May 1994.
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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 are $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 $4.8 million at December 30, 1993. Also included in
the 1995 maturities is $10 million borrowed under the revolving credit
facility obtained in connection with the AREI/AGP acquisition (the "AREI/AGP
Facility"), which expires on December 31, 1994. The $10 million was repaid in
full by drawing on the Ramada Express Credit Facility during the first quarter
of 1994.
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 availability of funds
under this facility will 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. Concurrently with the closing of the Proposed Credit Facility, the
AREI/AGP Facility will also 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.
Commitments and On-Going Capital Expenditures. At March 31, 1994 and
December 30, 1993, the Company had commitments of approximately $20 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 $33 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 facility; however, the timing of these expenditures is
uncertain. 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.
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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 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.
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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.
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.
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.
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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.
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. The Company has substantially completed a new main entrance
and a new building facade at Tropicana that will create 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,
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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; 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 late 1994. 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. On June 9, 1994, the Missouri Gaming Commission notified the
Company that its application will be among the next three applications to be
considered. 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, a Missouri statewide
election defeated a proposed constitutional amendment that would have allowed
such "games of chance" on riverboats. The Company intends to proceed with this
project utilizing electronic machines and gaming tables as approved by the
Missouri Gaming Commission.
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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 has indicated that it anticipates
granting a license for the Evansville market area this fall. On April 21, 1994,
the Company was ranked first among six applicants by the citizen selection
committee of the City of Evansville to operate the only riverboat gaming
facility planned to be licensed in the Evansville market. Each of the Company
and the second and third choices of the selection committee has engaged in
discussions with the City of Evansville seeking its endorsement to the Indiana
Gaming Commission of the applicant's license request and a development
agreement. These discussions 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. The discussions are expected to be completed by June 30, 1994. See
"REGULATION--Regulation and Licensing--Indiana." Evansville, located on the
Ohio River in southwestern Indiana, has 2.5 million people living within 100
miles, which encompasses the metropolitan Louisville, Kentucky area. 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 Indiana Gaming Commission is precluded
from holding licensing hearings and awarding licenses. The trial court decision
is being appealed directly to the Indiana Supreme Court, and the Indiana Gaming
Commission, through the Indiana Attorney General, has requested the Supreme
Court to handle the case on an expedited basis. 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
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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 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
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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, 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
the Claridge Hotel and Casino, the Sands Hotel and Casino, Showboat and Trump
Plaza. 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,
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 two 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.
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. 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
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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.
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").
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REGULATION
GENERAL
Regulatory aspects of the gaming business in both Nevada and New Jersey 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. In
both states, 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
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.
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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
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
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<PAGE>
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 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 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.
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<PAGE>
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 24, 1993, the Nevada Commission granted the Company prior
approval to make public offerings for a period of one year, subject to certain
conditions ("Shelf Approval"). The Company is in the process of seeking renewal
of the Shelf Approval and in that regard a representative of the Company
appeared before the Nevada Board on June 8, 1994 and the Nevada Board voted to
recommend approval of the application to the Nevada Commission. The Nevada
Commission is scheduled to conduct a hearing on June 23, 1994. However, the
Shelf Approval may be rescinded for good cause without prior notice upon the
issuance of an 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
38
<PAGE>
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.
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.
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<PAGE>
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 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.
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<PAGE>
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 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.
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<PAGE>
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 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 rules relative to certain
operating matters, including security, tax collection and remission,
accounting, cruises and other matters. 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.
The Company, through an Indiana subsidiary, has applied to the Indiana Gaming
Commission for a riverboat owner's license for the Evansville, Indiana market.
Five 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 has also participated in responding to a Request for Proposals
from the City of Evansville for its endorsement to the Indiana Gaming
Commission with respect to proposed riverboat casino operations in Evansville.
The Company is a finalist for the endorsement of the City of Evansville and has
been engaged in negotiations with the City of Evansville for a development
agreement to become effective should the Company be awarded a license by 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
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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.
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.
As part of its efforts to secure the endorsement of the City of Evansville,
the Company has engaged in negotiations with the city which 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. Negotiations have commenced with regard to the 1994 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. A small number of such employees are
covered by a contract that expired on June 1, 1994, but has been extended.
Negotiations are in progress with regard to both contracts. 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 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 following trademarks are important to the Company: Aztar, Trop,
TropWorld, Trop Park, Tropicana, Tivoli Pier, TropWorld Casino and
Entertainment Resort, Ramada Express and Express. There are no other trademarks
the use of which is material to the conduct of the Company's business as a
whole.
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LEGAL PROCEEDINGS
Aztar and more than 30 other major casino operators, as well as various
suppliers and distributors of video poker and electronic slot machines, have
been named as defendants in actions entitled William H. Poulos v. Caesar's
World, Inc., et al., (filed on April 26, 1994) and William Ahern v. Caesar's
World, Inc., et al., (filed on May 10, 1994) 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.
The Company intends to file motions to dismiss the complaints and to file
motions to transfer the actions to the United States District Court for the
District of Nevada. As the cases are at their inception, no discovery has been
conducted. The Company intends vigorously to defend these actions.
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.
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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
---- --- --------- ---------------
<S> <C> <C> <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.................... 55 Vice President, 6
Corporate
Communications
Meridith P. Sipek.............. 47 Controller 16
Craig F. Sullivan.............. 47 Treasurer 16
John B. Bohle.................. 50 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)
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.
45
<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.
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.
46
<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 May 20, 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
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth certain information regarding Directors' and
executive officers' beneficial ownership of Common Stock as of May 20, 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 **
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 (14 persons).... 2,001,864 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, and for Mr. Bohle
8,000 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 (14 persons), 1,720,916
shares, which they may acquire by the exercise of options within 60 days.
** Less than 1% of the outstanding shares of Common Stock.
47
<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 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 or , 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 option of the Company prior to ,
1999. On or after , 1999, the Notes will be redeemable at the option 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 as a percentage 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
48
<PAGE>
to such Note shall state the portion of the principal amount (in integral
multiples of $1,000) to be 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.
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 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 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. 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 so tendered to the Company by such Holder will be accepted for
payment; (2) 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.
49
<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 as a
percentage 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 qualify or be found
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 qualify or be found suitable under any
gaming laws or regulations applicable to the Company and such Holder or such
beneficial owner does not so qualify or is found unsuitable, the Company, at
its option, (i) shall require such Holder or such beneficial owner to dispose
of the Holder's or beneficial owner's Notes within 120 days after such Holder
or beneficial owner receives notice that the applicable
50
<PAGE>
gaming authorities have found that such Holder or beneficial owner does not so
qualify or such different time period as may be prescribed by such authorities
or (ii) shall redeem the Notes of such Holder upon not less than 30 nor more
than 60 days prior notice by the Company or such different period as may be
prescribed by such applicable gaming authorities. Any such redemption by the
Company 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,
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. 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 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
51
<PAGE>
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 calculating Consolidated Fixed
Charges for the period described in clause (ii) above, (A) the interest rate on
any Indebtedness bearing interest at a rate that is adjustable based on market
rate levels shall
52
<PAGE>
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 "Limitations 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 among the
Company and its Restricted Subsidiaries and as determined in accordance with
generally accepted accounting principles.
