SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 1994
----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ----------------
Commission file number 1-5440
----------------
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
- ------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 381-4100
---------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common stock, $.01 par value New York
Preferred share purchase rights New York
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
--- ---
<PAGE>
Facing Page (Continued)
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates
of the registrant was $275,812,865 at February 21, 1995 and is based on a
closing price of $7.38 and 37,373,017 common shares outstanding.
At February 21, 1995, the registrant had outstanding 37,874,364 shares
of its common stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information contained in the registrant's 1995 definitive Proxy
Statement, to be filed with the Commission, is incorporated by reference
into this Form 10-K. The following cross-referenced index details the page
location of such information. All other sections of the 1995 Proxy
Statement are not required in Form 10-K and should not be considered a part
thereof.
Part and Item of the Form 10-K 1995 Proxy Statement
- ------------------------------ --------------------
PART III
--------
ITEM 10. Directors and Executive
- ------- Officers of the Registrant Pages 1 and 2
ITEM 11. Executive Compensation Pages 5 through 7
- -------
ITEM 12. Security Ownership of
- ------- Certain Beneficial Owners
and Management Pages 3 and 4 under
captions "5% Beneficial
Owners" and "Directors and
Executive Officers"
ITEM 13. Certain Relationships
- ------- and Related Transactions Page 4 under caption
"Transactions with
Management and Others"
2
<PAGE>
PART I
------
ITEM 1. BUSINESS
- -----------------
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,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 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 Company operates in major domestic gaming markets with casino hotel
facilities in Atlantic City, New Jersey, and in Las Vegas and 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
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.
3
<PAGE>
The TropWorld complex encompasses 10 acres and has 220 yards of ocean beach
frontage along the Boardwalk in Atlantic City. TropWorld's 92,118-square-
foot casino contains 2,797 slot machines and 99 table games. 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 3,000 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.
In February 1995, the Company commenced construction on a $75 million
expansion of TropWorld. The expansion will consist primarily of a new 628-
room hotel tower, with additional restaurant and support facilities in the
existing operation. It is scheduled for completion by the summer of 1996.
The Company has executed a credit agreement with the Casino Reinvestment
Development Authority ("CRDA") for approximately $25,000,000 in funding for
this project. The Company will receive funds from the CRDA based on
expenditures made for the project to the extent the Company has available
funds on deposit with the CRDA that qualify for this funding.
TROPICANA
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. The
Tropicana casino occupies 45,000 square feet and contains 1,632 slot
machines and 58 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 1,906 hotel rooms and suites and approximately 100,000 square
feet of convention and exhibit space. The tropical theme is apparent in
the decor of the property, which includes a large collection of tropical
birds and fish. Tropicana offers its guests a variety of entertainment
including laser light shows, a comedy club, lounge shows and the Folies
Bergere revue, which is the longest-running production show in Las Vegas.
In May 1994, the Company substantially completed a new main entrance and a
new building facade at Tropicana that created a colorful Caribbean Village
motif.
Tropicana is located at an intersection which is 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
in 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 completed in early 1994. The Company has an
additional pedestrian bridge connecting one of the skywalks directly to the
Tropicana casino.
4
<PAGE>
Management believes that the new properties located at The New Four Corners
have stimulated 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. The
expansion 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 table
games and 1,604 slot machines.
CARUTHERSVILLE RIVERBOAT CASINO PROJECT
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 90 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 will have an approximate
14,000-square-foot casino with 500 slot machines and 30 table games and
will have an estimated capacity of 600 passengers and crew. The project
will also have pre-boarding facilities including a restaurant and a live
entertainment lounge. The estimated cost of the project is $55 million.
The Company hopes to begin operations in Caruthersville in April 1995.
However, commencement of operations is dependent on several factors that
are beyond the Company's control, including the granting of a gaming
license by the Missouri Gaming Commission. The Missouri Gaming Commission
has commenced its formal investigation of the Company's application and a
hearing is expected in April 1995. In addition, certain other approvals
are required, including those of the U.S. Army Corps of Engineers and the
U.S. Coast Guard.
EVANSVILLE RIVERBOAT CASINO PROJECT
In June 1994, the Company was named by the City of Evansville, Indiana as
its choice to develop and operate the only riverboat gaming facility
planned to be licensed in the Evansville market. The Company and the City
of Evansville have signed a development agreement that will bind the
Company to make certain payments to the City of Evansville as well as other
civic and charitable institutions. The City of Evansville endorsed the
Company's license request to the Indiana Gaming Commission and on
February 10, 1995, the Indiana Gaming Commission granted the Company a
certificate of suitability to develop and operate the riverboat gaming
facility. The certificate of suitability is a preliminary step to the
5
<PAGE>
granting of a full casino riverboat license. Gaming operations cannot
commence until after site approval by state and federal waterway
regulators. Evansville, located on the Ohio River in southwestern Indiana,
has more than 3.0 million people living within a 120-mile area, which
includes metropolitan Louisville, Kentucky. Aztar's proposed project, at
an estimated cost of $100 million, will 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
will also include a 250-room hotel, a 44,000-square-foot entertainment
complex for pre-boarding facilities, restaurants and lounge. With the boat
due for delivery in June 1995, operations could commence in the summer of
1995 utilizing temporary docking and boarding facilities, with all
permanent facilities scheduled to be in place by the fall of 1996.
FUTURE DEVELOPMENTS
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 the Company's standards
for sound, meaningful long-term opportunities. On January 17, 1995, the
City of Newport News, Virginia selected Aztar to develop a casino riverboat
facility in Newport News, subject to passage of a Virginia state law
legalizing riverboat gaming. Aztar has signed a memorandum of agreement
with the Industrial Development Authority of Newport News that calls for
construction of a casino riverboat facility on a 15-acre City-owned site on
the James River south of Christopher Newport Park. The agreement is
subject to certain conditions. The total project cost is estimated at $85
million. Start of construction and opening of the project is dependent on
passage of a riverboat gaming law and licensing of the Company by the State
of Virginia, along with other required approvals. Legislation to legalize
riverboat gaming in Virginia is expected to be considered in early 1996.
COMPETITION AND SEASONALITY
Competition
Although the Company has been able to compete successfully in its gaming
markets in the past, there can be no assurance that the Company will be
able to continue to compete successfully in these markets.
The Company faces intense competition in each of the markets in which its
gaming facilities are located from other companies in the gaming industry,
some of which have significantly greater financial resources than the
Company. Such competition results, in part, from the geographic
concentration of competitors. All of the Company's casinos primarily
compete with other casinos in their immediate geographic area and, to a
lesser extent, with casinos in other locations, including Native American
lands, and on cruise ships and riverboats, and with other forms of
legalized gaming in the United States, including state-sponsored lotteries,
off-track wagering and card parlors. Certain states have recently
legalized, and several other states are currently considering legalizing,
casino gaming in specific geographic areas within those states.
Legalization of large-scale, unlimited casino gaming in or near any major
metropolitan area or increased gaming in other areas could have an adverse
economic impact on the business of any or all of the Company's gaming
facilities.
6
<PAGE>
As of December 29, 1994, 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, the addition of new casino
hotels in the Atlantic City market would increase competition. A number of
the Company's competitors have announced definitive plans for expansion,
including Bally's Grand, Bally's Park Place and Trump Plaza. The Sands
Hotel and Casino, Bally's Park Place, Showboat and the Claridge Hotel and
Casino opened expansions of their gaming space in 1994. In addition,
legislation enacted in 1993 requires the CRDA 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 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
the MGM Grand and the Luxor have stimulated additional walk-in traffic that
provides increased opportunities for Tropicana to attract its target
customers and retain them through the Company's database marketing system.
There can be no assurance, however, that the increased competition from the
new casinos will not have an adverse effect on Tropicana. In 1994, several
construction plans were announced in Las Vegas. The largest of these are
three new casino resorts on the Strip. Mirage Resorts Inc. has announced
plans to build a 5,000-room megaresort, named Beau Rivage, on a 166-acre-
site, formerly the location of the Dunes hotel and golf course. This
project is scheduled to open by late 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, named Victoria, is scheduled to open in mid-1996. MGM Grand, Inc.
and Primadonna Corporation have announced plans to build a 1,500-room
resort hotel with 100,000 square feet of casino space on the 18-acre parcel
at the northwest corner of the Strip and Tropicana Avenue. This joint
project, named New York-New York, is scheduled to open in 1996.
In the Laughlin market, in addition to the Company's expansion completed in
September 1993, the Riverside opened an 800-room tower expansion in
December 1994. The Riverside has also 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. In connection with this project, a temporary
7
<PAGE>
facility with approximately 50 gaming positions was opened during 1994.
The permanent facility is expected to open in early 1995. In February
1995, the Mojave Indian Tribe also opened a 300-room hotel with
approximately 25,000 square feet of casino space in Nevada approximately 8
miles south of Laughlin. In addition, the Mojave Indian Tribe has signed
an agreement allowing a gaming company to build and operate up to three
casino hotels in this same area south of Laughlin. Plans to begin
construction have not been announced. 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.
Competition involves not only the quality of casino, room, restaurant,
entertainment and convention facilities, but also room, food and beverage
prices. The level of gaming activity also varies significantly from time
to time depending on general economic conditions, marketing efforts, hotel
occupancies and the offering of special events and promotions. The extent
and quality of complimentary services to attract high-stakes players and,
in Atlantic City, casino customers arriving under bus programs, the
personal attention offered to guests and casino customers, advertising,
entertainment, slot machine pay-out rates and credit policies with respect
to high-stakes players are also important competitive factors. As a
result, operating results can be adversely affected by significant cash
outlays for advertising and promotion and complimentary services to
patrons, the amount and timing of which are partially dictated by the
policies of competitors. If operating revenues are insufficient to allow
management the flexibility to match the promotions of competitors, the
number of the Company's casino patrons may decline, with an adverse effect
on its financial performance.
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
8
<PAGE>
games players, for example, are typically extended more credit than slot
players, and high-stakes players are typically extended more credit than
patrons who tend to wager lower amounts. The Company currently markets to
customers in all gaming segments; however, its credit policy will vary from
facility to facility based upon the various types of customers at each
facility. Gaming debts are legally enforceable under the current laws of
both New Jersey and Nevada; it is not clear, however, that all other states
will honor these policies. The uncollectibility of gaming receivables
could have a material adverse effect on results of operations. Provisions
for estimated uncollectible gaming receivables have been made in order to
reduce gaming receivables to amounts deemed to be collectible.
Gaming operations at the casinos are subject to risk of substantial loss as
a result of employee or patron dishonesty, credit fraud or illegal slot
machine manipulation. The Company has in place stringent control
procedures to minimize such risks; however, there can be no assurance that
losses will not occur. Current controls include supervision of employees,
monitoring by electronic surveillance equipment and use of two-way mirrors
and overhead catwalks. In New Jersey, the Company's activities are
observed and monitored on an ongoing basis by agents of both the New Jersey
Casino Control Commission (the "New Jersey Commission") and the New Jersey
Division of Gaming Enforcement (the "New Jersey Division"), each of which
maintains a staff on the premises of TropWorld. Similarly, in Nevada the
Company's gaming subsidiaries must comply with certain regulatory
requirements concerning casino and game security and surveillance, and the
gaming operations of Tropicana and Ramada Express are subject to routine
audit and supervision by agents of the Nevada State Gaming Control Board
(the "Nevada Board").
REGULATION
General
Regulatory aspects of the gaming business are pervasive in nature and the
following description should not be construed as a complete summary of all
the regulatory requirements faced by the Company. Gaming authorizations,
once obtained, can be suspended or revoked for a variety of reasons. If
the Company were ever precluded from operating one of its gaming
facilities, it would, to the extent permitted by law, seek to recover its
investment by sale of the property affected, but there can be no 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
9
<PAGE>
transactions to the Nevada Board. Violation of this regulation could
result in action by the Nevada authorities to fine or revoke, suspend,
impose conditions upon 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.
Hotel Ramada of Nevada ("HRN") is the Company's wholly-owned subsidiary
which operates the casino at Tropicana and Ramada Express, Inc. ("Express")
is the Company's wholly-owned subsidiary which operates the casino at
Ramada Express. HRN and Express are both required to be licensed by the
Nevada Gaming Authorities. The gaming licenses require the periodic
payment of fees and taxes and are not transferable. The Company is
registered by the Nevada Commission as a publicly traded corporation
("Registered Corporation") and as such, it is required periodically to
submit detailed financial and operating reports to the Nevada Commission
and furnish any other information which the Nevada Commission may require.
No person may become a stockholder of, or receive any percentage of profits
from HRN or Express without first obtaining licenses and approvals from the
Nevada Gaming Authorities. The Company, HRN and Express have obtained from
the Nevada Gaming Authorities the various registrations, approvals, permits
and licenses required in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company, HRN or
Express in order to determine whether such individual is suitable or should
be licensed as a business associate of a gaming licensee. Officers,
directors and certain key employees of HRN and Express must file
applications with the Nevada 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
10
<PAGE>
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
11
<PAGE>
circumstances, an "institutional investor," as defined in the Nevada Act,
which acquires more than 10%, but not more than 15%, of the Company's
voting securities may apply to the Nevada Commission for a waiver of such
finding of suitability if such institutional investor holds the voting
securities for investment purposes only. An institutional investor shall
not be deemed to hold voting securities for investment purposes unless the
voting securities were acquired and are held in the ordinary course of
business as an institutional investor and not for the purpose of causing,
directly or indirectly, the election of a majority of the members of the
board of directors of the Company, any change in the Company's corporate
charter, bylaws, management, policies or operations of the 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 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,
12
<PAGE>
or any distribution whatsoever; (ii) recognizes any voting right by such
unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to
the unsuitable person by way of principal, redemption, conversion,
exchange, liquidation, or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any
securities are held in trust by an agent or by a nominee, the record
holder may be required to disclose the identity of the beneficial owner to
the Nevada Gaming Authorities. A failure to make such disclosure may be
grounds for finding the record holder unsuitable. The Company is also
required to render maximum assistance in determining the identity of the
beneficial owner. The Nevada Commission has the power to require the
Company's stock certificates to bear a legend indicating that the
securities are subject to the Nevada Act. However, to date, the Nevada
Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Nevada Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. On June 23, 1994, the Nevada Commission granted the Company
prior approval to make public offerings for a period of one year, subject
to certain conditions ("Shelf Approval"). However, the Shelf Approval may
be rescinded for good cause without prior notice upon the issuance of an
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.
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
13
<PAGE>
are, in certain circumstances, required from the Nevada Commission before
the Company can make exceptional repurchases of voting securities above the
current market price thereof and before a corporate acquisition opposed by
management can be consummated. The Nevada Act also requires prior approval
of a plan of recapitalization proposed by the Company's Board of Directors
in response to a tender offer made directly to the Registered Corporation's
stockholders for the purposes of acquiring control of the Registered
Corporation.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations
are conducted. Depending upon the particular fee or tax involved, these
fees and taxes are payable either monthly, quarterly or annually and are
based upon either: (i) a percentage of the gross revenues received; (ii)
the number of gaming devices operated; or (iii) the number of table games
operated. A casino entertainment tax is also paid by casino operations
where entertainment is furnished in connection with the selling of food or
refreshments.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (a
"Licensee", or collectively, "Licensees"), and who proposes to become
involved in a gaming venture outside of Nevada is required to deposit with
the Nevada Board, and thereafter maintain, a revolving fund in the amount
of $10,000 to pay the expenses of investigation of the Nevada Board of
their participation in such foreign gaming. The revolving fund is subject
to increase or decrease in the discretion of the Nevada Commission.
Thereafter, Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. A Licensee is also subject to
disciplinary action by the Nevada Commission if it knowingly violates any
laws of the foreign jurisdiction pertaining to the foreign gaming
operation, fails to conduct the foreign gaming operation in accordance with
the standards of honesty and integrity required of Nevada gaming
operations, engages in activities that are harmful to the State of Nevada
or its ability to collect gaming taxes and fees, or employs a person in the
foreign operation who has been denied a license or finding of suitability
in Nevada on the ground of personal unsuitability.
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.
14
<PAGE>
The New Jersey Act and regulations concern primarily the financial
stability and character of casino licensees, their intermediary and holding
companies, their employees, their security holders and others financially
interested in casino operations, the nature of hotel and casino facilities
and a wide range of gaming and non-gaming related operations. The New
Jersey Act and regulations include detailed provisions concerning, among
other things, financial and accounting practices used in connection with
casino operations, residence and equal employment opportunities for
employees of casino operators, contractors for casino facilities and
others; rules of games, levels of supervision of games and methods of
selling and redeeming chips; manner of granting credit, duration of credit
and enforceability of gaming debts; manufacture, distribution and sale of
gaming equipment; security standards, management control procedures,
accounting and cash control methods and reports to gaming authorities;
advertising of casinos and standards for entertainment and distribution of
alcoholic beverages in casinos. A number of these provisions require
practices which are different from those in Nevada and some of them result
in casino operating costs being higher than those in comparable facilities
in Nevada.
The New Jersey Act also established the New Jersey Division to investigate
all license applications, enforce the provisions of the New Jersey Act and
attendant regulations and prosecute all proceedings for violations of the
New Jersey Act and regulations before the New Jersey Commission. The New
Jersey Division also conducts audits and continuing reviews of all casino
operations.
Adamar of New Jersey, Inc. ("Adamar"), a wholly-owned subsidiary of the
Company, has been licensed (subject to biennial renewal) by the New Jersey
Commission to operate TropWorld. In November 1982, the New Jersey
Commission granted a plenary license to Adamar. In November 1993, the
license was renewed for a period of two years. The Company and Ramada New
Jersey Holdings Corporation ("Holdings"), another of the Company's New
Jersey gaming subsidiaries, have been approved as qualified holding
companies for Adamar's casino license. Officers and directors of the
Company and Adamar and employees who work at casino hotel facilities
operated by Adamar also have been or must be approved or licensed. In
addition, all contracts affecting the facilities have been or must be
approved, and all enterprises that conduct business with Adamar must
register with the New Jersey Commission and those enterprises that conduct
gaming related businesses or that conduct business on a regular and
continuing basis, as defined by the regulations under the New Jersey Act,
must be licensed by the New Jersey Commission.
The New Jersey Commission has broad discretion regarding the issuance,
renewal, revocation and suspension of casino licenses. Casino licenses are
not transferable. A casino hotel facility must also continually satisfy
certain requirements concerning, among other things, the number of
qualifying sleeping units and the relationship between the number of
qualifying sleeping units and the square footage of casino space. The
Company believes that TropWorld continues to meet such requirements.
15
<PAGE>
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, and 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
16
<PAGE>
Commission determines that qualification is required or declines to waive
qualification, (i) file a completed application for qualification, along
with an executed and approved Trust Agreement, wherein all securities of
the holding or intermediary company held by that security holder are placed
in trust pending qualification, or (ii) file a notice of intent to divest
itself of such securities as the New Jersey Commission may require so as to
remove the need for qualification, which securities must be divested within
120 days from the date such determination was made.
The New Jersey Act further requires that corporate licensees and their
subsidiaries, intermediaries and holding companies adopt certain provisions
in their certificates of incorporation that require certain remedial action
in the event that an individual owner of any security of such company is
found disqualified under the New Jersey Act. The required certificate of
incorporation provisions vary depending on whether the stock of the company
subject to the requirements of the New Jersey Act is publicly or privately
traded. Pursuant to the New Jersey Act, the certificate of incorporation
of a publicly held company must 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.
17
<PAGE>
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 casino revenues for
the purchase of bonds to be issued by the Casino Reinvestment Development
Authority or make other approved investments equal to that amount; in the
event the investment requirement is not met, the casino licensee is subject
to a tax in the amount of two and one-half percent on gross revenues.
Regulation and Licensing - Missouri
On November 3, 1992, a statewide referendum authorized gaming in the state
of Missouri on the Missouri and the Mississippi Rivers. Local approval
from the home dock municipality, as required by the legislation, was also
obtained from the City of Caruthersville in the November 3, 1992 election.
On April 29, 1993, Missouri enacted revised legislation (the "Missouri
Gaming Law") which amended the existing legislation. The Missouri Gaming
Law established the Missouri Gaming Commission, which is responsible for
the licensing and regulation of riverboat gaming in Missouri and has the
discretion to approve license applications for riverboat gaming facilities.
In July 1993, the Company was chosen by the City of Caruthersville as the
preferred applicant to develop a gaming facility, and on September 20,
1993, the Company, through its subsidiary Aztar Missouri Gaming Corporation
("Aztar Missouri"), filed its initial application with the Missouri Gaming
Commission. The Missouri Gaming Commission has commenced its formal
investigation of Aztar Missouri's application and a hearing is expected in
April 1995. If Aztar Missouri is granted a license, it currently expects
to begin operations in Caruthersville, Missouri in April 1995.
In a decision handed down on January 25, 1994, the Missouri Supreme Court
held that games of chance were prohibited under the Missouri constitution.
On April 5, 1994, Missouri voters narrowly defeated the adoption of a
constitutional amendment that would have excepted excursion boats and
floating facilities from the constitutional prohibition on lotteries.
Local voters did re-approve gaming in the City of Caruthersville in the
April 5, 1994 election. Following the April 5, 1994 election, the Missouri
legislature amended the existing Missouri Gaming Law to clarify certain
definitions and to resolve some constitutional questions raised in the
Missouri Supreme Court decision. Pursuant to the Missouri Gaming Law, as
revised, the Missouri Gaming Commission issued two licenses on May 27, 1994
and two licenses on June 22, 1994. A fifth license was issued by the
Missouri Gaming Commission in late September 1994.
18
<PAGE>
In a statewide election held on November 8, 1994, Missouri voters approved
the adoption of an amendment to the Missouri Constitution which permits the
legislature to allow games of chance to be conducted on excursion boats and
floating facilities on the Mississippi River and the Missouri River. As a
result of the amendment, full-scale gaming is now available in Missouri.
Opponents to gaming in Missouri have brought several legal challenges to
gaming in the past and may possibly bring similar challenges in the future.
There can be no assurances that any future challenges, if brought, would
not further interfere with full-scale gaming operations in Missouri,
including the operations of Aztar Missouri.
Under the Missouri Gaming Law, the ownership and operation of riverboat
gaming facilities in Missouri are subject to extensive state and local
regulation. Aztar Missouri, any subsidiaries, and certain of its officers
and employees are and will be subject to certain regulations. As part of
the application and licensing process for a gaming license, the applicant
must submit detailed financial, operating and other reports to the Missouri
Gaming Commission. Each applicant has an ongoing duty to update the
information provided to the Missouri Gaming Commission in the application.
In addition to the information required of the applicant, each director,
officer and other key persons must submit a Personal Disclosure Form which
includes detailed personal financial information and is subject to thorough
investigation. In addition, certain officers and directors of Aztar have
been requested to submit a Personal Disclosure Form to the Missouri Gaming
Commission. All gaming employees must obtain an occupational license
issued by the Missouri Gaming Commission.
The operators licenses are issued through application to the Missouri
Gaming Commission, which requires, among other things, (a) investigations
into an applicant's character, financial responsibility and experience
qualifications and (b) that applicants furnish (i) an affirmative action
plan for the hiring and training of minorities and women and (ii) an
economic development or impact report. License fees are a minimum of
$50,000 for the initial application and $25,000 annually thereafter.
Licenses are to last for a term of two years, except that the first license
and subsequent renewal granted to each gaming operator are to be for terms
of one year. Aztar Missouri and its officers and certain employees have
submitted all the requisite licensing applications with respect to the
Caruthersville operation, and Aztar Missouri has no reason to believe that
these applications will not be approved. In addition, certain officers and
directors of Aztar have been requested to submit licensing applications to
the Missouri Gaming Commission. The Missouri Gaming Commission has
commenced its formal investigation of Aztar Missouri's application.
However, there can be no assurance that Aztar Missouri's application will
be approved in a timely manner or at all.
The Missouri Gaming Commission may revoke or suspend gaming licenses and
impose other penalties for violation of the Missouri Gaming Law and the
rules and regulations promulgated thereunder. Penalties include forfeiture
of all gaming equipment used for improper gaming and fines of up to three
times an operator's highest daily gross adjusted receipts during the
preceding twelve months. The gaming licenses are not transferable, and the
Missouri rules bar a licensee from taking any of the following actions
without prior approval by the Missouri Gaming Commission: (a) a pledge of
the license as collateral to other than a regulated bank or savings and
19
<PAGE>
loan association; (b) any individual transfer of an interest of 5% or
greater, either directly or indirectly, in a publicly traded company which
holds a license; or (c) distribution of assets in excess of 5% of
accumulated earnings of a licensee to anyone with an ownership interest in
the licensee. These restrictions on transfer of ownership apply to the
Company as well as the direct licensee, Aztar Missouri.
The bulk of the Missouri administrative rules contains detailed
requirements concerning the operation of a licensed excursion gaming boat
facility. These include a charge of two dollars per gaming customer that
licensees must pay to the Missouri Gaming Commission, minimum payout
requirements, a 20% tax on adjusted gross receipts, prohibitions against
providing credit to gaming customers (except for the use of credit cards
and cashing checks) and a requirement that each licensee reimburse the
Missouri Gaming Commission for all costs of any Missouri Gaming Commission
staff necessary to protect the public on the licensee's riverboat.
Licensees also must submit audited quarterly financial reports to the
Missouri Gaming Commission and pay the associated auditing fees. The
Missouri Gaming Law also provides a loss limit of $500 per person, per
excursion. Other areas of operation which are subject to regulation under
the Missouri rules are the size, denomination and handling of chips and
tokens; the surveillance methods and computer monitoring of electronic
games; accounting and audit methods and procedures; and approval of an
extensive internal control system. The Missouri rules also require that
all of an operator's purchases must be from suppliers licensed by the
Missouri Gaming Commission.
Although the Missouri Gaming Law provides no limit on the amount of
riverboat space that may be used for gaming, the Missouri Gaming Commission
is empowered to impose such space limitations through the adoption of rules
and regulations. Additionally, United States Coast Guard safety
regulations could affect the amount of riverboat space that may be devoted
to gaming.
With respect to the availability of dockside gaming, which may be more
profitable than cruise gaming, the Missouri Gaming Commission is empowered
to determine on a city and county-specific basis where such gaming is
appropriate and shall be permitted. Dockside gaming in Missouri may differ
from dockside gaming in other states, because the Missouri Gaming
Commission has the ability to require "simulated cruising". This
requirement would permit customers to board dockside riverboats only at
specified times and would prohibit boarding during the period of a
simulated cruise, which is expected to last for two to three hours.
However, customers are permitted to leave the facility at any time. As of
September 20, 1994, the Missouri Gaming Commission has authorized three
facilities to operate all or a portion of the facility as continuously
docked with a "simulated cruise" schedule.
Regulation and Licensing - Indiana
The ownership and operation of riverboat casinos in certain designated
waters 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 operating a riverboat casino in
the Evansville, Indiana market.
20
<PAGE>
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 on Lake Michigan, one on a landlocked lake in
Southwestern Indiana and five on the Ohio River (the Company is seeking one
of the five licenses allocated to Ohio River counties). The Indiana Gaming
Commission has proposed a set of regulations under the Indiana Act which
covers numerous operational matters concerning riverboat casinos licensed
by the Commission. These regulations have been published and set for
hearing. They will become effective thirty days after signature by the
Governor and filing with the Secretary of State. The regulatory climate in
Indiana may be more costly than exists in other states.
Among regulations being considered is one dealing with riverboat
excursions, routes and public safety. The Indiana Act requires licensed
riverboat casinos to be cruising vessels, and the regulations carry out the
legislative intent with appropriate recognition of public safety needs.
The regulations explicitly preclude "dockside gambling". For purposes of
the regulations, dockside gambling is defined to mean gambling on a vessel
which is permanently moored and not self-propelled and allows unlimited
passenger ingress and egress. Instead, the regulations define the type of
excursions riverboats must conduct based upon location (Lake Michigan or
the Ohio River), weather conditions and other safety factors.
Excursions must have a two- to four-hour duration. An excursion begins at
the time embarkation begins and concludes at the end of disembarkation if
gambling continues during disembarkation. Embarkation and disembarkation
may not exceed thirty minutes each. When the embarkation period ends, a
gangway or its equivalent must be closed so that no further embarkation is
possible.
For Ohio River excursions, such as those the Company intends to operate
through its Evansville operation, "full excursions" must be conducted at
all times during a year unless, for safety reasons, a "limited excursion"
is authorized by the master of the riverboat under the regulations. A
"full excursion" is a cruise on the Ohio River; a "limited excursion" is
not a cruise but a simulation where the gangway of a boat is closed with no
further ingress until the end of the designated excursion period.
Passengers may disembark during a limited excursion.
The conditions under which a limited excursion may be conducted include
unsafe water levels, unsafe weather (fog, winds, rain), ice, mechanical or
structural difficulties, unsafe traffic conditions, conditions which would
cause the vessel to travel into waters in which it would violate federal
law or the law of any state, or any other condition which would jeopardize
the safety of the passengers, the vessel or other vessels. The condition
relative to violations of the laws of other states is designed to address
the controversy between the Commonwealth of Kentucky and the State of
Indiana with respect to exercise of the police power over the waters of the
Ohio River.
Casino wagering is illegal in Kentucky. Most of the waters of the Ohio
River are, according to a decision of the United States Supreme Court, part
of Kentucky and therefore subject to its police power. Kentucky officials
21
<PAGE>
have threatened to exercise police power and make arrests if Indiana-based
riverboats venture into Kentucky waters to conduct casino wagering
operations. The "limited excursion" regulation would seem to provide a
clear basis for an Indiana riverboat operator to conduct operations without
any risk of legal action from Kentucky. Indiana and Kentucky officials
have discussed some kind of compact that would protect Indiana-based
riverboats from action by Kentucky, no agreements have been publicly
reported.
There is proposed legislation pending before the Indiana General Assembly
which would have the effect of repealing certain of the regulations and
require cruising in all cases. If passed in its present form, the
legislation could restrict operations; the author of the bill has indicated
that the bill should be amended to allow discretion in operations for
safety reasons only and not for the laws of other states.
The Company, through an Indiana subsidiary, has received from the Indiana
Gaming Commission a certificate of suitability for a riverboat owner's
license for the Evansville, Indiana market. The Company is now completing
requirements for formal licensing and hopes to be operating in Evansville
in the summer of 1995. The Company's Evansville riverboat can cruise from
its site of docking without entering Kentucky waters; therefore the
proposed legislation would not affect operations insofar as the Kentucky
police power issue is concerned.
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 licensees to disclose to the Indiana Gaming
Commission the identity of all 1% or greater owners of public companies.
The Indiana Gaming Commission also requires a broad and comprehensive
disclosure of financial and operating information on licensees and their
principal officers. The Company has provided full information and
documentation to the Indiana Gaming Commission.
In addition to securing a license to conduct riverboat casino operations
from the Indiana Gaming Commission, the Company will be required to secure
permits and approvals from the United States Army Corps of Engineers to
develop the facilities it proposes to use to conduct operations. Owners of
riverboat casinos are entitled to receive specialized alcoholic beverage
permits for riverboat operations. The 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
22
<PAGE>
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.
EMPLOYEES
The Company employs approximately 8,200 people of which approximately 2,700
employees are represented by unions. Of the approximately 4,200 employees
at TropWorld, approximately 1,300 are covered by collective bargaining
contracts. Substantially all of such employees are covered by a contract
that expires in 1999 and the remainder are covered by contracts that expire
in 1996. At Tropicana, approximately 1,400 of the 2,400 employees are
covered by collective bargaining contracts. Substantially all of such
employees are covered by contracts that expire in 1997 and a small number
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. The Company has fewer than 100 employees at its
riverboat casinos under development, none of which are covered by
collective bargaining agreements.
TRADEMARKS
The Company uses a variety of trade names, service marks and trademarks and
believes it has all the licenses necessary to conduct its business. The
Company has registered several service marks and trademarks with the United
States Patent and Trademark Office or otherwise acquired the licenses to
use those which are material to the conduct of the Company's business as a
whole.
The Company and Adamar of Nevada are the beneficiaries of an agreement with
Tropicana Enterprises, the owner of certain properties related to
Tropicana, and the Jaffe family regarding the use of the name "Tropicana"
for the operation of a casino hotel in Atlantic City and in connection with
the operation of a casino hotel in New York State (if gaming were to be
authorized in New York State). Pursuant to such agreement, the Company has
registered the name under the Lanham Act. Upon the occurrence of certain
events, the right to use the name reverts to Tropicana Enterprises.
Ramada has licensed the Company to use the name "Ramada" in conjunction
with the operation of Ramada Express, and will not use or permit the use of
the name "Ramada" in Laughlin, Nevada by any other person or entity.
The Company has registered the following important service marks: Aztar,
Trop, TropWorld, Trop Park, Tivoli Pier, TropWorld Casino and Entertainment
Resort and The Island of Las Vegas. The Company believes there are no
other trademarks or service marks the use of which is material to the
conduct of the Company's business as a whole.
ITEM 2. PROPERTIES
- -------------------
TROPWORLD.
TropWorld is located on a 10-acre site in Atlantic City, New Jersey. In
July 1993, TropWorld became wholly owned by the Company.
23
<PAGE>
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 lease ( 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 GAMING JURISDICTIONS
In connection with the Company's development of its business in new gaming
jurisdictions, the Company has purchased land and has an option to purchase
an additional parcel of land in Caruthersville, Missouri. The Company also
has options to purchase various parcels of land in Evansville, Indiana and
Bensalem, Pennsylvania.
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.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
The Company and more than 40 other major casino operators, as well as
various manufacturers and distributors of video poker and electronic slot
machines, have been named as defendants in an action originally filed in
the United States District Court for the Middle District of Florida,
Orlando Division entitled William H. Poulos, On Behalf of Himself and All
Others Similarly Situated v. Caesars World, Inc., et al., Case No. 94-478-
CIV-ORL-22, filed on April 26, 1994. This action was consolidated with
another subsequently filed action in that court entitled William Ahearn, On
Behalf of Himself and All Others Similarly Situated v. Caesars World, Inc.,
et al., Case No. 94-532-CIV-ORL-22 (the "Actions"). 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
24
<PAGE>
how those machines actually operate as well as the extent to which there is
actually an opportunity to win on any given play. The precise nature of
the Company's alleged role in the alleged fraud and conspiracy to defraud
are not discernible from the complaints.