53
<PAGE>
"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.
"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.
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"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 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.
"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 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.
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"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 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 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 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
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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.
"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, the quotient of the 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 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
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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 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.
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"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 March 31, 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.)
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
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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 or any Subsidiary of the Company (other than a Wholly
Owned Subsidiary and, in the case of a Restricted Subsidiary, from the
Company), (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,
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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 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
61
<PAGE>
Restricted Subsidiary pursuant to clauses (a) or (b) is included in any
computation 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 its 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 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) and (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) and (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
incurred 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 the Company
or such Restricted Subsidiary has not 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.
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
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<PAGE>
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 Governmental Authority
that may from time to time regulate the Company's gaming operations 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
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
63
<PAGE>
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
Accountant's Certificate with respect to the calculation of Consolidated Net
Worth 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)
the failure to pay interest on any Note for a period of 30 days after such
interest becomes due and payable, (ii) the failure to pay the principal of any
Note when such principal becomes due and payable, at maturity or otherwise,
64
<PAGE>
(iii) a default in the observance of any other covenant contained in the
Indenture that continues for 60 days after the Company has received 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) 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 any such judgment shall not be in effect, (vi) certain events of
bankruptcy, insolvency or reorganization affecting the Company or any
Significant Subsidiary and (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 reasonable, good faith judgment of the Board of
Directors of the Company, evidenced by a resolution of such Board, 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.
In case 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 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 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) within 10
days of such declaration or maturity, the holders of such Indebtedness shall
have rescinded such declaration and its consequences or such matured
Indebtedness shall have been discharged in full, (2) the Company shall have
delivered a notice of 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 and unless the Holders of at
least 25% in principal amount of the Notes have requested the Trustee to pursue
remedies in respect of such Event of Default and have offered the Trustee
reasonable indemnity against loss, liability or expense to be thereby incurred
and the Trustee has failed so to act for 60 days after receipt of the same.
Subject to certain restrictions, the Holders of a majority in principal amount
of the Notes are given 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 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.
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<PAGE>
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, a 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 transfers to
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, premium, if
any, 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, premium, if any, 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 Opinion of Counsel to the effect that, among other things, the
transfer 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 (d) 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 the Indenture or the Notes for certain
specified purposes, including curing ambiguities, defects or inconsistencies
and making any change that does not adversely affect the rights of any Holder.
Other modifications and amendments of the Indenture or the Notes may be made
with the consent of the Holders of a majority in principal amount of the Notes,
except that, without the consent of each Holder of Notes affected thereby, no
amendment may reduce the remaining principal amount
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<PAGE>
of or rate of interest on any Note, change the date on which payment of
principal or interest is due or the currency in which it is payable, change the
date on which any Note may be subject to redemption, reduce the redemption
price or reduce the amount of Notes whose Holders must consent to modify, alter
or waive any provision of the Indenture or the Notes.
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 its 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.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
between the Company and the Underwriter (the "Underwriting Agreement"), the
Company has agreed to sell to the Underwriter, and the Underwriter has agreed
to purchase, $ principal amount of the Notes.
In the Underwriting Agreement, the Underwriter has 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 Underwriter that the Underwriter
initially proposes 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. After the initial public offering, the public offering
prices and such concessions may be changed from time to time by the
Underwriter.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriter that the Underwriter currently
intends to make a market in the Notes; however, the Underwriter is 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
Underwriter against certain liabilities, including liabilities under the
Securities Act, or contribute to payments the Underwriter may be required to
make in respect thereof.
The Underwriter 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.
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 have
been audited by Coopers & Lybrand, independent accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said 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 Underwriter. Certain legal
matters with respect to Nevada, New Jersey and Indiana will be passed upon by
Lionel, Sawyer & Collins; Hankin, Sandson & Sandman; and McHale, Cook & Welch,
respectively.
68
<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 Decem-
ber 30, 1993, December 31, 1992 and January 2, 1992...................... F-6
Notes to Consolidated Financial Statements................................ F-7
Consolidated Balance Sheets at March 31, 1994 and December 30, 1993 (unau-
dited)................................................................... F-22
Consolidated Statements of Operations for the three months ended March 31,
1994 and April 1, 1993 (unaudited)....................................... F-23
Consolidated Statements of Cash Flows for the three months ended March 31,
1994 and April 1, 1993 (unaudited)....................................... F-24
Consolidated Statements of Shareholders' Equity for the three months ended
March 31, 1994 and April 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 exer-
cised................ 35 35
Issuance of restricted
stock................ 210 (210) --
Repurchase of common
stock................ (224) (224)
Preferred stock divi-
dend................. (800) (800)
Amortization of un-
earned 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 exer-
cised................ 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 re-
stricted stock....... (30) 30 --
Amortization of un-
earned 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 exer-
cised................ 4 2,145 2,149
Tax benefit from stock
options exercised.... 246 246
Preferred stock divi-
dend, net of income
tax benefit.......... (610) (610)
Amortization of un-
earned 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> <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
------- ------- -------
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 princi-
pal 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 be-
ginning 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 pension plan, which is not currently funded, for certain
former executive employees. The Company has a nonqualified retirement plan,
which is not required to be funded by the Company, for certain senior
executives. The Company has a 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>
MARCH
31, DECEMBER 30,
1994 1993
-------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 35,020 $ 39,551
Accounts receivable, net.............................. 19,673 19,170
Refundable income taxes............................... 1,009 2,062
Inventories........................................... 5,466 5,564
Prepaid expenses...................................... 7,803 9,206
Deferred income taxes................................. 6,498 6,566
-------- --------
Total current assets................................ 75,469 82,119
Investments in and advances to unconsolidated partner-
ship................................................... 13,460 13,776
Other investments....................................... 22,820 22,131
Property and equipment:
Buildings and equipment, net.......................... 640,639 648,139
Land.................................................. 81,795 81,795
Construction in progress.............................. 19,674 6,701
Leased under capital leases, net...................... 972 1,043
-------- --------
743,080 737,678
Other assets............................................ 20,527 21,467
-------- --------
$875,356 $877,171
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals......................... $ 32,531 $ 39,515
Accrued payroll and employee benefits................. 17,209 15,823
Accrued interest payable.............................. 13,489 13,714
Income taxes payable.................................. 2,644 2,633
Current portion of long-term debt..................... 2,503 2,499
-------- --------
Total current liabilities........................... 68,376 74,184