On December 9, 1994, the Florida Court ordered that the consolidated cases
be transferred to the United States District Court for the District of
Nevada. That transfer has occurred and the Nevada Court has assumed
control of the cases. The new case number is CV-S-94-1126-LDG(RJJ).
Numerous defendants (including the Company) have moved to dismiss the
complaint for failure to state a claim. No hearing has been set on this
motion. The plaintiffs have filed a motion seeking to certify the
consolidated actions as a class action. The defendants (including the
Company) have opposed certification of the class. No hearing date has been
set on this motion. The parties submitted a joint status report to the
Court on January 18, 1995. All discovery has been stayed by the Court
pending the entry of a scheduling order.
The Company believes that plaintiffs' allegations are without merit, and it
intends to defend the Actions vigorously.
The Company is a party to various 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None
25
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The registrant has elected not to include information concerning its
executive officers in its 1995 Proxy Statement, as allowed by the Proxy
Statement instructions. The registrant relies on General Instruction G(3)
of this report on Form 10-K in presenting the following information on its
executive officers.
Tenure
-----------------
With Present
Name Office Age Company Position
- ------------------- ---------------------------- --- -------- --------
Paul E. Rubeli Chairman of the Board, 51 16 years 3 years
President and Chief
Executive Officer
Robert M. Haddock Executive Vice President 50 14 years 8 years
and Chief Financial
Officer
Nelson W. Armstrong,
Jr. Vice President, 53 22 years 5 years
Administration, and Secretary
Joe C. Cole Vice President, 56 7 years 7 years
Corporate Communications
Meridith P. Sipek Controller 48 17 years 5 years
Craig F. Sullivan Treasurer 48 17 years 5 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.
26
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
- ------------------------------------------------
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.
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------------------------------------------------------------------------------
Aztar had 12,329 shareholders of record as of February 21, 1995.
The additional information required by this Item 5 is included in this report
on F-16, F-27 and F-38.
ITEMS 6, 7, and 8
- -----------------
The information required by Item 6 is included in this report on F-38; by Item
7, on F-28 through F-37; and by Item 8, on F-1 through F-27.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
None.
PART III
ITEMS 10, 11, 12 and 13 --------
- -----------------------
The information required by Items 10, 11, 12 and 13 is incorporated by
reference to the registrant's definitive Proxy Statement to be filed with the
Commission. A cross-referenced index is located on the facing page of this
report. Information concerning the registrant's executive officers is
presented above under a separate caption in Part I of this report.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
Page No.
(a) 1. Financial Statements: --------
Report of Independent Accountants F-1
Consolidated Balance Sheets, December 29, 1994 and
December 30, 1993 F-2
Consolidated Statements of Operations for the years ended
December 29, 1994, December 30, 1993 and December 31, 1992 F-4
Consolidated Statements of Cash Flows for the years ended
December 29, 1994, December 30, 1993 and December 31, 1992 F-6
Consolidated Statements of Shareholders' Equity for the
years ended December 29, 1994, December 30, 1993 and
December 31, 1992 F-8
Notes to Consolidated Financial Statements F-10
27
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------
(Continued)
- -----------
Page No.
--------
2. Financial Statement Schedules:
Report of Independent Accountants S-1
II - Valuation and Qualifying Accounts S-2
All other schedules are omitted because the required
information is either presented in the financial
statements or notes thereto, or is not present in amounts
sufficient to require submission of the schedules.
3. Exhibits:
3 Articles of Incorporation and By-Laws *
4 Instruments Defining the Rights of Security
Holders, Including Indentures *
10 Material Contracts *
11 Statement Regarding Computation of Per Share Earnings *
21 Subsidiaries of the Registrant *
23 Consents of Experts and Counsel *
27 Financial Data Schedule *
* See exhibit index at page E-1 of this report for a listing of
exhibits filed with this report and those incorporated by
reference.
All other exhibits have been omitted because the information
is not required or is not applicable.
(b) Reports on Form 8-K:
The Company did not file any report on Form 8-K during the
quarter ended December 29, 1994.
For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act
of 1933, the undersigned registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into registrant's
Registration Statements on Form S-8 No. 33-32399 and No. 33-44794
(filed January 5, 1990 and December 24, 1991, respectively):
28
<PAGE>
Insofar as indemnification for liabilities arising under the 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 Securities Act of 1933 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.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AZTAR CORPORATION By ROBERT M. HADDOCK March 20, 1995
----------------- ------------------------- ------------------
Registrant Robert M. Haddock Date
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
PAUL E. RUBELI Chairman of the Board, President March 20, 1995
- ------------------------- and Chief Executive Officer, and ----------------
Paul E. Rubeli Director
ROBERT M. HADDOCK Executive Vice President and March 20, 1995
- ------------------------- Chief Financial Officer, and ----------------
Robert M. Haddock Director
MERIDITH P. SIPEK Controller March 20, 1995
- ------------------------- ----------------
Meridith P. Sipek
JOHN B. BOHLE Director March 20, 1995
- ------------------------- ----------------
John B. Bohle
E. M. CARSON Director March 20, 1995
- ------------------------- ----------------
Edward M. Carson
A. S. GITTLIN Director March 20, 1995
- ------------------------- ----------------
A. Sam Gittlin
JOHN R. NORTON, III Director March 20, 1995
- ------------------------- ----------------
John R. Norton, III
ROBERT S. ROSOW Director March 20, 1995
- ------------------------- ----------------
Robert S. Rosow
R. SNELL Director March 20, 1995
- ------------------------- ----------------
Richard Snell
VESTA VALENTINE TEMEN Director March 20, 1995
- ------------------------- ----------------
Vesta Valentine Temen
TERENCE W. THOMAS Director March 20, 1995
- ------------------------- ----------------
Terence W. Thomas
CARROLL V. WILLOUGHBY Director March 20, 1995
- ------------------------- ----------------
Carroll V. Willoughby 30<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 29, 1994 and December 30, 1993, and the related
consolidated statements of operations, cash flows and shareholders' equity
for each of the three years in the period ended December 29, 1994. 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 29, 1994 and
December 30, 1993, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December
29, 1994 in conformity with generally accepted accounting principles.
As discussed in Note 14 to the consolidated financial statements, the
Company changed its method of accounting for income taxes in 1992.
COOPERS & LYBRAND L.L.P.
Phoenix, Arizona
February 16, 1995
F-1
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 29, 1994 and December 30, 1993
----------------------------------------
(in thousands, except share data)
1994 1993
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 43,861 $ 39,551
Short-term investments 8,250 --
Accounts receivable, net 17,391 19,170
Refundable income taxes 723 2,062
Inventories 5,693 5,564
Prepaid expenses 9,992 9,206
Deferred income taxes 7,894 6,566
--------- ---------
Total current assets 93,804 82,119
Investments in and advances to unconsolidated
partnership 12,627 13,776
Other investments 24,928 22,131
Property and equipment:
Buildings and equipment, net 635,678 648,139
Land 81,795 81,795
Construction in progress 37,965 6,701
Leased under capital leases, net 852 1,043
--------- ---------
756,290 737,678
Deferred charges and other assets 27,710 21,467
--------- ---------
$ 915,359 $ 877,171
========= =========
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
December 29, 1994 and December 30, 1993
----------------------------------------
(in thousands, except share data)
1994 1993
--------- ---------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accruals $ 40,083 $$ 39,515
Accrued payroll and employee benefits 15,467 15,823
Accrued interest payable 13,847 13,714
Income taxes payable 2,608 2,633
Current portion of long-term debt 666 2,499
--------- ---------
Total current liabilities 72,671 74,184
Long-term debt 430,212 404,086
Other long-term liabilities 21,986 21,882
Deferred income taxes 24,411 26,126
Contingencies and commitments
Series B ESOP convertible preferred stock
(redemption value $4,900 and $4,295) 4,711 3,905
Shareholders' equity:
Common stock, $.01 par value (37,459,228
and 37,359,011 shares outstanding) 414 414
Paid-in capital 347,284 346,965
Retained earnings 30,555 16,559
Less: Treasury stock (16,885) (16,885)
Unearned compensation -- (65)
--------- ---------
Total shareholders' equity 361,368 346,988
--------- ---------
$ 915,359 $ 877,171
========= =========
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 29, 1994, December 30, 1993 and December 31, 1992
-----------------------------------
(in thousands, except per share data)
1994 1993 1992
Revenues --------- --------- ---------
Casino $443,392 $439,294 $431,831
Rooms 41,514 32,248 32,651
Food and beverage 42,657 36,357 37,519
Other 13,877 10,863 10,044
-------- -------- --------
541,440 518,762 512,045
Costs and expenses
Casino 203,236 217,087 202,747
Rooms 25,268 19,495 19,527
Food and beverage 39,361 34,773 35,008
Other 7,753 6,737 6,827
Marketing 47,253 45,427 45,705
General and administrative 47,895 46,849 46,399
Utilities 13,556 12,328 11,617
Repairs and maintenance 19,905 19,953 18,544
Provision for doubtful accounts 3,102 1,566 2,622
Property taxes and insurance 17,781 16,729 16,108
Net rent 9,951 27,747 45,653
Depreciation and amortization 36,972 32,652 28,679
-------- -------- --------
472,033 481,343 479,436
-------- -------- --------
Operating income 69,407 37,419 32,609
Interest income 3,139 24,172 28,655
Interest expense (49,711) (45,363) (31,132)
-------- -------- --------
Income from continuing operations before
other items, income taxes, extraordinary
items and cumulative effect of accounting
change 22,835 16,228 30,132
Equity in unconsolidated partnership's loss (4,169) (3,822) (4,125)
-------- -------- --------
Income from continuing operations before
income taxes, extraordinary items and
cumulative effect of accounting change 18,666 12,406 26,007
Income taxes (1,862) (1,024) (9,629)
-------- -------- --------
Income from continuing operations before
extraordinary items and cumulative effect
of accounting change 16,804 11,382 16,378
Discontinued operations -- -- 1,262
Extraordinary items (2,708) -- (5,335)
Cumulative effect of accounting change -- -- 7,500
-------- -------- --------
Net income $ 14,096 $ 11,382 $ 19,805
======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
For the Years Ended December 29, 1994, December 30, 1993 and December 31, 1992
-----------------------------------
(in thousands, except per share data)
1994 1993 1992
-------- -------- --------
Earnings per common and common equivalent
share:
Income from continuing operations before
extraordinary items and cumulative
effect of accounting change $ .42 $ .28 $ .41
Discontinued operations -- -- .03
Extraordinary items (.07) -- (.14)
Cumulative effect of accounting change -- -- .20
-------- -------- --------
Net income $ .35 $ .28 $ .50
======== ======== ========
Earnings per common share assuming full
dilution:
Income from continuing operations before
extraordinary items and cumulative
effect of accounting change $ .41 $ .27 $ .40
Discontinued operations -- -- .03
Extraordinary items (.07) -- (.13)
Cumulative effect of accounting change -- -- .19
-------- -------- --------
Net income $ .34 $ .27 $ .49
======== ======== ========
Weighted average common shares
applicable to:
Earnings per common and common
equivalent share 38,196 38,367 38,212
Earnings per common share assuming
full dilution 39,224 39,429 39,311
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 29, 1994, December 30, 1993 and December 31, 1992
--------------
(in thousands)
1994 1993 1992
---------- ---------- ----------
Cash Flows from Operating Activities
Net income $ 14,096 $ 11,382 $ 19,805
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 39,529 34,577 30,639
Provision for losses on accounts
receivable 3,102 1,566 2,622
Loss on reinvestment obligation 950 991 1,103
Interest income -- 1,889 (4,389)
Rent expense (5) (880) (2,537)
Distribution in excess of equity in
income of partnership 1,149 1,449 1,355
Deferred income taxes (3,043) (1,280) (1,556)
Change in assets and liabilities:
(Increase) decrease in accounts
receivable (1,577) (1,442) (1,372)
(Increase) decrease in refundable
income taxes 1,339 -- (2,062)
(Increase) decrease in inventories
and prepaid expenses (1,121) (1,969) (1,582)
Increase (decrease) in accounts payable,
accrued expenses and income taxes
payable 1,434 1,955 (12,745)
Other items, net 5,780 2,087 2,502
--------- --------- ---------
Net cash provided by (used in) operating
activities 61,633 50,325 31,783
--------- --------- ---------
Cash Flows from Investing Activities
(Increase) reduction in invested funds (8,250) -- 5,075
Payments received on TropWorld second
mortgage -- 24,400 51,450
Payments received on other notes receivable 965 2,191 2,383
Increase in TropWorld second mortgage -- (24,400) (51,450)
Increase in other notes receivable -- (419) (174,678)
Purchases of property and equipment (54,442) (77,804) (20,607)
Acquisition of AREI/AGP partnership
interests, net of cash acquired -- (61,859) --
Additions to other long-term assets (6,682) (6,391) (4,544)
--------- --------- ---------
Net cash provided by (used in) investing
activities $ (68,409) $(144,282) $(192,371)
-------- -------- --------
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the Years Ended December 29, 1994, December 30, 1993 and December 31, 1992
--------------
(in thousands)
1994 1993 1992
--------- --------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt $254,795 $ 35,000 $200,000
Proceeds from issuance of common stock 274 2,149 261
Principal payments on long-term debt (231,507) (2,157) (3,787)
Debt issuance costs (11,473) (969) (6,349)
Repurchase of common stock -- -- (5,364)
Preferred stock dividend (773) (787) (797)
Redemption of preferred stock (230) (131) (90)
-------- -------- --------
Net cash provided by (used in)
financing activities 11,086 33,105 183,874
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents 4,310 (60,852) 23,286
Cash and cash equivalents at beginning
of year 39,551 100,403 77,117
-------- -------- --------
Cash and cash equivalents at end
of year $ 43,861 $ 39,551 $100,403
======== ======== ========
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 $ 75 $ 385 $ 3,687
Note received in sale of
property and equipment -- -- 225
Tax benefit from stock options
and preferred stock dividend 722 431 290
Forfeiture of restricted stock -- -- 30
Cash paid during the year for the following
for continuing and discontinued operations:
Interest, net of amount capitalized $ 47,087 $ 43,160 $ 31,905
Income taxes 2,065 1,997 8,165
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 29, 1994, December 30, 1993 and December 31, 1992
-------------
(in thousands)
Retained Unearned
Common Paid-in Earnings Treasury Compen-
Stock Capital (Deficit) Stock sation Total
-------- -------- --------- --------- --------- --------
Balance,
January 2, 1992 $ 409 $344,235 $(13,432) $(11,491) $ (821) $318,900
Stock options
exercised 1 260 261
Tax benefit
from stock
options exercised 79 79
Repurchase of
common stock (5,364) (5,364)
Preferred stock
dividend, net of
income tax benefit (586) (586)
Forfeitures of
restricted stock (30) 30 --
Amortization of
unearned
compensation 654 654
Net income 19,805 19,805
-------- -------- -------- -------- -------- --------
Balance,
December 31, 1992 410 344,574 5,787 (16,885) (137) 333,749
Stock options
exercised 4 2,145 2,149
Tax benefit
from stock
options exercised 246 246
Preferred stock
dividend, net of
income tax benefit (610) (610)
Amortization of
unearned
compensation 72 72
Net income 11,382 11,382
-------- -------- -------- -------- -------- --------
Balance,
December 30, 1993 $ 414 $346,965 $ 16,559 $(16,885) $ (65) $346,988
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Continued)
For the Years Ended December 29, 1994, December 30, 1993 and December 31, 1992
-------------
(in thousands)
Retained Unearned
Common Paid-in Earnings Treasury Compen-
Stock Capital (Deficit) Stock sation Total
-------- -------- --------- --------- --------- --------
Balance,
December 30, 1993 $ 414 $346,965 $ 16,559 $(16,885) $ (65) $346,988
Stock options
exercised 274 274
Tax benefit
from stock
options exercised 45 45
Reduction in income
tax valuation
allowance 520 520
Preferred stock
dividend, net of
income tax benefit (620) (620)
Amortization of
unearned
compensation 65 65
Net income 14,096 14,096
-------- -------- -------- -------- -------- --------
Balance,
December 29, 1994 $ 414 $347,284 $ 30,555 $(16,885) $ -- $361,368
======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE>
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. 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 1994, 1993 and
1992.
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.
Short-term investments
Short-term investments purchased with an original maturity of over three
months but less than one year are stated at cost.
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. The
interest that was capitalized during the year was $2,664,000 in 1994,
$3,491,000 in 1993 and $1,061,000 in 1992.
F-10
<PAGE>
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 $172,812,000 at December 29,
1994 and $139,690,000 at December 30, 1993.
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.
Deferred Charges
Debt 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.
Capitalized preopening costs, included in deferred charges and other
assets, were $817,000 and $60,000 at December 29, 1994 and December 30,
1993, respectively.
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):
1994 1993 1992
-------- -------- --------
Rooms $ 17,767 $ 18,992 $ 14,930
Food and beverage 33,610 33,287 30,568
Other 4,741 6,666 6,509
-------- -------- --------
$ 56,118 $ 58,945 $ 52,007
======== ======== ========
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.
F-11
<PAGE>
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 1994, 1993 and 1992 earnings per share for both
computations, dividends of $620,000, $610,000 and $586,000, respectively,
on the Series B ESOP Convertible Preferred Stock are deducted in arriving
at income applicable to the common stock. The 1994, 1993 and 1992
dividends are net of income tax benefits of $157,000, $185,000 and
$211,000, respectively.
Reclassifications
Certain reclassifications have been made in the 1993 and 1992 Consolidated
Statements of Cash Flows in order to be comparable with the 1994
presentation.
NOTE 2. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalents, short-term investments and trade accounts receivable. The
Company places its cash and temporary cash investments with high-credit-
quality financial institutions. At times such investments may be in excess
of the FDIC and SIPC insurance limits. At December 29, 1994, the Company's
short-term investments were at one financial institution.
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 29, 1994 and
December 30, 1993, the net receivables at TropWorld were $7,951,000 and
$8,948,000, respectively, and the net receivables at Tropicana and Ramada
Express combined were $9,394,000 and $10,175,000, respectively.
An allowance for doubtful accounts is maintained at a level considered
adequate to provide for possible future losses. At December 29, 1994 and
December 30, 1993, the allowance for doubtful accounts was $10,720,000 and
$9,908,000, 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
F-12
<PAGE>
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 $15,267,000 in 1994, $12,684,000 in 1993 and
$12,815,000 in 1992, of which 50% was eliminated in consolidation.
Summarized balance sheet information and operating results for the
unconsolidated partnership are as follows (in thousands):
1994 1993
-------- --------
Current assets $ 636 $ 270
Noncurrent assets 77,427 81,220
Current liabilities 983 1,516
Noncurrent liabilities 71,339 73,033
1994 1993 1992
-------- -------- --------
Revenues $ 15,360 $ 12,815 $ 12,980
Operating expenses (2,748) (2,755) (2,836)
-------- -------- --------
Operating income 12,612 10,060 10,144
Interest expense (4,492) (3,793) (4,318)
-------- -------- --------
Net income $ 8,120 $ 6,267 $ 5,826
======== ======== ========
The Company's share of the above operating results, after intercompany
eliminations, is as follows (in thousands):
1994 1993 1992
-------- -------- --------
Equity in unconsolidated
partnership's loss $ (4,169) $ (3,822) $ (4,125)
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 29,
1994 and December 30, 1993, other investments consisted of the Company's
deposit with the CRDA of $35,472,000 and $31,726,000, respectively, net of
a valuation allowance of $10,544,000 and $9,595,000, respectively.
In February 1995, the Company commenced construction on an expansion of
TropWorld. The expansion will consist primarily of a new 628-room hotel
tower, with additional restaurant and support facilities in the existing
operation. The Company has executed a credit agreement with the CRDA for
approximately $25,000,000 in funding for this project. The Company will
receive funds from the CRDA based on expenditures made for the project to
the extent the Company has available funds on deposit with the CRDA that
qualify for this funding. At December 29, 1994, the Company had
approximately $10,000,000 in available deposits with the CRDA that qualify.
The balance of funding will result from portions of future CRDA deposits.
F-13
<PAGE>
NOTE 5. LONG-TERM DEBT
At December 29, 1994 and December 30, 1993, long-term debt included (in
thousands):
1994 1993
-------- --------
11% Senior Subordinated Notes Due 2002; redeemable
beginning October 1, 1997 at 103.143% $200,000 $200,000
13 3/4% Senior Subordinated Notes Due 2004 ($180,000
principal amount, 14% effective interest rate);
redeemable beginning October 1, 1999 at 106.875%;
net of unamortized discount 177,650 --
Reducing revolving credit note; floating rate,
8.16% at December 29, 1994; matures December 31, 1999 50,000 --
13 1/2% First Mortgage Notes Due 1996 ($170,000
principal amount, 13.7% effective interest rate);
redeemable beginning September 15, 1994 at 100.00%;
net of unamortized discount -- 169,133
Ramada Express 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 notes payable; 7% to 14.6%; maturities to 2002 2,115 1,075
Obligations under capital leases 1,113 1,377
-------- --------
430,878 406,585
Less current portion (666) (2,499)
-------- --------
$430,212 $404,086
======== ========
Maturities of long-term debt for the five years subsequent to December 29,
1994 are as follows (in thousands):
Year
1995 $ 666
1996 471
1997 440
1998 474
1999 409
On October 8, 1992, the Company issued $200,000,000 principal amount of 11%
Senior Subordinated Notes Due October 1, 2002 (the "11% Notes"). Interest
on the 11% Notes is payable semiannually on April 1 and October 1. The 11%
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.
On October 4, 1994, the Company issued $180,000,000 principal amount of
13 3/4% Senior Subordinated Notes Due October 1, 2004 (the "13 3/4%
Notes"). Interest on the 13 3/4% Notes is payable semiannually on April 1
and October 1, beginning April 1, 1995. The 13 3/4% Notes are redeemable
F-14
<PAGE>
at the option of the Company, in whole or in part, on or after October 1,
1999, at prices from 106.875% of the principal amount plus interest
declining to 100% plus interest beginning October 1, 2003. The net
proceeds from the sale of the Notes were approximately $172,000,000. These
funds were used to redeem the $170,000,000 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. The redemption of the First Mortgage Notes was completed on
November 2, 1994.
The 11% Notes and 13 3/4% Notes, ranked pari passu, 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 of control of the Company, the holders of the 11% Notes and 13 3/4%
Notes would have the right to require repurchase of the respective notes at
par plus accrued interest. Certain covenants in the 11% Notes and 13 3/4%
Notes limit the ability of the Company to incur indebtedness or engage in
mergers, consolidations or sales of assets.
On October 5, 1994, the Company entered into a reducing revolving credit
facility maturing on December 31, 1999 (the "Bank Credit Facility") with a
group of banks. Funds are available under the Bank Credit Facility up to
approximately $207,000,000. The availability of funds under the Bank
Credit Facility will reduce quarterly beginning on March 31, 1996 in the
annual amounts of $25,000,000 in 1996 and $35,000,000 in each year
thereafter until maturity. The Bank Credit Facility is collateralized by
all the property of TropWorld and Ramada Express and, with certain
exceptions, the stock of the Company's subsidiaries. Interest is computed
on the outstanding principal balance based upon, at the Company's option, a
one, two, three or six-month Eurodollar rate plus a margin ranging from
1.25% to 2.50%, or the prime rate plus a margin ranging from zero to 1.25%.
The applicable margin is dependent upon the Company's outstanding
indebtedness (as defined) and operating cash flow. At December 29, 1994,
the Company was at the highest margin level. Interest computed based upon
the Eurodollar rate is payable quarterly or on the last day of the
applicable Eurodollar interest period, if earlier. Interest computed based
upon the prime rate is payable quarterly. The Company incurs a commitment
fee ranging from 0.375% to 0.5% per annum on the unused portion of the Bank
Credit Facility. During the period commencing on September 1, 1995 and
ending on October 31, 1995, the Company may request that the initial
reduction date and maturity date of the Bank Credit Facility each be
extended for one year. If that request is granted by the lenders, the
Company may request, during the period from September 1, 1996 through
October 31, 1996, a further one-year extension of each the initial
reduction date and maturity date.
The reducing revolving loan agreement governing the Bank Credit Facility
(the "Loan Agreement") imposes various restrictions on the Company,
including limitations on its ability to incur additional debt, commit funds
to maintenance capital expenditures (as defined), merge or sell assets.
The Loan Agreement limits the Company on its ability to commit funds to new
venture capital expenditures (as defined) for a single project in excess of
$50,000,000 with the following exceptions: (i) a riverboat casino project
in Evansville, Indiana; (ii) a riverboat casino project in Caruthersville,
Missouri; (iii) a hotel tower expansion project at TropWorld and (iv) up to
$50,000,000 in a certain type of new venture entity. The permitted new
venture capital expenditures have certain individual project maximum
F-15
<PAGE>
amounts and there is a certain limitation in the aggregate. The Loan
Agreement also prohibits dividends on the Company's common stock, other
than those payable in common stock, and repurchases of the Company's common
stock with certain limited exceptions. In addition, the Loan Agreement
contains certain financial tests, including a minimum net worth, a minimum
debt service coverage ratio and a maximum debt to operating cash flow
ratio.
Concurrently with entering into the Bank Credit Facility, the same group of
banks entered into an approximate $73,000,000 term loan with Tropicana
Enterprises maturing on December 31, 1999, which was used to refinance the
existing Tropicana loan in the same amount. The term loan calls for
principal payments of between approximately $2,500,000 and $3,300,000 each
year with a final payment of approximately $57,000,000 due at maturity.
The interest terms are the same as the Bank Credit Facility. If a request
is made by the Company for an extension of the initial reduction date and
maturity date of the Bank Credit Facility, a concurrent request is required
by Tropicana Enterprises for a similar extension of the maturity date of
the term loan. If the maturity date of the term loan is extended for one
year, principal payments would be approximately $3,500,000 for the year
2000, and if extended for one further year, approximately $3,800,000 for
the year 2001. The term loan is collateralized by the Tropicana property
and is serviced through rent payments made by the Tropicana operation. The
company is a noncontrolling 50% partner in Tropicana Enterprises.
On October 5, 1994, the Company repaid $35,000,000 that was outstanding
under the Ramada Express revolving credit note and then terminated that
credit facility.
During the first quarter of 1994, the Company repaid $10,000,000 borrowed
under the $10 million revolving credit note. On June 30, 1994, that credit
facility was terminated.
NOTE 6. 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 17 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.
F-16
<PAGE>
Properties leased under capital leases are as follows (in thousands):
1994 1993
-------- --------
Furniture and equipment $ 9,451 $ 9,410
Less accumulated amortization (8,599) (8,367)
-------- --------
$ 852 $ 1,043
======== ========
Amortization of furniture and equipment leased under capital leases,
computed on a straight-line basis, was $289,000 in 1994, $1,899,000 in 1993
and $3,533,000 in 1992.
Minimum future lease obligations on long-term, noncancelable leases in
effect at December 29, 1994 are as follows (in thousands):
Year Capital Operating
---- -------- ---------
1995 $ 439 $ 8,398
1996 237 8,205
1997 165 7,962
1998 160 7,654
1999 153 7,471
Thereafter 184 79,793
-------- --------
1,338 $119,483
========
Amount representing interest (225)
--------
Net present value 1,113
Less current portion (365)
--------
Long-term portion $ 748
========
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):
1994 1993 1992
-------- -------- --------
Minimum rentals $ 8,121 $ 30,565 $ 51,647
Contingent rentals 1,830 7,512 12,377
Less: Minimum lease income -- (2,773) (5,544)
Maintenance reimbursement -- (7,557) (12,827)
-------- -------- --------
$ 9,951 $ 27,747 $ 45,653
======== ======== ========
NOTE 7. OTHER LONG-TERM LIABILITIES
At December 29, 1994 and December 30, 1993, other long-term liabilities
consisted of (in thousands):
1994 1993
-------- --------
Accrued rent expense $ 13,043 $ 13,684
Deferred compensation and
retirement plans 8,789 8,044
Deferred income 154 154
-------- --------
$ 21,986 $ 21,882
======== ========
F-17
<PAGE>
NOTE 8. 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 1994, 1993 and 1992,
respectively, 2,206 shares, 1,203 shares and 878 shares were redeemed
primarily in connection with employee terminations and at December 29,
1994, cumulative redemptions totaled 4,526 shares. 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 9. 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 41,427,819 at December
29, 1994 and 41,351,153 at December 30, 1993. Common stock outstanding was
net of 3,968,591 and 3,992,142 treasury shares at December 29, 1994 and
December 30, 1993, 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.
The Company issued 42,000 shares of restricted stock in 1991, on which the
restrictions lapsed 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 1994,
1993 and 1992, respectively, was $65,000, $72,000 and $654,000.
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
F-18
<PAGE>
the Company in December 1990 to be held as treasury shares until claimed.
During 1994, 1993 and 1992, respectively, 23,551, 42,519 and 60,179 shares
were claimed; the balance of unclaimed shares was 423,206 as of
December 29, 1994.
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 29, 1994,
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 1994 or 1993. 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.
Changes in the number of common shares reserved under the Company's stock
option plan for directors who are not employees of the Company
("Nonemployee Director Stock Option Plan") are as follows (in thousands of
shares):
Number of Price Range
Shares of Options
--------- -----------
Balance, January 2, 1992 48 $6.00-$6.50
Granted 14 $5.50-$6.75
--------
Balance, December 31, 1992 62 $5.50-$6.75
Granted 9 $6.75
--------
Balance, December 30, 1993 71 $5.50-$6.75
Granted 13 $6.00-$6.75
Cancelled, expired or surrendered (8) $5.50-$6.75
--------
Balance, December 29, 1994 76 $5.50-$6.75
========
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 29, 1994, December 30, 1993 and December 31,
1992, common shares reserved for future grants of options under this plan
were 174,000, 179,000 and 188,000, respectively.
F-19
<PAGE>
Changes in the number of common shares reserved under the Company's
employee stock option plans are as follows (in thousands of shares):
Number of Price Range
Shares of Options
--------- -----------
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
Granted 110 $5.88-$7.00
Exercised (77) $3.19-$5.00
Cancelled, expired or surrendered (57) $5.00-$7.38
--------
Balance, December 29, 1994 3,478 $3.19-$8.15
========
At December 29, 1994, December 30, 1993 and December 31, 1992, options
exercisable under the Company's employee stock option plans were 3,289,000,
3,077,000 and 3,118,000, respectively; shares reserved for future grants
were 1,745,000, 1,797,000 and 1,805,000, respectively.
In addition to the common shares reserved under stock option plans at
December 29, 1994, the Company has 1,010,000 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 10. BENEFIT PLANS
The Company has a defined benefit pension plan, which is not currently
funded, for certain former executive employees. The Company has a
nonqualified defined benefit retirement plan, which is not required to be
funded by the Company, for certain senior executives. The Company has a
defined contribution savings plan that covers substantially all employees
who are not covered by a collective bargaining unit. Contributions to the
savings plan are discretionary. Total pension and savings plan expense was
$782,000 for 1994, $689,000 for 1993 and $662,000 for 1992. The Company
also contributed $2,182,000, $1,990,000 and $1,834,000 in 1994, 1993 and
1992, 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 1994, 1993 and 1992 was $183,000, $180,000 and $184,000, respectively.
The Company's ESOP 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,
F-20
<PAGE>
paid to the ESOP were $773,000 and $1,102,000 in 1994, $787,000 and
$1,088,000 in 1993, and $797,000 and $1,078,000 in 1992. Compensation
expense recognized in 1994, 1993 and 1992, respectively, was $1,214,000,
$1,311,000 and $1,400,000.
NOTE 11. 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):
1994 1993 1992
Current: -------- -------- --------
Federal $ (4,588) $ (2,231) $ (3,685)
State (317) (73) --
-------- -------- --------
(4,905) (2,304) (3,685)
Deferred: -------- -------- --------
Federal 2,174 378 (5,303)
State 869 902 (641)
-------- -------- --------
3,043 1,280 (5,944)
-------- -------- --------
$ (1,862) $ (1,024) $ (9,629)
======== ======== ========
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.
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.
1994 1993 1992
-------- -------- --------
Tax (provision) benefit at statutory rate (35.0)% (35.0)% (34.0)%
(Increase) decrease in tax resulting from:
State income taxes 2.5 4.3 (6.1)
Contributions and gifts (.7) (.6) (.5)
Disallowance of business meals (6.7) (4.1) (2.2)
Capitalized restructuring costs -- .8 2.3
Restricted stock and non-qualified stock
options .7 .7 --
IRS examination (4.1) (7.9) 3.6
General business credits 2.2 4.2 1.5
Change in valuation allowance 31.4 30.3 --
Other, net (.3) (1.0) (1.6)
------- ------- -------
(10.0)% (8.3)% (37.0)%
======= ======= =======
F-21
<PAGE>
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 29, 1994
and December 30, 1993, are as follows (in thousands):
1994 1993
--------- ---------
Net operating loss carryforward $ 18,261 $ 21,902
Accrued rent expense 4,840 4,818
Accrued bad debt expense 5,406 3,972
Accrued compensation 4,797 5,030
Accrued liabilities 2,909 1,823
General business credit carryforward 6,851 2,887
-------- --------
Gross deferred tax assets 43,064 40,432
-------- --------
Deferred tax asset valuation allowance (14,027) (20,974)
-------- --------
Other (1,463) (955)
Partnership investment (5,240) (5,328)
Depreciation and amortization (17,343) (12,199)
Ramada tax sharing agreement (21,508) (20,536)
-------- ---------
Gross deferred tax liabilities (45,554) (39,018)
-------- --------
Net deferred tax liabilities $(16,517) $(19,560)
======== ========
Gross deferred tax assets are reduced by a valuation allowance. Based on
the Company's history of operating earnings and its expectations for the
future, management has determined that operating income will more likely
than not be sufficient to recognize fully the net deferred tax assets. The
December 30, 1993 and December 31, 1992 valuation allowances were reduced
during 1994 and 1993 which caused a decrease in income tax expense of
$6,286,000 and $3,878,000, respectively. In addition, $520,000 that was
included in the December 30, 1993 valuation allowance was allocated to
shareholders' equity during 1994.
At December 29, 1994, tax benefits are available for federal income tax
purposes as follows (in thousands):
Net operating losses $ 27,722
General business credits 2,743
These tax benefits will expire in the years 2003 through 2009 if not used.
The Company also has alternative minimum tax credit carryforwards of
$4,108,000 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):
1995 $ 9,650
1996 24,524
1997 15,310
1998 18,209
1999 12,269
2000 6,245
2001 8,887
A valuation allowance has been established for those federal and state tax
benefits which are not expected to be realized.
F-22
<PAGE>
NOTE 12. DISCONTINUED OPERATIONS
In 1989, the Company disposed of its hotel business. 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.
NOTE 13. EXTRAORDINARY ITEMS
In October 1994, the Company expensed the remaining unamortized deferred
financing costs and unamortized discount in connection with the early
redemptions of the First Mortgage Notes and the Ramada Express revolving
credit note. These items were reflected in the 1994 Consolidated Statement
of Operations as an extraordinary loss of $2,708,000, which was net of an
income tax benefit of $1,776,000.
In 1992, a substantial portion of the proceeds from the issuance of the 11%
Notes were loaned to Ambassador General Partnership ("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, which was
net of an income tax benefit of $2,749,000.
NOTE 14. 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.
NOTE 15. CONTINGENCIES AND COMMITMENTS
In connection with the Company's commitment, subject to the granting of a
riverboat gaming license, to make certain payments to the City of
Evansville, Indiana as well as other civic and charitable institutions, the
Company obtained a letter of credit for $13,450,000. The Company's short-
term investments at December 29, 1994 are pledged as collateral for this
letter of credit.
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
F-23
<PAGE>
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. subsidiary. In connection with
these matters the Company has an accrued liability of $3,963,000 and
$3,980,000 at December 29, 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.
At December 29, 1994, the Company had commitments of approximately
$13,000,000 for the purchase of property and equipment.
NOTE 16. ACQUISITION
In July 1993, the Company acquired the partnership interests in Ambassador
Real Estate Investors, L.P. ("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 revolving credit note 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 statements of operations include 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.
F-24
<PAGE>
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):
1993 1992
-------- --------
(unaudited)
Revenues $518,762 $512,045
Income from continuing operations before
extraordinary items 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 items 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 items and cumulative
effect of accounting change $ .18 $ .20
Net income .18 .28
NOTE 17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents (in thousands) the carrying amounts and
estimated fair values of the Company's financial instruments at
December 29, 1994 and December 30, 1993, respectively. The fair value of a
financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale.
1994 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets
Short-term investments $ 8,250 $ 8,250 $ -- $ --
Other investments 24,928 24,928 22,131 22,131
Liabilities
Current portion of long-term
debt 666 666 2,499 2,602
Long-term debt 430,212 416,362 404,086 417,063
Off-Balance-Sheet
Letter of credit -- 13,450 -- --
The carrying amounts shown in the table are included, if applicable, in the
Consolidated Balance Sheets under the indicated captions. All the
Company's financial instruments are held or issued for purposes other than
trading.
The following notes summarize the major methods and assumptions used in
estimating the fair values of financial instruments.
F-25
<PAGE>
Short-term investments are valued at their carrying amounts included in the
balance sheets, which are reasonable estimates of fair value due to the
relatively short period to maturity.
Other investments consisted of deposits with the CRDA that bear interest at
two-thirds of market rates resulting in a fair value lower than cost. The
carrying amounts of these deposits are presented net of a valuation
allowance that results in an approximation of fair values.
The fair values of the Company's publicly traded debt were estimated based
on the bid prices in the public bond markets. The carrying amounts of the
revolving credit notes payable are reasonable estimates of fair value
because these notes are carried with floating interest rates.
The fair value of the letter of credit was estimated to be the same as the
contract value based on the nature of the fee arrangement with the issuing
financial institution.
F-26
<PAGE>
NOTE 18. 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 29,
1994 and December 30, 1993. The Company's common stock is listed on the
New York Stock Exchange.
First Second Third Fourth
-------- -------- -------- --------
1994
- ----
Revenues $130,566 $135,747 $146,847 $128,280
Operating income 16,844 18,800 22,343 11,420
Income (loss) before income
taxes and extraordinary items 4,638 6,622 10,121 (2,715)
Income taxes (85) (41) (2,554) 818
Extraordinary items -- -- -- (2,708)
Net income (loss) 4,553 6,581 7,567 (4,605)
Earnings per common and common
equivalent share:
Income (loss) before
extraordinary items .11 .17 .19 (.05)
Net income (loss) .11 .17 .19 (.12)
Earnings per common share assuming
full dilution:
Income (loss) before
extraordinary items .11 .16 .19 *
Net income (loss) .11 .16 .19 *
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
equivalent share:
Net income .04 .10 .13 .01
Earnings per common share assuming
full dilution:
Net income .04 .09 .13 .01
Common Stock Prices
- -------------------
1994 - High $ 7.88 $ 7.13 $ 7.38 $ 7.00
- Low 6.25 5.38 5.75 5.38
1993 - High 8.88 10.13 9.63 7.88
- Low 6.63 6.25 7.00 6.00
* Anti-dilutive
F-27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financial Condition -
Liquidity and Capital Resources
Debt -
Refinancing and Increase in Availability
At the end of 1993, the company had a substantial amount of debt maturing in
1996. The maturities of the company's long-term debt at that time were $2.5
million in 1994, $12.5 million in 1995 and $191.4 million in 1996. Also at
the end of 1993, Tropicana Enterprises' bank loan had a balloon payment of
$71.3 million due in 1996. This bank loan is serviced through rent payments
made by the company's Tropicana operation and the company is a noncontrolling
50% partner in Tropicana Enterprises. The debt associated with substantially
all of these maturities was refinanced during 1994.
Early in 1994, the company repaid the $10 million due in 1995 that was
borrowed under the revolving credit facility obtained in connection with the
purchase in July 1993 of 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. In June 1994,
the company terminated this revolving credit facility.
During 1994, the company had $26 million in borrowings under the revolving
credit facility due in 1996 that was collateralized by Ramada Express (the
"Ramada Express Credit Facility"). Repayments under the Ramada Express Credit
Facility totaled $51 million, including a final payment in October when the
company terminated the facility. On November 2, 1994, after having made the
mandatory $2 million sinking fund payment in September 1994, the company
redeemed the remaining $168 million of 13 1/2% First Mortgage Notes Due 1996
(the "First Mortgage Notes").
As a source of funds, the company had two major debt transactions in 1994.
On October 4, 1994, the company issued $180 million of 13 3/4% Senior
Subordinated Notes Due 2004 (the "13 3/4% Notes"). Interest on the 13 3/4%
Notes is payable semi-annually on April 1 and October 1, beginning April 1,
1995. The 13 3/4% Notes rank pari passu with the company's 11% Senior
Subordinated Notes Due 2002 (the "11% Notes"). On October 5, 1994, the
company entered into a $207 million reducing revolving credit facility
maturing on December 31, 1999 (the "Bank Credit Facility") with a group of
banks led by Bank of America as managing agent. At December 29, 1994, the
company's borrowings totaled $50 million under the Bank Credit Facility. The
availability of funds under this facility will reduce from $207 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 funds under
the Bank Credit Facility will be available as needed to fund the expansion of
the company's existing businesses and to fund the company's development of
businesses in new gaming jurisdictions. Concurrently with entering into the
Bank Credit Facility, the same group of banks entered into an approximate $73
million term loan with Tropicana Enterprises maturing on December 31, 1999,
which was used to refinance the existing Tropicana loan in the same amount.
The term loan calls for principal payments of between $2.5 million and $3.3
million each year, with a final payment of approximately $57 million due at
maturity.
F-28
<PAGE>
The company has structured its debt at December 29, 1994, so that it has a
base level of debt going forward consisting of the $200 million 11% Notes and
the $180 million 13 3/4% Notes. From this base, the company will add debt
under the Bank Credit Facility, as needed, to expand its existing properties
or to add new properties. The Bank Credit Facility also gives the company a
source of funds during its off seasons that can be repaid during the busy
seasons. Since the Bank Credit Facility is floating rate debt which, at
December 29, 1994, was lower than the fixed rates on the base debt, the
company's average cost of funds will decrease in the future as the company
borrows more under the Bank Credit Facility and the floating rate stays below
the fixed rates. Another advantage of the Bank Credit Facility is that the
company will have flexibility to reduce debt after the expanded or new
operations begin to generate cash flow.
At the end of 1994, the company had no substantial debt maturities for the
next five fiscal years because the earliest significant maturity is the Bank
Credit Facility on December 31, 1999. The 11% Notes mature in 2002 and the
13 3/4% Notes mature in 2004.
Caruthersville Riverboat Casino Project
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 90 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 will have an approximate
14,000-square-foot casino with 500 slot machines and 30 table games and will
have an estimated capacity of 600 passengers and crew. The project will also
have pre-boarding facilities including a restaurant and a live entertainment
lounge. The estimated cost of the project is $55 million. Through December
29, 1994, the company had spent approximately $25 million on this project, of
which $1.3 million had been spent in 1993. The expenditures in 1994 consisted
of approximately $22.4 million for the purchase of property and equipment and
$1.3 million for other assets including $0.6 million in preopening costs. The
company hopes to begin operations in Caruthersville in April 1995. However,
commencement of operations is dependent on several factors that are beyond the
company's control, including the granting of a gaming license by the Missouri
Gaming Commission. The Missouri Gaming Commission has commenced its formal
investigation of the company's application and a hearing is expected in April
1995. In addition, certain other approvals are required, including those of
the U.S. Army Corps of Engineers and the U.S. Coast Guard.
Evansville Riverboat Casino Project
In June 1994, the company was named by the City of Evansville, Indiana as its
choice to develop and operate the only riverboat gaming facility planned to
be licensed in the Evansville market. The company and the City of Evansville
have signed a development agreement that will bind the company to make certain
payments to the City of Evansville as well as other civic and charitable
institutions. The City of Evansville endorsed the company's license request
to the Indiana Gaming Commission and on February 10, 1995, the Indiana Gaming
Commission granted the company a certificate of suitability to develop and
operate the riverboat gaming facility. The certificate of suitability is a
F-29
<PAGE>
preliminary step to the granting of a full casino riverboat license. Gaming
operations cannot commence until after site approval by state and federal
waterway regulators. Evansville, located on the Ohio River in southwestern
Indiana, has more than 3.0 million people living within a 120-mile area, which
includes metropolitan Louisville, Kentucky. Aztar's proposed project, at an
estimated cost of $100 million, will 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 will also include
a 250-room hotel, a 44,000-square-foot entertainment complex for pre-boarding
facilities, restaurants and lounge. With the boat due for delivery in June
1995, operations could commence in the summer of 1995 utilizing temporary
docking and boarding facilities, with all permanent facilities scheduled to
be in place by the fall of 1996. Through December 29, 1994, the company had
spent approximately $9.8 million on this project, of which $0.7 million had
been spent in 1993. The expenditures in 1994 consisted of approximately $7.5
million for property and equipment and $1.7 million for other assets.
Tropicana Project
At December 30, 1993, the company was in the process of constructing a new
main entrance, adding a new building facade that created a colorful Caribbean
Village motif facing "The New Four Corners" of Las Vegas and funding a portion
of the construction by the State of Nevada of a four-way pedestrian skywalk
system at the intersection of Las Vegas Boulevard and Tropicana Avenue.
Expenditures in 1993 were approximately $5 million on this project. This
project was substantially completed in May 1994 and the company's expenditures
were $7.3 million in 1994. Funding for this project was from available cash
balances and cash flow.
TropWorld Project
On January 25, 1995, the company announced that it would commence construction
on a $75 million expansion of TropWorld. The expansion will consist primarily
of a new 628-room hotel tower, with additional restaurant and support
facilities in the existing operation. It is scheduled to be completed by the
summer of 1996. Approximately $25 million of the financing for the project
will come from Casino Reinvestment Development Authority ("CRDA") funds from
a pool of funds established by the New Jersey Legislature in 1993 expressly
to help develop hotel rooms in Atlantic City. The company's Bank Credit
Facility is available for the remainder of the financing.
On-going Capital Expenditures
During 1994, the company spent approximately $17 million on routine capital
expenditures at its three land-based properties.
Future Developments
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 the company's standards for
sound, meaningful long-term opportunities. On January 17, 1995, the City of
Newport News, Virginia selected Aztar to develop a casino riverboat facility
in Newport News, subject to passage of a Virginia state law legalizing
riverboat gaming. Aztar has signed a memorandum of agreement with the
F-30
<PAGE>
Industrial Development Authority of Newport News that calls for construction
of a casino riverboat facility on a 15-acre City-owned site on the James River
south of Christopher Newport Park. The agreement is subject to certain
conditions. The total project cost is estimated at $85 million. Start of
construction and opening of the project is dependent on passage of a riverboat
gaming law and licensing of the company by the State of Virginia, along with
other required approvals. Legislation to legalize riverboat gaming in
Virginia is expected to be considered in early 1996.
Commitments
At December 29, 1994, the company had commitments of approximately $13 million
for the purchase of property and equipment. In 1995, the company plans to
spend approximately $26 million on routine capital expenditures at its three
land-based properties, approximately $30 million to complete the
Caruthersville facility and approximately $39 million on the TropWorld
project. In addition, a substantial amount of the remaining approximately $90
million in project costs for the Evansville facility will be spent in 1995.
In connection with the company's commitment to make certain payments to the
City of Evansville and various community organizations, the company was
required to obtain a letter of credit for approximately $13.5 million. In
connection with this letter of credit, the company purchased an $8.25 million
six-month certificate of deposit as collateral. The company believes that its
existing cash balances, certificate of deposit and continuing cash flow, along
with funds from the Bank Credit Facility and the CRDA, will be sufficient to
meet any anticipated obligations as well as any working capital and liquidity
requirements.
Results of Operations -
1994 versus 1993
Aztar's consolidated revenues were $541.4 million for 1994, an increase of 4%
from $518.8 million in 1993. Increases in total revenues at Ramada Express
and Tropicana more than offset a decrease in total revenues at TropWorld. The
primary reason for the increase in consolidated revenues was the major
expansion of the Ramada Express facility completed in September 1993.
Consolidated casino revenue was up $4.1 million or 1% in 1994 compared to 1993
as the increase at Ramada Express offset a decrease at TropWorld. The trend
in the mix of consolidated casino revenue in 1993 and 1992, wherein games
revenue was decreasing and slot revenue was increasing, was broken in 1994.
Games revenue in 1994 remained basically even with 1993. Slot revenue also
remained even in 1994, with an increase in slot revenue at Ramada Express due
to the expansion offsetting a decrease at TropWorld.
Consolidated operating income was $69.4 million in 1994 compared with $37.4
million in 1993. The primary reasons for the increase in consolidated
operating income were the reduction in net rent at TropWorld and the expansion
at Ramada Express. The reduction in net rent was 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 an increase in depreciation and
amortization that was caused by this purchase. Additional analysis of the
performance of each of Aztar's three operating properties follows.
F-31
<PAGE>
Ramada Express
Ramada Express Hotel and Casino in Laughlin, Nevada had a very good year in
1994, despite a flat overall market, as a result of the major expansion that
was completed in September 1993. The expansion added 1,100 hotel rooms for
a total of 1,500 hotel rooms and added 20,000 square feet of casino space for
a total of 50,000 square feet of casino space.
As a result of this significant expansion, operating results for 1994 are not
comparable with 1993's. Ramada Express revenues were $81.0 million in 1994
compared with $56.2 million in 1993. Operating income was $15.9 million in
1994 compared with $5.5 million in 1993, an increase of 189%. Operating
income is after depreciation and amortization of $7.6 million in 1994 compared
with $5.4 million in 1993. Net rent was not significant in either year.
All revenue and cost components were higher in 1994 than in 1993. In spite
of the substantial increase in available rooms at Ramada Express in 1994
compared with 1993, the hotel occupancy rate was 87% in 1994 versus 80% in
1993. The operating margin, as measured by operating income before
depreciation and amortization, was 29% in 1994 compared with 19% in 1993. The
1993 results were affected by the disruption to its operations associated with
the construction activities and by additional costs incurred to minimize that
disruption. The company also expensed $1.4 million of costs associated with
the opening of the expanded facilities in 1993.
Tropicana
Tropicana Resort and Casino in Las Vegas, Nevada, continued to improve in 1994
on top of an improvement in 1993 over 1992. Total revenues for Tropicana were
$140.3 million in 1994 compared with $134.9 million in 1993 and operating
income was $8.9 million in 1994 compared with $7.2 million in 1993. Operating
income increased $1.7 million in spite of a $1.3 million increase in net rent
to $8.1 million in 1994 from $6.8 million in 1993. Net rent increased as a
result of a consumer price index adjustment, which took place in late 1993,
and an increase in the component of rent that is attributable to the increase
in interest rates in 1994 over 1993. The next consumer price index adjustment
occurs in late 1998. Operating income is also after depreciation and
amortization of $6.5 million in both 1994 and 1993.
The games revenue at Tropicana in 1994 was basically flat with 1993 after
decreases of 8% in 1993 and 7% in 1992. Games revenue had been declining 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 4% and 3% of casino revenue in 1994 and
1993, respectively, compared with 7% in 1992 and 10% in 1991. The mix of slot
revenue to total casino revenue was 61% and 63% in 1994 and 1993,
respectively, compared to 56% in 1992 and 49% in 1991.
Rooms revenue increased 20% in 1994 over 1993 as a combined result of higher
room rates and a 14% reduction in the number of occupied rooms provided on a
complimentary basis. Rooms cost increased 13% in 1994 over 1993 primarily as
a result of a decrease in the interdepartmental allocation to the casino
department caused by the reduction in the use of complimentary rooms as a
means of promoting casino activity.
F-32
<PAGE>
The provision for doubtful accounts increased $1.4 million in 1994 compared
to 1993 as a result of increasing the allowance for potential uncollectible
markers associated with the premium table game business.
TropWorld
TropWorld Casino and Entertainment Resort in Atlantic City, New Jersey had a
year in 1994, as was also the case in 1993, when total revenues decreased and
operating income increased. Total revenues decreased 2% to $320.1 million in
1994 from $327.7 million in 1993 while operating income increased 62% to $54.2
million from $33.5 million. The principal reason for the decrease in total
revenues was a decrease of $10.0 million or 3% in casino revenue in 1994
compared to 1993. This decrease in casino revenue is attributable to a $10.5
million decrease in coin redemptions and also a decrease in the use of
complimentary rooms and food and beverage service as a means of promoting
casino activity. In addition, severe weather conditions in the East were, in
large part, the cause of declines in the market's growth rate for casino
revenue during January and February 1994. A benefit associated with the
reductions in coin redemptions and complimentaries was a decrease in costs,
which is one of the reasons for the increase in operating income. Casino
costs decreased $14.2 million or 10% in 1994 compared to 1993.
The trend of declining games revenue at TropWorld moderated as the decrease
in 1994 compared with 1993 was only $0.5 million; there was a decrease of
$10.4 million in 1993 from 1992 and a decrease of $6.6 million in 1992 from
1991. The addition of poker and keno in 1994 had a positive effect. The slot
revenue percentage of total casino revenue broke its trend of year-over-year
increases; it was 76% in 1994 and 1993 compared to 73% in 1992 and 69% in
1991.
The primary reason for the increase in TropWorld's operating income was the
effects of the AREI/AGP acquisition, which resulted in a reduction in net rent
and an increase in depreciation and amortization. Net rent in 1994 was $1.4
million compared with $20.4 million in 1993 and depreciation and amortization
in 1994 was $22.5 million compared with $20.4 million in 1993.
New Gaming Jurisdictions
In mid-1993, the company began pursuing the development of its business in
various gaming jurisdictions. In connection with these efforts, the company
expensed approximately $1.6 million and $1.3 million of development costs in
1994 and 1993, respectively.
Interest Income and Expense
Interest income declined by $21.0 million in 1994 from 1993 as a result of the
AREI/AGP acquisition. In this acquisition, the cash paid by Aztar and notes
receivable from AGP were replaced on Aztar's balance sheet by the assets
acquired. The reduction in Aztar's interest income from the replacement of
the AGP notes receivable was for the most part offset by a reduction in rent
expense at TropWorld. This acquisition transaction also resulted in an
increase in depreciation and amortization at TropWorld.
Interest expense increased by $4.3 million or 10% in 1994 from 1993. The
increase is primarily attributable to a reduction in interest being
capitalized in association with construction projects and the refinancing that
F-33
<PAGE>
took place in October 1994. The refinancing resulted in approximately $2
million of higher interest expense in as much as the 13 3/4% Notes were issued
on October 4, 1994, and the First Mortgage Notes were not redeemed until
November 2, 1994, resulting in approximately 30 days of duplicate interest
expense.
Extraordinary Items
The company had an extraordinary loss in 1994 of $2.7 million, which was net
of an income tax benefit of $1.8 million, related to the early redemption of
the First Mortgage Notes that were due in 1996 and the Ramada Express Credit
Facility that was also due in 1996. The loss consists of the writeoff of the
unamortized deferred financing costs and unamortized discount associated with
the debt that was redeemed early.
Results of Operations -
1993 versus 1992
Aztar'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 are 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 has allowed for a decrease of $1.1 million
or 40% in the provision for doubtful accounts. Additional analysis of the
performance of each of Aztar's three properties follows.
Tropicana
Tropicana continued to improve in 1993. Once again, an increase in revenue
contributed to improved operating income as Tropicana held the increase in
total operating costs to 1% or less. Total revenues for Tropicana were up 3%
to $134.9 million in 1993 compared to $130.9 million in 1992 and operating
income improved 68% to $7.2 million from $4.3 million. Operating income is
after net rent of $6.8 million in 1993 compared to $7.1 million in 1992 and
depreciation and amortization of $6.5 million in 1993 compared to $7.1 million
in 1992.
F-34
<PAGE>
Casino revenue was up 7% in 1993 as Tropicana continued its shift in the mix
of table games revenue and slot revenue. The 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
F-35
<PAGE>
occupied on a complimentary basis by 11%. There was also an increase in coin
redemptions of $4.7 million in 1993 compared to 1992. These two items were
the primary causes of a $4.8 million or 3% increase in casino costs for 1993
compared to 1992.
Since payroll and related taxes and benefits are the company's largest cost
item, the company monitors the level of full-time equivalent headcounts.
These costs in 1993 were $0.3 million less than in 1992.
Net rent in 1993 was $20.4 million compared to $38.2 million in 1992 and
depreciation and amortization in 1993 was $20.4 million compared to $17.3
million in 1992. The primary cause of both the decrease in net rent and the
increase in depreciation and amortization was the purchase of the AREI/AGP
partnership interests.
Ramada Express
Ramada Express started 1993 with approximately 400 hotel rooms, 30,000 square
feet of casino space and surface parking for 1,500 vehicles. The facility
ended 1993 with approximately 1,500 hotel rooms, 50,000 square feet of casino
space, parking for 2,300 vehicles with about one-half in a garage, additional
food and beverage facilities, and additional special event and retail space.
The expansion began in September 1992 and was completed in September 1993.
Because of this expansion, the operating results for 1993 are not comparable
to 1992. Ramada Express revenues were $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.
F-36
<PAGE>
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 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 Inc. involving the discontinued hotel business.
Extraordinary Items
The company had an extraordinary loss in 1992 of $5.3 million, which was 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 outstanding of 12% First Mortgage
Notes Due 1996 of AGP.
Accounting Change
In 1992, the company adopted Statement of Financial Accounting Standards No.
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.
F-37
<PAGE>
SUMMARY OF SELECTED FINANCIAL DATA
Aztar Corporation and Subsidiaries
For the Five Years Ended December 29, 1994
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
Statement of Operations
Data (in thousands)
Revenues $541,440 $518,762 $512,045 $481,285 $515,060
Operating income (loss)(a) 69,407 37,419 32,609 13,654 (3,574)
Net interest income and
expense (a) (46,572) (21,191) (2,477) (5,856) (4,480)
Other, net (4,169) (3,822) (4,125) (5,030) (6,905)
Income (loss) from
continuing operations
before extraordinary
items and cumulative
effect of accounting
change 16,804 11,382 16,378 2,708 (15,922)
Discontinued operations -- -- 1,262 2,553 --
Extraordinary items (2,708) -- (5,335) 1,237 963
Cumulative effect of
accounting change (b) -- -- 7,500 -- --
Net income (loss) 14,096 11,382 19,805 6,498 (14,959)
Common Stock Data
(per share)
Income (loss) from
continuing operations
before extraordinary
items and cumulative
effect of accounting
change:
Earnings per common
and common
equivalent share $ .42 $ .28 $ .41 $ .05 $ (.42)
Earnings per common
share assuming
full dilution .41 .27 .40 .05 *
Cash dividends declared -- -- -- -- --
Equity 9.65 9.29 9.03 8.42 8.29
* Anti-dilutive
Balance Sheet Data
(in thousands at
year end)
Total assets $915,359 $877,171 $849,565 $638,474 $641,905
Long-term debt 430,212 404,086 378,058 176,693 180,391
Series B ESOP convertible
preferred stock 4,711 3,905 2,998 2,059 1,056
Shareholders' equity 361,368 346,988 333,749 318,900 312,771
(a) See "Note 16. Acquisition" of the Notes to Consolidated Financial
Statements.
(b) See "Note 14. Cumulative Effect of Accounting Change" of the Notes to
Consolidated Financial Statements.
F-38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Shareholders and Board of Directors
Aztar Corporation
Our report on the consolidated financial statements of Aztar Corporation and
Subsidiaries is included in this report on Form 10-K on page F-1. In
connection with our audits of such consolidated financial statements, we have
also audited the related financial statement schedule listed in the index on
page 28 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
Phoenix, Arizona
February 16, 1995
S-1
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
AZTAR CORPORATION AND SUBSIDIARIES
For the Years Ended December 29, 1994, December 30, 1993 and December 31, 1992
(in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------ ------------ ------------ ------------ ------------
Balance at Balance at
Beginning End of
Description of Year Additions Deductions Year
- ------------------- ------------ ------------ ---------- ------------
Allowance for
doubtful accounts
receivable:
1994 $ 9,908 $ 3,102(a) $ 2,290(e) $ 10,720
1993 13,124 1,566(a) 4,782(e) 9,908
1992 14,349 2,622(a) 3,847(e) 13,124
Deferred income
tax asset
valuation
allowance:
1994 $ 20,974 $ 1,551(b) $ 8,498(f) $ 14,027
1993 24,732 479(c) 4,237(f) 20,974
1992 -- 25,562(d) 830(e) 24,732
(a) Charged to costs or expenses.
(b) Reflects adjustments to the deferred income tax asset account.
(c) Reflects an adjustment to the deferred income tax asset account for the
effect of legislation that increased the federal income tax rate from 34%
to 35%.
(d) Allowance established in 1992 in connection with the adoption of
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes.
(e) Related assets charged against allowance account.
(f) Reflects reductions of $6,286,000 and $3,878,000 in 1994 and 1993,
respectively, with corresponding decreases to the 1994 and 1993 income
tax expense, due to the generation of taxable income that resulted in the
utilization of a portion of a net operating loss carryforward. In
addition, $520,000 that was included in the December 30, 1993 valuation
allowance was allocated to shareholders' equity during 1994. The
remainder of the reductions in 1994 and 1993 represented charges of
deferred tax assets against the valuation allowance account.
S-2
<PAGE>
EXHIBIT INDEX
- -------------
3.1 Restated Certificate of Incorporation, filed as Exhibit 3.1 to
Aztar Corporation's Registration Statement No. 33-32009 and
incorporated herein by reference.
3.2 By-Laws, as amended and restated May 9, 1991, filed as Exhibit 1
to Aztar Corporation's Form 8-K dated May 9, 1991 and incorporated
herein by reference.
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 October 8, 1992, between Aztar Corporation
and Bank of America National Trust & 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.
**4.3 Supplemental Indenture Evidencing Appointment of Successor Trustee,
dated January 12, 1995, between Aztar Corporation and First Bank
National Association, as successor Trustee, supplementing the
Indenture dated as of October 8, 1992.
4.4 Indenture, dated as of October 1, 1994, between Aztar Corporation
and American Bank National Association, as Trustee, relating to the
13 3/4% Senior Subordinated Notes Due 2004 of Aztar Corporation,
filed as Exhibit 4 to Aztar Corporation's Form 10-Q for the quarter
ended September 29, 1994 and incorporated herein by reference.
10.1 Amended and Restated Lease (Tropicana Hotel/Casino) between
Tropicana Enterprises and Hotel Ramada of Nevada, dated November
1, 1984, filed as Exhibit 10.20 to Ramada Inc.'s 1984 Form 10-K
(Commission File Reference Number 1-5440) and incorporated herein
by reference.
10.2 Amended and Restated Partnership Agreement by and between the Jaffe
Group and Adamar of Nevada, entered into as of November 1, 1984,
filed as Exhibit 10.22 to Ramada Inc.'s 1984 Form 10-K (Commission
File Reference Number 1-5440) and incorporated herein by reference.
*10.3(a) Management (Severance) Agreement, dated December 30, 1981, by and
between Ramada Inc. and Paul E. Rubeli, filed as Exhibit 10(l) to
Ramada Inc.'s 1981 Form 10-K (Commission File Number 1-5440) and
incorporated herein by reference.
*10.3(b) Management (Severance) Agreement, dated October 30, 1985, by and
between Ramada Inc. and Robert M. Haddock, filed as Exhibit 10.29
to Ramada Inc.'s 1985 Form 10-K (Commission File Number 1-5440) and
incorporated herein by reference.
*Indicates a management contract or compensatory plan or arrangement.
**Filed herewith
E-1
<PAGE>
EXHIBIT INDEX
- -------------
*10.3(c) Severance Agreements by and between Ramada Inc. and 2 executives
of Ramada Inc. prior to the Restructuring, filed as Exhibit
10.18(a) and (b) to Aztar Corporation's Registration Statement No.
33-51008 and incorporated herein by reference.
*10.3(d) Severance Agreements by and between Ramada Inc. and certain
executives of Ramada Inc. prior to the Restructuring, filed as
Exhibit 10.18(c),(d),(e),(f),(g),(h) and (i) to Aztar Corporation's
Registration Statement No. 33-51008 and incorporated herein by
reference.
*10.3(e) Amendment to Severance Agreement by and between Ramada Inc. and
Paul E. Rubeli prior to the Restructuring, filed as Exhibit
10.18(j) to Aztar Corporation's Registration Statement No. 33-51008
and incorporated herein by reference.
*10.3(f) Amendment to Severance Agreements by and between Ramada Inc. and
certain executives of Ramada Inc. prior to the Restructuring, filed
as Exhibit 10.18(k),(l),(m),(n) and (o) to Aztar Corporation's
Registration Statement No. 33-51008 and incorporated herein by
reference.
10.4 Reducing Revolving Loan Agreement, dated as of October 4, 1994,
among Aztar Corporation, Adamar of New Jersey, Inc., Ramada
Express, Inc. and the banks therein named; Societe Generale and
Midlantic Bank, N.A., as lead managers; Bank One, Arizona, N A and
Credit Lyonnais, as co-agents; Bankers Trust Company, as co-
managing agent; and, Bank of America National Trust and Savings
Association, as managing agent, filed as Exhibit 10 to Aztar
Corporation's form 10-Q for the quarter ended September 29, 1994
and incorporated herein by reference.
*10.5 Aztar Corporation 1989 Stock Option and Incentive Plan filed as
Exhibit 4 to Aztar Corporation's Registration Statement No. 33-
32399 and incorporated herein by reference.
*10.6(a) Employee Stock Ownership Plan of Aztar Corporation, as amended and
restated effective December 19, 1989, dated December 12, 1990,
filed as Exhibit 10.60(a) to Aztar Corporation's 1990 Form 10-K and
incorporated herein by reference.
*Indicates a management contract or compensatory plan or arrangement.
E-2
<PAGE>
EXHIBIT INDEX
- -------------
10.6(b) Term Loan Agreement, dated as of December 19, 1989, by and among
State Street Bank and Trust Company, as Trustee, Adamar Garage
Corporation, as lender, and Aztar Corporation, filed as Exhibit
10.50(b) to Aztar Corporation's Registration Statement No. 33-51008
and incorporated herein by reference.
10.6(c) Preferred Stock Purchase Agreement, dated as of December 19, 1989,
between Ramada Inc. and State Street Bank and Trust Company, as
Trustee, filed as Exhibit 10.50(c) to Aztar Corporation's
Registration Statement No. 33-51008 and incorporated herein by
reference.
10.6(d) Letter Agreement, dated as of December 19, 1989, between Aztar
Corporation and State Street Bank and Trust Company, as Trustee,
relating to the Employee Stock Ownership Plan of Aztar Corporation,
filed as Exhibit 10.50(d) to Aztar Corporation's Registration
Statement No. 33-51008 and incorporated herein by reference.
10.7(a) Agreement and Plan of Merger, dated as of April 17, 1989, among New
World Hotels (U.S.A.), Inc., RI Acquiring Corp. and Ramada Inc.,
as amended and Restated as of October 23, 1989, filed as Exhibit
2.1 to Aztar Corporation's Registration Statement No. 33-32009 and
incorporated herein by reference.
10.7(b) Letter, dated as of October 23, 1989, from Ramada Inc. to New World
Hotels (U.S.A.), Inc. regarding "Net Cash Flows from Investing
Activities", filed as Exhibit 2.1(a) to Aztar Corporation's
Registration Statement No. 33-32009 and incorporated herein by
reference.
10.7(c) Letter, dated as of October 23, 1989, from Ramada Inc. to New World
Hotels (U.S.A.), Inc. regarding certain franchising matters and
hotel projects, filed as Exhibit 2.1(b) to Aztar Corporation's
Registration Statement No. 33-32009 and incorporated herein by
reference.
10.8 Reorganization Agreement, dated as of April 17, 1989, between
Ramada Inc. and Aztar Corporation, as amended and restated as of
October 23, 1989, filed as Exhibit 2.2 to Aztar Corporation's
Registration Statement No. 33-32009 and incorporated herein by
reference.