Long-term debt.......................................... 404,033 404,086
Other long-term liabilities............................. 22,368 21,882
Deferred income taxes................................... 25,047 26,126
Contingencies and commitments
Series B ESOP convertible preferred stock (redemption
value $4,335 and $4,295)............................... 4,129 3,905
Shareholders' equity:
Common stock, $.01 par value (37,368,426 and
37,359,011 shares outstanding)....................... 414 414
Paid-in capital....................................... 346,965 346,965
Retained earnings..................................... 20,956 16,559
Less:Treasury stock................................... (16,885) (16,885)
Unearned compensation............................ (47) (65)
-------- --------
Total shareholders' equity.......................... 351,403 346,988
-------- --------
$875,356 $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 THREE MONTHS ENDED MARCH 31, 1994 AND APRIL 1, 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FIRST QUARTER
------------------
1994 1993
-------- --------
<S> <C> <C>
REVENUES
Casino................................................ $106,972 $104,359
Rooms................................................. 10,056 7,343
Food and beverage..................................... 10,577 8,487
Other................................................. 2,961 2,133
-------- --------
130,566 122,322
COSTS AND EXPENSES
Casino................................................ 48,610 51,299
Rooms................................................. 5,892 4,186
Food and beverage..................................... 9,421 7,942
Other................................................. 1,842 1,485
Marketing............................................. 11,442 11,550
General and administrative............................ 11,694 11,060
Utilities............................................. 3,156 2,677
Repairs and maintenance............................... 4,567 4,463
Provision for doubtful accounts....................... 1,051 452
Property taxes and insurance.......................... 4,416 4,183
Net rent.............................................. 2,345 12,547
Depreciation and amortization......................... 9,286 6,961
-------- --------
113,722 118,805
-------- --------
Operating income........................................ 16,844 3,517
Interest income....................................... 556 11,719
Interest expense...................................... (11,822) (11,727)
-------- --------
Income before other items and income taxes.............. 5,578 3,509
Equity in unconsolidated partnership's loss........... (940) (967)
-------- --------
Income before income taxes.............................. 4,638 2,542
Income taxes.......................................... (85) (958)
-------- --------
Net income.............................................. $ 4,553 $ 1,584
======== ========
Net income per common and common equivalent share....... $ .11 $ .04
Net income per common share assuming full dilution...... $ .11 $ .04
Weighted average common shares applicable to:
Net income per common and common equivalent share..... 38,261 38,291
Net income per common share assuming full dilution.... 39,292 39,341
</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 THREE MONTHS ENDED MARCH 31, 1994 AND APRIL 1, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
FIRST QUARTER
----------------
1994 1993
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net income.................................................... $ 4,553 $ 1,584
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 9,810 7,416
Provision for losses on accounts receivable................. 1,051 452
Loss on reinvestment obligation............................. 131 243
Interest income............................................. -- 1,460
Rent expense................................................ 237 (782)
Distribution in excess of equity in income of partnership... 316 323
Deferred income taxes....................................... (1,011) 585
Change in assets and liabilities:
(Increase) decrease in accounts receivable................ (1,754) 1,253
(Increase) decrease in refundable income taxes............ 1,053 90
(Increase) decrease in inventories and prepaid expenses... 1,417 984
Increase (decrease) in accounts payable, accrued expenses
and income taxes payable................................. (5,010) (17,047)
Other items, net.......................................... 212 368
------- -------
Net cash provided by (used in) operating activities..... 11,005 (3,071)
------- -------
Cash Flows from Investing Activities
Payments received on TropWorld second mortgage.............. -- 21,300
Payments received on other notes receivable................. 454 873
Increase in TropWorld second mortgage....................... -- (21,300)
Increase in other notes receivable.......................... -- (239)
Purchases of property and equipment......................... (14,140) (16,974)
Additions to other long-term assets......................... (1,307) (1,719)
------- -------
Net cash provided by (used in) investing activities..... (14,993) (18,059)
------- -------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt.................... 10,000 --
Proceeds from issuance of common stock...................... -- 2,048
Principal payments on long-term debt........................ (10,117) (1,016)
Preferred stock dividend.................................... (389) (395)
Redemption of preferred stock............................... (37) (17)
------- -------
Net cash provided by (used in) financing activities..... (543) 620
------- -------
Net increase (decrease) in cash and cash equivalents........ (4,531) (20,510)
Cash and cash equivalents at beginning of period............ 39,551 100,403
------- -------
Cash and cash equivalents at end of period.............. $35,020 $79,893
======= =======
Supplemental Cash Flow Disclosures
Summary of non-cash investing and financing activities:
Capital lease obligations incurred for property and
equipment.................................................. $ -- $ 247
Tax benefit from stock options and preferred stock dividend. 43 277
Cash paid (refunded) during the period for the following:
Interest, net of amount capitalized......................... $11,542 $22,097
Income taxes................................................ (11) 122
</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 THREE MONTHS ENDED MARCH 31, 1994 AND APRIL 1, 1993
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
FIRST QUARTER
------------------
1994 1993
-------- --------
<S> <C> <C>
Common stock:
Beginning balance........................................ $ 414 $ 410
Stock options exercised for 321,808 shares in 1993....... -- 3
-------- --------
Ending balance......................................... 414 413
-------- --------
Paid-in capital:
Beginning balance........................................ 346,965 344,574
Stock options exercised.................................. -- 2,045
Tax benefit from stock options exercised................. -- 233
-------- --------
Ending balance......................................... 346,965 346,852
-------- --------
Retained earnings:
Beginning balance........................................ 16,559 5,787
Preferred stock dividend, net of income tax benefit of
$43 and $44............................................. (156) (154)
Net income............................................... 4,553 1,584
-------- --------
Ending balance......................................... 20,956 7,217
-------- --------
Treasury stock:
Beginning and ending balance............................. (16,885) (16,885)
-------- --------
Unearned compensation:
Beginning balance........................................ (65) (137)
Amortization............................................. 18 19
-------- --------
Ending balance......................................... (47) (118)
-------- --------
$351,403 $337,479
======== ========
</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 $495,000 and $712,000 for the quarters
ended 1994 and 1993, respectively. 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 three months ended
March 31, 1994 and April 1, 1993 (in thousands):
<TABLE>
<CAPTION>
FIRST QUARTER
--------------
1994 1993
------ ------
<S> <C> <C>
Revenues........................................................ $3,582 $3,152
Operating expenses.............................................. (683) (694)
------ ------
Operating income................................................ 2,899 2,458
Interest expense................................................ (923) (967)
------ ------
Net income.................................................... $1,976 $1,491
====== ======
</TABLE>
NOTE 3: OTHER LONG-TERM LIABILITIES
At March 31, 1994 and December 30, 1993, other long-term liabilities
consisted of (in thousands):
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
Accrued rent expense........................................... $13,921 $13,684
Deferred compensation and retirement plans..................... 8,293 8,044
Deferred income................................................ 154 154
------- -------
$22,368 $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)
The December 30, 1993 valuation allowance was reduced during the 1994 first
quarter 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 1994 first quarter income tax expense by
$1,604,000.
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 $3,978,000 and $3,980,000 at
March 31, 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
$20,000,000 at March 31, 1994.
F-27
<PAGE>
NO DEALER, SALESMAN, 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 UNDERWRITER. 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.................................................................. 28
Credit Policy and Control Procedures...................................... 34
Regulation................................................................ 35
Employees................................................................. 43
Trademarks................................................................ 43
Legal Proceedings......................................................... 44
Management................................................................ 45
Security Ownership........................................................ 47
Description of the Notes.................................................. 48
Underwriting.............................................................. 68
Experts................................................................... 68
Legal Matters............................................................. 68
Index to Financial Statements............................................. F-1
</TABLE>
$180,000,000
AZTAR CORPORATION
% SENIOR SUBORDINATED
NOTES DUE 2004
- ---------------------------------
SALOMON BROTHERS INC
- -----------------------------------------------
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.................................................. +
Accounting fees and expenses............................................ +
Legal fees and expenses (other than Blue Sky)........................... +
Blue Sky fees and expenses, including legal fees........................ +
Trustee fees and expenses............................................... +
Miscellaneous........................................................... +
-------
Total .................................................................. +
=======
</TABLE>
- --------
* Expenses other than filing fees are estimated
+ To be filed by amendment.