10.9 Tax Sharing Agreement, dated as of April 17, 1989, among New World
Hotels (U.S.A), Inc., Ramada Inc. and Aztar Corporation, as amended
and restated as of October 23, 1989, filed as Exhibit 2.3 to Aztar
Corporation's Registration Statement No. 33-32009 and incorporated
herein by reference.
10.10 Guaranty and Acknowledgement Agreement, dated as of April 17, 1989,
among New World Development Company Limited, New World Hotels
(Holdings) Limited, New World Hotels (U.S.A.), Inc. and RI
Acquiring Corp., filed as Exhibit 2.4 to Aztar Corporation's
Registration Statement No. 33-29562 and incorporated herein by
reference.
E-3
<PAGE>
EXHIBIT INDEX
- -------------
10.11 Master Consent Agreement, dated July 18, 1989, by and among Ramada
Inc., Adamar of Nevada, Hotel Ramada of Nevada, Adamar of New
Jersey, Inc., Aztar Corporation, Tropicana Enterprises, Trop C.C.
and the Jaffe Group, with attached exhibits, filed as Exhibit 10.50
to Aztar Corporation's Registration Statement No. 33-29562 and
incorporated herein by reference.
*10.12 Aztar Corporation 1990 Nonemployee Directors Stock Option Plan, as
amended and restated effective March 15, 1991, filed as Exhibit A
to Aztar Corporation's 1991 definitive Proxy Statement and
incorporated herein by reference.
*10.13 Aztar Corporation Nonqualified Retirement Plan for Senior
Executives, dated September 5, 1990, filed as Exhibit 10.2 to Aztar
Corporation's Form 10-Q for the quarter ended September 27, 1990
and incorporated herein by reference.
**10.14 Second Amended and Restated Loan Agreement, dated October 4, 1994,
among Tropicana Enterprises, Hotel Ramada of Nevada and the banks
therein named; Societe Generale and Midlantic Bank, N.A., as lead
managers; Bank One, Arizona, N A and Credit Lyonnais, as co-agents;
Bankers Trust Company, as co-managing agent; and, Bank of America
National Trust and Savings Association, as managing agent.
*10.15 Summary of deferred compensation program for designated executives
of Ramada, dated November 10, 1983, filed as Exhibit 10(r) to
Ramada Inc.'s 1983 Form 10-K (Commission File Reference Number 1-
5440) and incorporated herein by reference.
*10.16 Deferred Compensation Agreements entered into by and between Ramada
and designated executives (including each Executive Officer), dated
December 1, 1983, 1984 or 1985, filed as Exhibits 10.60(a) through
(w) to Aztar Corporation's Registration Statement No. 33-51008 and
incorporated herein by reference.
*10.17 Deferred Compensation Plan for Directors, dated December 1, 1983,
filed as Exhibit 10(t) to Ramada Inc.'s 1983 Form 10-K (Commission
File Reference Number 1-5440) and incorporated herein by reference.
*10.18 Deferred Compensation Agreements entered into by and between Ramada
and certain outside Directors as of December 1, 1983, filed as
Exhibits 10.62(a),(b),(c) and (d) to Aztar Corporation's
Registration Statement No. 33-51008 and incorporated herein by
reference.
**11. Statement Regarding Computation of Per Share Earnings.
**21. Subsidiaries of Aztar Corporation.
**23. Consent of Coopers & Lybrand L.L.P.
**27. Financial Data Schedule.
*Indicates a management contract or compensatory plan or arrangement.
**Filed herewith
E-4
<PAGE>
------------------------------------------
SUPPLEMENTAL INDENTURE
EVIDENCING APPOINTMENT OF
SUCCESSOR TRUSTEE
------------------------------------
AZTAR CORPORATION,
as Issuer,
and
FIRST BANK NATIONAL ASSOCIATION,
as successor Trustee
Dated as of January 12, 1995
-------------------------------------
Supplementing the Indenture
dated as of October 8, 1992<PAGE>
SUPPLEMENTAL INDENTURE EVIDENCING APPOINTMENT OF
SUCCESSOR TRUSTEE (the "Supplemental Indenture"), dated as of
January 12, 1995, between AZTAR CORPORATION, a Delaware
corporation (the "Company"), as Issuer, and FIRST BANK NATIONAL
ASSOCIATION, a national banking association ("First Bank"), as
successor Trustee, supplementing the Indenture, dated as of
October 8, 1992 (the "Indenture"), among the Company and Bank of
America National Trust and Savings Association ("Bank of
America"), as Trustee (the "Trustee"), pursuant to which the
Company has issued its 11% Senior Subordinated Notes Due 2002.
Capitalized terms used and not otherwise defined herein shall
have the respective meanings set forth in the Indenture.
WITNESSETH:
WHEREAS, Section 509(b) of the Indenture provides that the
Trustee under the Indenture 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 such resignation; and
WHEREAS, Bank of America gave such written notice on
November 2, 1994; and
WHEREAS, Section 509(f) of the Indenture provides that in
case the Trustee shall resign, the Company shall promptly appoint
a successor Trustee by action of an Authorized Officer; and
WHEREAS, the Company, by resolutions duly adopted on
December 7, 1994 by the Board of Directors of the Company, duly
appointed First Bank as successor Trustee, Registrar for the
Notes under Section 206 of the Indenture and as Paying Agent and
designated the Corporate Trust Office of First Bank in the
Borough of Manhattan, The City of New York, as the office of the
Company for purposes of Section 702 of Indenture; and
WHEREAS, Section 510 of the Indenture provides that any
successor Trustee appointed 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 of the Indenture, evidencing the appointment of the
successor Trustee and thereupon the resignation of the retiring
Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring
Trustee; and
WHEREAS, Section 510 of the Indenture provides that on
request of the Company or the successor Trustee, such retiring
Trustee shall, upon the payment of its charges, execute and
deliver an instrument transferring to such successor Trustee all
the rights, powers and trusts of the retiring Trustee; and
<PAGE>
WHEREAS, the Company, First Bank and Bank of America entered
into an Instrument of Resignation, Appointment and Acceptance,
dated as of January 12, 1995, whereby First Bank accepted the
appointment as Successor Trustee, Registrar, Paying Agent and
authenticating agent under the Indenture, and Bank of America
transferred to First Bank all of its rights, title and interest
as Trustee in and to the trust estate and all of its rights,
powers and trusts under the Indenture; and
WHEREAS, Section 510 of the Indenture provides that upon
request of the 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.
NOW, THEREFORE, in consideration of the premises, and of
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and
First Bank have executed and delivered this Supplemental
Indenture and in further consideration of the premises and for
the considerations aforesaid, it is agreed among each of the
Company and First Bank and their respective successors and
assigns, as follows:
ARTICLE I
APPOINTMENT OF SUCCESSOR TRUSTEE
Section 1.1 Pursuant to the authority vested in him by
Section 509(f) of the Indenture, Craig F. Sullivan, as an
Authorized Officer, by execution of this Supplemental Indenture,
hereby appoints First Bank as successor Trustee under the
Indenture, to succeed to all the rights, powers, trusts and
duties which Bank of America now holds under and by virtue of the
Indenture with like effect as if originally named as Trustee in
the Indenture.
Section 1.2 The Company hereby ratifies the appointment of
First Bank in Section 1.1 and hereby appoints First Bank as
Registrar, Paying Agent and authenticating agent under the
Indenture, and hereby designates the Corporate Trust Office of
First Bank: First Trust New York, 100 Wall Street, Suite 1160,
New York, New York 10005, in the Borough of Manhattan, The City
of New York, and the Corporate Trust Office of First Bank: First
Trust California, 333 South Grand Avenue, Los Angeles, California
90071, The City of Los Angeles, as the offices of the Company for
purposes of Section 702 of the Indenture.
Section 1.3 First Bank hereby accepts the appointment as
successor Trustee, Registrar, Paying Agent and authenticating
agent under the Indenture, and accepts the designation of its
Corporate Trust Office in the Borough of Manhattan, The City of
New York, and its Corporate Trust Office in the City of Los
Angeles as the offices of the Company for purposes of Section 702
of the Indenture, and assumes the rights, powers and trusts which
Bank of America now holds under and by virtue of the Indenture,
upon the terms and conditions set forth therein, with like effect
as if originally named as Trustee under the Indenture.
Section 1.4 In accordance with Section 510 of the
Indenture, the Company, for the purpose of more fully and
certainly vesting in and confirming to First Bank, as successor
Trustee, the rights, powers and trusts vested in Bank of America,
as resigning Trustee, hereby vests First Bank with all rights,
powers and trusts of the Trustee under the Indenture.
Section 1.5 First Bank represents that it is qualified and
eligible under Article Five of the Indenture and the Trust
Indenture Act of 1939, as amended, to accept the appointment as
successor Trustee.
Section 1.6 First Bank and the Company hereby designate
that the address of the Trustee for the purposes of the
definition of "Trustee" in Section 101 of the Indenture and
notices to the Trustee in Section 106(1) of the Indenture shall
be: First Bank National Association c/o First Trust National
Association, 180 East Fifth Street, St. Paul, Minnesota 55101,
Attention: Richard H. Prokosch.
Section 1.7 The Company hereby designates that for purposes
of notices sent to the Company pursuant to Section 106(2) of the
Indenture, in addition to the notice sent to the Company, copies
of any such notice shall be given to Snell & Wilmer, One Arizona
Center, Phoenix, Arizona 85004-0001, Attention: David A.
Sprentall, Esq., and to Latham & Watkins, 633 West Fifth Street,
Los Angeles, California 90071, Attention: Brian G. Cartwright,
and no other copies shall be required.
Section 1.8 The Company shall cause notice to be given to
all Holders of the resignation of Bank of America as Trustee and
the appointment of First Bank as successor Trustee, in accordance
with Sections 509(g) and 107 of the Indenture.
ARTICLE I.I
MISCELLANEOUS
Section 2.1 The parties hereto agree to execute,
acknowledge and deliver such further instruments of conveyance
and further assurance and to do such other things as may be
reasonably required to more fully and certainly effect the
transactions contemplated hereby.
Section 2.2 This Supplemental Indenture may be executed in
any number of counterparts, each of which shall be original, but
such counterparts shall together constitute but one and the same
instrument.
Section 2.3 Except insofar as herein otherwise expressly
provided, all the provisions, terms and conditions of the
Indenture shall be deemed to be incorporated in and made a part
of, this Supplemental Indenture, and the Indenture, as
supplemented by this Supplemental Indenture, is in all respects
ratified and confirmed; and that the Indenture and this
Supplemental Indenture shall be read, taken and construed as one
and the same instrument.
Section 2.4 This Supplemental Indenture shall constitute a
supplemental indenture by and among the Company and First Bank
pursuant to Sections 510 and 601 of the Indenture.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and have caused their
respective corporate seals to be affixed and attested, all
effective as of the date first written above.
AZTAR CORPORATION
By: CRAIG F. SULLIVAN
-----------------------
Craig F. Sullivan
Treasurer
[SEAL]
Attest:
By: NELSON W. ARMSTRONG JR.
--------------------------------
Nelson W. Armstrong Jr.
Secretary
FIRST BANK NATIONAL ASSOCIATION
By: RICHARD H. PROKOSCH
--------------------------
Richard H. Prokosch
Trust Officer
[SEAL]
Attest:
By: J. PAULSON
-------------------------------
Name: Jaymes M. Paulson
Title: Assistant Secretary
_______________________________________________________________
_______________________________________________________________
SECOND AMENDED AND RESTATED LOAN AGREEMENT
among
TROPICANA ENTERPRISES,
a Nevada general partnership
as "Borrower"
HOTEL RAMADA OF NEVADA,
a Nevada corporation
as an additional party hereto
THE BANKS HEREIN NAMED
SOCIETE GENERALE
MIDLANTIC BANK, N.A.
as Lead Managers
BANK ONE, ARIZONA, N A
CREDIT LYONNAIS
as Co-Agents
BANKERS TRUST COMPANY, as Co-Managing Agent
and
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
as Managing Agent
October 4, 1994
_______________________________________________________________
_______________________________________________________________<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Definitions. . . . . . . . . . . . . . . 2
Section 1.2 Interpretation and Construction. . . . . 12
ARTICLE 2 AMOUNT, TERMS AND SECURITY OF THE LOANS. . . . . . 14
Section 2.1 The Loans. . . . . . . . . . . . . . . . 14
Section 2.2 The Notes. . . . . . . . . . . . . . . . 14
Section 2.3 Security for the Loans . . . . . . . . . 14
Section 2.4 Upfront Fee. . . . . . . . . . . . . . . 14
ARTICLE 3 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . 14
Section 3.1 The Loan Documents . . . . . . . . . . . 15
Section 3.2 The Deed of Trust. . . . . . . . . . . . 15
Section 3.3 Assignment and Assumption Agreement;
Assignment of Deed of Trust; UCC-2 . . . 15
Section 3.4 The Notes. . . . . . . . . . . . . . . . 15
Section 3.5 The HRN Master Lease . . . . . . . . . . 15
Section 3.6 HRN Master Lease Estoppel Certificate. . 15
Section 3.7 Partnership Estoppel Certificate . . . . 15
Section 3.8 Authority of Borrower and HRN. . . . . . 16
Section 3.9 Opinion of Counsel . . . . . . . . . . . 16
Section 3.10 Title Insurance Indorsements . . . . . . 17
Section 3.11 Payment of Taxes . . . . . . . . . . . . 17
Section 3.12 Insurance. . . . . . . . . . . . . . . . 17
Section 3.13 Reimbursement for Expenses and Fees. . . 17
Section 3.14 Borrower's Partnership Agreement . . . . 17
Section 3.15 Borrower's Fictitious Business Name
Certificate. . . . . . . . . . . . . . . 17
Section 3.16 Partnership Resolution . . . . . . . . . 17
Section 3.17 Corporate Resolution for Adamar. . . . . 17
Section 3.18 Corporate Documentation for HRN. . . . . 18
Section 3.19 Financial Statements . . . . . . . . . . 18
Section 3.20 Jaffe Subordination Affirmation. . . . . 18
Section 3.21 Subordination Affirmation of HRN
Master Lease . . . . . . . . . . . . . . 18
Section 3.22 Upfront Fee. . . . . . . . . . . . . . . 18
Section 3.23 Amendments to Expansion Financing
Documents. . . . . . . . . . . . . . . . 18
Section 3.24 Additional Documents . . . . . . . . . . 18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 19
Section 4.1 Organization; Power and Authorization. . 19
Section 4.2 No Conflict With, Violation of or
Default Under Laws or Other
Agreements . . . . . . . . . . . . . . . 19
Section 4.3 Litigation . . . . . . . . . . . . . . . 20
Section 4.4 Agreements Legal, Binding, Valid and
Enforceable. . . . . . . . . . . . . . . 20
Section 4.5 Information and Financial Data
Accurate; Financial Statements; No
Adverse Change . . . . . . . . . . . . . 21
Section 4.6 Governmental Approvals . . . . . . . . . 21
Section 4.7 Payment of Taxes . . . . . . . . . . . . 21
Section 4.8 Title to Properties. . . . . . . . . . . 22
Section 4.9 No Untrue Statements . . . . . . . . . . 22
Section 4.10 Brokerage Commissions. . . . . . . . . . 22
Section 4.11 No Defaults. . . . . . . . . . . . . . . 22
Section 4.12 HRN Master Lease; Borrower's
Partnership Agreement; and Policies of
Insurance. . . . . . . . . . . . . . . . 23
Section 4.13 Tradenames and Servicemarks. . . . . . . 23
ARTICLE 5 COVENANTS OF BORROWER AND HRN. . . . . . . . . . . 23
Section 5.1 FF&E . . . . . . . . . . . . . . . . . . 23
Section 5.2 Hotel/Casino Operator. . . . . . . . . . 24
Section 5.3 Permits; Licenses and Legal
Requirements . . . . . . . . . . . . . . 24
Section 5.4 Protection Against Lien Claims . . . . . 24
Section 5.5 Preservation of Partnership Status . . . 25
Section 5.6 No Change in Character of Business . . . 25
Section 5.7 Preservation and Maintenance of
Properties and Assets. . . . . . . . . . 25
Section 5.8 Repair of Properties and Assets. . . . . 26
Section 5.9 Financial Statements; Reports and
Books and Records. . . . . . . . . . . . 26
Section 5.10 Insurance. . . . . . . . . . . . . . . . 27
Section 5.11 Taxes. . . . . . . . . . . . . . . . . . 28
Section 5.12 Permitted Encumbrances Only. . . . . . . 28
Section 5.13 Advances . . . . . . . . . . . . . . . . 28
Section 5.14 Further Assurances . . . . . . . . . . . 29
Section 5.15 Indemnification. . . . . . . . . . . . . 29
Section 5.16 Inspection of the Premises . . . . . . . 30
Section 5.17 Compliance With Documents. . . . . . . . 30
Section 5.18 Suits or Actions Affecting Borrower. . . 30
Section 5.19 Borrower's Partnership Agreement and
HRN Master Lease . . . . . . . . . . . . 30
Section 5.20 Notice to State Gaming Control Board . . 30
Section 5.21 Matters Affecting HRN Master Lease . . . 31
Section 5.22 Matters Affecting HRN Equipment
Leases . . . . . . . . . . . . . . . . . 31
Section 5.23 Matters Affecting Subleases. . . . . . . 32
Section 5.24 HRN Master Lease . . . . . . . . . . . . 32
ARTICLE 6 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . 33
Section 6.1 Events of Default. . . . . . . . . . . . 33
Section 6.2 Default Remedies . . . . . . . . . . . . 34
Section 6.3 Application of Proceeds. . . . . . . . . 35
Section 6.4 Notices. . . . . . . . . . . . . . . . . 35
Section 6.5 Agreement to Pay Attorneys' Fees and
Expenses . . . . . . . . . . . . . . . . 36
Section 6.6 No Additional Waiver Implied by One
Waiver . . . . . . . . . . . . . . . . . 36
Section 6.7 Licensing of Managing Agent and Banks. . 36
Section 6.8 Exercise of Rights Subject to
Applicable Law . . . . . . . . . . . . . 36
Section 6.9 Discontinuance of Proceedings. . . . . . 36
ARTICLE 7 DAMAGE, DESTRUCTION AND CONDEMNATION . . . . . . . 37
Section 7.1 No Abatement of Payments . . . . . . . . 37
Section 7.2 Distribution of Capital Proceeds Upon
Occurrence of Fire, Casualty, or
Condemnation . . . . . . . . . . . . . . 37
ARTICLE 8 GENERAL CONDITIONS . . . . . . . . . . . . . . . . 39
Section 8.1 Failure to Exercise Rights . . . . . . . 39
Section 8.2 Successors and Assigns . . . . . . . . . 39
Section 8.3 Notices. . . . . . . . . . . . . . . . . 39
Section 8.4 Modification In Writing. . . . . . . . . 41
Section 8.5 Incorporation of Terms . . . . . . . . . 41
Section 8.6 Other Agreements . . . . . . . . . . . . 42
Section 8.7 Counterparts . . . . . . . . . . . . . . 42
Section 8.8 Rights, Power and Remedies are
Cumulative . . . . . . . . . . . . . . . 42
Section 8.9 Representations and Warranties . . . . . 42
Section 8.10 Assignment of Loan Documents by
Borrower . . . . . . . . . . . . . . . . 42
Section 8.11 Action by Banks. . . . . . . . . . . . . 43
Section 8.12 Time of Essence. . . . . . . . . . . . . 43
Section 8.13 Governing Law. . . . . . . . . . . . . . 43
Section 8.14 No Joint Venture . . . . . . . . . . . . 43
Section 8.15 Joinder in Execution by HRN. . . . . . . 43
Section 8.16 Non-Recourse . . . . . . . . . . . . . . 43
Section 8.17 Exhibits Attached. . . . . . . . . . . . 44
Section 8.18 Waiver of Right to Trial by Jury . . . . 44
Section 8.19 Purported Oral Agreements. . . . . . . . 45
Section 8.20 Removal of a Bank. . . . . . . . . . . . 45
ARTICLE 9 AGENCY PROVISIONS. . . . . . . . . . . . . . . . . 46
Section 9.1 No Obligations of Borrower . . . . . . . 46
SECTION 9.3 Managing Agent and Affiliates. . . . . . 47
SECTION 9.4 Proportionate Interest in any Collate-
ral. . . . . . . . . . . . . . . . . . . 47
SECTION 9.5 Banks' Credit Decisions. . . . . . . . . 47
SECTION 9.6 Action by Managing Agent . . . . . . . . 48
SECTION 9.7 Liability of Managing Agent. . . . . . . 49
SECTION 9.8 Indemnification. . . . . . . . . . . . . 50
SECTION 9.9 Successor Managing Agent . . . . . . . . 51
SECTION 9.10 Foreclosure on Collateral. . . . . . . . 51
Article 10 CERTAIN OTHER PROVISIONS. . . . . . . . . . . . . 52
SECTION 10.1 Amendments; Consents . . . . . . . . . . 52
SECTION 10.2 Nature of Banks' Obligations . . . . . . 53
SECTION 10.3 Binding Effect; Assignment . . . . . . . 53
SECTION 10.4 Sharing of Setoffs . . . . . . . . . . . 56
SECTION 10.5 Nonliability of the Banks. . . . . . . . 57
SECTION 10.6 No Third Parties Benefited . . . . . . . 58
SECTION 10.7 Confidentiality. . . . . . . . . . . . . 59
SECTION 10.8 Foreign Banks and Participants . . . . . 59
SECTION 10.9 Hazardous Material Indemnity . . . . . . 60
SECTION 10.10 Gaming Boards. . . . . . . . . . . . . . 61
SECTION 10.11 Termination; Release of Liens. . . . . . 61
SECTION 10.12 Other Lien Releases. . . . . . . . . . . 62
<PAGE>
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT ("A/R
Loan Agreement"), is made and entered into as of October 4,
1994, among Tropicana Enterprises, a Nevada general partnership
("Borrower"), Hotel Ramada of Nevada, a Nevada corporation
("HRN"), each lender whose name is set forth on the signature
pages of this A/R Loan Agreement and each lender which may
hereafter become a party to this A/R Loan Agreement pursuant to
Article 9 (collectively, with each lender who may hereafter
become a party to this A/R Loan Agreement pursuant to Section
10.3, the "Banks" and individually, a "Bank"), Societe Generale
and Midlantic Bank, N.A., as Lead Managers, Bank One, Arizona,
N A and Credit Lyonnais, as Co-Agents, Bankers Trust Company,
as Co-Managing Agent, and Bank of America National Trust and
Savings Association, as Managing Agent.
R E C I T A L S:
WHEREAS:
A. Borrower is the owner of the Tropicana Hotel and
Casino, Las Vegas, Nevada and the underlying real property
situated in Clark County, Nevada, which real property is more
particularly described on "Exhibit A" hereto, together with all
buildings, structures and other improvements situate thereon
(hereinafter the "Real Property").
B. On or about November 19, 1984, Borrower entered
into a Construction and Term Loan Agreement (the "Original Loan
Agreement") with the Original Bank Group referred to below
pursuant to which loans in the principal amount of Sixty-Seven
Million Five Hundred Thousand and No/100 Dollars
($67,500,000.00) were made by the Original Bank Group for the
purpose of financing an expansion and remodeling project on the
Real Property (the "First Loan"). On or about September 10,
1986, the Original Bank Group made an additional loan in the
amount of Ten Million Six Hundred Forty-Two Thousand Six
Hundred Fifty-Three and 83/100 Dollars ($10,642,653.83) (the
"Second Loan" and collectively with the First Loan, the
"Expansion Financing"). The Expansion Financing was evidenced
by and secured in the manner set forth in those certain
agreements, documents and instruments listed on "Exhibit B"
hereto. (hereinafter the "Expansion Financing Documents").
C. The Real Property, together with all items of
personal property situate thereon, are leased by Borrower to
HRN, pursuant to an Amended and Restated Lease Agreement dated
November 19, 1984, the original of which or a memorandum
thereof was recorded in the office of the County Recorder of
Clark County, Nevada on November 20, 1984, as Document
No. 1983542, as amended by a First Amendment to Amended and
Restated Lease dated January 1, 1986 and a Second Amendment to
Amended and Restated Lease Agreement dated December 12, 1989
(collectively, the "HRN Master Lease").
D. The rights of the Original Bank Group with
respect to the Expansion Financing Documents were acquired by
the Second Bank Group referred to below as of July 31, 1989,
and Borrower and the Second Bank Group concurrently entered
into an Amended and Restated Loan Agreement dated as of
July 31, 1989 (as amended from time to time, the "Second Loan
Agreement"), which amended and restated the Original Loan
Agreement in its entirety. Certain of the Expansion Loan
Documents continued in full force and effect during the term of
the Second Loan Agreement.
E. Pursuant to an Assignment and Assumption
Agreement of even date herewith among the Second Bank Group and
Banks, Banks have acquired all right, title and interests of
the Second Bank Group under the Second Loan Agreement and such
Expansion Financing Documents and are the holders and owners of
the indebtedness evidenced and secured by the Expansion
Financing Documents.
F. Banks and Borrower desire to amend and restate
the Second Loan Agreement in its entirety as hereinafter set
forth, and to amend and restate or amend certain of the
Expansion Financing Documents as hereinafter provided for by
this A/R Loan Agreement.
NOW, THEREFORE, in consideration of the foregoing,
and other valuable considerations as hereinafter described, the
parties hereto do promise, covenant and agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Definitions. For the purposes of this
A/R Loan Agreement each of the following terms shall have the
meanings set forth below:
"Adamar" shall mean Adamar of Nevada, a Nevada
corporation, a corporation organized under the laws of the
State of Nevada, which corporation is one of the general
partners of Borrower pursuant to Borrower's Partnership
Agreement having a fifty percent (50%) interest in
Borrower.
"Assignment and Assumption Agreement" means that
certain Assignment and Assumption Agreement of even date
herewith between the Second Bank Group, as Assignors, and
Banks, as Assignees, with respect to the Second Loan
Agreement and the Expansion Financing Documents (other
than those terminated in connection with the Second Loan
Agreement).
"Assignment of HRN Master Lease Rents" shall
mean the Assignment of HRN Master Lease Rents, dated
November 19, 1984, executed by Tropicana Enterprises, as
Borrower, and HRN, as Lessee, recorded November 20, 1984
in Book 2004, Instrument No. 1983550, Official Records of
Clark County, Nevada.
"Bank Disqualification" shall mean, with respect
to any Bank,:
(a) the failure of that Bank timely to file
pursuant to applicable Gaming Laws (i) any
application requested of the Bank by any Gaming Board
in connection with licensing required of that Bank as
a lender to Borrower or (ii) any required application
or other papers in connection with determination of
the suitability of the Bank as a lender to Borrower;
(b) the withdrawal by that Bank (except where
requested or permitted by the Gaming Board) of any
such application or other required papers; or
(c) any final determination by a Gaming Board
pursuant to applicable Gaming Laws (i) that the Bank
is "unsuitable" as a lender to Borrower, (ii) that
the Bank shall be "disqualified" as a lender to
Borrower or (iii) denying the issuance to the Bank of
any license required under applicable Gaming Laws to
be held by all lenders to Borrower.
"Banking Day" shall mean any Monday, Tuesday,
Wednesday, Thursday or Friday, other than a day on which
banks are authorized or required to be closed in
California, Arizona or New York.
"Bankruptcy Code" shall mean the United States
Bankruptcy Code, as amended, 11 U.S.C. 101 et seq.
"Banks" shall have the meaning set forth in the
Preamble of this A/R Loan Agreement.
"Borrower" shall mean Tropicana Enterprises, a
Nevada general partnership, its successors and permitted
assigns.
"Borrower's Partnership Agreement" shall mean
the Amended and Restated Partnership Agreement entered
into by and between Adamar and the Jaffe Group dated
November 1, 1984, as amended by that certain letter
agreement dated November 19, 1984, a First Amendment to
Amended and Restated Partnership Agreement dated June 19,
1985, a letter agreement dated December 15, 1987, and a
Second Amendment to Amended and Restated Partnership
Agreement dated December 12, 1989.
"Capital Proceeds" shall mean the net proceeds
(after deducting all expenses incurred in connection
therewith) available to Borrower from (i) partial or total
condemnation or destruction of any part of the Premises,
(ii) sales of easements, rights-of-way or similar interest
in any portion of the Premises, (iii) insurance proceeds
(other than rent insurance) received in connection with
the Premises, which shall be distributed in the manner set
forth in Section 7.2, (iv) the sale or other disposition
of any portion of the Premises in accordance with the
provisions of this A/R Loan Agreement (not including,
however, any proceeds received by Borrower or HRN from a
sale of FF&E if such FF&E is replaced by items of
equivalent value and utility and so long as no Event of
Default has occurred and is continuing, and (v) any other
extraordinary receipt of proceeds with respect to the
Collateral not in the ordinary course of business and
treated, for accounting purposes, as capital in nature,
excluding, however, any capital contribution or loan to
Borrower contemplated by Borrower's Partnership Agreement.
"Collateral" shall mean (i) all of the real and
personal property, FF&E, contract rights, equipment leases
and subleases, intangibles and other interests of Borrower
and HRN which are subject to the lien and security
interest of the Loan Documents; and (ii) any and all other
property and/or intangible rights, interests or benefits
inuring to or in favor of Borrower and/or HRN which are in
any manner assigned, pledged, encumbered or otherwise
hypothecated in favor of the Managing Agent or Banks to
secure repayment of the Loans.
"Collateral Assignment of HRN Equipment Leases"
shall mean the Collateral Assignment of HRN Equipment
Leases dated November 19, 1984 executed by HRN, as Debtor
and Assignor, and recorded November 20, 1984 in Book 2024,
Instrument No. 1983551, Official Records of Clark County,
Nevada.
"Collateral Assignment of Subleases" shall mean
the Collateral Assignment of Subleases dated November 19,
1984, executed by HRN as Debtor and Assignor.
"Commitment Assignment and Acceptance" means a
commitment assignment and acceptance substantially in the
form of Exhibit A to the Other Loan Agreement.
"Co-Agents" shall mean Bank One, Arizona, N A
and Credit Lyonnais. The Co-Agents shall have no rights,
duties or responsibilities under the Loan Documents beyond
those of a Bank.
"Co-Managing Agent" shall mean Bankers Trust
Company. The Co-Managing Agent shall have no rights,
duties or responsibilities under the Loan Documents beyond
those of a Bank.
"Deed of Trust" shall mean the Deed of Trust and
Security Agreement With Assignment of Rents executed by
Borrower as Trustor and Debtor and HRN as Additional
Debtor dated November 19, 1984 and recorded November 24,
1984 in Book 2024, Instrument No. 1983548, Official
Records of Clark County, Nevada, and Assignment of and
Notice of Additional Advance Under Deed of Trust and
Security Agreement With Assignment of Rents dated
September 10, 1986 and recorded September 11, 1986 in
Book 860911, Instrument No. 00268, Official Records of
Clark County, Nevada, as amended by the First Amendment to
Deed of Trust and Security Agreement with Assignment of
Rents dated July 31, 1989 and recorded August 2, 1989 in
Book 890802, Instrument No. 00398, Official Records of
Clark County, Nevada, and as amended and restated
concurrently herewith pursuant to the Second Amended and
Restated Deed of Trust and Security Agreement with
Assignment of Rents of even date herewith made by Borrower
and HRN, as Trustor and Additional Trustor, in favor of
Nevada Title Company, as Trustee, for the benefit of the
Managing Agent, as Beneficiary.
"Effective Date" shall mean the date upon which
the Second Amended and Restated Deed of Trust is recorded
in the Official Records of Clark County, Nevada.
"Eligible Assignee" shall mean (a) another Bank,
(b) with respect to any Bank, any Affiliate of that Bank,
(c) any commercial bank having a combined capital and
surplus of $100,000,000 or more, (d) any (i) savings bank,
savings and loan association or similar financial
institution or (ii) insurance company engaged in the
business of writing insurance which, in either case (A)
has a net worth of $200,000,000 or more, (B) is engaged in
the business of lending money and extending credit under
credit facilities substantially similar to those extended
under this Agreement and (C) is operationally and
procedurally able to meet the obligations of a Bank
hereunder to the same degree as a commercial bank and (e)
any other financial institution (including a mutual fund
or other fund) having total assets of $250,000,000 or more
which meets the requirements set forth in subclauses (B)
and (C) of clause (d) above; provided that (I) each
Eligible Assignee must either (a) be organized under the
Laws of the United States of America, any State thereof or
the District of Columbia or (b) be organized under the
Laws of any other country which is a member of the
Organization for Economic Cooperation and Development, or
a political subdivision of such a country, and (i) act
hereunder through a branch, agency or funding office
located in the United States of America and (ii) be exempt
from withholding of tax on interest and deliver the
documents related thereto pursuant to Section 10.9 and
(II) to the extent required under applicable Gaming Laws,
each Eligible Assignee must be registered with, approved
by, or not disapproved by (whichever may be required under
applicable Gaming Laws), all applicable Gaming Boards.
"Event of Default" shall mean any event or
circumstance defined as an Event of Default pursuant to
Section 6.1 hereof.
"Existing Notes" means, collectively:
(a) that certain Promissory Note, dated November 19, 1984,
executed by Borrower in favor of the Original Bank Group
in the principal amount of $67,500,000, as modified by a
First Modification to Promissory Note dated September 10,
1986, executed by Borrower and First Interstate Bank of
Nevada, N.A., The Valley National Bank of Arizona,
Canadian Imperial Bank of Commerce (California), Security
Pacific National Bank and Australia & New Zealand Banking
Group Limited and the related Endorsement attached thereto
executed by Horizon Financial, F.A. assigning all of its
right, title and interest therein to InterFirst Bank,
Dallas, N.A., as amended; and
(b) that certain Promissory Note in the principal sum of
$10,462,653.83 dated September 10, 1986, executed by
Borrower in favor of First Interstate Bank of Nevada,
N.A., The Valley National Bank of Arizona, Canadian
Imperial Bank of Commerce (California), Security Pacific
National Bank and Australia & New Zealand Banking Group
Limited, as amended.
"Expansion Financing" shall have the meaning set
forth in Paragraph B of the Recitals of this A/R Loan
Agreement.
"Expansion Financing Documents" shall mean the
documents and instruments more particularly described on
Exhibit B hereto and as referenced in Recital paragraph B
of this A/R Loan Agreement.
"FF&E" shall mean any furniture, fixtures and
equipment and other items described in the Financing
Statements which have been installed or are in the future
installed and used in connection with the Premises and the
Hotel/Casino Operation.
"FF&E Leases" shall mean all leases of FF&E
subject to the Collateral Assignment of HRN Equipment
Leases.
"Gaming Board" shall mean, collectively, (a) the
Nevada Gaming Commission, (b) the Nevada State Gaming
Control Board and (c) any other Governmental Authority
that holds regulatory, licensing or permit authority over
gambling, gaming or casino activities conducted by
Borrower and HRN.
"Gaming Laws" shall mean all laws pursuant to
which any Gaming Board possesses regulatory, licensing or
permit authority over gambling, gaming or casino
activities conducted by Borrower or HRN.
"Governmental Authority" shall mean any federal,
state, county or municipal governmental agency, board,
commission, officer or official whose consent or approval
is required or whose regulations must be followed as a
prerequisite to (i) the continued operation and occupancy
of the Premises, or (ii) the performance of any act or
obligation or the observance of any agreement, provision
or condition of whatever nature herein contained.
"Hotel/Casino Operation" shall mean the hotel
and casino business and related activities conducted on
the Premises and carried on under the style and name of
Tropicana Hotel and Casino.
"Hazardous Materials" shall mean substances
defined as "hazardous substances" pursuant to the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. 9601 et seq., or as
"hazardous", "toxic" or "pollutant" substances or as
"solid waste" pursuant to the Hazardous Materials
Transportation Act, 49 U.S.C. 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. 6901,
et seq., or as "friable asbestos" pursuant to the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq. or any
other applicable Hazardous Materials Law, in each case as
such laws are amended from time to time.
"Hazardous Materials Laws" shall mean all laws
governing the treatment, transportation or disposal of
Hazardous Materials applicable to any of the Real
Property.
"Hotel/Casino Operator" shall mean the Person
conducting the Hotel/Casino Operation. As of the
Effective Date, the Hotel/Casino Operator is HRN, acting
under the HRN Master Lease.
"HRN" shall mean Hotel Ramada of Nevada, a
corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada, which
corporation is (i) currently the lessee of the Premises
from Borrower under the HRN Master Lease, and
(ii) currently the operator of the Hotel/Casino Operation.
"HRN Master Lease" shall have the meaning set
forth in paragraph C of the Recitals of this A/R Loan
Agreement.
"HRN Master Lease Estoppel Certificate" shall
mean an estoppel certificate duly executed by HRN and
Borrower wherein each certifies and represents to the
Managing Agent and Banks as of the Effective Date that:
(i) the HRN Master Lease represents the entire agreement
between the parties thereto; (ii) that the HRN Master
Lease has not been modified, supplemented or amended
except as defined herein; and (iii) to the extent of the
actual knowledge of lessor and to the best knowledge of
lessee there are no defaults presently existing or
continuing under any of the terms and provisions of the
HRN Master Lease or the 1972 Lease as defined in the first
paragraph of the HRN Master Lease.
"HRN Master Lease Subordination Affirmation"
shall mean the agreement to be executed by Borrower and
HRN affirming that at all times during the life of the
Loans the HRN Master Lease shall be subordinate to the
encumbrance lien of the Deed of Trust, and each of the
other Loan Documents.
"Indebtedness" of any Person includes all
obligations, contingent or otherwise, which in accordance
with generally accepted accounting principles ("GAAP")
should be classified upon such Person's balance sheet as
liabilities, but in any event including liabilities
secured by any lien existing on property owned or acquired
by such Person or a subsidiary thereof (whether or not the
liability secured thereby shall have been assumed),
obligations which have been or under GAAP should be
capitalized for financial reporting purposes, and all
guaranties, endorsements, and other contingent obligations
with respect to Indebtedness of others, including, but not
limited to, any obligations to acquire any of such
indebtedness to purchase, sell, or furnish property or
services primarily for the purpose of enabling such other
person to make payment of any such Indebtedness, or
otherwise to assure the owner of any of such Indebtedness
against loss with respect thereto.
"Jaffe Group" shall mean those individuals and
entities defined as the Jaffe Group in Borrower's
Partnership Agreement, who are general partners of
Borrower having an aggregate fifty percent (50%) interest
in Borrower.
"Jaffe Subordination Affirmation" shall mean the
agreement to be executed by Borrower and Eugene Jaffe and
Elsie Jaffe as Co-Trustees under Trust A and the Residuary
Trust affirming that the Deed of Trust and Financing
Statements in favor of the Jaffe Group shall remain
subordinated at all times during the life of the Loans to
the encumbrance lien of the Deed of Trust and the other
Loan Documents.
"Lead Managers" shall mean each of Societe
Generale and Midlantic Bank, N.A.. The Lead Managers
shall have no rights, duties or responsibilities under the
Loan Documents beyond those of a Bank.
"Loans" shall mean the loans contemplated by
Section 2.1 hereof and evidenced by the Notes.
"Loan Documents" shall mean this A/R Loan
Agreement, the Notes, the Deed of Trust, and each of the
other Expansion Financing Documents (other than the
Expansion Financing Documents which were cancelled and
released pursuant to Section 2.4 of the Second Loan
Agreement), and each other instrument, document and
agreement now or hereafter executed with or in favor of
the Banks or the Managing Agent in connection with this
A/R Loan Agreement.
"Managing Agent" shall mean Bank of America
National Trust and Savings Association, when acting in its
capacity as the Managing Agent under any of the Loan
Documents, or any successor Managing Agent.
"Managing Agent's Office" shall mean the
Managing Agent's address as set forth on the signature
pages of this Agreement, or such other address as the
Managing Agent hereafter may designate by written notice
to Borrowers and the Banks.
"Note" shall mean any of the promissory notes
made by Borrower to a Bank evidencing that Bank's Pro Rata
Share of the Loans, substantially in the form of
Exhibit "C" hereto, either as originally executed or as
the same may from time to time be supplemented, modified,
amended, renewed, extended or supplanted.
"Original Bank Group" shall mean a syndicate of
lenders for which First Interstate Bank of Nevada, N.A.
acted as administrator. While various lenders were
members of this syndicate from time to time, (a) as of the
making of the First Loan, the Original Bank Group
consisted of First Interstate Bank of Nevada, N.A., The
Valley National Bank of Arizona, California Canadian Bank,
InterFirst Dallas, N.A. and Horizon Financial, F.A., and
(b) as of the making of the Second Loan, the Original Bank
Group consisted of First Interstate Bank of Nevada, N.A.,
The Valley National Bank of Arizona, Canadian Imperial
Bank of Commerce (California), Security Pacific National
Bank and Australia and New Zealand Banking Group, Limited.
"Other Loan Agreement" shall mean that certain
Reducing Revolving Loan Agreement of even date herewith
among Aztar Corporation, a Delaware corporation, Adamar of
New Jersey, Inc., a New Jersey corporation ("ANJI"),
Ramada Express, Inc., a Nevada corporation ("REI"), the
lenders party thereto, Societe Generale and Midlantic
Bank, N.A., as Lead Managers, Bank One, Arizona, N A and
Credit Lyonnais, as Co-Agents, Bankers Trust Company, as
Co-Managing Agent, and Bank of America National Trust and
Savings Association, as Managing Agent, either as
originally executed or as it may from time to time be
supplemented, modified, amended, restated or extended.
"Permitted Encumbrances" shall mean, at any
particular time, (i) liens for taxes, assessments or
governmental charges not then due and payable or not then
delinquent, (ii) liens for taxes, assessments or
governmental charges the validity of which are being
contested in good faith by Borrower by appropriate
proceedings, provided that Borrower shall have maintained
adequate reserves with respect thereto, (iii) liens
created or contemplated by the Deed of Trust and the other
Loan Documents, (iv) the liens, encumbrances and
restrictions on the Real Property which appear in
Schedule B, Part I and II of the Title Insurance Policy at
the Effective Date, (v) liens in favor of the Managing
Agent for the benefit of Banks or consented to in writing
by the Requisite Banks, including, without limitation, as
permitted in Section 5.12, (vi) easements, licenses or
rights-of-way, hereafter granted to any Governmental
Authority or public utility providing services to the
Premises, (vii) mechanic's, materialmen's and similar
liens that are being contested in the manner provided in
the Loan Documents or are otherwise permitted hereunder,
(viii) purchase money security interests for FF&E
heretofore or hereafter acquired (subject to the
limitations set forth in Section 5.1 with respect to FF&E
that is acquired hereafter), and (ix) liens of legally
valid leases for FF&E heretofore or hereafter acquired
(subject to the limitations of Section 5.1 hereof with
respect to FF&E that is hereafter acquired).
"Person" shall mean any individual, firm,
corporation, trust, association, partnership, joint
venture, tribunal or other entity.
"Premises" shall mean the Real Property and all
improvements or property, both personal and real which now
are or hereafter are situated upon the Real Property or
used in connection with the Hotel/Casino Operation.
"Pro Rata Share" shall mean, with respect to
each Bank, the percentage of the Commitment set forth
opposite the name of that Bank on Schedule 1.1 to this
Agreement, as such percentage may be increased or
decreased pursuant to a Commitment Assignment and
Acceptance executed in accordance with Section 10.3.
"Real Property" shall have the meaning set forth
in paragraph A of the Recitals of this A/R Loan Agreement.
"Requisite Banks" shall mean Banks holding Notes
evidencing in the aggregate 65% or more of the aggregate
Indebtedness then evidenced by the Notes.
"Second Amended and Restated Deed of Trust"
shall mean the Second Amended and Restated Deed of Trust
and Security Agreement with Assignment of Rents in the
form of Exhibit "D" hereto.
"Second Bank Group" shall mean a syndicate of
lenders for which First Interstate Bank of Nevada, N.A.
acted as administrator. While various lenders were
members of this syndicate from time to time, as of the
acquisition of the rights of the Original Bank Group under
the Expansion Financing Documents, the Second Bank Group
consisted of First Interstate Bank of Nevada, N.A. and The
Valley National Bank of Arizona.
"Subordination Affirmations" shall mean
collective reference to the Jaffe Subordination
Affirmation and HRN Master Lease Subordination
Affirmation.
"Title Insurance Company" shall mean
Commonwealth Land Title Insurance Company and its issuing
agent Nevada Title Company, 3320 West Sahara, Suite 200,
Las Vegas, Nevada, 89102, together with such reinsurers
with direct access as are requested by Borrower and
approved by the Managing Agent or other title insurance
company or companies as may be acceptable to the Managing
Agent.
"Title Insurance Policy" shall mean the ALTA
Extended Coverage Lender's Policy of Title Insurance
issued by Commonwealth Land Title Insurance Company,
Policy No. 84-07-311 RM dated November 24, 1984, together
with all indorsements attached thereto.
"Tropicana Enterprises" shall mean Tropicana
Enterprises, a general partnership organized under the
laws of the State of Nevada, which partnership is composed
of Adamar and the Jaffe Group.
"Upfront Fee" shall mean a non-refundable fee
payable to each Bank in consideration of the amendments
and modifications as set forth in this A/R Loan Agreement
in an set forth in the written invitation letter agreement
among Borrower and that Bank.
Section 1.2 Interpretation and Construction. In
this A/R Loan Agreement, unless the context otherwise requires:
(i) Articles and Sections mentioned by
number only are the respective Articles and Sections of
this A/R Loan Agreement as so numbered;
(ii) Words importing a particular gender
mean and include every other gender, and words importing
the singular number mean and include the plural number and
vice versa;
(iii) Words importing persons mean and
include firms, associations, partnerships (including
limited partnerships), societies, trusts, corporations or
other legal entities, including public or governmental
bodies, as well as natural persons;
(iv) Any headings preceding the texts of
the several Articles and Sections of this A/R Loan
Agreement, and any table of contents appended to copies
hereof, shall be solely for convenience of reference and
shall not constitute a part of this A/R Loan Agreement,
nor shall they affect its meaning, construction or effect;
(v) If any clause, provision or Section of
this A/R Loan Agreement shall be ruled invalid or
unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any
of the remaining provisions hereof;
(vi) The terms "herein", "hereunder",
"hereby", "hereto", "hereof" and any similar terms as used
herein refer to this A/R Loan Agreement; the term
"heretofore" means before the date of execution of this
A/R Loan Agreement; and the term "hereafter" means after
the date of the execution of this A/R Loan Agreement;
(vii) This A/R Loan Agreement and all
matters relating hereto shall be governed by and construed
and interpreted in accordance with the laws of the State
of Nevada;
(viii) If any clause, provision or Section of
this A/R Loan Agreement shall be determined to be
apparently contrary to or conflicting with any other
clause, provision or Section of this A/R Loan Agreement,
then the clause, provision or Section containing the more
specific provisions shall control and govern with respect
to such apparent conflict; and
(ix) Except where a different standard is
expressly indicated in this A/R Loan Agreement, all items
requiring the consent or approval of the Managing Agent,
Banks or Borrower shall be construed as providing that
such consent or approval may not be unreasonably withheld
or delayed.
ARTICLE 2
AMOUNT, TERMS AND SECURITY OF THE LOANS
Section 2.1 The Loans. Banks have acquired the
Loans made under the Original Loan Agreement and the Second
Loan Agreement pursuant to the Assignment and Assumption
Agreement, and Borrower is obligated to repay the Loans to
Banks. Borrower confirms that, as of the Effective Date, the
aggregate principal amount of the outstanding Loans is Seventy-
Two Million Six Hundred Ninety-Two Thousand Six Hundred Fifty-
Three and 86/100 Dollars ($72,692,653.86). Each Bank holds a
proportionate interest in the Loans which is equal to its Pro
Rata Share of the Loans. Borrower may not reborrow any amounts
repaid or prepaid on the Notes, except that Capital Proceeds
shall not be deemed as being prepaid or repaid if Borrower
meets the requirements contained in Section 7.2 hereof, in
which case such Capital Proceeds shall be applied and disbursed
in accordance with Section 7.2 hereof.
Section 2.2 The Notes. The rate or rates of
interest accruing with respect to the Loans, and the terms of
repayment and maturity date of the Loans are contained in and
are evidenced by the Notes.
Section 2.3 Security for the Loans. As security for
the due and punctual payment and performance of the Notes the
Managing Agent shall hold the Deed of Trust and the Expansion
Financing Documents for the benefit of Banks, save and except
for those of the Expansion Financing Documents cancelled
pursuant to Section 2.4 of the Second Loan Agreement. Without
limitation on the foregoing, the Collateral Assignment of
Subleases, the Collateral Assignment of HRN Equipment Leases
and the Assignment of HRN Master Lease Rents shall continue in
full force and effect and shall be deemed amended so that they
secure the Notes referred to herein.
Section 2.4 Upfront Fee. Concurrently with the
execution and delivery of this A/R Loan Agreement, Borrower
shall pay Upfront Fees for each Bank to the Managing Agent for
the account of Banks. The Upfront Fees are earned as of the
Effective Date and are not refundable under any circumstance.
ARTICLE 3
CONDITIONS PRECEDENT
The effectiveness of this A/R Loan Agreement is
contingent upon Managing Agent first having received prior to
or simultaneously with the execution and delivery of this A/R
Loan Agreement, in each case in form and substance reasonably
satisfactory to Banks, the following:
Section 3.1 The Loan Documents. Original
counterparts of each of the Expansion Financing Documents
(other than those terminated in connection with the execution
and delivery of the Second Loan Agreement), and all
assignments, endorsements and other documents and instruments
necessary for the transfer of all right, title and interest in
and to the Expansion Financing Documents and the Loans shall
have been executed and delivered and, where necessary,
recorded, vesting the Managing Agent and the Banks with a 100%
interest in and to each of the Expansion Financing Documents
and the Loans.
Section 3.2 The Deed of Trust. The Second Amended
and Restated Deed of Trust duly executed by Borrower and HRN as
Trustor and Additional Trustor.
Section 3.3 Assignment and Assumption Agreement;
Assignment of Deed of Trust; UCC-2. The Assignment and
Assumption Agreement, an assignment of the Deed of Trust (as
amended prior to the date hereof) and a Uniform Commercial Code
Financing Statement Assignment executed by the Second Bank
Group in favor of the Managing Agent for the benefit of the
Banks.
Section 3.4 The Notes. A Note duly executed by
Borrower in favor of each Bank in a principal amount equal to
that Bank's Pro Rata Share of the Loans, to be delivered
against surrender of the Existing Notes to the Borrower marked
"Replaced by Notes issued pursuant to Second Amended and
Restated Loan Agreement."
Section 3.5 The HRN Master Lease. A certified and
true copy of the HRN Master Lease, executed by HRN and Borrower
together with all amendments thereto.
Section 3.6 HRN Master Lease Estoppel Certificate.
The HRN Master Lease Estoppel Certificate duly executed by the
respective parties thereto.
Section 3.7 Partnership Estoppel Certificate. An
estoppel certificate duly executed by Adamar and the Jaffe
Group on behalf of Borrower, in connection with Borrower's
Partnership Agreement to the effect that there are no material
and adverse defaults existing under the terms, conditions,
covenants and agreements in Borrower's Partnership Agreement,
and that all prior partnership agreements between Adamar and
the Jaffe Group and all amendments, modifications and
supplements thereto have been superseded by Borrower's
Partnership Agreement.
Section 3.8 Authority of Borrower and HRN. Evidence
of the corporate or other requisite authority of Borrower and
HRN to execute the documents, instruments, guaranties and
certificates required by them to be executed under the terms of
this A/R Loan Agreement.
Section 3.9 Opinion of Counsel. An opinion from
counsel(s) of Borrower, Adamar and HRN (hereinafter the
"Clients") dated as of the Effective Date, to the effect that
(i) each Client has the full power and requisite corporate or
other authority necessary for the execution, delivery and
performance of their respective obligations under the Second
Amended and Restated Deed of Trust, the A/R Loan Agreement, the
Notes and any other document, agreement, certificate or
instrument executed by them in connection with the A/R Loan
Agreement, (ii) this A/R Loan Agreement and the Second Amended
and Restated Deed of Trust and the Notes executed by a Client
is valid and binding upon such Client, and enforceable in
accordance with its terms except as such enforcement may be
limited by bankruptcy, reorganization and other laws of general
application relating to or affecting the enforcement of
creditors' rights and to general principles of equity
(regardless of whether enforcement is considered in a
proceeding in equity or at law), and also except that certain
provisions of the Second Amended and Restated Deed of Trust may
be unenforceable in whole or in part, but the inclusion of such
provisions does not affect the validity of the Second Amended
and Restated Deed of Trust, and the Loan Documents contain
adequate provisions for enforcing payment of all monetary
obligations of the Trustor secured by the Deed of Trust and for
the practical realization of the rights and benefits afforded
thereby, provided such enforcement is conducted in accordance
with the procedures established by applicable laws, (iii) each
Client has duly authorized the taking of any and all action
necessary to carry out and give effect to the transactions
contemplated to be performed on its part by this A/R Loan
Agreement and the Deed of Trust and any other document,
agreement certificate and instrument executed by it in
connection with the A/R Loan Agreement, (iv) the
representations and warranties of each Client in Section 4.2
are, to the best knowledge of such counsel, after due inquiry
and investigation, true and correct, (v) the Second Amended and
Restated Deed of Trust has been fully executed and delivered
and will, when recorded in the office of the County Recorder of
Clark County, Nevada, continue to secure the Notes and
Borrower's performance under the terms of this A/R Loan
Agreement, and (vi) the representations and warranties of each
Client in the first sentence of Section 4.6 are, to the best
knowledge of such counsel, after due inquiry and investigation,
true and correct.
Section 3.10 Title Insurance Indorsements. The
written commitment of the Title Company that it shall issue its
ALTA Lender's form 110.5 Indorsement in favor of the Managing
Agent for the benefit of the Banks with respect to the Title
Insurance Policy showing the Deed of Trust as having a priority
identical to the priority enjoyed by the Second Bank Group.
Section 3.11 Payment of Taxes. Affidavits, certifi-
cates, paid bills or other documents, evidencing that all past
and current real and personal property taxes and assessments
which are presently due and payable applicable to the Premises,
have been paid in full.
Section 3.12 Insurance. Original certificates of
insurance and loss-payable endorsements in favor of the
Managing Agent for the benefit of the Banks, required by
Section 5.10 hereof, accompanied by affidavits, certificates,
paid bills or other documents evidencing that all premium
payments are current.
Section 3.13 Reimbursement for Expenses and Fees.
Reimbursement of the Managing Agent by Borrower for all
reasonable fees and out-of-pocket expenses incurred by the
Managing Agent in connection with the A/R Loan Agreement,
including, but not limited to, escrow charges, title insurance
premiums, recording fees, attorney's fees, and all other like
expenses remaining unpaid as of the Effective Date.
Section 3.14 Borrower's Partnership Agreement. A
certified true copy of the Borrower's Partnership Agreement,
together with all amendments thereto.
Section 3.15 Borrower's Fictitious Business Name
Certificate. A certified true copy of the fictitious business
name certificate duly executed by Borrower and filed in the
office of the clerk of Clark County, Nevada.
Section 3.16 Partnership Resolution. Original
Partnership Resolution authorizing Adamar to execute all
documents to be executed pursuant to this A/R Loan Agreement on
behalf of Borrower which Partnership Resolution shall be signed
by Adamar and each member of the Jaffe Group.
Section 3.17 Corporate Resolution for Adamar.
Original Certificate of Corporate Resolution and Certificate of
Incumbency executed by the Secretary of Adamar and attested to
by its President, Vice President, or Treasurer authorizing
Adamar as one of the General Partners of Borrower to enter into
all documents and agreements to be executed by Borrower
pursuant to this A/R Loan Agreement and further authorizing and
empowering the officer or officers who will execute such
documents and agreements with the authority and power to
execute such documents and agreements on behalf of the
corporation.
Section 3.18 Corporate Documentation for HRN.
Original Certificate of Corporate Resolution and Certificate of
Incumbency executed by the Secretary of HRN and attested to by
its President, Vice President, or Treasurer authorizing HRN to
enter into all documents and agreements to be executed by HRN
pursuant to this A/R Loan Agreement and further authorizing and
empowering the officer or officers who will execute such
documents and agreements with the authority and power to
execute such documents and agreements on behalf of the
corporation.
Section 3.19 Financial Statements. Financial
Statements of Borrower and HRN for the last fiscal year or part
thereof, where applicable, together with a certificate from the
Controller or Treasurer of Adamar, on behalf of Borrower, and
from the Controller or Treasurer of HRN, all of which
certificates shall be to the effect that the financial
condition of Borrower and HRN has not materially adversely
changed since the date of the financial statements previously
given to Banks, except as disclosed to Banks in writing as of
the Effective Date.
Section 3.20 Jaffe Subordination Affirmation. Duly
executed original Jaffe Subordination Affirmation in a form for
recordation in the Clark County, Nevada, Official Records.
Section 3.21 Subordination Affirmation of HRN Master
Lease. Original HRN Master Lease Subordination Affirmation
duly executed by HRN and Borrower in a form for recordation in
the Clark County, Nevada, Official Records.
Section 3.22 Upfront Fee. Evidence that Borrower
has paid the Upfront Fee to the Managing Agent for the account
of the Banks.
Section 3.23 Amendments to Expansion Financing
Documents. Amendments in recordable form to the Collateral
Assignment of HRN Equipment Leases and the Collateral
Assignment of Subleases, the Collateral Assignment reflecting
their assignment to the Managing Agent for the benefit of the
Banks which are in form and substance acceptable to the
Managing Agent.
Section 3.24 Additional Documents. Such additional
documents, affidavits, certificates and opinions as Banks may
reasonably require to insure compliance with this A/R Loan
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
To induce the Managing Agent and Banks to enter into
this A/R Loan Agreement and to hold the Loans hereunder,
Borrower and HRN as set forth below, make the following
representations and warranties:
Section 4.1 Organization; Power and Authorization.
Borrower is a general partnership duly organized and validly
existing under the laws of the State of Nevada. Each of Adamar
and HRN is a corporation duly organized and validly existing
under the laws of the State of Nevada. Each of Borrower,
Adamar and HRN (i) is authorized to do business in the
jurisdictions in which its ownership of property or conduct of
business legally requires such authorization, (ii) has all
requisite power, authority and legal right to execute and
deliver any document, agreement or certificate to which it is a
party or by which it is bound in connection with the Loans, to
consummate the transactions and perform its obligations
hereunder and thereunder, and to own their respective
properties and assets and to carry on and conduct its business
as presently conducted or proposed to be conducted, and
(iii) has taken all necessary action to authorize the
execution, delivery and performance of this A/R Loan Agreement,
the Deed of Trust, and the other Loan Documents to which it is
a party or by which it is bound and to consummate the
transactions contemplated hereunder and thereunder.
Section 4.2 No Conflict With, Violation of or
Default Under Laws or Other Agreements. Neither the execution
and delivery of this A/R Loan Agreement, the Deed of Trust, the
Subordination Affirmations, or any other document, agreement,
certificate or instrument to which Borrower and/or HRN is a
party or by which they or either of them is bound in connection
with the Loans, nor the consummation of the transactions
contemplated hereunder or thereunder, or the compliance with or
performance of the terms and conditions herein or therein, is
prevented by, limited by, conflicts in any material respect
with, or will result in a material breach or violation of, or a
material default (with due notice or lapse of time or both)
under, or the creation or imposition of any lien, charge, or
encumbrance of any nature whatsoever upon any of its property
or assets by virtue of, the terms, conditions or provisions of
(i) the Borrower's Partnership Agreement, (ii) any indenture,
evidence of indebtedness, loan or financing agreement, or other
agreement or instrument of whatever nature to which it is a
party or by which it is bound, or (iii) any provision of any
existing law, rule, regulation, order, writ, injunction or
decree of any court or Governmental Authority to which it is
subject.
Section 4.3 Litigation. Except as disclosed to
Banks in writing prior to the Effective Date, to the best
knowledge of Borrower and HRN, after due inquiry and
investigation, there is no action, suit, proceeding, inquiry,
hearing or investigation pending or threatened, in any court of
law or in equity, or before any Governmental Authority, wherein
an unfavorable determination, decision, decree, ruling or
finding would (i) result in any material adverse change in the
Premises or in its business, financial condition, properties or
operations, (ii) materially adversely affect the transactions
contemplated by this A/R Loan Agreement and the other Loan
Documents and its ability to perform its obligations hereunder
and thereunder, or (iii) materially adversely affect the
validity or enforceability of this A/R Loan Agreement and the
other Loan Documents. For purposes of this Section 4.3, any
action, suit, proceeding, inquiry, hearing or investigation
involving monetary amounts in excess of One Million and No/100
Dollars ($1,000,000.00), which are not covered by adequate
insurance to the Requisite Banks' reasonable satisfaction,
shall be deemed to be material. To the best knowledge of
Borrower and HRN, after due inquiry and investigation, it is
not in violation of or default with respect to any order, writ,
injunction, decree or demand of any such court or Governmental
Authority.
Section 4.4 Agreements Legal, Binding, Valid and
Enforceable. This A/R Loan Agreement, the Notes, the Deed of
Trust, the Assignment of HRN Master Lease Rents, and all other
Loan Documents have been executed and delivered by Borrower
and/or HRN, respectively, in connection with the Loans and
constitute legal, valid and binding obligations of Borrower
and/or HRN, respectively, enforceable against Borrower and HRN,
respectively, in accordance with their respective terms, except
as such enforcement may be limited by bankruptcy,
reorganization and other laws of general application relating
to or affecting the enforcement of creditors' rights and to
general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law), and also
except that certain provisions of the Deed of Trust may be
unenforceable in whole or in part under the laws of the State
of Nevada, but the inclusion of such provisions does not affect
the validity of the Deed of Trust and the Deed of Trust
contains adequate provisions for enforcing payment of all
monetary obligations of the Trustor secured by the Deed of
Trust and for the practical realization of the rights and
benefits afforded thereby, provided such enforcement is
conducted in accordance with the procedures established by
applicable law.
Section 4.5 Information and Financial Data Accurate;
Financial Statements; No Adverse Change. All information and
financial and other data previously furnished by Borrower, HRN
and Adamar, respectively, in the financial statements referred
to in Section 3.19 hereof is true, correct and complete as of
the date thereof, and there has been no material adverse change
with respect thereto to the date of this A/R Loan Agreement
since the dates thereof. No information has been omitted which
would make the information previously furnished in such
financial statements to Banks misleading or incorrect in any
material respect to the date of this A/R Loan Agreement. Any
and all financial statements heretofore furnished to Banks by
Borrower, HRN and Adamar, respectively, pursuant to
Section 3.19 hereof, (i) present fairly the financial position
of the entity to which they relate as at their respective dates
and the results of operations and changes in financial position
for the periods to which they apply, and (ii) have been
prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods
involved. Since the date of the financial statements referred
to in this Section 4.5 to the date of this A/R Loan Agreement
there has been no material adverse change in the financial
condition, assets, liabilities, business or operations of
Borrower, HRN and Adamar, except as disclosed to Banks in
writing as of the Effective Date.
Section 4.6 Governmental Approvals. All timely
consents, approvals, orders or authorizations of, or
registrations, declarations or filings with any Governmental
Authority which may be required in connection with the valid
execution and delivery of this A/R Loan Agreement and the other
Loan Documents by Borrower, Adamar and/or HRN, and the
carry-out or performance of any of the transactions required or
contemplated hereunder, or thereunder, by Borrower and/or HRN,
have been obtained or accomplished and are in full force and
effect, or can be obtained by Borrower.
Section 4.7 Payment of Taxes. Borrower and HRN have
duly filed or caused to be filed all federal, state and local
tax reports and returns which are required to be filed by it
and has paid or made provisions for the payment of, all taxes,
assessments, fees and other governmental charges which have or
may have become due pursuant to said returns, or otherwise
pursuant to any assessment received by Borrower and/or HRN,
except such taxes, if any, as are being contested in good faith
by Borrower and/or HRN by appropriate proceedings and for which
Borrower and/or HRN have maintained adequate reserves with
Managing Agent for the payment thereof.
Section 4.8 Title to Properties. Borrower and HRN
each have good and marketable title to (i) all of its
properties and assets reflected in the financial statements
referred to in Section 3.19 hereof as owned by it (except those
properties and assets disposed of since the date of said
financial statements in the ordinary course of business or
those properties and assets which are no longer used or useful
in the conduct of its business), and (ii) all properties and
assets acquired by it subsequent to the date of the financial
statements referred to in Section 3.19 hereof.
Section 4.9 No Untrue Statements. All statements,
representations and warranties made by Borrower and/or HRN,
respectively, in this A/R Loan Agreement, any other Loan
Document and any other agreement, document certificate or
instrument furnished or to be furnished by Borrower and/or HRN,
respectively, to the Managing Agent or Banks under this A/R
Loan Agreement, (i) are true, correct and complete in all
material respects, at the time they were made and on and as of
the Effective Date, (ii) do not contain any untrue statement of
a material fact, and (iii) do not omit to state a material fact
necessary in order to make the information contained herein or
therein not misleading or incomplete. Borrower and HRN,
respectively, understand that all such statements,
representations and warranties shall be deemed to have been
relied upon by the Managing Agent and Banks as a material
inducement to hold the Loans.
Section 4.10 Brokerage Commissions. Except as
previously disclosed to Banks, no person is entitled to receive
any brokerage commission, finder's fee or similar fee or
payment in connection with the consummation of the transactions
contemplated by this A/R Loan Agreement. No brokerage or other
fee, commission or compensation is to be paid by the Managing
Agent or Banks with respect to the transactions contemplated
hereby, and Borrower agrees to indemnify Managing Agent and
Banks against any such claims for brokerage fees or commissions
and to pay all expenses including, without limitation,
reasonable attorney's fees incurred by Managing Agent or Banks
in connection with the defense of any action or proceeding
brought to collect any such brokerage fees or commissions.
Section 4.11 No Defaults. Neither HRN nor Borrower
is in violation of or in default with respect to any applicable
laws and/or regulations which materially and adversely affect
the Premises or the business, financial condition, property or
operations of the Hotel/Casino Operation. Neither HRN nor
Borrower is in violation or default (nor is there any waiver in
effect which, if not in effect, would result in a violation or
default) in any material and adverse respect under any
indenture, evidence of Indebtedness, loan or financing
agreement or other agreement or instrument of whatever nature
to which it is a party or by which it is bound (except for any
defaults previously brought to Banks' attention, for which
Borrower has received a waiver from Banks), a default under
which might have consequences that would materially adversely
affect the Premises or the business, financial condition,
properties or operations of the Hotel/Casino Operation.
Section 4.12 HRN Master Lease; Borrower's
Partnership Agreement; and Policies of Insurance. Each of the
copies of the HRN Master Lease, Borrower's Partnership
Agreement, and the Certificates of Insurance relating to the
Premises delivered to Managing Agent by Borrower (i) is a true,
correct and complete copy of the respective original thereof as
in effect on the date hereof, and no amendments or
modifications of any of said documents or instruments not
included in such copies have been made, and (ii) has not been
terminated and is in full force and effect. Neither HRN nor
Borrower is in default in the observance or performance of its
obligations under said documents and instruments, and each of
HRN and Borrower has done all things required to be done as of
the date of this A/R Loan Agreement to keep unimpaired their
respective rights thereunder.
Section 4.13 Tradenames and Servicemarks. All
material tradenames, trademarks and servicemarks used in
connection with the Premises and the Hotel/Casino Operation are
described on Exhibit "E" hereto.
ARTICLE 5
COVENANTS OF BORROWER AND HRN
To induce Managing Agent and Banks to enter into this
A/R Loan Agreement and to hold the Loans hereunder, Borrower
covenants to Managing Agent and Banks as follows and to further
induce Managing Agent and Banks to enter into this A/R Loan
Agreement, HRN joins in such covenants where specifically set
forth hereinbelow:
Section 5.1 FF&E. Borrower and/or HRN have
furnished and equipped the Premises with the FF&E. All FF&E
that is purchased and installed in the Premises is owned by
Borrower or HRN free and clear of any liens, encumbrances or
claims, other than (i) Permitted Encumbrances and (ii) liens
created by the Deed of Trust and the other Loan Documents.