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
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
(a) Exhibits
------------
<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
, 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 with respect to financial statements of
the Company.
*24. Powers of Attorney for John B. Bohle, Edward M. Carson, A. Sam Gittlin,
John R. Norton, III, Robert S. Rosow, Richard Snell, Terence W. Thomas,
Carroll V. Willoughby and Meridith P. Sipek (included in the signature
page on page II-4 of this Registration Statement).
**25. Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939.
</TABLE>
- --------
* Filed herewith
** To be filed by amendment
II-2
<PAGE>
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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Phoenix, State of Arizona on the 14th day of June,
1994.
AZTAR CORPORATION
PAUL E. RUBELI
By___________________________________
Paul E. Rubeli Chairman of the
Board President and Chief
Executive Officer
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.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
PAUL E. RUBELI Director, Chairman June 14, 1994
- ------------------------------------- of the Board,
Paul E. Rubeli President and Chief
Executive Officer
ROBERT M. HADDOCK Director, Executive June 14, 1994
- ------------------------------------- Vice President and
Robert M. Haddock Chief Financial
Officer
JOHN B. BOHLE Director June 14, 1994
- -------------------------------------
John B. Bohle
E. M. CARSON Director June 14, 1994
- -------------------------------------
Edward M. Carson
II-4
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
A. S. GITTLIN Director June 14, 1994
- -------------------------------------
A. Sam Gittlin
JOHN R. NORTON, III Director June 14, 1994
- -------------------------------------
John R. Norton, III
ROBERT S. ROSOW Director June 14, 1994
- -------------------------------------
Robert S. Rosow
R. SNELL Director June 14, 1994
- -------------------------------------
Richard Snell
Director
- -------------------------------------
Terence W. Thomas
CARROLL V. WILLOUGHBY Director June 14, 1994
- -------------------------------------
Carroll V. Willoughby
MERIDITH P. SIPEK Controller June 14, 1994
- -------------------------------------
Meridith P. Sipek
II-5
<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
, 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 with respect to financial statements of
the Company.
*24. Powers of Attorney for John B. Bohle, Edward M. Carson, A. Sam Gittlin,
John R. Norton, III, Robert S. Rosow, Richard Snell, Terence W. Thomas,
Carroll V. Willoughby and Meridith P. Sipek (included in the signature
page on page II-4 of this Registration Statement).
**25. Statement of Eligibility and Qualification Under the Trust Indenture
Act of 1939.
</TABLE>
- --------
* Filed herewith
** To be filed by amendment
<PAGE>
Draft of June 9, 1994
Aztar Corporation
$[180],000,000
__% Senior Subordinated Notes Due ____
Underwriting Agreement
New York, New York
___________, 1994
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 Salomon Brothers Inc (the "Underwriter"), $[180],000,000 principal
amount of its __% Senior Subordinated Notes Due ____ (the "Securities"), to be
issued under an indenture (the "Indenture") to be dated as of _________, 1994,
by and among the Company and Bank of America National Trust and Savings
Association, as trustee (the "Trustee").
1. Representations and Warranties. The Company represents and
------------------------------
warrants to, and agrees with, the 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 has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (file number ________) on Form
S-3, including a related preliminary prospectus, for the registration under
the Securities Act of 1933, as amended (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 the Underwriter. The Company will next file
with the Commission either (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
<PAGE>
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 the Underwriter shall agree in writing to a modification, shall be
in all substantive respects in the form furnished to the Underwriter 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 the Underwriter, 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 Trust Indenture Act of 1939, as amended
(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 applicable
requirements of the Trust Indenture Act and the rules thereunder; and, on
the Effective Date, the Prospectus, if not 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 (Form T-1) under
the Trust Indenture Act of the Trustee 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 the Underwriter
specifically for inclusion in the Registration Statement or the Prospectus
(or any supplement thereto).
2
<PAGE>
(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 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 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.
(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 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 in the
Registration Statement and the Prospectus comply in all material respects
with the requirements of the 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 generally accepted
accounting
3
<PAGE>
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).
(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,
4
<PAGE>
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. The Company has full corporate
power and authority to issue, sell and deliver the Securities.
(l) The execution, delivery and performance of this Agreement, the
Indenture, the Securities and the consummation of the transactions
contemplated hereby and thereby, including the issuance, sale and delivery
of the Securities, will not (i) conflict with or result in a breach 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 certificate of
incorporation or by-laws 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
the Company or any of its subsidiaries or any of their respective
properties or assets or (iii) require any consent, approval, authorization,
order, registration, filing, qualification, license or permit 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 and the Clark County
Liquor and Gaming License Board (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 have already been obtained or as
may be required under state securities or blue sky laws in connection with
the purchase and distribution of the Securities by the Underwriter.
5
<PAGE>
(m) (i) None of the Company or any of its subsidiaries is in
violation of its articles of incorporation or by-laws (other than
violations that 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) 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.
(n) Each of the Company and its subsidiaries 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 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.
(p) (i) Each of the Company, its subsidiaries and Tropicana
Enterprises 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, its
subsidiaries
6
<PAGE>
and Tropicana Enterprises 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 are considering modifying, suspending or 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 each of its subsidiaries and a non-controlling 50%
equity interest in Tropicana Enterprises, 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 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, any of its subsidiaries or Tropicana
Enterprises.
(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 the Underwriter pursuant to paragraph (e) of
Section 5 of this Agreement has been issued and no proceedings for that
purpose have been instituted or,
7
<PAGE>
to the best knowledge of the Company, are threatened or contemplated, and
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
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
8
<PAGE>
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. (a) Subject to the terms and conditions and
-----------------
in reliance upon the representations and warranties herein set forth, the
Company agrees to sell, and the Underwriter agrees 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, to the Closing Date,
the Securities.
3. Delivery and Payment. Delivery of and payment for the Securities
--------------------
shall be made at _____ AM, New York City time, on __________, 1994, or such
later date (not later than _________, 1994) as the Underwriter shall designate,
which date and time may be postponed by agreement between the Underwriter 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 the Underwriter for the
Underwriter's account against payment by the Underwriter 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 the
Underwriter shall reasonably designate at least one business day in advance of
the Closing Date and payment for the Securities shall be
9
<PAGE>
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 the Underwriter 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 the Underwriter in New York, New York, not later than
____ PM on the business day prior to the Closing Date.
4. Offering by Underwriter. It is understood that the Underwriter
-----------------------
proposes to offer the Securities for sale to the public as set forth in the
Prospectus.
5. Agreements. The Company agrees with the Underwriter 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 the Underwriter's prior
consent. Subject to the foregoing sentence, if the 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
the Underwriter of such timely filing. The Company will promptly advise
the Underwriter (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
10
<PAGE>
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 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.