Neither Borrower nor HRN shall execute or be parties to any
leases or purchase agreements of FF&E entered into after the
date of execution of this A/R Loan Agreement for FF&E having a
deferred principal balance at any time in the aggregate in
excess of Seven Million and No/100 Dollars ($7,000,000.00), it
being understood that, for purposes of this limitation, the
stipulated loss value of any FF&E that is leased by Borrower or
HRN shall constitute the deferred principal balance
attributable to such leased FF&E. If Borrower or HRN should
sell, transfer, convey or otherwise dispose of any FF&E and not
replace such FF&E with purchased items of equivalent value and
utility or replace said FF&E with leased FF&E of equivalent
value and utility, Borrower shall be required to immediately
reduce the outstanding principal balance of the Loans by the
amount of the Capital Proceeds of the FF&E so disposed of,
subject, however, to the right of Managing Agent to verify to
its reasonable satisfaction the amount of said Capital
Proceeds; in the event the Requisite Banks and Borrower do not
agree as to the value of the purchased FF&E disposed of and the
amount of the Capital Proceeds, then Borrower, at its sole cost
and expense, shall obtain a written appraisal from an appraiser
reasonably satisfactory to the Requisite Banks, setting forth
said values and amounts, and Banks agree to accept the results
of said appraisal.
Section 5.2 Hotel/Casino Operator. At all times
during the life of the Loans, the Hotel/Casino Operation shall
be conducted by HRN or such other Hotel/Casino Operator as may
be first approved in writing by the Requisite Banks, which
approval shall not unreasonably be withheld. Provided,
however, that the Requisite Banks may, in their sole and
absolute discretion, require as a condition of their approval
of any successor Hotel/Casino Operator, that such successor
Hotel/Casino Operator assume each duty, responsibility and
obligation of HRN hereunder and under each of the Loan
Documents and the Deed of Trust and execute any documents and
instruments as may be necessary, in the reasonable opinion of
the Requisite Banks, to assure Banks that their position with
respect to the Premises, the Hotel/Casino Operation and the
Collateral remains as presently structured and is not adversely
affected.
Section 5.3 Permits; Licenses and Legal
Requirements. Borrower and the Hotel/Casino Operator shall
comply with and keep in full force and effect, as and when
required, all permits, licenses and approvals obtained from any
Governmental Authorities which are required for the operation
and use of the Premises as a first class hotel/casino facility.
Borrower shall comply with all material existing and future
laws, rules, regulations, orders, ordinances and requirements
of all Governmental Authorities, and with all recorded
restrictions affecting the Premises.
Section 5.4 Protection Against Lien Claims.
Borrower shall promptly pay and discharge all claims and liens
for labor done and materials and services supplied and
furnished in connection with the Premises in accordance with
this Section 5.4. If any mechanic's lien or materialman's lien
for an aggregate amount in excess of One Hundred Thousand and
No/100 Dollars ($100,000.00) shall be recorded, filed or
suffered to exist against the Premises or any interest therein
by reason of work, labor, services or materials supplied,
furnished or claimed to have been supplied and furnished in
connection with the Premises, said lien or claim shall be paid,
released and discharged of record within sixty (60) days after
the filing or recording thereof, or Borrower shall have caused
said mechanic's lien or materialman's lien to be released of
record pursuant to the provisions set forth in the Nevada
Revised Statutes 108.2413, et. seq., within ninety (90) days of
the date of the recordation of the mechanic's lien or
materialman's lien in the office of the County Recorder of
Clark County, Nevada. If any mechanic's lien or materialman's
lien for an aggregate amount of One Hundred Thousand and No/100
Dollars ($100,000.00) or less shall be recorded or filed
against the Premises, Borrower and/or HRN shall have the right
to contest such lien or liens in good faith by appropriate
proceedings.
Section 5.5 Preservation of Partnership Status. At
all times throughout the term of the Loans, Borrower shall
continue to be a Nevada general partnership.
Section 5.6 No Change in Character of Business. At
all times throughout the term of the Loans, the Premises shall
be operated as a first class hotel and casino facility in the
manner and style as presently conducted.
Section 5.7 Preservation and Maintenance of
Properties and Assets. At all times throughout the term of the
Loans, (i) Borrower and HRN, or other Hotel/Casino Operator,
shall operate, maintain and preserve all rights, privileges,
franchises, licenses and other properties and assets necessary
to conduct the Hotel/Casino Operation at the Premises, in
accordance with all applicable governmental laws, ordinances,
approvals, rules and regulations and requirements, including,
but not limited to, zoning, sanitary, pollution, building,
environmental and safety laws and ordinances, rules and
regulations promulgated thereunder, and (ii) Borrower and HRN,
or other Hotel/Casino Operator, shall not consolidate with,
remove, demolish, materially alter, discontinue the use of,
sell, transfer, assign, hypothecate or otherwise dispose of to
any Person, any part of the Premises or the Collateral
necessary for the continuance of the Hotel/Casino Operation at
the Premises, as presently conducted, other than in the normal
course of business or as otherwise permitted pursuant to this
A/R Loan Agreement with respect to FF&E.
Section 5.8 Repair of Properties and Assets. At all
times throughout the term of the Loans, Borrower and HRN, or
other Hotel/Casino Operator shall, at their own cost and
expense, (i) maintain, preserve and keep in a manner consistent
with the highest hotel and gaming casino operating practices
applicable to a first class hotel/casino operation, the
Premises, the Hotel/Casino Operation, the Collateral and all
FF&E owned or leased by Borrower and/or HRN, or other
Hotel/Casino Operator, in good and substantial repair, working
order and condition, ordinary wear and tear excepted, (ii) from
time to time, make or cause to be made, all necessary and
proper repairs, replacements, renewals, improvements and
betterments thereto, and (iii) from time to time, make such
substitutions, additions, modifications and improvements as may
be necessary and as shall not impair the structural integrity,
operating efficiency and economic value of the Premises or the
Collateral. All alterations, replacements, renewals, or
additions made pursuant to this Section 5.8 shall become and
constitute a part of said assets and property and subject,
inter alia, to the provisions of Section 5.1 and subject to the
lien of the Deed of Trust.
Section 5.9 Financial Statements; Reports and Books
and Records.
(i) At all times throughout the term of
the Loans, Borrower and HRN shall keep and maintain
complete and accurate books and records in accordance with
generally accepted accounting principles, consistently
applied. Borrower and HRN shall permit Banks and any
authorized representatives of Managing Agent and of Banks
to have reasonable access to and to inspect, examine and
make copies of the books and records, any and all
accounts, data and other documents of Borrower and HRN at
all reasonable times upon the giving of reasonable notice
of such intent. In addition, in the event that any
default, adverse litigation or material adverse change
occurs in the financial condition of Borrower and/or HRN,
then Borrower and/or HRN shall promptly notify Managing
Agent and Banks of such occurrence.
(ii) Company prepared unaudited financial
statements of Borrower, Adamar, and HRN shall be submitted
to Managing Agent and each Bank within 60 days after the
end of each fiscal quarter. Annual unaudited financial
statements of Borrower shall be submitted to Managing
Agent and each Bank by May 1st of each calendar year.
Annual audited financial statements of Adamar, and HRN,
together with all consolidating statements, shall be
submitted by Borrower and HRN to Managing Agent and each
Bank by May 1st of each calendar year which audited
statements shall be certified by Coopers & Lybrand or any
other firm of independent certified public accountants
satisfactory to the Requisite Banks. A copy of the annual
audited financial statements in form and content as
required by the State Gaming Control Board
(NGC-GCB Reg. 6) shall be forwarded to each Bank within
fifteen (15) days of the date such reports are submitted
to the Gaming Control Board, together with a copy of the
auditor's letter to management accompanying such reports,
if any. Borrower, Adamar and HRN shall supply such
additional information and detail as to any item or items
contained on any such statement that the Requisite Banks
may require. All such information will be prepared in
accordance with generally accepted accounting principles.
(iii) Throughout the term of the Loans,
Borrower and HRN shall furnish to Managing Agent and Banks
any other financial information reasonably requested by
any Bank.
Section 5.10 Insurance. Borrower shall obtain, or
cause to be obtained, and shall maintain or cause to be
maintained, at all times throughout the term of the Loans, at
its own cost and expense, and shall deposit with Managing Agent
for the benefit of Banks:
(a) Policies or certified copies of policies of
fire, earthquake (to the extent earthquake insurance
is available at commercially reasonable rates and is
generally maintained by hotels/casinos located in Las
Vegas, Nevada), flood (if available through the
Federal Emergency Management Act) and hazard
insurance with extended coverage, reasonably
acceptable to the Requisite Banks, issued by a
company or companies authorized to issue such
insurance within the State of Nevada, insuring all
buildings, improvements and contents in an amount
equal to all sums owing Banks or the maximum full
insurable value of such buildings, improvements,
furnishings, fixtures and equipment, whichever is
less, (such policies shall not contain a co-insurance
provision whereby Borrower in the event of loss
becomes a co-insurer), with property damage, public
liability and such other insurance coverage as the
Requisite Banks may reasonably require. All policies
shall provide that the insurer shall notify the
Managing Agent in writing not less than twenty (20)
days prior to the cancellation of any such policy.
The property damage and public liability insurance
policies shall name Managing Agent as additional
insured and shall contain minimum limits of coverage
reasonably acceptable to the Requisite Banks.
Certified copies of policies, or certificates
thereof, shall be delivered to and held by the
Managing Agent for the benefit of Banks and shall
contain a loss payable endorsement naming the
Managing Agent as additional loss payee.
Section 5.11 Taxes. Throughout the term of the
Loans, Borrower and HRN shall prepare and timely file all
federal, state and local tax returns required to be filed by
it, and Borrower and HRN shall promptly pay and discharge all
taxes, assessments and other governmental charges or levies
imposed upon it, or in respect of any of its property and
assets except such taxes, if any, as are being contested in
good faith by Borrower or HRN as provided in Section 4.7
herein.
Section 5.12 Permitted Encumbrances Only. At all
times throughout the term of the Loans, neither HRN nor
Borrower shall create, incur, assume or suffer to exist any
mortgage, deed of trust, pledge, lien, security interest,
encumbrance, attachment, levy, distraint, or other judicial
process and burdens of every kind and nature except the
Permitted Encumbrances on or with respect to the Collateral and
any other assets of HRN or Borrower, and except (a) with
respect to matters described in Sections 5.4 and 5.11 and such
items as are being contested in the manner described therein
and (b) with respect to any other items, if any, as are being
contested in good faith by appropriate proceedings and for
which Borrower and/or HRN have maintained adequate reserves
with Managing Agent for the payment thereof.
Section 5.13 Advances. At any time during the term
of the Loans if Borrower or HRN should fail (i) to perform or
observe, or (ii) to cause to be performed or observed, any
covenant or obligation of Borrower or HRN under this A/R Loan
Agreement, the Deed of Trust or any of the other Loan
Documents, then the Managing Agent, upon the giving of
reasonable notice may, and at the request of the Requisite
Banks shall (but shall not otherwise be under any obligation
to) take such steps as are necessary to remedy any such
non-performance or non-observance and provide for payment
thereof. To the extent that Borrower or HRN fail to
immediately reimburse Managing Agent therefor, each Bank shall
immediately reimburse Managing Agent for all amounts advanced
under this Section in accordance with its Pro Rata Share
thereof. All amounts advanced by the Managing Agent or the
Banks pursuant to this Section 5.13 shall become an additional
obligation of Borrower to Managing Agent and Banks secured by
the Deed of Trust and the other Loan Documents and shall become
due and payable by Borrower on the next interest payment date,
together with interest thereon at a rate per annum equal to the
default rate as set forth in each of the Notes (such interest
to be calculated from the date of such advancement to the date
of payment thereof by Borrower).
Section 5.14 Further Assurances. Managing Agent,
Banks and Borrower shall, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged
and delivered, such supplements hereto and such further
instruments as may reasonably be required for carrying out the
intention of or facilitating the performance of this A/R Loan
Agreement.
Section 5.15 Indemnification. Borrower agrees to
and does hereby indemnify, protect, defend and save harmless
Managing Agent, Banks and their trustees, officers, employees,
agents, attorneys and shareholders from and against any and all
losses, damages, expenses or liabilities of any kind or nature
from any suits, claims, or demands, including reasonable
counsel fees (including the allocated costs of any internal
counsel to the Managing Agent and Banks) incurred in
investigating or defending such claim, suffered by any of them
and caused by, relating to, arising out of, resulting from, or
in any way connected with this A/R Loan Agreement and the
transactions contemplated herein, or on account of any act or
omission to act by Managing Agent or Banks in connection with
this A/R Loan Agreement, unless caused by (i) the negligence or
willful misconduct of Managing Agent or Banks, or (ii) the
breach of this A/R Loan Agreement by Managing Agent or Banks.
In case any action shall be brought against Managing Agent or
Banks based upon any of the above and in respect to which
indemnity may be sought against Borrower, Managing Agent or the
relevant Banks shall promptly notify Borrower in writing, and
Borrower shall assume the defense thereof, including the
employment of counsel selected by Borrower and reasonably
satisfactory to Managing Agent and or the relevant Banks, the
payment of all costs and expenses and the right to negotiate
and consent to settlement. Upon reasonable determination made
by Managing Agent or the relevant Banks, the Managing Agent and
such Banks shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, and
Borrower agrees to pay reasonable attorneys fees of such
separate counsel (including the allocated costs of any internal
counsel to the Managing Agent or any Bank), whether such
separate counsel be employed due to a conflict of interest or
otherwise. Borrower shall not be liable for any settlement of
any such action effected without its consent, but if settled
with Borrower's consent, or if there be a final judgment for
the claimant in any such action, Borrower agrees to indemnify
and save harmless Managing Agent and Banks from and against any
loss or liability by reason of such settlement or judgment.
The provisions of this Section 5.15 shall survive the
termination of this A/R Loan Agreement and the repayment of the
Loans.
Section 5.16 Inspection of the Premises. At all
times during the term of the Loans, Borrower and/or HRN shall
provide or cause to be provided to Managing Agent and Banks and
any authorized representatives of Managing Agent or Banks,
accompanied by representatives of Borrower, the reasonable
right of entry and free access to the Premises to inspect same
on reasonable prior notice to Borrower.
Section 5.17 Compliance With Documents. Borrower
shall comply with each and every term, condition and agreement
contained in the Loan Documents.
Section 5.18 Suits or Actions Affecting Borrower.
Throughout the term of the Loans, Borrower shall promptly
advise Managing Agent in writing of (i) any claims, proceedings
or disputes (whether or not purportedly on behalf of Borrower)
against or, to the actual knowledge of Borrower, threatened or
affecting Borrower which, if adversely determined, would have a
material adverse effect on the Premises, the Hotel/Casino
Operation or the business, operations, properties or financial
conditions of Borrower, (ii) any material labor controversy
resulting in or threatening to result in a strike against the
Premises, or (iii) any proposal by any Governmental Authority
to acquire any of the Premises or Collateral. For purposes of
this Section 5.18, any claims, proceedings or disputes
involving monetary amounts in excess of One Million and No/100
Dollars ($1,000,000.00), which are not covered by adequate
insurance to the Requisite Banks' reasonable satisfaction,
shall be deemed to be material.
Section 5.19 Borrower's Partnership Agreement and
HRN Master Lease. Neither the Borrower's Partnership Agreement
nor the HRN Master Lease may be further amended, changed,
revised or modified in any material manner without the prior
written consent of the Requisite Banks, which consent shall not
be unreasonably withheld. Borrower shall promptly advise the
Managing Agent of and provide the Managing Agent with a copy of
all non-material amendments, changes, revisions and/or
modifications to the Borrower's Partnership Agreement and the
HRN Master Lease.
Section 5.20 Notice to State Gaming Control Board.
Borrower shall make or cause to be made all required reports
and disclosures to the Nevada State Gaming Control Board,
including, but not limited to reporting this Loan transaction
within thirty (30) days of the Effective Date as required by
Regulation 8.130(2) of the Regulations of Nevada Gaming
Commission and State Gaming Control Board.
Section 5.21 Matters Affecting HRN Master Lease.
Notwithstanding any provisions of the Assignment of HRN Master
Lease Rents to the contrary, Borrower will not, without the
written consent of the Requisite Banks, which consent shall not
be unreasonably withheld or delayed:
(a) Materially amend or modify the HRN Master
Lease;
(b) Waive any material default under or breach
of the HRN Master Lease or modification of the HRN Master
Lease;
(c) Give any consent, waiver or approval which
would materially impair Borrower's rights or interest in
the HRN Master Lease.
Borrower will promptly notify the Managing Agent of the
occurrence of any default under the HRN Master Lease and will
not, without the prior written consent of the Requisite Banks,
which consent will not be unreasonably withheld or delayed so
long as Borrower has complied with Section 5.2 of this A/R Loan
Agreement, commence any summary proceeding or other action or
proceeding to recover possession of the premises leased under
the HRN Master lease. The foregoing provision shall control
over any conflicting provision of the Collateral Assignment of
HRN Master Lease Rents to the contrary.
Section 5.22 Matters Affecting HRN Equipment Leases.
Notwithstanding any provision of the Collateral Assignment of
HRN Equipment Leases to the contrary, HRN will not, without the
prior written consent of the Requisite Banks, which consent
shall not be unreasonably withheld or delayed with respect to
the FF&E Leases:
(a) Cancel or terminate or consent to any
cancellation, termination or surrender or permit any event
to occur which would entitle any lessor to terminate or
cancel its FF&E Leases except for any cancellation or
termination caused by the default of the lessor
thereunder;
(b) Amend or modify any FF&E Leases in any
material respect affecting the operation of the Real
Property as a first-class hotel/casino operation;
(c) Waive any default under or breach of any
FF&E Leases except for any waiver that will not result in
any material adverse effect on the operation of the Real
Property as a first-class hotel/casino operation;
(d) Give any consent, waiver or approval which
would impair HRN's interest in any FF&E Leases.
The foregoing provisions of this Section 5.22 shall control
over any conflicting provision of the Collateral Assignment of
HRN Equipment Leases.
Section 5.23 Matters Affecting Subleases. Notwith-
standing any provision of the Collateral Assignment of
Subleases to the contrary, HRN will not, without the prior
written consent of the Requisite Banks, which consent shall not
be unreasonably withheld or delayed, with respect to the
Subleases described in such assignment (the "Leases"):
(a) Cancel or terminate or consent to any
cancellation, termination or surrender or permit any event
to occur which would entitle any lessee to terminate or
cancel its Lease except for any cancellation or
termination caused by the default of the lessee
thereunder;
(b) Amend or modify any Leases in any material
respect affecting the operation of the Real Property as a
first-class hotel/casino operation;
(c) Waiver any default under or breach of any
Leases except for any waiver that will not result in any
material adverse effect on the operation of the Real
Property as a first-class hotel/casino operation;
(d) Give any consent, waiver or approval which
would impair HRN's interest in any Leases;
The foregoing provisions of this Section 5.23 shall control
over any conflicting provisions of the Collateral Assignment of
Subleases.
Section 5.24 HRN Master Lease. Notwithstanding any
provision of the Loan Documents to the contrary, except with
respect to the assignment of rents set forth in the Assignment
of HRN Master Lease Rents and the assignment of rents clause
contained in the Deed of Trust, nothing contained in the Loan
Documents shall be deemed to be an assignment, transfer, or
conveyance of, or to otherwise encumber, the HRN Master Lease
or any guaranties or security deposits now or hereafter held in
connection therewith, in favor of Managing Agent or Banks.
Provided, however, that nothing herein contained shall be
deemed to modify or affect the subordination of the HRN Master
Lease to the Deed of Trust in favor of Managing Agent and Banks
as provided in the Subordination of Lease Agreement recorded
November 20, 1984 as Instrument No. 1983547, Clark County,
Official Records and as further provided in the HRN Master
Lease Subordination Affirmation executed concurrently herewith,
it being specifically understood and agreed by and among
Borrower, HRN, Managing Agent and Banks that at all times
during the life of the Loans, the HRN Master Lease shall be and
remain subordinated and junior to the lien of the Deed of
Trust.
ARTICLE 6
EVENTS OF DEFAULT
Section 6.1 Events of Default. The occurrence of
any of the following events and the passage of any applicable
notice and cure periods shall constitute an Event of Default
hereunder:
(i) Any representation or warranty made by
Borrower and/or HRN pursuant to or in connection with this
A/R Loan Agreement, the Deed of Trust, the Notes or any
other Loan Document or in any report, certificate,
financial statement or other writing furnished by Borrower
or HRN in connection herewith, shall prove to be false,
incorrect or misleading in any substantial and material
adverse aspect as of the date when made;
(ii) Borrower shall have defaulted in the
payment of any installment of principal and/or interest on
the Notes, or either of them, when due, and such default
shall have remained uncured for a period of ten (10) days
after written notice thereof to Borrower from Managing
Agent;
(iii) Borrower shall have defaulted in the
payment of any late charge for a period of five (5) days
after written notice thereof to Borrower from Managing
Agent;
(iv) Borrower and/or HRN shall fail to
observe or perform any term, covenant, condition or
promise contained in this A/R Loan Agreement, the Notes,
the Deed of Trust or any other Loan Document and such
failure continues for a period of more than thirty (30)
days after notice by Managing Agent of such failure;
(v) Borrower shall commence a voluntary
case or other proceeding seeking liquidation,
reorganization or other relief with respect to it or its
respective debts under the Bankruptcy Code or any
bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official, for any substantial part of its property, or
shall consent to any such relief or to the appointment or
taking possession by any such official in any involuntary
case or other proceeding commenced against it.
(vi) An involuntary case or other
proceeding shall be commenced against Borrower seeking
liquidation, reorganization or other relief with respect
to itself or its debts under the Bankruptcy Code or any
bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official, for any substantial part of its property, and
such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days.
(vii Borrower makes an assignment for the
benefit of its creditors, or admits in writing its
inability to pay its debts generally as they become due.
Section 6.2 Default Remedies. Upon the occurrence
of any Event of Default, the Managing Agent may declare the
unpaid balance of the Notes, together with the interest
thereon, to be fully due and payable, and the Managing Agent
may exercise any or all of the following remedies:
(i) Declare all outstanding unpaid
indebtedness together with all accrued interest thereon
immediately due and payable without presentation, demand,
protest or notice of any kind.
(ii) Enter upon and take possession of the
Premises.
(iii) Employ watchmen at Borrower's expense
to protect the Premises, from depredation or injury.
(iv) For the purpose of carrying out this
section and exercising these rights, powers and
privileges, Borrower hereby irrevocably constitutes and
appoints Managing Agent as its true and lawful
attorney-in-fact to execute, acknowledge and deliver any
instruments and do and perform any acts such as are
referred to in this paragraph in the name and on behalf of
Borrower.
(v) Any and all remedies available to
Managing Agent or Banks under the Deed of Trust and the
other Loan Documents.
(vi) Any other remedies available to
Managing Agent or Banks at law or in equity, including
requesting the appointment of a receiver to perform any
acts required of Borrower under this A/R Loan Agreement,
and Borrower hereby specifically consents to any such
request by the Managing Agent on behalf of Banks.
(vii) Through Managing Agent, Banks may
exercise one or more of their remedies simultaneously and
all their remedies are nonexclusive and cumulative.
Managing Agent and Banks shall not be required to pursue
or exhaust any collateral or remedy before pursuing any
other collateral or remedy.
(viii) Managing Agent's or Banks' failure to
exercise any remedy for a particular default shall not be
deemed a waiver of (a) such remedy, nor their rights to
exercise any other remedy for that default, nor (b) their
right to exercise that remedy for any subsequent default.
Each of the rights and remedies of Managing Agent and
Banks under this Section shall be exercised by the Managing
Agent acting with the consent of and at the direction of the
Requisite Banks.
Section 6.3 Application of Proceeds. All payments
and proceeds received and all amounts held or realized from the
sale or other disposition of the Collateral shall be applied in
the following order of priority:
(i) First, to the payment of all fees,
costs and expenses (including reasonable attorney's fees
and expenses) incurred by Managing Agent and Banks, their
agents or representatives in connection with the
realization upon any of said Collateral;
(ii) Next, to the payment in full of the
Notes and other amounts due under this A/R Loan Agreement,
the Deed of Trust and the other Loan Documents; and
(iii) Next, the balance, if any, of such
payments, proceeds, or amounts to Borrower or, if
otherwise determined by a court of competent jurisdiction,
to whomever may be entitled thereto.
Section 6.4 Notices. In order to entitle Managing
Agent and Banks to exercise any remedy available hereunder, it
shall not be necessary for Managing Agent or Banks to give any
notice, other than such notice as may be required expressly
herein.
Section 6.5 Agreement to Pay Attorneys' Fees and
Expenses. Upon the occurrence of an Event of Default, as a
result of which Managing Agent or Banks shall require and
employ attorneys or incur other expenses for the collection of
payments due or to become due or the enforcement or performance
or observance of any obligation or agreement on the part of
Borrower and/or HRN contained herein, Borrower and/or HRN
shall, on demand, pay to Managing Agent and Banks the
reasonable fees of such attorneys and such other expenses so
incurred by Managing Agent and Banks.
Section 6.6 No Additional Waiver Implied by One
Waiver. In the event any agreement contained in this A/R Loan
Agreement should be breached by either party and thereafter
waived by the other party, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive
any other breach hereunder.
Section 6.7 Licensing of Managing Agent and Banks.
If Borrower shall be in default hereunder or under the Notes or
Deed of Trust, and it shall become necessary, or in the opinion
of the Requisite Banks advisable, for Managing Agent or one or
more Banks to become licensed under the provisions of the laws
of the State of Nevada, or rules and regulations adopted
pursuant thereto, as a condition to the receiving the benefit
of any Collateral encumbered by the Deed of Trust for the
benefit of Managing Agent and Banks, Borrower does hereby give
its consent to the granting of such license or licenses and
agrees to execute such further documents as may be required in
connection with the evidencing of such consent.
Section 6.8 Exercise of Rights Subject to Applicable
Law. All rights, remedies and powers provided by this
Article 6 may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of the laws
of the State of Nevada and all of the provisions of this
Article 6 are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be
limited to the extent necessary so that they will not render
this A/R Loan Agreement invalid, unenforceable or not entitled
to be recorded or filed under the provisions of any applicable
law.
Section 6.9 Discontinuance of Proceedings. In case
Managing Agent or Banks shall have proceeded to enforce any
right, power or remedy under this A/R Loan Agreement, the
Notes, the Deed of Trust or any other Loan Document by
foreclosure, entry or otherwise, and such proceedings shall
have been discontinued or abandoned for any reason or shall
have been determined adversely to Managing Agent or Banks, then
and in every such case Borrower and Lenders shall be restored
to their former positions and rights hereunder with respect to
the Collateral, and all rights, remedies and power of Managing
Agent and Banks shall continue as if no such proceedings had
been taken, subject to any binding rule by the applicable court
or other tribunal in any such proceeding.
ARTICLE R
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 7.1 No Abatement of Payments. If all or any
part of the Collateral shall be materially damaged or
destroyed, or if title to or the temporary use of the whole or
any part of any of the Collateral shall be taken or condemned
by a competent authority for any public use or purpose, there
shall be no abatement or reduction in the amounts payable by
Borrower hereunder or under the Notes, and Borrower shall
continue to be obligated to make such payments.
Section 7.2 Distribution of Capital Proceeds Upon
Occurrence of Fire, Casualty, or Condemnation. All monies
received from fire, earthquake, flood and hazard extended
insurance policies covering any of the Collateral or from
condemnation or similar actions in regard to the Collateral,
shall be paid directly to the Managing Agent for the account of
Banks.
(i) In the event that the amount paid
to Managing Agent pursuant to this Section is equal
to or less than Five Hundred Thousand and No/100
Dollars ($500,000.00), the Managing Agent shall remit
such proceeds to Borrower unless an Event of Default
shall have occurred and then be continuing.
(ii) In the event the amount paid to
Managing Agent pursuant to this Section exceeds Fifty
Million and No/100 Dollars ($50,000,000.00), then
such amount may be paid by Managing Agent to Banks
for application to principal installments payable
with respect to the Loans in the inverse order of
their maturity, or at the option of the Requisite
Banks, the entire amount so collected, or any part
thereof, may be released to Borrower for repair or
replacement of the property destroyed or condemned or
to reimburse Borrower for the costs of such repair or
replacement incurred prior to the date of such
release.
(iii) In the event the amount paid to
Managing Agent pursuant to this Section is greater
than Five Hundred Thousand and No/100 Dollars
($500,000.00) but less than Fifty Million and No/100
Dollars ($50,000,000.00), then such amount may be
paid by Managing Agent to Banks for application to
the principal installments payable with respect to
the Loans in the inverse order of their maturity, or
at the option of Borrower, unless an Event of Default
has occurred hereunder and is then continuing, in
which case at the option of the Requisite Banks, the
entire amount so collected, or any part thereof, may
be released to Borrower in monthly or more frequent
draws (as the parties may agree) for repair or
replacement of the property destroyed or condemned or
to reimburse Borrower for the costs of such repair or
replacement incurred prior to the date of such
release.
In the event the Requisite Banks elect to, or are required to,
release all or a portion of the collected funds to Borrower for
such repair or replacement of the property destroyed or
condemned, such release of funds shall be made in accordance
with the following terms and conditions:
(a) The repairs, replacements and rebuilding
shall be made in accordance with the plans and
specifications reasonably acceptable to the Requisite
Banks and all applicable laws, ordinances, rules,
regulations and requirements of Governmental Authorities;
(b) Borrower shall provide Managing Agent and
Banks with a detailed estimate of the costs of such
repairs or restorations;
(c) Before commencing any such work, Borrower
or HRN shall, at its own cost and expense, furnish
Managing Agent and Banks with appropriate endorsements, if
needed, to the fire insurance policy which Borrower is
then presently maintaining, to cover all of the risks
during the course of such work;
(d) Such work shall be commenced by Borrower or
HRN within one hundred twenty (120) days after (i) settle-
ment shall have been made with the insurance companies,
and (ii) all the necessary governmental approvals shall
have been obtained, and such work shall be completed
within a reasonable time, free and clear of all liens and
encumbrances so as not to interfere with the lien of the
Deed of Trust; and
(e) Disbursements of such insurance proceeds
shall be made in the customary manner used by Banks for
the disbursement of construction loans;
(f) That in the event the insurance proceeds
are inadequate to repair or replace the property destroyed
or condemned and the Requisite Banks elect to, or are
required to release all or a portion of the funds
collected for such repair or replacement, Borrower agrees
to deposit with Managing Agent sufficient funds to cover
the difference between the costs of repair or replacement
and the funds released by Managing Agent and Banks to
Borrower for such repair or replacement of the property
destroyed;
ARTICLE 8
GENERAL CONDITIONS
The following conditions shall be applicable
throughout the terms of this A/R Loan Agreement:
Section 8.1 Failure to Exercise Rights. Nothing
herein contained shall impose upon Managing Agent or Banks any
obligation to enforce any terms, covenants or conditions
contained herein. Failure of Managing Agent or Banks, in any
one or more instances, to insist upon strict performance by
Borrower of any terms, covenants or conditions of this A/R Loan
Agreement, the Deed of Trust or the other Loan Documents, shall
not be considered or taken as a waiver or relinquishment by
Managing Agent or Banks of their right to insist upon and to
enforce in the future, by injunction or other appropriate legal
or equitable remedy, strict compliance by Borrower with all the
terms, covenants and conditions of this A/R Loan Agreement, the
Deed of Trust and the other Loan Documents. The consent of
Managing Agent or Banks to any act or omission by Borrower
shall not be construed to be a consent to any other or
subsequent act or omission or to waive the requirement for
Managing Agent's or Banks' consent to be obtained in any future
or other instance.
Section 8.2 Successors and Assigns. All of the
terms, covenants, warranties and conditions contained in this
A/R Loan Agreement shall be binding upon and inure to the sole
and exclusive benefit of, the parties hereto and their
respective successors and assigns.
Section 8.3 Notices. Unless otherwise indicated
differently, all notices, payments, requests, reports,
information or demand which any party hereto may desire or may
be required to give to any other party hereunder, shall be in
writing and shall be personally delivered or sent by telegram,
telex, telecopies or first-class certified or registered United
States mail, postage prepaid, return receipt requested, and
sent to the party at its address appearing below or such other
address as any party shall hereafter inform the other party
hereto by written notice given as aforesaid; provided, however,
notices to Managing Agent requesting disbursements of the Loan
proceeds need not be sent by certified United States mail:
If to Borrower,
HRN or Adamar: c/o Aztar Corporation
2390 E. Camelback, Suite 400
Phoenix, Arizona 85016
Attention: Treasury Dept.
With a copy to: Tropicana Hotel/Casino
3801 Las Vegas Blvd. South
Las Vegas, Nevada 89193
Attn: V.P. Finance
With a copy to: Jaffe Group
c/o Eugene Jaffe
530 River Oaks West
Calumet City, Illinois 60409
With a copy to: Sugar, Friedberg & Felsenthal
30 North LaSalle Street
Suite 2600
Chicago, Illinois 60602
Attention: Jonathan L.
Mills, Esq.
With a copy to: Latham & Watkins
633 West Fifth Street
Los Angeles, California 90071
Attention: Hendrik de Jong, Esq.
With a copy to: Snell & Wilmer
One Arizona
Phoenix, Arizona 85004
Attention: Dave Sprentall
If to Administrative
Agent or to any Bank:
Bank of America National Trust
and Savings Association, as
Managing Agent
Global Agency #5596
1455 Market Street, 13th Floor
San Francisco, California 94103
Attn: Peggy A. Fujimoto
Telecopier: (415) 622-4894
Telephone: (415) 622-4835
With a copy to: that Bank at its address set
forth on the signature pages
hereto
All notices, payments, requests, reports, information or
demands so given shall be deemed effective upon receipt or, if
mailed, upon receipt or the expiration of the third (3rd) day
following the date of mailing, whichever occurs first, except
that any notice of change of address shall be effective only
upon receipt by the party to whom said notice is addressed.
Section 8.4 Modification In Writing. This A/R Loan
Agreement amends, restates and supersedes the Second Loan
Agreement in its entirety. Neither this A/R Loan Agreement nor
any provision herein may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed
by the party against whom enforcement of the change, waiver,
discharge or termination is sought.
Section 8.5 Incorporation of Terms. Borrower agrees
that the Notes shall be made subject to all the terms,
covenants, conditions, obligations, stipulations and agreements
contained in this A/R Loan Agreement to the same extent and
effect as if fully set forth in and made a part of the Notes
(each and every reference in the Notes to the "Loan Agreement"
being hereby deemed to be a reference to this A/R Loan
Agreement), and Borrower and Managing Agent and Banks agree
that this A/R Loan Agreement is made subject to all the terms,
covenants, conditions, obligations, stipulations and agreements
contained in the Notes to the same extent and effect as if
fully set forth herein and made a part of this A/R Loan
Agreement, until this A/R Loan Agreement is terminated by the
repayment to Managing Agent and Banks of all principal,
interest and other sums and expenses due and owing on the
Notes. Notwithstanding any of the foregoing, if any provisions
in this A/R Loan Agreement or the Loan Documents are
inconsistent with the Notes, the Notes shall control and if any
provisions of the other Loan Documents are inconsistent with
this A/R Loan Agreement, this A/R Loan Agreement shall control.
Section 8.6 Other Agreements. If the terms of any
documents, certificates or agreements delivered in connection
with this A/R Loan Agreement, are inconsistent or conflict with
the terms of the Loan Documents, such document, certificate or
agreement shall be amended to the satisfaction of the Requisite
Banks to remove such inconsistency.
Section 8.7 Counterparts. This A/R Loan Agreement
may be executed by the parties hereto in any number of separate
counterparts with the same effect as if the signatures hereto
and hereby were upon the same instrument. All such
counterparts shall together constitute but one and the same
documents.
Section 8.8 Rights, Power and Remedies are
Cumulative. None of the rights, powers and remedies conferred
upon or reserved to Managing Agent or Banks in this A/R Loan
Agreement are intended to be exclusive of any other available
right, power or remedy, but each and every such right, power
and remedy shall be cumulative and not alternative, and shall
be in addition to every right, power and remedy herein
specifically given or now or hereafter existing at law, in
equity or by statute. Any forbearance, delay or omission by
Managing Agent or Banks in the exercise of any right, power or
remedy shall not impair any such right, power or remedy or be
considered or taken as a waiver or relinquishment of the right
to insist upon and to enforce in the future, by injunction or
other appropriate legal or equitable remedy, any of said
rights, power and remedies given to Managing Agent or Banks
herein. The exercise of any right or partial exercise thereof
by Managing Agent or Banks shall not preclude the further
exercise thereof, and the same shall continue in full force and
effect until specifically waived by an instrument in writing
executed by Managing Agent and Banks.
Section 8.9 Representations and Warranties. All
representations and warranties made herein shall be deemed to
be made only as of the Effective Date.
Section 8.10 Assignment of Loan Documents by
Borrower. Borrower may not assign any of its right, title or
interest in this A/R Loan Agreement, the Loan Documents and the
Loans, nor may Borrower delegate any of its obligations and
duties under the Loan Documents and the Loans, except as
expressly provided herein. Any attempted assignment or
delegation in contravention of the foregoing shall be null and
void.
Section 8.11 Action by Banks. Whenever Banks shall
have the right to give any notice or make an election, or to
exercise any right, or their consent shall be required for any
action under this A/R Loan Agreement or the Loan Documents,
then such notice, election, exercise or consent shall be given
or made by Banks in accordance with Article 9 hereof.
Section 8.12 Time of Essence. Time shall be of the
essence of this agreement.
Section 8.13 Governing Law. This A/R Loan Agreement
is, in all respects, to be governed by the laws of the State of
Nevada and if any action is taken to enforce the terms of this
A/R Loan Agreement such action shall be commenced and
maintained within the State of Nevada.
Section 8.14 No Joint Venture. In no event shall
Managing Agent or any Bank be deemed or construed to be joint
venturers or partners of Borrower or HRN.
Section 8.15 Joinder in Execution by HRN. HRN joins
in the execution of this A/R Loan Agreement for the purpose of
evidencing its consent and concurrence to the terms,
conditions, representations, warranties, covenants, provisions
and procedures herein contained applicable to it.
Section 8.16 Non-Recourse. Notwithstanding anything
in this A/R Loan Agreement, the Notes, the Deed of Trust or any
other Loan Document or Expansion Financing Document to the
contrary, (i) no general partner of Borrower (including,
specifically, any member of the Jaffe Group, as defined in the
Borrower's Partnership Agreement, or Adamar), shall have
personal liability for or be liable or subject to any
deficiency judgment for, payment of any portion of the Loans or
any other sums payable to Managing Agent or Banks under this
A/R Loan Agreement, the Notes, the Deed of Trust or any other
Loan Document or Expansion Financing Document, it being
expressly covenanted and agreed that no personal liability or
responsibility is assumed or at any time shall be asserted or
enforced against any of the partners of Borrower, or their
respective heirs, successors or assigns, on account of any
representation, warranty, covenant, obligation, understanding
or agreement contained in this A/R Loan Agreement, the Notes,
the Deed of Trust or any other Loan Document or Expansion
Financing Document, and (ii) HRN shall not have any personal
liability for the payment of any sums to Managing Agent or
Banks under this A/R Loan Agreement, the Notes, the Deed of
Trust, the Expansion Financing Document and the Loan Documents
except as specifically set forth in the Assignment of HRN
Master Lease Rents.
Without limiting or affecting in any manner
whatsoever the exculpatory provisions of this Section 8.16, and
subject to the provisions thereof, Managing Agent and Banks, in
exercising their rights, powers and remedies under the Loan
Documents, including the rights, powers and remedies described
in Section 8.8, may enforce the Loan Documents against Borrower
by any proceeding in law or in equity and recover all amounts
owing to Managing Agent or Banks from Borrower under the Loan
Documents solely and exclusively from the Collateral and
Borrower's other assets, whether now owned or hereafter
acquired, and in the event that any suit shall be brought
against Borrower upon any of the Loan Documents, whether before
or after maturity, by acceleration or passage of time, or
otherwise, for damages or a money judgment, any such judgment
obtained in, or as a result of, such suit shall be enforceable
and/or enforced solely and exclusively against the Collateral
and the other assets of Borrower (such assets not including any
right to require any partner of Borrower to contribute funds,
debt or equity, to Borrower, whether the capital account of
such partner be positive or negative, it being understood that
the exculpation of the partners of Borrower under this
Section 8.16 shall extend to any obligation of such partners to
Borrower in their capacity as partners).
Section 8.17 Exhibits Attached. Exhibits are
attached hereto and incorporated herein and made a part hereof
as follows:
Exhibit A - Legal Description
Exhibit B - Expansion Financing Documents
Exhibit C - Form of Notes
Exhibit D - Amended and Restated Deed of
Trust
Exhibit E - Tradenames, trademarks and
servicemarks
Section 8.18 Waiver of Right to Trial by Jury. EACH
PARTY TO THIS A/R LOAN AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY
HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE
TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS A/R LOAN AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
Section 8.19 Purported Oral Agreements. BORROWER
AND HRN EXPRESSLY ACKNOWLEDGE THAT THIS A/R LOAN AGREEMENT AND
THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR
THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN
INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 10.1 OF THIS
A/R LOAN AGREEMENT. BORROWER AND HRN AGREE THAT THEY WILL NOT
RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL
OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF THE MANAGING
AGENT OR ANY BANK THAT DOES NOT COMPLY WITH SECTION 10.1 OF
THIS A/R LOAN AGREEMENT TO EFFECT AN AMENDMENT, MODIFICATION,
WAIVER OR SUPPLEMENT TO THIS A/R LOAN AGREEMENT OR THE OTHER
LOAN DOCUMENTS.
Section 8.20 Removal of a Bank. Borrower shall have
the right to remove a Bank as a party to this A/R Loan
Agreement in accordance with this Section upon (i) the
occurrence of any event or circumstance which allows the
borrowers under the Other Loan Agreement to remove the same
Bank as a party to the Other Loan Agreement, and (ii) the
occurrence of any similar event or circumstance under this A/R
Loan Agreement or the Note (including without limitation any
claim for compensation or taxes, excused funding or refusal to
grant an extension under Sections 8, 9 or 14(c) of that Bank's
Note, or any Bank Disqualification); provided that, in any such
case (x) no Event of Default or any event or circumstance which
with the giving of notice or the passage of time or both has
occurred and then exists, and (y) such Bank is concurrently
removed as a party to the Other Loan Agreement pursuant to
Section 11.25 thereof. If Borrower is so entitled to remove a
Bank pursuant to this Section either:
(a) Upon notice from Borrower, the Bank being removed
shall execute and deliver a Commitment Assignment and
Acceptance covering that Bank's Pro Rata Share of the
Commitments under the Other Loan Agreement and the Loans
in favor of one or more willing Eligible Assignees
designated by Borrower, subject to (i) payment of a
purchase price by such Eligible Assignee equal to all
principal and accrued interest, fees and other amounts
payable to such Bank under this A/R Loan Agreement and the
Other Loan Agreement through the date of assignment and
(ii) the satisfaction of all other conditions specified in
Section 11.25 of the Other Loan Agreement; or
(b) In the event that the borrowers under the Other
Agreement are entitled, and elect, to reduce the
commitment thereunder as set forth in clause (y) of
Section 11.25 thereof, then, subject to Section 4 of the
Notes, the Bank being removed shall sell without recourse
to the remaining Banks, in accordance with their
respective Pro Rata Shares, its Note and its Pro Rata
Share of the Loans, subject to the payment of the purchase
price and satisfaction of the conditions described in
clause (a) above; and, in such event, Borrower shall issue
replacement Notes to the remaining Banks reflecting the
aggregate principal amounts of their Pro Rata Shares of
the Loans.
ARTICLE 9
AGENCY PROVISIONS
Section 9.1 No Obligations of Borrower. Nothing
contained in this Article 9 shall be deemed to impose upon
Borrower, its partners or HRN any obligation in respect of the
due and punctual performance by the Managing Agent of its
obligations to Banks under any provision of this A/R Loan
Agreement, and Borrower, its partners and HRN shall have no
liability to the Managing Agent or any of Banks in respect of
any failure by the Managing Agent or any Bank to perform any of
its obligations to the Managing Agent or Banks under this A/R
Loan Agreement. Without limiting the generality of the
foregoing, where any provision of this A/R Loan Agreement or
the Notes relating to the payment of any amounts due and owing
under the Loan Documents provides that such payments shall be
made by Borrower or HRN to the Managing Agent for the account
of Banks, Borrowers' and HRN's obligations to Banks in respect
of such payments shall be deemed to be satisfied upon the
making of such payments to the Managing Agent in the manner
provided by this A/R Loan Agreement or the Notes.
SECTION 9.2 Appointment and Authorization. Subject
to Section 9.9, each Bank hereby irrevocably appoints and
authorizes the Managing Agent to take such action as agent on
its behalf and to exercise such powers under the Loan Documents
as are delegated to the Managing Agent by the terms thereof or
are reasonably incidental, as determined by the Managing Agent,
thereto. This appointment and authorization is intended solely
for the purpose of facilitating the servicing of the Loans and
does not constitute appointment of the Managing Agent as
trustee for any Bank or as representative of any Bank for any
other purpose and, except as specifically set forth in the Loan
Documents to the contrary, the Managing Agent shall take such
action and exercise such powers only in an administrative and
ministerial capacity.
SECTION 9.3 Managing Agent and Affiliates. Bank of
America National Trust and Savings Association (and each
successor Managing Agent) has the same rights and powers under
the Loan Documents as any other Bank and may exercise the same
as though it were not the Managing Agent, and the term "Bank"
or "Banks" includes Bank of America National Trust and Savings
Association in its individual capacity. Bank of America
National Trust and Savings Association (and each successor
Managing Agent) and its Affiliates may accept deposits from,
lend money to and generally engage in any kind of banking,
trust or other business with Borrower or HRN, or any Affiliate
of Borrower or HRN, as if it were not the Managing Agent and
without any duty to account therefor to the Banks. Bank of
America National Trust and Savings Association (and each
successor Managing Agent) need not account to any other Bank
for any monies received by it for reimbursement of its costs
and expenses as Managing Agent hereunder, or for any monies
received by it in its capacity as a Bank hereunder. The
Managing Agent shall not be deemed to hold a fiduciary rela-
tionship with any Bank and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be
read into this A/R Loan Agreement or otherwise exist against
the Managing Agent.
SECTION 9.4 Proportionate Interest in any Collate-
ral. The Managing Agent, on behalf of all the Banks, shall
hold in accordance with the Loan Documents all items of any
collateral or interests therein received or held by the
Managing Agent. Subject to the Managing Agent's and the Banks'
rights to reimbursement for their costs and expenses hereunder
(including reasonable attorneys' fees and disbursements and
other professional services and the reasonably allocated costs
of attorneys employed by the Managing Agent or a Bank) and
subject to the application of payments in accordance with Sec-
tion 6.3, each Bank shall have an interest in the Banks'
interest in the Collateral or interests therein in the same
proportions that the aggregate obligations owed such Bank under
the Loan Documents bear to the aggregate obligations owed under
the Loan Documents to all the Banks, without priority or
preference among the Banks.
SECTION 9.5 Banks' Credit Decisions. Each Bank
agrees that it has, independently and without reliance upon the
Managing Agent, any other Bank or the directors, officers,
agents, employees or attorneys of the Managing Agent or of any
other Bank, and instead in reliance upon information supplied
to it by or on behalf of Borrower or HRN and upon such other
information as it has deemed appropriate, made its own inde-
pendent credit analysis and decision to enter into this A/R
Loan Agreement. Each Bank also agrees that it shall,
independently and without reliance upon the Managing Agent, any
other Bank or the directors, officers, agents, employees or
attorneys of the Managing Agent or of any other Bank, continue
to make its own independent credit analyses and decisions in
acting or not acting under the Loan Documents.
SECTION 9.6 Action by Managing Agent.
a. Absent actual knowledge of the Managing
Agent of the existence of an Event of Default, the
Managing Agent may assume that no Event of Default has
occurred and is continuing, unless the Managing Agent (or
the Bank that is then the Managing Agent) has received
notice from Borrower stating the nature of the Event of
Default or has received notice from a Bank stating the
nature of the Event of Default and that such Bank
considers the Event of Default to have occurred and to be
continuing.
b. The Managing Agent has only those
obligations under the Loan Documents as are expressly set
forth therein.
c. Except for any obligation expressly set
forth in the Loan Documents and as long as the Managing
Agent may assume that no Event of Default has occurred and
is continuing, the Managing Agent may, but shall not be
required to, exercise its discretion to act or not act,
except that the Managing Agent shall be required to act or
not act upon the instructions of the Requisite Banks (or
of all the Banks, to the extent required by Section 10.1)
and those instructions shall be binding upon the Managing
Agent and all the Banks, provided that the Managing Agent
shall not be required to act or not act if to do so would
be contrary to any Loan Document or to applicable Law or
would result, in the reasonable judgment of the Managing
Agent, in substantial risk of liability to the Managing
Agent.
d. If the Managing Agent has received a notice
specified in clause (a), the Managing Agent shall
immediately give notice thereof to the Banks and shall act
or not act upon the instructions of the Requisite Banks
(or of all the Banks, to the extent required by
Section 10.1), provided that the Managing Agent shall not
be required to act or not act if to do so would be
contrary to any Loan Document or to applicable Law or
would result, in the reasonable judgment of the Managing
Agent, in substantial risk of liability to the Managing
Agent, and except that if the Requisite Banks (or all the
Banks, if required under Section 10.1) fail, for five (5)
Banking Days after the receipt of notice from the Managing
Agent, to instruct the Managing Agent, then the Managing
Agent, in its sole discretion, may act or not act as it
deems advisable for the protection of the interests of the
Banks.
e. The Managing Agent shall have no liability
to any Bank for acting, or not acting, as instructed by
the Requisite Banks (or all the Banks, if required under
Section 10.1), notwithstanding any other provision hereof.
SECTION 9.7 Liability of Managing Agent. Neither
the Managing Agent nor any of its directors, officers, agents,
employees or attorneys shall be liable for any action taken or
not taken by them under or in connection with the Loan
Documents, except for their own gross negligence or willful
misconduct. Without limitation on the foregoing, the Managing
Agent and its directors, officers, agents, employees and
attorneys:
a. May treat the payee of any Note as the
holder thereof until the Managing Agent receives notice of
the assignment or transfer thereof, in form satisfactory
to the Managing Agent, signed by the payee, and may treat
each Bank as the owner of that Bank's interest in the
obligations under the Loan Documents for all purposes of
this A/R Loan Agreement until the Managing Agent receives
notice of the assignment or transfer thereof, in form
satisfactory to the Managing Agent, signed by that Bank.
b. May consult with legal counsel (including
in-house legal counsel), accountants (including in-house
accountants) and other professionals or experts selected
by it, or with legal counsel, accountants or other profes-
sionals or experts for Borrower or HRN or the Banks, and
shall not be liable for any action taken or not taken by
it in good faith in accordance with any advice of such
legal counsel, accountants or other professionals or
experts.
c. Shall not be responsible to any Bank for
any statement, warranty or representation made in any of
the Loan Documents or in any notice, certificate, report,
request or other statement (written or oral) given or made
in connection with any of the Loan Documents.
d. Except to the extent expressly set forth in
the Loan Documents, shall have no duty to ask or inquire
as to the performance or observance by Borrower or HRN of
any of the terms, conditions or covenants of any of the
Loan Documents or to inspect any Collateral or the
property, books or records of Borrower or HRN.
e. Will not be responsible to any Bank for the
due execution, legality, validity, enforceability,
genuineness, effectiveness, sufficiency or value of any
Loan Document, any other instrument or writing furnished
pursuant thereto or in connection therewith, or any
Collateral.
f. Will not incur any liability by acting or
not acting in reliance upon any Loan Document, notice,
consent, certificate, statement, request or other
instrument or writing believed in good faith by it to be
genuine and signed or sent by the proper party or parties.
g. Will not incur any liability for any
arithmetical error in computing any amount paid or payable
by the Borrower or HRN or any Affiliate thereof or paid or
payable to or received or receivable from any Bank under
any Loan Document, including, without limitation,
principal, interest, commitment fees, Loans and other
amounts; provided that, promptly upon discovery of such an
error in computation, the Managing Agent, the Banks and
(to the extent applicable) Borrower or HRN shall make such
adjustments as are necessary to correct such error and to
restore the parties to the position that they would have
occupied had the error not occurred.
SECTION 9.8 Indemnification. Each Bank shall,
ratably in accordance with its Pro Rata Share, indemnify and
hold the Managing Agent and its directors, officers, agents,
employees and attorneys harmless against any and all liabili-
ties, obligations, losses, damages, penalties, actions, judg-
ments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including, without limitation, attorneys'
fees and disbursements and allocated costs of attorneys
employed by the Managing Agent) that may be imposed on,
incurred by or asserted against it or them in any way relating
to or arising out of the Loan Documents (other than losses
incurred by reason of the failure of Borrower to pay the
Indebtedness represented by the Notes) or any action taken or
not taken by it as Managing Agent thereunder, except such as
result from its own gross negligence or willful misconduct.
Without limitation on the foregoing, each Bank shall reimburse
the Managing Agent upon demand for that Bank's Pro Rata Share
of any out-of-pocket cost or expense incurred by the Managing
Agent in connection with the negotiation, preparation, execu-
tion, delivery, amendment, waiver, restructuring, reorganiza-
tion (including a bankruptcy reorganization), enforcement or
attempted enforcement of the Loan Documents, to the extent that
Borrower or HRN is required by Section 6.5 to pay that cost or
expense but fails to do so upon demand. Nothing in this
Section shall entitle the Managing Agent to recover any amount
from the Banks if and to the extent that such amount has
theretofore been recovered from Borrower or HRN. To the extent
that the Managing Agent is later reimbursed such cost or
expense by Borrower or HRN, it shall return the amounts paid to
it by the Banks in respect of such cost or expense.
SECTION 9.9 Successor Managing Agent. The Managing
Agent may, and at the request of the Requisite Banks shall,
resign as Managing Agent upon thirty (30) days' notice to the
Banks and Borrower. If the Managing Agent shall resign as
Managing Agent under this A/R Loan Agreement, the Requisite
Banks shall appoint from among the Banks a successor Managing
Agent for the Banks, which successor Managing Agent shall be
approved by Borrower (and such approval shall not be
unreasonably withheld or delayed). If no successor Managing
Agent is appointed prior to the effective date of the
resignation of the Managing Agent, the Managing Agent may
appoint, after consulting with the Banks and the Borrower, a
successor Managing Agent from among the Banks. Upon the
acceptance of its appointment as successor Managing Agent
hereunder, such successor Managing Agent shall succeed to all
the rights, powers and duties of the retiring Managing Agent
and the term "Managing Agent" shall mean such successor
Managing Agent and the retiring Managing Agent's appointment,
powers and duties as Managing Agent shall be terminated. After
any retiring Managing Agent's resignation hereunder as Managing
Agent, the provisions of this Article 9, and Sections 5.15,
6.5, and 10.9, shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Managing Agent
under this A/R Loan Agreement. If (a) the Managing Agent has
not been reimbursed for any expense reimbursable to it under
Section 6.5, in either case for a period of at least one (1)
year and (b) no successor Managing Agent has accepted
appointment as Managing Agent by the date which is thirty
(30) days following a retiring Managing Agent's notice of
resignation, the retiring Managing Agent's resignation shall
nevertheless thereupon become effective and the Banks shall
perform all of the duties of the Managing Agent hereunder until
such time, if any, as the Requisite Banks appoint a successor
Managing Agent as provided for above.
SECTION 9.10 Foreclosure on Collateral. In the
event of foreclosure or enforcement of the Lien created by any
of the Collateral Documents, title to the Collateral covered
thereby shall be taken and held by the Managing Agent (or an
Affiliate or designee thereof) pro rata for the benefit of the
Banks in accordance with the obligations outstanding to each of
them under the Loan Documents and shall be administered in
accordance with the standard form of collateral holding
participation agreement used by the Managing Agent in
comparable syndicated credit facilities.
Article 10
CERTAIN OTHER PROVISIONS
SECTION 10.1 Amendments; Consents. No amendment,
modification, supplement, extension, termination or waiver of
any provision of this A/R Loan Agreement or any other Loan
Document, no approval or consent thereunder, and no consent to
any departure by the Borrower or HRN therefrom, may in any
event be effective unless in writing signed by the Requisite
Banks (and, in the case of any amendment, modification or
supplement of or to any Loan Document to which any of the
Borrower or HRN is a party, signed by each such party, and, in
the case of any amendment, modification or supplement to
Article 9, signed by the Managing Agent), and then only in the
specific instance and for the specific purpose given; and,
without the approval in writing of all the Banks, no amendment,
modification, supplement, termination, waiver or consent may be
effective:
a. To amend or modify the principal of, or the
amount of principal, principal prepayments or the rate of
interest payable on, any Note, or the Pro Rata Share of
any Bank, or amount of any fee or amount payable to any
Bank under the Loan Documents or to waive an Event of
Default consisting of the failure of Borrower to pay when
due principal, interest or any commitment fee;
b. To postpone any date fixed for any payment
of principal of, prepayment of principal of or any
installment of interest on, any Note or any installment of
any commitment fee, or to extend the term of this A/R Loan
Agreement;
c. to release any material portion of the
Collateral (except (i) as expressly provided for in
Sections 10.11 and 10.12, or (ii) as otherwise expressly
provided for in any Loan Document);
d. To amend the provisions of the definition
of "Requisite Banks", Articles 3 or 6 or this Section; or
e. To amend any provision of this A/R Loan
Agreement that expressly requires the consent or approval
of all the Banks.
Any amendment, modification, supplement, termination, waiver or
consent pursuant to this Section 10.1 shall apply equally to,
and shall be binding upon, all the Banks and the Managing
Agent.
SECTION 10.2 Nature of Banks' Obligations. The
obligations of the Banks hereunder are several and not joint or
joint and several. Nothing contained in this A/R Loan
Agreement or any other Loan Document and no action taken by the
Managing Agent or the Banks or any of them pursuant hereto or
thereto may, or may be deemed to, make the Banks a partnership,
an association, a joint venture or other entity, either among
themselves or with the Borrower or HRN or any Affiliate of
Borrower or HRN. Each Bank's obligations hereunder are several
and not joint or joint and several. A default by any Bank will
not increase the Pro Rata Share of any other Bank. Any Bank
not in default may, if it desires, assume in such proportion as
the nondefaulting Banks agree the obligations of any Bank in
default, but is not obligated to do so. The Managing Agent
agrees that it will use its best efforts either to induce the
other Banks to assume the obligations of a Bank in default or
to obtain another Bank, reasonably satisfactory to Borrower, to
replace such a Bank in default.
SECTION 10.3 Binding Effect; Assignment.
a. This A/R Loan Agreement and the other Loan
Documents to which Borrower and HRN are parties will be
binding upon and inure to the benefit of Borrower, HRN,
the Managing Agent, each of the Banks, and their
respective successors and assigns, except that, Borrower
and HRN may not assign their rights hereunder or
thereunder or any interest herein or therein without the
prior written consent of all the Banks. Each Bank
represents that it is not acquiring its Note with a view
to the distribution thereof within the meaning of the
Securities Act of 1933, as amended (subject to any
requirement that disposition of such Note must be within
the control of such Bank). Any Bank may at any time
pledge its Note or any other instrument evidencing its
rights as a Bank under this A/R Loan Agreement to a
Federal Reserve Bank, but no such pledge shall release
that Bank from its obligations hereunder or grant to such
Federal Reserve Bank the rights of a Bank hereunder absent
foreclosure of such pledge.
b. From time to time, each Bank may assign all or
any portion of its Note to one or more Eligible Assignees;
provided that (i) such Eligible Assignee, if not then a
Bank or an Affiliate of the assigning Bank, shall be
approved by each of the Managing Agent, HRN and Borrower
(neither of which approvals shall be unreasonably withheld
or delayed), (ii) such assignment shall be evidenced by a
Commitment Assignment and Acceptance, a copy of which
shall be furnished to the Managing Agent as hereinbelow
provided, (iii) except in the case of an assignment to an
Affiliate of the assigning Bank, to another Bank or of the
entire Note of the assigning Bank, the assignment shall
not assign a Pro Rata Share that, when added to the pro
rata share of the obligations under the Other Loan
Agreement being concurrently assigned to the same Eligible
Assignee, is equivalent to less than $5,000,000,
(iv) assignment of a Pro Rata Share must be concurrent
with an assignment to the same Eligible Assignee of the
same pro rata share of the assigning Bank's pro rata share
of the Other Loan Agreement and (v) the effective date of
any such assignment shall be as specified in the
Commitment Assignment and Acceptance, but not earlier than
the date which is five (5) Banking Days after the date the
Managing Agent has received the Commitment Assignment and
Acceptance. Upon the effective date of such Commitment
Assignment and Acceptance, the Eligible Assignee named
therein shall be a Bank for all purposes of this A/R Loan
Agreement, with the Pro Rata Share of the Commitment
therein set forth and, to the extent of such Pro Rata
Share, the assigning Bank shall be released from its
further obligations under this A/R Loan Agreement.
Borrower agrees that it shall execute and deliver (against
delivery by the assigning Bank to Borrower of its Note) to
such assignee Bank, a Note evidencing that assignee Bank's
Pro Rata Share of the Loans, and to the assigning Bank, a
Note evidencing the remaining balance Pro Rata Share
retained by the assigning Bank.
c. By executing and delivering a Commitment
Assignment and Acceptance, the Eligible Assignee there-
under acknowledges and agrees that: (i) other than the
representation and warranty that it is the legal and
beneficial owner of the Pro Rata Share being assigned
thereby free and clear of any adverse claim, the assigning
Bank has made no representation or warranty and assumes no
responsibility with respect to any statements, warranties
or representations made in or in connection with this A/R
Loan Agreement or the execution, legality, validity,
enforceability, genuineness or sufficiency of this A/R
Loan Agreement or any other Loan Document; (ii) the
assigning Bank has made no representation or warranty and
assumes no responsibility with respect to the financial
condition of Borrower or HRN or the performance by
Borrower or HRN of the obligations under the Loan
Documents; (iii) it has received a copy of this A/R Loan
Agreement, together with copies of the most recent
financial statements delivered pursuant to this Agreement
and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision
to enter into such Commitment Assignment and Acceptance;
(iv) it will, independently and without reliance upon the
Managing Agent or any Bank and based on such documents and
information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not
taking action under this A/R Loan Agreement; (v) it
appoints and authorizes the Managing Agent to take such
action and to exercise such powers under this A/R Loan
Agreement as are delegated to the Managing Agent by this
A/R Loan Agreement; and (vi) it will perform in accordance
with their terms all of the obligations which by the terms
of this A/R Loan Agreement are required to be performed by
it as a Bank.
d. The Managing Agent shall maintain at the
Managing Agent's Office a copy of each Commitment Assign-
ment and Acceptance delivered to it and a register (the
"Register") of the names and address of each of the Banks
and the Pro Rata Share of the Loans held by each Bank,
giving effect to each Commitment Assignment and
Acceptance. The Register shall be available during normal
business hours for inspection by Borrower or any Bank upon
reasonable prior notice to the Managing Agent. After
receipt of a completed Commitment Assignment and Accept-
ance executed by any Bank and an Eligible Assignee, the
Managing Agent shall, promptly following the effective
date thereof, provide to Borrower and the Banks a revised
Schedule 1.1 giving effect thereto. Borrower, the
Managing Agent and the Banks shall deem and treat the
Persons listed as Banks in the Register as the holders and
owners of the Pro Rata Share of the Loans listed therein
for all purposes hereof, and no assignment or transfer of
any such Pro Rata Share of the Loans shall be effective,
in each case unless and until a Commitment Assignment and
Acceptance effecting the assignment or transfer thereof
shall have been accepted by the Managing Agent and
recorded in the Register as provided above. Prior to such
recordation, all amounts owed with respect to the
applicable Pro Rata Share of the Loans shall be owed to
the Bank listed in the Register as the owner thereof, and
any request, authority or consent of any Person who, at
the time of making such request or giving such authority
or consent, is listed in the Register as a Bank shall be
conclusive and binding on any subsequent holder, assignee
or transferee of the corresponding Pro Rata Share of the
Loans.
e. Each Bank may from time to time grant
participations to one or more banks or other financial
institutions (including another Bank) in a portion of its
Pro Rata Share; provided, however, that (i) such Bank's
obligations under this A/R Loan Agreement shall remain
unchanged, (ii) such Bank shall remain solely responsible
to the other parties hereto for the performance of such
obligations, (iii) the participating banks or other
financial institutions shall not be a Bank hereunder for
any purpose except, if the participation agreement so
provides, for the purposes of Sections 5.15 and 10.9 but
only to the extent that the cost of such benefits to
Borrower does not exceed the cost which Borrower would
have incurred in respect of such Bank absent the
participation, (iv) Borrower, the Managing Agent and the
other Banks shall continue to deal solely and directly
with such Bank in connection with such Bank's rights and
obligations under this A/R Loan Agreement, (v) the
participation interest shall be expressed as a percentage
of the granting Bank's Pro Rata Share as it then exists
and shall not restrict an increase in the Loans, or in the
granting Bank's Pro Rata Share of the Loans, so long as
the amount of the participation interest is not affected
thereby, (vi) a participation in a percentage of the
granting Bank's Pro Rata Share of the Loans must be
concurrent with a participation granted to the same
participant of the same percentage of the granting Bank's
pro rata share of the obligations under the Other Loan
Agreement and (vii) the consent of the holder of such par-
ticipation interest shall not be required for amendments
or waivers of provisions of the Loan Documents other than
those which (A) extend the Maturity Date or any other date
upon which any payment of money is due to the Banks,
(B) reduce the rate of interest on the Notes, any fee or
any other monetary amount payable to the Banks, (C) reduce
the amount of any installment of principal due under the
Notes, or (D) release any material portion of the
Collateral (except as otherwise expressly provided for in
any Loan Document).
f. Notwithstanding anything in this Section to
the contrary, the rights of the Banks to make assignments
of, and grant participations in, their Pro Rata Shares of
the Loans shall be subject to the approval of any Gaming
Board, to the extent required by applicable Gaming Laws,
and to compliance with applicable securities laws.
SECTION 10.4 Sharing of Setoffs. Each Bank
severally agrees that if it, through the exercise of any right
of setoff, banker's lien or counterclaim against Borrower or
HRN, or otherwise, receives payment of the obligations held by
it under the Loan Documents that is ratably more than any other
Bank, through any means, receives in payment of such
obligations held by that Bank, then, subject to applicable
Laws: (a) the Bank exercising the right of setoff, banker's
lien or counterclaim or otherwise receiving such payment shall
purchase, and shall be deemed to have simultaneously purchased,
from the other Bank a participation in the obligations held by
the other Bank under the Loan Documents and shall pay to the
other Bank a purchase price in an amount so that the share of
such obligations held by each Bank after the exercise of the
right of setoff, banker's lien or counterclaim or receipt of
payment shall be in the same proportion that existed prior to
the exercise of the right of setoff, banker's lien or
counterclaim or receipt of payment; and (b) such other
adjustments and purchases of participations shall be made from
time to time as shall be equitable to ensure that all of the
Banks share any payment obtained in respect of its obligations
ratably in accordance with each Bank's share of the obligations
under the Loan Documents immediately prior to, and without
taking into account, the payment; provided that, if all or any
portion of a disproportionate payment obtained as a result of
the exercise of the right of setoff, banker's lien,
counterclaim or otherwise is thereafter recovered from the
purchasing Bank by Borrower or HRN or any Person claiming
through or succeeding to the rights of Borrower or HRN, the
purchase of a participation shall be rescinded and the purchase
price thereof shall be restored to the extent of the recovery,
but without interest. Each Bank that purchases a participation
in the obligations to another Bank pursuant to this Section
shall from and after the purchase have the right to give all
notices, requests, demands, directions and other communications
under this A/R Loan Agreement with respect to the portion of
the obligations purchased to the same extent as though the
purchasing Bank were the original owner of the obligations
purchased. Borrower and HRN expressly consent to the foregoing
arrangements and agree that any Bank holding a participation in
an obligation so purchased may exercise any and all rights of
setoff, banker's lien or counterclaim with respect to the
participation as fully as if the Bank were the original owner
of the obligation purchased.