(c) As soon as practicable, the Company will make generally available
to their security holders and to the Underwriter 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 the Underwriter and counsel for the
Underwriter, without charge, signed copies of the Registration Statement
and, so long as delivery of a prospectus by the Underwriter may be required
by the Act, as many copies of each Preliminary Prospectus and the
Prospectus and any supplement thereto as the Representatives 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 the Underwriter 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 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
11
<PAGE>
later, or if the information reported in the Prospectus, if 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 Obligation of the Underwriter. The obligation
-----------------------------------------------
of the Underwriter 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 the Underwriter agrees in writing to a later
time, the Registration Statement will become effective not later than (i)
____ PM New York City time on the date of determination of the public
offering price, if such determination occurred at or prior to _____ PM New
York City time on such date or (ii) _____ Noon on the business day
following the day on which the public offering price was determined, if
such determination occurred after ____ 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 the Underwriter 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 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 as described in the Prospectus;
(ii) the Company is qualified to do business and is in good
standing as a foreign corporation under the laws of the State of New
Jersey, and the Company is qualified to do business and is in good
standing as a foreign corporation under the laws of
12
<PAGE>
the State of Nevada, and the opinion of such counsel in this paragraph
may be expressed solely upon its review of certificates of
governmental officials of such jurisdictions and may be in each case
as of the date of such certificates;
(iii) the Company's authorized equity capitalization is as set
forth in the Prospectus; and the Securities conform to the description
thereof contained in the Prospectus;
(iv) the Indenture has been duly authorized, executed and
delivered by the Company, has been duly qualified under the Trust
Indenture Act, and, assuming the due authorization, execution and
delivery thereof by the Trustee, constitutes a legal, valid and
binding instrument enforceable against the Company in accordance with
its terms, except to the extent that the enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium and
other laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity);
(v) the sale and the issuance of the Securities have been duly
authorized by requisite corporate action on the part of the Company,
and the Securities, when executed and delivered in accordance with the
terms of the Indenture and delivered to and paid for by the
Underwriter pursuant to this Agreement and assuming the due
authentication thereof by the Trustee, will be valid and binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, except to the extent that the
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium and other laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforcement is considered in a
proceeding at law or in equity);
(vi) to the best knowledge of such counsel, there is no pending
or threatened action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries of a character required to be
disclosed in the Registration Statement which is not adequately
disclosed in the
13
<PAGE>
Prospectus, and there is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit, which is not described or
filed as required;
(vii) such counsel has been advised by the Commission that the
Registration Statement has become effective under the Act; any
required filing of the Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and within the
time period required by Rule 424(b); to the best knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued, no proceedings for that
purpose have been instituted or threatened and the Registration
Statement and the Prospectus (other than the financial statements and
other financial and statistical information contained therein as to
which such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act and the
rules thereunder; and such counsel has no reason to believe that at
the Effective Date the Registration Statement contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus as of the date of the
Prospectus, the Effective Date or the Closing Date included or
includes any untrue statement of a material fact or omitted or omits
to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;
(viii) this Agreement has been duly authorized, executed and
delivered by the Company;
(ix) no consent, approval, authorization or order of any court or
governmental agency or body is required for the consummation of the
transactions contemplated herein, except such as have been obtained
under the Act and such as may be required under the blue sky laws of
any jurisdiction in connection with the purchase and distribution of
the Securities by the Underwriter and such other approvals as have
been obtained;
(x) neither the issue and sale of the Securities, nor the
consummation of any other of the transactions herein contemplated nor
the fulfillment
14
<PAGE>
of the terms hereof will conflict with, result in a breach of, or
constitute a default under, the charter or by-laws of the Company or
the terms of any indenture or other agreement or instrument filed as
an exhibit to the Registration Statement or any judgment, order or
decree known to such counsel to be applicable to the Company or any of
its subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company
or any of its subsidiaries; and
(xi) to the best of such counsel's knowledge without independent
investigation other than inquiries of responsible officers of the
Company and review of certain documents furnished to such counsel by
the Company no holders of securities of the Company have rights to the
registration of such securities under the Registration Statement.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the State
of New York or the United States, to the extent they deem proper and
specified in such opinion, upon the opinion of other counsel of good
standing whom they believe to be reliable and who are satisfactory to
counsel for the Underwriter and (B) as to matters of fact, to the extent
they deem proper, 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 the Underwriter the opinion
of [Idelle A. Goldberg, General Counsel of TropWorld], and the opinion of
[Lionel Sawyer & Collins], Nevada counsel for the Company, each dated the
Closing Date and in form and substance satisfactory to the Underwriter.
(d) The Underwriter shall have received from Cleary, Gottlieb, Steen
& Hamilton, counsel for the Underwriter, 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 the Underwriter 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.
15
<PAGE>
(e) The Company shall have furnished to the Underwriter a
certificate, signed by the Chief Financial Officer and Treasurer 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, whether or not arising from transactions in the ordinary
course of business, except as set forth in or contemplated in the
Prospectus (exclusive of any supplement thereto).
(f) At the Execution Time and at the Closing Date, Coopers & Lybrand
shall have furnished to the Underwriter a letter or letters, dated
respectively as of the Execution Time and as of the Closing Date, in form
and substance satisfactory to the Underwriter, confirming that they are
independent accountants within the meaning of the Act and the applicable
published rules and regulations thereunder and stating in effect that:
(i) in their opinion the audited financial statements and
financial statement schedules included 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 related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements made available by the
16
<PAGE>
Company and its subsidiaries; 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 ________,
1994, nothing came to their attention which caused them to believe
that:
(1) any unaudited financial statements included in the
Registration Statement and the Prospectus do not comply in form
in all material respects with applicable accounting requirements
of the Act and with the published rules and regulations of the
Commission with respect to registration statements on Form S-3;
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 in the Registration Statement and the
Prospectus; or
(2) with respect to the period subsequent to _______, 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 _______, 1994 unaudited consolidated balance sheet
included in the Registration Statement and the Prospectus, or for
the period from _______, 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 _____, 1994 to such
specified date there were any decreases, as compared with the
corresponding period in the
17
<PAGE>
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 thereof unless said explanation is not deemed
necessary by the Representatives; 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 Registration Statement, including the information set forth
on the cover page of the Prospectus and under the captions "PROSPECTUS
SUMMARY", "INVESTMENT CONSIDERATIONS", "THE COMPANY", "USE OF
PROCEEDS", "SELECTED CONSOLIDATED FINANCIAL INFORMATION",
"CAPITALIZATION", "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION", "BUSINESS", "MANAGEMENT",
"SECURITY OWNERSHIP", "DESCRIPTION OF THE NOTES" and "CERTAIN
CONTRACTUAL ARRANGEMENTS", 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.
(g) 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 letter or letters referred to in paragraph (f) 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 the Underwriter's 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
18
<PAGE>
any amendment thereof) and the Prospectus (exclusive of any supplement
thereto).
(h) 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., 11% Senior Subordinated Notes Due 2002 of the
Company, the Securities or any of the Company's debt 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.
(i) Prior to the Closing Date, the Company shall have furnished to
the Underwriter such further information, certificates and documents as the
Underwriter 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 the Underwriter and counsel for the Underwriter, this
Agreement and all obligations of the Underwriter hereunder may be canceled at,
or at any time prior to, the Closing Date by the Underwriter. Notice of such
cancelation shall be given to the Company in writing or by telephone or
telegraph confirmed in writing.
7. Reimbursement of Underwriter's Expenses. If the sale of the
---------------------------------------
Securities provided for herein is not consummated because any condition to the
obligations of the Underwriter set forth in Section 6 hereof is not satisfied,
because of any termination 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 the Underwriter, the Company will reimburse the Underwriter upon
demand for all out-of-pocket expenses (including reasonable fees and
disbursements of counsel) that shall have been incurred by it in connection
with the proposed purchase and sale of the Securities.
8. Indemnification and Contribution. (a) The Company agrees to
--------------------------------
indemnify and hold harmless the Underwriter, the directors, officers, employees
and agents of the Underwriter and each person who controls the Underwriter
within the meaning of either the Act or the Securities
19
<PAGE>
Exchange Act of 1934, as amended (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 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 the Underwriter specifically for
inclusion therein. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) The Underwriter severally agrees to indemnify and hold harmless
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 from the Company to the Underwriter, but only with
reference to written information relating to the Underwriter furnished to the
Company by or on behalf of the Underwriter specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement
will be in addition to any liability which the 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
Underwriter for inclusion in any Preliminary Prospectus or the Prospectus, and
the Underwriter confirms 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
20
<PAGE>
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 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.
21
<PAGE>
(d) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 8 is unavailable or insufficient to hold harmless an
indemnified party for any reason, the Company and the Underwriter 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 the
Underwriter may be subject in such proportion as is appropriate to reflect the
relative benefits received by the Company and by the Underwriter from the
offering of the Securities; provided, however, that in no case shall the
-------- -------
Underwriter be responsible for any amount in excess of the underwriting
discount applicable to the Securities purchased by the Underwriter hereunder.
If the allocation provided by the immediately preceding sentence is unavailable
for any reason, the Company and the Underwriter 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 Underwriter in connection
with the statement 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 Underwriter 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 Underwriter. The Company
and the Underwriter 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 the Underwriter within the meaning of either the Act or the
Exchange Act and each director, officer, employee and agent of the Underwriter
shall have the same rights to contribution as the 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).
9. Termination. This Agreement shall be subject to termination in
-----------
the Underwriter's absolute discretion, by
22
<PAGE>
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 National Association of
Securities Dealers Automated Quotation National Market System or trading in
securities generally on the New York Stock Exchange or the National Association
of Securities Dealers Automated Quotation National Market System shall have
been suspended or limited or minimum prices shall have been established on such
Exchange or Market System, (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 the Underwriter's
judgment, impracticable or inadvisable to proceed with the offering or delivery
of the Securities as contemplated by the Prospectus (exclusive of any
supplement thereto).
10. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements of
the Company or its officers and of the Underwriter 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 the 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
cancelation of this Agreement.
11. Notices. All communications hereunder will be in writing and
-------
effective only on receipt and will be mailed, delivered or telegraphed and
confirmed to the Underwriter at [Seven World Trade Center], New York, New York,
100[48]; 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.
12. 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.
13. Applicable Law. This Agreement will be governed by and construed
--------------
in accordance with the laws of the State of New York.
23
<PAGE>
If the foregoing is in accordance with the Underwriter's understanding
of our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and the Underwriter's acceptance shall represent a
binding agreement among the Company and the Underwriter.
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
24
<PAGE>
- --------------------------------------------------------------------------------
AZTAR CORPORATION,
as Issuer,
and
[BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION],
as Trustee
---------------
INDENTURE
Dated as of ________, 1994
---------------
__% Senior Subordinated Notes Due 2004
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
<S> <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>
(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
ARTICLE ONE
Definitions and Other Provisions of General Application
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 101 Definitions............................. 1
SECTION 102 Incorporation by Reference of TIA....... 22
SECTION 103 Compliance Certificates and Opinions.... 22
SECTION 104 Form of Documents Delivered to
Trustee............................... 23
SECTION 105 Acts of Holders......................... 24
SECTION 106 Notices, etc. to Trustee and the Company 25
SECTION 107 Notice to Holders; Waiver............... 25
SECTION 108 Communication by Holders with Other
Holders............................... 26
SECTION 109 Conflict with TIA....................... 26
SECTION 110 Rules by Trustee and Agents............. 26
SECTION 111 No Recourse Against Others.............. 26
SECTION 112 Execution in Counterparts............... 26
SECTION 113 Effect of Headings and Table
of Contents........................... 26
SECTION 114 No Adverse Interpretation of
Other Agreements...................... 26
SECTION 115 Successors and Assigns.................. 27
SECTION 116 Separability Clause..................... 27
SECTION 117 Benefits of Indenture................... 27
SECTION 118 Governing Law and Choice of Forum....... 27
SECTION 119 Legal Holidays.......................... 27
SECTION 120 Incorporation of Exhibit................ 28
</TABLE>
ARTICLE TWO
The Notes
<TABLE>
<S> <C>
SECTION 201 Form.................................... 28
SECTION 202 Title and Terms......................... 28
SECTION 203 Denominations........................... 29
SECTION 204 Execution, Authentication, Delivery,
and Dating............................ 29
SECTION 205 Temporary Notes......................... 30
SECTION 206 Registration, Registration of
Transfer and Exchange................. 30
SECTION 207 Holder Lists............................ 31
SECTION 208 Mutilated, Destroyed, Lost or
Stolen Notes.......................... 32
SECTION 209 Payment of Principal and Interest;
Principal and Interest Rights
Preserved............................. 32
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 210 Persons Deemed Owners................... 33
SECTION 211 Cancellation............................ 34
SECTION 212 Computation of Interest................. 34
SECTION 213 CUSIP Number............................ 34
</TABLE>
ARTICLE THREE
Satisfaction and Discharge; Defeasance
<TABLE>
<S> <C>
SECTION 301 Satisfaction and Discharge of
Indenture; Defeasance................. 34
SECTION 302 Application of Trust Money.............. 38
SECTION 303 Repayment to the Company................ 38
SECTION 304 Reinstatement........................... 39
SECTION 305 Indemnity............................... 39
</TABLE>
ARTICLE FOUR
Defaults and Remedies
<TABLE>
<S> <C>
SECTION 401 Events of Default....................... 39
SECTION 402 Acceleration of Maturity; Rescission
and Annulment......................... 42
SECTION 403 Collection Suits by Trustee............. 43
SECTION 404 Trustee May File Proofs of Claim........ 44
SECTION 405 Trustee May Enforce Claims Without
Possession of Notes................... 44
SECTION 406 Application of Money Collected.......... 45
SECTION 407 Limitation on Suits..................... 45
SECTION 408 Unconditional Right of Holders to
Receive Principal and Interest........ 46
SECTION 409 Restoration of Rights and Remedies...... 46
SECTION 410 Rights and Remedies Cumulative.......... 46
SECTION 411 Delay or Omission Not Waiver............ 46
SECTION 412 Control by Holders...................... 47
SECTION 413 Waiver of Past Defaults................. 47
SECTION 414 Undertaking for Costs................... 48
</TABLE>
ARTICLE FIVE
The Trustee
<TABLE>
<S> <C>
SECTION 501 Certain Duties and Responsibilities..... 48
SECTION 502 Notice of Defaults...................... 49
SECTION 503 Certain Rights of Trustee............... 49
SECTION 504 Not Responsible for Recitals or
Issuance of Notes..................... 51
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 505 May Hold Notes.......................... 51