SECTION 10.5 Nonliability of the Banks. Borrower
and HRN acknowledge and agree that:
a. Any inspections of any property of Borrower
or HRN made by or through the Managing Agent or the Banks
are for purposes of administration of the Loan only and
Borrower and HRN are not entitled to rely upon the same
(whether or not such inspections are at the expense of
Borrower or HRN);
b. By accepting or approving anything required
to be observed, performed, fulfilled or given to the
Managing Agent or the Banks pursuant to the Loan
Documents, neither the Managing Agent nor the Banks shall
be deemed to have warranted or represented the
sufficiency, legality, effectiveness or legal effect of
the same, or of any term, provision or condition thereof,
and such acceptance or approval thereof shall not
constitute a warranty or representation to anyone with
respect thereto by the Managing Agent or the Banks;
c. The relationship between Borrower, HRN and
the Managing Agent and the Banks is, and shall at all
times remain, solely that of borrowers and lenders;
neither the Managing Agent nor the Banks shall under any
circumstance be construed to be partners or joint
venturers of Borrower or HRN or their Affiliates; neither
the Managing Agent nor the Banks shall under any
circumstance be deemed to be in a relationship of confi-
dence or trust or a fiduciary relationship with Borrower,
HRN or their Affiliates, or to owe any fiduciary duty to
Borrower, HRN or their Affiliates; neither the Managing
Agent nor the Banks undertake or assume any responsibility
or duty to Borrower, HRN or their Affiliates to select,
review, inspect, supervise, pass judgment upon or inform
Borrower, HRN or their Affiliates of any matter in connec-
tion with their property or the operations of Borrower,
HRN or their Affiliates; Borrower, HRN and their
Affiliates shall rely entirely upon their own judgment
with respect to such matters; and any review, inspection,
supervision, exercise of judgment or supply of information
undertaken or assumed by the Managing Agent or the Banks
in connection with such matters is solely for the
protection of the Managing Agent and the Banks and neither
Borrower, HRN nor any other Person is entitled to rely
thereon; and
d. The Managing Agent and the Banks shall not
be responsible or liable to any Person for any loss,
damage, liability or claim of any kind relating to injury
or death to Persons or damage to property caused by the
actions, inaction or negligence of Borrower, HRN and/or
their Affiliates and Borrower and HRN hereby indemnify and
hold the Managing Agent and the Banks harmless on the
terms set forth in Section 6.15 from any such loss,
damage, liability or claim.
SECTION 10.6 No Third Parties Benefited. This A/R
Loan Agreement is made for the purpose of defining and setting
forth certain obligations, rights and duties of Borrower, HRN,
the Managing Agent and the Banks in connection with the Loans,
and is made for the sole benefit of Borrower, HRN, the Managing
Agent and the Banks, and the Managing Agent's and the Banks'
successors and assigns. Except as provided in Sections 6.15
and 10.9, no other Person shall have any rights of any nature
hereunder or by reason hereof.
SECTION 10.7 Confidentiality. Each Bank agrees to
hold any confidential information that it may receive from
Borrower or HRN pursuant to this A/R Loan Agreement in
confidence, except for disclosure: (a) to other Banks; (b) to
legal counsel and accountants for Borrower, HRN or any Bank;
(c) to other professional advisors to Borrower, HRN or any
Bank, provided that the recipient has accepted such information
subject to a confidentiality agreement substantially similar to
this Section; (d) to regulatory officials having jurisdiction
over that Bank; (e) to any Gaming Board having regulatory
jurisdiction over Borrower or HRN, provided that each Bank
agrees to use its best efforts to notify Borrower of any such
disclosure unless prohibited by applicable Laws; (f) as
required by Law or legal process or in connection with any
legal proceeding to which that Bank and any of Borrower or HRN
are adverse parties; and (g) to another financial institution
in connection with a disposition or proposed disposition to
that financial institution of all or part of that Bank's
interests hereunder or a participation interest in its Note,
provided that the recipient has accepted such information
subject to a confidentiality agreement substantially similar to
this Section. For purposes of the foregoing, "confidential
information" shall mean any information respecting Borrower or
HRN reasonably considered by Borrower and HRN to be
confidential, other than (i) information previously filed with
any Governmental Agency and available to the public,
(ii) information previously published in any public medium from
a source other than, directly or indirectly, that Bank, and
(iii) information previously disclosed by Borrower or HRN to
any Person not associated with Borrower or HRN without a
confidentiality agreement or obligation substantially similar
to this Section. Nothing in this Section shall be construed to
create or give rise to any fiduciary duty on the part of the
Managing Agent or the Banks to Borrower.
SECTION 10.8 Foreign Banks and Participants. Each
Bank that is incorporated or otherwise organized under the Laws
of a jurisdiction other than the United States of America or
any State thereof or the District of Columbia shall deliver to
Borrower (with a copy to the Managing Agent), within
twenty (20) days after the date hereof (or after accepting an
assignment or receiving a participation interest herein
pursuant to Section 10.3, if applicable) two duly completed
copies, signed by a Responsible Official, of either Form 1001
(relating to such Bank and entitling it to a complete exemption
from withholding on all payments to be made to such Bank by
Borrower pursuant to this A/R Loan Agreement) or Form 4224
(relating to all payments to be made to such Bank by the
Borrower pursuant to this A/R Loan Agreement) of the United
States Internal Revenue Service or such other evidence
(including, if reasonably necessary, Form W-9) satisfactory to
Borrower and the Managing Agent that no withholding under the
federal income tax laws is required with respect to such Bank.
Thereafter and from time to time, each such Bank shall
(a) promptly submit to Borrower (with a copy to the Managing
Agent), such additional duly completed and signed copies of one
of such forms (or such successor forms as shall be adopted from
time to time by the relevant United States taxing authorities)
as may then be available under then current United States laws
and regulations to avoid, or such evidence as is satisfactory
to Borrower and the Managing Agent of any available exemption
from, United States withholding taxes in respect of all pay-
ments to be made to such Bank by Borrower pursuant to this A/R
Loan Agreement and (b) take such steps as shall not be
materially disadvantageous to it, in the reasonable judgment of
such Bank, and as may be reasonably necessary to avoid any
requirement of applicable Laws that Borrower make any deduction
or withholding for taxes from amounts payable to such Bank. In
the event that Borrowers or the Managing Agent become aware
that a participation has been granted pursuant to
Section 10.3(e) to a financial institution that is incorporated
or otherwise organized under the Laws of a jurisdiction other
than the United States of America, any State thereof or the
District of Columbia, then, upon request made by Borrower or
the Managing Agent to the Bank which granted such
participation, such Bank shall cause such participant financial
institution to deliver the same documents and information to
Borrower and the Managing Agent as would be required under this
Section if such financial institution were a Bank.
SECTION 10.9 Hazardous Material Indemnity. Each of
Borrower and HRN hereby agrees to indemnify, hold harmless and
defend (by counsel reasonably satisfactory to the Managing
Agent) the Managing Agent and each of the Banks and their
respective directors, officers, employees, agents, successors
and assigns from and against any and all claims, losses,
damages, liabilities, fines, penalties, charges, administrative
and judicial proceedings and orders, judgments, remedial action
requirements, enforcement actions of any kind, and all costs
and expenses incurred in connection therewith (including but
not limited to reasonable attorneys' fees and the reasonably
allocated costs of attorneys employed by the Managing Agent or
any Bank, and expenses to the extent that the defense of any
such action has not been assumed by Borrower), arising directly
or indirectly out of (i) the presence on, in, under or about
any Real Property of any Hazardous Materials, or any releases
or discharges of any Hazardous Materials on, under or from any
Real Property and (ii) any activity carried on or undertaken on
or off any Real Property by Borrower or HRN or any of their
predecessors in title, whether prior to or during the term of
this A/R Loan Agreement, and whether by Borrower, HRN or any
predecessor in title or any employees, agents, contractors or
subcontractors of Borrower, HRN or any predecessor in title, or
any third persons at any time occupying or present on any Real
Property, in connection with the handling, treatment, removal,
storage, decontamination, clean-up, transport or disposal of
any Hazardous Materials at any time located or present on, in,
under or about any Real Property. The foregoing indemnity
shall further apply to any residual contamination on, in, under
or about any Real Property, or affecting any natural resources,
and to any contamination of any property or natural resources
arising in connection with the generation, use, handling,
storage, transport or disposal of any such Hazardous Materials,
and irrespective of whether any of such activities were or will
be undertaken in accordance with applicable Laws, but the
foregoing indemnity shall not apply to Hazardous Materials on
any Real Property, the presence of which is caused by the
Managing Agent or the Banks. Borrower and HRN hereby
acknowledge and agree that, subject to Section 8.16 but
notwithstanding any other provision of this A/R Loan Agreement
or any of the other Loan Documents to the contrary, the
obligations of Borrower and HRN under this Section shall be
unlimited corporate obligations of Borrower and HRN and shall
not be secured by any deed of trust on any Real Property. Any
obligation or liability of Borrower or HRN to any Indemnitee
under this Section shall survive the expiration or termination
of this A/R Loan Agreement and the repayment of all Loans and
the payment and performance of all other obligations owed to
the Banks under the Loan Documents.
SECTION 10.10 Gaming Boards. The Managing Agent and
each of the Banks agree to cooperate with all Gaming Boards in
connection with the administration of their regulatory
jurisdiction over Borrower and HRN, including the provision of
such documents or other information as may be requested by any
such Gaming Board relating to Borrower or HRN or to the Loan
Documents.
SECTION 10.11 Termination; Release of Liens. Upon
(a) the full and final payment in cash of the Loans, all
interest and fees with respect thereto, (b) the payment of all
amounts then demanded by any Bank or indemnitee under Sections
of this Agreement providing for indemnification, and (c) the
payment of all amounts then due under the Loan Documents, the
Managing Agent is hereby authorized by the Banks to, and the
Managing Agent shall, upon the request of Borrower, execute and
deliver to Borrower discharges from further compliance with the
covenants contained herein and releases of the Liens created by
the Collateral Documents, and shall return any property pledged
to the Managing Agent as Collateral for the obligations under
the Loan Documents, notwithstanding the survival of any
provision of this Agreement herein provided for.
SECTION 10.12 Other Lien Releases. In addition to
the provisions of Section 10.11, each of the Banks hereby
authorizes the Managing Agent to, and the Managing Agent shall,
release any Lien granted to or held by the Managing Agent upon
any Collateral (i) sold, transferred or otherwise disposed of
in connection with any transaction not prohibited by the Loan
Documents, (ii) constituting property leased to Borrower or HRN
under a lease with a third party which has expired or been
terminated in a transaction not prohibited by the Loan
Documents or which will concurrently expire and which has not
been, and is not intended by Borrower or HRN to be, renewed or
extended, (iii) consisting of an instrument, if the
Indebtedness evidenced by such instrument has been finally
repaid in full, and (iv) if approved or consented to by those
of the Banks required by Section 10.1. Upon the request of the
Managing Agent, each Bank shall promptly provide written
confirmation of the authority of the Managing Agent to release
its Liens upon any one or more items of Collateral under this
Section.
IN WITNESS WHEREOF, the parties hereto have caused
this A/R Loan Agreement to be executed as of the day and year
first above written.
"Borrower"
TROPICANA ENTERPRISES, a Nevada
general partnership
By: ADAMAR OF NEVADA, general
partner
By: CRAIG F. SULLIVAN
----------------------------
Craig F. Sullivan, Treasurer
"HRN"
HOTEL RAMADA OF NEVADA, a Nevada
corporation
By: CRAIG F. SULLIVAN
----------------------------------
Craig F. Sullivan, Treasurer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Managing Agent
By: PEGGY A. FUJIMOTO
----------------------------------
Peggy A. Fujimoto
Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By: JON VARNELL
----------------------------------
Jon Varnell, Vice President
Address:
555 South Flower Street, #3283
Los Angeles, California 90071
Attn: Jon Varnell, Vice President
Telecopier: (213) 228-2641
Telephone: (213) 228-6181
BANKERS TRUST COMPANY, as Co-Managing
Agent and a Bank
By ROBERT R. TELESCA
-----------------------------------
Robert R. Telesca
Assistant Vice President
Address:
Bankers Trust Company
1 Bankers Trust Plaza
120 Liberty Street
New York, New York 10006
Attention: Mary Jo Jolly
Assistant Vice President
Telecopier: (212) 250-6076
Telephone: (212) 250-5860
with a copy to:
Bankers Trust Company
300 South Grand Avenue, 41st Floor
Los Angeles, California 90071
Attention: Robert I. Bernstein
Vice President
Telecopier: (213) 620-8484
Telephone: (213) 620-8173
BANK ONE, ARIZONA, N A, as a Co-Agent
and a Bank
By CLIFFORD PAYSON
-----------------------------------
Clifford Payson
Vice President
Address:
Bank One, Arizona, N A
201 North Central Avenue
Phoenix, Arizona 85004
Attention: Clifford Payson
Vice President
Telecopier: (602) 221-2632
Telephone: (602) 221-1773
CREDIT LYONNAIS LOS ANGELES BRANCH, as
a Co-Agent and a Bank
By T. VINCENT
-----------------------------------
Thierry Vincent
Vice President
Address:
Domestic Lending Office
Credit Lyonnais Los Angeles Branch
515 South Flower Street, 22nd Floor
Los Angeles, California 90071
Attention: David L. Miller
Vice President
Telecopier: (213) 623-3437
Telephone: (213) 362-5956
CREDIT LYONNAIS CAYMAN ISLAND BRANCH,
as a Co-Agent and a Bank
By T. VINCENT
-----------------------------------
Thierry Vincent
Authorized Signatory
Address:
Eurodollar Lending Office
Credit Lyonnais Cayman Island Branch
c/o Credit Lyonnais Los Angeles Branch
515 South Flower Street, 22nd Floor
Los Angeles, California 90071
Attention: David L. Miller
Vice President
Telecopier: (213) 623-3437
Telephone: (213) 362-5956
SOCIETE GENERALE, as a Lead Manager
and a Bank
By DONALD L. SCHUBERT
-----------------------------------
Donald L. Schubert
Vice President
Address:
Societe Generale
2029 Century Park East, Suite 2900
Los Angeles, California 90067
Attention: Donald L. Schubert
Vice President
Telecopier: (310) 551-1537
Telephone: (310) 788-7104
MIDLANTIC BANK, N.A., as a Lead
Manager and a Bank
By DENISE D. KILLEN
-----------------------------------
Denise D. Killen
Vice President
Address:
Midlantic Bank, N.A.
6000 Midlantic Drive
Mt. Laurel, New Jersey 08054-6000
Attention: Denise D. Killen
Vice President
Telecopier: (609) 778-2673
Telephone: (609) 778-2683
THE DAIWA BANK, LIMITED, as a Bank
By D. LAWRENCE
-----------------------------------
David M. Lawrence
Vice President and Manager
By F. GLENN HARVEY
-----------------------------------
F. Glenn Harvey
Vice President
Address:
The Daiwa Bank, Limited
800 West 6th Street, Suite 950
Los Angeles, California 90017
Attention: F. Glenn Harvey
Vice President
Telecopier: (213) 623-4629
Telephone: (213) 623-7205
BANK OF SCOTLAND, as a Bank
By CATHERINE M. ONIFFREY
-----------------------------------
Catherine M. Oniffrey
Vice President
Address:
Bank of Scotland
565 Fifth Avenue
New York, New York 10017
Attention: Catherine M. Oniffrey
Vice President
Telecopier: (212) 450-0872
Telephone: (212) 557-9460
FIRST SECURITY BANK OF IDAHO, N.A., as
a Bank
By VICTOR W. GILLETT
-----------------------------------
Victor W. Gillett
Vice President.
Address:
First Security Bank of Idaho, N.A.
119 North 9th Street
Boise, Idaho 83702
Attention: Victor W. Gillett
Vice President
Telecopier: (208) 393-2472
Telephone: (208) 393-2166
BANK OF AMERICA NEVADA, as a Bank
By ALAN F. GORDON
-----------------------------------
Alan F. Gordon
Vice President
Address:
Bank of America Nevada
Corporate Banking Department
300 South Fourth Street, Suite 200
Las Vegas, Nevada 89101
Attention: Alan F. Gordon
Vice President
Telecopier: (702) 654-7158
Telephone: (702) 654-7142
<PAGE>
EXHIBIT "A"
The Northwest Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) of
Section 28, Township 21 South, Range 61 East, M.D.B. & M.
EXCEPTING from the hereinabove described property that portion
of the Northwest Quarter (NW 1/4) of the Northwest Quarter (NW 1/4)
of Section 28, Township 21 South, Range 61 East, M.D.B. & M.,
more particularly described as follows:
COMMENCING at the Northwest corner of said Section:
THENCE South 87 degrees 36' East a distance of 50.06 feet to a point on
the East right of way line of U.S. Highway No. 91, this point
being the true point of beginning;
THENCE South 87 degrees 36' East along the North line of said Section a
distance of 1267.20 feet to a point;
THENCE South 0 degrees 25'00" East a distance of 101.41 feet to a
point;
THENCE South 89 degrees 45'02" West a distance of 1265.75 feet to a
point;
THENCE North 0 degrees 22'00" West a distance of 159.98 feet to the
TRUE POINT OF BEGINNING.
FURTHER EXCEPTING THEREFROM that portion of the Northwest
Quarter (NW 1/4) of the Northwest Quarter (NW 1/4) of Section 28,
Township 21 South, Range 61 East, M.D.B. & M., as conveyed to
the State of Nevada for public highway by Deed dated
December 15, 1952 and recorded August 11, 1953 as Document
No. 411231, Clark County, Nevada Records.
FURTHER EXCEPTING THEREFROM that portion as conveyed to Clark
County for road purposes by Document No. 104313 and recorded
April 23, 1957.
FURTHER EXCEPTING THEREFROM the Southerly 30 feet as conveyed
to Clark County for road and public utility purposes by
Document No. 262900, recorded February 22, 1973 in Book 303 and
by Document No. 551260, recorded February 4, 1976 in Book 592
of Official Records, Clark County, Nevada.
<PAGE>
EXPANSION FINANCING DOCUMENTS
1. Loan Agreement, dated November 19, 1984, executed by
Tropicana Enterprises, as Borrower, HRN, as Additional
Debtor, and Ramada Inns, Inc., and First Interstate Bank
of Nevada, N.A., The Valley National Bank of Arizona,
California Canadian Bank, Horizon Financial, F.A. and
InterFirst Bank Dallas, N.A. ("Original Banks").
2. Promissory Note dated November 19, 1984, executed by
Borrower, in favor of Original Banks in the amount of
$67,500,000.
3. Deed of Trust and Security Agreement With Assignment of
Rents, dated November 19, 1984, executed by Borrower, as
Trustor, and HRN, as Additional Debtor, in favor of Nevada
Title Company, as Trustee, and Original Banks, as
Beneficiary, recorded November 20, 1984, in Book 2024,
Instrument No. 1983548, records of Clark County, Nevada.
4. Nevada Uniform Commercial Code Financing Statement,
Form UCC-1, executed by Borrower and HRN, as Debtors, in
favor of Original Banks, as Secured Parties, recorded
November 20, 1984, in Book 2024, Instrument No. 1983549,
records of Clark County, Nevada.
5. Nevada Uniform Commercial Code Financing Statement,
Form UCC-1, executed by Borrower and HRN, as Debtors, in
favor of Original Banks, as Secured Parties, filed
January 22, 1985, File No. 85-00622, in the office of the
Nevada Secretary of State.
6. Assignment of HRN Master Lease Rents, dated November 19,
1984, executed by Borrower (as Lessor) and HRN (as
Lessee), and Original Banks, recorded November 20, 1984,
in Book 2024, Instrument No. 1983550, records of Clark
County, Nevada.
7. Collateral Assignment of HRN Equipment Leases, dated
November 19, 1984, executed by HRN, as Debtor and
Assignor, in favor of Original Banks, as Secured Parties
and Assignees, recorded November 20, 1984, in Book 2024,
Instrument No. 1983551, records of Clark County, Nevada.
8. Collateral Assignment of Subleases, dated November 19,
1984, executed by HRN, as Debtor and Assignor, in favor of
Original Banks, as Secured Parties and Assignees.
9. HRN Equipment Lease Estoppel Certificate, dated
November 19, 1984, executed by HRN, as Tenant, in favor of
Original Banks.
10. HRN Subleases Estoppel Certificate, dated November 19,
1984, executed by HRN, as Sublandlord.
11. HRN Master Lease Estoppel Certificate, dated November 19,
1984, executed by Tropicana Enterprises, as Landlord, and
HRN, as Tenant.
12. Borrower's Partnership Estoppel Certificate, dated
November 19, 1984, executed by Tropicana Enterprises in
favor of Original Banks.
13. Assignment of Construction Contract and Plans and
Specifications, dated November 19, 1984, executed by
Tropicana Enterprises, as Assignor, in favor of Original
Banks, as Secured Parties and Assignees.
14. Collateral Assignment of Permits, Licenses and Contracts,
dated November 19, 1984, executed by Tropicana
Enterprises, and HRN, as Assignor in favor of Original
Banks, as Secured Parties and Assignees.
15. Subordination Agreement, dated November 19, 1984, executed
by Tropicana Enterprises, as Owner, and Eugene Jaffe and
Elsie Jaffe, as Co-Trustees under Trust A and the
Residuary Trust, recorded November 20, 1984, in Book 2024,
Instrument 1983544, records of Clark County, Nevada re
Jaffe Deed of Trust.
16. Nevada Uniform Commercial Code Financing Statement,
Form UCC-2, executed by Tropicana Enterprises, as Debtor,
in favor of Eugene Jaffe and Elsie Jaffe, as Co-Trustees
under Trust A and the Residuary Trust, as Secured Party,
recorded November 20, 1984, in Book 2024, Instrument
No. 1983545, records of Clark County, Nevada.
17. Jaffe Trustees Subordination Agreement dated November 19,
1984, executed by Tropicana Enterprises, as Owner, and
Eugene Jaffe and Elsie Jaffe, as Co-Trustees under Trust A
and the Residuary Trust, as Beneficiaries re financing
statements.
18. Subordination of Lease Agreement, dated November 19, 1984,
executed by Tropicana Enterprises, as Owner, HRN, as
Lessee, and Ramada Inns, Inc., recorded November 20, 1984,
in Book 2024, Instrument No. 1983547, records of Clark
County, Nevada.
19. Snell & Wilmer Option Letter, dated November 19, 1984.
20. Commonwealth Land Title Insurance Company Policy of
Title Insurance, Policy No. 84-07-311 RM, dated
November 20, 1984, insuring Original Banks in the amount
of $67,500,000.
21. Reinsurance Agreement issued by Safeco Title Insurance
Company, Lawyers Title Insurance Company and Ticor Title
Insurance Company, dated November 20, 1984.
22. Assignment and Assumption Agreement for Participation
Interest in Loan, dated February 28, 1986, between Horizon
Financial, F.A., as Assignor, and InterFirst Bank Dallas,
N.A. as Assignee.
23. Endorsement attached to $67,500,000 Note executed by
Horizon Financial, F.A. assigning all of its right, title
and interest therein to InterFirst Bank, Dallas, N.A.
RN Assignment of Deed of Trust and Security Agreement With
Assignment of Rents recorded March 5, 1986, in
Book 860305, as Instrument 00463, Clark County Official
Records.
25. UCC-2 Assignment by Horizon Financial, F.A. to InterFirst
Bank Dallas, N.A., recorded March 5, 1986, in Book 860305,
as Instrument No. 00465, Clark County Official Records.
26. UCC-2 Assignment by Horizon Financial, F.A. to InterFirst
Bank Dallas, N.A., filed March 6, 1986, as Instrument
No. 85-00622, Nevada Secretary of State.
27. Memorandum and Notice of Assignments by Horizon Financial,
F.A. to InterFirst Bank Dallas, N.A., recorded March 5,
1986, in Book 860305, as Instrument No. 00464, Clark
County Official Records.
28. 104.1 Indorsement to ALTA Policy 408-112281 in favor of
InterFirst Bank Dallas, N.A.
29. UCC-2 Financing Statement (Assignment) executed by First
Interstate Bank of Nevada, N.A., The Valley National Bank
of Arizona, Canadian Imperial Bank of Commerce
(California) and InterFirst Bank Dallas, N.A. as
Assignors, to First Interstate Bank of Nevada, N.A., The
Valley National Bank of Arizona, Canadian Imperial Bank of
Commerce (California), Security Pacific National Bank and
Australia & New Zealand Banking Group Limited, as
Assignees, recorded September 11, 1986, in the Official
Records of Clark County, Nevada, in Book 860911, as
Document No. 0269.
30. UCC-2 Financing Statement (Assignment) executed by First
Interstate Bank of Nevada, N.A., The Valley National Bank
of Arizona, Canadian Imperial Bank of Commerce
(California) and InterFirst Bank Dallas, N.A. as
Assignors, to First Interstate Bank of Nevada, N.A., The
Valley National Bank of Arizona, Canadian Imperial Bank of
Commerce (California), Security Pacific National Bank and
Australia & New Zealand Banking Group Limited, as
Assignees, filed with the Secretary of State of the State
of Nevada on _____________, 19___, under File No. 85-0062.
31. Memorandum of Notice of Assignments executed by First
Interstate Bank of Nevada, N.A., The Valley National Bank
of Arizona, Canadian Imperial Bank of Commerce
(California) and InterFirst Bank Dallas, N.A. as
Assignors, to First Interstate Bank of Nevada, N.A., The
Valley National Bank of Arizona, Canadian Imperial Bank of
Commerce (California), Security Pacific National Bank and
Australia & New Zealand Banking Group Limited, as
Assignees, recorded September 19, 1986, in the Official
Records of Clark County, Nevada, in Book 860919, as
Document No. 283.
32. Endorsement attached to $67,500,000 Promissory Note
executed by First Interstate Bank of Nevada, N.A., The
Valley National Bank of Arizona, Canadian Imperial Bank of
Commerce (California) and InterFirst Bank Dallas, N.A.
payable to the order of First Interstate Bank of Nevada,
N.A., The Valley National Bank of Arizona, Canadian
Imperial Bank of Commerce (California), Security Pacific
National Bank and Australia & New Zealand Banking Group
Limited.
33. ALTA Lender's 108.8 Indorsement to Title Insurance Policy
No. 408-112281.
34. ALTA Lender's 104.4 Indorsement to Title Insurance Policy
No. 408-112281.
35. Assignment and Assumption Agreement for Participation
Interest in Loan dated September 10, 1986, executed by
First Interstate Bank of Nevada, N.A., The Valley National
Bank of Arizona, Canadian Imperial Bank of Commerce
(California) and InterFirst Bank Dallas, N.A., as
Assignors, to First Interstate Bank of Nevada, N.A., The
Valley National Bank of Arizona, Canadian Imperial Bank of
Commerce (California), Security Pacific National Bank and
Australia & New Zealand Banking Group Limited, as
Assignees.
36. Promissory Note in the principal sum of $10,462,653.83
dated September 10, 1986, executed by Tropicana
Enterprises, a Nevada general partnership, payable to the
order of First Interstate Bank of Nevada, N.A., The Valley
National Bank of Arizona, Canadian Imperial Bank of
Commerce (California), Security Pacific National Bank and
Australia & New Zealand Banking Group Limited.
37. First Modification to Promissory Note ($67,500,000), dated
September 10, 1986, executed by Tropicana Enterprises, a
Nevada general partnership, as Maker, and First Interstate
Bank of Nevada, N.A., The Valley National Bank of Arizona,
Canadian Imperial Bank of Commerce (California), Security
Pacific National Bank and Australia & New Zealand Banking
Group Limited, as Banks.
38. Assignment of and Notice of Additional Advance Under Deed
of Trust and Security Agreement With Assignment of Rents
recorded September 1, 1986, in the Official Records of
Clark County, Nevada, in Book 860911, as Document No. 268.
39. First Amendment to Loan Agreement dated June 4, 1985.
40. Second Amendment to Loan Agreement dated August 1, 1985.
41. Third Amendment to Loan Agreement dated September 10,
1986.
42. Fourth Amendment to Loan Agreement dated March 15, 1988.
43. Fifth Amendment to Loan Agreement dated May 5, 1988.
<PAGE>
Schedule 1.1
AZTAR CORPORATION AND SUBSIDIARIES EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
For the Years Ended December 29, 1994, December 30, 1993 and December 31, 1992
-------------------------------------
(in thousands, except per share data)
1994 1993 1992
Income from continuing operations -------- -------- --------
before extraordinary items and
cumulative effect of accounting
change $ 16,804 $ 11,382 $ 16,378
Deduct: preferred stock dividend
(net of income taxes credited
to retained earnings) (620) (610) (586)
-------- -------- --------
Income from continuing operations
before extraordinary items and
cumulative effect of accounting
change applicable to computation 16,184 10,772 15,792
Discontinued operations -- -- 1,262
Extraordinary items (2,708) -- (5,335)
Cumulative effect of accounting change -- -- 7,500
-------- -------- --------
Net income applicable to computation $ 13,476 $ 10,772 $ 19,219
======== ======== ========
Weighted average common shares
assuming no dilution 37,375 37,304 37,215
Stock options that had a dilutive
effect on net income (based on
relationship of market value to
exercise price), assumed to have
been exercised on the first day of
each period (or date of grant, if
later), less number of shares which
could have been purchased from the
proceeds of such assumed exercise:
Number of shares using the weighted
average market price for the assumed
purchase of shares described above 821 1,063 997
-------- -------- --------
Weighted average common shares
applicable to earnings per common
and common equivalent share 38,196 38,367 38,212
Additional shares using the market
close price at the end of the
period for the assumed purchase
of shares described above 5 22 47
Conversion of preferred stock at the
stated rate assumed to have been
converted at the beginning of the
earliest period reported 1,023 1,040 1,052
-------- -------- --------
Weighted average common shares
assuming full dilution 39,224 39,429 39,311
======== ======== ========<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (continued)
For the Years Ended December 29, 1994, December 30, 1993 and December 31, 1992
-------------------------------------
(in thousands, except per share data)
1994 1993 1992
-------- -------- --------
Earnings per common and common
equivalent share:
Income from continuing operations
before extraordinary items and
cumulative effect of accounting
change $ .42 $ .28 $ .41
Discontinued operations -- -- .03
Extraordinary items (.07) -- (.14)
Cumulative effect of accounting
change -- -- .20
-------- -------- --------
Net income $ .35 $ .28 $ .50
======== ======== ========
Earnings per common share assuming
full dilution:
Income from continuing operations
before extraordinary items and
cumulative effect of accounting
change $ .41 $ .27 $ .40
Discontinued operations -- -- .03
Extraordinary items (.07) -- (.13)
Cumulative effect of accounting
change -- -- .19
-------- -------- --------
Net income $ .34 $ .27 $ .49
======== ======== ========
EXHIBIT 21
SUBSIDIARIES OF AZTAR CORPORATION
The Company has no parent corporation. In addition to the subsidiaries listed
below, the Company has six other wholly-owned subsidiaries. The unnamed
subsidiaries, considered in the aggregate, would not constitute a significant
subsidiary.
Jurisdiction of
Incorporation
Name or Organization
---- ---------------
Adamar Garage Corporation Delaware
Adamar of Nevada Nevada
Adamar of New Jersey, Inc. New Jersey
dba TropWorld Casino and Entertainment Resort
Atlantic-Deauville, Inc. New Jersey
Aztar Development Corporation Delaware
Aztar Indiana Gaming Corporation Indiana
Aztar Missouri Gaming Corporation Missouri
Hotel Ramada of Nevada Nevada
dba Tropicana Resort and Casino
Ramada Express, Inc. Nevada
dba Ramada Express Hotel and Casino
Ramada New Jersey, Inc. New Jersey
Ramada New Jersey Holdings Corporation Delaware
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
---------------------
We consent to the incorporation by reference in the registration
statements of Aztar Corporation on Form S-8 (Registration No. 33-
32399 and No. 33-44794) of our reports, dated February 16, 1995 on
our audit of the consolidated financial statements and financial
statement schedule of Aztar Corporation as of December 29, 1994 and
December 30, 1993 and for each of the three years in the period
ended December 29, 1994, which reports are included in this Annual
Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Phoenix, Arizona
March 20, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at December 29, 1994 and the Consolidated Statement
of Operations for the year ended December 29, 1994 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-29-1994
<PERIOD-END> DEC-29-1994
<CASH> 43,861
<SECURITIES> 8,250
<RECEIVABLES> 28,111
<ALLOWANCES> 10,720
<INVENTORY> 5,693
<CURRENT-ASSETS> 93,804
<PP&E> 937,701
<DEPRECIATION> 181,411
<TOTAL-ASSETS> 915,359
<CURRENT-LIABILITIES> 72,671
<BONDS> 430,212
<COMMON> 414
4,711
0
<OTHER-SE> 360,954
<TOTAL-LIABILITY-AND-EQUITY> 915,359
<SALES> 42,657
<TOTAL-REVENUES> 541,440
<CGS> 39,361
<TOTAL-COSTS> 275,618
<OTHER-EXPENSES> 33,461
<LOSS-PROVISION> 3,102
<INTEREST-EXPENSE> 49,711
<INCOME-PRETAX> 22,835
<INCOME-TAX> 1,862
<INCOME-CONTINUING> 16,804
<DISCONTINUED> 0
<EXTRAORDINARY> (2,708)
<CHANGES> 0
<NET-INCOME> 14,096
<EPS-PRIMARY> .35
<EPS-DILUTED> .34
</TABLE>