SECTION 506 Money Held in Trust..................... 51
SECTION 507 Compensation and Reimbursement.......... 51
SECTION 508 Eligibility; Disqualification........... 52
SECTION 509 Resignation and Removal; Appointment
of Successor.......................... 52
SECTION 510 Acceptance of Appointment by
Successor............................. 53
SECTION 511 Merger, Conversion, Consolidation or
Succession to Business................ 54
SECTION 512 Preferential Collection of Claims
Against the Company................... 54
SECTION 513 Reports by Trustee...................... 55
</TABLE>
ARTICLE SIX
Amendments, Supplements and Waivers
<TABLE>
<S> <C>
SECTION 601 Without Consent of Holders.............. 56
SECTION 602 With Consent............................ 56
SECTION 603 Compliance with Trust Indenture Act..... 57
SECTION 604 Revocation and Effect of Consents....... 57
SECTION 605 Notation on or Exchange of Notes;
Effect of Supplemental Indenture...... 58
SECTION 606 Trustee Protected....................... 58
</TABLE>
ARTICLE SEVEN
Covenants
<TABLE>
<S> <C>
SECTION 701 Payment of Notes........................ 59
SECTION 702 Maintenance of Office or Agency......... 59
SECTION 703 Money for Note Payments to be
Held in Trust......................... 60
SECTION 704 Limitation on Restricted Payments....... 61
SECTION 705 Limitation on Indebtedness.............. 64
SECTION 706 Limitation on Liens..................... 66
SECTION 707 Limitation on Payment Restrictions
Affecting Restricted Subsidiaries..... 66
SECTION 708 Limitation on Capital Stock of
Restricted Subsidiaries............... 67
SECTION 709 Transactions with Affiliates............ 68
SECTION 710 Restriction on Incurrence of Certain
Indebtedness.......................... 68
SECTION 711 Change of Control....................... 68
SECTION 712 SEC Reports............................. 70
SECTION 713 Compliance Certificates................. 71
SECTION 714 Continued Existence and Rights.......... 71
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 715 Maintenance of Properties and
Other Matters......................... 71
SECTION 716 Taxes and Claims........................ 72
SECTION 717 Waiver of Stay, Extension and Usury
Laws.................................. 73
SECTION 718 Investment Company Act.................. 73
</TABLE>
ARTICLE EIGHT
Merger, Consolidation and Sale of Assets
<TABLE>
<S> <C>
SECTION 801 When Company May Merge, etc. ........... 74
SECTION 802 Successor Corporation Substituted....... 74
</TABLE>
ARTICLE NINE
Redemption
<TABLE>
<S> <C>
SECTION 901 Notices to Trustee...................... 75
SECTION 902 Selection of Notes to Be Redeemed....... 75
SECTION 903 Notice of Redemption.................... 75
SECTION 904 Effect of Notice of Redemption.......... 76
SECTION 905 Deposit of Redemption Price............. 76
SECTION 906 Notes Redeemed in Part.................. 77
SECTION 907 Redemption Pursuant to New Jersey Act
and Nevada Act........................ 77
</TABLE>
ARTICLE TEN
Subordination
<TABLE>
<S> <C>
SECTION 1001 Agreement to Subordinate................ 78
SECTION 1002 Liquidation; Dissolution;
Bankruptcy........................... 78
SECTION 1003 Default on Senior Indebtedness.......... 80
SECTION 1004 When Distribution Must Be Paid Over..... 80
SECTION 1005 Notice by the Company................... 81
SECTION 1006 Subrogation............................. 81
SECTION 1007 Relative Rights......................... 81
SECTION 1008 Subordination May Not Be Impaired
by the Company........................ 82
SECTION 1009 Distribution or Notice to
Representatives....................... 82
SECTION 1010 Rights of Trustee and Paying Agent...... 82
SECTION 1011 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice....... 82
SECTION 1012 Application by Trustee of Monies
Deposited With It..................... 82
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1013 Trustee's Compensation Not Prejudiced... 83
SECTION 1014 Officers' Certificate................... 83
SECTION 1015 Certain Payments........................ 83
SECTION 1016 Names of Representatives................ 83
SECTION 1017 No Fiduciary Duty Created to Holders
of Senior Indebtedness of the
Company............................... 83
SIGNATURES............................................. 84
EXHIBIT A - Form of Note............................... A-1
</TABLE>
______________
Note: This Table of Contents shall not for any purpose be deemed to be a part
of the Indenture.
v
<PAGE>
INDENTURE, dated as of ________, 1994, among AZTAR CORPORATION, a
Delaware corporation (the "Company"), and [BANK OF AMERICA NATIONAL TRUST AND
SAVINGS 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
(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.
<PAGE>
"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.
"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
2
<PAGE>
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:
-----------------
(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
3
<PAGE>
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
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; and
(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.
4
<PAGE>
"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.
"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 clause (ii) above, (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
5
<PAGE>
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 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
6
<PAGE>
(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 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
7
<PAGE>
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 HM-143 600,
Wilshire Boulevard, 5th Floor, Los Angeles, California 90017; 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 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 the agreement dated as of ________, 1994
---------------
between the Company and ________, as agent, as 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.
8
<PAGE>
"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, 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 Jurisdiction Law" means any law, statute, ordinance, code,
-----------------------
regulation, constitutional provision, rule, order, directive or other
enforcement requirement now or hereafter in existence of the United States
federal government or any state, county, municipality or other political
subdivision or any agency or other govermental authority thereof that now or
hereafter has jurisdiction over all or any portion of the gaming activities of
the Company or any of its Sunsidiaries.
"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
9
<PAGE>
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 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
10
<PAGE>
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,
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
11
<PAGE>
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.
-------------
"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.
12
<PAGE>
"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.
"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;
---- ----
13
<PAGE>
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, 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 bonds and other obligations of a like nature
incurred in the ordinary course of business (exclusive of obligations for the
14
<PAGE>
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 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
15
<PAGE>
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.
"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, the quotient of the 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 the New Jersey Act or the Nevada Act to remain as a
holder of such security) or is redeemable at the
16
<PAGE>
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.
"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.
---
17
<PAGE>
"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 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
18
<PAGE>
(iii) that operates, owns or leases any Property that is material 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.
"Subsidiary Casino Hotel" means any of the casino hotels leased, owned
-----------------------
or operated directly or indirectly by the Company or any Subsidiary of the
Company.
"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.
"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;
19
<PAGE>
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 Loan Agreement or any refinancings thereof),
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).
20
<PAGE>
"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 [Bank of America National Trust and Savings
-------
Association, 600 Wilshire Boulevard, Suite 500, Los Angeles, California 90017-
3217], 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 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
21
<PAGE>
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.
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;
22
<PAGE>
(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 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.
23
<PAGE>
(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 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.
24
<PAGE>
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, [600 Wilshire Boulevard, Suite
500, Los Angeles, California 90017-3217, 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:
Yvette E. Cohen, 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).
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.
25
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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 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
26
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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.
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
27
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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.
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 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
28
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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.
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
29
<PAGE>
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.
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
30
<PAGE>
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.
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
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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 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
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<PAGE>
payable to the Holder on the relevant Regular Record Date by 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 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)
33
<PAGE>
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 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
34
<PAGE>
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 principal of, premium, if applicable, 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,
premium, if applicable, 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;
35
<PAGE>
(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 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
36
<PAGE>
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 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 in an Officers' Certificate
delivered to the Trustee concurrently with such deposit;
37
<PAGE>
(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 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,
-------- -------
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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
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;
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(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, 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;
40
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(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
(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 reasonable, good faith judgment of the Board of
Directors of the Company, evidenced by a resolution of such Board, 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
41
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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 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 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.
43
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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.
(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
44
<PAGE>
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
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,
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(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.
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
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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 shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or of 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
unjustly 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 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:
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(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 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,
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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 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; and
(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.
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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-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 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.
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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.
(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 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;
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(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 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
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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.
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:
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(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, 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 and the
Nevada Commission 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 and the Nevada Commission 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.
(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.
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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
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 resolutions of their respective Boards 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:
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(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 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
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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.
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
58
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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 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. 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 at the
Corporate Trust Office. The Company hereby initially designates the BankAmerica
Trust of New York # 3913, 2 Broadway, 5th Floor, New York, New York 10004 in the
Borough of Manhattan, The City of New York as the office of the Company for
purposes of this paragraph.
The Company will also maintain in The City of Los Angeles an office or
agency where Notes may be surrendered 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 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. The Company hereby initially designates the Corporate Trust Office of
the Trustee in the City of Los Angeles as the office of the Company for purposes
of this paragraph.
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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 and an office or agency in the City of Los Angeles where Notes may
be surrendered 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 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
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(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 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):
(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
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:
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(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 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)
63
<PAGE>
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
(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.
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(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; (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 or 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
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
65
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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.
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 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
the ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions on such Restricted Subsidiary's
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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 (a) any agreement or instrument relating to any
Indebtedness of the Company or any Restricted Subsidiary existing on the
Effective Date or to the Credit Facility; (b) any agreement or instrument
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) any agreement or instrument 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) any agreement or instrument 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) any agreement or instrument 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 Governmental Authority that may from time to time
regulate the Company's gaming operations 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.
- --------
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
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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.
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 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, if any, to the
date of purchase.
(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
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a purchase price in cash equal to the principal amount thereof plus accrued
and unpaid interest 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 nor 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 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
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<PAGE>
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:
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
70
<PAGE>
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 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 its Subsidiaries
from discontinuing the operation and maintenance
71
<PAGE>
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.
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:
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(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.
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:
73
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(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) no Default or Event of Default exists immediately before or would
exist immediately after such transaction;
(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 (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
purusant 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
74
<PAGE>
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.
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.
75
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The notice shall identify the Notes to be redeemed and shall state:
(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 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.
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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 New Jersey Act and Nevada Act.
----------------------------------------------------
(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, 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, as the case may be (or such
different period as may be prescribed by the New Jersey Commission or the Nevada
Commission), 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 Commission).
(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 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 by the orders of the New
Jersey Commission or the Nevada Commission, 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 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, 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
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<PAGE>
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, as the case
may be, (ii) whether accrued interest is payable to the Holder under the New
Jersey Act or the Nevada Act 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 Nevada Act 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
78
<PAGE>
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 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 payment
to such Person pending judicial determination as to the right of such Person to
receive such payment.
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<PAGE>
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 Indebtedness 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
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
80
<PAGE>
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 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
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<PAGE>
(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 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
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<PAGE>
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.
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
83
<PAGE>
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:_______________________
[BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION]
By:_____________________________
Name:
Title:
SEAL
Attest:________________________
84
<PAGE>
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 October 1 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]
A-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the __% Senior Subordinated Notes Due 2004 issued under
the within-mentioned Indenture.
Dated:
[BANK OF AMERICA NATIONAL TRUST
AND SAVINGS 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 October 1 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, 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 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 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.
3. Paying Agent and Registrar. [Bank of America National Trust and
--------------------------
Savings 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
A-3
<PAGE>
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 October 1 of the years indicated below:
Year Percentage
---- ----------
1999 [ ]%
2000 [ ]
2001 [ ]
2002 and thereafter [ ]
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
his 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.
A-4
<PAGE>
7. Redemption Pursuant to the New Jersey Act and the Nevada Act. The
------------------------------------------------------------
Company is subject to the New Jersey Casino Control Act (the "New Jersey Act")
and the Nevada Gaming Control Act (the "Nevada Act"). 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, 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, as the case may
be (or such different period as may be prescribed by the New Jersey Commission
or the Nevada Commission), 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 either Commission). 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 by the orders of the New Jersey Commission or
the Nevada Commission, 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 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, 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 Control, the Company shall
have the right to redeem the Notes as provided in the Indenture.
A-5
<PAGE>
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 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 of
business of any Subsidiary Casino Hotel owned, leased or operated by any
Subsidiary of the Company for a period of more than 90 consecutive days. 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 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
A-6
<PAGE>
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 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, play
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.
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.
A-7
<PAGE>
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 (= 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-8
<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:___________________________________
A-9
<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-10
<PAGE>
Exhibit 12
AZTAR CORPORATION
Ratio of Earnings to Fixed Charges
(in thousands, except ratios)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
--------------------- --------------------------------------------------------
March 31, April 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 $ 4,638 $ 2,542 $12,406 $26,007 $ 2,768 $(14,959) $(62,184)
Fixed charges excluding interest
expense capitalized 12,934 18,115 60,366 56,701 59,895 63,346 78,679
Amortization of previously
capitalized interest 219 216 878 866 892 900 1,012
------- ------- ------- ------- ------- -------- --------
Adjusted earnings $17,791 $20,873 $73,650 $83,574 $63,555 $ 49,287 $ 17,507
======= ======= ======= ======= ======= ======== ========
Fixed charges:
Interest expense $11,822 $11,727 $45,363 $31,132 $32,101 $ 33,407 $ 43,716
Interest portion of rent 1,112 6,388 15,003 25,569 27,794 29,939 34,963
------- ------- ------- ------- ------- -------- --------
12,934 18,115 60,366 56,701 59,895 63,346 78,679
Interest expense capitalized 495 712 3,491 1,061 253 -- --
------- ------- ------- ------- ------- -------- --------
Total fixed charges $13,429 $18,827 $63,857 $57,762 $60,148 $ 63,346 $ 78,679
======= ======= ======= ======= ======= ======== ========
Ratio of earnings to fixed charges 1.32 1.11 1.15 1.45 1.06 .78 .22
======= ======= ======= ======= ======= ======== ========
Fixed charges in excess of earnings $ 14,059 $ 61,172
======== ========
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-3 of our
report, dated February 11, 1994 on our audit of the consolidated financial
statements of Aztar Corporation. We also consent to the reference to our firm
under the caption "Experts".
/s/ COOPERS & LYBRAND
- -----------------------------
COOPERS & LYBRAND
Phoenix, Arizona
June 14, 1994
